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Part four in my multi-part series on employee relations.

When it comes to running a company or even managing one, it’s easy to see yourself as the head of a complicated body of workers, all of whom look to you for guidance because clearly you’re the only one who has the vision for how to make the company work. However, this is really little more than an ego problem, and one that continues to bring down otherwise good corporations.

Companies that empower their employees to make decisions, take a stake in the company, and be a part of the events going on around them find that costs are lower, efficiency is up, turnover is down, and they can do a lot more with a lot less. The reason is that employees feel that their work actually matters and they aren’t little more than a face to some otherwise mechanical entity. Here are a few methods for empowering your employees that other large businesses have used successfully.

1. Teach even entry-level employees the basics of management practices and give them the authority to do things often reserved for management, like closing a location or implementing ideas that might increase efficiency. Maybe even let them have a say in hiring, or design a role for some of your employees in the hiring process. Most importantly, pay them more when you give them more responsibilities. Let them associate increased work with increased wages.
2. Have an open-book policy regarding your financial records, especially expense accounts. Let your employees see where money was coming in and going out, who it was being spent on, what sorts of discounts people were getting, etc. Dorian Drake International implemented this plan in 2002 and some of the immediate benefits were that employees noticed that some departments were getting vendor discounts others weren’t and pressured the company to negotiate for everybody. Also, travel expenses were severely cut, at least partially because everybody in the company would see how much you spent on business trips.
3. Give your employees the authority to spend money. If there’s a customer problem, let them solve it up to a certain amount without having to go through management for authorization or, worse, higher levels of bureaucracy. It doesn’t have to be a large amount, but the ability to give away something free or correct an issue caused by your company without adding a wait for approval on top of it ensures better customer satisfaction and will help retain clients, if not also garner referrals.
4. While this isn’t a solution for all businesses, some places might benefit from de-structuring the workday. Allowing employees to work hours that they are comfortable with and setting concrete goals with deadlines that they have to meet is a good way to relaxing the pressure on them and allowing them to produce most efficiently. If it isn’t necessary that they work along a set schedule, focus on a more results-oriented approach to scheduling and let them work out how to get it all done.
5. Skyline Construction has an innovative idea: let their employees choose their salary. They could pick a salary from within a specific range. The advantage to taking a lower one was that it gave them the opportunity to earn a higher year-end bonus if the company met certain goals. Many employees took lower salaries throughout the year, but worked harder to meet and exceed those company goals, many earning more as a result of their bonuses than they would have if they had taken the maximum allowed wage.

These are only some ideas of what you can do to make your employees feel as if they are a real part of your company. You can’t do everything yourself, nor should you try to. Give your employees a little extra responsibility and they might just surprise you with how they run with it.

And now for part two in our ongoing series on employment and employee relations:

Running a company in the United States means that there are a lot of bureaucratic hoops to jump through. Most of them involve filing paperwork, sending information into the government, and allowing people to keep track of your records so that everybody pays their fair share. Some of the requirements you have to meet are educational, however, and it’s important that you take the time to properly train your employees so they’re aware of the potential risks they might face on the job.

The first thing you have to ask yourself is, “Who sets the standards for training?” Obviously somebody has to decide what qualifies as federally acceptable training, both in terms of quality and content. The answer is that this is determined by the US Department of Labor’s Office of Occupational Safety and Health Administration (OSHA). They are the ones who decide exactly what is important for every US worker to know in every conceivable type of corporation. Regardless of what you do, there are certain types of training you will be required to have, and in specific industries there is additional knowledge you will need to know. More importantly, as a company owner, you’ll have to make sure your employees know it.

Before you even consider hiring employees, start at OSHA’s website and take a look at the materials you’ll need in order to properly train your employees. The OSHA Compliance Assistance Quick Start is a wonderful guide that will be able to help you pick the industry that you’re in and the types of training that might be required for it. Construction and Health Care are vastly different from other industries and have a different set of regulations that you’ll have to follow in order to be considered in line with federal requirements.

