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CIPD Research classifying Characteristics of HR in SME's

Stage of growth

Organisation’s People Management characteristics

Entrepreneurial edge

High levels of informality, emergent strategy, owner’s vision and values drive practice. Organisations reliant on peoples implicit know how, structures are fluid and job roles highly flexible. Owner tends to make all decisions around pay & reward who also takes responsibility for people management issues.


 Emerging Enterprise

A formalisation of the structure develops with teams and job roles forming, some procedures and policies are established to create operational consistency. There is growing awareness of the need to manage employment issues more effectively with the establishment of HR policies and processes. This need for consistency is counterbalanced by a need to react quickly to maintain flexibility to react to immediate issues.

 Consolidating Organisation

 As the organisation continues to grow, the owner has to take a step back & to consider the future business strategy which is transitioning from emergent to planned. There is now a need for someone with people responsibilities to ensure that people and management practices continue to support the organisation’s goals and values. A focus needs to be on retaining critical staff through effective retention strategies and to develop staff with people management responsibilities. This stage is also characterised by the introduction of additional layer of management with operational functions becoming more dispersed and less mutually dependent. Formalising communications becomes increasingly important to maintain effective two way dialogue. 


Established Organisation

A key characteristic for the continued growth of the business is for those having responsibility for people management to understand the business strategy and to understand the capabilities, culture and weaknesses of the business. A deeper understanding of organisation design, change management, culture, employee engagement and cross functional team collaboration become increasingly important requiring a skill set that the organisation may not have internally. The organisation’s vision and values need to become the “golden thread” underpinning all HR initiatives and become embedded in the HR policies and processes now more widely adopted by the “new leadership team” who are likely to require development themselves to fulfil their new roles.


Some SME Analytics

Company Category



UK employees


< 10

< £2m



< 50

< £10m



< 250

< £50m


  • Includes 2.8m sole proprietorships.

SME’s represent 59.1% of those employed in private sector companies. The CIPD has carried out a research study into the role of HR in these SME' focussing on how the most suitable HR practices change during periods of organisation transition. They identify four transitional stages illustrated below:

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