Human resource management in Small Organizations Essay

Much of our knowledge of human resource management involves large organizations with dedicated human resource departments and staff, but what about small organizations? Small organizations recruit, compensate, do performance management, and many of the same tasks as large organizations. There are certain things that can be mapped effectively from large to small organizations, but what happens to the rest that do not map? A small organization can not simply let things slip through the cracks based on size or ignorance of laws, rules, or requirements. This is what makes human resource management not only important in small organizations, but essential for their long term success. Human resource (HR) management is an issue that affects every type of organization large and small alike. The majority of research and information that is easily accessible though is for larger organizations with a staff of human resource professionals. While it is true that much of the information for larger organizations can be applied to smaller organizations the majority of things do not. This raises the question: is the practice of human resource management necessary in small organizations or is it simply for the Fortune 500 companies of the world? I propose that not only is human resource management important to small organizations, but it is essential for their long term success. Traditionally, Small organizations have always had limited resources. Many times they completely overlook the importance of a human resources department. In doing so, they elect to omit the department in their business model. This common oversight shifts the burden of specific HR responsibilities to other members of the staff. Most often, these members of management are not trained or experience in human resource management, nor are they schooled in policies and procedures. Because of this, many HR tasks fall through the cracks. These short falls do not negate laws, rules, and other employer responsibilities that cover human resource management. These regulations still apply to all organizations regardless of size. The lack of understanding creates a liability for small organizations because hey feel that they are exempt based on their size. They simply do not have an understanding of all the laws, rules, and other responsibilities that an educated human resource professional would. Without a dedicated HR department, the small business lacks a proper understanding and vision of human resource policies and procedures. This deficiency will also create problems for a small organization. Typically, most small organizations are focused on increasing sales, adding new products and services, and increasing profits. All these objectives are to be met with the aforementioned limited resources. What many small businesses overlook is that proper understanding and implementation of HR policies and procedures is vital to any business. This should be the center piece of any organization; large or small. Small businesses should create a solid foundation by creating a policies and procedures manual. While creating a policies and procedures manual is time consuming, it is essential for successful employee relations. These policies and procedures not only create an understanding between management and employee of what is expected, but most importantly, what is not expected. Often time’s small organizations assume that common sense should be the guide in determining human resource practices. This leaves too many things open to interpretation and can lead to liabilities that can damage or even end a small organization. Policies on sexual harassment, retaliation, Family and Medical Leave Act of 1993, and a host of other legal policies must be stated and understood by everyone in the workplace. There are many legal institutions just waiting for organizations to ignore these laws. Creating a policies and procures manual will put in writing what is not tolerated while protecting the small organization. It also will keep the business from being negligent in the protection of its employees. Liabilities are a real threat that face many small organizations; both in the short and long term scope. It does not matter if the organization is liable because of a lack of knowledge or truly negligent; the law only cares if an organization breaks it and not why. Liability issues while vital to the success of the organization are not important if there are no employees. Without employees, the organization cannot sell its goods or services and has no purpose to exist. While a human resource department is important because of liability, there are other issues that are the core responsibility of an HR director that are also key components to the success of a small organization. HR professionals must manage recruitment, compensation, retention, training, and performance. The next key component and considered to be the most important by many, including myself, is that of recruiting. The lack of a formal human resource department and policies make this important component the most challenging. Selection of staff starts with the challenge of who is going to do it. This task often falls on key management personnel and even the president/CEO of the organization. This often impacts the primary responsibilities of this person that directly affect the small organizations ability to increase and make profit. Once the person is selected he/she faces many challenges in the quest for a new staff member or members. The first of these is limited financial resources to spend on recruitment. The lack of money that can be spend limits the amount of areas the open position can be broadcast and there by limiting the pool of qualifies candidates. The popularity of Craigslist and other free online classified internet sites have cut the cost of spreading the word of open positions, but still only reach a limited audience. The ability to add open positions to a small organizations own website is also a free option, but once again limits the exposure to only people coming to its website. The more poplar websites like Monster, Career Builder, and Snag-a-Job reach a larger audience, but cost money. To increase the candidate pool from only online audience to print audience also this is another added expense to an already limited budget. Once the interview process starts there are several other issues that small organizations face. The first of these is the credibility of the organization. Credibility is hurt from even the practice of only posting open positions on a Craigslist. The amount of scams and illegimate business has made the public skeptical of many free sites like Craigslist so the free ad is not entirely free. A Fortune 500 company such as FedEx has no trouble with name recognition or creditability unlike Mailway Delivery, a small package courier. The problem of credibility for the Mailway Delivery’s of the world is another challenge that small organizations face. The next issue is the need of most small organizations employee’s to perform multiple roles. This could include answering phones, sending out mail, and various other duties that everyone shares to keep employee costs down. A candidate from a large corporation might have a specific duty that is his/her only task and that is what they are expected to focus on. In small organization tasks are far less defined and could even change regularly depending on the needs of the organization. This is why small organizations also focus on personal credentials or organizational fit when selecting a candidate. These issues have lead many small organizations to begin a new way of thinking about recruiting. This new way of thinking is outsourcing recruiting to companies such as Manpower, Talent Force and other professional recruiting organizations to take on the small organizations recruiting tasks. These recruiting organizations can provide highly trained human resource professionals and services that can reduce the time key management are taken away from their jobs and put it in the hands of the recruitment organization. The recruitment organization provides not only the benefit of the recruitment, but an array of other services such as benefit administration, payroll services, training, employee relations, and a host of other human resource tasks. This cost is significantly lower for the small organization than hiring someone plus the amount of exposure to