Human Resources for the Emerging Firm
It is the goal of most new business ventures to become viable operations that are successful over the long term. In some cases, the firm remains small, consisting of the individual or team that started the business venture. However, the owners of many new ventures desire to grow beyond this point, and hire employees to support continuing organizational success and growth. When this happens, it is necessary to put a human resource system into place so that employees are treated equitably and personnel decisions are made objectively, based on empirical data. Good human resource systems also encourage high performance and reward employees for contributing to the success of the organization. Although designing and implementing a good human resource system can be intimidating, there are many aids available to the small business owner to help in this endeavor.
Keywords Compensation; Growth Phase; Human Resources; Job Analysis; Performance Appraisal; Strategic Planning
Entrepreneurship: Human Resources for the Emerging Firm
Starting a new business is by definition an adventure. The entrepreneur or team develops a new idea or product that fills a need in the real world. Sufficient funding is obtained and the initial marketing effort is effective. If this trend continues and the client or customer list continues to grow and orders increase, the entrepreneur realizes that it is time to expand. Since in most cases the development of a viable, growing business was the goal from the beginning, this is a good thing. However, once the business expands beyond the entrepreneur or the original team, it begins the transition from being a free-form group of innovators who do things their own way to being a business with employees (who probably will not have the same vision and enthusiasm as the original team). When this happens, the organization must develop and implement a human resource system.
Human resource management is an essential function in any business. It is the human resource system of an organization that determines what types of people need to be hired in order to support the organization's goals and processes and that sets the standards for hiring the desired personnel. It is the human resource system that provides the training that helps employees meet the organization's goals and mission. It is the human resource system that evaluates employees' performance and rewards them for supporting the success of the organization. Without productive employees, the organization would cease to function. Without a well-structured human resource system, employees would not be enabled to do their jobs well and would have difficulty supporting the organization's mission.
As important as human resources are for the success of an organization, the emerging firm may find it difficult to develop and implement a strong human resource system. One reason for this is that when there is no human resource system already in place, it is difficult to know where to start. Some human resource functions are obvious: hiring employees, paying wages, providing training. Other functions, however, may be less obvious: developing solid job descriptions, setting fair performance appraisal practices, and determining ways to reward employees' performance in a way that promotes the goals of the organization. Setting up a new human resources system in an emerging business is different from refining one that is already functioning. As opposed to established organizations with extant human resources systems, the emerging organization must determine what functions are needed and develop and implement the appropriate policies and practices. This not only requires a different skill set than is needed to start the technical side of a new venture, but also requires a different skill set from the running of an established human resources system.
It may be tempting for the emerging organization to skimp when designing their first cut at a human resources system. The decision-makers may not know all the functions that human resources should fulfill in an organization, or they may think that some of the functions are not important for a small business. Such thinking may be compounded by the fact that emerging organizations tend to have a very limited budget for expenses perceived as not directly contributing to the bottom line. Without understanding the importance of the human resource system and its contributions to organizational success, therefore, it might be tempting to cut back on that portion of the budget.
However, research has shown that an effective human resource system can be a significant contributor to the performance and success of organizations. It is the human resource system that develops and implements the policies and practices that determine who is hired or even who applies for a job at the company in the first place. Once employees are hired, it is the human resource system that sets the tone for how the organization values and treats them. This treatment can significantly impact how vested employees are in the success of the company and whether or not they feel motivated to perform, not only in ways that meet the minimum requirements of their jobs, but that enhance the performance of the organization as a whole.
Not only does good human resource functionality in an organization contribute to its success: Lack of appropriate policies and procedures can open the organization to a host of unwanted consequences. For example, the US government has established numerous laws that regulate how one can do business from a human resources perspective. The Americans with Disabilities Act (ADA) prohibits organizations from discriminating against either applicants or employees on the basis of a disability, and requires them to make reasonable accommodations for people who could otherwise do the job. (For example, a person in a wheelchair who could not reach the top shelf in the stock room could not be rejected from employment based on this fact if it was possible to provide him or her with a tool that would allow items on the top shelf to be reached.)
Similarly, the Age Discrimination in Employment Act (ADEA) makes it illegal to discriminate against applicants or employees over the age of forty on the basis of their age. (For example, if a twenty-five-year-old and a fifty-year-old both applied for the same job, it would be illegal to not hire the older person merely on the basis of age if all other qualifications, salary requirements, etc. of the two applicants were the same.) Title VII of the 1964 Civil Rights Act makes it illegal for employers to discriminate against persons on the basis of race, color, religion, gender, or national origin. This law covers human resource policies and practices related to hiring, compensation, terms or conditions, and privileges. Without defensible human resource policies and practices in place, the emerging firm could find itself in a position where it could be challenged in court over its human resource actions.
Human Resources Essentials for Emerging Organizations
One of the foundations of a successful organization is strategic planning. The need for strategic planning is no less important in the human resources arena than it is in other areas of the organization. If, for example, a company producing computer software decides that it wants to increase its share of the business application software market, analysis and planning may show that the best way to do this is to offer a new product line. As part of the planning process, the human resource system must determine how it will provide the necessary talent to turn this vision into a reality and how the organization will compensate the new employees for their performance.
Planning for human resources comprises many activities, including objectively examining the goals and plans of the organization, as well as the talents of the people within it, to determine what employee knowledge, skills, and abilities will be needed in the future. Analysis and planning allow the development of action plans for how to change the makeup of the current employee talent pool in order to meet the company's needs for the future. This change can be facilitated through the hiring of new employees to meet the needs of new or expanded product lines or projects, or the training of current employees so that they can meet the future demands of the growing company. Human resource planning also involves a consideration of the other functions of human resources, including what characteristics new employees need to possess to best support the organizational mission, how it can be fairly determined whether or not potential employees have the necessary characteristics for this purpose, what fair compensation is for the new jobs and how that fits within the budget, and how and when employees should be evaluated in order to most effectively encourage them to maximize their performance.
Once the organization determines what type of human resources...
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