U.S. Small Business Administration                          EB-4
                   HUMAN RESOURCES MANAGEMENT
Dr. Gary Roberts
Gary Seldon
Kennesaw State College
Marietta, Georgia
Carlotta Roberts
University of Georgia
Athens, Georgia
                      Emerging Business Series
_________________________________________________________________
The material in this publication may not be reproduced or
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permission of the U.S. Small Business Administration.
While we consider the contents of this publication to be of
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Administration does not necessarily constitute an endorsement of
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All of SBA's programs and services are extended to the public on
a nondiscriminatory basis.
_________________________________________________________________
                         TABLE OF CONTENTS
INTRODUCTION
DEVELOPING A RESPONSIVE PERSONNEL SYSTEM
     Assessing Personnel Needs
     Recruiting
     Screening
     Selecting and Hiring
     Orienting New Employees to Your Business
     Compensation Issues
EMPLOYEE TRAINING AND DEVELOPMENT
     An Effective Training Program
     Purpose of Training and Development
     The Training Process
     Identifying Training Needs
     Training Goals
     Training Methods
     Trainers
     Training Administration
     Evaluation of Training
BUILDING EMPLOYEE TRUST AND PRODUCTIVITY
     Honesty
     Fairness
     The Legal Environment
     The Personnel Manager
CONCLUSION
REFERENCES
APPENDIXES
     A. Human Resource Management Audit Questionnaire
     B. Information Resources
_________________________________________________________________
INTRODUCTION
All small businesses must staff their operations. This involves
bringing new people into the business and making sure they are
productive additions to the enterprise. Effective human resource
management matches and develops the abilities of job candidates
and employees with the needs of the firm. A responsive personnel
system will assist you in this process and is a key ingredient
for growth.
Human resource management is a balancing act. At one extreme, you
hire only qualified people who are well suited to the firm's
needs. At the other extreme, you train and develop employees to
meet the firm's needs. Most expanding small businesses fall
between the two extremes -- i.e., they hire the best people they
can
find and afford, and they also recognize the need to train and
develop both current and new employees as the firm grows.
The first section of this publication explains how to hire and
train the right people and addresses the characteristics of an
effective personnel system, such as
   *  Assessing personnel needs.
   *  Recruiting personnel.
   *  Screening personnel.
   *  Selecting and hiring personnel.
   *  Orienting new employees to the business.
   *  Deciding compensation issues.
The second section of this publication addresses the training and
development side of human resource management. The third section
discusses how the personnel system and the training and
development functions come together to build employee trust and
productivity. These three sections stress the importance of a
good human resource management climate and provide specific
guidelines for creating such a climate. The appendixes include a
self-assessment questionnaire to assist you in evaluating the
effectiveness of your personnel system and a list of general
information resources.
_________________________________________________________________
DEVELOPING A RESPONSIVE PERSONNEL SYSTEM
Assessing Personnel Needs
The small business owner should base the firm's personnel
policies on explicit, well-proven principles. Small businesses
that follow these principles have higher performance and growth
rates than those that do not follow them. The most important of
these principles are
   *  All positions should be filled with people who are both
      willing and able to do the job.
   *  The more accurate and realistic the specifications of and
      skill requirements for each job, the more likely it is that
      workers will be matched to the right job and, therefore, be
      more competent in that job.
   *  A written job description and definition are the keys to
      communicating job expectations to people. Do the best job
      you can! is terrible job guidance.
   *  Employees chosen on the basis of the best person available
      are more effective than those chosen on the basis of
      friendship or expediency.
   *  If specific job expectations are clearly spelled out, and
      if performance appraisals are based on these expectations,
      performance is higher. Also, employee training results in
      higher performance if it is based on measurable learning
      objectives.
The first step in assessing personnel needs for the small
business is to conduct an audit of future personnel needs. Ask
yourself
   *  Can the workload you visualize be accomplished by the
      present work force? Will more or fewer employees be needed?
      Consider seasonal patterns of demand and probable turnover
      rates.
   *  Can any jobs be eliminated to free people for other work?
   *  What balance of full-time or part-time, temporary or
      permanent, hourly or salaried personnel do you need?
   *  What does the labor supply look like in the future?
   *  Will you be able to fill some of the jobs you've
      identified? How easily?
   *  What qualifications are needed in your personnel?
Develop a method to forecast labor demand based on your answers
to these questions. Once your needs are estimated, determine
strategies to meet them.
The process of selecting a competent person for each position is
best accomplished through a systematic definition of the
requirements for each job, including the skills, knowledge and
other qualifications that employees must possess to perform each
task. To guarantee that personnel needs are adequately specified,
(1) conduct a job analysis, (2) develop a written job description
and (3) prepare a job specification.
Job Analysis
Job analysis is a systematic investigation that collects all
information pertinent to each task performed by an employee. From
this analysis, you identify the skills, knowledge and abilities
required of that employee, and determine the duties,
responsibilities and requirements of each job. Job analysis
should provide information such as
   *  Job title.
   *  Department.
   *  Supervision required.
   *  Job description -- major and implied duties and
      responsibilities.
   *  Unique characteristics of the job including location and
      physical setting.
   *  Types of material used.
   *  Types of equipment used.
   *  Qualifications.
   *  Experience requirements.
   *  Education requirements.
   *  Mental and physical requirements.
   *  Manual dexterity required.
   *  Working conditions (inside, outside, hot, cold, dry, wet,
      noisy, dirty, etc.).
Job Description
The job analysis is used to generate a job description, which
defines the duties of each task, and other responsibilities of
the position. The description covers the various task
requirements, such as mental or physical activities; working
conditions and job hazards. The approximate percentage of time
the employee should spend on each activity is also specified. Job
descriptions focus on the what, why, where and how of the job.
