Employee relations for smaller business

Employee Relations for
Smaller Businesses

Organizing a Customer-Driven
Business
BUS 208_ER_Part A
Spring 2006
Copyrigh


The Changing Role of
Management
•
•
•
•
•

Manager vs. Leader
Boss vs. “Coach”
Demand vs. Delegation
Empowered vs. Controlled
Communicate WITH vs.
Communicate AT
• Trained vs. Labor


“old” Fundamentals
of Bureaucracy
 Chain of Command
 Rules & Regulations

B oss
V ic e P r e s id e n t

 Set Up by Function
S u p e r v is o r

 Communication = Minimal
E m p lo y e e


Organizational Structures
Tall Organizations
- Many Layers of
Mgmt.
- Cost of
Mgmt.=High

Flat Organizations
- Current Trend
- Creation of
Teams


Inverted
Organization Structure
Empowered
front-line
workers
Support

Personnel
Top
Mgmt.


Customer-Focused Design
• Information KEY
• Build teamwork
– cross-functional
– integration
• Self-management &
autonomy

• “Bottom-up”
relationships
• Outsource
• Global orientation
• Internal vs. external
customers


Customer-Driven-Powered
Cultures
• Responsive to Internal &
External Customers (and
all stakeholders)

• Focus on the benefits for
the customer and not the
just the benefits for the

company


Internal vs External Customers
Internal







Your employees
Your distributors
Your partners
Your board
Your “stakeholders”
YOU!

External
 Your Target Market

If you can keep your
internal market satisfied,
you have a much better
chance of keeping your
external market satisfied!


Compensating Your Employee

The Role of Incentives for
Retaining Employees


The RIGHT Employee is Your Best
Asset
• They bring talents, expertise, skills
& suggestions to your business.
• They are there everyday helping
you run your business, and good
employees take “ownership” & pride
in their work.
• The SUM can be greater than the
whole. The right employee can help
you expand your business and help
you make profits.


Compensation the KEY to keeping
the best employees??
 Compensation is the still the
most important thing to an
employee.
 A challenge for small business
owners is having the
compensation - and the
compensation package - that
keeps GREAT employees
around.
 This has become more difficult

with the rising cost of benefits.


Why Good Workers Leave

Source: USA Today-Snapshot, 10/16/00


The Role of Employee Incentives
(for the employer)
• Increases sales revenue
• Increases number of new
customers
• Increases customers to
come back - customer
retention
• Increases overall profits of
business
• Helps retain good
employees!


Role of Incentives for the
Employee
• The opportunity for the employee
to MAKE more money
• The chance to make more than the
‘base’ salary
• The opportunity for the employee
to be rewarded for a “job well

done!”
• The ability for the employee to set
goals and pursue them (MBO…
management by objective)


Common Incentives
•
•
•
•
•

Profit Sharing
Bonuses
Gifts
Commissions
Flex-time & Flex-place


Profit Sharing
• Larger businesses (publicly
traded) commonly use profit
sharing as an incentive. Profits
are verified from the financial
statements.
• All companies can establish an
ESOP employee stock
ownership plan, as a exit
strategy for the owner to transfer

the business to the employees.

Get a piece of
the pie!


Challenges for Profit Sharing &
ESOPS
• Owners of small private businesses are under no
obligation to make their financial statements
public. Employees normally do not have access
to the bottom-line profit numbers and can be
suspicious of profit sharing. This can be a
disincentive.
• If the company or the industry is in a slump
there is no incentive.
• ESOPS are difficult to set-up for businesses with
fewer than 15 employees and less than a
$500,000 annual payroll.


Bonuses
• Calculated Bonuses bonuses that are objectively
set-up and directly tied to
increased productivity,
revenue, profits or new
customers.
• Arbitrary Bonuses awarded by what the owner
feels is right and is not tied
to increased productivity or

performance.


Setting up Bonus Programs
Bonus Incentives can increase employee
productivity and morale if they are set
up properly.
1.
2.
3.
4.
5.
6.
7.

Plan the bonus program in advance.
Tie the program to a goal.
Internally market the program.
Establish a “team” approach.
Allow all players to have access.
Share the wealth. Award all.
Post the results.


Gifts and “Perks”
• Some employers will lavish
their employees with “gifts”
(paid vacations, dinners, social
events).

• Be aware that many
employees can feel
uncomfortable with this
tradition and believe it can be paternalistic, political,
subjective and unfair.


Commissions
• Commissions are money
rewards based on objective
and calculated formulas.
• They are the most common
incentive because they can
be directly linked to the
productivity of the
employee.
• Sales commission is the
most common.


Sales Commissions in Small
Businesses
 Some salespeople are paid solely on
commission. They may act as their own
sales rep or independent contractor.
Tip: Make sure you have solid sales
rep contract.
 Initially, there may be a challenge to
entice sales reps to carry your line.
 For a “young” small business, it might

be easier to hire salespeople on a
“living wage” or a base-salary plus
commission.


Base Salary + Commission
• If there is a base
wage the commission
rate is lower than
straight commission
sales.
• The commission
starts after the
employee reaches an
threshold agreed
upon of monthly or
quarterly sales.

Total Sales
Threshold
Sales over goal

$40,000
30,000
10,000

Base Salary
Commission
(5% x $10,000)

$2,000

Total Salary

$2,500

500


Considerations for Commission
Structures
Before you set-up your commission
structures analyze the situation:
- Is the commission structure fair to all
employees (what about full vs. part-time
employees)?
- What is the industry standard?
- How will you “weigh” commissions
between direct sales employees and
support personnel?


“Flexing” for your employees
• An increasing number of
companies are offering flextime
and flex-place as an incentive to
their employees.
• Flex-time is an arrangement
where employees work a normal
number of hours but have have

the flexibility of when they work.
• Flex-place allows for
telecommuting.