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Managing Human Resources

It does not begin and end with hiring people but it is a long-term, continuing process that has direct impact on an organisation's success.

It's people that make a difference. Smart entrepreneurs won't dispute that. They know that managing people is at the heart of running any profitable business. Capturing, retaining and developing human talent is a key endeavour, critical to the success of any enterprise establishing itself.

And yet the area of human resources and the issues involved tend to be neglected by many small businesses, which fail to recognise that clear practices must be established with regard to the management of talent.

The common - but highly flawed - view is that human resources begins and ends with hiring people. In reality, the realm of human resource management is a long-term, continuing process that has direct impact on your organisation's success.

Capturing Talent: Recruitment

Since not many start-ups are equal to the financial burden of placing a job ad, many entrepreneurs end up hiring people they meet through their circle of friends, who learned of the opening by word of mouth. Networking at industry functions is certainly a useful approach to discovering prospective employees.

On the other hand, most prospective employees tend to seek employment in larger and more established organisations such as multi national companies. These are often regarded as the employers of choice because they have a better image and are more well-known.

Small businesses therefore, need to make a special effort to advertise themselves, be it through placements in the newspapers or through word of mouth.

Another common practice for small businesses is hiring from within the inner circles of family and close friends. It is perfectly natural to fall back on the people you know and trust, especially for businesses that are just starting out.

According to the Wharton School, family businesses make up more than 75 percent of all businesses in the U.S, many of which started out as small businesses and some of which grew to be large well-known companies.

Still entrepreneurs should be wary of the problems and pitfalls that could crop up. The complexity of family relationships that are based on emotional ties sometimes hampers productive business, not to mention the disruption caused by conflicts, separation or divorce, jealousy and favouritism.

For this reason, it's wise to set policies down in writing that are developed jointly with a business lawyer as well as an accountant. Their objective should be to help guide the business, diffuse and avoid potential conflict. Detailed job descriptions and requirements should be included so that managers can just follow the "handbook."

When a family member who is unqualified angles for a position, the guidelines as laid out in the handbook must be matched. Establish guidelines for promotions, performance evaluations, raises, benefits, profit sharing, termination and other employee issues.

The goal is to create an even playing field where merit comes first, regardless of family connection.

Hiring Fast And Hiring Right

Many businessmen acknowledge a dearth of talent and manpower, claiming that even with job ads, only a very small percentage of the yield turn out to be likely candidates. So what do you do if you are starting to feel desperate about filling a position because time is money, and you're starting to lose both?

Human Resource managers at large corporations say you should never hire candidates you wouldn't hire if the people shortage weren't so severe. You need someone fast, yes, but this doesn't mean you should lower your standards and settle for second best. The solution is to identify the kinds of people you want to hire, weigh experience, seniority and ability, quickly identify the mismatches and then evaluate the remaining candidates for the traits you need. Never ever settle for second best.

Businesses must create a permanent profile of the ideal staff member, regardless of what stage your business is at and of what position you are filling. This way, you are better equipped to identify your potential staff. What bogs some small businesses down is that they hire people based on short-term needs, when what is necessary is a long-term perspective.

Knowing Where To Look

Instead of rushing to fill a position, do the opposite and slow down. Disciplining yourself to hire the right candidate and not just any warm body is difficult. In the case of emergency situations where productivity is at risk, consider two options. If your ad fails to bring in a good candidate and your networking has got you nowhere, consider doing what corporations do. Approach candidates who are already doing an excellent job elsewhere. Don't assume that just because someone has a job, he or she might not consider a change. If you know some people who are excellent workers and have the skills you need, ask them whether they're interested in discussing the opportunities you have to offer.

The other way is to outsource. Outsourcing is a viable solution for tasks that are beyond your core business and require a degree of expertise and efficiency. You'll get a greater level of skill and more flexibility than if you try to hire for them.

Typical functions that are outsourced include accounting and bookkeeping, payroll, marketing and advertising as well as other administrative and professional services.

Training & development human resource consultants in the US agree that the real challenge isn't finding people. It's finding the right people and turning them into first-rate contributors - fast.

Most business owners want to succeed, but do not invest in the training that might improve their chances of success. Why? Managers of small businesses are often strapped for time and this prevents them from being able to train their employees. Also, many managers often prefer to keep information to themselves. By doing so, their subordinates and others do not benefit from the training and development process as much as they would if they had real-life scenarios to relate to.

Finally, there is some scepticism towards the intrinsic value of training. Entrepreneurs believe the future cannot be predicted or controlled and their efforts, therefore, are best centred on activities like making money.

Every business, regardless of size, should take measures to give their employees some kind of training and orientation. The quality of employees and their development through training and education are major factors in determining long-term profitability of a small business.

If you hire and keep good employees, it is good policy to invest in the development of their skills, so they can increase their productivity. But often, training is considered for new employees only. This is a mistake because ongoing training for current employees helps them adjust to rapidly changing job requirements.

Time is a precious commodity - but putting time into training for staff is time spent wisely. Whether it's one weekend a month for a workshop or a weekly long lunch meeting where senior managers can impart their knowledge and experience to the staff, these can spell long-term productivity, and consequently, profit. Research shows that even small businesses that embark upon solid training efforts enjoy benefits that include reduced employee turnover, increased efficiency resulting in financial gains, and decreased need for supervision.


Pay your people as much as you can afford. Salaries should commensurate with employees' expected contribution to the business. In general, it is good business practice that for all positions you should pay at least market rate. When employees are treated well, they are going to be more motivated to perform well for you and your company.

Pay the person, not the position. In small companies, employees are often responsible for multiple tasks and their performance is expected to make all the difference in the overall performance of the company. Consider an individual's contribution to the success of your company, not just the job title. Some companies might even place a top salesperson on an incentive pay plan that allows him or her to potentially earn more than the president of a company. For example, the ad sales executive for a small publishing company frequently earned more than the editorial staff, including the editor-in-Chief, due to sales incentives and bonuses as well as salaries.

When a precedent is set, and employees recognise that work beyond their job description will be rewarded accordingly, they will surpass the scope of their job titles. They will be motivated to make substantial contributions to your business.

Retaining Knowledge In The Face Of Turnover

When a competent employee leaves your company, you lose something tangible. You lose that person's expertise and knowledge about your company. In the time this employee was at his job, he learned and developed skills specific to your business. In order to keep that knowledge in-house, that employee's knowledge must be preserved.

Professors at renowned business schools like Harvard and Dartmouth call this "Knowledge Management" - that is, the ways companies use and manage knowledge and information.

Establishing a simple exit process where an outgoing employee fills out a form regarding his job and the techniques he uses to do it well will help keep his replacement on track.

Set up a reporting system that has employees describing ongoing projects, so in case someone leaves, there is a file to go to. Documenting information is your main means to retain knowledge.

Set The Policies

Don't fall into the trap of thinking that you're just a small business and therefore, don't really need personnel policies. Set policies before you need them. Start-up companies may seem flexible at the outset. Its very tempting to make the rules up as you go along. But not having clear policies and practices can lead very quickly to misunderstandings, lost productivity, higher turnover and even possible legal exposure.

You may not need to develop a fifty-page human resource manual. But do set down in ink your expectations regarding performance, professional conduct, attendance, reporting procedures and any other critical aspect of your business. Your company may be small right now, but if you plan long-term and set successful trends in motion, you will save yourself many hassles when it grows in size.

"This article was contributed by Christopher Lai, Director-Head of Business Development, Small Business Services, CSG, American Express International Inc."

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