This attitude means that many business owners only reach for an HR professional once there is a problem which needs fire-fighting (problems which may not have arisen, had there been an HR presence in the first instance!). However, in an increasingly crowded market place, companies are often only able to differentiate themselves by executing more effectively than the competition. Therefore, by neglecting HR, many SMEs are missing out on a golden opportunity to increase their productivity by aligning business objectives with people management, leading to the following catalogue of errors:
2. Lack of clear goals and common purpose
Small business tend to have an informal company structure, in which roles, responsibilities and reporting lines may be fluid, at best, and unclear at worst! Meanwhile, clearly articulated business goals may be non-existent. Often, smaller organisations may see formal structures and company mission statements as “too corporate” and inflexible.
However, even the most skilled and driven employees need to understand how the business makes money and what their roles are in making this happen. For example, if any random employee cannot answer the question as to what they need to increase their performance related bonus (assuming there is one!) then more communication is needed to make this link clear. Any concerns regarding flexibility can be addressed by recruiting employees with the right attitude; rewarding flexibility through your performance management process, and by incorporating a flexibility clause into contracts of employment.
3. Sub-par recruitment
While an employee may get a job on the basis of their technical skill, they may well lose the job based on their personality! For example, an employee who has succeeded in a large organisation may flounder in a smaller company if they do not possess the drive, initiative and flexible attitude needed to “roll up their sleeves and get the job done” in a smaller business with fewer resources. Therefore, all businesses need to ensure they do their utmost to recruit the best people with, not just the right skills, but who also “think not what the business can do for them, but what they can do for the business”.
Similarly, employees are often promoted into management roles on the basis of job tenure. This may mean that people who have no interest in management, or who do not have the right motivation to be an effective manager, are inappropriately promoted (we have all come across true-to-life “David Brents”!).
4. Inconsistent employment decisions
Understanding and articulating the skills, aptitudes, attitudes and behaviours (collectively known as “competencies”) that matter to your business should form the backbone of your performance management strategy. Once articulated, you can then use competencies to recruit, reward and develop employees who demonstrate the right behaviour that will help your business succeed.
In the absence of such a “competency framework”, different managers may apply their own arbitrary criteria to employment decisions. The resulting inconsistencies can reduce efficiency, if people are not all pulling in the same direction, and lead to compliance issues such as discrimination. Inconsistent decisions may also dilute the effect of other HR policies. For example, if an employee is being managed for poor performance, it would be consistent to ensure that they did not also receive a merit increase in salary. Therefore, SMEs can make the most of their resources by identifying the right competencies for their business, and ensuring that they are integrated consistently with all employment decisions.
5. Training is seen as a “nice to have” cost
Effective organisations ensure that they have the right people, with the right skills, in the right jobs today, and for the future. However, SMEs often resist talent management, seeing training and development as a “nice to have” cost to business.
As a result, SME managers may not fulfil their potential in the absence of any management training and development, especially when newly promoted. However, the government Growth Accelerator (GA) initiative supports eligible SMEs by matching up to £2,000 spent on training management and leadership training for each senior manager. Access to GA funding effectively halves the cost of management training, while some HR consultancies offer cost-effective training by pooling resources for a number of different clients. These developments mean that professional training and development activities are now well within reach of many smaller organisations.
“So concludes 5 of the top 10 HR mistakes made by SMEs… Join us again next week for further insights into how SMEs can organise themselves to get the greatest return on their human capital. And how to use technology to harness the same state-of-the-art performance efficiencies as larger organisations….”
Karen Hill is Director of Nickshot Ltd, a consultancy which offers high performance human resources and payroll solutions to SMEs. A postgraduate of the LSE and Fellow of the Chartered Institute of Personnel and Development, Karen has worked in HR for 19 years, 15 years’ of which in senior management within an SME environment. If you are interested in finding out more about Nickshot’s offering, you can contact Karen on email@example.com or 07956 213119.”