There are two excellent resources the small business owner can
use to develop job descriptions. First, ask employees themselves
to describe their jobs. A good employee may know more about the
job than anyone else. Second, consult the Dictionary of
Occupational Titles, published by the Government Printing Office,
which contains over 20,000 job descriptions.
Job Specification
The job specification describes the person expected to fill a
job. It details the knowledge (both educational and
experiential), qualities, skills and abilities needed to perform
the job satisfactorily. The job specification provides a standard
against which to measure how well an applicant matches a job
opening and should be used as the basis for recruiting.
Recruiting
As a small business owner-manager, you should be aware of the
legal environment in which you operate. This is especially true
when it comes to recruitment. Being aware of legislation that
will affect your business is extremely important to efficient
recruiting.
Congress has passed several laws that deal with discrimination in
the workplace. The Civil Rights Act of 1964 and the Equal
Employment Act of 1972 are two that small businesses owners
should be especially aware of. The Equal Employment Opportunity
Commission (EEOC), is charged with enforcing federal law against
discrimination based on
   *  Race.
   *  Color.
   *  National origin.
   *  Sex.
   *  Age (between 40 and 70).
   *  Disability.
   *  Veteran status.
   *  Handicap.
   *  Religion.
Another law to be aware of is the 1963 Equal Pay Act, which
requires that men and women receive equal pay for equal work.
Box 1 is a list of illegal questions that are often asked during
the recruitment process. Review them carefully to ensure that you
avoid asking them when interviewing applicants.
     _______________________________________________________
               Box 1 - Often Asked (but Illegal)
             Questions in the Recruitment Process
        * How old are you?
        * Are you married?
        * Do you have any children?
        * How will you care for your children during work
          hours?
        * Where do you attend church/synagogue?
        * How old are your children?
        * Do you receive alimony or child support?
        * Are you Puerto Rican? (etc.)
        * Are you pregnant?
        * Send in a picture with your job application.
        * How much do you weigh?
        * What is your maiden name?
        * What is your father's surname?
        * Where were you born?
        * What clubs to you belong to?
     _______________________________________________________
Sources of Employees
Effective recruiting requires that you know where and how to
obtain qualified applicants. It is difficult to generalize about
the best source for each business, but a description of the major
sources follows.
   *  Present employees -- Promotion from within tends to keep
      employee morale high. Whenever possible, current employees
      should be given first consideration for any job openings.
      This practice signals your support of current employees.
   *  Unsolicited applicants -- Small businesses receive many
      unsolicited applications from qualified and unqualified
      individuals. The former should be kept on file for future
      reference. Good business practice suggests that all
      applicants be treated courteously whether or not they are
      offered jobs.
   *  Schools -- High schools, trade schools, vocational schools,
      colleges and universities are sources for certain types of
      employees, especially if prior work experience is not a
      major factor in the job specification. Schools also are
      excellent sources for part-time employees.
   *  Public employment offices -- The Employment Service of the
      U.S. Department of Labor works with state employment offices
      to provide no-cost brokerage of applicants who are seeking
      employment. Local offices will provide small businesses
      with applicants who have been screened on the basis of work
      experience, education and some psychological testing. They
      also have an up-to-date file on potential employees who
      possess a wide range of skills.
   *  Private employment agencies -- These firms provide a
      service for employers and applicants by matching people to
      jobs in exchange for a fee. Some fees are paid by the
      applicants, and there is no cost to the employer; for
      highly qualified applicants in short supply, the employer
      sometimes pays the fee.
   *  Employee referrals -- References by current employees may
      provide excellent prospects for the business. Evidence
      suggests that current employees hesitate to recommend
      applicants with below average ability. Word of mouth is one
      of the most commonly used recruiting sources in the small
      business community.
   *  Help Wanted advertising -- Letting people know that the
      business is hiring is a key element in gaining access to
      the pool of potential employees. At its simplest, this type
      of advertising may take the form of a Help Wanted sign in
      the window. More sophisticated methods involve using local
      media, primarily print sources such as daily and weekly
      newspapers. The classified pages of newspapers are
      frequently consulted by active job seekers, including
      currently employed individuals who may be tempted by a more
      attractive position. Other advertising media include radio
      and television. These tend to have a wider appeal than the
      newspaper; however, the price of an advertisement is
      correspondingly higher.
Specialty media publications, such as trade association magazines
and newsletters, may also produce quality job applicants. There
are efforts in some parts of the country to offer small business
employers access to cable television community bulletin boards.
Another high-tech opportunity is to list positions on computer
network bulletin boards.
Prices for help wanted advertising vary and the small business
owner approaches them with caution. A well-placed, high-quality
advertisement will attract good people, whereas, an expensive
advertisement in the wrong medium may get no results. Some
experimentation is worthwhile to most small businesses. Another
suggestion is to ask other small business people in the area
about their success with help wanted advertising. Learn from
others' successes and mistakes.
Screening
The screening process provides information about an individual's
skills, knowledge and attitudes, enabling a potential employer to
determine whether that person is suited to, and qualified for,
the position. Experience has shown that hiring an overqualified
person can be as harmful as hiring an underqualified person.
The application form is the place to begin screening candidates
for a job. It provides information on the person's background and
training and is the first means of comparing the applicant with
the job description. This will ensure that you don't waste time
on applicants who clearly do not meet the minimum requirements
for the job.
Generally, the following information is asked on an employment
application form: name, address, telephone number, social
security number, kind of work desired, work experience, military
service, education and references. See the sample application
form in Box 2.
