1. PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Part 5 Managing Growth in the Small Business Managing Human Resources

2. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–2 Looking Ahead After studying this chapter, you should be able to: 1. Explain the importance of employee recruitment and list some sources that can be useful in finding suitable applicants. 2. Identify the steps to take in evaluating job applicants. 3. Describe the role of training for both managerial and nonmanagerial employees in a small firm. 4. Explain the various types of compensation plans, including the use of incentive plans. 5. Discuss the human resource issues of employee leasing, legal protection, labor unions, and the formalizing of employer–employee relationships.

3. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–3 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 the firm’s bottom line. –Quality of employees determines the long-term competitive potential of the firm.

4. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–4 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. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–5 Sources of Employees Help-Wanted Advertising Public Employment Offices Employee Referrals Walk-insWalk-ins Private Employment Agencies Internet Recruiting SchoolsSchools Executive Search Firms Temporary Help Agencies

6. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–6 Diversity in the Workforce Workforce Diversity –Differences among employees in terms of such dimensions as gender, age, and race –Increasing with higher proportions of women, older workers, and racial minorities entering the workforce

7. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–7 Job Descriptions Job Description –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 skills and abilities needed by the job holder to successfully perform a specific job Aids in selecting the most qualified job applicant

8. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–8 Job Description for a Stock Clerk in Retail Food Store Title: Stock Clerk Primary Function: To stock shelves food products and other items Supervision Received: Works under direct supervision of store manager Supervision Exercised: None Duties: 1.Receive and store products in storage area. 2.Take products from storage, open outer wrapping, and place on store shelves. 3.Provide information and/or directions to customers seeking particular products or having other questions. 4.Monitor quantity of products on shelves and add products when supplies are low. 5.Perform housekeeping duties when special need arises—for example, when a container is broken or products fall on the floor. 6.Assist cashiers in bagging products as needed during rush periods. 7.Assist in other areas or perform special assignments as directed by the store manager. Title: Stock Clerk Primary Function: To stock shelves food products and other items Supervision Received: Works under direct supervision of store manager Supervision Exercised: None Duties: 1.Receive and store products in storage area. 2.Take products from storage, open outer wrapping, and place on store shelves. 3.Provide information and/or directions to customers seeking particular products or having other questions. 4.Monitor quantity of products on shelves and add products when supplies are low. 5.Perform housekeeping duties when special need arises—for example, when a container is broken or products fall on the floor. 6.Assist cashiers in bagging products as needed during rush periods. 7.Assist in other areas or perform special assignments as directed by the store manager.

9. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–9 Legal questions and applicant privacy Interviewer skills and potential biases Difficulties in obtaining useful information Validity and reliability of testing procedures ADA requires reasonable adaptations for disabled Evaluating Prospects and Selecting Employees Steps in Recruiting Employees Application Forms Applicant Interview Reference Checking Applicant Testing Physical Examination

10. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–10 Types of Training and Development Development of Managers and Professionals Orientation of New Personnel Training to Improve Quality Training of Nonmanagerial Employees Training and Development

11. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–11 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

12. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–12 PREPARE EMPLOYEES Put employees at ease. Place them in appropriate jobs. Find out what they know. Get them interested in learning. PREPARE EMPLOYEES Put employees at ease. Place them in appropriate jobs. Find out what they know. Get them interested in learning. PRESENT THE OPERATIONS Tell, show, and illustrate the task. Stress key points. Instruct clearly and completely. PRESENT THE OPERATIONS Tell, show, and illustrate the task. Stress key points. Instruct clearly and completely. TRY OUT PERFORMANCE Have employees perform the task. Have them tell, show, and explain. Ask employees questions and correct any errors. TRY OUT PERFORMANCE Have employees perform the task. Have them tell, show, and explain. Ask employees questions and correct any errors. FOLLOW UP Check on employees frequently. Tell them how to obtain help. Encourage questions. FOLLOW UP Check on employees frequently. Tell them how to obtain help. Encourage questions. Steps in Job Instruction Exhibit 19.1

13. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–13 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

14. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–14 Compensation and Incentives for Employees Wage or Salary Levels –Competitive compensation –Time- or output-based compensation Financial Incentives –Stock options –Commission systems –Piecework –Group incentives and team awards –General bonus and profit-sharing plans

15. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–15 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.

16. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–16 Compensation and Incentives for Employees (cont’d.) Fringe 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. Small firms are increasingly outsourcing the administration of their benefits programs.

17. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–17 Some Affordable Perks 1.Recognize major life events for employees, such as marriage or the birth or adoption of a child, with a small financial gift. 2.Give employees a paid day off on their birthday. 3.Offer employees $100 a year to use for personal enrichment, such as taking an art class, getting a massage, or attending a play—anything that makes them happy makes them more productive. 4.Bring bagels or donuts to work one Friday a month. 5.Offer recruitment bonuses to those who refer potential employees who stay with your company at least six months or more—one good employee leads to another. Source: Kathleen Landis, “Blue Sky Thinking,” My Business, June-July 2003, p. 39. Exhibit 19.2

18. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–18 Employee Stock Ownership Plans 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. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–19 Special Issues in HRM Employee Leasing –The “renting” of personnel from an organization that handles paperwork and administers benefits for those employees Leasing allows small firms to provide employee benefits. Leasing makes small firms subject to additional government regulations. –Professional Employment Organization A personnel-leasing company places employees on its own payroll and then “rents” them to employers on a permanent basis.

20. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–20 What Employee Leasing Companies Offer to Small Firms Better benefit packages Better health insurance Preparation of paychecks Payment of payroll taxes Analysis of government regulations Preparation of government reports Monitoring of vacation and sick days

21. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–21 Special Issues in HRM (cont’d.) Legal Protection of Employees –Civil Rights Act (1964) 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 “reasonable accommodation” by firms in the employment of disabled persons

22. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–22 Special Issues in HRM (cont’d.) Legal Protection of Employees (cont’d.) –Sexual harassment policy guidelines Establish clear and meaningful policies regarding sexual harassment in the workplace. Meet with employees and supervisory personnel to discuss the policies. Investigate any and all complaints of sexual harassment fairly and thoroughly. Take timely and appropriate action against all violators.

23. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–23 Special Issues in HRM (cont’d.) 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. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–24 Special Issues in HRM (cont’d.) Legal Protection of Employees (cont’d.) –Family and Medical Leave Act (1993) Legislation requires firms to provide employees with up to 12 weeks of unpaid leave for childbirth and other family needs Requires firms to continue health-care coverage during the leave and guarantee that the employee can return to the same or a comparable job Labor Unions –Participating in collective bargaining of labor contracts –Implementing constructive HR policies to minimize employees’ desire for organization and representation

25. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–25 Special Issues in HRM (cont’d.) Formalizing of Employer-Employee Relationships –Employee handbook contents Expression of company philosophy Recruitment Selection Training Vacations Grievances Discipline Performance reviews

26. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–26 Special Issues in HRM (cont’d.) The Need for a Human Resource Manager –Conditions favoring the appointment of an HR manager: There are a substantial number of employees (100 or more). Employees are represented by a union. The labor turnover rate is high. The need for skilled or professional personnel creates problems in recruitment or selection. Supervisors or operative employees require considerable training. Employee morale is unsatisfactory. Competition for personnel is keen.

27. Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 19–27 Key Terms headhunter workforce diversity job specification validity reliability Job Instruction Training fringe benefits employee stock ownership plans (ESOPs) employee leasing professional employment organization (PEO) Civil Rights Act Occupational Safety and Health Act Fair Labor Standards Act (FLSA) Family and Medical Leave Act