7 Signs It's Time to Hire a Fractional HR Director
Short answer: It's time to hire a fractional HR director when people issues are eating the owner's time, your managers keep escalating problems, or you're about to grow faster than your HR can keep up. Most companies hit that point somewhere between 15 and 75 employees, usually before they can justify a full-time HR leader.
A fractional HR director is an experienced HR leader who works inside your business part-time, on a monthly retainer. You get director-level judgment without a director-level salary. Here are the seven signs I see most often.
1. The owner is spending more than three hours a week on people issues
That's three hours not spent on sales, clients or strategy. When the CEO is the de facto HR department, every employee question, conflict and policy decision routes to the most expensive person in the building.
2. Your managers keep pulling you into their problems
Performance conversations, attendance issues, conflict between team members. If your managers bring these to you instead of handling them, they haven't been coached on how. A fractional HR director coaches managers through real situations as they happen, which is how managers actually get better.
3. You've had a near miss
A termination that almost went sideways. A complaint nobody investigated properly. A pay question you couldn't answer. Near misses are the cheapest warning you'll ever get. The next one may come with an attorney's letter.
4. Your handbook and policies are a template
If your handbook came from a PEO, a payroll company or a download, it probably doesn't match how your company actually operates, or every state you have employees in. Policies you don't follow consistently create more risk than having no policy at all.
5. You're about to grow
New hires, new managers, a new location, a new state, an acquisition or new investors. Growth multiplies every people problem you already have. It's far easier to build the foundation before the growth than to repair it during.
6. You have a PEO, and the gaps are still landing on you
A PEO handles payroll, benefits and compliance administration. It doesn't manage your people. If you're paying for a PEO and still doing most of the HR yourself, a fractional HR director fills the gap and helps you use what you're already paying for. I wrote more about that in Do I Still Need HR If I Have a PEO?
7. You can't justify a full-time HR leader yet
A full-time HR director is a six-figure hire before benefits. If you need the expertise but not 40 hours a week of it, fractional is the right-sized answer. For a full breakdown, see Fractional HR vs. Full-Time HR vs. PEO: What Each Really Costs.
What does a fractional HR director actually do?
It depends on what your business needs, but the work usually includes:
Coaching managers through performance and conduct conversations
Running investigations and terminations the right way
Customizing your handbook and policies to fit your business and your states
Building your hiring and onboarding process
Setting pay ranges and a pay philosophy you can defend
Planning the people side of growth: roles, structure and future leaders
Being the person employees and managers can go to, so it isn't you
When fractional HR is not the right fit
If you have more than a couple hundred employees, or your people issues need someone on site full-time, you've likely outgrown fractional. And if all you need is someone to answer occasional compliance questions, an HR hotline may be enough. Fractional is for the middle: real HR leadership needs, without full-time volume.
Frequently asked questions
How much does a fractional HR director cost?
Most fractional HR engagements are a monthly retainer. Cost depends on how much time and what scope your business needs. It's a fraction of a full-time HR director's salary and benefits.
How many hours does a fractional HR director work?
It varies with the scope you agree on. Some companies need a few hours a week of ongoing support; others need more during a project like a handbook rebuild or a reorganization.
Is a fractional HR director the same as an HR consultant?
Not quite. A consultant usually delivers a project and leaves. A fractional HR director is embedded in your business on an ongoing basis, knows your people and acts as your HR leader.
Can a fractional HR director work with our PEO?
Yes, and it's a strong combination. The PEO handles administration, and the fractional HR director handles everything that needs someone inside your business.
See where you stand
If your company uses a PEO, take the free PEO Gap Check. It takes about two minutes and shows your top three HR gaps.
UNTIL NEXT TIME,
Stacey
Stacey Dennis, SHRM-SCP, is the founder of Possibilities Unlocked, a fractional HR firm for growing companies. She spent nine years inside a publicly traded PEO before starting her firm.