HUMAN RESOURCES MATTERS TO SMALL BUSINESS

Here is another awesome research paper a student has written specific to the HR needs of small business owners (SBO).  SBO's make up a majority of my clientel because they don't have the budget or the demand for a full time HR professional most of the time.  Owners don't have time to keep up with the changes in HR which is why I am often called in as an HR consultant.  The following is printed by permission by guest author Taylor N. David:

Why Human Resources Training Matters to the Small Business Industry by Taylor N. David

Abstract

This paper explores eleven sources that elaborate on the importance of Human Resources training and education in the small business industry. This paper will examine why small business owners should participate in frequent HR (Human Resources) training and how HR training can benefit their business in the long term. A brief overview on what HR departments do including why HR training is necessary for small business owners will be discussed in this paper. This paper will focus on detailed HR related issues effecting the small business industry, such as common HR mistakes small business make and showcase the importance of effectively handling employee relations. This paper will also examine creative strategies for small businesses to recruit the best possible talent, as well as several retention methods small businesses should implement in order to retain skilled and talented employees. The importance of motivation and employee-supervisor relationships will also be briefly discussed in this paper, as it is an essential component for retaining talent.

Why Human Resources Training Matters to the Small Business Industry

            Human Resources is a critical department of any organization, regardless of the size. HR departments are responsible for a vast majority of tasks including analysis and design of work, recruitment and selection, employee training and development, compensation and benefits, employee relations, HR policies, employee data, legal compliance, and support for business strategies (Gerhart et al., 2015, p. 6). Since many small businesses lack dedicated HR departments, the responsibility of Human Resources falls on the business owners’ shoulders. It is estimated that 50% of United States workers work in a small business, with small businesses accredited for creating 63% of new jobs from mid-2009 to 2012 (Marino, 2014). Small business owners can benefit from HR training in numerous ways. Frequent training can prevent small businesses from making common HR mistakes and ensure they are in compliance with national laws and regulations. Since HR work consumes 25%-35% of a small business owners’ time, frequent HR training and education can provide small business owners with information like how to effectively handle employee relations (Marino, 2014). Likewise, HR training will help small businesses develop strategies to recruit the best possible talent while also developing employee retention strategies.

Common HR mistakes

            Regular HR training can prevent common HR mistakes within the small business industry, such as wrong hires, lacking job descriptions, no record of performance documentation, not having an employee handbook, and not abiding by federal employment laws. HR training can assist small business owners in making sure they are hiring the right employee(s) for their business, as well as improving their hiring process. The hiring process is very time consuming, and it is essential that business owners do not settle for less-than-qualified employees because the cost of a bad hire can have a detrimental impact on business. Small business owners spend around $1,900 on average to hire a new employee and over 60% of small business owners have admitted to making the mistake of a bad hire, as conducted by a recent Monster study (Brooks, 2016). Hiring the wrong employee can also negatively impact how the business operates and tarnish the businesses’ image. A recent study on Monster shows that out of the 639 small businesses surveyed, more than half said that hiring the wrong employee has resulted in product errors, while 24% said they lost customers because of it (Brooks, 2016). The cost of a bad hire is likely to impact small businesses much more than large businesses. Senior Vice President of small business solutions at Monster supports this; two wrong hires can cost an average small business 3.8% of their yearly revenue, while a typical Fortune 500 company is only expected to waste 0.02% of its revenue as a result of two wrong hires (Brooks, 2016). 

HR training can also help small business owners with writing correct job descriptions. Since many small businesses do not have dedicated departments, employees perform a wide variety of tasks. It is crucial that employees know their role in the business and that starts with accurate job descriptions. On another note, a company’s job description can discourage qualified employees from applying for the position. For example, in a recent study from the Wall Street Journal, researchers rewrote 56 job advertisements to distinguish between two different approaches. The Needs-Supplies approach focused on what the company can do for the candidate, while the Demands-Abilities approach focused on what the company expects from the candidate. Out of the 991 responses, applicants who responded to the Needs-Supplies approach were rated higher than those who responded to the Demands-Abilities approach (Martin, 2016). A significant takeaway from this study shows the importance of showing room for growth and promising opportunities within job descriptions in order to attract both talented and qualified candidates.

Many small businesses make the mistake of not keeping a detailed record of employee performance. Since keeping employee records is a vital element of Human Resources, HR Training can help small business owners recognize the need for keeping performance documentation of their employees. Performance documentation records will aid small business owners in promotional decisions, as well as recognizing when an employee is causing problems within the businesses. For example, should a business owner ever have to terminate an employee, they will need to have detailed records to avoid or prepare for legal issues (Lee, 2013). Many small businesses also make the mistake of not having an employee handbook. Human Resources departments are primarily involved with constructing employee handbooks; well-written handbooks are necessary in order to protect the business as well as encouraging employees to follow the vision of the company. Employee handbooks are responsible for making sure employees understand and meet employers’ expectations and behave and perform in a satisfactory manner, while also protecting the business by treating employees consistently and to help win unemployment lawsuits and claims (Brannen). Frequent HR training also allows small business owners to review national laws they must abide by, such as non-discrimination laws, wage and labor laws, leave of absence laws (FMLA), Safety laws (OSHA), and immigration laws.

