Business owners have good reason to fear that personnel managers may bureaucratize their companies. But failure to pay for first-rate professional advice can be a recipe for disaster.
We had two employees who drove to work together, and they established a pattern of coming in 10 or 15 minutes late. One of them got fired for coming in late, and the other got promoted. That didn't do much for employees' opinion of the company " recalls John Folkerth, president of Shopsmith Inc. The Vandalia, Ohio, maker of woodworking equipment, at the time in the late 1970s, had about 200 employees. Shopsmith had no personnel department, and the two chronically late employees worked for different supervisors.
Folkerth's story illustrates why a few months later Shopsmith hired its first personnel director and why he wishes he had hired one earlier. The personnel director, a former armed-forces personnel specialist, developed a handbook that spelled out attendance rules, among other things, and began reviewing firings to make sure Shopsmith had obeyed anti-discrimination laws and had considered other options before terminating jobs. He took over the administration of employee benefits and began training programs on such fundamentals as how to use industrial machinery, the duties of a supervisor, and the proper ways for customer service people to handle clients.
But Folkerth knew that Shopsmith's management of its people left much to be desired. The training programs weren't creating the skills needed most. Managers, for example, gained nothing from them and saw that they lacked the abilities needed to guide what was now a $62 million-a-year company.
In early 1981 when Shopsmith -- an INC. 100 company -- had 1,000 employees, Folkerth hired a "vice-president for human resources," Gerald Lerer, who had nearly 20 years of experience with larger companies. Lerer now supervises the personnel director and has reorganized the training program to emphasize skills Shopsmith will need in the next 6 to 12 months. Lerer has become a key consultant, advising managers on setting goals and using their time. And when the company suddenly realized in mid-1981 that it couldn't achieve its 1981-82 sales targets and would have to cut costs he helped reorganize the business along "profit center" lines, helping the company cut employment to 850 from 1,200. Many small and medium-size companies are confused about when and whether to hire a personnel specialist. Personnel specialists generally impose rules on formerly freewheeling companies, and the job requires such an array of talents that the people small companies can afford rarely possess them all.
Yet Folkerth and some other entrepreneurs argue that by the time companies become so large that the owner can't personally supervise every employee, most need to hire some kind of personnel expertise -- even if it is just a consultant who visits every few months or a retired schoolteacher hired as personnel director for $18,000 a year. Folkerth suggests that most organizations are better off getting expert help with personnel "when you have maybe 50 or 75 people."
Personnel and "human resources" tasks range from simple record-keeping to advising top managers on major reorganizations. The job usually includes:
* Managing employee benefits and records.
* Assuring consistency, fairness, and obedience to the law in treatment of employees.
* Recruiting new employees. * Helping evaluate employees' contributions and likely career paths.
* Developing employees' abilities through training programs.
* Evaluating the quality of human relations in the company, including the quality of communications between supervisors and their subordinates.
* Helping top managers define the company's goals and philosophy and design systems to implement them -- methods for regularly setting and reviewing goals for middle managers or planning for replacement of key people, for instarice.
Many entrepreneurs doubt that personnel professionals really help businesses work better. "Personnel management is the president's job," says Gary Hillman, president of Machine Technology Inc., a 100-employee manufacturer of semiconductor equipment in Whippany, N.J. "A personnel director has a fundamentally powerless position and no real constituency." Hillman argues that most personnel management functions that the president can't do himself should be performed by line managers or by the president's administrative assistant.
But most specialists argue that a manufacturing business, at least, shouldn't try to grow much larger than Hillman's without somcone to help with hiring, training, personnel evaluation, and communications -- and without the policy manuals and other printed matter that personnel professionals use. Even a service business where sales, administrative, and professional staffs may each have their own leaders and their own style, needs a personnel director by the time it has a few hundred employees, they say. Otherwise, top managers will become overburdened with detail and lose touch with employees. "It's a very difficult transition from the small company to the mid-size company," says consultant William Ballew of Ballew, Reinhardt & Associates Inc. in Memphis. "If the owner tries to do everything himself, either the company begins to go downhill or he has a heart attack."
Texas Tumbleweed Inc., an 18-unit Houston-based restaurant chain, set up a separate personnel office when it had 8 restaurants, about 30 managerial employees, and nearly 400 hourly employees, most of them part-time. "We were really struggling when we had people from operations handling all the hiring and such," says Steven Reingold, one of the chain's officers. "When we had only 4 or 5 units it was very easy for someone from operations to feel at ease handling personnel matters because he knew everybody. Later, we lost that." Today the company has about 80 managerial employees, 800 hourly workers, and $20 million a year in sales. The personnel director has made growth easier by taking on the hiring and training of managers and the administration of employee benefits, Reingold says.
