Human Resource Basics for the Small Business Owner

I was recently at an event connecting with many entrepreneurs and leaders of small business in a variety of industries.  At the end of the day I reflected on some of the discussions we had and some of the human resource misconceptions out there.

First and foremost, if you are operating a business with any size group of employees, you absolutely must manage and plan for those human resources! 

While you may not be ready to hire an HR leader for your small business, you should have someone to directly manage or oversee some key aspects of human resource management. Here are some critical areas that need to be managed as part of running a small business.

1.Recruiting and Hiring

When it is time to bring in a new resource, hiring the right person is critical especially in a small business. Performance gaps become obvious very quickly on a small team and can create resentment if the individual isn’t carrying his/her weight.  Cultural fit is also a key factor.  Take your time and invest the time up front to ensure that you are hiring the right person to join the team. Evaluate the person for their skill set but also confirm that they share the same values as the rest of the team.

2.Compensation

While compensation is not the only reason employees stay, it still ranks in the top 5.  Make sure that you are competitive in the marketplace and within your industry.  Be on top of employment trends, benefit offerings and perks that support your workforce and the workplace culture.  A gap in a key role within a small business can put a huge strain on the business and the rest of your employees.  If that means investing a little more to retain your employees, isn’t it worth it?

3.Planning for Employment Needs (Workforce Planning)

Do you have plans for growth? Many small business are looking to expand the business.  Depending on the industry and skill sets required, planning for this growth needs to happen long before the hire. Forecasting future talent needs to support growth and replace employees that may leave the organization are critical to achieving those objectives.  This is especially true in businesses requiring very specialized skill sets.  For example, one organization I spoke to was so specialized and the technology was so new that their approach was to “grow their own” as the skills didn’t exist in the market.  That is, they had to teach new employees about the business and technology.  In this case, it takes several years to bring a new employee up to speed.  In this scenario, the business will need to hire today for growth projections that are 5 years out.

4.Evaluating/Managing Performance

Whether you believe in the traditional once annual review or informally provide ongoing feedback, it is imperative that you provide employees with targets and evaluate performance so that they are clear on how they are progressing (or not!).  Developing a competent and motivated team is important to reach your business goals and feedback on goals helps keep everyone on track.

5.Communication

As obvious as it is, communication continues to be a key issue in almost every organization.  Take the time to share information, update on progress towards goals, build that connection between employees and the organization’s “why”.  The more connected employees feel, the greater satisfaction they derive from their work and chances are, they will stay.

Human Resource Management is not just for the large corporation. Let’s not confuse this strategic imperative with having a dedicated resource or department.  Regardless of the size of the organization, these are critical aspects to managing and growing your business.

HR Service providers can help develop programs and processes to ensure the small business owner has the support required while remaining very cost effective.