Strategic Human Resources

In small and large businesses today a lot has changed.   One of the areas that have experienced a dramatic shift in thinking is human resources.  The knowledge-driven economy has forced large organizations to change how they view their employees.  

In the past businesses have seen employees as almost a line item on the balance sheet.  A common way to refer to employees is human capital.  This inferred that they were easily replaceable and the amount spent was directly related to the return.

Funny enough, mom-and-pop businesses have always known that the human capital concept was a poor way to think about employees.  A small business understands how important each person is that works in their business.   

These days, managers not only have to fight for product markets and technical expertise but also the hearts and minds of the most talented people in the market.   So small or large, most successful businesses understand that human resources are a strategic part of the business.  

Human Resource is a strategic asset

Today Human Resource becomes a separate department when a business usually has over 100 employees.  We have access to several services that a business can outsource to that can handle most of the needs below this number, but, as a rule, when you grow above 100 you will most likely need a separate HR department.

What is HR, how is it defined: According to Armstrong (1997), Human Resource Management can be defined as “a strategic approach to acquiring, developing, managing, motivating and gaining the commitment of the organization’s key resource – the people who work in and for it.”

A shorter definition is Human Resource Management is a management function concerned with hiring, motivating, and maintaining the workforce in an organization. 

A common complaint that HR directors and managers had was we’re told our department is key to business success, but when it comes to strategic planning and decisions we don’t get a seat at the table. In a recent Harvard Business Review article Why Chief Human Resources Officers Make Great CEOs  Ellie Filler has noticed a dramatic change. 

Filler, a senior client partner in the Swiss office of the executive recruiting firm Korn Ferry is quoted as saying “ For years many of the HR chiefs she recruited reported to the COO or the CFO and complained that they lacked real influence in the C-suite. Today, she says, they often report directly to the CEO, serve as the CEO’s key adviser, and make frequent presentations to the board. “

If you’re a small business then you might be thinking C-Suite I have one person there and that’s me.  HR department one person and that’s me also.  How is any of this relevant to my business?

It’s a good question, but what concerns the large successful organizations should concern you.  And this is, the ways we get and keep our best people is changing for large, small, or in-between sized businesses.

The question is as a small business, what can you do to make your HR efforts more effective and strategic?

What is Strategic HR

Creating a strategic HR model consist of three main areas:

1. Building
2. Linking
3. Bonding

This is the model followed by fortune 500s but a small business can take from this to implement the concepts on a different less organizational level.

Let’s look at the building task first.  What does building mean?  In large organizations, it means creating human resource systems, processes, and culture to counter the deep-rooted bias towards financial assets and recognize the value of Human Capital.

That definition is a lot of biz talk meant for execs around the coffee bar, but to make it fit a small business we need to distill it down. 

It means, look at your culture and ask:

• What kind of culture do you have or want in your business.  
• Do you have a place that promotes employee engagement?  
• Do your employees feel like they have a say in the business?  
• How do I know?  

A simple way to get your head around the type of culture you have is to ask yourself, how many times in the recent past have employees offered up suggestions on how the business could do better?  And did you listen and take action?  

If the answer is; I rely on employees to provide improvement suggestions and whatever the suggestion we always consider it.  Then we try and get back to the employee and give feedback on why we took the advice or did not.  

That is great because you already understand how to engage your employees and your ahead of about 70 -80 % of most businesses. 

If the answer was; I have to do everything, it is rare anyone offers anything useful.  That means you are a little closer to the norm and there is some work to do. 

Just remember no matter what your business has a culture, and you need to ask is the culture we have, the one I want?

Linking

In large corporations, they worry about things like linking knowledge to the network and developing learning organizations based on knowledge or sharing networks

Again kind of tough to figure out how this can apply to a small business.  What it comes down to is sharing.  

Sharing knowledge, experience, and leadership is how a small business can put this concept to work.  In large organizations, they use software, consultants, and systems to help make this all work. 

But for a small business, it comes down to a sharing culture that does not silo information and makes an effort to engage everyone.  This does not need software or networks it is more attitude than anything.  

Questions to ask to see how you’re doing:

• Do employees value each other?
• Do employees work across tasks to get projects done?
• Do your managers value and request employee input?

No one should kid themselves setting up a culture that supports this linking type of activity is not easy.  It requires constant effort and directed goals.   

Why invest to change the culture?

The return on investment is significant.  Investing the time and energy to get your employees engaged in the business your goals and what you’re trying to achieve with your business will pay long-term dividends.

A concrete example of how aiming for this type of employee engagement provides a good return on the business is you, as the owner, get more time to focus on creating growth for the business.  

Most small business owner’s biggest complaint is they never have enough time to work on business growth.  Their day is taken up fighting the constant, never-ending little decision battles that are required to make the business work.  

This is another great indication you have not engaged your workforce properly so that you can free up your time.  Commonly known as working more in the business than on the business.

It is often the case that a small business owner gets caught up in the day-to-day operating decisions that are essential for smooth operations but don’t help the business grow.  It is not at all unusual and this is one of the biggest reasons for a small business to stop growing.  

For an owner to get away from the day-to-day decisions means they will have to give up some control and if you don’t have a workforce in place that can take over, well you’re going to be stuck.

In the end, to keep it simple, the engaged culture will allow you to grow, a culture that is not engaged in the business will stifle growth.  And this is where your return on investment in developing a proper culture comes in.

Bonding

Great, so you’ve spent time and energy developing the culture training your employees, and getting the whole operation spinning and working without you watching every moment.  And then it happens your key person heads out the door and your back to where you started.

Of course, this situation is inevitable and it is not if it is going to happen, but when it is going to happen.   How do you minimize the effects and how do you minimize the number of times you have to deal with it?

The answer is bonding.

First, let’s understand that humans by nature crave stability and long-lasting bonds.  It is just part of our DNA how we are wired.  

We want to belong, feel like we are part of something and when we do, it is harder to leave and go into the unknown.  Even if the unknown is paying more.

The great thing about bonding is that if you have worked to create the culture that we have talked about earlier then you’re pretty much there.  Because a culture that has an engaged set of employees, and is respected by management, is almost by definition a culture that has a high degree of bonding.  

If you have the right culture then there are things you can do to promote more bonding these include:

• Get together to do fun activities outside of work.
• Go on a company retreat and invite family, but make sure it is more about the retreat and relaxation than about work.
• Encourage company activities like sports teams
• Encourage group volunteer days and make them paid.  (in the long run these more than pay for themselves)

Of course, if your culture sucks and people are unhappy then the bonding exercises above won’t move the needle and may make things worse.

Research has shown that to keep your most talented people takes more than good pay.

Job satisfaction is key see More Than Job Satisfaction American Psychological Association.

Put it all together Building, Linking and Bonding and you will have a workforce that not only makes your life easier but will provide you with a competitive edge that lets you gain market share and improve your bottom line.