HR PLANNING IN EVOLVING SMALL AND ENTREPRENEURIAL ORGANIZATIONS

HR management and ultimately HR planning are critical in small and entrepreneurial organizations. “People problems” are among the most frustrating ones faced by small-business owners and entrepreneurs.

EVOLUTION OF HR ACTIVITIES

 At the beginning of a small business’s existence, only very basic HR activities must be performed. Compensation and governmentmandated benefits must be paid. As the organization evolves, more employees must be recruited and selected. Also, some orientation and on-the-job training are necessary, though they are often done haphazardly.

The evolution of the business proceeds through several stages. The focus of each stage reflects the needs of the organization at the time. In the initial stage, the organization first hires an HR clerk, then possibly an HR administrator. As the organization grows, it may add more HR professionals, often including an employment or benefits specialist. With further growth, other specialists, such as trainers, may be needed. From this point, additional clerical and specialist employees can be added, and separate functional departments (employment, compensation, benefits, and training) can evolve.

SMALL BUSINESS AND FAMILY ISSUES

One factor often affecting the planning of HR activities in small firms is family considerations. Particular difficulties arise when a growing business is passed on from one generation to another, resulting in a mix of family and nonfamily employees. Some family members may use employees as “pawns” in disagreements with other family members in the firm.

Also, nonfamily employees may see different HR policies and rules being used for family members than for them.

Key to the successful transition of a business from one generation to another

is having a clearly identified HR plan. Crucial in small businesses is incorporating the role of key nonfamily members with HR planning efforts. Often, nonfamily members have important capabilities and expertise that family members do not possess. Therefore, planning for the attraction and retention of these “outsiders” may be vital to the future success of smaller organizations. One survey of over 3,000 small businesses found that management succession was one of the top challenges faced by family-owned firms. It even may be that the nonfamily members will assume top management leadership roles, with some or all family members who are owners serving on the Board of Directors, but not being active managers in the firm. Additionally, nonfamily executives may be the intermediaries who focus on the needs of the business when familymember conflicts arise. Small businesses, depending on how small they are, may use the HR planning that follows, but in very small organizations the process is much more intuitive and often done entirely by the top executives, who often are family members.