Description
Respond to the following in a minimum of 175 words: Explain ways entrepreneurs can use small size—familiarity, flexibility, and informality—to improve their HR processes. Describe the 4 domains of human resources. Which domain is most significant, and why? Textbook used: Dessler, G. (2020). Human resource management (16th ed.). Pearson
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The Small Business Challenge
Learning Objective 18-1Explain why HRM is important to small businesses and how small
business HRM is different from that in large businesses.
There’s nothing small about small business. About half the people working in the United States
today work for small firms.2 Small businesses as a group also account for most of the 650,000 or so
new businesses created every year,3 as well as for most of America’s business growth (small firms
grow faster than big ones). And small firms create most of the new jobs in the United States.4
Statistically speaking, therefore, many (or most) people graduating from college probably do or will
work for small businesses—firms with less than 200 or so employees. Anyone interested in human
resource management thus needs to understand how managing human resources in small firms
differs from that in huge multinationals.
How Small Business Human Resource Management Is Different
Managing human resources in small firms is different for four main reasons: size, priorities,
informality, and the nature of the entrepreneur.
Size
For one thing, it’s unusual to find a business under 90 or so employees with a dedicated HR
professional.5 As a rule, it’s not until a company reaches about 100 employees that it can afford an
HR specialist. Yet even five- or six-person retail shops recruit, select, train, and pay employees. So,
it’s usually the owner or his or her assistant that does the HR tasks; the bookkeeper might handle
payroll, for instance. As a result, SHRM found several years ago that even firms with under 100
employees often spend the equivalent of two or so people’s time each year addressing human
resource management issues.6 Those hours usually come out of the owner’s long workday.
(However, about 10% of SHRM members work in firms with less than 100 employees, so there are
exceptions.) 7
Priorities
At the same time, business realities drive many entrepreneurs (the men and women who provide the
vision and “spark” that starts a new business) to focus more on non-HR issues. After studying small
e-commerce firms in the United Kingdom, one researcher concluded that, as important as human
resource management is, it just wasn’t a high priority for these firms:
Given their shortage of resources in terms of time, money, people and expertise, a typical SME
[small- and medium-size enterprise] manager’s organizational imperatives are perceived elsewhere, in
finance, production and marketing, with HR of diminished relative importance.8
Informality
One effect of this is that human resource management tends to be more informal in smaller firms.
Thus, one study analyzed training practices in about 900 family and nonfamily small companies.9
Training tended to be informal, with an emphasis on methods like coworker and supervisory on-thejob training.
Such informality isn’t just due to a lack of resources, it’s a “matter of survival.” Entrepreneurs must
react fast to changing competitive conditions. So, there’s logic in keeping things like compensation
policies flexible. The need for small businesses to adapt quickly often means handling matters like
raises, appraisals, and time off “on an informal, reactive basis with a short time horizon.”10
The Entrepreneur
Entrepreneurs are people who create businesses under risky conditions, and starting new businesses
is always risky. Entrepreneurs therefore tend to be dedicated and visionary, and somewhat
controlling. Researchers believe that small firms’ informality partly stems from entrepreneurs’
tendency to control things. For example, “Owners tend to want to impose their stamp and personal
management style on internal matters, including the primary goal and orientation of the firm, its
working conditions and policies, and the style of internal and external communication and how this
is communicated to the staff.”11
Implications
This combination of small size, priorities, informality, and entrepreneurial tendencies can easily
translate into several problems for a small firm’s human resource management practices.12
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First, inadequate human resource practices may put small business owners at legal risk. For
example, Outback Steakhouse long had no human resource department. That changed after
an EEOC suit led Outback to pay a $19 million sex discrimination settlement. They hired an
executive-level HR professional. Similar legal risks abound for violating Family Medical
Leave Act regulations, and not paying for overtime hours worked, to name a few.
Second, not having a dedicated HR person can slow company decisions and overwhelm its
managers. After LRN Corp. eliminated its human resource department, tasks like hiring
became convoluted as line managers tried to figure out what skills jobs required, and how to
find and select the best people. Soon managers were pushing all these decisions up the
ladder to the top manager.
Third, without human resource information systems, paperwork is time consuming, and
duplication may create data entry errors. Employee data (name, address, marital status, and
so on) often appears on multiple human resource forms (medical enrollment forms, W-4
forms, and so on). Any personal data change then requires manually changing all forms. This
is inefficient, and causes errors.
