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HR in SME’s – Are your practices appropriate?

Achieving sustainable organisation performance through HR in SME’s.

A summary of the CIPD research paper.

The CIPD study identifies the four distinct stages of SME transition that HR need to pay attention to, each characterised by different People Management issues and opportunities. It also identifies inflection points between each stage where HR practices that have worked to date may no longer be appropriate going forward.

The four stages and their characteristics are:

Entrepreneurial edge: The start-up stage characterised by informality & an emerging strategy, flexible job roles, with learning mainly on the job and reward mainly focussed on salary determined by the owner possibly supplemented with share options plus the legal minimum benefits. There is usually no formal HR, with people issues dealt with by the owner, whose vision & values drive practice.

Emerging Enterprise: This stage is typically characterised by the formalisation of the structure and job roles and introduction of high level processes, whilst flexibility remains important. HR policies & processes are introduced though HR tends to be mainly at the transactional level. As organisations grow and new layers are added the gap between the owner and employees increases. Effective communications that reinforces the vision & values becomes key and there is a letting go of the reins from the owner to trusted lieutenant manager(s.)

Consolidating Organisation: This stage of transition is often characterised by by reflection and improvement to allow space to consider future direction. The business strategy by now moves from emergent to planned providing the opportunity for a more forward thinking HR approach to be adopted. Alignments of performance goals to strategy become increasingly important as does career and management development as the business seeks to develop the loyal staff that have grown the business. Building effective two- way communications increases in importance as do approaches to maintaining strong employee engagement particularly where the organisation is dispersed. Some organisations start to take a more systematic approach to other HR activities particularly in aligning reward to the future success of the business. Although HR policies & processes are in place cracks appear due to growth or a changing business context. Here HR needs to take on a more pro-active role to evaluate the organisation’s health in facing the next stage.

Established Organisation: HR initiatives now become more strategic and need to be aligned to the organisation goals and a deep understanding of both the context and evolution of the business, including it’s capabilities and weaknesses. The Organisation’s vision and values provide the golden thread through which HR initiatives, (including reward,) weaved. A total reward package is now more common with attention focussed also on non-financial rewards such as job enrichment & talent development.   There is also a noticeable switch from management to leadership development in harnessing the capabilities of the senior team.

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People Management in SME Companies. 

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