The next question you should ask is, “How am I supposed to actually train my employees?” If everyone trains new hires the way they want, there is no guarantee that the same information is being passed along or that it’s being done in an efficient and effective manner. It would be far too easy for a business owner to give a five minute rundown to an employee still on the job that can be misinterpreted or simply missed. Either way, there is a solution to that as well.

To quote their website, “The OSHA Directorate of Training and Education (DTE) develops, directs, oversees, manages and ensures implementation of OSHA’s national training and education policies and procedures.” What this means is that they’re provided the training and reference materials you need in order to make sure that your employees are up to date on federal safety requirements and the processes involved in maintaining them.

This is by no means comprehensive. Federally mandated training is not difficult to do once you understand what does and does not apply to your company, but it is vitally important to stay in compliance with the procedures. It’s also important to ask questions. Spend time browsing through the OSHA resources and getting an idea of what is required for you, and if you have questions, contact them and ask. You have nothing to lose and everything to gain by spending a few minutes familiarizing yourself with these regulations.

I’m beginning a multi-part series on employees and how to handle them today. Hopefully my readers will find these articles interesting and helpful in dealing with your own employees.

When you’re working for somebody else, the hiring process seems very simple. Turn in an application, go for an interview, fill out some tax forms, and you’re now part of whatever company you applied for. It’s easy for most employees to go through. However, as an employer, there are many more steps to be taken in order to bring that one person into your company.

The first thing you need is an EIN (Employer Identification Number). This is a way for the IRS to track who you are and how many employees you actually have. It also is necessary for reporting to state agencies. The IRS provides a wonderfully helpful guide on how to go about applying for one on their website, so take a few moments and find out exactly what you need to qualify.

Next you need to set up records for tax withholding. Now that you have employees, it’s your job to keep records of employment taxes for four years on all of your employees. You’re also required to have them fill out form W-4 in order to determine how much tax is being withheld from each check. Once a year, employers must also report to the federal government how much tax has been withheld from each employee in form W-2. Copy A should be sent to the Social Security Administration no later than the last day of February (last day of March if you’re doing so electronically), and a copy should be sent to employees no later than January 31st of the year following the one being reported. State taxes should be looked up by contacting your state tax agency.

The next important step is to make sure your employee fills out an I-9 form. This is a form designed to check for an employee’s eligibility to work in the United States. By federal law, it is the employer’s responsibility to verify this information, and they can do so by entering the data from the form into the government’s E-Verify system.

According to the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, employers must register new hires and new re-hires with their state’s reporting agency within 20 days. This is a relatively simple process, and instructions for it can be found here.

You are also required to get various types of insurance, including Worker’s Compensation coverage either through a commercial carrier on a self-insured basis or through your state Worker’s Compensation Insurance program, and Unemployment Insurance taxes, which can be determined by contacting your state’s tax agency. Also, if you have employees in California, Hawaii, New Jersey, New York, Rhode Island, or Puerto Rico, you’ll need to obtain Disability Insurance.

Once you have employees, you are now required by law to post certain notices in your workplace that inform your workers of their rights and your responsibilities to them. The posters are available for free from both federal and state labor agencies, and you can find the ones you’ll need by following this link.

As an employer, you now have many more tax forms to fill out, including but not limited to quarterly filings that must be made to indicate how much income tax, Medicare, and social security withholding you did for every employee. This requires you to file IRS Form 941 or 944 depending on how much you paid, an Employer’s Quarterly Tax Return, and several more besides. The federal government provides a good guide for what sort of forms you need to fill out on their website.

Of course, the mechanics of employment are not the be-all, end-all of being a good employer. It’s important to maintain a positive workplace, provide benefits, encourage workplace safety, and learn how to best manage your people. A lot is involved in having employees, but they’re also necessary if you want your business to grow.

I recently read a blog post written by Chris MacDonald at The Business Ethics Blog. I don’t always agree with everything Mr. MacDonald says, and this is no exception, but I feel that his arguments are based on a primarily false assumption in his post Exploitation at the Top that the executives that are being socially pressured to accept less compensation are somehow “owed” what they are getting in the first place.

