1. Chapter 9Copyright © 2010 by Nelson Education Ltd. Selecting the Management Team and Managing Human Resources 9 PowerPoint Presentation by Ian Anderson, Algonquin College

2. Chapter 9Copyright © 2010 by Nelson Education Ltd. Looking Ahead After studying this chapter, you should be able to: 1.Discuss the entrepreneur’s leadership role. 2.Discuss the evolving features of small firm management. 3.Describe the characteristics and value of a strong management team. 4.Identify the various kinds of plans and approaches to planning. 5.Explain the importance of employee recruitment and list some sources that can be useful for finding suitable applicants. 9-2

3. Chapter 9Copyright © 2010 by Nelson Education Ltd. Looking Ahead 6. Identify the steps to take in evaluating job applicants. 7. Describe the role of training for both managerial and nonmanagerial employees in a small firm. 8. Explain the various kinds of compensation plans and the differences between daywork and incentives. 9. Describe the problem of time pressure and suggest solutions 10.Discuss the contract employees, labour unions, the formalizing of human resources management, and government regulations pertaining to employee protection. 9-3

4. Chapter 9Copyright © 2010 by Nelson Education Ltd. Leading and Motivation Personal Involvement of the Entrepreneur –Creates a significant personal relationship with employees based on loyalty and respect. –Directly influences employees’ understanding of how the firm operates (e.g., its ethics). –Makes the firm attractive to new employees. 9-4

5. Chapter 9Copyright © 2010 by Nelson Education Ltd. LeadershipLeadership Leadership That Builds Enthusiasm –Empowerment Giving employees authority to make decisions or take actions on their own –Work teams Groups of self-managed employees with the freedom to function without close supervision –Benefits Workers are more satisfied with their working environment Productivity and profitability are enhanced 9-5

6. Chapter 9Copyright © 2010 by Nelson Education Ltd. Constraints on Management in Small Firms Small bank accounts and limited staff Lack specialized professional staff –Market research, HR, Financial analysis, etc. Constant change in organizational and managerial needs 9-6

7. Chapter 9Copyright © 2010 by Nelson Education Ltd. Stages of Growth One-Person Operation Player-Coach –Entrepreneur begins coordinating the activities of others Intermediate Supervision –Entrepreneur no longer direct, hands-on management Formal Organization –Greater formality in planning and control 9-7

8. Chapter 9Copyright © 2010 by Nelson Education Ltd. Stages of Growth 9-8 Exhibit 9-1

9. Chapter 9Copyright © 2010 by Nelson Education Ltd. The Management Team Management team: –Consists of managers and other key persons who give a company its general direction Characteristics of a Strong Management Team –Capable of securing the resources needed to make business a success –Reassures investors about their investment and the continuity of business –Diversity of talent makes the team stronger than an individual entrepreneur 9-9

10. Chapter 9Copyright © 2010 by Nelson Education Ltd. The Venture Team Founder(s) –Advisory Board –Key Employees –Board of Directors –Management Team –Lawyer –Accountant 9-10

11. Chapter 9Copyright © 2010 by Nelson Education Ltd. Complementary Management Team Building a Complementary Management team: –Competencies required depends on type of business Combination of education and experience Requires achieving a balance of skills and competence in functional areas –Designing a management structure that defines relationships and responsibilities Outside professional support: –Supplements the skills of a management team –Active board of directors can counsel and guide 9-11

12. Chapter 9Copyright © 2010 by Nelson Education Ltd. PlanningPlanning Management Functions –Planning Long-range – strategic plans (future) Short-range – operational plans (current year) –Leading –Organizing –Controlling 9-12

13. Chapter 9Copyright © 2010 by Nelson Education Ltd. Planning Terminology Budget – A document that expresses future plans in monetary terms Business Policies –Guides for managerial decision making Procedures –Specific methods followed in business activities Standard Operating Procedure –An established work method of conducting a business activity 9-13

14. Chapter 9Copyright © 2010 by Nelson Education Ltd. Success in Planning Make time for planning –Need detailed planning and quality control Set clear goals –Goals - created for critical performance areas –Objectives – short-term targets Encourage employee participation / communication 9-14

15. Chapter 9Copyright © 2010 by Nelson Education Ltd. Recruiting Personnel (The Importance of People) The Need for Quality Employees –Employee performance 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. 9-15

16. Chapter 9Copyright © 2010 by Nelson Education Ltd. Attracting Applicants to Small 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 9-16

17. Chapter 9Copyright © 2010 by Nelson Education Ltd. Sources of Employees Walk-insWalk-ins SchoolsSchools Public Employment Agencies Executive Search Firms Employee Referrals Private Employment Agencies Internet Recruiting Help-Wanted Advertising Temporary Help Agencies 9-17

