When you think about how you’d ideally like for your HR team to spend their time, you probably envision a scenario where they collaborate with other departments to operate strategically, devising new plans that will streamline day-to-day operations like payroll, talent acquisition, and employee retention. However, as an organization grows, sometimes the HR department finds itself just putting out fires instead of growing alongside the company as a whole.

It isn’t necessarily solely the result of a company hiring more people than the HR team can handle. The HR tipping point often occurs when an organization has grown in scale, thereby increasing the stakes and the responsibilities of the HR team. As an organization sees more growth, employees often see more responsibilities, which means their HR needs may increase. This results in your HR team often functioning in a reactive mode rather than a strategic mode.

If you believe that your HR talent isn’t being optimized due to too many operational tasks that prevent them from being able to focus on strategy and growth, it might be time to explore your options for consulting, HR outsourcing services, and other tools as discussed below.

This article is for informational purposes only and does not constitute legal or HR advice.

When Your HR Tech Infrastructure Isn’t Scalable

Your team depends on HR technology to efficiently manage operations such as onboarding, employee engagement, payroll, and performance management. If your team still depends on dated spreadsheets or unreliable systems, it creates not only more work for the team but also more room for human error.

Many organizations erroneously believe that the only choice is between outsourcing HR administrative functions entirely or keeping everything in-house. However, a hybrid model is possible. Smart company leadership will often outsource the mundane tasks like payroll while maintaining an internal HR team to engage with employees and ensure that HR strategies scale alongside the organization as a whole. This is often accomplished by working with a PEO.

What Is a PEO?

You may be asking, “What is a PEO?” A PEO is a professional employer organization that offers third-party HR services to companies. Some PEO clients  may eschew internal HR departments entirely and depend solely on HR outsourcing services while others may opt for the aforementioned hybrid model to allow their internal teams to focus on employee engagement and company culture.

However, a PEO isn’t simply an outside HR firm that a company hires to handle its operations. One of the key advantages of working with a PEO is access to pooled benefits, where employees are grouped with those of other client organizations. This broader employee base can strengthen a company’s ability to offer more competitive health insurance and other benefits than it might be able to negotiate on its own.

A PEO operates under a co-employment model, meaning certain employer responsibilities are shared while the business retains control over day-to-day operations and management decisions. This arrangement allows organizations to share responsibility for administrative and compliance-related tasks. In many cases, PEOs also manage workers’ compensation coverage and related claims, reducing administrative burden for internal teams. While a PEO acts as a co-employer, it does not have a stake in the business or its revenue.

Although many companies do depend on PEO services for payroll, it’s a misconception that these services are only used to manage the books. PEOs can handle just about all of a company’s HR-related administrative functions from hiring and onboarding to employee retention services. A PEO can support a wide range of HR needs, depending on an organization’s structure and goals. However, many businesses choose to maintain an internal HR leader or team to focus on company culture and long-term growth as well.

Why The Hybrid Model Works

Smaller organizations can often satisfy all of their HR needs through a PEO, but larger organizations may choose to keep many functions in-house to foster a strong company culture and encourage growth. Sensitive HR topics are often better handled by an internal HR team with guidance from the PEO, such as setting company policy on harassment or combatting any toxicity amongst co-workers that may occur.

However, the benefits of having an internal HR team go beyond the negative functions. Internal HR teams can set the tone of the workplace culture, dedicating their time to initiatives like wellness and mentor programs. These programs can do incredible things when it comes to boosting employee morale. When employees feel like they work within a positive setting where they’re appreciated, productivity increases, often significantly.

There is no universal formula for how HR teams should scale as an organization grows. Some startups that anticipate rapid expansion choose to invest earlier in HR capacity to help establish processes and culture before headcount increases significantly. While PEOs can support a wide range of HR services and help manage administrative complexity, internal HR teams often focus on understanding the day-to-day dynamics of the organization. Together, this balance allows policies, people practices, and long-term strategies to evolve in ways that support both growth and culture.

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Beating the HR Tipping Point Once and for All

When you hire HR talent, your goal isn’t solely to have a team that can handle routine operations and oversee the books. Rather, you want to cultivate an HR team that sets the culture within your organization, creating strategies and long-term goals that align with the company’s mission statement.

Your HR professionals are your employees’ go-to when they have concerns or issues with their employment. Therefore, it’s important they’re able to operate within a growth framework, rather than constantly reacting to administrative demands.

Whether you choose to work exclusively with a PEO or rely on a hybrid model, HR services are the backbone of your company. Smart leadership recognizes this and invests the time and resources into making sure they get it right.