Let’s examine for a second in what way these people are “owed” anything.  Not all executives were directly responsible for the actions that lead to the financial crash we’ve experienced, but still, we’re talking about “bonuses,” which are a reward for good work. Contractually obligated bonuses are no more than salary, so I don’t see why people should either receive extra money or have their salary raised for failing to succeed in their jobs. As a side note, I find it ironic and amusing that the same people who argued for the sanctity of contracts when it comes to executive bonuses also argued that union auto workers should have their salaries and benefits cut despite their contracts, but I digress.

Compensation divorced from achievement is pure insanity, and I fail to see how the legitimate anger of people who have been dealing with rising prices and falling service for years now qualifies as “exploiting the weakened position of executives.”

Honestly, it is not exploitation to demand that CEOs and upper level executives take less money for themselves that could be used by the company to lower prices, increase quality, or hire more people when the unemployment rate is so high. How many people’s yearly salaries can be paid if a CEO takes a $4 million bonus instead of $12 million? How many more people could be employed if John Thain didn’t spend $1.22 million redecorating his office while reducing his workforce.

The very idea of attributing any sort of social pressure to exploitation of upper level CEOs and execs is almost comical. I appreciate Mr. MacDonald’s originality and the implied idea that exploiting people who have made their substantial livings on exploiting others is still wrong, but the consumer wields precious little power over companies of a certain size, especially when there is no competition due to the tacit agreements of corporations to not lower prices, and expressing their anger publically is some of it. While I don’t condone more extreme actions like the death threats some corporate CEOs have received, I see no problem with public threats of boycotts or demonstrations.

The executives of corporations have been exploiting consumers for years now in a carnival-like atmosphere, consequence and regulation free, and it sank our country into economic disaster. Now that people are demanding that they do their job before getting paid for it, they feel that are being treated unfairly. Unfortunately, you can’t go on preying on those with less power than you forever. I suggest taking bonuses only when you actually achieve something, so you don’t have only downsizing and higher prices to point to when people want to know what you did to earn those multi-million dollar checks.

One of the major problems that has suddenly come to the attention of the general public is that of valuation. I’m not saying that valuation is a bad thing in any respect, but rather that the values of properties and business have been thrust into the public spotlight and now more people are having to consider assets in terms that business people have been thinking in for quite some time.

The real issue, however, is that they’re picking up the same bad habits that so many business people already have, specifically that things like valuation are only to be done when absolutely necessary, usually when selling the company or asking for a loan. However, why on Earth wouldn’t you want to know the value of your company at other times?

Just to take one example, what if you, as the business owner, want to start preparing for a transfer of power, either to family members or some specific person/group? How can you do that accurately without knowing the value of the company? If something should happen to you, not knowing the current value of your company will increase the amount that it will cost both in terms of taxes and the legal fees involved in sorting out exactly who gets what and in what proportion.

The fact of the matter is, it’s important to occasionally value your company even if you aren’t asking for money or trying to sell it. The only way that you can understand how your business is growing is to have a general idea of where it is now as compared to before, and estimation might be enough for some circumstances, but having a solid foundation with which to work gives you the chance to plan a cohesive strategy for the future of your company. It also makes it easier for your company to live on past you.

Companies should always be looking for new ways to innovate. New products, new ideas, new concepts and approaches mean that business moves forward and the market benefits from increased cash flow and better service. It’s an elegant system that rests solely on a company’s willingness to continue to try new things. What’s interesting, however, is that the newest ideas are often hiding inside your business and can be exactly what you need in order to innovate effectively.

Instead of trying to pump money into brand new projects or find tiny changes that can be made without actually releasing anything significantly new, trying looking at what you have available with a new perspective. Start in your R&D department and see what sorts of projects or efforts were started but you found them to be unmarketable at the time. What’s changed between then and now? Maybe there’s a way to bring them out now that didn’t exist previously.

Next, take a look at your distribution networks. Is there a way to improve them? It’s not just about shopping around for new companies to move your product, it’s also about seeing where people want to go and evaluating if that place will be a good market for what you have to sell. Often if companies are already traveling someplace, they’ll have better deals on the transport.

