Why HR Matters To SME’s

By on July 28, 2016 in

Clear and well implemented HR processes and policies create great employee engagement and optimum organisation performance. This is even more important for those in the SME community. 

A Strong HR Framework Is Essential

We are occasionally invited to speak to SME and Entrepreneur groups about talent acquisition and retention and are often struck by how under prepared and under resourced such organisations can be in HR terms. Owners of these businesses however, are a great audience to speak to; they are typically life-long learners and always eager to latch on to initiatives that will help their businesses grow. Good HR processes and policies are essential to all organisations but perhaps even more so to those in the SME community. Often family businesses, the informal policies that arise and that are relied on in SME’s rarely stand up to the scrutiny of a tribunal. Perhaps it is in the nature of such business owners to accept that risk is a part of life. However, a strong HR framework is essential to employee engagement and performance as well as being central to maximising the return on investment in wages and benefits that each makes.


At a basic level, it is essential that all employees are presented with an employment contract as these terms and conditions are core to the relationship between the employee and the organisation. While a written contract is not legally required, a written statement of the terms of employment must be provided by law to every employee within two months of their commencement with a firm. Details such as commencement date, job title,status of contract (permanent, temporary etc.) pay, hours, holiday entitlement, location of workplace, notice period and any post-employment restrictive covenants must be laid out clearly to protect the interests of the organisation in particular.Verbally agreeing these details alone is inadequate, illegal and is likely to lead to dispute.

Best Practice Is Challenging But Profitable

Of equal importance is the provision of clear HR related policies by which the employee and the employer are expected to abide. Non provision of these policies will almost definitely result in a loss for the organisation in the event an employee decides to take some form of action against it.They are a critical element in protecting the firm and the firm’s owners and not just peripheral to the employment relationship.There have been 30 separate acts of legislation relating to employee protection alone in the last 13 years in Ireland and these do not cover all of the areas in which firms must have clear and stated policy. In addition to the core must-have areas of coverage, firms are well advised to have policies in place around surveillance of email, internet and social media use.We live in rapidly changing times and while technology provides outstanding opportunities for growth, it also opens up SME’s to a whole new world of risk.

Bringing an SME firm up to best practice in HR process and policy is challenging. Many firms are simply under resourced but that is no longer a good enough excuse not to properly protect the firm, it’s owners and employees.That said, the purpose of HR is not just about protection but also about driving higher contribution from employees and securing their discretionary effort.Without a strong HR culture, SME’s are simply losing an opportunity to add value. Smaller firms often find it easier to define their purpose, the reason that they exist for their customers. Having a clear purpose gives employees a sense of purpose and stronger connection to the goals of a firm.The same may be said of an SME having a clear and articulated set of organisation values.These will, in the case of an SME, inevitably reflect those of the founder and business principal.Values are the reference point that employees use when they are not absolute on which path to take on any given matter. If employees identify with your values, they are more likely to be passionate about the organisation achieving its purpose. Practices, as opposed to policies, are generally what employees experience as a consequence of working in your organisation.The practices in an SME are an opportunity to reinforce what your organisation is all about and directly impact the experience your customers will have.

If you own an SME and are still of the view that this is all soft and irrelevant to your firm, it’s not. HR goes directly to the bottom line; good HR feeds profit growth. All organisations have culture, values and practices, be it formally or informally. If you are experiencing underperformance or high staff turnover, the chances are your organisation has not aligned its purpose, values or practices with those of your employees. Protect your investment with good HR.

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