HRM textbook

CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 621
If so, as one writer puts it, It s a sure bet that their lower morale and simmering
resentments are having a negative effect on your operations and sapping your
profits. 60 Reducing such fairness problems involves several steps, including: 61
* Set the ground rules. One family business consultant says,
During the hiring process the [management] applicant should be informed as
to whether he or she will be essentially a placeholder, or whether there will be
potential for promotion. At a minimum, make the expectations clear, regarding
matters such as the level of authority and decision-making the person can
expect to attain. 62
* Treat people fairly. Work hard to avoid any appearance that family members are
benefiting unfairly from the sacrifice of others. 63
* Confront family issues. Discord and tension among family members distracts
and demoralizes employees. Family members must confront and work out their
differences.
* Erase privilege. Family members should avoid any behavior that would lead
people to the conclusion that they are demanding special treatment in terms
of assignments or responsibilities. 64 Family employees should come in earlier,
work harder, and stay later than other employees stay.
4 Discuss how you would
choose and deal with a
professional employee
organization.
USING PROFESSIONAL EMPLOYER ORGANIZATIONS
As we explained in Chapter 13 (Benefits), many small business owners look at the issues
involved with managing personnel, and decide to outsource most of their human
resource functions to vendors. 65 These vendors go by the names professional employer
organizations (PEOs), human resource outsourcers (HROs), or sometimes employee or
staff leasing firms.
How Do PEOs Work?
These vendors range from specialized payroll companies to those that handle all an
employer s human resource management requirements. 66 At a minimum, these firms
take over the employer s payroll tasks. 67 Usually, however, PEOs assume most of the
employer s human resources chores. By transferring the client firm s employees
to the PEO s payroll, PEOs become co-employers of record for the employer s
employees. The PEO can then fold the client s employees into the PEO s insurance
and benefits program, usually at a lower cost. The PEO usually handles employeerelated
activities such as recruiting, hiring (with client firms supervisors approvals),
and payroll and taxes. Most PEOs focus on employers with under 100 employees, and
charge fees of 2% to 4% of a company s payroll. HROs usually handle these functions
on an administrative services only they re basically your HR office, but your
employees still work for you. 68
Why Use a PEO?
Employers turn to PEOs for several reasons:
LACK OF SPECIALIZED HR SUPPORT Small firms with fewer than about
100 employees typically have no dedicated HR managers. The owner has most of the
human resource management burden on his or her shoulders.
PAPERWORK The Small Business Administration estimates that small business
owners spend up to 25% of their time on personnel-related paperwork, such as
background checks and benefits sign-ups. 69 Because the PEO takes over most of this,
many small businesses conclude that it s cheaper for them just to pay the employee
leasing firm s fees.