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When you started your business, HR probably wasn’t the priority.
- Quick conversations solved issues.
- Everyone knew everyone.
- You handled the paperwork yourself.
And that informal, personal style helped you grow.
But something shifts around 15–20 employees. What once felt manageable starts to feel heavy.
- People issues take longer.
- Managers handle similar situations differently.
- You spend more time firefighting and less time leading.
That doesn’t mean you’ve failed. It means the business has evolved.
The real risk isn’t doing HR yourself. It’s staying informal for too long.
When doing it yourself reaches its natural limit
Most successful business owners are natural problem-solvers. When something needs doing, you figure it out and get on with it. This resourcefulness has probably served you well in most areas of your business, and it’s something to be proud of. But as you grow, people management presents unique challenges.
“I think as a founder it can be very difficult to let go, but If you don’t let go you are restricting the growth potential, the sustainability of your business.” Alison Godfrey, Founder Director, Godfrey Wilson
The challenge isn’t that you’re doing anything wrong – it’s that the informal approach that worked so well now faces new and more complex pressures:
- You’re solving the same problems repeatedly.
- Different approaches create confusion.
- You’re reactive rather than strategic.
- Important decisions get delayed.
The hidden costs of staying informal too long
The financial impact of outgrowing your current approach isn’t always obvious, but it can be substantial. It’s not that you’re doing anything wrong – it’s that without the right structure, even good intentions can lead to expensive problems:
Staff turnover in the UK costs an average of between £11-30K per departing employee once you factor in recruitment, training, and lost productivity – and the more senior the role, the more it costs. If poor management causes just two extra departures per year, that’s £22-60K down the drain.
Employment tribunal cases can cost upwards of £8,500 on average, even when you win. If you lose, awards can reach tens of thousands, plus your legal costs.
Underperformance from employees who should have been managed better or moved on sooner can easily cost 20-30% of their salary in lost productivity each year.
Management time spent firefighting could be invested in business development. If you value your time at £100 per hour and spend just 5 hours per week on preventable people issues, that’s £26,000 per year of opportunity cost.
Reputation damage from being seen as a poor employer affects your ability to attract good people and can even impact customer relationships.
Add it up, and the cost of staying purely informal for a 20-person business often exceeds £50,000 per year in direct and opportunity costs. This isn’t about blame – it’s about recognising when success creates new challenges and taking action to address it.
Signs your business is ready for more structured people management
This transition rarely announces itself with fanfare. More likely, you gradually notice that the personal, informal approach that served you so well is being stretched, that people seems to have switched off a bit or are grumbling, or you’re falling behind on business management issues because you’re constantly firefighting people problems.
Here are a few typical signs that it might be time to add some professional structure behind your personal touch:
The inconsistency problem- Different managers handle the same situations in completely different ways. One gives verbal warnings, another jumps to formal processes, and a third ignores issues entirely. Your employees notice these inconsistencies, and it damages both morale and your credibility as an employer. You get dragged into more issues yourself to resolve them – and you don’t have time.
The recruitment lottery- Hiring takes forever, you keep getting the wrong candidates, or you make hasty decisions because you’re desperate. When that happens, you’re often trying to shoehorn people into evolving roles they weren’t really hired for, or having to say goodbye to great people because you don’t really have the right role for them anymore. Without proper recruitment processes, you’re gambling with every hire – and bad hires in a small business hurt everyone, and cost a lot of money and time.
The compliance wake-up call- This often comes as a shock: an employee threatens a tribunal, you receive a formal grievance, or someone raises a discrimination claim. Suddenly you realise you’ve been unknowingly exposed to significant legal risks, and you don’t feel equipped to handle it in the best way.
The key person panic- You depend heavily on specific individuals, but you’ve never thought about succession planning, knowledge transfer, or what happens if they leave. When they hand in their notice, panic sets in.
The management time drain- You and your senior team are spending increasing amounts of time on people issues instead of growing the business. Every HR problem lands on your desk because there’s nowhere else for it to go. Meanwhile, you don’t have a clear plan for the next one, three or five years, and the budget is weighing on your mind because you haven’t had time to analyse it properly.
The culture confusion- You know your company culture matters, but you can’t quite define what yours is anymore. New starters struggle to understand “how things work around here,” and maintaining your original culture becomes harder as you grow. You notice a few people being absent, and the people who used to stick around after hours to get the job finished are out the door at 5pm.
The big benefit has been having a person from outside of the whirlwind coming in to focus on how we move the dial, rather than an internal person doing their day job and trying to look at the bigger picture. We’ve also built a credible people and culture team that helps sustain a high-performance three-year work plan”. James Hutchins, Managing Director, Zentura.
