Every business, past and present, started with one person who had one idea.
Fairly quickly, this one person has to seek partners or additional employees. In 1902, Henry Ford, with only $900 in his pocket, met with Alexander Malcomson to discuss the idea of starting an automobile manufacturing company using an assembly line method of production. As a result, over a century later, many of us drive Ford vehicles.
A more recent example has Steven Jobs (who worked for Atari) calling his high school friend Steven Wozniak (who worked for Hewlett-Packard) to talk about what can be done with the binary code: the result was Apple Computer.
And the initial one idea will also expand to respond to a changing market.
Where would Ford be if it still only produced black automobiles?
I will leave it to others to write about the production, marketing and legal side of our respective businesses. What I enjoy is working with the people side of enterprises, especially the smaller employers who do not have a dedicated HR professional on staff.
So what do the above companies have in common? Let me introduce what I call the people cycle of business. It begins when a company hires its second and, in fact, all subsequent employees.
The first decision of the cycle usually comes as a result of the famous tipping point. An existing employee, despite probably working long hours, experiences a failure in getting a task successfully completed. This failure could be as slight as making clerical errors due to being rushed, or as major as missing a key customer deadline.
A wise manager will analyze the cause of the failure and decide how improvements can be made. Usually a revised process is developed or new technology is introduced to improve the employee work output just enough to avoid a repeat of the problem. This mini-loop can happen several times before the manager runs out of cost-effective options. He finally admits that hiring an additional person is the best alternative.
Why is this often one of the last options?
The answer lies in the fact that people are generally expensive. They have to be continually paid, often with premiums based on the amount of time they work during the week. The government taxes the company extra just for having them on the payroll (in addition to the taxes they take from the employee’s paychecks). Employees have to be given time off, in fact they only work an average of 25 percent of the week (40 hours out of the available 168 hours in a week) and that’s based on full productivity, which doesn’t include the fact that sometimes they get sick or take other time off.
But, let’s move on now that the costly decision has been made to hire an additional person.
The second phase of the people cycle is to determine exactly what the new person is going to do, relative to those who are already with the company. Hence, a job description is written. Suddenly, someone within the company is starting to make critical HR decisions, whether they realize it or not.
This job description is so important that it will have its own dedicated column in the near future. For now, just understand that both the skill requirements and compensation decisions for the recruiting effort rely on the details set forth in the description.
Finally, after searching for candidates, reviewing resumes, conducting interviews, testing, checking references, and negotiating a job offer, a new hire is brought on board. Now the real work begins to not only teach them the job at hand, but also to impart to the new hire the culture of the organization. Many a manager drops the ball on this latter item, so it too will be the subject of a future article.
Just like expensive machinery, people have to be periodically maintained, so the cycle continues and eventually there are performance reviews, development plans and salary adjustments. All of this constitutes what the HR professionals call talent management.
If someone truly excels in their position, then plans are made for additional responsibilities, departments are re-organized and promotions announced. High potential employees are identified and sent off to special training so that they can become future leaders of the company.
So, if everything is so good, why do I call it a cycle? Because, by definition, even in the very best of circumstances, the process will repeat itself. When the employee is promoted, quits, retires or otherwise leaves the organization, the manager has to start all over again. The wise manager will even ask once again, “Do I really need to hire someone?”
Randy Fox is the founder and senior partner of Capstone HR Services, Inc., an HR consulting firm dedicated to serving the needs of the small employer in the greater western Kentucky region, including Evansville, Ind. and Clarksville, Tenn. Contact him at 270-703-9352.