HR professionals play a critical role in helping SMEs expand their footprints.
By Simon Kent
Growth is always on the agenda for businesses and the start of a new year is a great time for new efforts to be made and strategies to be clarified. Building a company from SME to a larger entity is a challenge in many respects. Indeed, this progression can mark the creation of a proper HR function from humble beginnings.
“The founders of organisations often start by hiring people they know,” says Dr. Paul Aldrich, global head of people and performance for Pemberton Asset Management. Due to the size and nature of the SMEs, all people information is likely to be held in basic spreadsheet format with little or no specific HR system in play. “They outsource the legal and compliance aspects of employment (contract templates and an employee handbook) to law firms and other specialists.” Payroll is also likely outsourced to a specialist, Aldrich says.
However, as the company seeks to grow, this approach becomes untenable. “At some point, the founders will run out of contacts to hire,” he explains. “They may be too busy to focus on strategic workforce planning and will ideally minimise time spent on the administrative side of people management, as they need to focus more directly on business growth through product and service development and customer acquisition.”
For Aldrich, the answer is to further outsource the function beyond purely operational elements, perhaps finding someone to focus on the job for two or three days a week. As the company grows further, it may then become more attractive to bring the function in-house and establish a dedicated HR team.
But what should HR expect or aim to do during a period of sometimes fast and always crucial growth? Peter Ryding, a serial turnaround CEO and founder of VicYourCoach.com, says that when introducing and building a formal HR function, it is important to retain the positive characteristics of an SME. “In the modern VUCA world, HR has a vital role in SMEs growing into something larger,” he says. “Successful organisations need speed and agility or they die. This is easy for SMEs, yet gets much tougher as you need to introduce new processes and systems to bring efficiencies without killing off innovation. The trick is to have the right culture—and that is at the heart of what HR can direct.”
Not only does HR have a crucial role in ensuring the culture of an organisation is consistent and positive as it grows, but it must also ensure that tenured employees remain engaged, motivated, and appreciated as they are joined by more colleagues. “As new people with new skills are recruited, HR must ensure that the existing employees—the ones who built the SME—are equipped, empowered, and engaged to learn new skills too,” he says. “Don’t let them feel left behind or less relevant or you will create resentment and ‘them and us’ conflict. Ensure they realise they have to keep learning to keep earning to remain employable, and that by doing so they have the same career opportunities as the new recruits.”
Case Study: Remote Bob
Having founded her start-up Remote Bob in February 2019, Barbara Krecak says that it can take time to understand what the people are capable of doing. This is an important ground-level consideration that has to be in place before any expansion can be considered. Remote Bob, which offers outsourced back-office support for companies, started with only two people split between Croatia and London. It now has a full-time team of seven and 40-plus regular freelancers.
One of Krecak’s initial challenges was understanding if her team members had been set realistic targets. “In well-established companies, you know that the average sales cycle is three months and if a salesperson doesn’t deliver anything that means he is underperforming,” she explains. “In a start-up, everything is new and experimental, so even if no one delivers anything for six months that maybe means that the sales cycle is nine months long—or maybe not. That is a combination of people management and HR challenge.”
Without this baseline understanding, the typical HR responsibilities around people development, training, and productivity are difficult to measure. Moreover, until such aspects become clear, it is also difficult to consider bringing in more talent and determine what that talent should look like. Krecak has now hired an external HR specialist to help with her business’ expansion. “The biggest benefit of hiring an HR person, in my opinion, is help with recruitment,” she says. “When hiring new employees, I always see only the good sides of everyone. The HR person is there to analyse personality and give us their professional opinion.”
Since the company is clearly evolving as it grows, it is also difficult to introduce and establish HR policies above and beyond the basic essentials required for employing people. As Remote Bob continues to expand further, new policies will no doubt be introduced, but at the moment, daily issues and challenges by far outweigh the importance of such paperwork beyond the need for compliance.
Ultimately, the role of HR in building a business extends beyond the power or influence of policy. Close attention to culture and employee well-being at a time of change is vital if a company is to grow successfully and make a bigger mark on its market. Sue Lingard, director at Cezanne HR, says that the growing pressures on companies through compliance, globalisation, and employee experience have made HR’s role more important than ever.
“If they are looking to aid the growth of the business, happy employees are vital,” she says. “As employee performance is directly linked to business productivity and growth, if HR is to retain as well as develop their talent, successful performance management is in the interest of the organisation as a whole, alongside its benefit for employees. There’s no doubt that talent must grow with the business.”
There is no doubt, too, that HR as a function must also grow in order to consistently meet the demands of the business and all of its employees.