Finally, take a look at your research. All of those studies that you commissioned, all of the tests you ran, labs you contracted to, have given you valuable information. I don’t mean valuable just in terms of being able to tell you what you need to know about your product, but valuable to others who may have a similar market area that they’re working in. They can commission their own reports or they can buy yours which is equally good data and probably cheaper. There’s no reason to let that information sit and collect dust when you can pass it along to another company and make back part of what you spent on it originally.

There are plenty of ways to innovate and find new sources of cash flow while also making your business more efficient, but they require you to take a look at your business with a fresh perspective. Re-examine the things that you once rejected with new eyes and you might find a hidden gem that was just waiting for you to use.

Major economic recession has become a part of our lives. It’s been building for years now (or descending, as the case may be) and the October crisis has made it very clear that for the time being things will be tight. However, that won’t always be the case, and it’s time for companies to realize that if they don’t start working to retain their best employees now, they won’t be able to when the options are once again open.

That is the upside of the economic crisis for many companies, isn’t it? Lack of opportunities mean that your best employees aren’t going anywhere, and the effort that it normally takes to retain them is unnecessary. “Employee retention” is simply a code word used to justify exorbitant and unearned bonuses. However, this has also allowed companies to acquire and use wonderful talent at prices they otherwise wouldn’t have been able to, making way for these talented individuals to potentially develop innovations that would help the industry, whichever industry it might be.

The problem is that the economy will not always be in a downturn. Eventually, it turns back up. If you look at the economic history of the United States, for example, you’ll see that since its inception it has undergone roughly 10-15 year bust-boom cycles that only ended in the mid-1940’s after New Deal reforms. We had roughly 50 years of prosperity that was then followed by a little over twenty years of market volatility surrounding the slow dismantling of those reforms. The economy will eventually start moving back up again, and the smart, dedicated employees that were such a bargain will find new companies to work for or strike out on their own and eventually be your competition.

The only way to avoid that eventuality is to start retaining them now. I’m not suggesting bribing them with string-free paychecks or unsavory proposals like some Mafia goon, but rather re-evaluate the way you deal with them. Instead of contractual bonuses, return to an older system where bonuses are given based on merit, and make sure that they realize that you’re showing your appreciation for their dedication and loyalty. Embrace informality and encourage discussion at all levels of the company so that your employees feel like they have a stake in the future of the corporation. Most importantly, structure your corporation in such a way that employees are not cut off from one another. If your top executives feel as if they are alone and not part of a coherent whole, they are more likely to see themselves as only beholden to one person, rather than a vital part of a working group.

Business owners and CEOs have been able to get away with a lot in the past few years because of a pervading feeling of “I’m lucky to have a job at all.” That will end though, and if you wait then you may find it’s too late to retain the brilliant minds you picked up on discount during the Recession Sale.

I’m a progressive by nature. I like to see things move forward, technology advance, people adopt new ideas that can be used to benefit all people. Which is why I’m completely astounded and flabbergasted every time I see people trying to take a new technology and cram it, wholesale, into an old business model.

Now, I understand why they’re doing this: the old way works. It makes money. New products require old timers like me to either come up with new ways to profit from them, or hire somebody younger to come up with those new ways for us. Neither option is attractive when the first fails and the second feels far too much like admitting defeat.

I recently read a post from Charles Day, one of our friends from The Lookinglass Blog, in which he describes an experience that he had with his cell phone provider attempting to provide “customer service.” Honestly, the attempt is laughable and I highly recommend reading the entire transcript.

However, while reading said transcript I couldn’t help but fall into an almost transient state of déjà vu. I remember having the exact same conversation a long time ago, it must have been the mid-90’s, maybe earlier (memory is the first thing to go). It wasn’t in text, but rather over the phone, and I was trying to understand why my phone provider required an extra charge for this thing called “call waiting” when it clearly states on my bill that it is “included.”

