With talent shortages in the UK, small businesses and entrepreneurs ignore HR at their peril
Employees are the most important resource of any business. This is especially true of small businesses where one person represents a significant proportion of the output, and if they aren’t pulling their weight productivity can dwindle. So given that HR managers have the responsibility of hiring the right people in a climate in which there is a shortage of talent and ensuring those people are fully trained and developed, they’re viewed as a pretty vital and strategic element of everyday life in SMEs, right? Wrong.
We’re sorry to break it to all you HR managers out there: you aren’t always the most popular bunch. Complaints range from “I wasn’t paid on time” to “do we really need to waste more time on another meeting?” However, this usually comes down to a lack of understanding on the part of a business as to what HR is for. While big businesses seem to understand the value of having a professional HR staff, most smaller companies think they cannot justify the cost.
Cougar Automation provides consultancy and automation software solutions for world-class manufacturing clients. When Clive Hutchinson bought Cougar in 2001 it was making a substantial loss. Through his creative approach to management and fostering of an open and collaborative culture, profit more than doubled and Cougar made it into the coveted Sunday Times Best Companies to Work For in recognition of his excellent approach to people management. Hutchinson achieved all of this without having a dedicated HR team.
“Without HR, the leaders within the business actually get practice of managing a team directly without the interference of people sitting at the side who are divorced from really what’s going on,” explains Hutchinson. “The things achieved through HR are very good things to be done but they should be done by the leaders of the business, not by people attached to the side.”
All SMEs have to deal with HR issues but most aren’t getting the kind of traction Cougar is getting. They may be ignoring HR at their peril. With a lack lack of engagement and a shortage of talent prevalent in the workplace, maybe it’s time to reconsider.
Charlie Mowat is the managing director of the Clean Space, which provides ethical cleaning services to commercial spaces in London, Manchester, the Midlands, Gloucestershire, Bristol, Cardiff and Brighton. Mowat is committed to changing the way cleaners are treated and paid in the industry and has recently discovered how useful a dedicated HR team can be in delivering on this. “Overall we have much more engaged staff than previously,” says Mowat. “I used to think HR was a box-ticking exercise, and so we didn’t bother.”
In January of this year Mowat took on a HR person and has described the “revelation” in his thinking. “HR has added a lot more than I expected and helped me understand the power of HR in a better sense.” CleanSpace has seen not just an improved recruitment process but staff are now sticking around longer.
Mowat also sees the value of HR managers when it comes to the law. “Small businesses get burnt with things like tribunals and would greatly benefit in this regard by having a better understanding of HR.”
Serial entrepreneur David Lester similarly felt frustrated by employment legal issues and red tape. That’s why he started citrusHR, which provides an affordable HR solution, allowing small businesses, startups and charities to focus on growing their business while avoiding legal pitfalls. Subscribers also get monthly employment law updates and access to fully qualified HR consultants by phone.
“The burden of trying to keep up with the law and looking after all their staff’s needs while trying to keep customers well served is almost unbearable for smaller employers. The result is often small businesses make silly mistakes that often cost them large sums in fines or compensation,” says Lester. Employment law is becoming more complex and the costs of getting it wrong are ever higher. An HR department can act as a personal specialist on employment law. Whether it is poorly performing employees, sickness absence issues, disciplinary or grievances, redundancies or TUPE transfers, a HR presence can be very useful.
“It is true for most small businesses that its most valuable assets leave at the end of the work day, yet the most common factor keeping business owners awake at night is staff problems,” says Lester. He believes that HR is something most small businesses can’t afford to do without and given the increasingly accessible nature of tools and services there really is no excuse.
“You don’t need someone in-house – tech advances mean there is now a system which stores all employee records securely online and even automates processes like generating job offers and contracts or processing forms for maternity leave online, saving hours and hours,” Lester adds.
The popularity of the outsourcing of HR has accelerated over the past decade. It’s not difficult to see why: it allows companies to offload work that isn’t part of their core business and is often a cheaper option than a permanent hire. If you look at the wide-ranging traditional duties of human resources, it’s no wonder that companies are seeking outside help. HR is supposed to be responsible for finding, developing, retaining and training the best people. It can also be responsible for benefits, compensation, employee and labour relations, business partners, data collection and legal issues.
Portus Consulting, founded in 2003 by Stuart Gray, advises SME clients on every aspect of employee benefits, from choosing the products that are right for their business to helping them show employees the value of their benefits. Additionally, it also provides prompt, professional and commercially focused advice that reduces business risk at a competitive cost.
“For me if you have ambitions to move your business forward then HR is a must,” says Gray. He said SMEs would, however, be better served by a HR consultant rather than a department. “A department is unnecessary and costs a lot of money whereas a consultant costs a few thousand pounds a year and pay for themselves by reducing risk to the business and allowing people to focus on driving forward pro-actively, rather than getting bogged down in day-to-day HR matters, which are not their area of expertise anyway.”
Another option is to hire a part-time HR director. Julia’s House, a charitable hospice run by Martin Edwards, hired Diane de Souza to work three days a week in 2008. Based on the size of the organisation – it’s 70-people strong – and growth ambitions, the decision was taken to professionalise the function, hiring a strategic HR professional to shape the organisation’s people agenda in line with Julia’s House’s values and its strategic ambitions.
“We didn’t just want someone to do the people administration and set the policies and procedures associated with good people management. We wanted someone who could make a significant contribution to the organisation through developing a strategic people approach to help the organisation grow and deliver on its promises of an excellent standard of care,” says Edwards.
If small firms invest properly in HR it saves a lot of time and money because if you do things right in the first place you will spend far less time managing grievances, disagreements, complaints and disputed departures, he adds. “Those that don’t have expert guidance in that regard will haemorrhage time managing those situations and the better you get at your HR practices, the better you retain your staff and inevitably spend less money on recruitment.”
It’s safe to say in this kind of arrangement both parties need to be flexible. This will help allay any fears that a part-time HR manager may not be around when you actually need them, reassures Edwards. “So long as that person is contactable during the rest of the working week, then you can get by with a part-time person. We also have a HR expert on our board, so when Diane isn’t available we always have an expert to call upon.”
HR is something of a journey. At many SMEs, management simply don’t know what HR can do for their businesses. But founders must become aware of the strategic value of HR at a time when there is a severe shortage of talent. Not only does that have ramifications for future hires but those already in the organisation: as the economic recovery gathers pace and more jobs become available, it may be your most valued employees heading for the door.
There was a time when marketing and finance weren’t invited to the management table but now they have found their place. The time has come to see the relevance of HR to the development and success of SMEs and invite them to the top table too.