365 Answers About Human Resources for the Small Business Owner: What Every Manager Needs to Know About Work Place Law

Contents

CHAPTER 1

The Role of Human Resource Management

Human resource management is the general term for all of the functions encompassed in the acquisition, retention, development, and administration of a company’s employees. This set of functions formerly fell under categories called personnel administration or personnel management. It should, therefore, cover every function in this process, including planning labor needs, job analyses and descriptions, recruitment methods, interviewing and selection, orientation and training, compensation management, records management, performance management, health, safety, morale, fairness issues, and, ultimately, termination, including firing and layoffs as well as retirement.

Why Does a Company Need a Human Resource Department?

Every company must deal with human resource issues. In a small company, the owner probably starts out handling these duties and then may delegate responsibilities to an administrative assistant or someone in the finance department. As a company grows, senior management will realize that many duties require specialized training and background. As more laws are passed that regulate the employment process, it becomes increasingly important for a company to have the expertise to understand and to comply with these laws. An employment-related lawsuit could cost a firm ten times more than a competent human resource manager would. The complexity of employment law and the fallout from not following it properly are often what lead a company to hire a professional to handle the responsibilities of human resource management.

When and how does a company owner or board of directors decide that it is time to establish a human resource department? Usually, this is not a planned decision, but rather a result of normal growth and expansion. A growing business will require additional employees, but it also will require the business head to focus on the core aspects of the business and its growth. When he takes time away from that to advertise, recruit, interview, hire, and train each new employee, his primary duties will suffer. If a small business owner spends entire days interviewing candidates, this is time he is not spending contacting and following up with customers or clients. If he concentrates on the core aspects of the business, he will require additional help in the form of new employees. This Catch-22 is first solved by hiring someone who can replace the business owner in performing the hiring function. Many companies, at least in the beginning, use existing in-house staff. For example, an administrative assistant places ads and conducts interviews, and then the payroll clerk handles the administrative end of the hiring process. This approach is fraught with potential dangers and will work only as a stop-gap measure in a growing business. Errors, legal problems, and continued growth will eventually force the business owner to hire or to designate an individual whose sole duty is the human resource function.

The Routine Duties of the Human Resource Department

A company that decides to formalize the human resource management function by hiring a specialist must consider applicants with broad ranges of experience in different areas of the field. Applicants may also have varying backgrounds, ranging from the former payroll clerk who worked her way up to department head to the graduate with a master’s degree in labor relations. The level of knowledge and experience required will depend on the company’s individual needs. Frequently the number of employees will determine the managerial level of the HR specialist. A company that employs primarily hourly blue-collar workers on a factory floor, for instance, will have different requirements than a medical practice with a staff of professionals. Accurate payroll processing and performance management may be more important in the factory, while compensation and retention management may be more important in the medical office.

The normal duties of the human resource manager, or, as the company grows, the human resource department, covers the full range of employee relations, including some overlap into other departments. To be effective, the HR manager should be a member of the senior management team, participating in the company’s overall strategic planning process. This will enable him or her to project staffing needs, design more effective job descriptions, and coordinate training and development programs. He will need to work with other department heads to understand the requirements of each position: with the accountant or controller to develop payroll budgets, with the legal department to ensure compliance, and so on. The position of human resource manager requires a level of responsibility and seniority that will allow him or her to overlay the human resource function onto the entire structure of the organization. Typically, the routine duties performed by the HR manager and the HR department are:

• Planning for labor needs.

• Conducting job analyses and writing job descriptions.

• Recruiting candidates.

• Designing and conducting selection processes.

• Selecting candidates.

• Managing the hiring process (considering job offers, making reference checks).

• Orientation of new employees.

• Developing training programs in conjunction with other departments and then managing these training programs.

• Developing a payroll budget and managing compensation (wages, salaries, and incentives).

• Managing such benefits as health, dental, and life insurance; pension plans; vacation; and sick days.

• Setting performance criteria and conducting appraisals.

• Counseling and disciplining employees, handling labor relations with unions.

• Assuring compliance with relevant tax laws.

• Assuring compliance with relevant employment laws.

• Ensuring the safety of employees.

• Maintaining employee records.

• Terminating employees.

