"Hello, sir. We are from the Department of Labor and have a few things to discuss with you."

These are not the words anyone wants to hear from a pair of men dressed in dark suits, starched white shirts and plain neckties -- agents straight from the movie Men in Black. Unfortunately, this is what happened to me many years ago, as I found myself reviewing the pair of ordinary business cards in the doorway of my business, contemplating how I landed on a DoL watch list.

I remember anxiety flooding over me, and I quickly concluded it must have been my inexperience that led me to do something stupid, and it was about to land me in jail. I started considering prison nicknames.

It turned out the DoL office had received an anonymous call from someone in our warehouse claiming we were not paying overtime. Indeed, we were not paying overtime, but as I explained to the agents, it was all just a simple misunderstanding. We had recently decided to hire more people, but several employees suggested that, rather than hiring more people, they be allowed to work more hours. We could not afford to pay overtime, so they agreed -- and even signed an agreement -- they would work more hours for the same rate.

It was indeed a stupid, "rookie" mistake -- Federal law mandates that employees be paid overtime for any time worked over 40 hours per week, regardless of any written agreement that might be in place. The men were very amenable, however, and worked with me -- so I could avoid time in a cold, bleak jail cell with no windows and a tattooed cellmate named Cletus for overtime fraud.

We ended up paying all employees the overtime they deserved and implemented a new policy moving forward. Shortly thereafter I hired an HRM firm to implement processes and protocols, write an employee handbook, and conduct regular audits of our practices.  

The larger lesson, however, was just how badly I misjudged how important having a policy -- or any policies -- was to running an effective business. As years passed and I transitioned to management consulting for entrepreneurs, I have continued to see many entrepreneurs underutilize and undervalue HRM early in planning, often to the costly detriment of their business.

So, as you consider this function for your business, here are a few tips I have passed along to many young entrepreneurs as they start and grow their business.

Create order.

While entrepreneurs thrive and operate in a constant state of ambiguity, most human beings do not. For that reason, consider an HR professional to help you develop the processes that will properly set expectations in your organization and ultimately assist in developing and retaining talent.  

Understand flexibility.

While a good HR manager is able to create the processes that satisfy laws and regulations -- and keep you out of jail -- great HR managers understand that environments are organic and evolve, especially young businesses. An HR manager with experience in this regard is what you will need during the critical growth periods of your company.

Apply incentives.

An important aspect of managing human resources is understanding the varying values and motivations of the team. The incentives of employees, especially in younger companies that are steeped in uncertainty, fall along different levels in Maslow's Hierarchy of Needs. It is important, therefore, to integrate this understanding when developing offers, contracts, bonuses, and promotions that attract the best talent.

Create good environments.

We all should know by now that creating a work environment that is conducive to productivity and creativity is critical for a company. While this is typically the responsibility of the entrepreneur, laying out a vision that will ultimately set the company's values and culture, a skilled HR manager will be the person responsible for executing it and, more important, creating the structure upon which this environment will be built and sustained.

The majority of a company's overhead consists of human resources (labor, employees, or however you want to label it). Management of these resources, therefore, should be as much of a priority for entrepreneurs as managing any other asset. This includes not only hiring the right people but having the right systems and incentives in place to motivate and retain them.

What do you think? Have you run into problems with your HRM? How did you resolve it? Please share your experience with me on Twitter.

Published on: May 28, 2019
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