The sheer diversity of approaches to HR within SMEs was one of the things that particularly struck me while listening to speakers at a recent CIPD conference.
The businesses taking part had widely varying takes on everything from recruitment and reward to performance management and the formality (or otherwise) of their people processes.
Much of this, of course, was due to the fact that the SMEs in question were at different stages of their development. Some were very much ‘fledgling’ businesses still feeling their way, while others were established operations with a firm foothold in their markets.
One thing they did all appear to have in common, however, was a conviction that HR had a key role to play in supporting the business through its various stages of transition.
A recent research report from the CIPD (‘Achieving sustainable organisational performance through HR in SMEs’), outlines the four key stages of growth SMEs typically go through and pinpoints the HR opportunities and challenges that are likely to arise at each stage.
It provides a great reference point for SMEs who want to make sure they are anticipating the people issues that lie ahead and are ready to respond. So where is your business currently sitting within the four stages – and what issues should you be pro-actively preparing for?
At this stage, SMEs are typically informal with fluid structures and flexible job roles. There’s often no formal HR person or department and people management is generally dealt with by the owner or MD. As the business grows, however, and more people are recruited there comes a point where a more formal approach is required. The key decision that has to be made is whether people management should be retained by the owner, delegated to an existing member of staff or whether a dedicated HR professional needs to be recruited.
The next stage of growth is typically characterised by a slightly more formal approach. An organisational structure emerges and policies and processes are put into place. The business is, however, still growing rapidly so some flexibility remains. HR practice tends to be reactive rather than strategic – responding to immediate needs to recruit more people for example. There is, however, a tipping point where a short-term knee-jerk approach no longer fits the bill. The real HR challenge is to introduce a more strategic, structured and consistent approach to people management – without becoming too prescriptive and bureaucratic and stifling innovation.
This third stage is when the business tends to take as step back, reflect on where it’s got to and decide on future direction. The business strategy is now planned rather than emergent and there are typically more layers of management. It is at this point that the cracks can begin to show if the HR strategy and process no longer fit with the planned future direction of the business. The key issues that need attention at this point are culture, employee engagement and the ability and willingness of people to share knowledge and work collaboratively. HR needs to think carefully about what it needs to ‘stop’ doing – because the processes or approaches that have worked in the past are no longer appropriate or are failing to add value.
In this final stage, the focus moves to cementing the performance of the business and setting it up for long-term future success. HR’s role at this point needs to become more forward-looking and outward-facing. The key to success is to develop a deeper understanding of the market the business is operating in and the opportunities and challenges it faces. It’s about identifying the capabilities and skills the company will need going forward, and making sure the HR strategy is supporting the businesses long-term goals.
Which stage of transition have you found most challenging? We’d like to hear your views.