Focus on HR - Three Key HR Practices

By Hedley Lawson, Jr.
According to a study by Cornell University presented in August 2006, smaller businesses create 22 percent higher growth in sales, 23 percent higher profits and 67 percent less turnover when three key HR practices are implemented.

Practice 1: Hiring Based On Fit—When an company hires qualified applicants, taking into consideration organizational fit and culture, those applicants will be better suited to fostering and contributing to the work environment and more likely to remain with the company long-term.

Practice 2: Create a Family-Like Environment—Employees in smaller company’s, like optical labs, expect more personal attention and well-rounded involvement and, therefore, perform better in these work environments.

Practice 3: Empowerment and Discretion—When small companies give employees greater discretion, authority and responsibility they outperform their market peers.

The research compared smaller companies to their industry peers, differentiating them based on key human resources practices and strategies. The study was based on surveys of top managers and owners as well as employees from 323 small businesses. The companies ranged in size from 8 to 600 employees with an average of 53 employees—not unlike the size of many optical labs. The surveys focused on various organization characteristics related to sales, profitability, and turnover.

Hiring Based On Fit

It should be no surprise that hiring for organizational fit was a key element of successful small organizations. The surveys found that the most common way of achieving this goal was through structured interviews that addressed specific aspects of the cultural work environment that are unique to the company.

Creating a Family-Like Work Environment One company sponsored social events to encourage employees and their families to get to know each other better. Another company regularly held company-wide “All Hands” meetings to continuously inform employees about important information, while a third company solicited ideas on internal and external business activities.

Collins believed after reviewing the data that the goal of this practice is to create a social aspect to the job out of which the employee benefits from not only monetary compensation but also a relationship in which they can foster friendships and feel they are an integral part of the organization.

“I think this is all about making an employee’s job more than just a ‘job.’ Because if it is only about money, then the person is merely a free agent looking to maximize earnings and will do this wherever they can make the most money.”

Self-Management, Empowerment & Discretion Self-management does not mean “performance reviews” for the purpose of this study. Instead, the most successful empowerment practice involved setting goals, training employees on how to perform the tasks, and by engaging in frequent feedback discussions. The best practice found in these successful companies was to set broad goals—as opposed to constant oversight or micromanagement. These successful companies also engaged with employees in terms of ideas on how to better perform the job or achieve the goals.

These three key HR practices are easy to talk about, but often difficult to live. It is important to note that these practices, once institutionalized, can significantly enhance revenue, profitability and retention. The other key finding in this research is that these factors impact small businesses as much as large businesses. Most of the research previously conducted has been on larger companies and is thought to only apply to the Fortune 1000. The majority of American businesses, like optical labs, are comprised of less than 50 employees and this research now clearly demonstrates the value of these key HR practices for the smaller business.

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Labtalk September/October 2018