Fourth, if the small business can’t efficiently hire, train, appraise, and compensate employees,
how will it compete with companies that can? It could be at a competitive disadvantage.
Why HRM Is Important to Small Businesses
A small software start-up experienced turmoil when social media postings from one employee
accused another of harassment. The moral, says one expert, is that start-ups can’t assume that all
they need is an employee handbook; they also need a functioning HR system.14
In fact, small firms with effective HR practices do better than those without them. For example, a
study in the UK found a direct positive relationship between small companies’ use of formal human
resource practices and the companies’ financial performance and labor productivity.15 An earlier
study focused on 168 family-owned high-growth small and medium-size enterprises (SMEs). The
successful SMEs placed more emphasis on training and development, performance appraisal,
recruitment packages, maintaining morale, and setting competitive compensation levels than did less
successful ones.16
For many small firms, effective human resource management is also required for getting and keeping
big customers. For example, to comply with international ISO-9000 quality standards, many large
customers check that their small vendors follow the necessary HR standards.17
We devote this chapter to methods small business managers can use to improve their human
resource management practices, starting with Internet and government tools.
Using Internet, Government, and Other Tools to Support the HR Effort
Learning Objective 18-2Give four examples of how entrepreneurs can use Internet and
government tools to support the HR effort.
No small business need cede the “HR advantage” to big competitors. Knowledgeable small business
managers can level the terrain by using Internet-based HR resources, including free online resources
from the U.S. government. For example, the Small Business Administration (SBA) provides (under
Manage Your Business) a Hire and Manage Employees page, with a list of HR items to address.18
Other useful sites include the following.
Government Tools for Complying with Employment Laws
Complying with federal (and state and local) employment law is a thorny issue for entrepreneurs.
For example, the entrepreneur needs to know, “Must I pay this person overtime?” and, “Must I
report this injury?”
Start by knowing which federal employment laws apply. For example, Title VII of the 1964 Civil
Rights Act applies to employers with 15 or more employees, while the Age Discrimination in
Employment Act of 1967 applies to those with 20 or more.19 Small business owners will find the
legal answers they need to answer questions like these online at federal agencies’ Web sites.
DOL Online elaws Advisors
The U.S. Department of Labor provides “elaws Advisors” (such as its Health Benefits Advisor) for
laws covering matters like pay and benefits, and health and safety. Using elaws Advisors is a bit like
having an expert for advice, for example “is this employee exempt from overtime pay
requirements?”20 Thus, as in Figure 18-1 click “Begin FirstStep-Employment Law Overview
Advisor Now.” The wizard takes you through questions like “What best describes the nature of your
business?”
Figure 18-1 Full Alternative TextProceeding through the wizard, the owner arrives at “results.” This
says, “Based on the information you provided . . . the following employment laws administered by
the Department of Labor (DOL) may apply to your business or organization.”21 Typically, these
laws might include the Consumer Credit Protection Act, Employee Polygraph Protection Act, Fair
Labor Standards Act, Immigration and Nationality Act, Occupational Safety and Health Act,
Uniformed Services Employment and Reemployment Rights Act, and Whistleblower Act.A linked
DOL site (www.dol.gov/whd/flsa/index.htm) provides information on the Fair Labor Standards
Act (FLSA).22 It also contains several specific FLSA “elaws Advisors.” Each provides practical
guidance on questions such as when to pay overtime. Figure 18-2 presents, from this Web site, a list
of elaws Advisors.23Figure 18-2Sample DOL elaws Advisors
Online Employment Planning and Recruiting Tools
Online tools can make small business owners as effective as their large competitors at writing job
descriptions and recruiting applicants. For example, as we saw in Chapter 4 (Job Analysis), O*NET
(http://online.onetcenter.org) enables business owners to create accurate job descriptions and job
specifications quickly.
Online Recruiting
Small business owners can also use the online recruiting tools in Chapter 5 (Recruiting). For
example, it’s easy to scour LinkedIn.com, and to post jobs on Careerbuilder.com, and on
professional associations’ job boards. Similarly, the best applicant tracking software does more than
track job candidates.24 They also automatically post open jobs to job Web sites. Some, like Bullhorn
(www.bullhorn.com/) post jobs to social media sites including LinkedIn, Twitter, and Facebook.
