Synthesize the relationship between/among
control, entrepreneurial activity and human
resource management
UNIT 5 (section 1):
HRM and entrepreneurial activity
Learning objectives - HRM
1. Explain why HRM is important to small businesses and
how small business HRM is different from that in large
businesses.
2. List ways entrepreneurs can use their small size to
improve their HR processes.
3. Discuss the various HRM Policies consistent with
Entrepreneurial behaviour
4. Using Key Elements of the HRM System, explain how
an entrepreneurial environment can be created.
5. Explain how entrepreneurial motivation can be
enhanced.
6. Discuss how you would choose and deal with a
Professional Employee Organization (PEO).
How Small Business HRM Is
Different?
1. Size: Most small businesses do not have dedicated HR
staff
2. Priorities: HR is usually not a high priority
3. Informality: HR is not a formal process
4. Nature of the entrepreneur: Entrepreneurs tend to be
somewhat controlling
Implications
• Small business owners run risk that basic/
underdeveloped HR practices will put them at a
competitive disadvantage
• A lack of specialized HR expertise - legal or other
problems (legislation – LRA, EEA; contracts, policies
and procedures in the workplace – sexual harassment,
information, health & safety)
• Small firms are probably not adequately addressing
potential workplace litigation
• Small business owners might not be fully complying
with compensation regulations and laws
• Duplication and paperwork leads to inefficiencies as
well as data entry errors
Why HRM Is Important to
Small Business?
Successful small- and medium-sized enterprises (SMEs)
should place a great importance on
• Training and development
• Performance appraisals
• Recruitment packages
• Maintaining morale
• Setting competitive compensation levels
• Health and Safety
Effective HRM can be a condition for getting and keeping
big customers
Trend toward international quality standards means even
small businesses must attend to HR processes
Leveraging Small Size
• Familiarity with employee’s strengths, needs and
family situation
• Better communication
•
Make sure they have what they need to do the job
•
Recognize a job well done
•
Creativity and innovation
HRM Policies and Entrepreneurship
HRM Policies Consistent with Entrepreneurial Behavior
General Area
Practices Encouraging Entrepreneurship
Planning/Overall Job Design
Reliance on formal planning
Long-term orientation in planning and job design
Implicit job analysis
Jobs that are broad in scope
Jobs with significant discretion
Jobs that are less structured
Integrative job design
Results-oriented job design
High employee involvement
Recruitment and Selection
Reliance on external and internal sources for candidates
Broad career paths
Multiple career ladders
General, implicit, less formalized selection criteria
Extensive job socialization
Open recruitment and selection procedures
HRM Policies and Entrepreneurship
HRM Policies Consistent with Entrepreneurial Behavior (Cont.)
Training and Development
Long-term, career orientation
Training with broad applications
Individualized training
High employee participation
Unsystematic training
Emphasis on managerial skills
Performance Appraisal
High employee involvement
Balanced individual-group orientation
Emphasis on effectiveness over efficiency
Result oriented (vs. Process)
Based on subjective criteria
Emphasis on long-term performance
Compensation/Rewards
Emphasizes long-term performance
Decentralized/customized at division or department levels
Tailored to individuals
Emphasizes individual performance with incentives for
group efforts
Merit and incentive-based
Using Key Elements of the HRM System to Create an
Entrepreneurial Environment
Job Planning and Design:
What are employees asked to do and
how do we allow them room to show
initiative?
Recruitment and Selection:
Who do we hire to be
entrepreneurial and how do
we hire them?
Creating
an
Entrepreneurial
Work
Environment
Compensation and Rewards:
How do we incentivize employees to
be entrepreneurial, take ownership,
and stay with the company?
Performance Appraisals:
How do we guide, reinforce
and help employees identify
with entrepreneurial
performance?
Training and Development:
How do we help employees recognize their
entrepreneurial potential and develop the
skills to best capitalize on that potential?