     _______________________________________________________
               Box 2 -- Sample Application Form
     Date _____________________
     Name __________________________________________________
     Social Security Number ________________________________
     Address________________________________________________
     Telephone Number_______________________________________
     Position desired ______________________________________
     EDUCATION
     _______________________________________________________
     _______________________________________________________
     _______________________________________________________
     _______________________________________________________
     EMPLOYMENT RECORD:
     Name and address of company, position, dates employed
     and reason for leaving:
     _______________________________________________________
     _______________________________________________________
     _______________________________________________________
     MILITARY SERVICE:
     Branch__________________ from __________ to ___________
     Rank Achieved __________ Type of discharge ____________
     REFERENCES:
     _______________________________________________________
     _______________________________________________________
     _______________________________________________________
     _______________________________________________________
The personal interview is the second step in the screening
process. During the interview, the manager learns more about the
applicant through face-to-face contact, including observation of
personal appearance. The interview should be guided, but not
dominated, by the manager as it is important to let the candidate
speak freely. Whenever possible, the interviewer should ask
questions that are directly related to the job. Devise a list of
questions that will adequately assess the applicant's
qualifications while meeting the specifications for the job.
Three major errors often committed in the personal interview are
   *  Failure to analyze the requirements of the job in
      sufficient detail to generate valid questions.
   *  Failure to ask candidates the right questions to determine
      their strengths and weaknesses, and their fit with the
      job.
   *  Too much reliance on gut reaction instead of objective
      evaluation of candidates based on criteria established in
      the job specification.
Interviewing makes the selection process more personal and gives
the interviewer an overall idea of whether the applicant is
appropriate for the job. The following list of techniques in
Box 3 will help you select the right applicant for the job.
     _______________________________________________________
                      Box 3 - Interviews
      1. Review the job description before the interview.
      2. Break the ice -- establish a friendly atmosphere.
      3. Develop an interview time plan and stick to it.
      4. Keep an open mind, i.e., don't form an opinion too
         early.
      5. Give the candidate time to tell his or her story;
         don't talk too much.
      6. Present a truthful picture of the company and the
         job.
      7. Listen carefully, concentrate and take notes.
      8. Avoid detailed discussion of salary too early in
         the interview.
      9. Be courteous.
     10. Don't leave the candidate hanging -- discuss the
         next step in the hiring process and the timing.
     _______________________________________________________
Other screening techniques include employment tests and physical
examinations. Some employment tests measure aptitude,
achievement, intelligence, personality and honesty. A physical
examination determines if the applicant meets the health
standards and physical demands of the job.
Selecting and Hiring
If the screening process is thorough, selecting the best
applicants for the job is easy. However, before making the final
selection, one last step should be taken: the top candidate's
references should be checked for accuracy and input. You should
be aware of the tendency of references to give a rose-colored
picture of applicant's character and ability. Despite this
potential bias, a careful check with former employers, schools
and other references can be most constructive. At a minimum,
checking can determine whether or not the applicant was truthful
about his or her employment history.
Orienting New Employees to Your Business
An employee handbook communicates important information about the
company to the employee. The handbook should cover topics such as
company expectations, pay policies, working conditions, fringe
benefits and the company philosophy toward customers (see Box 4).
     _______________________________________________________
                Box 4 - Employee Handbook Topics
     Welcome from the owner        Personal appearance
     History of the company        Use of telephones
     Introduction to the company   Prohibited acts
     Company products and services Absence from work and
                                   reporting policies
     Hours of work
                                   Weather emergencies
     Holidays
                                   Pay policies
     Insurance
                                   Disciplinary procedures
     On-the-job injury             and appeals
     Jury duty                     Termination
     Military Leave                Vacation policy
     Parking rules                 Sick leave
                                   Parental leave
     _______________________________________________________
Once an individual is hired, he or she should receive a
comprehensive orientation on the general policies of the company
and on the specific nature of the job. Rules should be explained
in detail, job expectations agreed upon and any questions
answered before the new employee begins work. New employees
should be introduced to other employees and made to feel welcome.
Compensation Issues
Compensation takes two forms: (1) direct compensation (wages and
salaries) and (2) indirect compensation (fringe benefits).
Direct Compensation
Wages and salaries are the compensation people receive on a
regular basis (monthly, biweekly or weekly). Workers are paid on
the basis of time (by the hour, day, week or month) or on the
basis of output (an incentive plan).
Some of the legal issues regarding wage and salary compensation
include
   *  Wages and hours -- The Fair Labor Standards Act of 1938
      introduced the minimum wage and the 40-hour work week. As
      of April 1, 1991, the minimum wage is $4.25 an hour. The
      law also specifies that workers must receive time-and-a-
      half pay for time spent on the job in excess of 40 hours.
      (Not all employees are covered by this act; managers,
      professionals and sales personnel may be excluded.)
   *  Eligibility to work -- The Immigration Reform Control Act
      of 1986 was intended to reduce the number of illegal
      immigrants seeking jobs in the United States. Under the
      law, employees hired after November 6, 1986, must show
      proof of their identity and eligibility to work. There are
      sanctions against employers who do not comply with this
      act.
   *  Child labor -- The minimum age for children in most jobs is
      16 years old. Fourteen- and 15-year-olds are restricted to
      a few jobs, such as filing and sales. Persons under 14
      years of age may work only under certain conditions.
   *  Social Security -- The Social Security Act passed in 1935
      provides a minimum guaranteed income to retired and
      disabled persons. This system is funded by a tax on both
      employees and employers. In 1990 employees were required to
      pay the system an amount equal to 7.65 percent of the first
      $51,300 earned. Employers are required to match that amount.
   *  Unemployment benefits -- Each state has a program for
      providing protection for those who lose their jobs (usually
      through no fault of their own). While programs vary from
      state to state, each program must comply with certain
      federal guidelines. Employers pay a tax to the state, which
      maintains these funds for use by the unemployed.
