May 27, 2003
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Identifying and managing human resource issues:
What's the Process? |
By Brian Pelletier
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While every company has human resource issues, small companies often have more than their fair share - and many don't even know it.
Small business owners, who regularly confront and overcome the obstacles faced by their growing companies, feel they know enough to handle most HR issues - recruiting, interviewing, payroll and the day-to-day management of people. But very few actually understand the critical details that underlie these and other HR tasks, and fewer still have the processes in place to ensure that employees and job candidates are treated fairly.
"Acquiring basic knowledge of HR functions like tax filing and payroll, and the complex regulations that govern them, is a challenge right from the start," says Dave Carter, vice president of sales at Ceridian Small Business, an HR information services company. "Just keeping up with mandated legal changes can be a full-time job."
Most small business owners, even without the pinch of a slow economy, hesitate to outsource HR, or any other function. But the cost of not deferring to experts can be significant - fines for noncompliance with payroll taxes, according to Carter, range from two percent to ten percent, depending on how late the taxes are filed. And a lawsuit triggered by an inappropriate interview question can be disastrous.
Avoiding fines and lawsuits are only part of the equation. Most small business don't have the processes in place that help them make the right hires, or that help them lead and develop the people who work for them now.
"Any business owner who says they don't have issues is fooling themselves," says Kelly Hyman of Chicago-based KSH Consulting. "Do you have turnover? Is the grapevine your main means of communication? Do employees know what their performance goals are? Are they being surprised at their performance reviews? Every company has human resource issues that need to be addressed."
Making the Right Hire
With today's tight job market, many business owners take a casual approach to hiring. They've interviewed people before, so they see it as a simple task of looking over a few resumes, spending some time with a few candidates, and then making an offer.
Unfortunately, interviewers often don't truly understand what they legally can and can't ask during an interview. Questions that would typically be icebreakers when meeting someone for the first time - Married? Kids? What kind of car do you drive? - are all things that you absolutely should not ask in a job interview.
Having a documented process for hiring can help eliminate these problems, and can also help get beyond the "will we be able to work together?" issues to cover the "is this the most qualified person for the job?" issues as well. A background check is also critical, and surprisingly inexpensive.
"People who are entrepreneurial often tend to hire people simply because they like them, without closely matching the needs of the job to the individual," says Gina Wylie, an HR consultant in Chicago. "On the other side, they'll find someone with a great background, but they'll find a typo in their resume and not be able to look beyond that."
Wylie recently worked with a small business owner who hired a salesperson she considered a perfect fit, based on the candidate's personality. The hire didn't work out, because the salesperson was a great closer but not good at finding an opening and breaking through with a new customer. The owner needed someone to churn the waters and generate sales leads that the owner could then close on herself.
"We train people on what nut to fall for," explains Wylie. "Interviewing has become a lot more sophisticated, and behavioral interviewing is becoming more standard. We also use a lot of assessment tools to identify people's strengths and weaknesses, because people too often misread the signs."
Small businesses often have too many people interview all the candidate. "In some companies everyone and their mother needs to meet someone and like them before they're hired," says Wylie. "Yes, people are going to work closely together, but with the right processes, tools and interview questions, two or three people should be able to interview a candidate and make a solid decision. People get caught up in the process and don't see how many times a resume is being touched."
Another hiring challenge for many companies is even more fundamental - not being able to provide a simple document that lists the company's benefits.
One of Wylie's clients, for example, was having difficulty getting a particular candidate to accept his offer. The owner was offering what he thought was a higher sales commission, but in reality it wasn't competitive with what other companies were offering, especially without any documented company benefits.
"The biggest question people forget to ask is, 'why would someone want to come work here?'" says Wylie. "It's not just because people are nice."
Identifying Career Paths
While the need for HR processes continues after the candidate is hired, even fewer small businesses have job descriptions, career paths and performance evaluation systems in place. Even with a great job in a growing company, employees of businesses lacking these processes can feel like their career is in limbo simply because they can't see where it's headed.
