HR, or people management, has a vital role to play in driving long-term performance in SMEs, whatever stage of growth the organisation is in and whether or not the organisation has a dedicated HR function. That’s according to the latest research by the Chartered Institute of Personnel and Development (CIPD): Sustainable organisation performance through HR in SMEs.
Based on research with four case study organisations and drawing on the experiences of four additional HR directors and business leaders, the study has uncovered four key stages of organisation transition in SMEs, each associated with different opportunities and challenges for people management: entrepreneurial edge, emerging enterprise, consolidating organisation and established organisation.
The research identified six key insights for HR practitioners in SMEs as well as those who are responsible for HR activities but may not have HR explicitly in their job title:
1. Anticipation is key: readiness and relevance will determine success – HR must have a deep understanding of the organisation’s context, strategy, vision and values in order to anticipate key stages of growth and transition that may require a shift in HR strategy and practices.
2. Organisation values and purpose need to be the constant bedrock of the business – HR must work hard to preserve the owner/leader’s founding vision and values by making them vibrantly part of how the organisation and its people work on a day to day basis, as well as ingrained in the organisation’s people management processes.
3. Skilful alignment of people management insight with leaders’ aspirations is a critical HR challenge – while leadership appetite for the more intangible HR issues may be limited in the early days of the business, HR must be confident in using its insight into current people management issues and future challenges to ensure its potential to influence long term performance is not overlooked.
4. Simplicity of structure and purity of process preserves innovation and entrepreneurship – although more processes and structure will be needed as an business grows, it’s important to find the right balance between structure and fluidity so that agility and entrepreneurial spirit are not stifled or undermined by bureaucracy
5. Sustainable growth involves striking a balance between preservation and evolution – rather than being sentimental about what has always been, it is often necessary to let go of processes or aspects of the organisation’s culture that no longer support its vision and priorities.
6. Look beyond immediate operational issues and take the opportunity to lay the organisation’s cultural foundations for the future – process driven responses to challenges as a business grows may only provide short term solutions and miss a golden opportunity to support the longer-term goals of the organisation. particular
Dr. Jill Miller, research adviser at the CIPD, comments: “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. With larger teams, the skills and capabilities of managers become of paramount concern, and maintaining people’s strong engagement with the organisation’s purpose and vision becomes more challenging as the distance between the owner/founder and employees increases.
“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.”
Building on this research, the CIPD will be producing a practical tool with activities, checklists and further case study examples to support HR professionals in SMEs.