Indirect Compensation
Fringe benefits are an important part of the overall compensation
package in most small businesses. Employee benefits now account
for about 40 percent of payroll costs. The profitability of the
small firm is one of the primary determinants of what benefits
are offered by the firm.
Box 5 is a list of options to consider when deciding which fringe
benefits to offer employees.
     _______________________________________________________
                     Box 5  Fringe Benefits
     Old age payments               Paid vacations
     Survivor payments              Payment for jury duty,
                                     National Guard or
     Disability and health           reserve duty
      insurance
                                     Profit sharing
     Pension plans
                                     Bonuses
     Life insurance
                                     Education payments
     Dental insurance
                                     Worker's compensation
     Accident insurance
                                     Unemployment
     Discounts on goods/              compensation
      services purchased
      from the company               Child care
     Employee meals
     _______________________________________________________
Cafeteria Planning
One successful approach to providing benefits to employees of a
small business is to allocate a certain amount of money per
employee for benefits. Each employee then chooses the package of
benefits that suits his or her current needs. This approach is
called cafeteria planning because it is similar to going down a
cafeteria line, where each customer chooses what he or she wants
to eat. It has been suggested that employees perceive this
approach as highly equitable because it (1) allows freedom of
choice and (2) does not impose a single package of benefits on
all employees.
For example, a young employee with several small children may be
interested in dental insurance for his family. He is not really
interested in or motivated by a pension plan at this time in his
life. Another employee in this same company is in her late
forties, has no dependent children and is planning for
retirement. To force the same benefit on these two employees is
not an effective use of benefit money. To allow some choice on
the part of participants is a major advantage of the cafeteria
approach to benefit planning.
Small businesses face difficult challenges when they try to match
benefits with big firms. Nevertheless, the small firm can enjoy
the benefits of greater flexibility and innovativeness by
offering a cafeteria plan.
_________________________________________________________________
EMPLOYEE TRAINING AND DEVELOPMENT
An Effective Training Program
The quality of employees and their development through training
and education are major factors in determining long-term
profitability of a small business. Hiring and keeping good
employees is the key to the first factor. (Hiring has been
discussed in the first section and retaining employees will be
discussed in the third section.) If you hire and keep good
employees, it is good policy to invest in the development of
their skills, so they can increase their productivity.
Training often is considered for new employees only. This is a
mistake because ongoing training for current employees helps them
adjust to rapidly changing job requirements.
Purpose of Training and Development
Reasons for emphasizing the growth and development of personnel
include
   *  Creating a pool of readily available and adequate
      replacements for personnel who may leave or move up in the
      organization.
   *  Enhancing the company's ability to adopt and use advances
      in technology because of a sufficiently knowledgeable
      staff.
   *  Building a more efficient, effective and highly motivated
      team, which enhances the company's competitive position and
      improves employee morale.
   *  Ensuring adequate human resources for expansion into new
      programs.
Research has shown specific benefits that a small business
receives from training and developing its workers, including:
   *  Increased productivity.
   *  Reduced employee turnover.
   *  Increased efficiency resulting in financial gains.
   *  Decreased need for supervision.
Employees frequently develop a greater sense of self-worth,
dignity and well-being as they become more valuable to the firm
and to society. Generally they will receive a greater share of
the material gains that result from their increased productivity.
These factors give them a sense of satisfaction through the
achievement of personal and company goals.
The Training Process
The model in Chart 1 traces the steps necessary in the training
process.
     _______________________________________________________
            Chart 1 - Steps in the Training Process
                    Organizational Objectives
                         Needs Assessment
                                           Is there a gap?
                       Training Objectives
     Select the Trainees
                Select the Training Methods & Mode
                                           Choose a Means of
                                           Evaluating
                       Administer Training
                      Evaluate the Training
     _______________________________________________________
Your business should have a clearly defined strategy and set of
objectives that direct and drive all the decisions made --
especially training decisions. Firms that plan their training
process are more successful than those that do not. Most business
owners want to succeed, but do not engage in training designs
that promise to improve their chances of success. Why? The five
reasons most often identified are
   *  Time -- Small businesses managers find that time demands do
      not allow them to train employees.
   *  Getting started -- Most small business managers have not
      practiced training employees. The training process is
      unfamiliar.
   *  Broad expertise -- Managers tend to have broad expertise
      rather than the specialized skills needed for training and
      development activities.
   *  Lack of trust and openness -- Many managers prefer to keep
      information to themselves. By doing so they keep
      information from subordinates and others who could be
      useful in the training and development process.
   *  Skepticism as to the value of the training -- Some small
      business owners believe the future cannot be predicted or
      controlled and their efforts, therefore, are best centered
      on current activities -- i.e., making money today.
A well-conceived training program can help your firm succeed. A
program structured with the company's strategy and objectives in
mind has a high probability of improving productivity and other
goals that are set in the training mission.
For any business, formulating a training strategy requires
addressing a series of questions.
   *  Who are your customers? Why do they buy from you?
   *  Who are your competitors? How do they serve the market?
      What competitive advantages do they enjoy? What parts of
      the market have they ignored?
   *  What strengths does the company have? What weaknesses?
   *  What social trends are emerging that will affect the firm?
The purpose of formulating a training strategy is to answer two
relatively simple but vitally important questions: (1) What is
our business? and (2) What should our business be? Armed with the
answers to these questions and a clear vision of its mission,
strategy and objectives, a company can identify its training
needs.
Identifying Training Needs
Training needs can be assessed by analyzing three major human
resource areas: the organization as a whole, the job
characteristics and the needs of the individuals. This analysis
will provide answers to the following questions:
   *  Where is training needed?
   *  What specifically must an employee learn in order to be
      more productive?
   *  Who needs to be trained?