18. Chapter 9Copyright © 2010 by Nelson Education Ltd. 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. 9-18

19. Chapter 9Copyright © 2010 by Nelson Education Ltd. 9-19 Exhibit 9-6 Job Description for a Stock Clerk in Retail Food Store

20. Chapter 9Copyright © 2010 by Nelson Education Ltd. Evaluating Prospects and Selecting Employees Steps in Recruiting Employees Application Forms Applicant Interview Reference Checking Applicant Testing Physical Examination 9-20

21. Chapter 9Copyright © 2010 by Nelson Education Ltd. Training and Developing Employees Purposes of Training and Development –Prepare 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. Factors in Establishing a Training Program –Determining the need for training –Creating a plan for training –Setting a timetable for training –Providing employee counselling 9-21

22. Chapter 9Copyright © 2010 by Nelson Education Ltd. Types of Training and Development Developing Managerial and Professional Employees Orientation of New Personnel Training to Improve Quality Training Nonmanagerial Employees Training& Development to Improve Job Quality 9-22

23. Chapter 9Copyright © 2010 by Nelson Education Ltd. Compensation and Incentives for Small Business Employees Financial Incentives –Keys to developing an effective bonus plan: Set attainable goals. Set meaningful goals. Bring workers in (employee participation). Keep targets moving. Aim carefully. …continued 9-23

24. Chapter 9Copyright © 2010 by Nelson Education Ltd. Compensation and Incentives for Small Business Employees Profit Sharing – A percentage of profits is distributed to employees 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. Cafeteria plans can be a part of benefits along with dental care and child-care re-imbursement 9-24

25. Chapter 9Copyright © 2010 by Nelson Education Ltd. Employee Stock Ownership Plans and Profit Sharing 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. 9-25

26. Chapter 9Copyright © 2010 by Nelson Education Ltd. Factors that Contribute to Quality of Work Life Top six factors that employees felt “were very important in a job”: –A workplace free from harassment and discrimination –A healthy and safe workplace –Trustworthy senior management –Good balance between work and personal/family life –Good job security –Good pay 9-26

27. Chapter 9Copyright © 2010 by Nelson Education Ltd. “Very Important” Job Factors 9-27 Exhibit 9-7 Source: CPRN-Ekos Changing Employment Relationships Survey 2000 (n 2000). Reprinted by permission of Canadian Policy Research Networks Inc.

28. Chapter 9Copyright © 2010 by Nelson Education Ltd. Time Management The Problem of Time Pressure –Many owner-managers work 60-80 hours per week. –Effect of overwork is inefficient work performance. Time Savers for Busy Managers –Effective use of time (time management) Analyze how time is normally spent Eliminate practices that waste time Carefully plan available time Use a daily planner to prioritize activities Don’t avoid unpleasant or difficult tasks Limit conference and meeting times 9-28

29. Chapter 9Copyright © 2010 by Nelson Education Ltd. 9-29 Hours per Week Worked by New Business Owners Exhibit 9-8 Data developed and provided by the NFIB Foundation and sponsored by American Express Travel-Related Services Company.

30. Chapter 9Copyright © 2010 by Nelson Education Ltd. Special Issues in HRM Contract Employees –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 that places employees on its own payroll and then “rents” them to employers on a permanent basis. …continued 9-30

31. Chapter 9Copyright © 2010 by Nelson Education Ltd. Labour Unions –Most entrepreneurs prefer to operate independently and to avoid unionization –Most small businesses are not unionized –Unions primarily concentrate their efforts on larger companies. …continued 9-31 Special Issues in HRM

32. Chapter 9Copyright © 2010 by Nelson Education Ltd. Special Issues in HRM Formalizing of Employer-Employee Relationships –Employee handbook contents Expression of company philosophy Recruitment Selection Training Vacations Grievances Discipline Performance reviews 9-32

33. Chapter 9Copyright © 2010 by Nelson Education Ltd. Special Issues in HRM The Need for a Human Resource Manager –Conditions favouring the appointment of an HR manager: A substantial number of employees (100+) Unionized employees A high labour turnover rate A strong need to recruit skilled and professional employees Supervisors or operative employees in need of training Low employee morale Intense job market competition for personnel 9-33

34. Chapter 9Copyright © 2010 by Nelson Education Ltd. Protecting Employee Rights Legal Protection of Employees – Legislation prohibiting discrimination based on race, colour, religion, sex, or national origin. – Protection from robbery, assault, and other crime 9-34

35. Chapter 9Copyright © 2010 by Nelson Education Ltd. Harassment Policies 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. 9-35

36. Chapter 9Copyright © 2010 by Nelson Education Ltd. Employment Benefits and Employment Insurance (EI) Federal and provincial employment standard codes set out required working conditions such as maximum work hours, overtime pay, meal breaks, minimum wages, and parental and maternity leaves. Women on maternity leave are entitled to employment insurance (EI) as are those workers who become unemployed, as long as they have met certain requirements. 9-36