Managing employees in small businesses

IT IS SAID that small firms do not have the
same kind of resources as large firms to
implement formal human resource management
programs. Small firms, however, still
need to keep their employees satisfied and
productive especially in the light of higher
competition.They need to recognize these
employees can be a source of competitive
advantage.
On the surface, it seems small firms have
little need to invest in the management of
their people. They have only a small number
of people, who take on broad responsibilities
and perform multiple tasks.
The entrepreneur has a definite mark on
business operations and has an informal and
personal relationship with the workers while
the workers themselves relate well among
themselves. His business depends much on
the local market and usually has a limited
number of customers. In short, the people
side of the business is fairly small and contained
and it can be argued the entrepreneur
need not turn to other people for
help to address “people” issues
(Koning, 1992).
But small businesses
grow.
When they do, they typically encounter
problems related to people. Getting the
right people for the right job is one. Retaining
employees, especially the good ones, is
another. Negotiating wages and salaries becomes
complicated while training and development
becomes a necessity. Tax regulations,
community relations, and other HR
concerns can become an extensive burden
for the growing small firm.
The small business, as a result, is inundated
with new challenges. It must not only
take care of the basics of personnel management
— of hiring and firing, of fulfilling
contractual and governmental commitments,
and satisfying the employees with tokens of
benefits and other company provisions —
but must also move towards higher levels of
people management to ensure that people
are not only satisfied and productive but
also a source of competitive advantage.
How does a small business make its
people a source of competitive advantage?
For one, it can increase employee satisfaction.
This can minimize employee turnover,
absenteeism, and lost productivity. This can
be done by instituting a human resource
management (HRM) program, creating an
HRM department, or bringing in somebody
whose sole responsibility is to ensure that
people are managed well. As a guide, some
HR experts (Little, 1986 and Caudron, 1993)
suggest that businesses with less than 100
employees can operate without a full-time
personnel or HR manager while a base of
150 or more employees would require an
HR manager or department.
HR capability can be extremely important
for firms functioning in dynamic and complex
environments. They must have the ability
to innovate, accept risk, and identify and
exploit entrepreneurial opportunities
(Hayton, 2003). While the owner-entrepreneur
can be expected to be
principally adept at these,
it may not be enough
for the firm to be truly competitive. He will need everybody
in his organization to have these abilities.
It will no longer be possible for the entrepreneur
to take on the entrepreneurial
challenges single-handedly. The days of the
Henry Fords deciding everything for the organization
or of a Don Andres Soriano deciding
on the flavor of the month for ice
cream are over. Every employee should be
able to make decisions at his level without
waiting for the go-signal of the one on top
of him. In today’s highly-charged and competitive
environment, not deciding or waiting
for directions will slow down service to the
customer and spell disaster for the company.
In this regard, Pfeiffer (1998) lists seven
HRM practices of successful businesses. They
are: employment security, selective hiring,
decentralized work arrangements, performance-
based pay, extensive employee training,
reduced status differentials, and information
sharing. To provide a source of competitive
advantage, people should be “leveraged.”
This means the power of employees
to do things should be strengthened by
adopting certain HRM work practices such
as those above that positively impact business
performance (Wagnar and Rodendeau,
2006).
Perhaps, the importance of HRM in small
businesses is even more critical in the light
of their comparatively meager material or financial
resources. Small firms must depend
on above-average, committed, and qualified
employees. Indeed, in many studies, the
connection between people regarded as
value assets and sustainable business success
has been proven (Behrends 2007, Reid
& Adams 2001, Huselid 1995, Astachan &
Kolenko 1994, and King-Kauanui, Ngok &
Ashley-Cotleaur 2006).
Where can small businesses go from
here? It may be safe to assume they want to
move forward in their HRM efforts as they
seek competitive advantage in the marketplace.
First, they may wish to define the
mission of their business. If they do not
have one, then all efforts should be directed
towards it. They then can take stock of their
present HRM capability and examine their
strengths and weaknesses.
For instance, how do they recruit and
place people? Is it crude and unimaginative?
Do they exclusively rely on referral from
relatives and friends? Do they use long-term
HR planning? Do they define jobs and responsibilities
in a way that is clear to
people? In relating with employees, do they
provide them opportunities to learn new
skills? Are owners perceived to be fair to
people? Do they show empathy for employees’
problems? Are there stable work schedules?
Do they consult their employees? Are
progressive HR policies in place?
In an age where companies and people
must learn new things continuously to keep
up with change, how do small businesses
ensure training for their people? Is there a
budget for training? Is free time given to
employees for training?
Finally, in the matter of compensation
and benefits, how do the small firms provide
these? Are these attended to informally
and without a system? Are jobs evaluated?
Are the appropriate HR policies on compensation
and benefits in place? As compensation
and benefits may impact operational
costs, do the small firms have options for
getting workers? Are semi-retired or older
workers considered for employment? Are
some work assignments outsourced?
In a manner of speaking, small firms today
have crossed the Rubicon. They have
reached a point of no return. They can no
longer stand still and be content with what
they have or where they are in terms of
business. They have a responsibility for society
to be better at what they are doing.
And the way to go is lift up their people to
become a real source of competitive advantage.
________________________________________
Mr. Baltazar is the president of the Partnership
Forum for International Trade Development,
Inc.