Begin by assessing the current status of the company -- how it
does what it does best and the abilities of your employees to do
these tasks. This analysis will provide some benchmarks against
which the effectiveness of a training program can be evaluated.
Your firm should know where it wants to be in five years from its
long-range strategic plan. What you need is a training program to
take your firm from here to there.
Second, consider whether the organization is financially
committed to supporting the training efforts. If not, any attempt
to develop a solid training program will fail.
Next, determine exactly where training is needed. It is foolish
to implement a company-wide training effort without concentrating
resources where they are needed most. An internal audit will help
point out areas that may benefit from training. Also, a skills
inventory can help determine the skills possessed by the
employees in general. This inventory will help the organization
determine what skills are available now and what skills are
needed for future development.
Also, in today's market-driven economy, you would be remiss not
to ask your customers what they like about your business and what
areas they think should be improved. In summary, the analysis
should focus on the total organization and should tell you
(1) where training is needed and (2) where it will work within
the organization.
Once you have determined where training is needed, concentrate on
the content of the program. Analyze the characteristics of the
job based on its description, the written narrative of what the
employee actually does. Training based on job descriptions should
go into detail about how the job is performed on a task-by-task
basis. Actually doing the job will enable you to get a better
feel for what is done.
Individual employees can be evaluated by comparing their current
skill levels or performance to the organization's performance
standards or anticipated needs. Any discrepancies between actual
and anticipated skill levels identifies a training need.
Selection of Trainees
Once you have decided what training is necessary and where it is
needed, the next decision is who should be trained? For a small
business, this question is crucial. Training an employee is
expensive, especially when he or she leaves your firm for a
better job. Therefore, it is important to carefully select who
will be trained.
Training programs should be designed to consider the ability of
the employee to learn the material and to use it effectively, and
to make the most efficient use of resources possible. It is also
important that employees be motivated by the training experience.
Employee failure in the program is not only damaging to the
employee but a waste of money as well. Selecting the right
trainees is important to the success of the program.
Training Goals
The goals of the training program should relate directly to the
needs determined by the assessment process outlined above. Course
objectives should clearly state what behavior or skill will be
changed as a result of the training and should relate to the
mission and strategic plan of the company. Goals should include
milestones to help take the employee from where he or she is
today to where the firm wants him or her in the future. Setting
goals helps to evaluate the training program and also to motivate
employees. Allowing employees to participate in setting goals
increases the probability of success.
Training Methods
There are two broad types of training available to small
businesses: on-the-job and off-the-job techniques. Individual
circumstances and the who, what and why of your training program
determine which method to use (see Box 6).
     _______________________________________________________
           Box 6 - Training Techniques and Activities
              Orienting Special  Creative      Sales,
              new       skill    technical     administra-
              employees training and           tive,
                                 professional  supervisory
                                 education,    and manager-
                                               ial education
On-the-job
 Orientation     X
 Apprentice      X        X           X              X
 Internship               X           X              X
 Job rotation    X
Off-the-job
 Lecture         X        X           X              X
 Films           X        X           X              X
 Television      X        X           X              X
 Conferences     X                    X              X
 Role playing                         X
 Simulation      X        X           X
 Programmed      X        X           X              X
 Laboratory                           X
Source:Adapted from B. M. Bass and J. A. Vaughan, Training in
Industry: The Management of Learning, Copyright 1966.
____________________________________________________________
On-the-job training is delivered to employees while they perform
their regular jobs. In this way, they do not lose time while they
are learning. After a plan is developed for what should be
taught, employees should be informed of the details. A timetable
should be established with periodic evaluations to inform
employees about their progress. On-the-job techniques include
orientations, job instruction training, apprenticeships,
internships and assistantships, job rotation and coaching.
Off-the-job techniques include lectures, special study, films,
television conferences or discussions, case studies, role
playing, simulation, programmed instruction and laboratory
training. Most of these techniques can be used by small
businesses although, some may be too costly. Box 7 shows the
range of costs for different types of training. Choose the
techniques that meet your needs and fit your budget.
     _______________________________________________________
     Box 7  Relative Expense of Various Training Techniques
                (from least to most expensive)
                                                 Range
                                               Low  High
     Orientation                                $0  $  5
     Lecture (in house)                          0    10
     Role playing                                0    25
     Films                                       5    25
     Television                                  5    50
     Job rotation                               25   500
     Simulations (computer)                    125  1000
     Apprenticeships                           350  1500
     Internships                               350  2500
     Programmed instruction (computer)         100  3500
     Conferences (off site)                    500  3500
     Laboratory training                      1000  5000+
     *Per participant per period.Note:The range of expenses
      should be taken as examples only and were obtained by
      a telephone survey of small businesses and trainers
      in a large metropolitan area. Costs vary widely by the
      content of the training the location and the source.
     _______________________________________________________
Orientations are for new employees. The first several days on the
job are crucial in the success of new employees. This point is
illustrated by the fact that 60 percent of all employees who quit
do so in the first ten days. Orientation training should
emphasize the following topics:
   *  The company's history and mission.
   *  The key members in the organization.
   *  The key members in the department, and how the department
      helps fulfill the mission of the company.
   *  Personnel rules and regulations.
Some companies use verbal presentations while others have written
presentations. Many small businesses convey these topics in
one-on-one orientations. No matter what method is used, it is
important that the newcomer understand his or her new place of
employment. The importance of an employee handbook for imparting
rules and culture was discussed earlier, with specific
suggestions for what should be included in the employee handbook.
Lectures present training material verbally and are used when the
goal is to present a great deal of material to many people. It is
more cost effective to lecture to a group than to train people
individually. Lecturing is one-way communication and as such may
not be the most effective way to train. Also, it is hard to
ensure that the entire audience understands a topic on the same
level; by targeting the average attendee you may undertrain some
and lose others. Despite these drawbacks, lecturing is the most
cost-effective way of reaching large audiences.
