Leading a smaller business is, by design, hands-on. Leaders of these companies usually know the team personally, stay close to their customers, and shape where the company is headed through the decisions they make week to week. It’s work with visible impact. Yet these leaders lose a good portion of their working hours to the administrative side of employer responsibilities.

We wanted to know what that lost time costs the business, and whether leaders are overlooking a better way to run HR. Together with Insperity, we set out to measure three things:

1. How much time HR administration takes from leaders
2. What that lost time is worth to the business
3. Whether a better option exists

We surveyed leaders at 832 US businesses, most of them owners, founders, and CEOs. We also interviewed leaders at several organizations to add context to the numbers. This blog post focuses on the 418 businesses with under 150 employees.

Doing HR yourself looks like the lean choice, yet for many of these companies it’s the more expensive one, and the one carrying the most risk.

Keeping HR in-house to run lean can add both cost and risk

HR administration cost starts as time, and time is the easiest cost to overlook. When the leader responsible for moving the business forward is also managing HR, the work simply can’t fit inside the workday — so they give up business opportunities or personal time to get it done.

For companies with under 150 employees, both the business and the leader pay that cost.

Cost to the business

• Missing business opportunities. 37% have postponed growth or expansion planning, and roughly a quarter have cut back on customer engagement (24%) or sales and revenue activity (23%).

Cost to the leader

• Doesn’t fit into the workday. The admin still has to get done, so it runs past normal hours. Two-thirds handle payroll or employee issues outside the workday at least sometimes, nearly a third often or more.
• Giving up personal time. When admin piles up, 42% sacrifice personal or family time first.

46% of leaders say HR admin distracts them from moving the business forward — sometimes, often, or always.

Nearly half of leaders (45%) in our survey said this administrative burden limits their strategic thinking. Time spent reconciling payroll is time not spent winning customers or developing new offerings to bring to market, and at a company of this size, there’s often no one else to pick up that work.

What HR admin costs leaders

A leader running lean and watching every cost is doing the right thing. The challenge is that the most visible cost, the price of bringing in help, is the smaller one. The bigger costs are the hours spent, the opportunity costs, the business strategy and growth work set aside, and the HR compliance risk that costs nothing until it costs a great deal.

The instinct to economize is sound; it’s just pointed at the wrong number. Once a leader sees the full cost, the decision tends to make itself.

Across all 418 businesses with under 150 employees, the cost shows up in time, dollars, and business performance:

• Time. 22% of leaders spend 7+ hours a week on HR admin, and 27% say that time has increased over the past year.
• Dollars. 39% value that time at $51K+ a year. 17% value it at $101K+.
• Business performance. Leaders report a moderate or worse negative impact on business growth (41%), innovation (40%), and leader effectiveness, team productivity, and organizational efficiency (37% each).

What good HR looks like for a smaller business

Most companies under 150 employees already pay for some HR tools, such as payroll services, HR software, or filing systems. These tools speed up routine tasks. They can’t tell a leader which rule applies, how to handle a difficult situation, or when to act.

We asked leaders to rate what they’d want from an HR partner. Taking routine admin off their plate came last, and every other option rated higher:

What leaders say they’d want from an HR partner (% rating critical)

• Improving the overall employee experience: 62%
• A dedicated advisor who understands their business: 61%
• Strategic HR advice tied to business goals: 59%
• Proactive guidance on compliance and regulatory changes: 59%
• Expert support for complex, high-stakes decisions: 56%
• Reliably taking routine admin off their plate: 49%

Back to growth, strategy, and customers

We asked leaders at companies with under 150 employees who already use outside HR support where their time goes now. Growth came out well ahead:

• Driving business growth and revenue: 60%
• Strategic planning and long-term decisions: 49%
• Personal time and balance: 48%
• Customer and client relationships: 47%

Only 6% said they noticed no real difference.

Key takeaways for small business leaders

Reassess how you run HR as your team grows

Leaders at companies of 30 to 49 employees are far more likely to carry a heavy HR admin load than those under 30: 26% spend 7+ hours a week on it, compared with 14%, and 52% value that time at more than $50,000 a year, compared with 29%. At smaller companies, the work still feels manageable, so few leaders stop to ask whether they should still be running HR themselves. As your team grows, that’s the reason to ask.

Weigh hidden risks in your HR decisions

More than three-quarters of leaders are confident HR is handled correctly, yet a third of them still worry about a costly mistake. Both are true, because the real danger is a problem you don’t catch until it has already turned into a penalty or a claim. When you decide how to best run HR, weigh that risk alongside the visible costs you already track: the hours for the work and the tools in place.

The real cost of doing HR yourself

A small business doesn’t need its leader processing payroll or tracking a leave law across three states. It needs them setting vision and direction, winning customers, and building the team.

The real cost of doing HR yourself isn’t the admin itself. It’s the time that could go into running and growing the business. 

Read the full report

Interested in what’s behind these numbers? The full report, Reclaim Your Leadership with Expert HR Support, includes the complete findings and results by company size.

Get the report →