It seems that the definition of the word “included” hasn’t changed much, and continues to be “not a part of your plan.” However, the marked similarity with which Verizon is attempting to defraud their customers with antonyms and how my local company did strikes me as an attempt to maintain a business model based on conflicting and confusing terminology. It’s gotten worse over the years (look for a future post on credit card legislation), but the primary function remains unchanged. Couple that with consistent debates on whether to open cell phones to telemarketers or create a “cell phone listing,” and you have comfortable people trying to make the world feel like it did when they were younger and more in control.

It’s time to let go and accept that you’re moving on. There’s nothing wrong with it, and nobody is suggesting that you get on an ice flow and wave goodbye to your friends and family, but if you’re not willing to progress with the market, holding it back artificially is not going to do anything. It’s a losing strategy, and short-term returns will only translate into major long-term losses.

Anyone who reads this blog knows that I respect the advance of technology in business. I respect efficiency and I respect cleverness. However, I value responsibility above all of these, and I feel that business has been moving further and further from that.

The newest perpetrator in irresponsible behavior is the New York Stock Exchange and they are doing so with their new facility in New Jersey dedicated to fast trading. For those who don’t know what that is, it’s a new way of using computers to perform potentially thousands of trades every second. However, by its very nature this will do nothing but further destabilize an already very unstable market with tiny trades that make trending absolutely impossible.

Fast trading lends itself well to older trading strategies that will become even easier now, specifically sculpting, which can be incredibly dangerous in an unstable market.

Sculpting is where traders buy and sell incredibly quickly, usually for a profit of only a few cents per share, gaining a quick buck while keeping shares of companies in a perpetual state of flux. This can make it difficult or impossible for legitimate traders to actually purchase or sell shares of a company, preventing the price from settling from one second to the next and unnaturally altering the value of the stock.

The new NYSE hub will contribute to the instability that this kind of trading brings to the market. It has the potential to take an already shaky market still trying to get back on its feet after the crisis less than a year ago and further shudder it to pieces the same way that program trading contributed to the ’87 crash by mindlessly selling at the wrong times, exacerbating the problem. In this case, the problem is quick-money traders looking to manipulate the market in tiny ways that add up very quickly, and a fast trading hub in New Jersey will do nothing but make it possible for this irresponsible behavior to continue.

LLCs (Limited Liability Companies) are a relatively new form of business structure created by state statutes, but one that is gaining quick popularity. There are a lot of real advantages to registering your business as an LLC, mostly evident in flexibility. There are drawbacks, too, but for many eligible companies, this is a sound way to go.

Before we continue, I want to point out that the “C” in LLC is for “company,” not “corporation.” In fact, LLCs are specifically unincorporated associations, which give them a greater ability to alter their structure as needed for the good of their business.

The primary advantages to having an LLC are in terms of taxation. You can register the company with the IRS as a sole proprietor, partnership, S corporation, or C corporation, (Check-the-box taxation) always assuming that it would otherwise fit the criteria for such. That being the case, so long as it’s not registered as a C corporation, you have the availability of pass-through taxation, which basically means you don’t have to worry about being double taxed on the same income.  Owners are called “members” and are taxed at the member level with this type of structure.

Even more importantly, however, is that members are protected from liability for acts and debts of the LLC. This means that if another member makes poor financial decisions that cause the LLC issues, you won’t necessarily be held responsible. In most states LLCs are considered separate legal entities from the individual members, leaving more direct responsibilities with individual partners in the company and alleviating a lot of the “rise together, fall together” mentality that has been so prevalent in the business world since the conception of business partners.

There are, of course, some disadvantages. For one, the structure is still reasonably new, so investors are less likely to back a system that they are unfamiliar with. Even worse, some will require that members agree to be personally liable for debt accumulated by the company, which of course misses part of the point of an LLC. Some people are unfamiliar with a company that doesn’t have to have officers like a corporation, and taxation jurisdictions outside of the US may tax the LLC as a corporation regardless if you’re operating there.

That being said, most of the disadvantages associated with LLCs are based in their unfamiliarity. That will be cleared up in time, but the potential advantages far outweigh those, as well as the advantages of being at the front of this.

So consider that your business might benefit from being an LLC. Not all companies will work best with this structure, however don’t be afraid of it because of unfamiliarity. It might be what you need to run the best, most efficient company that you can.