Human Resources in SME Sector

The SME sector is focussed on survivability and anything that can help a company to continue to exist. Maybe the SME sector has always been focussed primarily on how to survive with few exceptions to this. The question is what can HR do to assist the survival of an SME Company and even beyond survival growth?

There aren’t a fixed number of HR strategies to solve all SME company problems but rather variations of HR practices which should be applied to a company depending on its needs based on the environment it operates in. A diagnose should take place to understand where the company stands and what HR practises could be helpful in tackling the issues at hand. If a good diagnosis and implementation are completed then HR can help to strengthen a SME company’s ability to survive and develop.                                            

The question of HR as a strategic partner in the SME sector is irrelevant as most plans are short term and don’t have long term strategic implications. Good SMEs operate on the basis of entrepreneurship and flexibility and companies will easily change their approach to issues in order to find the right way forward. When dealing with SMEs you will very often see fire fighting without knowing what exactly is causing the problems in the first place. Taking some time to understand what exactly is happening is crucial in order to reach a positive conclusion.

The basis for any HR approach in SMEs is a sound legal footing. There are too many legal requirements for companies to ignore this. Employment legislation, through the EU, has increased dramatically in the last number of years. However the NERA reports make it clear that a lot of companies do not comply with basic legal requirements and this in itself can jeopardise the future of any company. It is foolish to think you can ignore this. 

When assisting SMEs with their survival there are a number of HR practices which can be helpful, such as: -

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Staff Selection – too often staff selection in the SME sector is done unprofessionally and ends up being a stop gap solution to a problem.  Selection criteria is seldom established or adhered to. Furthermore training on how to interview candidates is essential for successfully selecting new excellent employees. Getting the right new employee can save money and getting employees with the right attitude is essential.

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Staff Development – in difficult times staff development is often overlooked. However if you want to do more with less then you need to develop the fewer employees to do more. Even the best employees will not be able to perform new tasks if not properly instructed. For instance employees who need to find better and faster ways to perform tasks need to be instructed on how to do this.

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Employee Engagement – Employee engagement is also important for small companies. It can make a huge difference having the right culture and attractiveness. Small companies even have an advantage over bigger companies as people should find it easier to understand what the company is about and how to relate to it. However in SMEs personalities can make employee engagement difficult.

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Performance Management – SME companies need to have a clear picture of who is helping them to achieve their goals and who isn’t. Staff need clear Key Performance Indicators which will be evaluated. Employees deserve feedback on how they are performing in order to improve their performance. Repeated underperformance needs to be tackled and resolved or else it may take too much time and effort to manage. 

SMEs are focussed on survivability especially in these days. We have to remember that the SME sector is the backbone of any economy. The right flexible HR approach can give the small and medium size companies the support they need in difficult times in order to survive and create employment.

Constructive Feedback

We are getting close to the time when organisations go through their performance reviews. Performance development is based on the assumption that people cannot learn and develop unless they receive feedback on how they are progressing. As people are an expensive resource it makes sense to maximise their output by ensuring that every employee performs at their full potential. In performance reviews giving feedback is one of the most important skills. Either conscious or unconscious feedback is given and it establishes the working relationship between manager and employee. Any employee needs feedback to understand where they stand in the organisation. They need this information to assess their role in the team; department and how they are doing. Without regular feedback employees would drift around not knowing what, how and when to act.

Feedback is required to provide motivation and structure to the employee and let him see what the progress is in their day to day work. Feedback in organisations is positive in the sense that its aim is to point the way to further development and improvement, not simply tell people where they have gone wrong (negative feedback). Feedback must report on successes as well as failures. However, failures are treated as opportunities for learning so that they are less likely to be repeated in the future.

Feedback is always factual. It refers to results, events, critical incidents and significant behaviours which have affected the performance in specific ways.

The Key Actions for Giving Constructive Feedback are: -

Ø  State the constructive purpose of your feedback

Ø  Describe specifically what you have observed

Ø  Give positive as well as corrective feedback

Ø  Describe your reaction

Ø  Give the other person the opportunity to respond – Am I correct?

Ø  Offer specific suggestions

Ø  Do not wait too long with giving your feedback

Ø  Summarise and express your support.

Once feedback is given you might want to react on this by restating the sender's feelings or ideas in your own words, rather than repeating their words. Your words should be saying, "This is what I understand your feelings to be, am I correct?" It not only includes verbal responses, but also nonverbal ones. Nodding your head or squeezing their hand to show agreement, dipping your eyebrows shows you don't quite understand the meaning of their last phrase, or sucking air in deeply and blowing it hard shows that you are also exasperated with the situation.

The rationale for giving performance feedback is that it will help sustain or improve performance. However, some skill is required when giving feedback, since if it is not done correctly it could result in the employee becoming offended, confused or even de-motivated.