Small Business Employee Selection Tools
Some tests are so easy to use they’re particularly helpful for small firms. One is the Wonderlic
Personnel Test (www.wonderlic.com/), which measures general mental ability. With questions
somewhat similar to the SAT, it takes less than 15 minutes to administer. The tester reads the
instructions, and keeps time as the candidate works through the 50 problems. The tester scores the
test by totaling the number of correct answers. Comparing the person’s score with the minimum
scores recommended for various occupations shows whether he or she achieved the minimum score
for the job in question.
The Predictive Index is another example. It measures work-related personality traits, drives, and
behaviors—in particular, dominance, extroversion, patience, and blame avoidance. A template
makes scoring simple. The Predictive Index program includes 15 standard benchmark personality
patterns. For example, there is the “social interest” pattern, for a person who is generally unselfish,
congenial, persuasive, patient, and unassuming. This person would be a good personnel interviewer,
for instance.
Many vendors, including Wonderlic and Predictive Index, offer online applicant testing and
screening services. Wonderlic’s service (which costs about $9,000 per year for a small firm) first
provides job analyses for the employer’s jobs. Wonderlic then provides a Web site the small business
applicants can log into to take one or several selection tests. It will also help set up a testing
procedure.
Some other small business recruiting and selection suggestions would include
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Don’t forgot the obvious. Sometimes the easiest way to get good candidates is a “Help
Wanted” sign on the door.
Keep it local, and in the industry. Use online job boards that target a particular industry or
city to minimize irrelevant applicants.26 For example, Jobing.com maintains city-specific job
sites in over 19 states.27 Smartrecruiters.com28 lists dozens of job boards for specific
industries or types of jobs, such as Dice.com for technical professionals (go to
www.smartrecruiters.com, then Marketplace, then Job Boards).
Test online. Use online tests, for instance, to test an applicant’s proficiency at QuickBooks,
or even at selling over the phone. Vendors include (as a small sample) IBM’s Kenexa,
eskill.com/, selectivehiring.com, and berkeassessment.com.29
Poll your contacts. Tap friends and employees for recommendations, and use social
networking sites such as LinkedIn. One employer says, “I get people vouching for each
applicant, so I don’t have to spend hours sorting through résumés.”30
Send a recording. InterviewStream is one of several vendors that records online video
interviews for about $30 to $60.31 It sends the candidate an e-mail invitation with a link.
When he or she clicks the link, a video interviewer asks the company’s prerecorded
questions. Hiring managers can review the videos at their leisure.32
Small Business Training Tools
Small companies can’t compete with the training resources of giants like Google. However, as
explained in Chapter 7 (Training), online training can provide employee training that used to be
beyond most small employers’ reach. Online sources (see Chapter 7) range from private vendors
(such as www.PureSafety.com and www.skillsoft.com) to the small business administration
(www.sba.gov/sitemap) and the National Association of Manufacturers (NAM). The buyer’s guide
from the Association for Talent Development (www.td.org/) lists many vendors (check under
Resources).34 Online learning platforms like Docebo’s (www.docebo.com/) make it easy for a
company’s employees to access off-the-shelf and customized online learning courses and
programs.35
Employment Appraisal and Compensation Online Tools
Small employers have easy access to computerized and online appraisal and compensation services.
For example, Oracle Corporation’s ePerformance36 lets managers formalize the employee’s goals
and then assess progress toward meeting those goals. The eAppraisal system from Halogen
Software37 is another example. SAP Success Factors (www.successfactors.com/en_us.html)
provides particularly effective performance management assistance. It facilitates assigning and
monitoring goals, helps management provide feedback to employees, and makes it easy to review
goal attainment as part of performance appraisal.38
Similarly, lack of easy access to high-priced salary surveys once made it difficult for small businesses
to adjust their pay scales. Today, sites like www.salary.com and www.Glassdoor.com make it easy to
determine local and national pay rates. Benefits administration packages, as from Zenefits
(www.zenefits.com/), make it easy for employees to register for benefits, and to access their
insurance and benefits information.39
Employment Safety and Health Tools
Average injury rates for small businesses are somewhat lower than in big companies.40 However,
most people work for small businesses, so that’s still a huge number of total accidents. Small
business managers should have a command of the tools and techniques in Chapter 16 (Safety). As
also explained there, OHSA provides free services for small employers.41 These include free on-site
safety services for small businesses, and the OSHA Sharp program, a process through which OSHA
certifies that small employers have achieved commendable levels of safety awareness.42
Leveraging Small Size with Familiarity, Flexibility, Fairness, and Informality
Learning Objective 18-3 List five ways entrepreneurs can use their small size to improve their HR
processes.
