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Human Resource Management:
Small Business Considerations
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Hiring Employees
• No decision is as important or complex as the
decision to hire an employee
• Of the 25.4 million businesses in the United
States in 2004, over 19.5 million had no
employees
• Adding employees increase amount of work that
can be done – serving more customers, staying
open longer

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• Owner and business become responsible
for safety and well-being of the employee
– Legal requirements as an employer (see
Figure 19.1 and Tables 19.1 and 19.2)
• What kind of work needs to be done?
– You can hire either part-time or full-time
employees
– Many additional expenses
• Attracting, training, retaining
• Carefully balance the ledger

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• Employee fit: the match between the
needs, expectations, and culture of the
small business with the expectations and
the skills of the individual employee
– Let an applicant work part-time for a while so
you can see if he/she fits
• Probationary period: trial period in which
an employee has temporary status
before a formal offer to work full time is
presented

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Attracting Employees
• Tends to be expensive,
expensive so consider less
expensive alternatives

– Networking
– Internet recruiting
– Employee referral
– Company websites
– Career service offices

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• Sources:
Sources cont.
– Professional groups
– Outsourcing
– Non-traditional methods:
methods
• Local churches and pastors
• Visit local high school for entry-level jobs
• State unemployment offices

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Matching the Work to the Worker

• Writing a job description:
description define and discuss all
the essential knowledge, skills, and abilities
– Craft a job analysis:
analysis
• Reason the job exists
• Mental or physical tasks involved
• How the job will be done
• The qualifications needed

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• Crafting a Job Description:
Description
– Start with a title
– Give a job overview (or a summary of the
job)
– Define the duties and responsibilities
– Knowledge, skills, and abilities
– Credentials and experience
– Special requirements

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• Evaluating job prospects:
prospects is an individual
the right match for the position and your
small business
– Create same specific questions you will ask
of all candidates
– Ask that person to demonstrate their skills
– Consider involving one or two other
interviewers
– Never hire a moderately qualified just
because you need someone now

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Training Your Employees
• Assess your firm’s training needs
– Where is training needed? What key areas
need the most attention?
– What specifically must an employee learn in
order to be more productive?
– Who needs to be trained?

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• Two broad types of training:
training
– On the job:
job
• Delivered to employees while they perform
their regular jobs
• Orientations, job instruction training,
apprenticeships, internships and
assistantships, job rotation, and coaching
– Off the job:
• Lectures, special study, videos, television
conferences, case studies, role-playing,
simulation, programmed instruction, and
laboratory training

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• Three Guidelines for Training:
– Give your employees opportunities to use
their new skills
• Owners often hesitate to train employees
because afraid they will leave for better job
– Make training an ongoing process
• Good employees want to learn
– Think of training as an investment (as
opposed to an expense)
• Results of sink-or-swim method include costly
mistakes, unhappy workers, and low
productivity

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Rewarding Employees
• 5 factors are most valuable to employees:
1. Teamwork:
Teamwork allows people to interact
2. Recognition:
Recognition showing appreciation, giving
credit, incorporate a reward system
3. Training:
Training providing learning opportunities
4. Empowerment:
Empowerment allow employees to use their
judgment
5. Contribution:
Contribution they make a difference

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23 Rewards Offered Employees

Table 19.3
of Small Businesses

Factors Psychological Contract Items

Autonomy and Growth Meaningful work

Challenging and interesting work
Participation in decision making
Freedom to be creative
Opportunity to develop new skills
Increasing responsibilities
A job that provides autonomy and control
Recognition of my accomplishments
Career guidance and mentoring

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23 Rewards Offered Employees

Table 19.3
of Small Businesses

Factors Psychological Contract Items

Benefits Health care benefits

Vacation benefits
Retirement benefits
Tuition reimbursement
Rewards and opportunities Opportunities for promotion and
advancement
Opportunities for personal growth
Pay and bonuses tied to performance
Job training
Continual professional training

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23 Rewards Offered Employees

Table 19.3
of Small Businesses

Factors Psychological Contract Items

Job security and work Well-defined job responsibilities

responsibility A reasonable workload
Job security

Work facilitation Adequate equipment to perform job

Enough resources to do the job

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• Reviewing employees’ performance
– Performance review:
review once a year to monitor
your employee’s job satisfaction, overall
performance, and set career objectives
• Recognize performance, set goals, and set
direction
– Pay review:
review reward your employees if they
have performed all duties and met general
requirements

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Compensation and Benefits
• Determine the organization’s salary
philosophy:
philosophy
– Find comparison factors for salary
– Research salary range
– Determine whether you are competitive
– Salary.com: or on
http://hotjobs.yahoo.com

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• Bonuses and long-term incentives:
incentives single
lump at end of year
– Profit-sharing plans, stock options, or stock
grants
• Health insurance:
insurance not always affordable
– Sends the message that you care about their
health
– Consider having employees pick up part of
the tab

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• Retirement plans:
plans 401(k) plans have
become popular because they are
relatively easy to administer
• Other incentives:
incentives
– Time off
– Flexible schedules
– Sick days / personal days
– Vacation days

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• Entrepreneurial Leadership: leadership
really means administration
– Two key factors: Task and Person
• Essential to grow any business
– 75% of businesses in U.S. consist of only the
owner; no employees
• Looks at how you operate as chief
executive - 3 components:
– Innovation
– Operation
– inspiration
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Human Resource Issues in Family Business
• Estimated 95% of businesses are family
businesses
• Two key HR management issues that surface:

– Striking a balance between nepotism and

meritocracy
– Managing privilege

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• Nepotism: a management philosophy of
selecting and promoting people based
on family ties
• Meritocracy:
Meritocracy a management philosophy
of selecting and promoting people based
solely on their being the most capable
person for the job

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• Good HR Practices for All Businesses
– Key elements of a good HR approach
• Transparent procedures with consistent
application
• Job basics
• Job metrics
• Task repair
• Lines of communication
• Clear termination rules
• Line of appeal

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Dividing up ownership and dividends
• Owners of corporations often receive the base of
their compensation as a salary
– Also receive dividend from the corporation
• Family members receive similar packages
– Higher than non-family members
– Create profit sharing plans or bonus system for non-
family members

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