Role playing and simulation are training techniques that attempt
to bring realistic decision-making situations to the trainee.
Likely problems and alternative solutions are presented for
discussion. The adage there is no better trainer than experience
is exemplified with this type of training. Experienced employees
can describe real world experiences, and can help in and learn
from developing the solutions to these simulations. This method
is cost effective and is used in marketing and management
training.
Audiovisual methods such as television, videotapes and films are
the most effective means of providing real world conditions and
situations in a short time. One advantage is that the
presentation is the same no matter how many times it's played.
This is not true with lectures, which can change as the speaker
is changed or can be influenced by outside constraints. The major
flaw with the audiovisual method is that it does not allow for
questions and interactions with the speaker, nor does it allow
for changes in the presentation for different audiences.
Job rotation involves moving an employee through a series of jobs
so he or she can get a good feel for the tasks that are
associated with different jobs. It is usually used in training
for supervisory positions. The employee learns a little about
everything. This is a good strategy for small businesses because
of the many jobs an employee may be asked to do.
Apprenticeships develop employees who can do many different
tasks. They usually involve several related groups of skills that
allow the apprentice to practice a particular trade, and they
take place over a long period of time in which the apprentice
works for, and with, the senior skilled worker. Apprenticeships
are especially appropriate for jobs requiring production skills.
Internships and assistantships are usually a combination of
classroom and on-the-job training. They are often used to train
prospective managers or marketing personnel.
Programmed learning, computer-aided instruction and interactive
video all have one thing in common: they allow the trainee to
learn at his or her own pace. Also, they allow material already
learned to be bypassed in favor of material with which a trainee
is having difficulty. After the introductory period, the
instructor need not be present, and the trainee can learn as his
or her time allows. These methods sound good, but may be beyond
the resources of some small businesses.
Laboratory training is conducted for groups by skilled trainers.
It usually is conducted at a neutral site and is used by upper-
and middle-management trainees to develop a spirit of teamwork
and an increased ability to deal with management and peers. It
can be costly and usually is offered by larger small businesses.
Trainers
Who actually conducts the training depends on the type of
training needed and who will be receiving it. On-the-job training
is conducted mostly by supervisors; off-the-job training, by
either in-house personnel or outside instructors.
In-house training is the daily responsibility of supervisors and
employees. Supervisors are ultimately responsible for the
productivity and, therefore, the training of their subordinates.
These supervisors should be taught the techniques of good
training. They must be aware of the knowledge and skills
necessary to make a productive employee. Trainers should be
taught to establish goals and objectives for their training and
to determine how these objectives can be used to influence the
productivity of their departments. They also must be aware of how
adults learn and how best to communicate with adults. Small
businesses need to develop their supervisors' training
capabilities by sending them to courses on training methods. The
investment will pay off in increased productivity.
There are several ways to select training personnel for
off-the-job training programs. Many small businesses use in-house
personnel to develop formal training programs to be delivered to
employees off line from their normal work activities, during
company meetings or individually at prearranged training
sessions.
There are many outside training sources, including consultants,
technical and vocational schools, continuing education programs,
chambers of commerce and economic development groups. Selecting
an outside source for training has advantages and disadvantages.
The biggest advantage is that these organizations are well versed
in training techniques, which is often not the case with in-house
personnel.
The disadvantage of using outside training specialists is their
limited knowledge of the company's product or service and
customer needs. These trainers have a more general knowledge of
customer satisfaction and needs. In many cases, the outside
trainer can develop this knowledge quickly by immersing himself
or herself in the company prior to training the employees.
Another disadvantage of using outside trainers is the relatively
high cost compared to in-house training, although the higher cost
may be offset by the increased effectiveness of the training.
Whoever is selected to conduct the training, either outside or
in-house trainers, it is important that the company's goals and
values be carefully explained.
Training Administration
Having planned the training program properly, you must now
administer the training to the selected employees. It is
important to follow through to make sure the goals are being met.
Questions to consider before training begins include
   *  Location.
   *  Facilities.
   *  Accessibility.
   *  Comfort.
   *  Equipment.
   *  Timing.
Careful attention to these operational details will contribute to
the success of the training program.
An effective training program administrator should follow these
steps:
   *  Define the organizational objectives.
   *  Determine the needs of the training program.
   *  Define training goals.
   *  Develop training methods.
   *  Decide whom to train.
   *  Decide who should do the training.
   *  Administer the training.
   *  Evaluate the training program.
Following these steps will help an administrator develop an
effective training program to ensure that the firm keeps
qualified employees who are productive, happy workers. This will
contribute positively to the bottom line.
Evaluation of Training
Training should be evaluated several times during the process.
Determine these milestones when you develop the training.
Employees should be evaluated by comparing their newly acquired
skills with the skills defined by the goals of the training
program. Any discrepancies should be noted and adjustments made
to the training program to enable it to meet specified goals.
Many training programs fall short of their expectations simply
because the administrator failed to evaluate its progress until
it was too late. Timely evaluation will prevent the training from
straying from its goals.
_________________________________________________________________
BUILDING EMPLOYEE TRUST AND PRODUCTIVITY
The most effective way to build trust in the workplace is to work
together. There are no magic gimmicks or other simple solutions.
Trust cannot be created by excessive wages, great company picnics
or wonderful working conditions; it can only be generated through
teamwork, honesty and fairness. Although trust and productivity
are complex issues and represent only part of the total fabric of
interpersonal relationships in small businesses, three attributes
appear to have a positive effect on trust in successful small
businesses:
   *  The owner-manager of the small business is open and honest
      about the day-to-day business operations.
   *  The owner-manager of the small business is consistent and
      fair about personnel policies.
