Chapter 31

What could be my major concerns regarding production?

First, keep in mind that no two manufacturers are going to share precisely the same concerns. The following discussion is meant to be general in nature.

As an overall concern, keeping a lid on your per unit cost of production is likely to be your greatest challenge. Although simply stated, managing cost means gaining a total understanding that will allow you to successfully deal with the complexity of each and every fixed and variable expense (cost to you) to manufacture or offer your product or service.

The second greatest challenge to manufacturers and processors presently seems to be finding the right amount of qualified labor. Next, come general concerns about regulations and consumer tastes. Changing market structure is also frequently mentioned as a primary worry for manufacturers. Other factors such as consistency in quality and price of raw materials, raw and finished goods transportation logistics and cost, and the availability of employee healthcare options tend to be frequently listed as basic concerns by business decision-makers.

The Center for Industrial Research and Services (CIRAS) or your nearest Small Business Development Center (SBDC) has very helpful information that addresses the issues of cost identification and management.


Chapter 32

How do I hire and keep good employees?

There is not a single answer to this question as the factors are as unique as the personalities of the people you hope to attract. A good pay and incentive package coupled with a decent working environment should at least place you on equal ground with other employers.

32.1 Hiring good employees

The hiring process should not be haphazard. Before you begin, you need to define the job, the experience or education level required and what you are willing to pay--salary and benefits. If you have not formulated a personnel policy, now is the time.

You need to consider the number of hours to be worked each week, the number of days per week, holiday work and the time and method for overtime pay; fringe benefits; vacation and sick leave; time off for personal needs; training; retirement; a grievance procedure; performance review and promotion; and termination.

Employment and training procedures should be established so that you have a better chance of hiring the right employee for the right job and that you hire employees to fill in on those areas where you may be weak. There are a number of sources to which you can turn for job candidates: classified advertising, employment agencies, temporary agencies, state employment agencies, unions, schools, community organizations, former employees or friends and family.

Rather than making your selection based on intuition, you need to follow a process that enables you to determine the candidate's worthiness for the position. Review the candidate's resume, application and work samples; test the applicant if appropriate for the position; interview the candidate; and check his or her work references.

When interviewing, don't make the common mistake of asking what the candidate has done; rather, ask how the candidate did it. Interview the candidate, not his or her resume. Moreover, don't neglect to assess three essential factors you won't find on anyone's resume: intellect, interpersonal skills and motivation level.

When interviewing, it is also important to know the laws related to job discrimination. According to one expert, there are two simple rules to test whether or not to ask a question:

  1. Is it job related? If it isn't, don't ask.
  2. Is the question presented only to a specific type of candidate? If it is, don't ask.

When it comes time for the hiring decision, undoubtedly your sense of people will come into play; your ability to separate "good" employees from "bad" one. However, a few words of warning: All too often, consultants say, employers hire people they believe will turn around, only to find a difficult battle on their hands. Time is too precious to waste on anyone who cannot contribute 100 percent.

Once you have carefully selected your new employee, it is important to create a good working relationship. Open-mindedness, patience, communication skills, willingness to listen and other human relations skills play a vital role in the development of such relationships. "Be aware of individual personalities," says one business owner. "We maintain an 'open door' policy by talking to our employees as human beings." Says another owner, "Hiring good people, developing appropriate relationships and making them part of the operation are the keys to a successful business.

And although you have been careful to hire the right person for the job and are working hard to form rewarding relationships with your employees, you can still be subject to problems. That is the nature of business. Very often, the problems you experience mirror those of society in general.

Currently, employers are faced with the problem of drug abuse and drug testing and with adhering to the new regulations set down by the 1986 immigration law. Substance abuse costs American business about $100 billion a year in lost production, according to the federal government. In 1980, a government-sponsored study revealed that about 10 percent of the nation's workforce was impaired by alcohol abuse.

While many large businesses have set up substance abuse programs, such programs are too expensive for the small business owner. One consultant recommends writing out a policy statement concerning drug and alcohol use at work and coming to work in a drug or alcohol-induced state. He advises that the policy should state that the use of drugs or alcohol on the job is unacceptable and grounds for disciplinary action, including dismissal. Another consultant suggests that the small business owner investigate outside employee assistance programs as a way of offering help to troubled employees at a relatively low cost. If no such provider is available in the area, you may want to join with other local companies to create an employee assistance program together.

The other major societal issue--hiring illegal immigrants--can have significant impact on the operation of a small business. Under the Immigration Reform and Control Act of 1986, employers must hire only U.S. citizens and aliens authorized to work in the United States. Violators can face stiff fines. The Immigration and Naturalization Service (INS) requires that you ask each new person hired the following questions: Are you a U.S. citizen? Or, are you an alien lawfully authorized to work in the United States? Their answers should be noted on your employment records.

The employer must attest under penalty of perjury--on a form provided by the U.S. Attorney General--that he or she has verified by examining the documents specified in the law, that each new person hired is authorized to work in this country. Documents that satisfy the verification requirements include a U.S. passport, certificate of U.S. citizenship, certificate of naturalization and certain foreign passports and resident alien cards. Documents such as a Social Security card or birth certificate also are acceptable if examined together with approved identification such as a driver's license.

Employers must keep the verification forms on file for three years from the date of hire or for one-year following the employee's separation from service, whichever is later. For further information on the new law, the INS has produced a "Handbook for Employers," document number M274. Contact your local INS office to receive a copy.

