Small business owners face a unique set of challenges. Their responsibilities seemingly know no bounds. Whether its operations, finances, accounting, sales, or marketing, they have a hand in all of it.
The other side of the business, the people side, is equally challenging and even more important. Managing employees in a small business is no easy task. Whether you’re hiring or firing, reviewing performance, or maintaining critical paperwork, there is never a shortage of things to do. Software tools can make things easier, but ultimately, employee management is a very personal experience and it takes a personal touch.
Our goal today is to break down the fundamentals of employee management and focus specifically on how to manage employees in a small business. We’ll cover the entire employment lifecycle from hire to fire, and provide insights into how each phase should be managed.
Phases of the Employee Lifecycle
To understand how to manage employees in a small business, you must first understand the different phases of an employee’s lifecycle. Each phase is unique and requires attention to different details. Learning the critical elements of each individual phase, and the components within that phase, will set you up for success.
Pre-Employment. The pre-employment phase is typically categorized by two processes, which are hiring and onboarding. Part of this phase takes place outside of your company’s walls but it doesn’t make it any less critical to the success of the business. If you’re unable to find the right people to work for you, there’s little chance that the business will succeed.
Employment. The second phase is the employment phase. This is where an employee is actively working for your company and receiving wages for their labor. During this phase, the business will be responsible for storing and tracking important employee information, reviewing performance and re-assessing expectations, offering benefits, and promoting high achievers.
Termination. The final phase of the lifecycle is termination. Termination takes place either voluntarily or involuntarily. This phase is encompassing of the offboarding and debriefing processes an employee will go through when they are released from their employment obligations.
Learn about the four reasons why small business owners can no longer afford to not use HR software.
How to Manage Employees in Each Phase of the Employment Lifecycle
Now that you have a better grasp of the three phases of the employment lifecycle, we’ll dive into the details and break down the various processes and responsibilities within each phase. Remember, understanding how to manage employees in a small business begins by recognizing that each phase and each process needs its own unique attention.
Hiring is often one of the first steps in company creation and is step number one in the pre-employment phase. To get the business moving, there’s a good chance you’ll need some help. The way you go about hiring will enable you to identify and recruit great people who will be assets in your organization. Do this wrong, however, and you may be stuck with employees who are unable or unwilling to help you realize your goals.
So what are some basic, best-practices when it comes to hiring? Here are a few we recommend:
1. Create an easy application: If you want great people to apply to work for your business, you need to make the application process as painless and low-friction as possible. Great people have options and will not waste their time with meaningless questions or unnecessary data collection. Never ask more questions than are necessary. Additionally, you should make accessibility a priority. Allow for job seekers to apply online (including on your website) or in-person.
2. Be prompt in your communication: Hiring is as much about speed as it is anything else. If you are slow to contact the candidates who apply to your job, then you’re taking an unnecessary risk. Job seekers do not apply for a single position. When they are on the hunt, they’ll send their resumes to multiple companies. Naturally, the best, most qualified candidates will be contacted and hired first. If you’re not quick, you’ll be left with second-rate applicants.
3. Create an appropriate interview process: Your interview process should match the job that the candidate is applying for. This means that entry-level or hourly positions (such as a call-center job) should not require more than two rounds of interviews before a decision is made. Interview processes that last longer will exhaust candidates and the best people who have options elsewhere will not have the patience for it. Candidates interviewing for more senior-level positions will be more patient with a longer process.
4. Communicate your decisions: If there is one thing that bothers candidates more than just about anything else, it’s when a business is not forthcoming about their decision. Many businesses will choose to reject a candidate internally, but will never tell the candidate that they’ve been rejected. They’ll keep them waiting and waiting and waiting, and eventually, the candidate will move on, but not before they’ve acquired a very bad taste for the company. Always communicate your decisions. Make it clear if you’re moving forward with a candidate or if you’re moving on from them.