Adding professional structure to personal leadership
Here’s where many business owners get confused: they think HR means losing the personal touch that makes their business special. It doesn’t. Professional people management is about creating the structure that lets you maintain your personal approach while ensuring consistency and fairness across a larger team.
There’s administrative HR – policies, paperwork, and compliance. That’s important, but it’s not the whole picture.
Strategic people management is different. It’s about using structure to enhance your personal leadership style. It’s asking questions like:
- How can we attract and keep the best talent in our market while staying true to who we are?
- What kind of processes will support our culture rather than stifle it?
- How do we develop our people so they can grow with the business?
- What changes do we need to support our growth plans without losing what makes us special?
When you’re handling everything informally, you never get to these strategic questions. You’re too busy with the day-to-day to think about the bigger picture.
Consider this example: one People Puzzles client wanted to understand “what was driving our organisational culture, key risks and issues, what our priorities should be, and to understand what we could achieve with our limited resources.” Their People Director conducted a thorough assessment of current capabilities, helped to clarify the longer term vision, and designed a team structure and development framework to help the owner step back and bring on the next generation of leadership. Engagement went up, productivity went up, and staff turnover fell sharply. The client said the People Director’s pragmatism and positivity “helped us achieve many of our goals including organisational restructures, re-design of several key HR processes and upskilling of our teams.”
That’s the difference strategic HR expertise makes – it’s not just solving problems or treating the symptoms – it’s about identifying the underlying causes, preventing them and driving growth.
And it doesn’t have to be full time.
Why the fractional approach makes sense
By this point, most founders reach the same conclusion: they need more structure, but not a full-time HR salary.
But here’s what many business owners don’t realise: you don’t need someone full-time to get the expertise you need. Most of our clients don’t want, don’t need, or simply can’t afford a full time HR role at this level. But they have all seen the benefits of accessing this level of commercial, strategic expertise on a part-time basis.
Fractional HR gives you:
- Senior-level expertise without senior-level salaries or risks
- Objective, external perspective on internal challenges
- Flexibility to scale support up or down as needed
- No long-term commitment or complicated contracts
- Immediate impact from someone who’s solved these problems before
- Seamless cover if needed from a UK-wide team (specific to People Puzzles – yes we are biased, but you don’t get this from a single independent consultant!)
- Access to a wider network when you need specific expertise for a project or initiative (again, specific to us)
Most of our clients work with their People Director for 3-8 days per month. That’s enough to provide strategic direction, handle complex issues, and build the processes, teams and accountability you need, but at a fraction of the cost of a full-time hire.
Making the evolution from informal to structured
The transition from informal to professional people management doesn’t happen overnight, and it doesn’t mean losing what makes your business special. Here’s how businesses typically evolve while keeping their personal touch.
As one client put it: “I used to have the view that HR was managing difficult cases and moving people on with occasional recruitment support.” But working with experienced HR expertise changed that perspective entirely.
Bringing in an experienced People Director just one day a week is often enough to mobilise teams and get the underlying structures and behaviours working in your favour. Fractional People Directors are quick to build rapport with clients and the wider teams, and the external perspective is often the differentiating factor in being able to identify what’s really going on, and fix it.
What success looks like
When you get your people strategy right, the transformation is noticeable:
- Recruitment becomes easier (and cheaper!) because you’re clearer about what you need and you’re seen as a good employer
- Management time reduces because processes handle routine issues automatically
- Employee engagement improves because people understand what’s expected and feel fairly treated
- Business growth accelerates because you can focus on strategy rather than people problems
- Legal risks diminish because you’re operating within proper frameworks
On average, People Puzzles clients grow 30% in 12 months of working with our People Directors. Recently, clients have reported savings of between 35% and 300% on their annual recruitment costs thanks to a People Director handling this function in-house. These are not coincidences – when your people strategy supports your business strategy, growth follows.
Taking the next step
If you recognise your business in this article, you’re in good company. This evolution is a natural part of successful business growth, and the fact that you’re thinking about it shows you’re ahead of the curve.
You don’t need to transform everything overnight, and you certainly don’t need to lose the personal touch that makes your business special. Professional people management is about adding structure that supports your leadership style, not replacing it.
The informal approach that got you this far has served its purpose well. Now it’s time to build on that foundation with the professional structure that will take your business to the next level while keeping what makes you special.
After all, you wouldn’t handle your finances, legal requirements, or IT security informally at this stage. Your people strategy deserves the same thoughtful, professional approach – and your business will be stronger for it.