Time for SMEs to get strategic with HR?

It’s probably fair to say that HR strategy isn’t at the top of the agenda in a busy SME. With a limited number of staff to go round – and particularly at a time when economic conditions are tough – the focus is most likely to be on meeting the day-to-day demands of clients and winning new business.

I spent some time last week at the HR Software Show listening to SMEs talking about their HR issues. It was clear that when it comes to HR, they see their biggest challenge as finding ways to deal time and cost-effectively with the transactional stuff that comes with the territory of employing people. There usually just isn’t time to take a longer-term, strategic view of the people issues – whether they have a dedicated HR person or not.

New research from the CIPD, however, suggests that looking beyond the day-to-day and getting the people strategy right is vital for the growth and continued success of an SME. The recently published study (Sustainable organisation performance through HR in SMEs) that’s available to CIPD members highlights that SMEs face different people challenges at different stages of their growth.

In the early entrepreneurial days, the owner-manager knows everyone personally and can deal with HR issues on-the-spot without the need for formal processes. As the business grows, however, the leader inevitably becomes more distanced from employees. A more formal approach has to be taken to HR, policies and processes need to be introduced and it becomes more difficult to keep people enthusiastic and engaged.

Often, decisions about issues such as recruitment or performance management are made ‘on the hoof’ in response to an immediate need, rather than in a considered way that takes the long-term growth plans of the business into account. The business loses the raw excitement of the early days and there’s a danger the original vision and ethos of its founder gets lost.

If this sounds a bit like your business, you might want to look at the six key insights, put together by the CIPD, for HR practitioners (or those with responsibility for HR) in SMEs. With apologies to the authors for a condensed and simplified version, here’s what they have to say:

  • HR people need to understand exactly where the business is heading and how it’s going to get there so that they can develop an HR strategy to match.
  • HR needs to help employees understand the vision and values of the business – and to make sure these guiding principles are reflected in the HR policies and processes they put together.
  • HR issues need to be high on the business agenda – and HR managers need to ensure those at the top understand the importance of good people management and the contribution it can make to business growth.
  • It’s inevitable that more process and structure will be needed as the business grows – but HR must make sure the early ‘entrepreneurial spirit’ isn’t stifled by unnecessary bureaucracy.
  • Those responsible for HR need to strike the right balance between preservation and evolution. In other words, don’t hang onto practices that are no longer fit for purpose as the business grows.
  • SMEs need to look beyond the immediate operational issues and make HR decisions that are good for today, but also support their longer term goals.

The CIPD is planning to use the findings of its research to inform development of a practical tool-kit for HR professionals in SMEs. Watch this space for more details – and let us have your views on the importance of a strategic approach to HR.

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  1. Obviously HR in SME’s can be just as strategic as in larger organisations. I think many of the things larger organisations label “strategic” need a critical reappraisal. Take a look at my blog, provocatively entitled “Easy ways to make HR strategic” at employmentmarketing.blogspot.com

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