The simplest definition of human resources (HR) that I can offer is that it’s the management of employees as a capital asset. A business acquires and manages employees, in a manner similar to acquiring and managing any other capital asset. Now what exactly does this entail?
Employees are human and they are a business resource. However, in the same way that machinery or equipment is capital that is acquired, utilized, appreciates or depreciates in value, and which can be improved, sold or discarded, HR relates to the management of employees in a similar manner. Although this explanation may seem callous, under closer examination it is evident that HR pays as much attention to the “human” half of its name as it does to the “resources” aspect.
HR concerns the approach and ideology a business adopts for the life cycle of its employees and its company culture. Recruiting, selecting, compensating, motivating, maintaining and promoting employees are all part of HR. HR further includes strategic, budget and succession planning. Consequently, to some extent, all businesses with more than one employee have HR concerns and practice HR. Furthermore, a business’ HR philosophy may be multidisciplinary or singular in approach.
For example, an HR ideology may focus more on labor and employee relations than on organizational culture and development. Yet, an effective HR philosophy has to acknowledge that because employees affect every facet of business, and are the human face of business, employees have the greatest impact on productivity and profits.
HR affects profit and productivity.
Therefore, in order to improve productivity and profits and decrease employment related expenses, management must know how to treat employees in a fashion which enhances their value. Ultimately, effective HR helps to maximize profits and productivity by minimizing employment related expenses and maximizing employee performance.
In U.S. industry, modern HR theories date back to the Industrial Revolution. Moreover, since the Industrial Revolution, HR has evolved along with changes in production, distribution, finance and, perhaps most importantly, legal and civil rights. HR poses problems for a business when it fails to understand how these changes influence macro and micro HR practices.
More about Macro and Micro HR will be explained in my next article. Do look out for it.
As a labor and employment attorney and businessperson, Charles Krugel has represented management in hundreds of negotiations, in-house and 3rd party proceedings. Charles has over 13 years of experience in the field and he has run his own successful management side practice for the past 7 years.
Month: November 2007
Once you decided to start your own business, and after you have considered the Things to Consider before Starting a Business, the necessary next step is to write a business plan.
Why Should I Write a Business Plan?
Quite simple: you plan to dedicate a significant amount of your life time (and probably of your money) to this idea. Better make sure that you have a solid base for doing this.
I’m not saying that a business plan is a guarantee for success. I’ve seen too many brilliant business plans which turned out to be a business failure. But without a business plan, chances for failure are much higher. And there is just less at stake modeling a pricing strategy in Excel than trying it out in real life…
But that’s only one aspect. Another one which can’t be rated high enough is communication. Especially if you plan to start a business as a team, a written business plan is essential. Written means: in plain, complete sentences, as text document. While a presentation is great to get the main points across, you will be surprised about the discussions taking place when trying to convert a presentation into a full document. All of a sudden, it turns out that bullets points are interpreted differently between team members or that everybody has a different mental model of the future company.
– Write down the details.
– Write down your assumptions.
– Write down what you know about the market, your potential customers, your competitors, your revenue streams.
This helps you to identify blind spots, and get everybody in your team aligned.
Do I Need to Do the Numbers?
Short answer: Yes.
Long answer: Of course.
Why? Because you need to understand whether you can make a profit on your business model or not. To come to such a conclusion, it’s not sufficient (in my opinion) just to have a top line with revenue estimates, a bunch of monthly expense items and at the bottom line, you calculate the assumed profit or loss. What’s wrong with it? It’s hiding the business drivers which can make or break your business.
I highly recommend to go through the exercise and try to model your business, at least for main business drivers. Try to identify the relevant parameters, and build them as parameters to play with into your spreadsheet:
Just to give you an example: Assume you plan to sell your product to business customers. What do you think is the average deal size you can strike with a customer? What is the sales cycle (some industries have sales cycles well over a year, while other products you can sell at the very first contact). Do you need to visit your customer? How many visits do you think are required to close a deal? How many customers can you handle within a month? How many can a sales rep handle? Do you need to pay sales commissions? etc.
