SMEs that don’t engage with HR are putting themselves at risk

The cost of not hiring an HR specialist is far greater than an HR manager’s salary

In 2016, the National Federation of Self Employed & Small Businesses (FSB) reported that there were 5.5 million SMEs in the UK, employing 15.7 million people and generating an annual turnover of more than £1.8trn. It is a sector to be taken very seriously, and yet, as a coach of SMEs, I am increasingly surprised at how many don’t have any real HR or L&D provision in place. More than this, I am surprised by how many employees accept what really comes down to unacceptable behaviour from their SME employers.

Employers are not being properly educated about the disadvantages they face because of a lack of engagement with HR. It’s odd when you think that most businesses – no matter how small – will have a specialist to manage finance, IT or operations, but, when it comes to the management of their (usually) most valuable asset – their people – they don’t realise that by hiring a specialist manager they will reap benefits here, too.

Some of the most common issues I see are:

  1. Poor recruitment: jobs are given to family and friends who managers are then reluctant to manage; poor pre-recruitment screening; promotion decisions are based on length of service, not quality of skills.
  2. Inefficient performance management: people are moved to a new role because they were unable to do the one they had. No paper trails in place to show how objectives have been set, nor is training and coaching given. No protection for the manager or the employee, and reduced efficiency.
  3. Unmanaged absence: no return-to-work interviews; poor tracking; unhappy workers who are picking up the workload of absent colleagues.
  4. Poor retention of the right people.
  5. Inadvertent law-breaking.

A trained HR manager can mitigate these risks and many others, as well as manage absence and set a standard for managing good and bad performance. They stay in touch with the workforce and so can help to build trust and transparency, which in turn builds engagement and shapes the people agenda. They can get a company-wide view on skills and skills gaps, ensuring that people are developed to meet the changing needs of the business, which in turn increases efficiency. They can look after the basic legal requirements of an organisation such as employment contracts and job descriptions.

There is so much talk about engaging millennials, living company values, being an employer of choice and talent management. The only person who is really going to take on these challenges and own them is the HR manager. If no one owns these challenges, they aren’t on any agendas – and they fall by the wayside.

Herzberg defined recognition, reward and the job itself as motivating factors for employees – and, conversely, procedures, working conditions and relationships with management as the causes of dissatisfaction. It is precisely these factors that HR will have a close view of and be able to improve, which in turn will increase employee motivation, business efficiency and staff retention.

The argument that HR is a costly luxury to a small business should be revisited; there are many ways to engage affordable HR expertise – before you face the financial consequences of leaving it too late.

Penny Whitelock is the director of Crystal Clear Business Solutions