Because small businesses need to capitalize on their strengths, it makes sense for them to capitalize
on their smallness when dealing with employees. For example, smallness can mean more personal
familiarity with each employee’s strengths, needs, and family situation. And it can mean being
flexible and informal in its human resource management policies and practices.43
Simple, Informal Employee Selection Procedures
In addition to online recruitment and selection tools,44 small business managers shouldn’t forget
simple, low-tech selection aids. For example, the Work Sampling Test we explained in Chapter 6
involves having the candidate show how he or she would actually do one of the job’s tasks—such as
a marketing candidate spending 30 minutes outlining an ad for a product. The accompanying HR
Tools feature presents a more informal selection interview procedure the small business manager
may find useful.
Improving Performance: HR Tools for Line Managers and Small Businesses
A Streamlined Interviewing Process45
The small business owner, pressed for time, may use the following practical, streamlined
employment interview process.46 One way to do so is to focus on four basic required factors:
knowledge and experience, motivation, intellectual capacity, and personality. To proceed this way,
interviewing expert John Drake suggests asking the following questions:
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Knowledge and experience. What must the candidate know to perform the job? What
experience is necessary to perform the job? For example, ask a combination of situational
questions plus open-ended questions to probe the candidate’s suitability for the job, such as,
“How would you organize such a sales effort?” or “How would you design that kind of Web
site?”
Motivation. What should the person like doing to enjoy this job? Is there anything the
person should not dislike? Are there any essential goals or aspirations the person should
have? For example, probe such areas as the person’s likes and dislikes (for each thing done,
what he or she liked or disliked about it).
Intellectual capacity. Are there any specific intellectual aptitudes required (mathematical,
mechanical, and so on)? How complex are the problems the person must solve? What must
a person be able to demonstrate intellectually? For example, ask questions that judge such
things as complexity of tasks the person has performed, and grades in school.
Personality. What are the critical personality qualities needed for success on the job (ability
to withstand boredom, decisiveness, stability, and so on)? How must the job incumbent
handle stress, pressure, and criticism? What kind of interpersonal behavior is required in the
job? For example, probe by looking for self-defeating behaviors (aggressiveness, compulsive
fidgeting, and so on) and by exploring the person’s past interpersonal relationships, such as
leading the work team on the last job. Is the candidate personable? Shy? Outgoing?
How to Organize the Interview
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Have a plan. Devise and use a plan to guide the interview. Drake says that significant
areas to touch on include the candidate’s:
o College experiences
o Work experience—summer, part-time
o Work experience—full-time (one by one)
o Goals and ambitions
o Reactions to the job you are interviewing for
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o Self-assessments (by the candidate of his or her strengths and weaknesses)
o Military experiences
o Present outside activities47
Follow your plan. Start with an open-ended question for each topic, such as “Could you
tell me about what you did in college?” Then probe for information about the person’s
knowledge and experience, motivation, intelligence, and personality.
Match the Candidate to the Job
You should now be able to draw conclusions about the person’s knowledge and experience,
motivation, intellectual capacity, and personality, and to summarize the candidate’s strengths and
limits. This should provide a rational basis for matching the candidate to the job—one based on the
traits and aptitudes the job actually requires.
Flexibility in Training
Two things characterize training in small businesses. First, small businesses focus on what the
training will do for their bottom lines, rather than how employees may benefit.48 (Similarly, they
focus management development on teaching specific firm-related skills, such as how to sell the
firm’s products).49
Second, a study several years ago in Europe found that small firms were also relatively informal in
how they trained employees.50 This probably isn’t surprising, since (as explained in Chapter 8),
training experts estimate that on average about 70% of all training is in fact “informal.”
Encouraging Informal Training
Given the importance of informal learning, small business managers should take steps to encourage
and facilitate it.
