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Feature:
What Every Small Business Owner Needs to Know About Human Resources
Every business needs a bankable idea, a realistic business plan, money to fund operations and growth, and the “right people.”
Fact is that if you have the right people, obtaining the other three is more likely.
Getting and keeping the right people is the essence of Human Resources, and one of every business’s top challenges. Human Resources (HR) done right is both a strategic and tactical endeavor. One without the other is incomplete.
The tactical elements of HR are what used to be called “personnel.” They are largely transactional and about getting the paperwork right. Personnel or HR Administration is essential to government compliance as well as internal control and decision making.
Effective HR begins with competent administration. Ironically, HR administration is both tactical and strategic. It is strategic because it is a relatively inexpensive form of risk mitigation. When paperwork is compliant with government regulations and intelligent in terms of documentation and process, your business benefits in several important ways:
- Applicants and employees are treated fairly and consistently
- If something goes wrong, you have the “documentation” to defend yourself from legal and governmental intervention
- If you ever sell your business, you do not have value deducted for lingering liabilities you may not even realize were present. In some situations, we have found liabilities amounting to 20% - 50% of the initial offering during HR due diligence. If you are acquiring another company, these can be hidden “time bombs.”
Beyond HR administration, HR plays a strong strategic role in assisting management to define its staffing needs and pursue effective recruiting practices. Hiring managers should own their own recruiting, but HR can and should play an advisory role to minimize costs and establish process that leads to successful hiring.
Are we paying too much for our employees? Is our high turnover due to inadequate compensation? Is our mix of compensation between salary, benefits, and short and long term incentives right? Do my employee practices build employee engagement or discontent? Am I paying for employees to show up, or am I paying for results.
Do I have the talent to move to the next level or enter a new market or line of business? These questions and many more are strategic HR questions.
Most small to mid-size businesses can not afford and really do not need a full time HR staff. What they do need is the capacity to get the paperwork done, to protect the business, and to prepare for the future. Because HR is both tactical and strategic, if you hire someone strong on the tactical elements, they may not (and probably do not) know many of the elements of strategic HR. If you hire someone who knows strategic HR, this person may (and probably will) become bored with all the transactional HR. Faced with this dilemma, many small business owners are turning to HR outsourcing as a solution. If you are considering HR outsourcing be sure to turn to a company that provides strategic HR as its primary purpose but that also offers HR administrative outsourcing at an attractive rate.
Acting sooner rather than later will save your business money and hassle over the long haul. Remember, by getting the HR right, you are much more likely to develop and effectively implement a winning well funded business plan.
Philip A. Davis is a Senior Vice President with Flex HR, Inc. For more information, call 678-977-5578, email Phil at pdavis@flexhr.com or visit www.flexhr.com.
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