In This Chapter

Investing in your employees is important regardless of your size—and it isn’t difficult!

The need for growth and development is deeply imbedded in the human species. When employees feel they have opportunities to develop personally and professionally, they are more likely to become engaged in the business—which means you have more loyal, hard-working employees dedicated to the success of your enterprise. Employees who feel as if their contributions really matter and have opportunities for personal growth work more effectively for your team and are less likely to leave or be wooed away by your competitors.

As a small business owner, you may think that there are few or no opportunities for advancement for your employees—and you may be right. But there are opportunities within the business for your employees to continue to develop their skills and expand their knowledge. In this chapter, we show you how to exploit those opportunities.

Establishing clear goals and objectives for each of your employees is the critical first step. This requires, certainly, developing job descriptions, which we talked about briefly in Chapter 8 and will discuss in more detail in Chapter 14. Outside of the job description, it is essential that employees understand their specific role within the organization, the responsibilities of that role, and the goals and objectives they must work toward.

Let’s look at an example. You have hired a receptionist for your business. The goals and objectives for that role may be as follows:

In addition, you expect the individual to be friendly, professional, courteous, and helpful at all times. By establishing these goals and objectives, you have something to measure the employee’s performance against.

You should define roles for every employee working for your business and clearly delineate the responsibilities for each of those roles. Although you can draw from a variety of resources for a list of the typical responsibilities associated with particular roles, we encourage you to focus more on the role as it pertains to your company and the responsibilities you believe are most important for that role.

Take these steps to develop the roles and responsibilities for employees:

Employees should understand your expectations and how they will be measured on their performance. We talk more about performance later in this chapter.

For some roles, you may choose to add additional responsibilities, such as assisting others when necessary. You often see on job descriptions, “Additional responsibilities as assigned.” These additional responsibilities may include working on special projects or assisting in other areas of the business during busy periods.

As a best practice, review roles and responsibilities of employees on a regular basis to update them. You’ll likely find that their roles and responsibilities have changed over time.

Setting goals for employees to strive toward is essential for meeting your business’s objectives, but you need to ensure those goals are aligned with their personal goals. You may think aligning personal goals to business goals is the responsibility of the employee, but that’s not entirely the case.

Suppose you have a key employee who helps you to run your manufacturing operations. Lately, he has shown considerable interest in marketing, has been taking classes at the local college, and has been popping by the marketing department frequently throughout the day to learn about what they have going on. He is spending less time in the manufacturing area. He has been with your business for 10 years and is one of your best employees.

What do you do? If you can’t help him align his personal goals (getting more involved with marketing) with the business goals (ensuring a well-run manufacturing operation) you risk losing him to another business that will give him that opportunity.

You might consider dividing his time between both areas of the business, which will enable him to learn more about marketing and continue to perform his regular role. To support this, and not have him feel overwhelmed, you’ll need to hire another resource to help him out in manufacturing. You may find that he becomes one of your best marketing employees, and he can train the new employee to take over his manufacturing role. Alternatively, if hiring another resource is not possible due to budget constraints, work with him to balance his personal goals with the business goals. There is a happy medium; you just have to find it!

And don’t forget the importance of aligning your own personal goals to the goals of your business. We know this sounds obvious, but here’s a story to consider. The authors know of a business owner who had an opportunity to expand his business into other geographic locations. It meant working more hours and increasing his travel time. However, he and his wife recently had a child and he wanted to spend more time at home. His personal goal: reduce time at the office and spend more time at home. The business goal: increase time at the office and on the road to expand the business. He had three options to resolve this conflict:

He chose option 3.

On a regular basis—for yourself and your employees—set aside time during the workday to review personal and business goals. Are the goals still in alignment? If not, what can you do? What are the options? Don’t let employees get to the point where they are completely frustrated and ready to walk out the door to another opportunity or to work for your competitor. Rather, see what you can do to help them meet their personal goals while still meeting the business goals. You’ll find a bit of brainstorming goes a long way toward finding a solution that works for both of you.

Developing your employees is essential—regardless of the size of your business, how many employees you have, and their roles and responsibilities within the business. This doesn’t have to cost you a lot of money or time. There are a variety of options to consider for providing professional development opportunities for your employees.

Mentoring: Mentoring programs help you, as the business owner, get new employees or those moving into new roles up to speed quickly by pairing them with another employee who provides guidance and answers questions about responsibilities of the role and the business culture. Basically, mentors show them the ropes. We discuss this topic in more detail in the following section.

Training: Options for training include sending your employees to workshops, providing in-house training opportunities, and providing e-learning and virtual training courses. Too often smaller businesses don’t even consider training for their employees because they believe it’s too expensive or haven’t budgeted for it. Offering your employees training to strengthen their skills is an excellent way to help them develop and grow in their roles. It’s also a great way to build loyalty among your staff; when you focus on their professional and personal development, they are more likely to be committed to you and your business. Consider providing training in skills related to their specific roles—such as negotiating skills for those working with vendors or in new technologies for IT folks—as well as general skills training such as listening skills, communicating with others, and time management, which will help anyone in any role.