   *  The owner-manager spends a great deal of his or her time
      concentrating on good communications with those working in
      the firm.
Honesty
Secrecy breeds suspicion. Whenever information is kept on close
hold, the context becomes open to misinterpretation. Total
quality improvement is based on the concept that workers care as
much about the success of the small business as the owners do.
Studies of small businesses indicate that employees tend to
overestimate profits by substantial amounts. These same studies
indicate that when true financial information is shared with
employees, substantial cost controls are voluntarily initiated by
all members of the work force.
Whenever in doubt concerning the amount of information to share
with employees, experience indicates that too much is better than
not enough. Never lie to workers about human relations issues.
Institutional memory is long term; any deceit will be remembered
for many years. Note that employees talk with each other and
inconsistencies will be quickly detected and brought to the
surface -- frequently to your embarrassment. The following are
suggestions on how to avoid this dilemma:
   *  Take time to talk with your workers.
   *  Find out what they're thinking.
   *  Find out what they'd like to know and tell them whenever
      possible.
   *  Don't tell only good things.
   *  Allow employees an opportunity to provide you, the owner,
      with information, questions and suggestions. In this way,
      communications are two way.
Fairness
Fairness ranges from consistency in personnel actions and fair
market practices to adherence to the various laws governing the
workplace. The concept of due process requires that a small
business follow its own rules and policies. Employees must be
treated the same when it comes to personnel issues.
Each worker should have an equal chance to perform at his or her
best. Decisions concerning rewards, promotions and advancement
should always be based on performance, and good performance
should be spelled out in the job description. When performance is
equal among employees, seniority should be used to break ties.
The key to healthy work relations is managing communications
within the firm. Most of the communication will flow as orders
and instructions to employees. Nevertheless, communicating (and
honesty and fairness) is a two-way process. It is difficult for
employees to be intelligent and enthusiastic teamworkers if they
do not know the reasons behind orders and instructions. Perhaps
even more important is giving employees the opportunity to
contribute ideas and opinions before the manager-owner makes a
decision. This adds dignity and meaning to the job in the eyes of
most employees and their families.
Communicating includes telling employees where they stand, how
the business is doing and what future plans are being developed.
Negative feedback may be necessary at times, but positive
feedback should be the primary tool for establishing good human
relations. Never forget that employees are people, and that they
will quickly detect insincerity. They also will respond to honest
efforts to treat them as mature, responsible adults. Some
practical human relations techniques that stimulate two-way
communications include
   *  Periodic performance review sessions (every three months).
   *  Bulletin boards.
   *  Suggestion boxes.
   *  Newsletters.
   *  Regular open meetings.
The Legal Environment
Small businesses operate in a complex legal environment that
places many constraints on recruitment, selection, placement and
other personnel practices. Laws may specify what is required,
what is acceptable or what is prohibited. Every personnel system
must consider the statutes relating to these issues. One of the
most important laws the small business owner should be aware of
is the Occupational Safety and Health Act (OSHA 1970). This law
is aimed at reducing the number of safety and health hazards in
the American workplace. Businesses must comply with health and
safety standards set by the U.S. Department of Labor for
individual industries.
The past sixty years have been characterized by laws that
encourage collective bargaining and that try to bring about a
better balance between management and labor. Many of these laws
apply to small businesses:
   *  Norris-LaGuardia Act (1932) -- Protects the rights of
      unions to organize. It also prohibits yellow-dog contracts
      -- an employment practice where the firm requires employees
      to promise they will not join a union if hired by the
      company.
   *  Wagner Act (1935) -- Guarantees workers the right to engage
      in union activities, to organize and to bargain
      collectively without interference from employers. A small
      business manager may not prohibit employees from union
      activity.
See the discussion of other applicable laws in the first section
under Recruiting and Compensation Issues.
The Personnel Manager
Many small businesses cannot afford a full-time specialist to
deal with human resource problems. However, as a business grows,
its structure becomes more complex and personnel problems
increase in number and potential cost. At a certain point in the
typical small business, it becomes apparent that a full-time or
part-time personnel manager is needed. Conditions that indicate
the necessity of a personnel manager include
   *  The firm has more than 100 employees.
   *  Employees are represented by a union.
   *  Turnover is very high (and costly).
   *  The need for skilled or semiskilled labor creates problems
      in recruitment or selection.
   *  Employee morale is low.
   *  Competition for good personnel is especially keen in the
      market area.
_________________________________________________________________
CONCLUSION
All small businesses must staff their operations, by bringing in
new people and by training new and current employees. Effective
human resource management matches and develops the abilities of
job candidates and employees with the needs of the firm. A
responsive personnel system will help you manage this process and
is a key ingredient for your business's growth.
Human resource management is a balancing act: hiring qualified
personnel who are well suited to the firm's needs and training
and developing employees to meet the firm's needs are the
endpoints of the continuum. Most expanding small businesses fall
in the middle of this continuum -- i.e., they hire the best
people they can afford, but they also recognize the need to train
and develop current employees as the firm grows.
This publication should provide you with an increased awareness
of the importance of creating a good human resource management
climate within the firm, and specific guidelines on how to create
such a climate.
_________________________________________________________________
REFERENCES
Leap, Terry and Michael Crino. Personnel/Human Resource
Management. New York: Macmillan Publishing Co., 1989.
Longenecker, Justin and Carlos Moore. Small Business Management.
Cincinnati: South-Western Publishing Co., 1987.
Roxe, Linda, A. Personnel Management for the Smaller Company. New
York: AMACOM, 1979.
Tate, Curtis, et al. Successful Small Business Management. Plano,
TX: Business Publications, Inc., 1985.
Wexley, Kenneth and Gary P. Latham. Developing and Training Human
Resources in Organizations. Glenview, IL: Scott Foresman and Co.,
1981.
