Over half of small businesses handle employment matters themselves. That’s because many business owners consider human resources a complex task that’s easy to neglect. Barbara Talabisco, President and CEO of Wakefield Talabisco International explains
Less than 50% of small business owners are confident in how their company handles HR matters, and that’s because they pass on HR responsibilities to employees who need more training in the field.
If this sounds exactly like how you handle human resources in your small business, then know you’re not alone. As we said, over half of small businesses do everything on their own. You must recognize the importance of HR for small businesses.
Human Resource Management (HRM)
HRM is the leading system businesses use to manage people within the organization. The three primary responsibilities of a human resource manager are:
- Employee compensation and benefits
- Defining work
HRM for the small business owner
Ultimately, the role of HRM for the small business owner is crucial if you want to maximize productivity by optimizing employee effectiveness. HRM is often responsible for, among other things:
- Recruitment and hiring
- Performance management and reviews
- Employee retention
- Employee development and training
- Safety and wellness
- Benefits and payroll
- Effective communication and engagement
HRM for small businesses is necessary because, with an efficient human resources function, your business will thrive in employee performance, customer retention, loyalty, and commitment. The focus should always be on achieving goals and executing objectives. HRM ensures this happens. Here are some areas to focus on when considering HRM:
Businesses investing in a strong candidate experience will increase their chances of hiring high-quality talent. Almost 80% of workers prefer new or additional benefits over a pay increase. Even more importantly, candidates will join your company, and existing employees will stay longer at a company that proactively listens to and addresses their issues and concerns.
Engaged vs. disengaged employees
Disengaged employees are nearly twice as likely as engaged employees to seek new jobs. Additionally, millennials are more likely to leave their employer because they’re unhappy with how their leadership skills are being developed. Employees have said that company culture is a critical job satisfaction factor.
Just 25% of employees who quit their jobs said that money was the main reason they chose to leave, stating that if their company provides equal opportunities, they’re about four times more likely to be proud to work for it.
These are just a few examples of the benefits HRM can have on your small business. If this sounds like a lot of work and you need more time, you better make sure you cut some out of your schedule. For these reasons and many more, it is clear why many small business owners are turning to Human Resources for better business outcomes.
Edward Gubman wrote in the Journal of Business Strategy, “The basic mission of human resources will always be to acquire, develop, and retain talent; align the workforce with the business; and be an excellent contributor to the business. Those three challenges will never change.”
HR directly impacts and affects the company culture and workplace environment, sets the tone for internal communication, helps to settle disputes, and much more.
Why is HR for small businesses necessary?
With efficient human resources, small businesses can succeed in employee performance, retention, loyalty, and commitment to their job role. This will lead to your business achieving its goals and objectives.
Still not convinced? There are dozens of statistics to back up how important HR is for small businesses.
- Businesses that invest in a strong candidate experience will increase their hire quality by 70%.
- Almost 80% of workers prefer new or additional benefits over a pay increase.
- 75% of employees will stay longer at a company that proactively listens to and addresses their issues and concerns.
- Disengaged employees are nearly twice as likely as engaged employees to seek new jobs.
- 71% of Millennials are more likely to leave their employer because they’re unhappy with how their leadership skills are being developed.
- 79% of workers said company culture is a critical job satisfaction factor.
- Just 25% of employees who quit their jobs said that money was the main reason they chose to leave.
- Employees said that if their company provides equal opportunities, they’re about four times more likely to be proud to work for that company.
These statistics, and so many more, prove that human resources for small businesses is necessary and then some. This sounds like a lot of work, and you don’t have the time. Plus, you need to find out if hiring someone to take care of this for you is necessary.
That’s why so many business owners are turning to employee management apps, so it’s a more efficient and streamlined process.
Using the right employee management software, you quickly build professional skills, streamline onboarding, boost engagement and morale, provide exceptional customer service, and more.
As a small business manager, you’re expected to wear a dozen hats and then some. However, the right technology makes this burden easier.
Human resources mistakes and how to avoid them
You can establish the best ways to avoid critical errors by understanding common HR mistakes.
Hiring the wrong person
When you’re looking to fill an open position, you may be tempted to fill it as fast as possible. This means that you could easily hire the wrong person, someone who doesn’t fit the company culture, and this only leads to problems in the workplace, to the point where you will need to replace them and start the process all over again.
Small business owners generally don’t have the time or money to do an extensive background check. However, it’s a step that shouldn’t be avoided. We recommend asking behavioral questions during the interview to gauge the candidate and setting clear, focused job descriptions.
Not setting job descriptions
Setting ‘open-ended’ job descriptions may seem like an easy win, but you are much better off telling your employees exactly what is expected. You can only hire the right person if you know what specific roles and responsibilities are in their lap.
