So when should an SME start to plan and consider their people strategy?

Typically, most SMEs have limited resources with individuals wearing many hats and mucking in to get jobs done including those related to HR.  Whoever is the least busy gets to hire the next employee, to Google the answer to a query or deal with the staff moans and groans.  HR is seen as a barrier to growth or at best a necessary evil, neither of which is likely to encourage a SME to create and adopt a HR strategy.

Whilst many SMEs including those who are service based survive initially, 60% fail in the first 5 years – having no plan and poor management being in the top 10 reasons for failure.  In addition, not all those who survive reach their growth potential.

So when should an SME start to plan and consider their HR strategy?

There is no magic formula or set time but for many it is when the owners or senior management seem to spend more time addressing people-related problems or the operational side of the business becomes unwieldy and manging informally doesn’t appear to work anymore.  This is the time to take back control of the people side of the business through setting a people plan.  That is all an HR Strategy is – a plan of the people you will need: what they will do; how you will manage and motivate them to reach targets; how they will develop and grow; and how you intend to maintain the culture and values you have so carefully fostered.  In short, a plan outlining what you need to do from a people perspective to reach your business goal.  This can be one or multiple pages long – the length and format are not important, it is the content that is crucial.

Most people strategies cover a number of components, each detailing how that element of people management will contribute to the business’ success whatever that looks like:

  • What roles are required now and in the future and what are the key skills, knowledge, experience and characteristics of the ideal people to fill these?
    It is important to get the balance right between technical capabilities and softer competencies and values, which will contribute to the company’s culture.
  • How will these roles be managed and the people motivated?
    This covers management structure and capability; processes to monitor, support and encourage performance; reward structures; engagement and involvement techniques; and the activities which will enhance the culture and make people want to come to work.
  • How will you achieve growth and succession?
    Promotion from within is attractive when recruitment costs are so high and common selection tools are notoriously unreliable but this is only likely to be successful if you train, mentor, coach and support people to grow within the company.
  • How will the people strategy be implemented and measured?
    To really reap the benefit of this, the company will need to invest in expertise to proactively drive the strategy and therefore the informal, ‘all muck in’ approach to HR is unlikely to be enough.

Whilst definitely not rocket science, many SMEs need some help to establish their first HR strategy and that is where we come in.