Job rotation: Taking on additional roles within the business, even for short periods of time, is a great learning opportunity. For example, if you have a large marketing initiative coming up, why not assign some employees from other areas of the business to marketing to help with the project. Job rotation is a great way to enable employees to experience all of the operations of the business, and for those employees who have the potential to take on a senior leadership role at some point in the future, it’s a great way to learn about the business as a whole.

Tuition reimbursement: If you can afford it, consider reimbursing your employees for part or all of their tuition for college classes they take toward a degree program. You don’t have to cover the entire tuition—even a small amount offered to employees goes a long way. You might consider a flat amount each year, or a percentage based on the grade received. A tuition reimbursement program requires some planning on your part to ensure it is fair and equitable for employees and well-managed. There may be tax implications, so talk with your accountant about the best way to implement such a program.

Time off for external activities: If your employees are actively involved in volunteer organizations—or if you’d like them to be—provide them time off to engage in those activities without reductions in vacation time.

Conferences: By providing your employees opportunities to attend conferences relevant to their role, you are giving them a chance to expand their knowledge in their field, network with people in the same field, and learn industry best practices. There are conferences for IT professionals, manufacturing, project management, process management, and marketing and sales—to name just a few.

As you can see, there are many ways to help your employees to grow and develop personally and professionally—without breaking the budget!

For all professional development opportunities, have your employees complete an action plan to apply the skills they are learning.

Mentoring programs partner a junior employee with a senior employee. Often, these programs end up providing development opportunities for both employees. Mentoring programs provide a variety of benefits for businesses, including the following:

Mentoring programs build a sense of teamwork and camaraderie among employees, which increases engagement in the business and improves employee retention rates.

Be sure to provide mentors with training on how to mentor others, which is a learning opportunity for them!

When setting up a mentoring program, think about the purpose of the program for your business. Carefully choose mentors and mentees for the program—it’s important that they are a good match. Some businesses enable their employees to select mentors from outside the business. If you permit this, be sure to give them a bit of time during their day—be it an extended lunch period, a later starting time, or an earlier ending time—to meet with their mentors.

Most small businesses are too small to reward employees with more senior roles—there is simply no ladder to climb. But don’t discount the value of providing your employees the opportunity to take on new responsibilities within the business or to head up special projects. Horizontal development and growth—lateral moves within the business to continue to develop professionally—are great ways to build skills.

We know one business owner who offers each of her employees, on a rotating basis, a chance to take the lead in planning the annual holiday event for the business. This person leads a project team to plan for and coordinate the event. Additionally, she sends the individual leading the event to a project management basics training program, where he gains valuable skills for managing the holiday event and future projects. To make sure he has enough time to focus on the event, she gives him time to step away from his regular role and has other employees fill in for him, which provides learning opportunities for others, too.

Employees learn when they are given the chance to take risks and fail without worrying about losing their jobs. Provide a safe environment for your employees to try something new and be creative. Let them know that it’s okay to fail. By setting processes and procedures for such situations, you can reduce the impact of a failure on the business. In such situations, let them have some decision-making authority within guidelines you set, and make yourself or your managers available as a sounding board or to provide guidance. Some great ideas have come out of giving employees an opportunity to be creative and take risks.

Don’t discount your nonexempt employees (hourly employees, administrative or clerical staff, union employees) from development opportunities. Just like all your other employees, they want opportunities to develop their skills and expand their knowledge. Provide them the same or similar opportunities you provide all your other employees.

Succession planning is your process for identifying, developing, and retaining individuals to take on key leadership roles within your business. It is a component of overall talent management.

As you develop your employees and evaluate their work, identify those individuals who can take on even greater roles and responsibilities in the business. Perhaps you have a smart marketing assistant who is a quick learner and a hard worker. Based on what you’ve seen so far, she has the potential to lead the marketing division of your business in the future. Make sure your managers are trained to identify these kinds of employees and give them the appropriate training and opportunities.

Too often small business owners don’t plan for the future of their business. Who is going to take over your business when you are ready to retire? Unless you expect to just shut the doors, someone needs to fill your shoes. Often there are employees in the wings who are capable of taking over. Your job is to manage that talent—identify them and develop their leadership skills. In other words, you need to develop a succession plan.

Developing a succession plan includes these steps:

While not every employee will be part of your succession planning program, they must all have development plans. Not all employees are headed for the top, but they are all valuable to the business’s success and should be given opportunities to grow professionally and personally.

As we discussed earlier in this chapter, giving your employees clearly defined roles and responsibilities, with clear goals and objectives for fulfilling them, provides you with a way to measure your employees’ performance. If employees’ roles and responsibilities are not clearly defined, you don’t have metrics in place to measure against. Any evaluations will just be guesswork.

Provide your employees feedback about their performance on a regular basis, not just at their annual review. If you nip problems in the bud early on, you have a better chance of getting the employee back on track before larger problems surface. A problem employee becomes a morale issue for all employees. Most employees want to do well in their roles. Don’t assume employees just don’t care—this is very rarely the case.