Recruitment

A recent study confirmed that recruiting a new employee has the highest impact of all HR instruments to the bottom line of a company. If you think about it for a moment it is logic. If you hire someone who may become an excellent employee or a future bad performer this is going to impact on the bottom line of your company.

The problem still is that critical talent is in short supply even in our current circumstances with high unemployment. The costs of a hiring mistake are high especially for managerial staff.

So how does a company get it right? The answer is commitment. The tools are out there – using them to achieve excellent recruiting just takes time and focus.

It may seem impossible to squeeze more time out of the day for recruiting. Then again, a bad hire drains away more time than any one of us would like to admit. It takes a few weeks to hire even a wrong person. What follows is loss of productivity, lost credibility of management and a wasted investment getting an employee on board.

Finally there is the investment in another search. All the while the actual work is still on hold. Whatever the results, the employee was hired to achieve results who are often no closer to completion than they were when he was hired.

Viewed from this perspective organisations can’t afford not to invest the additional time and focus for recruiting excellence.

In recruitment the following rule applies: the best predictor of future behaviour is past behaviour.

Because of the nature of the recruitment effort there is a great deal of error involved in trying to predict a candidate’s future performance. It is impossible to be certain that a candidate will excel in this company at this time with these challenges. The best a company can do is to reduce the unknowns by hiring as closely as possible to the actual situation. Ideally the company should hire someone doing the exact same job in an excellent manner at another company. The further a company moves away from this situation the further it gets away from the likelihood of a good hire. Why is that the case? The answer is that the best predictor of future behaviour is past behaviour. There may be someone in the stack of CVs who could be a great sales manager. He says he can do the job. The hiring team believe he can do a great job. Should they hire him? No. They should go out and find the person who already is a great sales manager. Because what someone has already done is a better predictor of future performance than verbal skills and interview behaviour ever could be.

Of course hiring the sure thing means missing out on the unexplored talent. The company will miss discovering a star. But it will also miss hiring a complete disaster. It hurts to reject people who might have been great. But it is devastating to hire someone who cannot perform.  

Contract

Contract

In my work as HR Consultant I meet a lot of companies as I solve staff issues for them. Very often when giving them advice on particular issues, like disciplinary issues it is wise for me to have a look at their contract of employment, just to make sure they are covered from all angles.

The answer I get time and again is that there is no need to look at our contract, it is fine and we have been using it for years. Still I insist on seeing the contract. Often there is a problem. Important clauses are missing or incorrectly worded. Sometimes it is just one piece of paper which states this is a contract of employment.

When I point out that it isn’t a valid contract, the answer is mostly: “Oh, but I really trusted the guy who gave it to us”. Yes, he probably is a nice guy, but he isn’t a specialist on employment legislation. He might have copied and pasted the contract from another nice guy and this is how you end up with something which will cause serious trouble when you don’t need it.

Once I saw a contract copied straight from the internet, it looked good at first sight but on inspection it turned out that it was a US Contract of Employment! This contract wouldn’t go down well before an Irish Rights Commissioner.

It used to be in Ireland that you didn’t need a contract of employment. It was all between employer and employee and whatever they had agreed, as long as it wasn’t too far off, was valid. This all changed when the EU Directive on Terms of Employment (Information) came into play and became Irish law in May, 1994. We have to face the fact that this piece of legislation is in play now for more than 18 years. Technically you don’t need a contract as a Statement of Terms and Conditions of Employment covers you, but most companies use contracts, as contracts have the benefit that both parties sign it.

As a minimum the following items should be addressed in a Contract of Employment: -

·         Full names of both employer and employee

·         The address of the employer

·         The place of work or a statement that the employee is required to work at various places

·         The title of the job or the nature of the work

·         The date of the commencement of the contract of employment

·         In case of a temporary contract of employment, the expected duration or in a fixed term contract the date on which the contract expires

·         The rate or method of calculation of the employer’s remuneration and details as to what intervals the payment of remuneration will be made

·         Any terms or conditions relating to hours of work including overtime

·         Any terms or conditions relating to paid leave

·         Any terms or conditions relating to sick leave or for payment due to incapacity as a result of injury

·         Details of pensions or pension schemes

·         The period of notice which the employee and employer is required to give

·         Reference must be made to any collective agreements which directly affect the terms and conditions of employment 

·         Employers are obliged to notify employees of any changes to their terms and conditions of employment as soon as possible but no later than a month thereafter

Furthermore an employer is required to hand over the company disciplinary and grievance procedure which need to be compliant with the Code of Practice of Disciplinary and Grievance Procedures. Most companies make this part of the contract of employment.

I presume you will dash off now to have a look at your contract, if you have any questions give a call at 065 7071933.