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HR challenges and opportunities for SMEs 

HR for SME and New Businesses | HR Solutions

The 5.9 million small to medium sized enterprises (SME) in the UK, face challenges including managing cash flow, generating new business, creating an effective marketing strategy and effectively managing HR issues. Current concerns about the Brexit transition, a national skills shortage and uncertainty over employee status are all added pressures for small business owners and HR leaders.   That is without even mentioning the Corona Virus.

By concentrating on developing key areas of the business such as internal structures, culture, processes, and practices, SMEs can not only overcome these challenges but transform them into opportunities to help them grow and thrive.

HR and SMEs

Dealing with red tape, regulations are often the top most time-consuming activities for an SME. Managing employee performance, recording holiday leave and monitoring absenteeism are also other issues that distract people from being able to do their core job of running a business. While it’s crucial that businesses spend time on HR and observe certain processes, it shouldn’t come at the expense of business expansion or even its survival.

Many small to medium employers strive for excellence and need their employees to go that extra mile to help the business differentiate itself from other businesses, particularly larger organisations. With this in mind, instead of seeing HR as simply a compliance issue or ticking box exercise, businesses should view it much more strategically.

Maintaining an entrepreneurial culture

In the early days, SMEs are generally full of aspirations and potential and enjoy a culture that is fun, energetic, fast-paced and above all, entrepreneurial. They are often comprised of a young ambitious team that works closely with one another and managers and founders of the business. However, as the business begins to grow and teams become larger with less frequent interactions with the top-level management, the business can often lose its entrepreneurial spirit. This can lead to employees feeling less valued and engaged.

While challenging, HR can play a pivotal role in maintaining the culture through keeping everyone involved, informed and engaged across the business. By utilising social media and internal communication platforms, HR can communicate about critical developments both inside the business and industry-wide by sharing successes and listening to ideas and employee grievances. This helps to keep everyone connected as the business grows.

HR documents and employment law

Young businesses find it a challenge to stay up to date with the basic employment law regulations and requirements for the paperwork they are required to have in place. This includes employment contracts, disciplinary policies, grievance policies, and a health and safety policy if they employ five or more people. A crucial function of HR must be to meet all minimum employment law regulations such as handbooks, contracts, policies and procedures, and job descriptions. While these are all legally binding documents, they can also rapidly become out of date as employment legislation is constantly changing.

While SMEs must know the minimum legal requirements, it’s worth considering investing in bespoke policies and contracts to provide extra protection for the business. This helps to ensure they are relevant and current and can add the most value to the business.

Performance and personal development

For SMEs, managing talent is a significant challenge facing HR. Management time is generally focused on growth and scale and performance appraisals can often be poorly structured or just not documented at all. This is often because other structures such as competency framework, values, and job descriptions are not well defined.

However, when carried out effectively, a performance management system aligns the efforts of every employee with the overall company goals. This ensures that everyone plays their part or at least understands their role in the company’s overall success. It also ensures that employees have the appropriate training and development in order to be effective and make it easier for them to do their jobs. SMEs have the advantage of being able to keep systems flexible while focusing on four key goals:

  1. Align employee activity to the goals and strategies of the business.
  2. Good quality two-way communication between line managers and staff.
  3. Identify the learning and development requirements of each individual employee to ensure they always have the appropriate skills to do their job.
  4. Identify the employees who add the most value to the business and target them for future opportunities.
Employee recruitment

Recruiting the ‘right’ talent is one of the top challenges for HR in small organisations. Stiff competition, a limited pool of qualified candidates and the inability to offer a competitive salary are some of the common recruitment constraints for SMEs. Inadequate branding and the perceived risks associated with a young business can also make them less attractive to potential employees compared to bigger and more established organisations.

However, there has been a significant perception shift in recent years and qualified and experienced people are now keen to take up senior roles in smaller enterprises. SMEs often have exciting profiles and offer diverse roles and responsibilities combined with good benefits packages.

While many growing businesses are focused on sales and profit, they often fail to focus attention on employee issues until they become urgent; but the importance of HR in contributing to the growth of SMEs cannot be underestimated. With the right tools and HR expertise in place, supporting your workforce and dealing with business regulations should be viewed as a core business strategy.

HR Planning and Support

HR Solutions can help you formulate your HR Strategy, through an engaged exercise to help explore your company’s objectives and overall vision for future success. To find out more call, call us on 0844 324 5840 or contact us online.

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