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Three Critical Human Resource Challenges For Small Business
I believe the three most critical challenges facing today’s small business owners in managing their human resources fall into the following three categories:
(1) Attracting and retaining qualified personnel;
(2) Moving from a craft or promotional organization to an administrative organization; and
(3) Addressing the special needs of a diverse workforce.
The rationale for these three categories is:
Attracting and retaining qualified personnel
There are at least six significant factors that add to the complexity of this challenge.
Firstly, a number of local communities experience a limited number of available local applicants.
Second, there is often a lack of accessibility due to limited or non-existent transport options. For example, a company in Sun Prairie, Wisconsin a number of years ago could not find enough interested and available local residents. The obvious answer was to recruit in the nearest major city, which was Madison, Wisconsin. But the lack of a bus route between Madison and Sun Prairie — especially around the third shift — ruled out that possibility at the time.
Third, small businesses are often limited in the salary and benefits packages they can offer, especially as they compete with larger businesses.
Fourth, small businesses often lack advancement opportunities for existing staff. Either there are no growth opportunities or the existing staff lack the necessary technical expertise or administrative experience to fill the positions when they become vacant.
Fifth, the transient nature of applicants with limited qualifications can make it difficult to retain them.
Sixth, it can be difficult for a small business to create a sufficiently healthy motivational climate to retain employees. Long working hours, frequent crises due to inexperience and the need to respond quickly to unforeseen customer needs, the uncertainty of work and pay, the frequent need for evening and/or weekend hours, the lack of growth opportunities, the limited benefits, the lack of opportunity and /or funding for training, and inexperienced supervisors and management, can all contribute to staff burnout or staff turnover.
Moving from a craft or promotional organization to an administrative organization
There are four integrally related factors that make this movement difficult.
First, staff who were initially attracted to the craft or promotional nature of the organization may become very uncomfortable when the business transitions into an administrative mode.
Many small businesses falter as they grow, thrive and add additional staff. As more people are added and levels of supervision are required, they begin to lose the family feeling associated with a craft organization, with instant access and ongoing contact between staff and owners. Staff may also miss the intimacy and informality of the craft organization and become disillusioned with the “big business” more formal culture of an administrative organization with written policies and procedures.
Then there are employees who hire because of the excitement of the entrepreneurial venture, challenged to face crises and move quickly to take advantage of critical opportunities that so often arise in a sales promotion organization. They may become bored with the standardization and slower pace that an administrative organization requires. Their gradual isolation from the charismatic owner who first piqued their interest and commitment can also disenchant them.
Second, the business owners may lack knowledge, skills or experience in supervision. In all organizations, including a craft organization, there is a need to supervise and manage staff. Many entrepreneurs have not worked in other companies, so they have no model to draw on in terms of what is and is not appropriate. Other entrepreneurs hire family or friends and then have great difficulty issuing orders or dealing with performance issues.
Third, many small businesses, regardless of where they are in the organizational cycle (craft, promotional, or administrative), lack adequate human resource management policies and procedures to help them supervise in a consistent manner. Obviously, it is easier to solve performance problems if there are written performance standards or operational guidelines.
Fourth, as organizations move into an administrative state, they face an increasing need to comply with specific government regulations. There is an additional complexity involved in payroll and tax reporting and rewriting job descriptions, recruiting and hiring policies and procedures to comply with the ADA, etc.
Address the unique needs of a diverse workforce
Due to labor shortages, additional government regulation, and the increasing diversity of the population, many small businesses will need to hire individuals they may not have considered before, then train and integrate them into their workforce. There will be an increasing number of non-traditional hires, second careers, older workers, part-timers and workers who reflect the complexion of the community the company serves.
Companies will need to adapt to the diverse needs of this workforce. This may include: initiating flexible scheduling; Technical or computer skills training; addressing literacy issues; compliance with immigration requirements and special permits; create special accommodations for general accessibility and specific employees’ physical disabilities; provision of health care, on-site day care and other benefit packages; getting involved in school-to-work programs, apprenticeships and mentoring programs; liaise with various community organizations for recruitment purposes; and finding solutions to transport and accessibility problems.
They may also need to undertake cross-cultural training, establish policies and procedures to deal with harassment issues and simply become more sensitive to the different communication, trust, motivational and management needs and practices of different cultures.
There are many other challenges that small businesses face in terms of quality improvement, customer service, technological advancements, financing, etc.
Healthcare alone warrants its own category. However, based on my years of training and consulting in the small business community throughout Wisconsin, I believe these three categories summarize the biggest and most significant issues facing small businesses today in human resource management.
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