Driving long-term performance through people management in SMEs

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Adapt and survive might seem like a drastic old cliché,  and “change-management” can often be perceived as something that only applies to multi-national companies; but as we’ll see –  SMEs also need to identify key stages in their development and act on them.

Unfortunately, most of the research into organisational development has tended to centre upon large, often global companies, leaving any relevant findings or “models” to be simply handed down to fit smaller companies. This seems unfair, as SMEs make up by far the largest percent of enterprises in the UK.

A study entitled “Sustainable Organisation Performance Through HR in SMEs” has been undertaken specifically to address this oversight and begins by identifying four key stages that most SMEs find themselves in.

According to the CIPD, getting people management right is vital in driving their long-term performance of an SME, no matter what stage of growth it is at – and even if it doesn’t have a dedicated HR function.

The thrust of the whole study centres upon ‘Sustainability’ and the need to keep performing over the long-term. The “Four Developmental Stages” report draws on the experience and insight of a number of HR directors and business leaders, and focuses on four case study organisations:

  • The Entrepreneurial Edge. This is an SME with an informal and flexible set-up, usually with no formal HR function and often a general absence of systems and processes for people management.
  • The Emerging Enterprise. This is where the SME’s structure is becoming more formal even though flexibility is still important, and beginning to introduce HR policies and processes.
  • The Consolidating Organisation. This is a time for assessment, where strategic planning takes place and where HR is becoming more aligned in accordance with and directly supportive of that strategy.
  • The Established Organisation. This is where there is a focus on long-term performance and the people issues, such as culture, engagement and talent management that drive it.

Interestingly, the CIPD found that the average SME does not necessarily pass through these four stages in a 1-2-3-4 order.  It is more likely that a business may move forwards or backwards between the stages by choice or as a matter of course.

There are many external factors which affect the four stage progression, such as changes of ownership and financial difficulties, or any number of external factors such as a recessionary environment.

However, the report notes that it is the quality of HR intervention and people management between these stages that can make all the difference to the SME and its performance.

The report goes onto offer the below outlined six key insights for HR practitioners, or those who take responsibility for HR in helping the SME adapt and progress through the transitional stages:

  • Anticipation – where readiness and relevance will determine success.
  • Organisational values – a shared sense of purpose can become the constant bedrock of the business.
  • Alignment – the alignment of people management with leadership aspirations (a critical HR challenge).
  • Simplicity – a simplified structure preserves innovation and entrepreneurship.
  • Sustainability – long term growth involves striking a balance between preservation and evolution.
  • Looking beyond – taking a long term view beyond immediate operational issues can help lay the organisation’s cultural foundations for the future.

Which stage you consider your organisation to be in and whether it could benefit from moving on is, of course the question, and helpfully the CIPD intends to produce a “practical tool with activities, checklists and further case study examples to support HR professionals in SMEs.” Deservedly so, the SME is being given a measure of attention and support for a relevant and sustainable organisational development approach.