Like gawky adolescents, small companies tend to go through an ‘awkward phase’ before they develop into mature, established businesses.
That period can be testing for managers, responsible for overseeing a rapidly expanding workforce while also managing the day-to-day challenges of bringing in new business.
With more staff, HR issues take up more hours of the working day. Recruitment and staff turnover are constant headaches. Dealing with ever-more complex employment contracts is exhausting, and putting together benefits packages that will attract high-fliers can be torturous.
To compound these problems, people management responsibility often falls to general business managers with little (if any) HR expertise or training. These individuals are forced to negotiate a minefield of employment legislation – and still find time for the daily grind of identifying and exploiting new business opportunities.
The reality is that most new businesses tend to adopt ‘quick-and-dirty’ methods and tools to manage HR during the start-up phase – and then neglect to update them as the company grows. Managers respond to HR issues on an ad hoc basis, using a combination of manual effort and information hidden away in spreadsheets and Word documents on various computers.
This approach may work in the early days, says Riana Barnard, head of business consulting at HR services company Arinso, but it is unlikely to serve that company well in the long run. “It’s costly, it’s time-consuming, and it focuses almost entirely on the operational aspects of HR, at the total expense of strategic considerations,” she explains.
As a result, most SMEs (small- and medium-sized enterprises) eventually reach a ‘tipping point’, when managers realise that, to remedy its growing pains, the business needs to establish formal HR processes and invest in technology to support them, according to Ciaran Rafferty, UK general manager of the SME business at enterprise software company SAP.
But the point at which that realisation strikes is very much down to the individual organisation.
“It’s not really a matter of size it’s more a matter of management maturity and the organisation’s long-term strategic vision,” says Rafferty.
One business that is thinking ahead is Manchester-based food manufacturer the Authentic Food Company. Over the past four years, this family business has doubled in size and employs more than 200 people, but its management is determined to maintain a close, personal relationship with all of them.
“What that means to us is that we continue to create a caring and respectful environment where employees are supported in their career development goals, regardless of how big the company becomes,” says Parminder Basran, the company’s business controller. “Rapid growth should not be allowed to get in the way of being a good and responsible employer,” he adds.
For that reason, the company has decided to ditch its old blend of disparate payroll systems, Excel spreadsheets and Word documents, in favour of migrating all its HR information onto the same SAP software system it already uses to run its manufacturing and supply chain operations.
That, says Basran, will give the Authentic Food Company “a single version of the truth” when it comes to HR management. It will also enable the company to standardise and automate many of its HR processes, re-engineer its approach to appraisals and performance management, and to start paying hourly staff using the BACS system – a move Basran forecasts will save it about 50p per transaction.
“We have a lot of information about our employees that is, at present, scattered around the company on different PCs – what football teams they support, their favourite drinks, their kids’ names, what kind of restaurants they go to. Having that information in a single place will enable us to tailor rewards and incentives more effectively,” Basran explains.
“It also means that we follow the same policies and procedures as much larger companies, so we’ll be matching them on the efficiency and cost-effectiveness of our HR processes.”
A consolidated view of data also makes it easier for HR to run off management reports and manage data, according to Francesca Scott, HR manager at the Cairngorms National Park Authority (CNPA).
At its inception in March 2003, the CNPA had only 12 employees, but by 2005, that figure had passed 60 and the organisation was struggling to meet its reporting requirements as a public sector body.
“Even the most basic historic data was difficult to store and retrieve in the Excel format, such as salary and job history,” explains Scott.
“We also have a legal duty to monitor internal and external procedures for equality in the areas of race, sex, religious belief and disability, and a duty under the Freedom of Information Act to provide accurate information when this is requested. Investing in an HR software system has given us confidence in our data, enabling us to keep tabs on business-critical information and produce relevant reports quickly,” she says.
The new software, from HR systems supplier Snowdrop, provides much quicker access to employee data and previously unrecorded information, such as next-of-kin, dependants and emergency contact details, says Scott.
Absence monitoring has become more effective, and no longer relies on individuals remembering to complete a form.
The simple tracking of recruitment information, meanwhile, allows the HR team to ensure that the CNPA does not contravene discrimination legislation, and can produce reports to demonstrate that compliance.
For some companies, however, the most distressing symptom of getting bigger is simply the time and effort involved in HR management. That was certainly the case for Linton Fuel Oils, a south London-based distributor of fuels and lubricants. Although the company has been established for 30 years, it has grown significantly in the past five, “and we haven’t handled the growth of the workforce very well”, admits Tony Hancock, Linton’s operations director.
“Mostly it was me, the chief operating officer and the company secretary doing everything HR-related, and it took the threat of a tribunal to make us wake up to the fact that this system wasn’t working,” he says. “We strive to be a good employer, but we weren’t very up-to-date on the latest employment legislation. And despite spending long hours on HR issues, our records were still incomplete,” he says.
The solution for Linton was to outsource the entire HR function. The company approached Northgate HR and is now in the process of setting up the contract. “Northgate will effectively provide all the service that we would expect from an internal HR manager, but without us having to pay a London salary to attract someone at the right level,” explains Hancock.
The team at Northgate has updated Linton’s company handbook and has standardised documentation such as offer letters and contracts. Moving forward, it will establish a formal system of staff appraisal and enable Linton to introduce performance-related bonuses.
“Until now, perhaps because of our history as a family business, we’ve been handing out the same bonuses to very good people as to the not-so-good people. That’ll soon be a thing of the past,” says Hancock.
For Linton, as for the Authentic Food Company and the CNPA, investing in HR technology has played a huge part in easing its growing pains. Implemented well, this can help any adolescent organisation leave its infancy behind and face the future with mature confidence.
Signs of corporate adolescence
Piles of paperwork: Does it seem like every HR process comes with a dozen forms to be filled in, signed and filed away? Do those piles regularly build up?
Information hide-and-seek: Does your team spend hours searching PCs and filing cabinets for a particular offer letter or contract? Is data held on multiple spreadsheets on different desktops?
Performance pressures: Can you quickly and easily measure the performance of employees? Are your appraisal methods based on robust information or hearsay and recall?
Recruitment headaches: Do your recruitment campaigns frequently attract the wrong kind of candidate? Does it take too long to identify, interview and recruit good candidates?
Turnover nightmares: Are employees leaving in their droves? Are you doing your best to keep them satisfied and fulfilled in their jobs?
Haphazard processes: When it comes to HR, does every manager handle people issues in the same way? Or does everyone have their own methods and systems for keeping track of personnel?
High absence levels: Is absenteeism unacceptably high? Can you monitor absence levels in order to identify problem areas and address them?
Patchy benefit take-up: If the take-up of benefits is low, do you have the right benefits and awards in place for particular employees?
Compliance concerns: Are you confident that your organisation is in step with the Working Time Directive, the Data Protection Act, health and safety, or the latest pensions laws? Are you fully aware of your responsibilities?
HR image at a low ebb: Does HR suffer from a low – or negative – profile within the organisation? Do employees know that your organisation values them and their efforts?