Simple Employee Selection
Procedures
• Web-based recruiting (24/7)
• Usually an informal process
• Work-sampling tests
• Interviewing candidates asking questions to reveal the
following:
o Knowledge and experience
o Motivation and personality
o Intellectual capacity
Employment Appraisal and
Compensation
• Small businesses can use software and online
programs to create highly professional performance
appraisals
• Easy access to online salary surveys make it easy to
determine local pay rates
• Simple Retirement Benefits
• Flexibility in benefits and rewards such as
o Extra time off and compressed workweeks
o Provide bonuses at critical times
o Help employees better themselves
o Feed them
o Make them feel like owners
Entrepreneurial Motivation
Expectation That:
INDIVIDUAL
MOTIVATION
TO BE
ENTREPRENEURIAL
ON THE JOB
is a
function
of
EFFORT
SPENT ON
ENTREPRENEURIAL
ACTIVITIES
Importance Rating:
will
lead
to
SUCCESSFUL
PERFORMANCE
EVALUATION
will
lead
to
REWARD
Perceived
Equity
Porter and Lawler’s Expectancy Model
Flexibility in Training
• Online training resources can help even the playing
ground for small businesses
• Informal training approach focused on learning specific
job-related competencies
• Small businesses can implement a four-step process
to streamline training procedures
1. Write a job description
2. Develop a task analysis record form
3. Develop a job instruction sheet
4. Prepare training program for the job
Managing HR Systems,
Procedures and Paperwork
• Basic components of Manual HR Systems
• Obtaining and organizing a set of standardized personnel
forms covering each important aspect of HR
o Recruitment and selection
o Training and appraisal
o Compensation
o Safety processes
•
HR Kit would include:
o Application
0 Employment interview
o Reference check
0 Employee record
o Performance evaluation 0 Warning notice
o Exit interview
0 Vacation request
o Lawsuit-Prevention guide
Outsourcing - Using Professional
Employer Organisations (PEO)
• Vendors ranging from payroll companies to one that
handle all an employer’s HRM requirements
• PEOs focus on employers with 100 or less employees
• Charge fees based on 2-4% of payroll
• Use PEO for:
o Lack of specialized HR support
o Paperwork
o Liability
o Benefits
o Performance
o Not CORE function
Outsourcing – Guidelines to use
PEO
• Conduct a needs analysis
• Review the sources of all PEO firms considered
• Determine if the PEO is accredited and how long it
has been in business
• Check provider’s bank, credit and professional
references as well as the PEO’s staff
• Understand how employee benefits are funded
• Review the service agreement carefully
• Understand how the firm will deliver services
• Ask about upfront fees
• Periodically get proof that payroll taxes and insurance
premiums are being paid
Key Entrepreneurial Manager Behaviours
1. Efficiently gets proposed actions through red tape into
practice
2. Displays enthusiasm for acquiring skills;
3. Quickly changes course of action when results are not being
achieved;
4. Encourages others to take the initiative for their own ideas;
5. Inspires others to think about their work in new and
stimulating ways;
6. Devotes time to helping others find ways to improve
products and services;
7. Constantly look for good ideas of others;
Key Entrepreneurial Manager Behaviours
8. Boldly moves ahead with a promising new approach when
others might be more cautious;
9. Vividly describes how things could be in the future and what is
needed to get there;
10. Gets people to rally together to meet a challenge;
11. Creates an environment where people get excited about
making improvements.
UNIT 5 (section 2):
CONTROL and entrepreneurial activity
Learning objectives - CONTROL
1. Explain the nature of control on organisations
2. Discuss the dimensions of control and
entrepreneurship
3. List the elements in an organisation’s control
system
4. Critically discuss the ‘Entrepreneurial
Philosophy of Control’
5. Describe the five elements of CE
management control system
The Nature of Control in Organizations
• Control system – Formal and informal mechanisms that help individuals
regulate what they do with themselves and other resources on the job.
• It implies a carefully constructed and well-integrated set of items.
• A set of control mechanisms evolves, with components subject to
change
• The principal outcomes sought through control efforts include:
o Risk reduction
o Elimination of uncertainty
o Highly efficient operations
o Goal conformance
o Specific role definitions
Dimensions of Control and Entrepreneurship
Administrative Domain
Entrepreneurial Domain
Tight, extremely
detailed
Centralized
Loose with broad
guidelines
Decentralized
Stress conformity
Decentralized
Flexible, allow
discretion
Informal
People/comm.
based
Emphasis on feed
forward
Inflexible, no
discretion
Formal
Rule and
procedure based
Emphasis on
feedback
Elements in an Organization’s Control
System
•
•
•
•
•
•
•
•
Budgets
Purchasing policies
Hiring rules
Annual employee, dept, and division reports
Performance reviews
Strategic and operational plans
Financial and resource audits
Financial statements
The Entrepreneurial Philosophy of Control
• A core principle in the entrepreneurial philosophy of control requires
that managers give up control to gain control.
• To give up control is to empower
• “Empowerment really means stopping the disempowerment of people
– but this just brings back to hierarchy – for empowerment (typically)
reinforces hierarchy.” -Mintzberg
• Control is vital for sustained entrepreneurship. The real issue is the
nature and intent of the controls and how they are used.
• Incremental innovation can occur in more tightly controlled
environment, but discontinuous innovation requires extensive
autonomy.
The Entrepreneurial Philosophy of Control
Figure 11.2: Relating Types of Innovation Initiatives to Control
Degree of Control
The
Control-Autonomy
Continuum
Degree of Autonomy
Projects
Assigned
and Closely
Monitored
by Senior
Executives
Initiatives in
Mainstream
Departments
or
Functions
Projects in
Centralized
R&D
Departments
Independent
Venture
Team
Projects
Projects in
Separate
Venture
Division
Completely
Self-Appointed
Intrapreneurial
Projects
Five elements of CE management
control system
1. Planning what is desired. Establish clear
goals and objectives.
2. Establishing standards of performance,
realistic measurements of the level and
quality of the goal(s).
3. Monitoring and evaluating actual
performance. Establish a system of
reporting accurate, relevant, timely
information and identifies any deviations.
Five elements of CE management
control system
4. Comparing actual results with desired results.
Interpret and evaluate information - give details of
progress, disclose deviations, and identify causes.
5. Rectifying deviations and taking corrective
action. Execute the most appropriate course of
action.
Expanding on the Concept of Slack
• There is a need for control and moderation – managing slack
involves a fine balancing act
• If there is an abundance of easily available money for projects
and ideas – huge amounts of money will be wasted
-- Likewise -• If controls on resources are too tight, the incentive to innovate
will disappear
ANY QUESTIONS?