U.S. Small Business Administration

Keeping good employees

The honeymoon has ended. Those exciting first few weeks or months of a new job are over. Employees are settled in, and some may even find themselves in a rut. You know what that can mean: decreased productivity, increased absenteeism, carelessness, and perhaps most importantly, the loss of valuable employees. In such cases, how do you keep your employees motivated? It's not as difficult as you think. It's that tried-and-true old standby, positive reinforcement.

Behavior is influenced by the results or consequences of that behavior. To motivate people, you have to offer them consequences. Consequences come in two varieties: positive and negative.

Research has shown it's almost impossible to create a motivated workforce using negative consequences, or punishment. It may change people's behavior for the short term, but doesn't motivate them to maintain the desired behavior for any length of time. Moreover, there is a "punishment effect." When punishment is used to control behavior, people perform at a level sufficient to avoid punishment.

On the other hand, there are many ways to positively reinforce desired behavior, with proven good results. A simple "thank you" to employees for a job well done; praise; offering your help; showing concern; asking for their advice or opinion; small awards like a cup or trophy; putting their picture on a bulletin board; a choice of work assignments; time off with pay; a promotion; or a bonus or incentive pay.

Here are a few precautions to ensure that your reinforcement is effective:

  • Be specific about which behavior you are reinforcing.
  • Reinforce immediately after you observe the behavior.
  • Make reinforcement contingent upon performance -- give credit only when it is due.
  • Make the reinforcement proportional to what the employee did.
  • Individualize the reinforcement. Every employee has different preferences.
  • Be consistent.
  • Be sincere.
  • Vary the reinforcement.

You should be aware that motivation can go beyond reinforcement. You may have a serious morale problem in your company, one that positive reinforcement, alone, cannot solve. You will need to talk to your managers and other employees to find out if they are unhappy and why.

Factors that cause poor morale include:

  • the thrill of start up is gone,
  • personality clashes with company's emerging culture,
  • the belief that employees are unfairly compensated for their considerable efforts on behalf of the company,
  • and the feeling that they don't have much of a voice in how the company is run.

Here are some approaches to try:

  • Think about broadening the current range of responsibilities of your talented people.
  • The key to motivating and retaining good employees is to be a good manager yourself. The people at the top of an organization set the tone. Be sensitive to your employees' needs. Learn where you can be flexible in order to accommodate employees and enhance their job satisfaction.
  • Start a career development program to help your top performers identify and expand their skills and talents, and determine how their particular gifts can be used in your new stage of growth.
  • Determine whether there is open communication between you and your managers and your other employees. Create an environment where every employee feels an important member of the group

As mentioned earlier, we are facing a shortage of qualified workers in this country. One of the primary methods of wooing and holding on to this precious human commodity is an effective benefits program. Over and above employee health insurance and benefits, another aspect is employee assistance.

A large number of employee assistance programs are increasingly directed at employees suffering from drug or alcohol abuse. Many large companies have set up in-house programs to help employees with substance abuse--but what can small companies do?

If you notice several of your good workers have undergone personality changes and that the quality of their work is slipping, it's time to take a closer look. Ignoring substance abuse can be a costly mistake, since there is evidence that dealing effectively with alcohol and drug problems can pay off to increased productivity, lower health care costs and a work force that feels management cares about them.

You can begin to address substance abuse problems with a written policy statement regarding drug and alcohol use at work. The policy should state plainly that drug, alcohol use on the job is forbidden, and that violation of this policy is grounds for disciplinary action, including dismissal.

To help troubled employees directly, you may want to consider an outside employee assistance program (EAP). These programs offer employees a place they can go for help with personal problems, including alcohol and drug abuse. They provide trained counselors who can offer short-term help and referrals to specialists, if needed. The cost of these programs is usually about $2 to $3.50 per month per employee, including coverage for the employee's family.

If there are few or no providers in your area, you may want to join with other local companies to create an EAP together. In some cases, outside employee assistance programs encourage more people to seek help and minimize the role the company plays in resolving employee' personal problems.

When choosing an EAP provider, inquire about what services they provide, where referrals are made, whether there is follow up after referrals and the program staff's qualifications. Be wary of providers who specialize in general health care rather than employee assistance, or programs that do not offer 24-hour counseling or referral. Also, be sure the EAP programs provide you a list of other clients in the area for references.

Once you have found a suitable EAP, make it an attractive alternative. Stress that you are implementing the program to help keep people on the job, not as an excuse to fire them. Explain that the benefits are available to the whole family and include confidential counseling for all types of problems, not just drug and alcohol abuse.


The success of your business depends on your employees. And like a good marriage, the relationship between you and your employees should be a two-way street. Communication, trust and commitment are critical. If you want that relationship to last a long time, you must be willing to work hard to make it grow.

U.S. Small Business Administration


Chapter 33

Who can help me with my production questions?

CIRAS, a part of Iowa State University Extension, the College of Engineering, and a partner with the Iowa Manufacturing Extension Partnership, provides Iowa manufacturing and processing firms with technical and management information so they can make better decisions. Areas of expertise available through CIRAS include finance, marketing, engineering and facilities planning. Each year, CIRAS responds to more than 1,000 requests from Iowa's 4,000+ core manufacturers.

The Iowa Manufacturing Extension Partnership (MEP) is a statewide network that provides technical and business assistance to small- and mid-sized manufacturers. Account Managers throughout the state meet with clients to answer questions, identify areas for improvement, and provide links to resources that companies can use to increase their productivity and competitiveness.

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