In This Chapter

Human resources covers a variety of areas, some of which may be relevant to your business from day one and some which will only become important as your business grows. For example, as a start-up business, you’ll need to focus on hiring and compensation issues. As your business grows, you’ll begin to look more closely at issues such as retention and succession planning.

Human resources will be a component of your business from the very first day and throughout the life of your business.

Recruiting the best talent for your business is a key function of human resources. Choosing the best talent starts with understanding what resources you need in your business and developing job descriptions and roles and responsibilities for each of those resources. It also entails understanding the type of behavior—or personal attributes—you want in your employees. For example, if you are customer-service focused (and aren’t all businesses?), you need individuals who are outgoing, friendly, and go above and beyond to meet the needs of the customer. You will also need employees with a high degree of emotional intelligence.

Think of emotional intelligence as a level of emotional maturity. Some people are absolutely brilliant but aren’t capable of working with others. You need individuals who are intelligent and make others feel good about working for your company. For instance, a person who shines during a one-on-one interview with you by giving you all the right technical answers but is rude or dismissive to the person working as your receptionist would show a low level of emotional intelligence.

Genuine empathy and concern for others is a trait of people with high levels of emotional intelligence. Many analysts believe that this kind of intelligence plays a far greater role in personal and emotional success than the classic intelligence quotient measured by IQ tests.

The very best way to find top talent for your business is to commit to improving your own hiring and interviewing skills over time, and then to ensure that you, as the business owner, stay involved in the hiring process. We are not suggesting you should be responsible for the entire process of recruiting, interviewing, and hiring, but you want to be sure you put the final stamp of approval on all selections for your business—or delegate this only to your most senior managers.

Recruiting the best talent also requires having a formal process in place to be sure you are selecting the best people for your business. Take the time necessary in the hiring process to do it right. It’s better to take your time selecting the best hire rather than jumping at hiring the first or second person through the door for an interview only to have to terminate them later.

It is important that you provide good training to employees who will be interviewing job candidates. Especially if you will use behavioral (or competency-based) interviewing techniques, you must provide people with some background for interviewing effectively using these skills. Additionally, coordinate the interviewing process so you get the most information from the candidates being interviewed to make a decision.

Let’s look at an example. Let’s assume that you need to hire a receptionist for your business. You have asked your marketing assistant, your administrative assistant, and one of the sales team members to be part of the interviewing process. In order to ensure that everyone isn’t asking the same questions, you focus the interviews as follows:

You will also be interviewing the candidate and will focus on whether or not she is a fit for the business culture. You should prepare questions for each of the interviewers to ask the interviewee. You should also do some role-playing, with another employee acting as the job candidate, so the employees who are part of the interview can practice their skills.

By taking some time to prep the interviewers, you have a better chance of getting the information you need to make a decision on a candidate. Additionally, teaching your employees interviewing skills also helps them develop professionally (see Chapter 13). You might want to bring in an outside resource to train your employees in effective interviewing skills, but it may not be necessary if you are able to do this yourself. Additionally, the recruiting agency you hire might be willing to offer this service to you as part of the contract.

Once you have checked references and are ready to make an official offer to a candidate for the job, consider the following:

References: Ask for at least three references from the candidate, including one from their current job. Some candidates may be hesitant to provide a reference from a current job, especially if that employer doesn’t know they are looking for a new job.

In this case, ask for three other references and tell the candidate you will check their current employer reference if they choose to accept a position with your company.

Pre-employment screening: If you require pre-employment screening—such as background checks for criminal records, driving records, or drug use—be sure you have a process in place to ensure you are complying with all applicable laws. Remember that some states require background checks for certain roles within a business. Check with your state or your legal counsel to ensure you know the laws. We recommend you hire an agency to do pre-employment background screening for you.

Make sure all potential candidates know you do pre-employment screening. You’ll likely find that those candidates who have something to hide will not proceed with the interview process. You’ll need to have the candidate sign a form acknowledging that they are giving you permission to conduct pre-employment screening.

Resumé check: Checks the facts on the individual’s resumé, including all past employment, roles they held at those companies, dates of employment, reason for termination, and salary at the time they left the position. Additionally, check educational background and any other relevant information.

Consider hiring the individual on a 90-day trial period during which employment can be terminated if the new hire is not working out satisfactorily. You can check references and do pre-employment screening during that initial 90-day period. Any issues that arise during these checks may be considered grounds for termination.

Your offer letter should include the following items:

Ask the candidate to sign and return the letter accepting your offer of employment.

Every business, regardless of its size, needs policies and procedures in place to ensure the effectiveness and efficiency of its business operations. Establishing, documenting, and maintaining policies and procedures helps ensure success by avoiding communication problems, inconsistencies in how employees are treated, or potential lawsuits. You should develop a policy and procedure manual for your business that meets your needs now and can grow with your business. As a best practice, review and update the policy and procedure manual on an annual basis.

Your policies and procedures manual may include information on the following issues:

Some policies are required by law and must be posted in a common area for all to see. These include the following federally regulated policies:

See the U.S. Department of Labor’s website (www.dol.gov) for information that must be posted in the workplace. Local and state government websites will also provide this information.

