Managing Human Resources PART 5 Managing Growth in the Small Business

Looking Ahead After studying this chapter, you should be able to: Explain the importance of employee recruitment and list some sources that can be useful in finding suitable applicants. Identify the steps to take in evaluating job applicants. Describe the roles of training and development for both managerial and nonmanagerial employees in a small business. Explain the various types of compensation plans, including the use of incentive plans. Discuss the human resource issues of co-employment, legal protection, labor unions, and the formalizing of employer–employee relationships.

The Need for Quality Employees Recruiting Personnel The Need for Quality Employees Employee performance directly or indirectly affects the capability of the firm to service customer needs. Employee performance affects profitability. Payroll costs affect firm’s bottom line. Quality of employees determines the long-term competitive potential of the firm.

The Lure of Entrepreneurial Firms Advantages of Employment in Small Firms Quicker movement to decision-making levels of management Greater managerial freedom More opportunities for broad-based managerial experience Flexibility in work scheduling and job sharing

Sources of Employees Help-Wanted Advertising Public Employment Offices Employee Referrals Walk-ins Private Employment Agencies Internet Recruiting Schools Executive Search Firms Temporary Help Agencies

Diversity in the Workforce Workforce Diversity Differences among employees in terms of such dimensions as gender, age, and race. Diversity is increasing with higher proportions of women, older workers, and racial minorities entering the workforce.

Job Descriptions Job Description Job Specification A written summary of the essential duties required by a specific job Aids in personnel recruitment. Helps focus employees on their work. Provides direction in training. Serves as the basis for performance review. Job Specification A list of the knowledge, skills and abilities needed by the job holder to successfully perform a specific job Aids in selecting the most qualified job applicant.

Evaluating Prospects and Selecting Employees Steps in Recruiting Employees 1 2 Using application forms 3 Interviewing the applicant 4 Checking references and background information 5 Testing the applicant Requiring physical examinations

Evaluating Job Applicants Telephone Screening Credit Checks Skills Assessment Face-to-Face Interviews Drug Screening Motor Vehicle Record Checks Background Checks Personality and Behavior Testing Physical Examinations

Testing the Applicant Job-Related Testing Validity Reliability The U.S. Supreme Court has upheld the Equal Employment Opportunity Commission’s requirement that any test used in making employment decisions must be job-related. Validity The extent to which a test assesses true job performance ability. Reliability The consistency of a test in measuring job performance ability.

Types of Training and Development Orientation of New Personnel Development of Managers and Professionals Training to Improve Quality Training of Nonmanagerial Employees Training and Development

Training and Developing Employees Purposes of Training and Development Prepare new recruit to perform the duties of the job. Improve the performance of current employees. Prepare employees for career advancement. Improve morale of current employees. Serve as an inducement to potential applicants.

Exhibit 20.1 Steps in Job Instruction Training

From Training to Implementation Suggestions for Training Efforts: Put it (an employee’s personal action plan) on paper Measure results (increased productivity) of training Involve peers to support and reinforce training Involve supportive superiors Provide access to experts to fill in training gaps

Training and Developing Employees (cont’d) Development of Managerial and Professional Employees Determining the need for training Creating a plan for training Setting a timetable for training Providing employee counseling

Compensation and Incentives for Employees Wage or Salary Levels Competitive compensation Time- or output-based compensation Financial Incentives Commission systems Piecework Group incentives and team awards Bonus and profit-sharing plans

Compensation and Incentives for Employees (cont’d) Performance-Based Compensation Plans Keys to developing an effective bonus plan: Set attainable goals. Include employees in planning. Keep updating goals.

Employee Stock Ownership Plans (ESOPs) Stock Incentives Stock Options Employee Stock Ownership Plans (ESOPs) Plans through which a firm is sold either in part or in total to its employees. Employees’ performance is motivated by their sharing of ownership in the firm. Owners can cash out and withdraw without selling to outsiders. ESOPs offer tax advantages to owners and employees.

Compensation and Incentives for Employees (cont’d) Employee Benefits Supplements to compensation designed to be attractive and beneficial to employees. Benefits are a substantial portion of payroll costs. Small firms tend to provide fewer benefits. Use of flexible benefit plans is growing. Small firms are increasingly outsourcing the administration of their benefits programs.

Co-Employment Agreements Special Issues in HRM Co-Employment Agreements Outsourcing burdensome administrative processes to a fee-for-services organization (PEO) that handles payroll and benefit administration for those employees. Allows small firms to provide improved employee benefits. Makes small firms subject to additional government regulations affecting larger firms. Professional Employment Organization (PEO) A company that sets up co-employment agreements, assisting businesses with the administrative demands of keeping employees on their payrolls.

Legal Protection of Employees Civil Rights Act (1964) as amended Legislation prohibiting discrimination based on race, color, religion, sex, or national origin. Applies to all employers of more than 15 people. Americans with Disabilities Act (1990) Legislation prohibiting discrimination against persons with disabilities; requires firms make “reasonable accommodations” in the employment of disabled persons.

Legal Protection of Employees (cont’d) Sexual harassment policy guidelines: Establish clear policies and procedures regarding sexual harassment in the workplace. Require employees to report incidents of harassment to management immediately. Investigate any and all complaints of sexual harassment fairly and thoroughly. Take appropriate action against violators and maintain claimant confidentiality. If a lawsuit is to be filed, contact an attorney.

Legal Protection of Employees (cont’d) Occupational Safety and Health Act (1970) Legislation that regulates the safety of workplaces and work practices. Created the Occupational Safety and Health Administration (OSHA) to establish and enforce health and safety standards. Fair Labor Standards Act (FLSA) Federal law that establishes a minimum wage and provides for overtime pay for more than 40 hours per week.

Legal Protection of Employees (cont’d) Family and Medical Leave Act (1993) Firms must provide up to 12 weeks of unpaid leave for childbirth and other family needs. Firms must continue health-care coverage during the leave and guarantee that employee can return to the same or a comparable job. Labor Unions Participating in collective bargaining for labor contracts. Implementing HR policies to minimize employees’ desire for organization and representation.

Special Issues in HRM (cont’d) Formalizing Employer-Employee Relationships Standardizing personnel policies and procedures Avoiding the paralytic effects of excessive regulation while avoiding the increasing costs of informality Establishing a performance review system based on SMART goals: Specific Measurable Achievable Realistic Time-bound

Special Issues in HRM (cont’d) The Need for a Human Resource Manager Conditions favoring appointment of an HR manager: A substantial number of employees (100 or more) Unionized employees High labor turnover rate Need to recruit and select skilled/professional employees Considerable need to train supervisors or operative employees Poor employee morale Strong competition for personnel

Key Terms headhunter workforce diversity job specification behavioral interview validity reliability employee training management development Job Instruction Training piecework employee benefits co-employment professional employment organization (PEO) Civil Rights Act Occupational Safety and Health Act Fair Labor Standards Act (FLSA) Family and Medical Leave Act (FMLA)