When Kent Ackley launched a lead-inspection business four years ago, he focused on the things that would keep the company operating – providing good service, increasing business and monitoring expenses.
And he thought about something else: human resources.
Even though Ackley was hiring just six inspectors, he wanted to make sure it was done right, including drafting job descriptions and company policies and ensuring IRS compliancy.
He first hired a consultant.
“I knew enough to be dangerous, and to be compliant you need to know more than that,” said Ackley, president of Rhode Island Lead Technicians Inc., in East Providence. “I was eager to get my business going, not to be sifting through labor regulations.”
Thinking about human resources issues ahead of time makes Ackley unusual among those who start new business ventures each year, according to the R.I. Small Business Development Center at Johnson & Wales University.
Strapped for cash and all-consumed with the fight for survival, entrepreneurs frequently neglect the human resources component of running a business, what they may initially perceive as not worth their time.
The result can be operations that suffer from overlapping job duties, unclear performance expectations and an insufficient understanding of how workers will be compensated, said Douglas Jobling, director of special projects at the center.
Usually, that’s not enough to knock a company out of business, but it can act as a drag on growth, which is paramount for a startup.
Jobling said he recently worked with a small Rhode Island manufacturer that never properly outlined a hiring plan when it opened for business five years ago. High turnover in one critical position in the production process proved expensive as quality control suffered and the company struggled to find the right person for the job.
“They didn’t have a good handle on things,” Jobling said.
The center had the owners write down what they wanted the company to look like and what type of employees they needed to do that, including any desired skills. From that, Jobling said, the owners were able to pinpoint an employee already working for the company who was ideal.
In order to prevent those types of difficulties, new companies should plan ahead, according to consultant Joyce Maynard, of Johnston-based HR Express.
Yes, businesses usually start with one or two employees, Maynard said. “But a business owner should be thinking ahead, not just for today,” she added. “Almost no one thinks of [human resources issues] at the beginning – or they don’t think it’s important.”
Jobling agreed.
“If you put the extra time and think it through and plan it out, you save yourself a lot of trouble,” he said.
But that’s usually not what happens. Often, instead of hiring workers based on needed skills, it’s based on other criteria. “The tendency is to rely on family, friends and business colleagues to help with the startup,” Jobling said.
Getting a solid idea of what skills are needed and how much workers should be compensated will help prevent entrepreneurs from having to hire “on a recommendation from their cousin,” he added.
In more-troubling scenarios, Jobling said, a new company with little knowledge of human resources matters could get into legal trouble, violating labor laws or wage-withholding requirements.
Still, new business owners apparently take it lightly. Seminars on the topic at the center consistently draw few attendees, said Maynard, who has run some of the informational sessions.
Jobling usually doesn’t hear from a company until trouble has already developed. That could be several years after it’s established.
He said it’s usually when a company has grown to at least 12 to 15 employees. “That’s when you start seeing the problems,” he said. “That’s when it’s getting a little too big for the owners to stay on top of what the employees are doing on a direct basis.”
Many times, problems crop up when a company becomes successful and busy, according to Maynard. “Who do we hire? What should they get paid? None of those questions were ever answered,” she said.
Liberty Cedar Inc., an 18-year-old seller of exterior wood products in South Kingstown, didn’t have problems when the owners and the bookkeeper were performing the human resources tasks. But when Liberty grew to more than 40 employees, something had to change, according to general manager Lloyd Sherman.
The bookkeeper and owners could no longer devote the time needed to research human resources issues.
Last year, they hired a consultant to help draft documents such as job descriptions and policies for the use of company vehicles.
“As the roster and revenues grew, things got more complicated,” Sherman said. “There were changes [in labor regulations] that could have gone under the radar.” •
