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Small Businesses Benefit From Effective Employee Management Strategies

It isn’t always evident to corporate America the value that HR offers; A study was just published by Cornell University showing that small businesses who implement HR practices show significant growth, increased revenue and decreased turnover compared to companies that do not. Thought you’d find the summary below of interest:

August 31 2006 - Effective HR practices can directly affect business results for small enterprises, according to a four-phase landmark study, conducted by Cornell University associate professor Christopher Collins, Ph.D. Collins' study shows that small businesses implementing ‘Effective Employee Management Strategies' can experience (in comparison to companies that do not):

  • 22.1 per cent higher revenue growth
  • 23.3 per cent higher profit growth
  • 66.8 per cent reduction in employee turnover

This fourth stage of the Cornell research looked at 323 businesses with between 8 and 600 employees (average=53) across a wide range of industries. Manager/owners and employees were both surveyed to minimize bias.

The study divides HR practices into three categories:

  1. Administrative Relief - processing payroll, taxes and insurance premiums and keeping records
  2. Business Protection - maintaining up-to-date regulatory compliance, risk management practices and access to insurance programs
  3. Workforce Alignment - employee selection, people management, and employee motivation and retention practices.

This study focuses on the third category. Workforce alignment practices have been shown in earlier studies to have a greater effect on business results than the other two categories combined. Businesses with aligned workforces can produce results that are 39 per cent better than those that do not have optimal people management strategies. The gap is only 8 per cent for the other two categories of HR practices.

Effect of Strategies

Strategy Implementation Type Revenue Growth Improvement Profit Growth Improvement Employee Turnover Reduction
All Effective Strategies 22.1% 23.3% 66.8%
Employee Selection Strategy Only 7.5% 6.1% 17.1%
Employee Management Strategy Only 11.5% 3.9% 15.1%
Employee Motivation and Retention Strategy Only 3.8% 13.3% 19.1%

What are the most effective employee management strategies for small businesses? The study identified the most effective selection, people management and employee motivation and retention strategies:

  1. Base recruitment on person-organizational fit rather than person-job fit. Hiring candidates who fit the organization's culture is more effective than recruiting solely on the basis of skills that fit a particular job.
  2. Use self-management rather a controlling management strategy. When employees are empowered with greater discretion and trust they perform better than people who are tightly controlled and closely monitored.
  3. Create a family-like environment/community to motivate and retain employees rather than focus on pay as a motivator.

Should you need assistance in any area of Human Resource Management, please consider HR NETwork as your consulting partner.

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