When you hire the right person for the job and to fit the company culture, you want to keep them around for a long period. That’s the goal. And the only way to truly achieve that is through an efficient onboarding process. After all, 15% of employees said an ineffective onboarding program was why they left the company.
You must answer the following questions answered if your onboarding is to be successful:
- When will onboarding start, and how long will it last?
- What impression will the new employee walk away with on their first day?
- What should they know about the company culture?
- What goals do you have for the new employee?
- What process will you use to gain feedback and measure their onboarding success?
- Who is involved in onboarding?
Have their onboarding mapped out for the first day, first week, first month, first three months, and the first year. All this contributes to a positive work ethic and helps deter burnout.
Performance isn’t documented
HR managers must record and document all performance reviews, meetings, and issues. If any problems arise, from job performance to attitude, you must discuss them one-on-one with the employee to create an action plan.
Everything, from the time the problem was noted to your first meeting with the employee, must be documented. You need this information to let the employee go and go through the offboarding process. Otherwise, you’re open to legal action.
On the other hand, performance reviews also show an employee’s progression to receive a raise, a promotion, new responsibilities, etc.
A poorly kept employee handbook
HR managers must keep a current employee handbook to reflect company policies and procedures accurately. Additionally, it should include the discrimination policy, harassment policy, vacation requests, drug and alcohol policy, and background checks must reflect the most current federal and state laws.
The employee handbook is only relevant if every employee has access to it at any time or has a physical copy. You must also have signed acknowledgment of receipt and understanding forms for every employee.
Review your handbook annually for any changes in your company, and keep it current at the state and/or federal level.
Ignoring employment laws
Human resources for small businesses focuses on employment laws based on your business location. If you ignore or purposely disregard the law, then you are not protected from legal action or other problems that may come up. Consider putting together a corrective action plan.
Improper classification of employees
You must classify your employees correctly: regular vs. temporary, full-time vs. part-time, and exempt vs. non-exempt. You may have contract employees as well.
With the above outlined, we now outline what your human resources manual for small businesses should replicate. Please note that this is a guide, and we recommend having legal counsel go through everything to keep you compliant.
The small business human resources manual
HR is rife with laws and regulations, so small businesses often put off dealing with it. Generally, for companies with fewer than 50 employees, you must implement three basic things to cover the basics, and employee files you must keep up to date.
Human resources maintain all the paperwork necessary, ensuring that your company complies with labor laws and is protected if a future dispute arises. All small businesses should have the following documentation on every single employee:
- I-9 File: The United States government refers to the I-9 to identify and verify that your employees are, in fact, eligible to work in the United States. You must keep all employee I-9 files together, in one file, instead of individually.
- Employee general file: Create this file for your benefit, as it contains additional documentation associated with that employee. From their resumes, performance reviews, disciplinary action, 360 performance reviews, training verification, W-4 forms, payroll details, etc.
- Employee medical file: A medical file contains notes from doctors, disability information, and any other medical information you have on an employee. Medical files are far more critical than General Files are should be stored away with a lock and key.
Technology and connectivity
In today’s world, employees can be overwhelmed by the technological advancements they need to be aware of, particularly those who are telecommuting, working from home, and coming into the office once or twice a week. It is easy for them to feel overwhelmed by technology, and sometimes the lines are blurred between work and personal life.
Since mobile devices and connectivity allow us to answer emails and deal with work issues at any moment, it is essential to stay aware of your employee’s well-being. If you encourage this kind of dedication, ensure your hiring process procedures make this clear in the employee handbook. Otherwise, you cannot expect constant connectivity.
HR data security
Small business owners have a responsibility to keep their employee’s data secure. As with any data, recent technology has provided a window for those wanting to get their hands on that information. Using everything from malware-infected resumes to well-published data breaches, the small business owner must know how detrimental they can be.
Most small business owners think this won’t affect them, but if you are using paper files, it can be tricky. You are responsible for ensuring all data from computers and software are password protected and stored on a secure cloud. You also need to make sure that your cloud backup is encrypted.
President and CEO
Wakefield Talabisco International
Since founding Wakefield Talabisco International in 1992, Barbara has brought her vast network of personal contacts and in-depth industry understanding to the firm. Her dynamic, results-driven personality, ingenuity, and combination of creative candidate-development skills consistently generate successful placements. Barbara leads searches for corporate clients ranging from innovative start-ups to billion-dollar multinationals.
Barbara’s experience in the executive search industry spans more than 30 years. With a background in research, she moved rapidly to the level of partner and has contributed to the success of the well-known firms Judd Falk, Rene Plessner, Kurt Einstein Associates, and Gilbert Tweed Associates. Barbara’s industry specialization encompasses consumer products, financial services, direct selling/direct marketing, fashion, cosmetics, technology, and retail. Her clients include some of America’s fastest-growing companies.
Read Barbara’s previous blog on small business mistakes here.
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