HR management vital for SMEs

Small businesses should not overlook the 'fundamental' role that human resources (HR), or people management, can play in driving long term performance, says the Chartered Institute of Personnel and Development (CIPD).

Research based on studies with various SMEs, HR directors and business leaders, found that SMEs could benefit from better HR management, regardless of their size and whether it has a dedicated HR department or staff.

The CIPD said that SMEs often overlook HR practices because of 'restraints on material and finances', although this only further necessitated the case for better employee management.

Research adviser at the CIPD Jill Miller, said: "SMEs are vital to the UK economy, but with limited material and financial resources, good people management is fundamental to their long-term performance and growth."

"As an organisation's workforce grows and the scope of operations changes, particular challenges arise, particularly when it comes to balancing the need for formal systems and processes with the desire to preserve value-creating innovative and entrepreneurial cultures."

According to the CIPD, business performance of larger SMEs particularly relies on a manager's attitude to HR issues. This is because a business's purpose and vision becomes more challenging as the distance between the owner and employees increases.

Its report uncovered six key points which SMEs should consider in regards to HR:

  1. Anticipation: SMEs should have an understanding of the business's position in the market, strategy, values and forecasts, in order to anticipate business challenges which may require a change in employee management.
  2. Business values and purpose: HR can enforce the owner/leader's business vision by filtering values down to employees and how they work on a daily basis.
  3. HR and alignment with management goals: Cooperation between HR and management can be challenging, but should be working together as both directly contribute to performance.
  4. Balance between simplicity and HR structures: Growing businesses need to strike a balance between growing HR needs and fluidity if the business is to work effectively.
  5. Embracing change: Sustainable business growth requires regular reviews to its HR strategies. Previous processes that no longer support a business's vision should be ended or changed.
  6. Forward planning: HR should look beyond current challenges and work towards the longer-term goals of the business.

Jill Miller added: "Whether responsibility for people management rests with the owner/founder, office manager or HR practitioner, it is through anticipating and responding in a timely way to the people management opportunities and challenges presented at different stages of growth that an organisation can achieve competitive advantage."