We can’t possibly discuss all the human resource policies and procedures that you might include for your business—it all depends on your business, the number of employees you have, and the industry in which the business exists. However, some policies and procedures to consider include workplace rules and guidelines (such as breaks and lunch time, vacation time, dress code, filing grievances or complaints, and making personal phone calls), employment policies (such as ethics, handling confidential information, behavior in the workplace, and personnel files and records), and payroll policies (such as employee classifications, pay periods, timesheets, payroll deductions, and advances).

Be sure to build some flexibility into your policies or procedures. For example, suppose you have a two-week vacation allowance for all your employees and require them to use their vacation time within the calendar year with no carryover into the next year. You include this information in your employee manual. However, one year, during a particularly busy time period, some members of your manufacturing department weren’t able to take vacation allocated to them because the business needed them on the job. (Keep in mind that if they insist on taking vacation, you might be legally required to allow them to do so no matter how busy you are. However, let’s assume for the purposes of this example that they are willing to forego a week of their vacation time to meet the business’s needs in getting product out the door.) Here is where the flexibility comes in. You don’t want these employees to lose a week’s vacation just because they were loyal to the business. A good policy would permit allowances to be made in special circumstances, such as emergency situations or tight deadlines. The policy would permit the immediate manager to allow the exception and would provide details as to the relevant timelines.

It should go without saying that you need to be consistent about being flexible; in other words, you can’t allow an exception in the policy for one employee and then refuse to allow an exception for another employee when the same conditions apply.

Don’t feel you need to go it alone in determining the appropriate policies and procedures for your business. The members of your advisory group can help you create appropriate policies and procedures for your business. You may also accept input from a variety of sources, including the following:

In addition, groups such as the Society for Human Resource Management (www.shrm.org) provide a variety of resources for human resources professionals.

All of these resources can provide guidance in creating effective policies and procedures for your business.

Getting into details on employment law is beyond the scope of this book. As a best practice, you should seek legal counsel about state and federal employment laws that affect your business and your industry (see Chapter 15 for a list of major employment laws).

Employee agreements are contracts between individual employees and the employer that delineate both the conditions of employment and the rights and obligations of both the employee and the employer. They vary in complexity depending on the status of the employee in your business. For instance, senior-level employees may have stock options and bonus information included in their agreements, along with confidentiality and noncompete clauses.

A standard letter of agreement may include information such as:

All employees should receive and sign an employee agreement, which is not to be confused with the offer of employment letter.

When deciding whether to hire someone as a full-time or part-time employee, or as a temporary contractor, you’ll need to take the following issues into consideration:

One option is to hire employees initially in a temporary contractor role as a trial before you hire them as permanent employees for your business.

Be careful in how you classify your employees. Due to the increasing number of companies hiring contractors to work for long periods of time and not providing them benefits, the government has put many new regulations in place to protect workers. When in doubt, check with your legal counsel.

Terminating employees is never an easy task. This section focuses on terminating employees for nonperformance or breach of an employment agreement, such as stealing, releasing confidential information, or drug use.

When terminating employees, follow these best practices:

Be specific and stick to the facts. You don’t want to get angry or say something inappropriate during a termination interview. For example, you wouldn’t want to tell the individual you are terminating that he has “always been difficult to work with” when the stated reason you are terminating the person is that he is not performing up to the standards of the job. The impression you leave by making such a remark may be that you simply don’t like the employee, which could very well lay the groundwork for an employee discrimination lawsuit. Be very specific about why he is being terminated. For example, let’s say that one of your employees was taking unexcused time off. In the last week, he did not show up for work on two occasions and did not provide a reason for his whereabouts. Your conversation during the termination meeting might go as follows:

“Robert, in the last week you did not show up for work on Tuesday and again on Thursday. When asked, you provided no reason for your absence and got belligerent during the conversation with your manager. As per the employee guidelines, and your employee agreement, unexcused absences from work are grounds for termination. Given the situation, we are terminating your employment effective immediately.” Do not feel as if you have to engage in extensive conversation with the employee, especially if he becomes belligerent. Restate the reason for termination and explain that the policy is clear on the matter.

Have a witness. Always have someone else in the room with you when you terminate an employee. If a manager of a department is terminating someone in her department, you or another senior-level employee should also be in attendance in the meeting. If you are a very small business, consider asking someone from your advisory board or your legal counsel to assist in the process.

Be sure that if the termination is due to a performance problem—such as an individual not fulfilling the requirements of the job—you give the employee a chance to improve his or her performance. There is no set amount of time you must provide, but be consistent from employee to employee. Failure to be consistent will leave you exposed to potential wrongful termination lawsuits, which can be costly and damaging to your business’s reputation.

Provide the following to an employee upon termination:

In some cases, you may be able to hold the last check or a severance check until the employee returns all company property. Be sure, however, that your state laws allow for this.

The following are the most common termination mistakes made by employers:

Any of these mistakes can set you up for a wrongful termination lawsuit. If you are unsure about how to terminate a particular employee, or whether or not you are violating any laws, seek legal advice. Paying for any legal advice in advance will be far less costly than a lawsuit for wrongful termination of employment. For more insights on avoiding legal problems associated with terminations, see http://humanresources.about.com/od/legalissues/a/terminations.htm.

Terminating employees is one of the most difficult tasks you’ll face. Be sure you do so fairly, professionally, and after much consideration.