Does your business need an HR
The definition of small and medium sized enterprises (SMEs) is any business with fewer than 250 employees. According to Department for Business, Energy and Industrial Strategy there were 5.7 million SMEs in the UK in 2017, which was over 99.9% of all business. SMEs can be further classified as micro (0-9 employees), small (10-49 employees) and Medium (50-249 employees).
Human resource approaches adopted across this diversity of organisations (micro, small and medium) look very different.
Q. At what stage an SME should hire an HR professional?
Before answering this question, let us first understand the stages of business growth.
Stage 1 Existence
This is the first stage after inception and starts once the product or service is ready. The key attribute of this stage is can the business obtain customers and deliver the product/services. The owner pretty much does everything and directly supervises subordinates. To summarise the owner is the key man and is the business.
Stage 2 Survival
In the journey from existence to survival the organisation has proved that is a viable business entity. It has enough customers. Now the problem shifts from acquiring market share to the relationship between revenues and expenses. If an organisation has a growth vision and there is a need for the product/service in the market – the concept of break even does not always imply. WhatsApp revenue for the year ending December 2013 was $10.2 million with net loss of $138 million. However, Facebook acquired WhatsApp for $22 billion. WhatsApp user base in 2014 was 600 million, so in layman’s term it cost Facebook $36 per user.
Stage 3 Success
The key characteristics of this stage are how to continuously exploit the organisation’s accomplishments, expand or keep the company stable and profitable. The discussion of an exit strategy or an early retirement may also start here.
The issues of people, planning, and systems gradually increase in importance as the company progresses from slow initial growth to acquiring a decent market share. From inception to existence owner/founder deals with all people issues, with no formal HR role. Employees often have flexible job roles and the organisation structure is very fluid. The owner’s vision and values guide what employees do and how they do it. If issue relating to immigration law/employment law or a tribunal claim comes then ACAS or FSB (The Federation of Small Businesses) tends to be the first point of call. Some owners also call their accountant/solicitor for advice.
It is impossible for startups to hire a talented HR professional from day one on a bootstrap budget. However, once the teams develop that operate beyond your direct scope of management, it's important to have an HR professional who can help scale the business according to the company's vision and align the company's needs with best practices.
Hiring an HR, you invest in your company's most valuable asset like hiring CTO or CFO. Make sure you hire an HR before you desperately need one. There are a lot of events that trigger need and often owners do not end up having the best advice. Events like tribunal claims, whistleblowing, breach of immigration or employment laws can have serious repercussions. Businesses should have policies and procedures in place from the first day.
We've all heard the saying, "the early bird gets the worm," and it could be enduring for SMEs that employ an HR professional from day one. SMEs always succeed when their vision, mission, and goals are achieved at pace, while still maintaining an image as "the place to be." HR leaders play a strategic part in any successful company, and having them from day one can safeguard and will take your business further.
If an SME does not have an HR, very often the owner/founder lose track of the business vision, although the revenues may be higher than expected. The owner starts working in the business rather than working on the business. This may be due to a number of reasons - spending too much time on admin, not hiring the right people, ineffective communication and lower morale. Tools like COMPLYGATE can be significant for SMEs in getting things right from the beginning. However, it is not a substitute for an HR partner or competent immigration advice.
Finally, your business may be making money, employees may be doing their job, but they may not be doing it as effectively, efficiently or profitably, as they could have been with an HR professional in the team.