After you make the decision on who to hire, you must immediately begin the onboarding process. New hire onboarding is critical to the employee’s experience and, when done correctly, will lead to lower employee turnover rates. These are a few things that you’ll definitely want to get right:
1. Sign the proper documents: Now that an employee has agreed to work for you, the next step is to make sure you get all your legal ducks in a row. This means paperwork. All new hires in the United States should complete an I-9 form within three days of starting their new job. This is required by federal law. Additionally, new hires will need to complete tax forms (typically a W-4 for full-time employees) as well as any company documents such as non-disclosure agreements, non-compete agreements, health insurance contracts, and more.
2. Train your new hires: A key component to your onboarding process will be your new hire training. Without proper and exact training, it’ll be difficult for the new employee to assimilate into his/her job. It’s important that you set clear expectations and then train them in order to meet those expectations. If an employee does not feel comfortable in their new role due to lack of training, they will leave. We recommend creating a training program for each position you staff. The training program may span days or weeks depending on the complexity of the job. Having a pre-made program in place will not only keep you on track but will provide structure and stability for your new employee.
3. Introduce the company culture: Of course, training for the skills, responsibilities, and demands of the job won’t be enough. Not only do employees need to feel comfortable doing their work, but they need to feel comfortable with the company they work for. It’s no secret that every company has a unique culture, a unique vocabulary, and unique traditions. Help your new hires understand your culture by immersing themselves in it. Teach them about your core values. Explain your mission and vision. Explain written or unwritten do’s and don’ts. And for heaven sakes, show them where the bathrooms are located.
4. Help the new hire feel part of the team: In the same way that most kindergarten students are afraid to leave their parents on the first day of school, many employees feel extremely nervous about starting a new job. The “first-day jitters” are normal, but it’s your job to ensure that they dissolve quickly. It’s important to introduce your new hire to the rest of the team. Help them make friends. Tell them who they can turn to when they need help. Get to know them on a personal level. Show them that you care. All of these things will not only make your employee feel happier and more welcome, but they’ll also lead to higher production and lower turnover.
EddyHR is built to make hiring, onboarding, and employee management simple.
Unfortunately, a not-so-small part of managing employees in a small business (like in any business) can be rather dull. There is information that you need to keep track of and store properly so that it can be accessed in case of audits or emergencies (which often amount to the same thing). Here are a few tips and tricks to properly tracking and storing employee information:
1. Securely store documents: Let’s say that you did a good job in the onboarding process collecting signatures for all the required documents. Well, now the question becomes, what are you going to do with all that paperwork? You certainly can’t afford to lose it, but do you have anywhere to store it? And how will you ensure that it’s stored securely where no one else can access it without your permission? Luckily, there is software built specifically for this. Don’t risk storing sensitive data on unsecured spreadsheets, or worse, in filing cabinets. Store them properly and securely. This protects the business and your employees.
2. Record and store important contact information: In addition to all the documents, there is other information about your employees that you’ll need to store in a secure location. This includes things like contact information (phone number, email address, physical address) and emergency contact information. This information should be readily accessible in case of an emergency, but should also not be so accessible that it’s available to anyone in the company.
3. Track job and salary history: Keeping detailed employment records is important, especially when it comes to job and pay history. If an employee stays with your company for an extended period of time, they’ll likely change jobs, receive wage increases, and maybe even be awarded bonuses. Tracking this information is not only important for you, but for the employee. Both parties will benefit from a history of how those things changed over time.
1. Hold performance reviews regularly: Performance reviews benefit the business and the employee. When you conduct regular performance reviews, both parties have an understanding of expectations and reality. Expectations because they can discuss changes or improvements that need to be made in the future, and reality because they can have honest conversations about the work that’s already being done. When performance reviews are not held regularly, the business loses clarity on the work done by the employee, and the employee loses sight of the company’s expectations.
2. Recognize that good ideas can come from anyone: Businesses often stall when all information has to flow through a single department or a single person. Small business owners especially struggle to cede control over certain processes or ideas because they are typically more invested than anyone else in the company. However, if you do not allow employees to regularly contribute suggestions or ideas that influence company strategy or decision making, then the employees will begin to feel undervalued and unheard. It’s important to be open to suggestions from anyone, including the newcomers in your organization.
