Human Resources and Family-Owned Businesses

by Mary Pille, Employers' Association

The United States has thrived through the decades, both in good and challenging times, with family-owned businesses being an economic driver. Family-owned businesses are a big part of the American dream. Typically, as a business' profitability grows, that often means adding employees to the mix. A different set of skills is often necessary to manage growth-especially when it comes to human capital.

As a business owner, the most important resource in the business is the people, and they should be your competitive advantage. According to Abraham Zaleznick of Harvard Business Review, who pinpoints the critical importance of HR activities in any organization, "The work of human resources is to identify and develop people who have the talents and imagination businesses need to compete in a changing, complex, competitive environment. That means that HR management ought to be the most important job in every business."

HR management does not necessarily require an HR department, and even where there is one, responsibility for identifying and strengthening key personnel does not rest solely with the HR department. It is the owner/manager's responsibility.

If people are your most important resource, then you need to understand the role of human resources in business. Many owners believe that because they have only a few employees, they do not need to focus on human resources issues. The reality is that when you are a business owner, you need to focus more attention and support to your human resources because, effectively, they can make or break your business.

Even from a mathematical perspective, this is true. If a small business has only four employees, each of those employees has at least a 20-percent impact on the business (the small business owner is counted in this impact assessment). If a business has 19 employees, each of those employees has a five-percent effect on the business; and so on. Therefore, the impact of a bad hiring decision or an underperforming employee is significant to small businesses. Talent engagement has an impact even in the smallest of businesses.

Family-owned businesses often experience even more challenges when it comes to HR practices, especially when family and non-family employees are working in the business. When it comes to working family members, it is often more difficult to make objective business decisions, especially as it relates to pay, discipline or other compliance-related issues. It is critical however, that all employees (family or otherwise) be treated consistently to achieve the best competitive advantage.

Every business employs resources to get work done; typically, the resources are a mix of people and equipment. Equipment resources are typically measured for value (that is, cost and return on investment or payback on investment). Human resources are often not valued similarly but if they were, business owners would pay a lot more attention to making sure they hired the right people, trained them well and measured their performance effectiveness regularly. iBi


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