If your revenue estimation sound like “I plan to acquire one new customers a month with a sales cycle of three months, requiring 20% of my time during the acquisitin period. Additionally, I assume that every second customer becomes a repeat customer with a sales cycle of just one month, requiring 10% of my time in this period. My travel costs are about 300$ per visit, and the avarage deal is 20k”, then you are moving in the right direction.
This is just a small part of the questions you should ask yourself. Play with the parameters to judge the impact on your business model. Increasing the sales cycle (and therefore cash in) from two month to six month could kill your company if you do not have enough working capital, for example. Two additional on-site visits can severely affect your margins. Perhaps you need to reconsider your pricing? Or your sales strategy?
Get Feedback
Use your written plan to get feedback. Hand it over to people you trust, give them time to read it, and ask for feedback. Do this often. Chances are that you get a lot of questions like “Ok, you plan to do marketing. What exactly do you plan to do?” Use it to ensure that you have no blind spots in your business plan.
When Should I Present My Business Plan to Investors?
Whenever you are ready to bet your own money on it. Remember, you do not write a business plan for investors. You write it for yourself, to get a business off the ground.
Klaus Wiedemann is Founder and Managing Director of Daisho Blacksmith GmbH, a product and consulting company dedicated to support todays professional with software and methodology to sharpen their competitive edge. He blogs regularly at Not For Slaves, focusing on the working environment of the 21st century and its implications and opportunities for the individual.
Using Your (small) Size as a Competitive Advantage
Are you ever frustrated or hesitant when you talk to prospective customers because you can’t readily explain why they should come to you rather than go to your competitors? Sure, you might have your 30-second elevator speech, but then they ask you that dreaded question, “So what makes you different?” Then, all those self-doubts creep in, and you just aren’t sure what to say. Differentiation can boost confidence–yours in yourself and that prospective customer’s confidence in you!
Dif-fer-en-ti-ate v. tr. To perceive or show the difference in or between; discriminate.
In business terms, to differentiate means to create a benefit that customers perceive as being of greater value to them than what they can get elsewhere. It’s not enough for you to be different–a potential customer has to take note of the difference and must feel that the difference somehow fits their need better. (Other words that mean virtually the same thing: Competitive Advantage; Unique Selling Proposition; or Value Proposition.)
As you are building your business, you can use differentiation to attract more customers. Once you have momentum, differentiation allows you to charge a higher price because you are delivering more value to your customers. Make a point to evaluate and adjust your differentiation methods at least annually.
The various methods of differentiating your businesses fall into four general categories:
Price Differentiation
Focus Differentiation
Product/Service Differentiation
Customer Service Differentiation
Price Differentiation
Differentiating on price is probably the most common and easily understood method. HOWEVER, for Solo Entrepreneurs, caution is in order. On the one hand, potential customers might expect a lower price from you than from your larger competition because they perceive you as having less overhead, etc. On the other hand, cheaper prices can evoke perceptions of lower quality, a less-stable business, etc. And if you compete on price against competitors with deeper pockets, you can price yourself right into bankruptcy. Be creative with this differentiator by competing on something other than straight price. For example, you might offer:
- More value–offer more products or services for the same price.
- Freebies –accessories, companion products, free upgrades, and coupons for future purchases.
- Free shipping, etc.–convenience sells, especially when it is free!
- Discounts–includes offering regular sales, coupons, etc. (see cautions above)
Focus Differentiation
For Solo Entrepreneurs, this is the most important method of differentiation, and in many ways, the easiest. Why? Because as a Solo Entrepreneur, you simply can’t be everything to everybody, so you must pick a specific way to focus your business. Once you have done that, you have an automatic advantage over larger companies because you can become more of an expert in that one field –and you can build close relationships with key customers that will be hard to duplicate. For example, you might differentiate yourself through:
- Location–take advantage your closeness to prospective customers.
- Customer specialization–be very specific about what characteristics your customers will have – for example, racing bicycle enthusiasts or companies with a spiritual conscience.
- Customer relationships–know customers really well, form partnerships with them, and get them to speak for you!
