When you ask small business owner/managers what business issue literally keeps them awake at night, they say one or more of the following: “My cash flow….collecting money….increasing sales…keeping the bank happy…making payroll” Ask them where Human Resources management fits in and they’d probably say “Human Resources? I’m too busy for that fluffy, big company stuff. I don’t have the time or the money. I’ve got a business to run.” And yet, when they find themselves in a messy people issue, the same owner/manager is willing to pay his lawyer or other advisers whatever it takes to make the problem go away and keep him out of court or even worse, jail. Sometimes that runs into thousands of dollars and sometimes the problem still doesn’t go away.

Unfortunately for the Human Resources profession, the business owners’ perception of Human Resources management is more fact than fiction. The Human Resources function has done little over time to promote the notion that good people practices and a healthy financial bottom line go hand in hand. Consequently it is perceived, with some justification, as a non-value added expense that should be avoided if at all possible.

In this article, we hope to dispel that perception. In our combined fifty plus years of corporate and consulting HR experience, we have learned two important lessons;

1) Good people management does have a direct and positive relationship to a strong bottom line

2) Managing people is not rocket science although some HR professionals and consultants would have you think otherwise.

Spending just 5-10 minutes a day doing something different than you are doing now with your employees will pay huge dividends but you have to know what to do differently. It could be as simple as asking employees for their ideas or encouraging an employee’s behavior through positive reinforcement. It could be communicating policies so that employees understand the company’s expectations or developing a work improvement plan to bring an employee back to acceptable performance. None of this is hard to do. So, what does it really take to be a good people manager? Well, it all starts with hiring the best people you can find. Then you have to get them to perform to their maximum potential. You have to reward them appropriately for that performance. You have to give them some structure or boundaries within which they can work comfortably and finally you have to understand risk and how to minimize it.

Let’s take a look at each area in greater detail.

Hiring: The cost of employing the wrong person can be enormous: wasted time, wasted training, mistakes, replacement costs, legal action … the list goes on. Studies have shown that the true cost of turnover can be as high as one and a half times annual salary. Making the right decision can therefore directly contribute to improving business performance. There’s no question that building a set of interviewing skills requires practice, an opportunity that the small business person doesn’t get. However, learning and following some basic recruitment principles improves the probability of hiring the right person. The people factor is what distinguishes successful organizations from unsuccessful ones.

Managing Performance: Managing Performance in the workplace involves letting employees know what is expected of them, how they are doing, and how they can do an even better job. Only then can employees contribute their best, use their abilities to the fullest, and feel connected to their organization. Managers need certain skills to manage performance effectively. In most cases building these skills requires basic behavioral change. Given the right tools, anyone can make it happen. Again, this is not rocket science!

Rewarding Performance: Employee pay and benefits are too important to ignore. Small and medium sized businesses sometimes think that taking a proper approach to this important issue will be both complex and costly. It doesn’t have to be either. Remember, the primary objective for establishing a solid Pay and Benefits program in any organization is “to attract and retain the quality of employees you need to achieve your business objectives”.

Managing Risk: Managing risk is one of the cornerstones for developing a solid platform for business growth and organizations that understand risk and put measures in place to manage it are likely to be more successful over the longer term. Penalties for non-compliance with legislation can be significant, in some cases threatening an organization’s survival. It is important to recognize that risk management is a complicated area and may require the advice of legal counsel in certain situations.

Policy Administration: People expect to be treated fairly and consistently at work. The best way to accomplish this is to establish and communicate a set of people policies that reflects the organization’s values and culture while ensuring compliance with applicable legislative requirements.

Conclusion:

Given the right tools and processes, any small business owner, manager or administrator can manage the core of their business, their people, like a professional. Good people practices and a healthy financial bottom line go hand in hand and our fictional small business manager should be sleeping peacefully in the knowledge that his approach to managing the people side of his organization is giving him a stronger bottom line and a more successful company.

Barry Chapman and Ron Guest have a combined 50 years of accumulated HR expertise in a half dozen major corporations. Both worked as HR executives in large companies and subsequently as highly regarded management consultants. Their accumulated knowledge forms the basis of the HR Power Centre solution.