The Importance of Small Businesses

If you know me, or have been reading me for anytime, you probably have discerned that I am a human resources consultant. However, unlike most consultants who pursue big companies, I specialize in helping small companies deal with the challenges of having employees. So small business growth is important to me and apparently it is to country as a whole. In the Wall Street Journal this morning (11/19/2010) there is an article entitled "Few Businesses Sprout, With Even Fewer Jobs". The article reports start-ups have failed to keep pace with closings, and even those that do open up are doing so with fewer employees and hiring at a slower pace. The authors of the article, Justin Lahart and Mark Whitehouse, say that "Research shows that new businesses are the most important source of jobs and a key driver of the innovation and productivity gains that raise long-term living standards. Without them there would be no net job growth at all." Let me emphasize that

 "without them there would be NO net job growth at all."

That is how important small business growth is to this country. Yet there are major roadblocks to that growth occuring. Since I spend a great deal of time talking to small business owners and leaders , and I am one as well,  I can give you a first hand account of the "why." The biggest reason is UNCERTAINTY! They are uncertain about taxes and the impact of healthcare "reform." Most businesses are concerned about those, but it is magnified in a small business. For big businesses it may be expensive, for small businesses it may mean the end of the business or the failure to even start up. So you are not going to see small businesses grow in any significant fashion until that uncertainty is cleared up. And if it is cleared up in a way that has a large negative impact then there will be no movement there either.

The article also went on to show that another hindering factor is money. Lack of it, inability to get it from banks, and even hesitation on the part of "angle" investors to put money in without taking large amounts out. One business owner friend of mine has explored getting money that way and opted not to pursue it because the investors wanted control of the business. Most of us who have started a business are going to be very hesitant to give up control.

Another factor, not mentioned typically in articles, is the amount of regulation that small business have to deal with in starting a business. Even companies with as few as two or three employees have a slew of federal and state laws they have to comply with as they start up. My experience has been that typically they don't know what they don't know and it is only later when they get in trouble that they understand how daunting the task of having employees is. It is also an indication that most business owners do not realize how important good HR is to their success. They would be much better off if they constructed good HR from the outset. Many mistakes would be avoided.

To that end I have decided to dedicate my Friday posts to issues of small business HR. So if you know anyone starting a small business have them check in on Fridays (actually have them check in everyday, they will learn a ton.)

 (And now the commercial, I am always happy to provide consultation to anyone starting up a business or growing it.)

The Mardi Gras Edition of the Carnival of HR

Michael Krupa, at Infobox, has hosted this weeks version of the Carnival of HR, Mardi Gras! Mardi Gras is a celebration time and this Carnival is a no exception. Hurricanes, beads, masks and more are available. Here the music and dance to the tune of great HR blogs. Learn about networking, HR mistakes, essential tools for change, office politics, time saving social media tools, continuing education, certification and much, much more! So flash on over to see Michael Krupa and let him throw you some beads or serve you a drink and settle down for some great reading in HR.  

Top 5 HR Mistakes That Small Businesses Make

I am giving a presentation today to a small business association. As all of you know, HR mistakes for any company can be disruptive or even destructive, regardless of the size of the company. For small companies HR mistakes can be amplified and have a significant effect on the potential survival of the company. As I was preparing for the presentation I thought this would make a good blog post as well. So here goes.

1. Not Hiring the Right Person. Many small business owners hire someone just because they know them, they are a family member or they feel sorry for them. They do not have a clear definition of the job skills needed for the job or if the individual possess those skills. And because they often know the person, or think they know them, they do not conduct a background check on them. Often them may miss a "skeleton in the closet" (click the phrase to see a meaning.)
2. Ignoring Government Regulations. Many small companies are mostly or totally unfamiliar with the majority of laws that govern the workplace. Given that most federal laws cover companies as small as 15 employees there are very few things that do not apply to them. They need knowledge, but they don't know it. (Which is why I am in the HR consulting business, btw.) Some choose to ignore regulations because they have had no trouble up to now. Well as the old AAMCO commercials used to say "You can pay me now or you can pay me later."
3. Misclassifying Employees. One of those laws that applies to almost all companies, regardless of size, is the Fair Labor Standards Act. Small business SCREWS THIS UP ALL THE TIME. I spend ALOT of time explaining that Salary does not equal Exempt and just because you call someone an independent contractor does not make them so.
4. Poor Documentation. Documentation in many companies is an afterthought. In many small businesses it is non-existant. The hiring process does not get documented correctly, as in incomplete I-9s. And discipline records are almost never there or are done after the fact. Terminations are generally not supported and often result in unemployment cases being lost or discrimination suits either lost or settled.
5. Not Rewarding Employees. Rewards are not always measured in $$$$. A good evaluation, training and communication are also rewards. In these recessionary times many small companies have taken the tack that since they cannot afford to give any raises there is no need to do a performance evaluation. In reality now is the most important time to do them. People who are afraid that they might lose their job at any time would like to know from their boss that they are doing a good job. Employees are feeling under-appreciated these days and as a result you read figures as high as 1 in every 2 employees is considering changing jobs in the next recovery. In a small company that kind of loss would be devastating.

Those are the Top 5 Mistakes that I will talk about. But there is one other thing I will tell my audience. They need to be vigilent. There are 14 or more pieces of legislation on the federal level, and who knows what is happening on the state level, that will affect business, small and large, in the employment and labor arena. All of them could have a potentially detrimental effect. To avoid this, and to have input in the legislative process, active involvement is needed.

So there you go. I would like your feedback so I can fine tune this presentation for future opportunities. Tell me what you think.