If an otherwise excellent employee is suddenly performing poorly, there is obviously something going on, perhaps outside the work environment. While you can’t resolve every employee’s personal problem—nor should you attempt to do so—the more you know about your employees, the easier it will be to get them back on track. Suggest outside resources to help them to resolve their personal problems.

Your job is not just to focus on problems. You should regularly encourage your employees and provide them positive feedback. When you hear from one of your managers about what a great job one of the employees did on a particular task, seek out that employee to congratulate him. It’s impossible to overestimate the value of recognizing employees for a job well done. A pat on the back by the boss is a wonderful thing.

Develop a plan and a process for formally evaluating employee performance. At a minimum, consider formally evaluating performance twice a year. Keep in mind that this doesn’t need to be an extensive process.

During the performance review process, nothing should come as a surprise to the employee being evaluated. If you are having regular conversations about performance, employees should already know what to expect in the review. Don’t wait to talk to them about performance during the formal performance review sessions. That isn’t effective (or fair) for either side.

Your performance reviews should measure the employees against their performance of their assigned tasks and responsibilities. Are they meeting the goals and objectives of the assigned role? You might consider using the following ratings: Outstanding, Exceeds Expectations, Meets Expectations, Below Expectations, and Unsatisfactory. Whatever words (or numbers) you choose for ratings, make sure that it is very clear what each rating means within the specific position in question.

During the performance review, you should set specific, unique goals and objectives for the individual for the upcoming year. Ask the employees to contribute to those goals and objectives—what do they want to accomplish? What are areas they want to develop? Provide your employees support and opportunities to improve in areas where improvement is needed, and give them opportunities to strengthen their skills.

As your business grows, you may need to make changes to your performance review process. Evaluate your process and its effectiveness on a regular basis. When there are any major changes in your business—such as significant growth or new roles and responsibilities for employees—make changes in the performance review process so it remains effective.

Each role in your business should have a salary range with a low, mid, and high point. There are many resources available that show salary guidelines for various positions. Salary.com (www.salary.com/mysalary.asp) and Salary Expert (www.salaryexpert.com) are two online resources for salary guidelines.

As a smaller business, you’ll have trouble competing with salaries offered by the big businesses, but don’t discount the value many employees place on working for a smaller business. Smaller businesses frequently enable employees to work on a variety of projects and be involved in a wide range of business areas. Getting this kind of experience is more difficult for employees who work in larger organizations, where employees often have very specific roles and are unable to work on projects or assignments outside their area of responsibility.

Be sure to explain exactly what you offer employees when trying to attract good candidates to the job. Total compensation packages include any health-care costs covered by the company, tuition reimbursement, professional development opportunities (conferences or workshops), disability and life insurance, vacation time, sick time, stock options or profit sharing, 401(k) plans, year-end bonuses, dependent care or child care benefits, and flexible spending accounts. If you hire salespeople, commissions and bonuses are also part of their packages. The value of these benefits, in addition to the employee’s salary, is a component of their compensation package.

One big challenge business owners face—regardless of the size of their business—is determining how to provide employees with salary increases. Some companies base them on performance reviews, with the percentage of increase tied to ratings; others award salary increases outside of the performance review process, giving employees an across-the-board percentage raise every year regardless of performance. The latter practice, however, can set up some real animosity among employees. Hard workers will be bitter that the slackers in your company receive the same raise.

Some businesses get around this issue by providing a cost of living increase for all employees and adding a bonus for top performers. If you choose this option, delineate clearly what makes a top performer.

Finally, some businesses tie salary increases exclusively to the performance of the business. All employees share in the success of the business through profit sharing.

Tying raises to performance is one way to drive excellent performance in the business. If you decide to tie salary increases to performance reviews, you’ll need to ensure that the process is perceived as fair by all employees. As we noted previously, the performance review must evaluate individuals against their assigned roles and responsibilities and must also assess whether they are meeting the goals and objectives of those roles. Anything else is not only unfair to the employee but also sets you up for potential legal challenges. The following table outlines one method of tying salary percentage increases to performance ratings:

Based on the performance of your business, the percentages may change year from year. If it is a bad year profit-wise for your business, you may choose lower percentage increases for employees; the percentages may become 5 percent, 4 percent, 2 percent, .5 percent, 0 percent, or whatever works for your business and your financial situation. Make sure employees know the percentages and the factors used in setting them.

As we have mentioned in previous chapters, your employees are very likely to have important ideas for improving how you run your business. They may have ideas for products or services you might offer, ways to generate revenue, cutting costs, or marketing products or services to customers. Your job is to make generating and sharing creative ideas part of the company culture.

For example, if you are trying to find a new way to market your products to customers, hold a contest among your employees and reward the best ideas. If you want your employees to find ways to cut costs in their operational areas, reward employees in the department that show the most savings without affecting the product quality or customer service. Rewards may come in the form of an extra day off from work, a bonus, a gift certificate, or lunch on the boss.

Some employees consistently contribute ideas that improve your business. Acknowledge those contributions publicly and via the performance review process.