Several things contribute to building an environment in which informal learning thrives. Informal
learning occurs when employees have something they need to learn, are motivated to learn it, and
are given the opportunity to learn.51 Informal learning tends to take place as a by-product of
employees’ other activities, and so usually occurs during day-to-day conversations, networking, and
through teamwork and mentoring.52 (To paraphrase one expert, workers learn more over coffee
than they do taking courses.)53 The best informal learning also tends to be goal directed, as when a
manager who needs to recruit an engineer asks LinkedIn group colleagues how to do so; informal
learning is thus often triggered by something at work that motivates the employee to initiate an
informal learning interaction.54 And, informal learning occurs best where employees know that top
management encourages and supports such learning.55
Given all this, the small business owner can do several things to encourage and facilitate informal
learning. These include
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Make it clear that you encourage employees to learn on the job, particularly when they’re
faced with a work problem.56
Make high-quality content available. For example, while much on the Internet is free,
sometimes the job-relevant content for your company requires a subscription; if so, provide
such subscriptions.57
Encourage supervisors to provide informal learning through coaching.58
Offer to cover tuition for special classes.59
Identify online training opportunities.60
Encourage and facilitate (for instance, through a dedicated page on the company intranet)
the sharing of best practices.61
Send employees to special seminars and meetings for learning and networking.62
Provide plenty of opportunities for informal learning at work, such as chalkboards at
worksites and lunch areas.
Flexibility in Benefits and Rewards
The Family and Work Institute surveyed the benefits practices of about 1,000 small and large
companies.63 Not surprisingly, they found that large firms offer more extensive benefits packages
than do smaller ones. For example, larger employers offered more wellness programs, and asked
their employees to pay a smaller share of health premiums than did small firms, on average.
However, small firms offered more flexibility. For example, employees at small employers (50–99
employees) were more likely than large employers (1,000 or more employees) to (1) take time off
during the workday to attend to important family or personal needs without loss of pay; (2) have
control over when to take breaks; and (3) periodically change starting and quitting times within some
range of hours.64
Some small businesses also “discovered how to turn tiny into tight-knit, earning employees’ trust by
keeping them in the loop on company news and financials, and their loyalty by providing frequent
feedback on performance.” 65 For example, ID Media, with 90 employees, gives all new employees
a welcome breakfast on their first day.66
Wards Furniture in Long Beach, California, further illustrates this. Many of its 17 employees have
been with the firm for 10 to 20 years. Brad Ward, an owner, attributes this partly to his firm’s
willingness to adapt to its workers’ needs. For example, workers can share job responsibilities and
work part-time from home. As a result, Wards Furniture is a good example of using small size to
create valuable work–life benefits such as extra time off, compressed workweeks, schedule flexibility,
and recognition for employees.
Here are other examples of what Wards and other small employers can offer:67
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Extra time off. For example, Friday afternoons off in the summer.
Compressed workweeks. For example, compressed summer workweeks.
Bonuses at critical times. Small business owners are more likely to know what’s happening
in their employees’ lives. Use this knowledge to provide special bonuses, for instance, if an
employee has a new baby.
Flexibility. For example, “If an employee is having a personal problem, help create a work
schedule that allows the person to solve problems without feeling like they’re going to be in
trouble.”68
Sensitivity to employees’ strengths and weaknesses. The small business owner should
stay attuned to his or her employees’ strengths, weaknesses, and aspirations. For example,
give them an opportunity to train for and move into the jobs they desire.
Help them better themselves. For example, pay employees to take a class to help them
develop their job skills.
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Feed them. Provide free meals occasionally, perhaps by taking your employees to lunch.
Make them feel like owners. For example, give employees input into major decisions, let
them work directly with clients, get them client feedback, share company performance data
with them, and let them share in the company’s financial success.
Make sure they have what they need to do their jobs. Having motivated employees is
only half the challenge. Also ensure they have the necessary training, procedures, computers,
and so on.
Constantly recognize a job well done. Capitalize on your day-to-day interactions with
employees to “never miss an opportunity to give your employees the recognition they
deserve.”69
Simple Retirement Benefits
About the same percentage of small firms (93%) as large ones (98%) offer defined contribution
401(k) plans, but more large firms (35%) offer defined benefits plans than do small firms
(15%).70
An easy way for small businesses to provide retirement benefits is through a SIMPLE IRA
plan.71 With the SIMPLE (for Savings Incentive Match Plan for Employees) IRA, employers
must (and employees may) make contributions to traditional employee IRAs. These plans are for
employers or small businesses with 100 or fewer employees and no other retirement plan.