Setting Objectives for the Human Resource Function

A company that is newly establishing a human resource function should be clear about its needs and requirements. Some companies prefer a strongly centralized approach, in which all HR-related functions are handled only by the HR department. Other businesses prefer line managers to be responsible for interviewing, making the hiring decisions, and training employees, leaving only the administration to the HR department. Making this delineation clear is critical: managers stepping all over one another in interviewing and hiring and the resulting confusion for staff can be disastrous for employee relations. Setting firm objectives for the human resource department can be difficult and, at times, counterproductive, but controls need to be implemented to make this function of the organization as accountable as any other. Does the company want to have limits on how long a position can remain empty? This may mean hiring a less-than-ideal candidate. How closely does the salary budget for a particular department or position have to be followed? Perhaps some wiggle room will have to be built into the budget numbers to attract the best candidate. Should quality-control checks be established? These will help ensure, for example, that all necessary forms are completed for each employee, that each employee interview is conducted in the same manner (to avoid inferences of discrimination), and that testing, reference checking, and other pre-employment procedures are done systematically. What kind of error margins can be tolerated? Unlike some line functions objectives, such as product per man-hour, product rejection, and return rate, objectives of the human resource function are difficult to measure. How does an organization say, Of every 20 employees you hire, we expect 18 of them to be flawless? Some objectives, however, can be established and measured, and the human resource department will benefit from having a system of measurement. Reduction in turnover rate, increased employee participation in training programs, and a decrease in workers’ compensation claims are a few measurements in which accountability on the part of the HR department will increase employee morale and corporate bottom-line profits.

In addition to making and sometimes enforcing personnel policy, the HR department can have a strong role in employee management. The HR manager should make it his or her responsibility to inform employees about policies and changes, and how they affect employees’ morale. When an employee feels that his voice is not heard by management, it is the HR department that will hear the complaint and receive the brunt of the blame. Most employee complaints are about pay, benefits, working conditions, and recognition, all responsibilities of the personnel department.

Since the HR department is at the forefront of the hiring process, bringing in top-quality employees should be one of the main goals of that department and of the company. The HR department also frequently has the ear of the general staff. Problems and concerns are usually brought to HR first. A first-rate HR manager will use this information to alert senior management of problems that are simmering, before they become full-blown fires.

Confidentiality must be respected, of course, and the HR manager does not want to assume the role of company spy, but both general staff and management will benefit if the HR department is attuned to falling morale, overworked employees, or complaints about supervisors. The HR department may be responsible for the employee training and development, influencing the future growth of the company. In today’s customer-focused environment, well-trained employees can mean the difference between success and failure.

The HR manager and his department should be informed of new developments in personnel management. Technological advances, trends in hiring practices or benefits programs, and changes in salary structures or demographic shifts in the labor pool should all be brought to senior management’s attention as part of good corporate governance. Especially in the field of labor law and regulations, any changes should be investigated and acted upon quickly.

The HR department should also stay abreast of such changes in computer programs as payroll processing, employee management databases, training software, and other programs intended to enhance efficiency and lower costs. The dizzying array of products in this field makes it difficult to judge which are the most valuable, but an HR manager should be familiar with new developments in HR management software to make informed decisions or recommendations to management.

The human resource department can also be instrumental in managing and monitoring quality-control programs in the rest of the organization. Because quality-control programs depend on well-trained, motivated the HR function and quality-control are closely linked. If the HR department makes it a priority both to establish and enforce performance standards and to support those standards with excellent training programs, the quality-control function will be easier to manage. The HR department is responsible for incentive and reward programs and can integrate them into processes, motivating employees to perform better. Frequently, departments are graded on their adherence to quality-control measurements. The HR department can devise incentives for meeting all goals, meeting 95 percent of goals, and so on, effectively spurring the department to better performance that will meet the quality-control goals.

The HR department also can design and develop comprehensive employee involvement programs, a major productivity booster. At the outset, the HR department conducts new employee orientations. This is a perfect time to start new employees on the path of becoming involved. If employees are informed from the beginning that their involvement is valued, and the entire company in cooperation with the HR department follows a policy of inclusion through team building, feedback and assessments, and worker empowerment, then productivity and quality will surge.

