1. Managing Human Resources
PART 5 Managing Growth in the Small Business

2. 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.

3. 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.

4. 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

5. 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

6. 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.

7. 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.

8. 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

9. 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

10. 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.

11. 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

12. 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.

13. Exhibit 20.1 Steps in Job Instruction Training

14. 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

15. 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

16. 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

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. 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.

24. 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.

25. 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

26. 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

27. 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)