liability issues is cut down significantly. These firms also have the option of temporary labor, seasonal labor, and other not permanent labor solutions. They can also be used as an almost try before you buy approach to hiring new people. Another important component to the success of a small organization is that of compensation. This is an important topic in any organization and small organizations are no exception. Compensation is important to several aspects of small organizations including recruitment and retention of staff. It is as simple as if the organization can not pay a fair amount for staff then recruitment will be hard and retention even harder. The limited amount of resources in small organizations makes creating an enticing compensation plan for recruiting and retention a challenge. This has lead small organizations to come up with some different strategies on pay levels, pay mixes, pay structure, benefits and pay raises, but the majority emphasis is placed on pay mix. The pay mix of small organizations focus more on pays incentives than base pay. This pay mix allows the small organization to use the saved cash on labor to reinvest in the company and freeing up scarce resources. This also provides motivation for the staff to achieve goals, increase productivity, and have an overall stake in the success of the organization. These pay incentives can be either short or long term. Short term pay incentives in small organizations may include things like stock and/or profit sharing. The reasoning of why this is a successful is simple. It provides the employee with a tangible reward for his/her work in making the organization successful. This gives the employee to achieve a larger goal with a greater reward based on long term pay incentives. Long term pay incentives are typically a larger stake in the company through some form of equity, stock, stock options, or some other stock based program. This in itself continues the motivation even when this is achieved because the employee begins to identify with management based on their ownership stake in the company. This works extremely well in the high technology organizations, but can be used in almost all organizations. Pay structure in small organizations tend to have far less levels of management and organizational hierarchy so rewards and pay rate are not an indication of status among employees. Pay raises in small organizations are often not given in the same way at large organizations. Small organizations see payroll as a fixed cost and are often not willing to increase this without the success of the organization. This is why short and long term pay incentives and organizational fit play such an important part in the retention of staff. If the employee does not feel the company will be successful they will not be satisfied with a lower base salary because of the lack of faith in the success of the organization. Benefits are a department where small organizations suffer based on the scarce resources available and the high cost of employee retirement plans, company pension plans, and life insurance type options. This is where the long term pay incentives of stock options and ownership in the company have to be a substitute for standard large organization benefit packages. One benefit that small organizations do benefit the most and many choose to invest in is that of education help or reimbursement. This helps the employee by free or subsidized education and the small organization can oftentimes fill gaps in education because of the diversity of job needs. An accountant that also helps with I. T. needs would benefit his/her self as well as the company if he/she took I. T. training classes from the local community college. This not only benefits the employee, but the organization also. This makes education the best benefit for any small organization to invest in. Benefits in small organization may seem unorthodox to many traditional human resource standards, but they are necessary to help recruit and retain the best staff they can. In small organizations it is important to look at compensation from a total view, meaning looking not just at base salary and incentives, but at psychological rewards, learning opportunities, and individual recognition. Retention is an important aspect of staffing that impacts all companies and can be devastating to small organizations. Employees are the most important asset of any small organization and the instability of losing an important asset can cause havoc. Employee retention not only affects a small organization in losing a valuable asset it is an added expensive of finding and training someone else. This combined with any education paid for by the small organization is lost. The goal then of the small organization is to retain the valuable employees through the bonus programs, family type work structure, and many of the other psychological benefits small organizations have to offer. This will lead to lower cost and more efficiency in the organization. Performance management in small organizations does incorporate some parts of compensation such short and long term incentives, training, and other rewards it mostly focuses on performance evaluation processes, disciplinary actions, the laying off of employees and the termination of employees. Often the lack of formal procedures that was discussed earlier comes into play and can negatively effect the organization. The lack of written expectations, rules, and procures open the small organization up to law suits and other liabilities. Performance evaluations, disciplinary procedures, and the law involving termination of employees are important issues small organizations need to spend time on. Training in small organizations is another important component of human resource management effects on the organization. Often times in small organizations the roles of employees are altered, shifted, and sometimes even changed to meet the demand at the time. The amount of change in roles requires that employees stay trained in the area or areas they are working in order to be effective in their job. There are several different types of training that are most common in large and small organizations alike. The first type of training is what most people associate with the word training, formal classroom training. This type of training has been shown to have a positive impact on workers, but is costly in time and money for the organization. This makes formal training for small organizations not the most efficient with some exceptions. Those exceptions are trade association training classes, college seminars, and in house training. Another option that was discussed earlier in the paper was also tuition reimbursement / tuition assistance that are options for formal training. The most common for of training for small organizations is unstructured or most often referred to as on the job training. This is even a selling point in a lot of recruiting efforts of small organizations. The hands on training that a small organization can provide is valuable to the employee as they can not often times get that at a formal training facility. This form of training is often seen as less structured which allows for more interaction and increased learning in many cases. Another form of training that is a new form of training that can be supplemented with formal and informal training is based on social psychology that uses socialization to train new employees. This approach uses socialization to teach the new employee their role in the organization, adjust to job requirements and the culture of the new job. The small organizations have been found to benefit more from this type of training because the new employee is more quickly invited to meetings, asked to go to lunch, and work closer with people than a larger organization. This results in feeling part of the team quicker and learning more quickly. The need for human resource management begins the second the first employee is hired regardless of the size of the organization. The seemingly simple process of hiring, firing, and paying employees is filled with many unseen obstacles that can create problems for a small organization. Effective human resource management has a direct effect on the success of a small organization. It has been said throughout the paper of a small organizations most valuable asset being its employees. This is why human resource management is key to the success of any small organization.