HR Strategies for SMEs – Part 1

Although I’m sure there are plenty of HR consultants who will disagree with me, it’s not essential to have cutting edge and best practice HR initiatives in every business.

Every decision you make in business needs to have a commercial basis, and spending time (and money) on human resources will come at an opportunity cost.

You must decide what the right balance is for your business and make decisions that will yield the highest return on investment.

That may be investing in human resources, or perhaps it may be marketing and promoting your business, spending time developing a new product or service, or reducing your operating costs.

But there are ways you can improve your HR management by focusing on the areas that are most important to your business.

To get started, here are a few essential HR practises that businesses (regardless of size) must have in place to mitigate potential risk:

  • Employment agreements which are compliant with relevant industrial laws and protect YOUR business.
  • Appropriate policies (e.g. safety, discrimination and bullying) that meet your obligation as an employer to provide a safe and discrimination-free workplace for staff.
  • Appropriate record keeping (i.e. staff, disciplinary and termination files) and processes to protect you from potential litigation and adverse action by current or former staff.

If you don’t have these in your business, you are exposing yourself to unnecessary risk.

If you are unsure how to implement these practices speak with a HR consultant who can make this happen for you.

There are successful businesses that have very little emphasis on human resource development.

However, if you answer yes to any of these questions, investing in human resources management and development in your business will yield a positive impact:

  1. Is your business heavily reliant on the knowledge and relationships your staff have with customers, clients or suppliers?
  2. Would you like to improve the performance and productivity of your staff (and business)?
  3. Is your business reliant on decision making and input from you at levels you would prefer not to be involved with (i.e. are you working IN your business rather than ON your business)?
  4. Do you anticipate increasing your staff headcount (growth strategy) in the next three years?

If you answered ‘yes’ to these questions, here are some HR strategies to consider.

Retention Strategies

If your business relies on the knowledge and service of your people, you need to work hard at retaining your staff.

Retention strategies are not solely based on salary or financial bonuses.

If you are an SME it’s unlikely you’ll be able to compete with the large multi-nationals on salary.

However, think of the great benefits you offer that they can’t (e.g. variety of work, autonomy, direct access to the boss).

If you speak with your staff you’ll quickly discover what they value about working in the business, and then build from there.

While you should be able to find a lot of low, or no cost, initiatives that will positively impact retention (see my previous blog – How to Motivate Employees) be prepared to spend money as well.

Think of the cost and risk of losing a key staff member. What would that do to your business?

It’s worth spending the time and money to keep key people rather than risk losing them through inaction.

In addition, basic compliance measures such as IP, Confidentiality and Restraint of Trade clauses in your employment contracts will protect you from staff potentially setting up a business in competition to you or poaching key customers.

Performance and Productivity

Do you currently link the KPIs of your staff to your business strategy? Do you even have KPIs?

Many businesses operate without job descriptions and KPIs, which can make performance measurement (and subsequent reward) difficult.

When developing KPIs for staff, ensure they are meaningful and demonstrate a link between their performance and overall business success.

Once you’ve developed meaningful KPIs and accountabilities for staff, you can then put in place measurement and accountability tools.

While I occasionally come across people who don’t put much effort in, 99% of staff I work with actually want to make a difference and have an enormous sense of pride about their contribution to their small business.

The final factor in improving performance and productivity is motivation. You can define what people need to achieve to meet goals, but if you can’t motivate them to want to achieve you’ve lost the battle.

So how do you motivate staff?

It will be different depending on the individual. The common mistake I see being made by SMEs is using money as a motivator.

I have written about the pitfalls of this in my previous blog – Why Money Isn’t A Great Employee Motivation Strategy, so won’t cover it here, except to say that SMEs can’t afford to compete with larger organisations on pay and it is not an effective motivator.

In my next blog I’ll provide further HR strategies for businesses entering the growth phase.

Meanwhile, I’d be interested to hear your strategies on how to retain and motivate staff. Look forward to hearing your thoughts.

Vantage Performance is Australia’s leading business transformation and turnaround firm – solving complex problems for businesses experiencing major change.

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