Any business looking to grow has many pressure points and competing demands for investment and it's not unusual for CEOs to put HR best practice into the "too hard" or "too expensive" basket, especially for the business leaders of SMEs.
There are a number of good reasons not to do this as research indicates that SMEs who focus on the 'people' side of their business earn up to 2.1 times more profit margin than their peers.
High growth businesses usually have limited resources, and in many instances, when faced with a choice, set aside HR initiatives to ensure they have better financial systems or customer service systems in place.
These are important too - but many SMEs don't realise the consequences of just having an admin/accounts person handle human resources, rather than having a solid HR strategy in place that will support the growth and change of the business.
There are clear benefits in getting your HR practices right.
Companies highly skilled in core human resources practices earn up to 3.5 times the revenue growth and as much as 2.1 times the profit margins of less capable companies, according to previous research by Boston Consulting Group and the World Federation of People Management Associations (*From Capability to Profitability).
One of the key points of difference cited in the research was performance management.
I think too often "performance management" as a concept gets a bad rap. It’s certainly not about dishing out the discipline.
There is so much more to performance management than simply conducting annual performance appraisals. Appraisals are an important tool, but alone they will not ensure sustainable performance.
Performance management is a process for establishing a shared understanding about what is to be achieved at an organisational level, aligning organisational goals with the employees' agreed measures, skills, competency requirements, development plans and delivery of results.
The emphasis is on improvement through learning and development in order to achieve success (for the overall business strategy) and to create a high performance culture.
Performance management is not just a tool for large organisations, it is crucial for SMEs wanting a greater return on their people investment. Rewards include increased productivity, reduced employee turnover and the ability to identify and rectify performance gaps.
It's all about doing the right thing by your people and your business, to get the best out of both. Get it right and productivity, revenue and return will benefit.
Where do you start? Here are six performance management tips to increase productivity and revenue:
- Take a strategic/big picture and proactive approach to performance management. Link to individual, team and business outcomes, as well as other HR processes, such as reward and recognition. You want everyone on the same page and working together on the right things at the right time, to ensure company success.
- Tailor your performance management program to your vision, culture and organisational goals - there's no one size fits all approach. There must be alignment between what employees do and the leadership team's vision.
- Engage management and the workforce during the design phase and before implementation. Buy-in for the program is critical for its success.
- Conduct training and refreshers on the program and performance appraisal systems. Start with key staff, line managers and supervisors.
- Provide role clarity for all employees by defining responsibilities and expected standards of performance, through simple Key Performance Indicators. If employees don’t understand what is expected of them and how they’ll be measured, then what are they working on and towards? You get what you focus on and measure.
- Performance management programs are not a "set and forget" - they need to be reviewed and continuously improved.
Giving people a higher calling or a purpose makes them passionate about their jobs and is a major reason why they should work for your company; otherwise it is just a job.
Some high growth SMEs can't afford a full-time HR leader, but they recognise that to grow the business they need much more than someone doing payroll, filling out forms, organising birthday cakes for staff or advertising vacancies online.
Don't be reticent to seek expert assistance for HR, to help provide a greater return on your people investment and to mitigate the risks associated with attraction, retention and performance strategies.