3. Align goals and expectations: To manage employees well, you need to set clear goals and expectations. When an employee knows what they’re working towards, and when their vision is in line with yours, both parties will be happier when the desired outcomes are achieved. When goals and expectations become misaligned, either the employee or the business owner will grow frustrated. Additionally, employees should be able to see how their work contributes to the overall goals of the company. It’s important to draw lines between every employee’s contributions and the big-picture vision of the organization.
4. Reward employees for excellent work: When an employee performs well, they should be rewarded. Their performance will have a positive impact on the business which usually generates more revenue, which usually means more profit. Do not hesitate to share these profits or successes with the employees directly contributing to them. The last thing you want is a high-achieving employee leaving your company because they do not feel properly compensated or valued. We suggest reviewing wages and bonuses on a quarterly basis. Do not hesitate to promote employees and increase their pay when they have proven themselves to be a valuable asset. Remember, it is much more expensive to find a replacement than it is to incrementally increase a high-performer’s salary.
1. Offer the best benefits you can afford: We are well aware that employee benefits can be extremely costly. We know that not every small business will be able to afford to offer things like health insurance, 401k matching, or tuition reimbursement. However, even if you can’t offer these kinds of benefits, there are plenty of fringe benefits that you can get creative with. For example, you could give employees a monthly stipend for a gym membership or for their home internet connection. You could provide generous PTO, grant access to a company Audible account, or commit to offering flexible work hours. Recognize that managing employees in a small business often comes down to keeping them happy. What are the benefits that you offer that get your employees most excited? If nothing comes to mind, get to work solving this problem.
1. Provide a fair warning: In an ideal world, an employee should never be fired without a fair warning. We understand that this is not always the case and that occasionally, drastic situations call for immediate termination. However, most employees who are involuntarily terminated from their jobs demonstrate clear patterns or negligence, unsatisfactory performance, or other inappropriate behavior long before their final day of work. When an employee falls into this category, be honest and candid about what you’re seeing. Don’t wait to tell an employee that they’re failing to meet expectations. Call attention to the problem as soon as possible and give them time to correct it.
2. Give clear expectations after warning: Once a warning has been issued, it’s important that the employee understands that they need to make changes if they want to continue working at your company. Many businesses create something that’s commonly referred to as a “PIP” or Performance Improvement Plan. PIPs are used to help employees understand where they’re falling short, what they need to do to correct the problem, and goals or achievements they must hit in order to keep their job. Setting clear expectations can align the business and the employee and it makes it easier to let the employee go if they do not live up to the agreed-upon standards.
3. Conduct exit surveys: When an employee decides to leave your business voluntarily, use this opportunity to conduct an exit interview. Exit interviews are an underrated way of learning what it’s really like to work within your company. Typically, when an employee is on their way out, they’re much more likely to be honest and open about their experience. Ask them questions about their manager, their job, their working conditions, their benefits, their pay, and more. Ask them why they’re choosing to leave and if there is anything you could have done to convince them to stay. Do your best to listen and learn, rather than overreact or get emotional about the feedback or criticism that may come your way.
Check out our detailed guide on how to terminate employees the right way.
If learning how to manage employees in a small business seems like a massive undertaking, it’s because it is. Managing people can be one of the most challenging aspects of running a business. Learning to do it the right way will prove vital to your success. Invest the time to create plans and programs in order to follow the outline above. As you commit to the three phases of the employment lifecycle, you’ll see a difference in your workplace. You’ll recruit better people. Those people will be better trained and prepared to do their jobs. They’ll be happy and excited to work for you because your expectations are aligned with theirs. They’ll feel like they’re being properly compensated and rewarded for good work. And when things don’t go their way, they’ll feel like they received honest and fair warnings before their day of termination.
Small and simple changes can go a long way. Get started today!