Economy and Environment and Small Business

Right decision crucial for small firms:

April 24, 2006

Of course, trying to be less subjective does not mean you shouldn't consider "fit" with the organization's culture. In a small company, fit can be critical.

One way to attempt to reduce early turnover is to use the "realistic job preview," in which prospective employees are given both the positive and negative aspects of the job, as opposed to the traditional approach of "selling" the firm. If individuals aren't going to enjoy the job, it's better to know it before they are hired than after you spend time and money training them.

Remember that once you find the employees you need, you don't want to lose them to "poachers." Establish your company as an employer of choice.

For example, capitalize on the advantages of a small company by emphasizing intangibles such as the more familial atmosphere, comfortable environment and the ability to know the whole team, including top management. Also, in a smaller company, employees generally perform a wider, more challenging range of duties.

With this flatter organizational structure, however, come fewer opportunities for promotions. To offset this, small firms should strive to provide employees with personal growth by providing a variety of training opportunities on an ongoing basis.

With regard to pay and benefits, small companies should stress "total compensation" rather than just salary. For example, flexibility in scheduling can be a key benefit, as work/life balance is an increasing concern for many people.

Lastly, you can't overlook the importance of communication. Here, smaller companies have an advantage because even the highest level of manager is not that far removed from the employee at the lowest level of the job structure.

It's also important to express appreciation to employees on an ongoing basis. Employees want to hear from management, and not just when something goes wrong.

By following these guidelines, small companies can attract and retain the talent they need. And with the right employees working together, a small business is likely to reap big rewards.
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In today's economy, it's said that human capital is the most precious resource a company has. That's not just true in "knowledge-based" industries-employees everywhere are pushed to do more with less. Recruiting people with the right skills for the job at hand is a must.

No matter the size of the organization, all businesses need to consider the impact of their hiring decisions on the organization's quality of work life, productivity and profits. But for small firms, which have fewer employees and fewer resources, making the right decision is even more critical.

Estimates of employee turnover costs range from 25 percent to 200 percent of annual compensation. And that doesn't reflect things like lowered morale, loss of experience and disruptions to service.

So how can you get it right the first time? First, consider training managers in interviewing/hiring. Many managers make hiring decisions based on subjective fac- Hassell is an associate professor of management at the IU Kelley School of Business Indianapolis; Malatestinic is a lecturer in management there.
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