Employee Relations

            Employee relations are an imperative element to HR success; small business owners need to understand how to deal with employee complaints and assist employees with any questions or concerns they may have. An effective employee relations strategy will help build communication between the employer and employees while also validating confidentiality. Small business owners need to know how to manage complaints such as dealing with difficult employees, minimizing bullying, and preventing sexual harassment in the workplace. Strong employee relation strategies will help business owners create a trusting and positive work environment to combat such issues (Muller).  Bullying and sexual harassment claims impact even the smallest of businesses. It is important that business owners follow the EEOC’s recommendations of establishing internal grievance procedures, providing harassment training, and taking immediate action when complaints arise (Walsh, 2016). Since small businesses typically do not have dedicated HR departments, the business owner must know how to assist employees with information regarding raises and compensation and employee benefits such as vacation, time off, health insurance plans, and retirement plans.

Recruitment

As stated earlier, hiring the wrong employee(s) can impact small businesses in devastating ways. It is not only tremendously costly, but 30% of small business failures are blamed on poor hiring decisions (Marino, 2014). Regular HR training will help small business owners recruit the best possible talent by adopting established HR recruitment strategies. When recruiting talent, small business owners have the advantage to showcase their flexibility. Small businesses typically have fewer obstacles to face, which allows sooner opportunities for employee advancement and growth (Evans, 2014). Three fundamental recruitment strategies  small business owners should be implementing are posting on job boards, encouraging employee referrals, and using social media. A downside to using job boards like Monster or Indeed is the cost and a tremendous amount of unqualified applicants, so implementing an incentive employee referral program could be of value to small businesses. Top performing employees are most likely to surround themselves with talented, skilled people just like themselves (Evans, 2014). Small business owners should also use social media sites like Twitter, Facebook, and LinkedIn in order to recruit top talent. Companies must find a way to adapt to the changing market and social media recruiting plays an important part in the recent shift from selection to development. This shift means that companies have to look at different areas for current employees while also finding contributing members to team (Smith, 2015). Social media sites are a great way for small businesses to look for local talent while also broadening their recruiting horizons.  

Many people wish to work for companies who establish an online presence and keep up with recent trends. In fact, a current survey conducted by MIT and Deloitte found that the majority of respondents, ages 22 to 60, desire to work for organizations who keep up with digital trends (Martin, 2016). Social media recruiting is becoming a popular trend in HR recruiting and is relatively cost effective. Social media recruitment is beneficial because both job seekers and people that know people who are looking for jobs are on social media; one can easily share a job post with their friends on social media sites at the click of a button (Evans, 2014). The recruitment side of HR training can also help small businesses improve their own interview process, such as asking open-ended questions and facilitating background checks to avoid hiring bad employees. Asking the right questions is an important part of the interview process. Employers should ask questions involving candidates’ long-term goals and questions regarding their motivation and drive in order to find the best-fit candidate for their business (Martin, 2016).

Retaining talent

            Traditional HR training and education can help small business owners develop strategies to retain valuable employees. Retaining employees is the most overlooked HR function within small businesses simply because HR departments are not established in the majority of small businesses (Newman, 2014). The cost of replacing an employee is excessively high and since it is difficult to find worthy employee talent, small business owners need reputable and proven retention methods. The estimated cost of employee turnover is 75%-150% of the employee’s salary, which helps shed a light on why retaining employee talent is so important for businesses (Marino, 2014). Small business owners are constantly competing with large businesses and do not want to lose employees to larger competition. Small businesses can develop retention strategies by paying employees above the labor market, providing more incentive and bonus opportunities, letting key employees know they’re essential to the business, creating flextime/telecommuting opportunities, and discuss future opportunities with employees (Schappel, 2012).

An important component to keeping employees satisfied and motivated is to have a respectable employer-supervisor relationship (Walsh, 2016). Since small businesses hire less employees, small business owners are likely able to develop closer and more personable relationships between their employees. Small business owners should communicate effectively to their employees and listen to their goals and interests. Employees want to feel valued, so it is important to give constructive feedback and recognition when it is deserved. Likewise, small  businesses should conduct yearly satisfaction surveys and assessments in order to make necessary changes to retain employees. This may help with job burnout and assist in developing job rotation or job enrichment strategies. By implementing these retention strategies, employees will feel valued and feel like their employer is looking for their best interest, which will likely reduce employee turnover statistics.

            Although small businesses typically lack dedicated HR departments, HR training can benefit the small business industry in remarkable ways. Some would say the HR department is the supporting structure of a company; a successful business cannot ignore HR tasks and responsibilities. Small business owners should participate in frequent HR training or classes in order to keep up-to-date with current issues and to get the most out of their business. Overlooking HR duties can financially burden an organization and negatively affect company performance. Since HR work consumes nearly one fourth of a small business owners’ time, there is absolutely no reason to not partake in HR training and education (Marino, 2014). Frequent HR training will give small business owners’ peace of mind by assuring them they are not making common HR mistakes and to confirm they are complying with federal and state laws, while also providing small business owners with creative employee relations, recruitment, and retention strategies.

HUMAN RESOURCES MATTERS TO SMALL BUSINESS

References

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