SIMPLE IRAs are inexpensive and easy. The owner contacts an eligible financial institution and
fills out several IRS forms.72 Most banks, mutual funds, and insurance companies that issue
annuity contracts are generally eligible.73 The plan has very low administrative costs. Employer
contributions are tax deductible.74 A typical employer contribution might match employee
contributions dollar for dollar up to 3% of pay. The financial institution usually handles the IRS
paperwork and reporting.
Fairness and the Family Business
Most small businesses are “family businesses,” since the owner (and often some employees) are
family members.
Being a nonfamily employee here isn’t easy. The tendency is to treat family and nonfamily
employees differently. 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.”75 Differential treatment of nonfamily versus family employees is so widespread that it
is an area of small business research. Two experts suggest family business owners follow a fourstep program to ensure fairness.76
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First, the family commits to the idea that all employees, family and nonfamily, should be
treated fairly and consistently.77 Work hard to avoid “any appearance that family
members are benefiting unfairly from the sacrifice of others.”78 Avoid “any behavior
that would lead people to the conclusion that they are demanding special treatment in
terms of assignments or responsibilities.”79
Second, the family communicates their commitment that all employees are entitled to
fair practices.80
Third, before they sign on, all employees must know that they can “freely and safely”
discuss and report perceived unfair decisions.81 Particularly inform management
applicants as to whether they will have potential for promotion. Make the expectations
clear, regarding matters such as the authority the person will have and can attain.82
Fourth, have a committee that meets monthly to correct any alleged unfair decision
voiced by family or nonfamily employees.83
Using Professional Employer Organizations
Learning Objective 18-4 Discuss how you would choose and deal with a professional employer
organization.
As we explained in Chapter 13 (Benefits), many small business owners—pressed for time and
concerned about the legal pitfalls of personnel blunders—opt to outsource all or most of their
human resource functions to vendors. 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?
PEOs range from specialized payroll companies to ones that handle all an employer’s human
resource management needs.
In determining which personnel tasks to outsource, the small business manager has many choices.
At a minimum, these firms take over the employer’s payroll tasks. Usually, however, PEOs shoulder
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.84 The PEO usually handles employee-related activities such as recruiting, hiring (with client
firms’ supervisors’ approvals), and payroll and taxes. PEO companies like Paychex
(www.paychex.com/) provide payroll, tax, and benefits processing but also handle recruiting and
training. Oasis Outsourcing (www.oasisadvantage.com/) can handle the full human resource process
for very small companies, ranging from recruitment through selection, training, appraisal, and
compensation. ADP total source (https://totalsource.adp.com/ts/logout.do) handles payroll
processing for thousands of employers, but can also manage the entire HR process, even including
initial candidate interviews.85
Most PEOs focus on smaller employees, often those with under 100 employees (although some
handle clients of 5,000 employees or more).86 They typically charge fees of 2% to 4% of a
company’s payroll; alternatively, some charge monthly per-employee fees of $40-$125, depending on
the services they provide.87
Why Use a PEO?
Some small business owners turn to PEOs to avoid the sorts of personnel-related problems we
itemized earlier in this chapter. These were: (1) inadequate human resource practices may put small
business owners at legal risk; (2) not having a dedicated HR person can slow down company
decision making and overwhelm its managers; (3) without human resource information systems,
paperwork duplication is time consuming and creates data entry errors; and (4) if the small business
can’t efficiently hire, train, appraise, and compensate employees, it may find itself at a competitive
disadvantage.
Insurance and Benefits
However insurance and benefits are often the big PEO attraction. Getting health and other
insurance is often a problem for smaller firms. That’s where employee leasing comes in. The PEO
absorbs the client firm’s employees as its own. That often enables the PEO to offer larger benefits
packages more cheaply than a small business could get on its own.
What Is the Alternative?
If it does not want to use a PEO, what should the small business do? Most owners simply handle it
all themselves. Some retain HR-savvy consultants who provide, on an hourly basis, the
knowledgeable assistance in job analysis, recruiting, selection, and other matters that the small
business owner needs. The advent of new HR software that provides services including applicant
tracking, automatic recruitment ad placement, online selection testing, and performance
management, plus employee data management is another smart option.89 The following section
looks closer at such software systems.
Managing HR Systems, Procedures, and Paperwork
Learning Objective 18-5 Describe how you would create a start-up human resource system for a
new small business.
Introduction
Consider the paperwork required to run a five-person retail shop. Just to start with, recruiting and
hiring an employee might require a help want
