Three Critical Human Resource Challenges For Small Business

Laurel Auction - Three Critical Human Resource Challenges For Small Business

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I believe that the three most critical challenges facing today's small business owners in the management of their human resources fall within the following three categories:

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(1) Attracting and retaining qualified staff;

(2) Moving from a craft or a promotional organization to an administrative organization; and

(3) Addressing the special needs of a diverse workforce.

The justification for these three categories follows:

Attracting and Retaining Qualified Staff

There are at least six significant factors that increase the complexity of this challenge.

First, a number of communities are experiencing a limited number of available local applicants.

Second, there is frequently a lack of accessibility due to limited or non-existent transportation options. For example, a number of years ago, a company in Sun Prairie, Wisconsin could not find enough interested and available local residents. The obvious answer was to recruit in the closest larger city, which was Madison, Wisconsin. However, the lack of a bus route between Madison and Sun Prairie- particularly around the third shift- mooted out this possibility at that time.

Third, small businesses are often limited in terms of the wage and benefit packages they can offer, particularly as they compete with larger businesses.

Fourth, small businesses often lack advancement possibilities for existing staff. Either there are no growth opportunities, or the existing staff lacks the necessary technical expertise or administrative experience to fill the positions when they become available.

Fifth, the transient nature of applicants with limited qualifications may make it difficult to retain them.

Sixth, it may be hard for a small business to create a sufficiently healthy motivational climate to retain employees. Long hours, frequent crises resulting from inexperience and the necessity to respond quickly to unanticipated customer needs, the insecurity of work and payroll, 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, may all contribute to staff burnout or turnover.

Moving from a Craft or a Promotional Organization to an Administrative Organization

There are four integrally related factors that make this movement difficult.

First, the staff who were initially attracted by the craft or promotional nature of the organization may become very uncomfortable when the business moves into an administrative mode.

Many small businesses falter as they grow, prosper, and add on additional staff. As more people are added and supervisory levels are needed, they begin to lose the family feeling associated with a craft organization, with immediate access and continual contact between staff and owners. Staff may also miss the intimacy and informality of the craft organization and become disenchanted with the "big business" more formal culture of an administrative organization, with written policies and procedures.

Then there are staff who hire on because of the excitement of the entrepreneurial venture, challenged by meeting crises and moving quickly to take advantage of critical windows of opportunity that occur so frequently in a promotional organization. They may become bored by the standardization and slower pace required by an administrative organization. Their gradual isolation from the charismatic owner who first perked their interest and commitment may also disenchant them.

Second, the business owners may lack the knowledge, skill, or experience in supervision. In all organizations, even a craft organization, there is a need to supervise and manage staff. Many entrepreneurs have not worked in other businesses, so they have no model to draw from in terms of what is or is not appropriate. Other entrepreneurs hire family or friends and then have a great difficulty issuing orders or handling performance issues.

Third, many small businesses, regardless of where they are in the organizational cycle (craft, promotional, or administrative) lack sufficient personnel management policies and procedures which might help them supervise in some consistent fashion. Clearly, it is easier to address performance issues if there are written performance standards or operational guidelines.

Fourth, as organizations move into an administrative mode, they face an increasing need to comply with specific governmental regulations. There is an additional complexity involved in payroll and tax reporting, and rewriting position descriptions, recruitment and hiring policies and procedures to comply with ADA, etc.

Addressing the Special Needs of a Diverse Workforce

Due to labor market shortages, additional governmental regulation, and the increasing diversity of the population, many small businesses will have to hire individuals that they may not have considered in the past, and then train and incorporate them into their workforce. There will be an increasing number of non-traditional hires, second career, older workers, part time workers, and workers who mirror the complexion of the community that the business serves.

Businesses will have to adjust to the different needs of this workforce. This may include: initiating flexible scheduling; providing training in technical or computer skills; addressing literacy issues; complying with immigration requirements and special permits; making special accommodations for general accessibility and specific employees' physical impairments; providing health care, on-site daycare, and other benefit packages; getting involved in school to work programs, apprenticeship and mentoring programs; creating liaisons with different community organizations for recruitment purposes; and finding solutions to transportation and accessibility issues.

They may also need to institute cross cultural training, establish policies and procedures to handle harassment issues, and simply become more sensitized to the different communication, trust, motivation, and management needs and practices of various cultures.

There are many other challenges that small businesses face in terms of quality improvement, customer service, technological advancements, financing, etc.

Health care alone warrants its own category. However, based upon my years of training and consulting in the small business community throughout Wisconsin, I believe that these three categories summarize the largest and most significant issues facing small businesses today in the area of human resource management.

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