Qualities of an Outstanding Human Resource Manager

Choosing the right person for this job not only will be the greatest challenge, but also will result in the greatest value for the company. An efficient, well-run, caring human resource department is the life blood of an organization. Employee morale has a great impact on how successful an organization becomes, and employees who feel valued, respected, and rewarded (not only monetarily) will have good morale. Regrettably, many employees view the HR manager as the evil character Catbert in the Dilbert comic strip, arbitrarily issuing and applying policy and being an obstructionist at every opportunity. The HR department must view the employees as its customers; HR is there to serve the employees, and therefore should be working as a good customer service department would, assisting in any way possible within its scope of responsibility. A good manager will train his or her staff in good customer service, and an HR manager should be no different. Hiring a poor or even incompetent HR manager will result in a broad range of serious problems, including having unqualified employees, high employee turnover, lost time in interviewing, legal issues resulting from discriminatory actions or unsafe conditions, decreased morale and motivation, and poor training. Today’s sophisticated and educated workforce requires and expects efficient management of employee rights, benefits, compensation, and career development. In addition, the highly regulated nature of business requires an HR manager who is familiar with local, state, and federal issues that affect personnel management, and who is sensitive to the diverse needs of today’s workforce, including flexible schedules, family management issues, and benefits packages.

In theory, skills applicable to the human resource field can be quantified as well as verified. Many colleges and universities today offer programs in human resource management, and there are independent certification programs such as Professionals in Human Resources and Certified Benefits Professional. Education and certification may assure a company that the candidate has the technical skills for the position, but experience in managing the HR function is critical for outstanding performance. How does a company find an outstanding human resource manager? In general, a combination of the educational level and technical skills necessary for the level of the position, combined with a number of years’ experience, preferably in the same industry, will yield a competent HR manager. The critical skills for a human resource manager, in addition to HR credentials, are sensitivity and integrity for dealing with difficult and personal issues, and good oral and written communication skills. Some proficiency in mathematics and computers is desirable and can be measured, but how do you gauge sensitivity, integrity, and communications skills in finding the ideal human resource manager? Asking the right questions in the interview process will be a great help in this area. Good interviewing skills will pay off in all hiring decisions, but especially when hiring an HR manager. Keep in mind that an experienced HR manager is also an experienced interviewer and probably knows the answers his interviewer hopes to hear. Nevertheless, it is important to ask the traditional, Tell me about yourself question to check for sincerity and to learn his or her philosophy of HR management. Find out if the candidate knows about your company, and, more importantly, if he or she shows a genuine interest in it. Ask about skills and strengths in prior positions and how they can help your company attain its goals. Focus on what the candidate considers his or her most significant career-related achievement.

Another interview foil is to present a negative hypothetical situation for the applicant. The candidate’s reaction and proposed solution can frequently give the interviewer insight into the prospect’s management style. Did he propose handling the situation in a sensitive manner? Was she all-business in her approach? A final aspect to examine is whether the applicant shows the general management strengths the company is seeking. If the company has decided that the HR manager should be an integral part of the senior management team, he should not be so much of a specialist that he cannot make recommendations and decisions on a company-wide level.

A superior HR manager will make it his business to keep abreast of new trends in the field and to offer new solutions to the company. If a prospective HR manager is a member of relevant professional organizations, seems well-read in his field, and can offer novel solutions to personnel problems the company faces, he will probably be a good choice. Too many people in this field become stagnant and get used to doing things the same old way.

As a company grows, a full-blown HR department may be required, and the duties of each staff person in the HR department will become more specialized. A large company would typically have a vice president of human resources, aided by an administrative assistant, and then a veritable army of specialists including a director of employee health services, a manager of compensation services, a manager of employee relations, a director of benefits services, payroll processing clerks, employee counselors, recruiters and interviewers, job analysts, training specialists, and so on. An outstanding human resource manager, in this case, will also have to be a good department manager, able to train, motivate, and guide his or her own staff.

Ensuring that the Human Resource Function Is Integrated into the Overall Corporate Strategy

The human resource function has undergone tremendous changes during the past 15 years. One of those changes is the recognition that the HR function has to be an integral part of the overall strategy of the company. The human resource practices and policies of a company directly affect the performance of a company because they directly affect the performance of one of the company’s biggest assets: its people. Because of this, the human resource function has assumed more business importance in the modern company. The most senior employee involved with human resources should have the ear of the top echelon of management or even be a direct member of senior management—not in a supporting role, but with input into the financial, operational, and strategic planning of the firm. The HR specialist helps formulate long-term staffing strategies and designs training programs that ensure proper performance of jobs, features necessary to the survival of the firm. This increased role has led to a field of study now known as strategic human resource management, which links human resource management with strategic goals and objectives to improve business performance and develop organization cultures that foster innovation and flexibility" (Truss and Gratton, 1994).

It is not surprising, then, that most progressive companies today actively include the HR role in developing and integrating their overall corporate strategy. In order for this corporate level strategy to filter down to the everyday functioning of the organization, it must be built into the hiring process, the training process, the retention process, the safety process, and many others. For this to happen, the HR manager needs to know