When a Family Business Should Outsource Human Resources
Entrepreneur's New Year’s Guide
In this ongoing series, The Fix, we look at real problems faced by real companies and how they solved them.
The Challenge: 2012 was a big year for Buzz Marketing Group. The Philadelphia research and viral marketing firm had reached its 16th year and landed large clients such as Dell which would drive its annual revenue up 112% over 2010. To handle this influx of work, the team had grown over the same period, with 60% more contractors and 33% more employees.
Growth has its drawbacks, however, and founder Tina Wells was frustrated with how much time she spent on human resources, rather than business development. Wells estimates that she spent nearly 8 hours a week handling tasks like tracking vacation time, updating the employee handbook and creating job descriptions. Additionally, she'd hired several of her five younger siblings at different points in the company's history and even today, two of her siblings are full-time employees. Wells says there was a misperception within the firm that family received special treatment, creating tension she wanted to erase.
Related: Is it Time to Outsource HR?
"We needed to address how we were going to attract new senior talent as well as promote open communication within the company, whether or not your last name was Wells," she says. "Sometimes regardless of how a company operates, you can't help how others feel when a lot of employees are family. I try to remind people that Walmart and Campbell are both ‘family' businesses too."
The Fix: Last year, Wells expanded its contract with Paychex, a third-party payroll and human resources firm. Buzz initially started working with Paychex in 2011 to manage its payroll. In 2012, Paychex began managing the firm's human resources, overhauling the company's handbook from 20 pages to 130 pages, codifying the firm's policies, crafting job descriptions and tracking employee performance. With an online HR system, employees could easily access company manuals and forms as well as track paid time-off themselves. After expanding its services, roughly 1 percent of Buzz's budget goes to Paychex, according to Wells.
Paychex also helped ease the transition for two key hires to the company in 2012, a vice president of marketing and a chief operating officer, creating job descriptions, offer letters and working with new hires in their first weeks.
But most importantly, hiring Paychex created a neutral, third-party layer of management to address misperceptions of nepotism within the company. "We had an HR process previously, but having somebody completely unassociated with the family manage human resources made it easier for everyone on staff to communicate," says Wells. Paychex created a cushion between the staff and leadership, leading to "a much more comfortable working environment. Bringing in a third party was the only way to make everybody feel like there was a fair playing field."
These days, the time Wells spends on HR concerns for her 8-person firm has shrunk by 88% to one hour a week and she can focus more on decision making for her business. "This has given me the time to be the creative executive I want to be, coming up with solutions for my clients," she says.
The Takeaway: Hiring a third-party human resources firm can save time and ease communication issues in a family business.