Challenge No. 7: Managing People

Finding, keeping, and managing good personnel, both hourly employees and management, ranks among the major challenges for small businesses. Many owners believe that it is critical to success. An owner who recommended, “Make sure you have good employees before opening your doors”, expressed their thoughts. Managing People  is critical to the success of your small business.

Finding qualified employees can be a real challenge. For example, in addition to competing with larger companies for business, small business owners find that they must also compete with each other when it comes to hiring good employees. “One of the big challenges facing relatively small businesses like us,” noted an owner, “is attracting the best talent we can get. For small companies to get somebody good, they’ve got to offer a lot.” Another owner explained that “it’s difficult competing against the big guys who have lower costs of doing business.”

 Nonetheless, small business owners believe in their ability to compete for good employees because they can offer some benefits that big companies cannot – such as flexible schedules, loyalty and other intangible benefits.

 The road to building a competent staff is often paved with challenges. Many small business owners find it difficult to select the right employees. Retaining good help is particularly difficult. The owner of a civil engineering firm hit the nail on the head: “It’s very hard to keep people who are loyal to you and who want to put the hours in. Otherwise, they’d be in their own business.”

 Motivating employees through encouragement and guidance helps to build and retain a competent staff. Here, too, a realistic and supportive attitude can help meet the challenge:

 Motivating employees to consistently deliver quality is critical to business success, particularly for a service business. Owners must communicate their goals effectively and train their employees to help achieve these goals. All this requires a delicate balance act.

Generally, owners rely on employee training to ensure that their staff is competent and has the right attitude. For instance one owner said, “one of the things that can help is an internal education program and a proper training program. Also, have a quality assurance review of what you’re doing before the product goes out the door.”

 Compensation is a second effective method to motivate employees into conveying a positive attitude and working responsibly. As you might expect, many owners find this a particular challenge. While small businesses typically do not have the resources to pay high wages, they need to adequately compensate employees in order to attract and retain them.

 Benefits are another important way to attract and retain good employees. A fair and generous benefits package helps employees feel both valued and secure – – two important characteristics that small business owners feel they can offer to their employees. Even the smallest of businesses can offer such benefits through group programs.

 Being creative with intangible benefits is another effective way to retain employees. A bookstore owner recommended that you “figure out other ways to compensate them. We give them special discounts on what they buy within the store. Also, I try to be flexible about their hours.”

 When an employee doesn’t work out, then what? Many owners find this one of the most challenging aspects of the business. Often, the difficulty of firing an employee leads owners to retain weak players longer than they should.


Challenge No. 3: Having the Proper Attitude

“The first thing I tell my kids is, if possible, find something that you love that has the potential of being a successful business. Enjoy what you do. Ideally it’s something you’d do for nothing.” Having the proper attitude will make you better in everything you do.


Small business owners agree that the proper frame of mind, realistic expectations and strong personal commitment to your venture are at least as important to a business’ success as industry knowledge.

“Want to win,” recommended one owner. This absolute drive to do what you love is necessary in order to withstand the demands of starting and running a business. Small business owners unanimously agree that starting a business requires long hours — even longer than most had anticipated.


“Make sure you want to devote a lot of time to it,” advised one owner. Another disclosed how the demands could hit closer to home: “My biggest first-year challenge was long hours” he said. “I knew they were going to be long. I didn’t know they were going to be that long. It affects your family you’re not there to do all the family things you had been doing before you went into business — and that in turn affects your business.”


Long hours and the normal strains of business usually add up to stress — and coping with that stress is a major challenge for small business owners. A supportive family and the will to succeed see many owners through that critical first year.


The hardest challenge for me and my wife during our first year was the stress, disclosed one owner. “A combination of things helped me deal with this. Certainly, my love for my wife, who is my partner, and a great deal of love and affection for the business. We really like what we do … not every day, but most of the time it is fun. They say that business is tough when you love it, but it would be impossible if you didn’t.

And I think that had a lot to do with making it.”


Maintaining the necessary high energy level over time is another major challenge — but with the right attitude, it can be a fun challenge.


“Early on I worked the hours. But I never noticed it…. Getting up in the morning and going in there and chasing that business around was the most fun I ever had. Talking to people about it. Sitting down with other people in the same kind of business. I mean, I just lived and breathed it for a good three and a half, four years, sixty hours a week. But it was fun. Just a thrill.”


Another extremely successful small businessman who had recently started his fourth business explained why he had come out of retirement — for the second time — to do it all again: “It’s more fun than I’ve ever had,” he said.


Realistic expectations are also important. “Be realistic,” advised one owner, “don’t expect the worst, but don’t expect the world.” Every business has its setbacks — “Prepare yourself for failures,” recommended one owner — but commitment and the right attitude carry owners through.


Finally, owners stress that to be successful you must have the right motivation. A “get-rich-quick” mentality is unrealistic and will probably lead to eventual failure … while a deep commitment to quality can help you take off in the other direction.


“The idea of integrity, to be in business to serve others, is the only way in which to be productive. Chasing the almighty dollar may help for just a little while, maybe weeks, months or years, but it is still just a little while. To be able to always have people receive you in a positive manner in your business, performance is very important. Without it, I don’t care what you are selling.”

Challenge No 2: Knowing the Basics of Business Management

“I found I had to become a business person, something I didn’t realize I was going to have to do. I had to learn a lot about accounting, about bookkeeping, about the banking business.” Without Knowing the Basics of Business Management you chance of success is greatly reduced.


