Turning a small business venture into a successful, profitable machine is a difficult thing to achieve. According to the U.S. Bureau of Labor Statistics, 34 percent of new business ventures fail within two years and 56 percent fail within 4 years. Assuming a business venture is properly planned and funded, the single biggest error that small business owners make is neglecting management.
Things like managing payroll, hiring employees and tracking their performance, taking the proper steps prior to terminating employees and complying with local, state and federal laws may seem like tasks better suited for large companies. But if entrepreneurs wish to become big business owners, they should act like a big business owner from the outset.
1. Create an Employee Handbook
An employee handbook is one of the employer’s best tools to inform employees regarding workplace policies and procedures, prohibited conduct, potential grounds for termination, clarification of employee status and handling of grievances. Small business entrepreneurs may have rules in mind, and they may even have conversations with employees regarding workplace rules.
Without a handbook, however, employees could argue that they were never properly informed of policies and procedures, making it more difficult for employers to justify discipline or termination based on violation of the rules. Small business entrepreneurs should strive to create an employee handbook, regardless of the size of their workforce.
2. Don’t Hire Bad People
This seems straightforward enough, but many small business entrepreneurs are unfamiliar with the tools at their disposal to identify candidates with skeletons in their closets. Employee background checks are essential toward bringing the right people into the company.
These checks may include a review of an applicant’s criminal history, credit history and references. In so doing, however, business owners must comply with a litany of federal and state laws controlling how such checks should be performed and what information is permissible for them to acquire and use in the decision-making process.
3. Set Up an Employee Training and Discipline Program
While entrepreneurs need to hire the right candidates, they also need to retain the right employees and discipline the right employees. Proper training initiatives can result in increased productivity and retention, reduced turnover and the need to spend valuable time and money hiring replacements.
Similarly, performance improvement plans, applied fairly and consistently to employees, can produce positive outcomes or, where employees are unsalvageable, lay the groundwork for lawful discipline or termination.
4. Manage Payroll Like an Accountant…with a Law Degree
This is a complex area of the law, but the complexity is no excuse, even for inexperienced entrepreneurs. Employers are obligated to pay their employees in a timely manner, deduct and remit the proper taxes to local, state and federal authorities, report accurate information and account for benefits. Thankfully, automated payroll systems exist to take much of the guess work out of this process, but small business entrepreneurs must familiarize themselves with the regulations and take steps to implement procedures to comply with the law.
5. Don’t Act in Haste; Build a Case
Inevitably, employers will need to take action against problematic employees, whether the action is warning, suspension or termination. In some cases, however, a hasty response can create additional problems for the employer, resulting in costly, time-consuming litigation. To guard against this possibility, employers must fully and contemporaneously document all instances of employee misconduct, warnings, progressive discipline and the results of internal investigations.
When employers have built up evidence to substantiate a decision to warn, suspend or terminate, they must still be cognizant of state and federal laws that protect employees from discrimination or retaliation. Only after employers have reviewed the evidence and the law should they take action.