Custom Research: The State of the HR Function in Small to Mid-Sized Businesses

Boost HR strategy and practices in smaller organizations

Most of the management research focuses on large organizations; this leaves many HR professionals in small and mid-sized businesses (SMBs) with fewer than 1,500 employees wondering how much of this research is relevant to them. To help close the gap in our understanding of HR’s challenges, priorities, and practices in SMBs, HR.com partnered with UKG, a global HR technology company, to investigate HR strategies in SMBs and provide best practices for making changes. We invite you to read the report which includes research insights and key takeaways you can apply in your own organization.

This study covers a wide range of topics of interest to HR leaders in SMBs including automation, data, compliance, employee self-service, and more. The data in this study provides a benchmark that readers can judge their own organization against and provides clarity on which actions should be a priority so that HR can make a larger impact.

Key Findings from the Study

1. SMBs typically struggle with connecting HR work to business strategies.
2. HR automation remains a challenge that can impact the time available for strategy.
3. Many organizations would benefit from regulatory compliance automation.
4. About half of HR professionals in SMBs indicate that their organizations struggle to achieve proactive analytics.
5. Improving managerial and employee self-service could free up HR’s time.
6. HR strategy experts¹ succeed by integrating processes, leveraging high levels of automation and making good use of data.

HR Automation Remains a Challenge That Can Impact Time Available for Strategy

Most HR departments automate at least some of their HR, payroll, talent, time and scheduling processes. Almost half of respondents (45%) say they have some specific solutions to automate certain processes, but only a small proportion (14%) have what might be considered the ideal solution: all their processes automated in a single system.   

Most HR Professionals in SMBs Need Best Practices

More than half of HR professionals indicate their organization has a high need for best practices. It can be particularly challenging for HR leaders in SMBs to keep up with best practices since these HR professionals may wear several hats.

Fifty-four percent either take a reactive approach to people-related data or fail to use such data at all

Almost one-quarter of respondents (24%) say they do not measure specific KPIs for HR and payroll

Most (71%) indicate it is not very easy for the leadership team to tie people data and HR results to larger business goals

Certain Managerial and Employee Processes Could Be Made Easier

Some common processes are relatively easy for managers. For example, 79% say approving time off is easy to do at their organization. However, other less frequent but equally important processes appear to be more difficult. For instance, 38% say understanding and reporting on team data is not easy, and 29% say the same about reviewing performance.
 

What Leads to Strategic HR Departments?

To better understand why some HR functions have a strategic focus, whereas others are mired in back-office tasks, we divided the respondents into two cohorts: HR strategy experts* and HR strategy novices**

HR strategy experts are more likely than HR strategy novices to have all their processes automated either in multiple systems (26% vs. 21%) or automated in a single system (18% vs. 10%). There is no question that automation can play a big role in opening the door for HR to be strategic.

One of the most notable features of HR strategy novices is how unlikely they are to use HR and payroll processes to inform their strategic direction (only 6% do) and how likely it is that those processes are disconnected from each other (35% suffer from this disconnection).

HR strategy experts are more than five times as likely as HR strategy novices to use their HR data to make actionable recommendations. HR strategy experts are almost three times as likely as HR strategy novices to have a high level of regulatory compliance automation. HR strategy experts are four times more likely than HR strategy novices to be proactive in aligning people strategy to business strategy and goals.

Leadership teams in HR strategy expert organizations are more than twice as likely to often or always see HR and payroll as strategic functions.
 

Notes
* HR strategy experts: Those who answered 4 or 5 to the question “On a scale of 1 to 5, rate how much your HR team focuses on back-office tasks (such as managing employee records or processing forms) as opposed to helping guide business and people strategy (such as presenting people data or continuously improving processes).” 
** HR strategy novices: Those who answered 1 or 2 to the same question.
 

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