Human Capital Principles For Entrepreneurs
What Human Resources policies and practices will help emerging growth companies get the most productivity and value out of their people? All entrepreneurs would acknowledge the principle that the success of their enterprise depends on the performance of their employees. But many entrepreneurs still find reasons to put human capital issues in the back seat. They may think that the kind of employees they want are motivated simply by the challenge and excitement that comes with building an innovative business model or technology. Or that the chance to get in on the ground floor of what might one day be a big company that pays high salaries is sufficient to energize their work force. They might say that they don’t have the resources to support rigorous processes such as providing feedback on employee performance. They may worry that such performance reviews will create an expectation for raises that the company can’t afford. And some entrepreneurs may--rightly or wrongly--associate formal HR processes with big, bureaucratic organizations--the opposite of what they want their company to be.
A specific example: the private equity (PE) industry, which invests in, grows and sells companies within 5 or 7 years at the most. Some PE firms tend to think it’s enough to “tie in” a few key employees with a bonus if and when a portfolio company is successfully sold—and that the motivation and development of other employees is a low priority.
I bring a distinctive perspective to this issue. I was head of HR for a large healthcare organization before moving into a senior executive role. Now I am a strategic human capital advisor to emerging growth and smaller to mid-size organizations, enabling them to enjoy greater success by mobilizing the best efforts, creativity, energy and human potential of every person on the payroll.
I recognize that smaller companies are different. But I strongly believe that entrepreneurs neglect human capital issues at their peril. I would suggest that even small companies consider the following principles:
- Foster emotional commitment - You need employees to be productive, innovative and loyal, thereby adding to your company’s bottom line. Employees need and want to feel emotional commitment to and from their employer. The prospect that the company may grow and provide them a high paying job (or maybe even stock in the company) is simply not sufficient to motivate them fully today. People need to feel that they are respected, that their contributions to the company are recognized and that their employer cares about them as people. You aren’t going to get your money’s worth from employees who feel you regard them as interchangeable cogs in a wheel—no matter how innovative a wheel you are building.
- Specify expectations - You should be relentless in defining and letting employees know what is expected of them and providing them with tools needed to do their jobs well. Loyal employees are those who feel their company has integrity and is transparent with them about the state of the business and its prospects. Example: being open that the company doesn’t have money for raises can help employees understand that the company is doing the best it can.
- Align strategy with employee aspirations - Your business strategy and the aspirations of your employees must be aligned, so that they identify the success of the company with their own. Strategic and operating goals must be based on a mission, goals and values that the company visibly tries to live by. It won’t work if these are just words on a sign on the office wall. If you want employees to drive a strategy to provide the best customer service in your industry, they must see you and your team “walk the talk”—and see you get satisfaction from doing so. The compensation program must be aligned with the company goals—for example, spot bonuses for employees who help to turn around a dissatisfied account. Seek to become an attractive “employment brand,” a company known to be a great place to work, so that you can be very selective in hiring and choose the “cream of the crop”.
- Provide timely rewards - Reward people who have made a significant contribution and are pegged as a possible leader or whose contribution could be a game changer to the company. Such rewards go to the importance of kindness, caring and expressing appreciation. Don’t worry that your decision criteria for such rewards aren’t perfectly rigorous. Relatively small rewards like movie tickets, gift certificates, family outings and lunch with the CEO can go a long way to inspire people to do their very best work.
- Create a low cost HR Infrastructure - A structure that will facilitate the above goals doesn’t have to be expensive. Entrepreneurs have access to a variety of tools: software packages or the services of a company that specializes in outsourced HR services. Professional Employment Organizations (PEOs) are another option. These companies provide basic administrative services like payroll and benefits, applicant tracking software, recruiting services, performance appraisals, and benefits administration. To assure the alignment of human capital strategies with strategic and operating goals, companies may benefit from the services of a fractional or part time strategic human capital advisor, to insure that every dollar invested in people is optimized.
- Identify key employees - Treating all employees well doesn’t mean losing sight of which employees are most critical to your success. You should continuously ask which of your people are most valuable and would leave the largest hole if they left. These are the people who warrant the most attention and investment in development, bonuses and other perquisites. Getting to know these folks is critical to identifying and fulfilling their specific professional needs and desires.
- Moving people around through different functions - can be a good way to motivate them while preparing them to move into higher level positions. Some high performers prefer to spend time with C suite executives or mentoring programs.
- Drive focus on the market and customers - Will a focus on engaging and retaining your people lead you to become overly internally focused? It shouldn’t. It’s hard for people who don’t feel good about their work to put a positive face to the outside world. If you meet your peoples’ needs it is much more likely they will be outwardly focused.
- Measure employee satisfaction - There are a number of low cost tools that can be used to measure employee satisfaction and engagement, for example Gallup Q12.
Resourceful entrepreneurs will find ways to implement the above principles and practices without spending a lot of money on HR or creating bureaucratic processes that make the company less agile. It’s not enough for you to be committed to the business and excited about its prospects. The people who work for you need to feel the same way—and this doesn’t happen by itself. HR practices that keep your workforce engaged and motivated are just as important—maybe more important—than landing that next big customer or launching that next product. The people who come into work for you in the morning hold the future of your business in their hands. Make sure that they care about your success and identify it with their own.
About the Experts
Irene Helsinger is a Managing Director of Newport Board Group in Houston and a member of the Newport Board. She was a senior executive in one of the nation’s leading healthcare systems, St. Luke’s Episcopal Health System in the Texas Medical Center in Houston, for over 20 years. In that time Irene rose to senior positions in Human Resources and then to Chief Administrative Officer and ultimately Chief Operating Officer of its most prestigious affiliate.