In addition to knowledge of a specific field, small business owners need to know the basics of managing a business — for example, the principles of accounting and bookkeeping, production scheduling, personnel management, financial management, marketing, planning for the future, and more. Many owners feel they were under prepared in these areas, particularly in the financial aspects.

One of the best management skills to have, according to a golf equipment manufacturer, is fearless self-knowledge. “Be qualified to run your business,” he advocated. “Be aware of your own weaknesses and go out and get help to make up for those areas…to get through that first one or two years.”

Other executive skills are also important. A computer-engineering consultant stressed her need “to be able to do briefings properly, comfortably, to gain confidence of groups of people…to quickly communicate my capabilities and my company’s capabilities.”

Executive skills also include goal setting and decision-making, and human resource development. This last aspect is important, noted many owners, because it builds the future of a business. Not only must you find and retain good employees, but you must continually train them to ensure that you have a qualified staff as the business grows.

Another common theme expressed among the many small business owners interviewed was the need for good sales skills. During start-up, many of them found themselves sales people for the first time.

As a business grows, the need to further develop management skills intensifies. In addition to such areas as managing people, the ability to plan is an essential skill that builds the future of a company.

“Planning,” according to one owner, includes the idea of budgeting not only for your present conditions, but also planning for the future.” Anticipating what your industry will be like several years down the road, where the competition is directing its efforts, what customers will want in the future, and where profits should be reinvested are some samples of what must be included in planning efforts.

To help with ongoing planning during the life of their businesses, many owners develop a formal business plan before starting or purchasing a company.

“We did a lot of planning before we started,” recalled a publisher. “We did the whole business plan and marketing plan, and planned out how much revenue we were going to receive for the first year and how much money we were going to need to get us through.”

Business plans usually include projections of fixed and variable expenses, and analyze of the company’s break-even point (the amount of sales necessary to cover expenses), competition, and projected sales. A business plan also includes strategies for marketing and growth.

This establishes a permanent but flexible “game plan” that provides guidance when difficult decisions must be made. Other planning tools, such as annual marketing plans, spell out specific steps to be taken to reach short-term goals.

During any kind of planning activity, outside consultants such as accountants and lawyers, and agencies such as the Small Business Administration, can provide valuable expertise.

Finally, one of the most important but often overlooked aspects of planning is how or when to leave your business. A successful financial service business owner insisted that this should be included in the initial business plan. “By the time many people are ready to sell their businesses,” they’re so personally involved in the business that they cannot make an objective decision. The decision to divest oneself of a business is a highly emotional and difficult one. By establishing early-on the conditions under which a business will be sold, you can make a better decision.”


Retaining good employees

Retaining good employees has always been a challenge, and even more so today in light of market conditions and high employee expectations. Here are ten things you can and should do in retaining good employees.

1. Share the results of good work, tangibly.

Monetary and non-monetary rewards need to be tied to results so that, in receiving them, the employee knows that he or she is being rewarded for their specific contribution. Gifts given at the whim of the employer can be regarded as actually demeaning in that they bear little relationship to actual contribution.

2. Let your employees know they are part of a team.

Employees have heard the old saw, people are our biggest asset, so much so that they nearly vomit when it is repeated. Letting them know means having direct, regular, and personal contact.

3. Follow the CFH rule; be candid, frank, and honest.

Somehow, the higher one gets on the executive ladder, the more the misconception seems to exist that you can get away with not telling the truth to your employees. That simply isn’t so. As Abraham Lincoln said: You can fool some of the people some of the time, etc. Being less than honest means that you’ll get less than the best from your people.


4. Don’t spare the bad news.

Some employers have a penchant for spreading the good news and hoarding the bad on the grounds that their employees won’t be able to take it. The surprising thing is that, given a chance, most people are more resilient than we think.

5. Little things mean a lot.

Have you ever received a card or note out of the blue, when you were down or having a hard time, from someone who knew and simply took the time to let you know that he or she cared? Taking time to find out what’s going on with your employees (yes, after 5:00 PM) and letting them know you care–with a card, a call, or simply a word, can make a huge difference.

6. Recognize that suspicion is normal.

As an employer, you may not want to hear it, but one of the unfortunate effects of downsized America is employers are, in general, not regarded as believable! So, it takes patience, fortitude, and a good deal of practice to get to the point where you are believed by your people. Don’t become dismayed, just keep at it, as long as what you do and say is real.

7. Distribute choice perqs.

As long as you are in business for a profit, no business can afford to operate as though all people and positions are equal, because they’re not! Some people are more talented than others; some have more energy, drive, and concern; and some demand more because they can get it. For those in this latter category, the true high achievers, you will have to treat them differently or lose them. They don’t need your guidance so much as your recognition that they are outstanding.

8. Set your boundaries and make them clear.

Every single person who reports to you should be absolutely clear about two things: (1) what you expect of them, and (2) what they can expect of you. It pays to have a formal written policies statement and manual to discuss personally with everyone who reports to you.

9. Make it clear that, in your organization, continued growth is a condition of continued employment.

Too many organizations, especially in government, tolerate averageness, the hewers of wood and carriers of water. In the long run everyone, including the employee, suffers. From here on out into the twenty-first century, there will be less and less room for those who do just enough to get by.

10. Be genuine and be a model

You would think that this is obvious. Unfortunately, it’s not. I’ve seen so many executives and CEOs who follow the dictum: Do as a say, not as I do. One of the surprising results of chronic reengineering has been that those employees who are truly self-directing have become less willing to tolerate unacceptable conditions. The average performers will hang around, but the outstanding ones will bide their time and leave.