BUS 208_ER_Part A Spring 2006 Copyright, sjh

Employee Relations for Smaller Businesses

Organizing a Customer-Driven Organizing a Customer-Driven BusinessBusiness

The Changing Role of Management

• Manager vs. Leader• Boss vs. “Coach”• Demand vs. Delegation• Empowered vs. Controlled• Communicate WITH vs.

Communicate AT• Trained vs. Labor

“old” Fundamentals of Bureaucracy

Chain of Command

Rules & Regulations

Set Up by Function

Communication = Minimal

E m p loyee

S u p erviso r

V ice P res id en t

B oss

Organizational Structures

Tall Organizations

- Many Layers of Mgmt.

- Cost of Mgmt.=High

Flat Organizations

- Current Trend

- Creation of Teams

Inverted Organization Structure

Empowered Empowered front-line front-line workersworkersSupport Support

PersonnelPersonnel

Top Top Mgmt.Mgmt.

Customer-Focused Design

• Information KEY• Build teamwork

– cross-functional– integration

• Self-management & autonomy

• “Bottom-up” relationships

• Outsource • Global orientation• Internal vs. external

customers

Customer-Driven-Powered Cultures

• Responsive to Internal & External Customers (and all stakeholders)

• Focus on the benefits for the customer and not the just the benefits for the company

Internal vs External Customers

Internal

Your employees Your distributors Your partners Your board Your “stakeholders” YOU!

External

Your Target Market

If you can keep your internal market satisfied, you have a much better chance of keeping your external market satisfied!

Compensating Your Employee

The Role of Incentives for Retaining Employees

The RIGHT Employee is Your Best Asset

• They bring talents, expertise, skills & suggestions to your business.

• They are there everyday helping you run your business, and good employees take “ownership” & pride in their work.

• The SUM can be greater than the whole. The right employee can help you expand your business and help you make profits.

Compensation the KEY to keeping the best employees??

Compensation is the still the most important thing to an employee.

A challenge for small business owners is having the compensation - and the compensation package - that keeps GREAT employees around.

This has become more difficult with the rising cost of benefits.

Why Good Workers Leave

0%5%

10%15%20%25%30%35%40%45%

LimitedAdvancement

Potential

Lack ofRecognition

LowSalary/ Benefits

Source: Source: USA Today-Snapshot, 10/16/00

The Role of Employee Incentives(for the employer)

• Increases sales revenue• Increases number of new

customers• Increases customers to

come back - customer retention

• Increases overall profits of business

• Helps retain good employees!

Role of Incentives for the Employee• The opportunity for the employee

to MAKE more money• The chance to make more than the

‘base’ salary• The opportunity for the employee

to be rewarded for a “job well done!”

• The ability for the employee to set goals and pursue them (MBO…management by objective)

Common Incentives

• Profit Sharing

• Bonuses

• Gifts

• Commissions

• Flex-time & Flex-place

Profit Sharing

• Larger businesses (publicly traded) commonly use profit sharing as an incentive. Profits are verified from the financial statements.

• All companies can establish an ESOP employee stock ownership plan, as a exit strategy for the owner to transfer the business to the employees. Get a piece of

the pie!

Challenges for Profit Sharing & ESOPS

• Owners of small private businesses are under no obligation to make their financial statements public. Employees normally do not have access to the bottom-line profit numbers and can be suspicious of profit sharing. This can be a disincentive.

• If the company or the industry is in a slump there is no incentive.

• ESOPS are difficult to set-up for businesses with fewer than 15 employees and less than a $500,000 annual payroll.

Bonuses

• Calculated Bonuses - bonuses that are objectively set-up and directly tied to increased productivity, revenue, profits or new customers.

• Arbitrary Bonuses - awarded by what the owner feels is right and is not tied to increased productivity or performance.

Setting up Bonus ProgramsBonus Incentives can increase employee

productivity and morale if they are set up properly.

1. Plan the bonus program in advance.

2. Tie the program to a goal.

3. Internally market the program.

4. Establish a “team” approach.

5. Allow all players to have access.

6. Share the wealth. Award all.

7. Post the results.

Gifts and “Perks”

• Some employers will lavish their employees with “gifts” (paid vacations, dinners, social events).

• Be aware that many employees can feel uncomfortable with this tradition and believe it can be -

paternalistic, political, subjective and unfair.

Commissions

• Commissions are money rewards based on objective and calculated formulas.

• They are the most common incentive because they can be directly linked to the productivity of the employee.

• Sales commission is the most common.

Sales Commissions in Small Businesses

Some salespeople are paid solely on commission. They may act as their own sales rep or independent contractor. Tip: Make sure you have solid sales rep contract.

Initially, there may be a challenge to entice sales reps to carry your line.

For a “young” small business, it might be easier to hire salespeople on a “living wage” or a base-salary plus commission.

Base Salary + Commission

• If there is a base wage the commission rate is lower than straight commission sales.

