1. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-1 Managing Human Resources in Entrepreneurial Firms Chapter 12

2. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-2 The Small Business Challenge Entrepreneurship is important! More than half the people working in the U.S. work for small firms Small business accounts for most of the 600,000 or so new businesses created every year Small business accounts for most business growth Small firms account for about three-fourths of employment growth in the U.S. economy

3. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-3 How Small Business HRM Is Different Size: Most small businesses do not have dedicated HR staff Priorities: HR is usually not a high priority Informality: HR is not a formal process Nature of the entrepreneur: Entrepreneurs tend to be somewhat controlling

4. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-4 Implications Small business owners run risk that rudimentary HR practices will put them at a competitive disadvantage A lack of specialized HR expertise may produce legal or other problems Small firms are probably not adequately addressing potential workplace litigation Small business owners might not be fully complying with compensation regulations and laws

5. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-5 Duplication and paperwork leads to inefficiencies as well as data entry errors Implications, cont.

6. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-6 Why HRM Is Important to Small Business Successful small- and medium-sized enterprises (SMEs) place a great importance on –Training and development –Performance appraisals –Recruitment packages –Maintaining morale –Setting competitive compensation levels

7. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-7 Effective HRM can be a condition for getting and keeping big customers Trend toward international quality standards means even small businesses must attend to HR processes Why HRM Is Important to Small Business, cont.

8. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-8 Using Internet and Government Tools Personality profile tools and other programs can be purchased and utilized online to help give small businesses an edge Accessing government tools can ensure compliance with employment law The Department of Labor’s (DOL’s) “First Step Employment Law Advisor” helps employers determine which laws apply to their business –www.DOL.gov/elaws/firststep/

9. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-9

10. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-10 Available “First-Step” Advisors Coverage and employment status advisor Hours worked advisor Overtime security advisor Overtime calculator advisor Child labor rules advisor Section 14(c) advisor

11. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-11

12. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-12 EEOC The U.S. Equal Employment Opportunity Commission (EEOC) administers Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 (ADEA), Title I of the Americans with Disabilities Act of 1990 (ADA), and the Equal Pay Act of 1963 (EPA) –www.EEOC.gov/employers/

13. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-13 The EEOC Web site Helps employers determine the following: What laws does the EEOC enforce and do they apply to my business? How I determine if my business size is covered by EEOC laws? Who may file a charge of discrimination with the EEOC and when? Can a small business resolve a charge without undergoing an investigation or lawsuit?

14. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-14 The OHSA Web site The DOL’s Occupational Safety and Health Administration site presents a wealth of information for small business owners, including the OSHA Handbook for small Business –www.OSHA.gov/www.OSHA.gov/ –Small businesses can request a free consultation or participate in the Sharp program

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16. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-16 Using O*Net Free, effective DOL Web site helps you develop job descriptions and is available at http://online.onetcenter.org http://online.onetcenter.org To utilize, small business owners must –Decide on a plan and develop an organization chart –Obtain a list of job duties and human requirements from O*Net –Complete the job description

17. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-17

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20. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-20 Web-Based Recruiting Small businesses can post positions on –Internet job boards –Professional association Web sites –Local newspaper classifieds –Dot-jobs domains

21. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-21 Employment Selection Convenient and available 24/7 online employment selection services allow small businesses to implement formal testing programs –Wonderlic Personnel Test –Predictive Index

22. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-22 Employment Training Online training resources can help even the playing ground for small businesses and can be utilized through –Private vendors –The Small Business Administration (SBA) –The National Association of Manufacturers (NAM)

23. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-23 Employment Appraisal and Compensation Small businesses can use software and online programs to create highly professional performance appraisals Easy access to online salary surveys make it easy to determine local pay rates

24. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-24 Leveraging Small Size Familiarity with employee’s strengths, needs and family situation Flexibility in benefits and rewards such as –Extra time off and compressed workweeks –Provide bonuses at critical times –Help employees better themselves –Feed them –Make them feel like owners

25. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-25 –Make sure they have what they need to do the job –Recognize a job well done Leveraging Small Size, cont.

26. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-26 Employee Recognition Challenging work assignments Freedom to choose own work activity Having fun built into work More of preferred task Role as boss’s stand-in when he or she is away Role in presentations to top management Job rotation

27. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-27 Encouragement of learning and continuous improvement and provided with ample encouragement Being allowed to set own goals Compliments and thank you notes Expression of appreciation in front of others Special awards Bigger desk or office Employee Recognition, cont.

28. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-28 Simple Retirement Benefits The Pension Protection Act of 2006 contains a provision for employers with less than 500 employees for a new type of retirement benefit combining traditional defined benefits and 401(k) plans A low-cost, effective choice is a Simple (savings incentive match plan for employees) IRA plan where employers MUST contribute and employees MAY contribute

29. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-29 Simple Employee Selection Procedures Usually an informal process Work-sampling tests Interviewing candidates asking questions to reveal the following: –Knowledge and experience –Motivation and personality –Intellectual capacity

30. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-30 Flexibility in Training Informal training approach focused on learning specific job-related competencies Small businesses can implement a four-step process to streamline training procedures 1.Write a job description 2.Develop a task analysis record form 3.Develop a job instruction sheet 4.Prepare training program for the job

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33. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-33 Informal Training Methods Offer to cover tuition for special classes Identify online training opportunities Provide a library of tapes and DVDs for systematic, disciplined learning during commute times Encourage sharing of best practices

34. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-34 Send people to seminars and association meetings for learning and networking when possible Create a learning ethic by having everyone teach each other what they’re learning Informal Training Methods, cont.

35. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-35 Fairness and the Family Business Set the ground rules Treat people fairly Confront family issues Erase privilege

36. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-36 Using Professional Employer Organizations Vendors ranging from payroll companies to one that handle all an employer’s HRM requirements PEOs focus on employers with 100 or less employees Charge fees based on 2-4% of payroll

37. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-37 Why Use a PEO? Lack of specialized HR support Paperwork Liability Benefits Performance

38. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-38 PEO Caveats Some employers are not comfortable letting a third party become the legal employer of their employees Liability concerns Lax due diligence Overstating employer benefits or savings

39. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-39 Guidelines for Finding/Working with PEOs Conduct a needs analysis Review the sources of all PEO firms considered Determine if the PEO is accredited and how long it has been in business Check provider’s bank, credit and professional references as well as the PEO’s staff Understand how employee benefits are funded

40. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-40 Review the service agreement carefully Understand how the firm will deliver services Ask about upfront fees Periodically get proof that payroll taxes and insurance premiums are being paid Guidelines for Finding/Working with PEOs, cont.

41. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-41 Managing HR Systems, Procedures and Paperwork Basic components of Manual HR Systems –Obtaining and organizing a set of standardized personnel forms covering each important aspect of HR Recruitment and selection Training and appraisal Compensation Safety processes

42. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-42 Basic Forms HR Kit would include: –Application –Employment interview –Reference check –Employee record –Performance evaluation –Warning notice –Exit interview –Vacation request –Lawsuit-Prevention guide

43. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-43

44. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12-44 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.