Why people management is vital in SMEs

18 July 2012 -

“We’re too small to focus on people management” is a false ethos for up-and-coming firms, according to recent CIPD research. Research adviser Dr Jill Miller explains why

A focus on people management is essential in all organisations, and SMEs are no exception. With limited material and financial resources, good people management is fundamental to the long-term performance and growth of smaller organisations, which are vital to the UK economy. If there is not an HR function per se, people-management responsibilities may fall to someone without HR explicitly in their job title, often a business leader or office manager.

Recent Chartered Institute of Personal Development (CIPD) research – Achieving Sustainable Organisation Performance Through HR in SMEs – has uncovered the different people-management opportunities and challenges associated with different stages of SME growth. The research also revealed some practical ideas for leaders and managers in SMEs that they can tap into as a means of gaining a competitive advantage through their employees. Those ideas are:

1 Simplicity is key 

When an SME reaches a certain size, the temptation can be to create a wealth of people-management policies and processes to prescribe work and ensure fairness across the organisation. But too much red tape can stifle innovation and entrepreneurial spirit. It’s a fine balance – but keeping things simple is what will keep the organisation agile.

2 Take a longer-term view

Before creating another process to deal with an issue, consider whether that response is just a short-term fix. With each issue, there is a golden opportunity to build the organisation’s culture and support its longer-term goals. For example, when putting recruitment processes in place, make sure you are also defining the skills, capabilities and “cultural fit” that make people successful here.

3 Don’t be sentimental about “what’s always been the way”

Rather than being sentimental about how we’ve always done things, it is often necessary to let go of processes or aspects of an organisation’s culture that no longer support its vision and priorities. Ask yourself: which aspects of your culture and practices are really adding value, and which are no longer suitable – perhaps undermining business priorities?

Conversely, which aspects of being a smaller organisation are you determined not to lose through growth? For example, effective knowledge sharing, cross-functional working and being close to the customer are vital for success, and larger organisations can strive at great cost to embed these values.

4 Align people management needs with leader aspirations

While leadership appetite for the more intangible people issues may be limited in the early days of a business, it’s important to examine what is required in the people-management sphere for the long term. Skilfully coupling the founder/leader’s vision for the business with influential insight about the organisation’s people-management needs is a significant challenge, but an essential one to tackle.

Plus, maintaining people’s strong engagement with the company’s founding purpose and vision is a management challenge, as the distance between the owner/founder and employees increases.

To sum up…

Wherever responsibility for people management lies, it is by anticipating and responding to the people-management opportunities and challenges presented at different stages of growth that an organisation can achieve competitive advantage, and thrive.