3 Critical Steps to Improving Your Small Business Human Resources

If people are your most important resource, then you need to understand the role of human resources in your small business. Many small business owners believe that because they have only a few employees they do not need to focus on human resources issues. The reality is that when you are a small business owner, you need to focus more attention and support to your human resources because, effectively, they can make or break your business.

Even from a mathematical perspective this is true. If a small business has only 4 employees, each of those employees has at least a 20% impact on the business (the small business owner is counted in this impact assessment). If a business has 19 employees, each of those employees has a 5% impact on the business; and so on. Therefore the impact of a bad hiring decision or an under-performing employee is significant to small businesses.

Every business employs resources to get work done; typically the resources are a mix of people and equipment. Equipment resources are typically measured for value (that is, cost and return on investment or payback on investment). Human resources are often not valued similarly but if they were, business owners would pay a lot more attention to making sure they hired the right people, trained them well and measured their performance effectiveness regularly.

Let’s consider how you can better manage your human resources:

Step #1: Create a workforce plan – this would detail the number of staff your business needs to operate effectively.

Analyze the characteristics of your current workforce: job descriptions; individual skills profiles: make sure to include skills that cross-over to other functional areas (e.g. a shipper/receiver might also be capable of doing the purchasing and/or handling the inventory in your business); experience; training or education; demographics of your staff – age, time or duration with the business; aptitude required for each position; turn-over rates; and more.

You want to know if you need to be concerned about the majority of your staff retiring in the next year; or why you have high turn-over rates; or what type of aptitude and skill is required in each position; etc. Gather the data, then analyze the data you have gathered.

What are the issues your business faces in terms of attracting new employees, in terms of retaining those employees, and in terms of developing those employees’ skills and aptitude? For example, in Western Canada it has been difficult to find employees to work in the manufacturing industries as most of the potential workforce has gone to work either in high paying oil and gas jobs in Northern Alberta or to work in the construction jobs for the 2010 Olympics. How would your business handle attracting new employees in face of competing industries for a small labor pool?

Step #2: Create a training and development plan – this would detail how you plan to develop the staff you have to be more efficient and productive and to be capable of doing more than one functional responsibility (this is particularly important in small businesses where employees need to be capable of working in a number of areas).

Step #3: Create a performance effectiveness program – this would involve developing a specific performance evaluation or review program for employees in your business. You might consider working with employees to create the program. You want to ensure that the program involves the employee: a self appraisal section, as well as a section for the owner or manager to complete.

Managing your people may be the most challenging part of being a business owner. It is not easy to predict how people will react to changes in the business or to your directions or to customer interaction. As a small business owner it is your primary responsibility to develop excellent employees. It is very likely that your employees will have contact with your customers; you want to have employees who understand how to provide customers with good service, who are well trained and knowledgeable, and who are reliable and experienced. With excellent employees, you can develop an excellent and successful business.