Management and employees both love and hate the "employee handbook," a compilation of "dos and don'ts" that is a staple in the workplace for most large corporations. From the employees' perspective, handbooks never precisely address their unique situation; for employers, the balance between rigidity and flexibility is seldom comfortable. But for entrepreneurs operating a small company (5-100 employees), living without a handbook can be a foolish risk.

The American Heritage® Dictionary of the English Language: Fourth Edition 2000 defines an entrepreneur as: "A person who organizes, operates, and assumes the risk for a business venture." The question is whether or not small business owners can afford to operate without formal employee policies.

About five years ago, a local female professional left her corporate job with a well-known company because of frustrations with the "big-company cookie-cutter machine." She wanted to start her own company where people would be treated like family and as individuals.

The first few years in business were challenging and rewarding in terms of the five employees she hired. They were a close-knit group, focused on making the business a success. Business growth necessitated hiring someone to manage production.

The person hired started off well, but within nine months, she began coming in late, leaving early and taking a significant number of days off for her sick child. Her co-workers complained to the business owner about the unfairness.

When it came time for paid vacation, she received the same as everyone else who had worked full shifts and taken fewer days off. In fact, when questioned by complaining employees, the business owner couldn't remember what she said about how many days off each person deserved.

When the business owner approached the production manager, she was met with disdain. The employee responded with "I thought we were pretty loose here—aren't we supposed to be all about 'no rules?' As long as I get my work done, what do you care?"

This incident ultimately led to the development of time off policies covering such things as work hours, absenteeism, sick time, vacation time and unpaid time off. Although the employee handbook developed was quite simple in comparison with those used by large companies, employees applauded it as a big step toward fairness. Key to the business owner's success was the fact that she had a group meeting to review and discuss the content.

Small business owners often find they have little time to deal with every employee's individual circumstances. Although the intent of treating everyone as unique and special is noble, the result is often catastrophic.

For small businesses, referring to the handbook as an "Employee Information Guide" may be a more positive approach. It's tone and language can reflect the culture of the company—even approaching casual and fun. It only takes one employment claim or disgruntled employee to demonstrate that core policies and procedures are beneficial.

Key reasons why small businesses need a handbook:

• In the absence of a policy, past and present practices become policy.
  
  
• Small companies must comply with most of the same laws as large companies. At five employees, most state anti-discrimination laws apply. At 15 employees, the Civil Rights Acts, Americans with Disabilities Act and Federal Pregnancy Discrimination Act apply.
  
  
• Communicating mutual expectations about time-off entitlements, performance and behavior expectations may reduce liability.
  
  
• A well-written "at-will employment" disclaimer, outlining the employer and the employee's legal right to terminate the employment relationship at any time, can strengthen a business owner's right to terminate an employee.
  
  
• Employees want to see the same standard applied to everyone.

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Authored by: Danielle Rodenbough, principal of Trouble At Work (TAW), a Human Resources Consulting firm, in Leawood, Kansas that specializes in small businesses. She may be contacted at 913-345-8592 or danielle@troubleatwork.net
Source: Creating Quality Newsletter, Volume 12, Number 7, July 2003

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