Small and midsize businesses (SMBs) have always been the primary source of innovation in America; and while consumers and business customers have applauded their products and services, these small companies perhaps have demonstrated their greatest inventiveness in their creative business models.
Specifically, they have found imaginative and productive ways to level the competitive playing field by embracing the Internet. A retail organization may not be a Wal-Mart or a Macy's, but its Web site can make its offerings just as attractive to consumers. Similarly, traditional phone companies find themselves competing head to head with upstart voice-over-IP companies offering the Internet as a voice provider, and huge television networks are scrambling to hold onto audiences flocking to the Web - YouTube, Joost, social networking sites, etc. - for entertainment.
More recently, SMBs have discovered they can compete not only for customers but also for personnel and workplace status with the largest of companies, again by adapting tools available on the Web. Today, small businesses can enjoy advantages once reserved for larger companies by using online applications to automate performance and talent management, along with routine HR administrative processes.
The real impact of these virtual HR tools has been exceptional. A mid-size Web-development and technology company called Proxicom slashed the time devoted to reviews by a third since it adopted hosted HR services from San Mateo-based SuccessFactors, and estimates it saved $60,000 in the first year of using the program. The popular Shutterfly organization, which provides photo-sharing over the Web and a social-networking site, enlarged its compliance rate for staff reviews to 98 percent in just two years after adopting a similar version of these virtual HR tools.
The automated, "virtual performance management tools rely principally on software-as-a-service applications that are hosted on the Web. As a result, SMBs do not need to download or install any software and require very little training to launch the service in their own companies. Because the software resides on a provider's server, rather than the customer's, when updates are available the provider simply upgrades its own software and every customer has immediate access to the latest version. Moreover, small businesses do not need to hire IT staff to install, maintain and secure software and dataeverything is stored and kept safe on the Web.
SMBs are becoming very adept and innovative in their use of Web-based HR tools. For example, Nittany Embroidery and Screening in Pleasant Gap, Pennsylvania, employs an online performance management system for its 20-person staff. The company, with $2.5 million in annual sales, produces official gear for the Nittany Lions of Penn State University, as well as for the State College Spikes minor-league baseball club and the Miller Brewing Company. Nittany has transformed its employee review process into a high-quality program that helps align its workforce with the company's goals, increase employee satisfaction levels and develop individual plans for its staff.
Company owner Erin O'Leary noted that previously, without a full-time HR staff, this kind of goal alignment had been suffering. Using tools from Success Factors, O'Leary was able to automate the performance management process for employees to increase retention and satisfaction "in a way that we could never have supported in a traditional model.
Implementation of the program was far simpler than O'Leary had imagined initially. The company's existing processes were incorporated into the Web-based software so that the automated process virtually mimicked the organization's traditional process for managing performance. As a result, the methodology remained a familiar one, but the software ensured that all the processes involved were completed at the right pace and sequence.
One of the tools making the greatest difference for companies is the performance review program available through software-as-a-service. This application combines assessments from all the colleagues and supervisors of each employee against his or her individual, pre-set goals. The software lets managers set out the staff member's objectives in alignment with company objectives at the very beginning of the review process. Going forward, the system measures the employee's performance against these pre-established criteria and displays that progress in real-time dashboards. At the end of the review cycle, the level of progress can be measured against the goal.
Of great importance is that this entire automated process is completely transparent to manager and employee alike. The outcome is that employees tend to evaluate themselves and their performance throughout the process, and managers can easily provide regular feedback. Potential or real problems are spotted as they arise, rather than waiting as long as six months or a year for the next full review.
Automated compensation planning tools can also be incorporated to help managers determine how to allocate available dollars based on employee performance. With reward tied to actual performance, more of the company's best employees stay, rather than fleeing to large organizations that appeal to those feeling insufficiently paid or valued.
The cost of these online HR tools is about equal to buying each employee one movie ticket a monthand the results can be just as exciting in terms of employee attitudes and staff development. When compared with the cost of a termination or resignationwhich, according to the U.S. Labor Department, averages $32,000 for advertising, interviewing and on-boarding replacementsWeb-hosted HR capabilities make financial sense while making happier employees and managers.
These expert systems online are keeping employees on target in SMB organizations, who are building HR departments - virtually and in reality - that rival those of larger organizations. This gives the little guy an edge on big brother, producing an engaged, motivated workforce focusing momentum on the goals ahead and the rewards along the way.
