Does your MSP need an HR Department?

If your Managed Services Provider company started as a small, entrepreneurial business with just a few employees, the owner and/or top manager probably did most of the hiring (and firing, if necessary), negotiated compensation packages, granted or denied raises, chose what benefits to provide and made all of the other decisions and policies governing company personnel.

When do you need HR?

As a company grows, however, there comes a point where – just as you eventually need an accountant and an attorney and then later a whole accounting department and legal department – you’ll need to consider hiring one or more professionals who are trained in the management of the “people part” of running the business. That means, sooner or later, a personnel or human resources (HR) department, if for no other reason than the growing number and complexity of laws and regulations regarding the employer-employee relationship.

An aside: business experts don’t all agree on what the difference is between a personnel department and an HR department. Those who think there is a difference generally define it as one of scope, with HR being a broader term. Some see the title of “human resources” as more impersonal while others consider “personnel” to be outdated and “small time.”

Regardless of what you call it, these “people pros” are dedicated to attracting the best workers and helping employees develop their skills and talents to benefit both the company and their own careers. Of course, the “best worker” for one company might not be a good fit at all in another, so they must have the ability to assess both your organization’s particular needs (based on what you do, your mission and goals, business strategy, management style and philosophy, financial situation, and many other factors) and a job candidate’s personality traits, skill level, knowledge, experience and other characteristics that determine how well he/she will do the particular business environment.

Talent management

An important buzz phrase in the HR field is “talent management.” This is particularly important in a knowledge-based industry (such as MSP services) that requires both mastery of technology and “soft skills” that are necessary to effectively deal with customers (and potential customers) and partners, as well as internally with superiors, subordinates and peers.

Recruiting top talent isn’t enough. Talent management is all about keeping those workers motivated – and a good salaries and benefits package often isn’t enough to do that. HR involves helping workers with personal career goal planning and then helping them to realize those goals, recognizing and developing leadership abilities, keeping them challenged (without challenging them beyond their abilities and interests to the point of frustration) and guiding them in a career path that builds on their competencies and gives them opportunities to learn new things.

The cycle starts with the process of “onboarding,” another buzzword that refers to the company’s program for helping new employees find their place in the organization and making them feel welcome. This not only makes the employees happier, it also means they will become more productive more quickly, and so it benefits the company as well. Communication is a vital part of this process. It’s critical that the employees understand the company’s expectations of them in their new job roles and also that the company understand the expectations with which the employee is coming to this new role.

Every company has its own unique subculture, and whether or not an employee is ultimately happy with the job depends in large part on whether he/she feels like someone who “belongs” in this group. When employees are left on their own to integrate into the organization’s culture, it’s likely to take them longer to become engaged with their jobs and those with whom they work.

Talent management focuses on both an employee’s potential – the inherent ability to do the job and do it well – and on actual performance. People tend to perform at a higher level when doing tasks that they enjoy or that interest them. So putting workers into jobs where they like what they’re doing on a daily basis isn’t about catering to employees’ wishes as some “old style” managers believe, but is actually a business strategy that’s designed to get the best work out of them. According to studies such as one conducted by IBM several years ago, this results in very real, bottom-line financial benefits to the company.

Getting started

What do you do when you’re at that “in between” stage of growth, when you know it’s time to do something about HR but you don’t have the money and resources to create an HR department, or maybe even to hire a full-time personnel director? Many small businesses contract with individual HR consultants or a company such as ADP to get a program in place and bring them into compliance with HR rules and regulations. If you’re determined to do it yourself, you can find a very high level overview of what needs to be done on this web site.


Part of the growing pains that come with success is the need to bring specialists in, on a part- or full-time basis, to handle aspects of the business that get more complicated as your organization gets bigger. HR/personnel is one such area, and can be one that makes or breaks a small company as it transitions into a mid-sized and eventually a large corporation.

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