I learned a long time ago there are three mainparts of operating a successful business — good financial management, good marketing/sales management and good human-resource management. All three areas must be strong and evenly balanced or you will have a business that is out of balance.
As I travel the country doing consulting I find most businesses are pretty good at the marketing/sales part, but are weaker in the areas of financial and human-resource management. This can cause hardship and even disaster for a business.
The important area of human-resource management has seen more dramatic changes than any other part. In fact, there have been so many changes that I don’t know how owners and managers are able to keep up with them.
Let’s start in the beginning. It is believed the human-resource field first evolved in 18th century Europe during the Industrial Revolution. Employers knew people were crucial to the success of an organization. They believed the
well-being of employees led to improved work. History tells us the first human-resource department in the U.S. was established by the National Cash Register Co. in 1901 following a bitter strike. The early name for this function within a company was “personnel.” And the role largely was compliance-based and focused on payroll recordkeeping, workplace safety and employee grievances. The common term today is human-resource management (HRM or simply HR).
My boss at a large plumbing/HVAC wholesale business once told me the two most important assets of a business were inventory and accounts receivable. He suggested if I learned to manage these well I would be successful. He was right. Both areas are very important, but I believe he missed the most important asset of all — the people who work for the business. I believed that then and believe it even more today.
The HR field is greatly influenced and shaped by state and federal laws governing employment issues. Indeed, regulations and laws govern all aspects of human-resource management including recruitment, placement, development and compensation.
Managers and owners of businesses going back to the 1960s and 1970s well remember during an interview you could ask any question you felt applicable to the process. And if you wanted to fire someone you simply showed them the door. This is not the case today. Because of the proliferation of state and federal laws, you must walk a tight line and be careful how you handle these issues.
Federal laws were first enacted in the 1930s. I counted 62 separate federal laws that have been put into place since then — each one impacting how our businesses will be operated. In addition to this, almost all these laws have seen hundreds of additions and amendments made to them. This does not include myriad state and local laws. As an ex-business owner I can attest to the fact all of this government intervention has taken a lot of the fun out of operating a business. I do understand many of these regulations were designed to help and protect both employers and employees, but I also believe many of these regulations have added a serious burden and more expenses to the operation of our businesses.
Most of the larger wholesale businesses in the United States have their own HR departments. These are dedicated professionals who work hard to stay on top of all the regulations and changes. They know how important it is to keep the business out of trouble and how to keep both the employees and employers happy. Plus, where HR used to be pretty much a backroom operation dedicated to mainly administrative activities, today the HR function of a company is tightly aligned to the overall strategic plan of operating that business. The recruitment, development, retention and happiness of the employees play a huge role in the overall success of the business.
Let’s take a look at the major changes that have occurred in the past 10-15 years. Yours truly has done a considerable amount of homework on this subject, including interviews with several managers of HR departments, a couple manufacturers, a professional HRM company, as well as Internet- and book-based research.
I was interested to learn a number of companies outsource part of or a majority of their HR needs. There are a number of companies that specialize in this area. They will do everything from payroll to helping write policies and procedures, and being advisors on sticky issues such as termination, infractions and even recruitment.
Here’s an HR mantra I’ve shared in the past. If you want to be the best company in your geographic area, you must do each of these things: Hire the best; Train the best; Communicate the best; Motivate the best; and compensate the best. Hiring new people is expensive, so retention and growth has become more important than ever.
According to Jason Averbook, author of “From Now to Next,” HR is at a crossroads as technology can now accomplish many of management’s traditional responsibilities faster, cheaper and better than ever before. Is your company incorporating this new technology to help you manage your HR responsibilities? The digital age is here for HR just like it is in virtually every aspect of running a business. There are countless recruiting platforms, onboarding programs and talent-management systems available to employers. Many professionals in the HR field have argued HR, as a whole, will have to adapt quickly or face extinction.
Darren Bounds, CEO of Breezy HR, which markets an employee application tracking platform for smaller businesses, relates his company and applications like it now can replace one or two dedicated HR staff members within an organization. Likewise, recruiting software has become more advanced and cost-effective.
Almost every day we read or hear about areas of HR affected by new regulations such as minimum wage, paid time off, health and medical coverage and age discrimination to mention just a few.
The following is a list of a few areas that have changed and/or are changing in the past few years:
· Leave of absence;
· Independent contractor;
· Rest/meal period;
· Late payment of wage claims;
· Trade secrets;
· Unfair competition;
· Wrongful termination;
· Invasion of privacy;
· Drug testing;
· Use of digital devices at work;
· Health and safety; and
· Workers comp and disability claims.
How are HR managers expected to stay current on all these never-ending changes? It’s tough, but it’s also absolutely necessary in order to keep the business out of trouble. This is another reason more businesses are outsourcing many of their HR needs to outside professional firms.
Here are a few more HR area presenting challenges to companies.
· More employees wanting and even expecting to receive flex time;
· Mandatory paid leave time;
· Smartphone evolution and tablets being used at work (for both personal and business use);
· Social media influx and how it’s used;
· A multigenerational workforce. Different generations trying to work together to meet their individual needs;
· Access of data in this digital age has brought many advantages for both employers and employees;
· Lack of a stable, skilled workforce and lack of loyalty to a company. Many younger employees want, and even expect, instant gratification. If they perceive they aren’t getting what they expect, they don’t hesitate to leave and look for another job;
· Continued added benefits for employees, which puts a strain on profitability;
· Legalization of marijuana in several states and spreading to other states. How will companies with drug policies address this?
· Continued changes in exempt vs. nonexempt employees;
· Increased and ever-changing health and safety requirements;
· Lack of trade-school training. Where will plumbers, electricians, carpenters, etc., come from in the future?
· How and when employee performance reviews will be handled. The historic “once a year” sit-down won’t satisfy the younger generations.
In my opinion there will continue to be more changes in the area of HR management. For businesses to remain healthy, viable and profitable they will have to do an outstanding job of managing their HR responsibilities.