Human Resources: A Top Priority in Tough Times

I’ve been pleasantly surprised that I continue to get many calls for consulting help in these tougher economic times. A lot of the calls in the past 12 months have started out like this: “My sales are down, I haven’t been able to cut expenses as quickly as revenues have dropped and I’m starting to show red ink on the bottom line. What should I do?”

My first inclination is to tell them, “Start doing now all those things you should have been doing when times were good.”

Generally, I begin by asking a series of questions to learn more and then try to spell out a plan to get the business back on a profitable footing. Many of the areas that were ignored in the good times, and now in these tougher times, revolve around good human resource management. Let’s take a look at some of the things that you should be concentrating on in these more challenging times.

Reviewing your Team

First, people are the biggest expense item on the profit and loss statement. The average total expense of all of your people costs (payroll, taxes, benefits, etc.) is probably close to 60 percent of your total expenses. That includes the owner.

If your total people costs are higher than 60 percent, you have a problem. If they are less than 55 percent, you may be under compensating your team.

With sales and profit revenues shrinking, this is the perfect time to evaluate all of your employees to maximize their effectiveness – and to eliminate the weakest one(s).

Your challenge as a business owner/manager is to always be culling out the weakest people and working hard to strengthen everyone else.

Unfortunately, most owners/managers are slow to respond to downturns in business. Everyone assumes that things will bottom out soon and start getting better. But waiting for the hole to get deeper only makes it harder to dig out of it. Review your team today. Identify your weakest link and, if you can’t strengthen it, cut it out of there!

Being the Best

For years I have stated in this column that there are five important things you should try to do better than anyone else in the area of Human Resource Management. Learn to do these five things the best and you will enhance your opportunity of being the best.

Hire the Best. Take time in the hiring process to find the very best candidates possible. In these tough times, there are good people looking for work. Have a good system to review all of the resumés and applications. Be a great interviewer. Have one or two other people at your business interview the candidates as well. Then compare notes.

Check references carefully. Put the terms and conditions in writing (not a contract – but a letter of understanding).

Train the Best. By this I don’t just mean on-the-job training. You should have a formal, written training program in place. It should begin day one – and never end. The program should include product knowledge, policies and procedures, computer and all technology instruction, design and pricing and the all-important selling skills if the employee is a design/sales consultant.

Too many owners/managers ignore this important area. Yours is a selling business, so you need to be sure you teach selling skills. Would you not agree that nothing happens until the sale is made? You spend a lot of time, money and energy teaching design skills – start spending as much on teaching selling skills.

Communicate the Best. There are all kinds of ways to communicate with your employees. The bulk of communication is probably face to face, one on one. This is good – but it’s not enough. I suggest that you have all of the following means of improving how you communicate with your employees.