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Top Five HR Priorities for Small Business Owners

written by: N. Plowman•edited by: Michele McDonough•updated: 6/2/2011

Small business owners can benefit immensely from understanding and employing common human resource trends and strategies for improving their workforce. This article discusses the top five HR priorities for small business owners and discusses the best way to implement these strategies.

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    The Importance of HR in Small Businesses

    Most small businesses do not have a need for an in-house HR professional because of the size and newness of the company. However, this does not mean small business owners should ignore human resource strategies and common practices. Instead, when a company is in early development, it is the best time to implement solid and effective human resource strategies. This will allow small businesses to effectively manage their workforce throughout the turmoil and pressure of significant growth and prosperity.

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    Top Human Resource Priorities

    To ensure small business owners effectively keep up with their growing workforce, the following human resource considerations should be of utmost priority.

    1. Implement Legal Employment Practices

    Ensuring a business’s employment practices are legally sound is critical for small business owners. In order to reduce the likelihood of violating an employment law and assuming unnecessary liability or risk, small business owners must understand common employment laws and how to effectively implement the laws in their employment practices. To ensure employment policies and procedures are legally sound, it is highly recommended that small business owners consult a legal specialist or an HR professional when drafting an employee handbook.

    2. Improve Employee Satisfaction

    Since a company’s human capital is its greatest asset, it is critical to ensure employees are satisfied with the company and their position. The potential benefits of increasing employee satisfaction include increased productivity, improved morale and sense of organizational commitment, enhanced motivation and desire to advance within the company, and decreased turnover rates. There are many monetary and non-monetary ways to increase employee satisfaction, and whichever one a company chooses should align with its mission, goals, and available resources.

    3. Construct Fair and Equitable Compensation Strategies

    Scale One of the cornerstones of a successful business is fair and equitable compensation strategies because compensation not only dictates how much fixed costs a company incurs but also determines how satisfied and motivated employees are within the company. As a small business owner, it is critical to evaluate market and industry trends when determining compensation levels to ensure one’s rates are competitive enough to attract and retain the most qualified employees. Next, consistent compensation requirements must be established in relation to a predetermined pay grade to ensure employees performing similar jobs are being compensated fairly and equitably in relation to one another. Finally, any performance-based compensation programs or employee incentive programs must be developed to ensure consistency in rewarding additional compensation to the workforce.

    4. Develop Reliable Evaluative Systems

    The most effective way to ensure workforce success is to develop and implement meaningful and reliable evaluative systems. An established and reliable performance evaluation program ensures consistency across reviews, which enhances employee acceptance of the review processes and subsequent performance-based decisions. The first step is to conduct a thorough job analysis of each position and write effective job descriptions. Next, the job description can be used to devise evaluation components, similar to the downloadable Manager Evaluation and Self-Evaluation review templates found in the Project Management Media Gallery. Finally, a systematic method for evaluating and making sense of reviews must be devised and communicated to employees and managers.

    5. Design Effective Training & Development Programs

    As a small business owner, a primary goal should be to increase retention and promote internal growth, which can be done by designing effective training and development initiatives. The most common training initiative is to implement a standardized new employee orientation program, which ensures satisfaction and commitment early on in an employee’s history with the company. Another cost effective way to improve personnel development is to implement a mentorship program where an employee is paired with a successful, senior-level employee to learn new skills and improve awareness of company goals and processes. A final way to increase training in a variety of areas is to implement a job rotation program among employees, which not only improves cross-training but enhances employees’ ability to be flexible to the changing needs of a new business.