- Affinity relationships–associate your product/service with a well-known person or organization.
- One-stop shopping–offer everything your target market needs, in your area of expertise.
- Wide selection (within your niche) – although this one may seem to be the opposite of focus–the key is to be very specific in one dimension and very broad in another.
Product/Service Offering Differentiation
How much you are able to differentiate your product or service offering will vary based on what type of business you are in. For instance, if you are in a highly regulated business, your options may be limited. Explore a totally new market or type of product or service, however, and the possibilities abound. The key to successful differentiation in this category, again, is to know your customers, really, really well. Talk to them often, and you will know what they need most and be able to offer it, long before your competitors know what is happening. For example, your product or service could stand out in one of these ways:
- Quality–create a product or service that is exceptional in one or more ways.
- Lasts longer
- Better features
- Easier to use
- Safer
- New/First–be the first one to offer something in your location/field.
- Features/Options–offer lots of choices, unusual combinations, or solve a problem for a customer in a way no one else does.
- Customization–as a Solo Entrepreneur, you may be able to more easily handle special orders than big, mass-market competitors.
Customer Service Differentiation
Have you noticed how customer service seems to be out of vogue these days? This situation makes excellent customer service a great opportunity for differentiation and another natural advantage for Solo Entrepreneurs that already know what’s important to their customers. Build your reputation on making customers feel really good about doing business with you. Works great with referral marketing, too. Examples:
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Deliver Fast–next day, or one-hour–make it faster than customers think possible.
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Unique channel–offer a service over the phone or Internet instead of in person or in their office rather than yours.
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Service-delight customers!–it may seem expensive to offer exceptional service–but it pays off in word-of-mouth advertising.
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Before/during/after-sales support–provide technical or other support to customers using your product. You might use joint ventures to provide that support–but customers will perceive it as being from you!
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Guarantee/warranty–offer 100% money-back, or free replacement parts.
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YOU–offer yourself, your unique blend of talents and skills, to attract customers. Make sure they get access to you, too!
Keys to Successful Differentiation:
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Know your customers, really, really well.
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Pick a blend of differentiation methods that, in the eyes of your customers, truly sets you apart.
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Talk about your differentiation in terms of customer benefits.
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Tell everyone about what differentiates you–often.
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Keep your differentiation fresh by listening for changing customer needs.
Categories
Future Work – Part 2
Continued from Part 1 of the article Future Work by Abe WalkingBear Sanchez
Even more companies will move from the old “department” way of thinking and will seek out commonalities within their different business functions. In the future, like today, redundancy elimination will rule.
In the future, like today, smart business managers won’t waste their time and energy worrying about change or sitting in a bar crying into their scotch. The best way to deal with change is to get ahead of it; it’s kind of like politicians trying to figure out where people are going so they can race ahead of them and claim to be their leader.
In the future, like today, the best way to avoid being run over by change is to accept and embrace it. Business managers not enrolled in a technology class, or constantly improving their skills will have targets painted on their backs. And just like today it’ll only be a matter of time before they get hit.
Smart business managers are and will be those that take the functions they manage and look for ways to add value. A business manager not focused on improvement becomes an administrator at best and a bureaucrat at worst.
Good Jobs, Good Pay
If jobs are going to be outsourced or off shored, chances are good that they’ll be those jobs that are redundant in nature. Rut riding, doing the same old things limits growth and puts businesses and business managers at risk. “I pity the fool.” Mr. T
While we wait for automation to move us to a point where the production of basic food and products is local and unique, just like in the old days; there are things we can do to better participate in and help shape the future.
The growth areas of the future are technology, education and health care. We know that technology is good, although sometimes it’s used in a bad way; but that speaks to the nature of man and his fears. Technology is “the science of the practical.” At one point in our history technology allowed us, via a long stick, to reach higher hanging fruit and to crack nuts with a rock. It makes sense that in the future automated transportation pods (ATPs) will replace cars. Along with cars disappearing so will the deaths of 40,000 + Americans killed, and the hundreds of thousands injured every year in accidents. Just think about the gas/energy that would be saved if efficient pods, in constant communication with each other replaced today’s cars and drivers.