Again, the issue here grows from the fact that the business owner is too close to the problem. Especially in a small company, employees may feel uncomfortable raising what they see as an important but delicate topic, and when everyone is busy, no one has time for mentoring or career path development. On top of that, few small business managers have the training to address personnel issues in the best way possible.
Small business of nearly every size can benefit from some outside help in these areas. With five to ten employees, there's usually a large amount of one-on-one contact between the owner and the employees, but again, being busy and focused on business tasks can get in the way. Larger companies, up to about 100 employees, still might not have the critical mass to require a full-time HR person, but the company is probably too big for the owner to know everything that's going on with everyone. And even larger companies, with a dedicated HR function, can benefit from an outside expert.
"The issue is really the need to look at business processes - developing them if they don't already exist, and streamlining them if they do," says Kelly Hyman. "Supervisors in small businesses are usually working supervisors who do client work and manage people, so they don't have the time to devote to mentoring. That's one of the easiest things to let slip, even when they see that it's an issue. They're busy focusing on customers."
Hyman recently worked with a company of about 20 people to identify and address a number of employee-management issues. The company was very successful, with young bright employees and a more experienced management team - and some significant turnover problems.
Hyman started by talking to some of the managers to understand how they saw everyone's roles and how they characterized the company's culture. She learned where they thought the organization was in its development, and where they wanted it to be. Then she did the same with the employees, and found a number of disconnects.
"They were all too close to each other, and some of the employees felt uncomfortable saying these things to their boss," explains Hyman. "With a neutral third-party, the employees were very happy to talk about the issues that bothered them, and very forthcoming."
Hyman's organizational assessment identified the gaps in the processes, and gave the managers prioritized recommendations that tied in with the company's structure. "The issues may have been difficult for the managers to hear, but they were smart enough to see that they had issues, and were able to bring someone in to help identify them," says Hyman.
Outsourcing Systems
Critical to the success of any HR process is the system on which the data resides. In a small business where everyone knows everyone else, the wise and diplomatic owner naturally doesn't want this familiarity to spread to such matters as how much other employees earn or what their bonus was this year.
Some small businesses address this problem by dedicating a PC entirely to HR purposes, with varying levels of password protection. Others look outside the organization for a service firm that can host the data within a state-of-the-art encrypted security system. These systems not only keep data secure, but also ensure full compliance with employment laws governing the data and payroll processes.
"A web-based application allows a business owner to manage the payroll process remotely, when he or she is meeting with customers or visiting a job site, for example," says Carter of Ceridian. "An off-site HR system can also provide the peace of mind that comes from simply being able to check in and ascertain that all systems are 'go' without having to keep up with constant changes to the laws."
Managers have a choice of many different hosted services from many different vendors. One of Wylie's roles with her clients is helping them determine what system is best for them. Her experience on the IT side of a help desk enables her to bridge the communication gap between the IT experts who design and install the systems and HR professionals and business managers who use them.
"Many people aren't necessarily computer savvy, and it's hard to get them to let go of their paper calendar in exchange for a sophisticated web-driven application," explains Wylie. "It's helpful to have someone who understands the needs of the HR manager, and also knows how to talk to the technical people to customize something for a client."
To keep implementation costs down, Carter recommends that business owners seek out systems that don't require customization. He also suggests looking for a system flexible enough to work for the business now, but that also provides the same economies of scale needed by a large business, allowing them room to grow.
"Small businesses looking for a competitive advantage can find one by not getting bogged down in non-revenue producing administrative processes," adds Carter. "Outsourcing HR solutions can alleviate a lot of anxiety."
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Brian Pelletier is managing editor of CHI1, and president of Green Cardinal Communications
(www.greencardinal.com), a full-service marketing communications agency.
He can be reached at blp@chi1.com.
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