This was the focus of a Wall Street Journal article a month ago. I got so excited, I spilled my coffee! The article was surprisingly balanced and covered the pros and cons of having no formal HR group. The subtitle was, Is it a Dream or a Drag?

The article points out that many smaller firms start out with no HR. Then, after growing to a couple dozen employees, firms tend to setup HR. The same occurs right after a company is hit with a huge employment related litigation like a discrimination or harassment suit. (This is a reaction due to fear which is not good in business or in a zoo!)

Larger firms and especially public ones have large human resources groups. The article states that companies have, on average, 1.5 HR people for every 100 employees. Wow! And even those half ones can be costly and dangerous.

Having worked in both smaller, private firms and large, public ones I do have an opinion or two on this HR debate. When private company Donn was acquired by public USG Corp. we had no HR professionals at our main Ohio headquarters. With our two large operating plants there, we had just under 1,000 employees which generated sales in today’s dollars of $200 million. Not a small business. Within a couple years, USG had installed 7 HR, Labor Relations and Safety people. After the recent recession, that was substantially reduced. So how did Donn manage without all this HR help?

Every manager at Donn was their own HR person. You hired people, gave promotions, organized training and fired people on your own. If we had the need for a professional opinion because of the threat of litigation, we hired a specialist lawyer or labor relations consultant. And you learned much more about your people, their ambitions and their concerns because you had to work through issues directly with them, not with an HR person along your side (or in your way.)

That said, I believe there is a role for HR especially in larger firms. As they grow, companies need some standardized approach to compensation and promotions. Good HR people, like my USG friend Gary, can also help a firm introduce bold, new programs like mentoring and diversity (not an easy thing twenty years ago in the male oriented construction industry!) But good HR groups needs to remember that it is a staff, advisory group, not a sole decision maker or star maker in people’s careers.

We have many more stories about HR coming in The Business Zoo!