An Executive's Guide to Cutting HR Costs

It's no surprise that most people like to do what they're best at, and small businesses are no different. Most small business executives want to focus on their core business?usually the founder's area of expertise.
Still, the economics of profit and loss demand that entrepreneurs must deal with what they may view as the "HR troll"?the all-important but dreaded management of human capital and the programs that are as important to the healthy life of the company as food and water are to the human body. You can ignore what's good for you for only so long. And then it catches up with you.

Introduction
Entrepreneurial execs know that they need to follow the rules, but they may not realize what decisions may lead to the two vital components that keep HR costs lower:
1. Increasing productivity
2. Minimizing human capital expenses
The following paper will focus on minimizing human capital expenses in four areas:
1. Hiring the right person for the right seat on the right bus
2. Improving performance with motivational yet balanced total compensation
3. Complying with the law
4. Offering competitive benefits, communicated effectively

Barbara Spector of SmartMoves! advises small businesses to "hire the right person for the right seat on the right bus," borrowing a quote from Good to Great by Jim Collins. She urges, "Think of the small amount of investment involved here compared to what it costs if you hire the wrong person."
Scott Hauge, president of Cal-Insurance and founder of the Small Business Commission in California, reinforces Spector's admonition: "Hiring a bad employee is really expensive. Set up a hiring procedure to know which questions you can [and should] ask ? You can't pay someone enough to [pick up the slack of] a bad employee ? it sends a message to good employees that they're going to have to do the work that the bad employee can't or won't do." Most hiring managers will tell you that they want to hire the right person. But how do you translate dozens or even hundreds of resumes into the employee your company can't live without?
"Most companies hire on skill, fire on fit," Spector observes. "And that's a mistake. To find top talent, first you have to define superior performance. Then you've got to take that definition and apply it to performance-based behaviorial interviewing and other strategic recruiting techniques to attract the best candidates."
With recruitment, Spector says, success or failure depends on four additional measurements of prospective employees?those soft skills that cannot be accurately discerned in an interview:
1. Personality. How will they approach their work? Do they have the necessary drive? Do they have the right attitude to achieve the desired job results?
2. Cognitive ability. Will they be able to cope with the mental demands of the job? How do they solve problems? How will they communicate?
3. Occupational interest. What type of activities will motivate and prompt candidates to succeed? In what type of culture or environment will they thrive?
4. Job Match. How do candidates' overall make-up (items 1-3) compare to your best performers in the same job?

According to Spector, combining a performance-based interview approach with this fourpart assessment method will vastly increase your success rate in hiring the right employee, especially when compared with traditional methods.

"Lastly," says Spector, "once you have the right person in the right seat, survey that talent regularly to assess job satisfaction. This significantly impacts retention and keeps your organization tuned in to what your employees are needing from and appreciating about your company."
While most small businesses wouldn't be inclined to conduct surveys in this way, employees may surprise you with the simplicity of their feedback. And it's okay to set an expectation that the company can't or won't comply with every suggestion for change.


Incent Performance with Motivational Yet Balanced Total Compensation.

MBA graduates may learn that both negative and positive reinforcement will motivate people to perform.