• The commission starts after the employee reaches an threshold agreed upon of monthly or quarterly sales.

Total Sales $40,000Threshold 30,000Sales over goal 10,000

Base Salary $2,000Commission (5% x $10,000) 500Total Salary $2,500

Considerations for Commission Structures

Before you set-up your commission structures analyze the situation:

- Is the commission structure fair to all employees (what about full vs. part-time

employees)?- What is the industry standard?- How will you “weigh” commissions

between direct sales employees and support personnel?

“Flexing” for your employees

• An increasing number of companies are offering flextime and flex-place as an incentive to their employees.

• Flex-time is an arrangement where employees work a normal number of hours but have have the flexibility of when they work.

• Flex-place allows for telecommuting.

Motivating Employees

• Motivation is the degree of effort an employee exerts to accomplish a task- it is shows up as the excitement about his/her work.

• Motivating employees to higher levels of performance is still one of the BIGGEST challenges employers face.

Is Money the “best” motivator?

• For most of us it is important, but…

• Money alone is NOT enough for most employees (people)…

• It is not the only factor that will help you retain a good employee.

• What motivates you to stay on a job?

Most Common U.S. Motivators

0% 10% 20% 30% 40% 50% 60% 70%

Cash Awards

Gift Certificates

Merchandise Awards

Individual Travel

Time Off Job

Use of Credit/ Debit Cards

Source:Source: Incentive Federation

Intrinsic and Extrinsic Motivators

• Intrinsic comes from within. This is self- motivation.

• Employees that are self-motivated take pride in what they do.

• Extrinsic comes from the outside. This includes salary, bonuses and praise from others.

Intrinsic vs. Extrinsic Rewards

Intrinsic = Intrinsic = InsideInside

Feeling of Feeling of Job WellJob Well

DoneDone PridPridee

Sense of Sense of AchievemeAchieveme

ntnt

Extrinsic = Extrinsic = OutsideOutside

PraisePraise

Salary Salary IncreaseIncrease

StatusStatus

RecognitioRecognitionn

PromotionPromotionss

GiftsGifts

Maslow’s Hierarchy of Needs

Physiological Physiological NeedsNeeds

Safety NeedsSafety Needs

Social Social NeedsNeeds

Esteem Esteem NeedsNeeds

Self-Self-

ActualizatiActualizationon

UnsatisfiedUnsatisfied

SatisfieSatisfiedd

Four Aspects of Motivation

Entrepreneurs CAN motivate employees without going broke. Here are five strategies

1. Empowering Employees2. Effective Job Design3. Fair Rewarding & Compensation4. Feedback & Positive

Communication5. Being a good role model and

leader

Building the Best “Culture” for Your Business Environment

• When you are hiring you are taking a BIG step, for the employer and for your business.

• It is just as important to consider how the candidate will “fit” into your business culture, as their skills to do the job.

• Creating a culture is defined by “leadership” of the company…Culture arises from your consistent and relentless pursuit of a set of core values that everyone in your company can believe in.

“ People are NOT your greatest asset! The “right” people are your greatest asset!”

From, First Break All the Rules

Why have an Employee Policy Manual

• In order for an organization to function properly it needs to have rules to follow and policies to help proceed.

• An Employee Policy Manual is the guide for the employee and the owner.

• Your Employee Policies & Procedure Manual should describe the basic attributes of employment at your company that need to be known in advance before an employee agrees to accept your position.

Outline of Major Points that Should Be Addressed in An Employee Manual

• Employee Compensation• Employee Benefits• Employee Travel Policy• Reimbursement of

Expenses• Hours of Work, Work

Schedules• Key Policy• Trade Secrets and

Confidentiality

• Employee Performance Evaluation Procedures

• Employee Suggestion Policy

• Employee Termination Policy

• Non-discrimination & Sexual Harassment Policy

• Employee’s Use of Equipment Policy

• Employee Privacy

How You Can Be a Great Boss: Become a Leader not just a Manager or Employer

--- Leadership is the process of influencing and inspiring others to work to achieve a common goal and then giving the power and the freedom to achieve it!

Leadership and ManagementManagement and Leadership are Not the same, but both are

important in small business.• Leadership without management is unbridled.• Management without leadership is unispired.• Leadership is often the passion to get the business going.• Management is the tool to keep the business on track.• Management deals with things; Leadership deals with

people. You manage things; you lead people.

What is a Good Boss?

Think about the employers you have worked for…

What do you consider makes a “good boss”?

What attributes do you look for when you want to work for someone?

What character traits do you want to avoid?

Great Boss 101 Define and constantly reinforce the vision for the organization

Respect & Support employees

Set the example for the employees

Creates a climate of trust and “safety”

Focus on employees’ efforts on challenging goals

Provides the resources to get the job done

Communicates effectively with employeesValues the diversity of their workersCelebrates the employees success (gives credit when credit is due)Encourages creativityMaintains a sense of humorCreates a motivational environmentBecomes a catalyst for changeKeeps their eyes on the horizon