Personnel Management In The Smaller Firm

Written by Joe Driscoll

November 16, 2009

Big business must take advantage of its “bigness” to be successful. Big business is capital intensive, has greater market shares, and enjoys economies of scale. Small business must also capitalize on its inherent size advantages. Small businesses are people intensive, have flexibility, and enjoy proximity to their markets.

With the complexities involved in managing large organizations, successful big businesses are known for their advanced administrative systems. However, with its relatively greater dependence on people, the smaller business must also recognize the importance of personnel management and administration.

The development of effective administration and personnel management in the smaller firm is constrained by several factors. The complexity of running any business, particularly a small business, is often initially underestimated. While being small offers the opportunity to be informal, it does not justify being less methodical. There is a big difference between informality and lack of organization; between formality and organization.

Once the need for an organized administrative effort has been recognized, small businesses frequently adopt big business practices. Installing the administrative practices from a big business into a small company environment is like trying to put a size 12EE foot into a size 10C shoe. You might get it in, but it won’t be comfortable and after awhile, you’ll throw the shoe away and be bare foot again..

Small companies are sometimes enamored with their size. It becomes an excuse for avoiding the actions that could otherwise make them better companies, regardless of their size. “We’re too small, we can’t afford it.” “We don’t need that, it’s for big companies.”

The reality is that in most small businesses personnel costs are the largest controllable cost area. Administration and personnel management must be given the attention it deserves because of its enormous impact on the survivability and profitability of the business.

While people are the dominant resource in most businesses, they are much more than a necessary evil. Intelligent administration and personnel management provides distinct competitive advantages. If as much attention was given to managing people as is given to managing financial resources, the financial results would improve.

Many smaller and growing businesses have experienced similar personnel and administrative problems. In the early stages of many companies, everyone knows what’s going on and everyone communicates frequently and openly. These open lines of communication are a key to the enormous productivity and success of young, understaffed, and under capitalized companies.

The decline in spirit that often occurs when smaller companies begin to grow is, and should, be avoided. As the business grows, top management tends to be more reluctant to share results, plans, and problems. Management should work at maintaining an open organization as they build. Keep the spirit alive!

For one of a number of reasons, limited staffed, budget, and resources, the smaller enterprise neglects training. It is perhaps the single best opportunity for improving the utilization of human resources.

Training can be offered to everybody. It pays enormous dividends and costs only a little. Training can be provided internally. For example, the sales department can make a market presentation to the production department, or vice versa. Training can be provided on a complimentary basis by inviting one of your customers or suppliers to make a presentation on their business to your employees. Training can be provided professionally from carefully selected seminar programs.

Compensation plans should be one of management’s most potent programs in a smaller business. Owner-managers have the flexibility, resources, and hands on knowledge to insure that compensation is an effective mechanism in the overall management of the business. Why then, is compensation such a source of dissatisfaction?

Compensation is often treated like a squeaky wheel in a smaller business. When the noise gets loud enough, a minimum treatment is applied. Conflicting pressures, inexperience, and lack of comfort in dealing with these types of issues cause the owner-managers to shy away from utilizing compensation as a resource to enhance the performance of its human assets.

Large corporations are known for the “across the board, cost of living” pay mentality for the majority of their employees. However, they are quite inventive and generous with the compensation of their key employees. In a smaller business, every employee is key and management must insure that their compensation programs meet the standards of internal equity, external equity, and incentive.

Because its your business, bring the level of attention to your human resources that you bring to your financial and physical resources.

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