Johnston, William B, et al. Workforce 2000: Work and Workers for
the 21st Century. Indianapolis, IN: Hudson Institute, 1987.
_________________________________________________________________
APPENDIX A: HUMAN RESOURCE MANAGEMENT AUDIT QUESTIONNAIRE
 1.  Does the business have a plan for forecasting long-term
     personnel needs?
 2.  Are there guidelines for hiring personnel, or are employees
     hired based on gut feelings?
 3.  Are there job descriptions for all positions?
 4.  What do employees like about their jobs?
 5.  What do employees dislike about their jobs?
 6.  Why do employees leave the organization?
 7.  Is there an active training program? Is it based on
     an assessment of where the firm is now or where it should be
     in the future?
 8.  Are a variety of training programs available?
 9.  How is morale in the firm?
10.  Do employees really believe what you have to say?
11.  Are all employees treated fairly?
_________________________________________________________________
APPENDIX B: INFORMATION RESOURCES
U.S. Small Business Administration (SBA)
The SBA offers an extensive selection of information on most
business management topics, from how to start a business to
exporting your products.
SBA has offices throughout the country. Consult the U.S.
Government section in your telephone directory for the office
nearest you. SBA offers a number of programs and services,
including training and educational programs, counseling services,
financial programs and contract assistance. Ask about
     *     SCORE: Counselors to Americas Small Business, a
           national organization sponsored by SBA of over 11,000
           volunteer business executives who provide free
           counseling, workshops and seminars to prospective and
           existing small business people.  Free online counseling
           and training at www.score.org.
     *     Small Business Development Centers (SBDCs), sponsored
           by the SBA in partnership with state governments, the
           educational community and the private sector. They
           provide assistance, counseling and training to
           prospective and existing business people.
     *     Womens Business Centers (WBCs), sponsored by the SBA
           in partnership with local non-government organizations
           across the nation. Centers are geared specifically to
           provide training for women in finance, management,
           marketing, procurement and the Internet.
For more information about SBA business development programs and
services call the SBA Small Business Answer Desk at 1-800-U-ASK-
SBA (827-5722) or visit our website, www.sba.gov.
Other U.S. Government Resources
Many publications on business management and other related topics
are available from the Government Printing Office (GPO). GPO
bookstores are located in 24 major cities and are listed in the
Yellow Pages under the bookstore heading. Find a Catalog of
Government Publications at http://catalog.gpo.gov/F
Many federal agencies offer Websites and publications of interest
to small businesses. There is a nominal fee for some, but most
are free. Below is a selected list of government agencies that
provide publications and other services targeted to small
businesses. To get their publications, contact the regional
offices listed in the telephone directory or write to the
addresses below:
Federal Citizen Information Center (FCIC)
Http://www.pueblo.gsa.gov
1-800-333-4636
The CIO offers a consumer information catalog of federal
publications.
Consumer Product Safety Commission (CPSC)
Publications Request
Washington, DC 20207
http://www.cpsc.gov/cpscpub/pubs/pub_idx.html
The CPSC offers guidelines for product safety requirements.
U.S. Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
http://www.usda.gov
The USDA offers publications on selling to the USDA. Publications
and programs on entrepreneurship are also available through
county extension offices nationwide.
U.S. Department of Commerce (DOC)
Office of Business Liaison
14th Street and Constitution Avenue, NW
Washington, DC 20230
http://www.osec.doc.gov/obl/
DOC's Business Liaison Center provides listings of business
opportunities available in the federal government. This service
also will refer businesses to different programs and services in
the DOC and other federal agencies.
U.S. Department of Health and Human Services (HHS)
Substance Abuse and Mental Health Services Administration
1 Choke Cherry Road
Rockville, MD 20857
http://www.workplace.samhsa.gov
Helpline: 1-800-workplace. Provides information on Employee
Assistance Programs Drug, Alcohol and other Substance Abuse.
U.S. Department of Labor (DOL)
Employment Standards Administration
200 Constitution Avenue, NW
Washington, DC 20210
The DOL offers publications on compliance with labor laws.
U.S. Department of Treasury
Internal Revenue Service (IRS)
1500 Pennsylvania Avenue NW
Washington DC 20230
http://www.irs.gov/business/index.html
The IRS offers information on tax requirements for small
businesses.
U.S. Environmental Protection Agency (EPA)
Small Business Ombudsman
1200 Pennsylvania Avenue NW
Washington, DC 20480
http://epa.gov/sbo
Hotline: 1-800-368-5888
The EPA offers more than 100 publications designed to help small
businesses understand how they can comply with EPA regulations.
U.S. Food and Drug Administration (FDA)
5600 Fishers Lane
Rockville MD 20857-0001
http://www.fda.gov
Hotline: 1-888-463-6332
The FDA offers information on packaging and labeling requirements
for food and food-related products.
For More Information
A librarian can help you locate the specific information you need
in reference books. Most libraries have a variety of directories,
indexes and encyclopedias that cover many business topics. They
also have other resources, such as
     *     Trade association information
           Ask the librarian to show you a directory of trade
           associations. Associations provide a valuable network
           of resources to their members through publications
           and services such as newsletters, conferences and
           seminars.
     *     Books
           Many guidebooks, textbooks and manuals on small
           business are published annually. To find the names of
           books not in your local library check Books In Print,
           a directory of books currently available from
           publishers.
     *     Magazine and newspaper articles
           Business and professional magazines provide
           information that is more current than that found in
           books and textbooks. There are a number of indexes to
           help you find specific articles in periodicals.
      *    Internet Search Engines
In addition to books and magazines, many libraries offer free
workshops, free access to computers and the Internet, lend
skill-building tapes and have catalogues and brochures
describing continuing education opportunities.
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