By the way, someone is going to automate the roads, care for the sick and educated the children of the world…why shouldn’t it be Americans?
With Americans aging out in record numbers and with millions already driving by touch, or drunk or high on something; why haven’t we already started to automate existing cars?
And what about the waste in producing millions of new cars every year so that they can sit around unused 90% + of the time? We pay good money to create scrap for the Chinese.
In Closing
“We have nothing to fear but fear itself” Franklin D. Roosevelt
In the near future business function integration and off shore competition will continue to expand. Just like the past. Things in the future will get better for more people but in the transition some friction will be generated, some jobs will cease to exist.
Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles and worked with numerous companies in a wide range of industries.
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Future Work – Part 1
This is Part 1 of the article Future Work by Abe WalkingBear Sanchez
Who’s responsible for our future society? How can business managers shape the future?
Ron Fleisher of Tampa FL is a smart man. One of his favorite “quotes” is a window on how we should view the world and our place in that world.
“It is not important that I remain consistent with what I may have said or done in the past; what is important is that I remain faithful to the truth as it reveals itself to me.” M.K. Gandhi
Gandhi, another smart man, understood that our words and actions, collectively and as individuals, are based on what we know. If our knowledge base changes, so must we.
To better understand where we are going we must first draw a line from where we have been to where we are at. Only by referencing the past and the present can we hope to understand the course of the future.
The Past
There was a time, not so very long ago, when priests and kings dictated human activity. Institutions, then and now, are driven by a need to maintain things as they are. The continuation of the status quo is often justified as the preservation of proven traditions. Try to change things and they’d come for you and for your family, and maybe your entire village.
Fear of retribution is counterproductive to the full utilization of human synergy.
In the more recent “old days”, the 1960s, business organizations had many more levels of managers and supervisors, than they do today. It sometimes seemed as if there were more chiefs than Indians. Office spaces were larger in the 60s because room was needed for filing cabinets, but people were smaller. The goal of smart businesses in the 60s was the same as smart businesses today; to meet or exceed the customers’ expectations. Customer expectations were different/lower in the 60s; but then we were just starting to have our lunch eaten by the Japanese quality movement.
Life time employment and powerful unions walked upon the land in the 60s. High tech consisted of large fax machines that looked and sounded like small clothes dryers; a noisy drum that went around and around. In the 60s, person to person interaction limited the amount of work that got done. Meetings on memos and memos on meetings.
The Present
Today technology has reduced the number of filing cabinets and managers/supervisors to a point that if they were small furry animals they’d be on an endangered list. The levels of people involved in business have shrunk sometimes to the point where it’s hard to find a real person with which to interact. Today quality in products and services is a given if you wish to attract customers. Quality in the way that a company does business, its processes, is critical to customer retention. Low communications and data transmission costs coupled with the use of English worldwide has led to jobs being off shored and outsourced. Better and cheaper technology allows fewer people to do more work than ever before. More work being done cheaper by fewer people, sound great, …unless it’s your job that a machine has eliminated, or that is being done by someone else, somewhere else and for less pay and bennies. Today new
technology is old by the time we learn to use it. Not to worry, it’s all part of a greater scheme.
The Future
Gone is the day of the hunter/gatherer, of the family farm, and of the American factory worker. Fading away is the day of the information middleman, of information workers. In his 1999 book, The Dream Society: How the Coming Shift from Information to Imagination will Transform Your Business, Rolf Jensen starts the introduction by stating “The sun is setting on the Information Society – even before we have fully adjusted to it’s demands.”
Well it’s here, the future, and like an intrusive relative it always seems to show up at dinnertime and unexpected. Change is the constant and it comes faster and faster. To remain cost competitive while providing for the ever increasing demand for customer customization; ever more technology and off shore workers will be employed by business.
Continued tomorrow in Part 2 of the article Future Work by Abe WalkingBear Sanchez
Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles and worked with numerous companies in a wide range of industries.