Human resource challenges
A range of challenges face SMEs in managing human resources, starting from the hiring process to managing day-to-day issues such as leave and health and safety.
The hiring process
This is one of the first human resource management challenges as a business grows. Creating job descriptions and ads can be time consuming. Then you need to go through the selection and interview process. According to Glassdoor, it takes 23 days on average to find the right candidate. If you don’t create accurate job descriptions, hurry interviews and don’t ask the right questions, you could end up hiring the wrong person for the role. According to research by Elmo Software it takes an average of 39.7 days to fill a vacant role and costs $11,865.
Onboarding and training for better human resource management
Not having an onboarding process is a big mistake for many SMEs. When new employees join a business, they are usually enthusiastic about learning about their new company and the role. A lack of onboarding or an ineffective onboarding process can demoralise staff and increase turnover. One study revealed that 15% of new employees leave their positions because there was no onboarding process. They might not have the proper tools and resources, or the knowledge of the process and procedures, to get their work done.
Once employees have spent time in the business, training and development will ensure that they can provide the most value while getting personal satisfaction from professional growth. While larger businesses often offer training programs, small companies often miss this opportunity because they are too busy with day-to-day challenges or don’t have the resources to provide training. The result is lower employee engagement, retention and effectiveness. At a minimum, SMEs need to have training in place to cover compliance requirements.
Legal compliance
Recent high-profile cases of non-compliance with employment laws have led to reputational damage and bankruptcy for some businesses. In 2019, the hospitality empire of celebrity chef George Calombaris was required to backpay $7.8 million in wages and superannuation after admitting to underpaying more than 500 employees. Besides compensation and benefits, compliance issues arise in any area, including the hiring process, health and safety, termination and retirement. Keeping with all these areas and constant changes create headaches for small business owners. Getting it wrong can result in hefty fines and reputational damage.
Health and safety
This has always been a challenge for SMEs and has become even more important due to the COVID-19 pandemic. Managing health and safety for this situation and day-to-day operations is one of the many challenging HR requirements for small business. Business owners and managers can be subject to substantial penalties, including fines and imprisonment, if injury or death results from negligence.
Tips for effective human resource management
Most SMEs don’t have the resources to set up a dedicated HR department, so these challenges need to be addressed by business owners and managers without having full-time HR professionals on board.
1. Create a policies and procedures manual
Writing down policies and procedures will enable you to create consistency and improve your HR strategy over time. This manual should cover all aspects of your business, from accounting and administration, to recruitment and remuneration. You can save time on this process by using an existing template. A few examples of these free templates include SweetProcess and SmartSheet.
Here’s a template that focuses on human resources policies and procedures, and can be customised to reflect your business circumstances. While creating a manual can be time consuming, the increase in productivity will create a significant return on the time and resources spent. In addition, if key staff leave your organisation unexpectedly, you will have documentation to guide replacement staff filling a role. In effect, a policies and procedures manual is essential for business continuity.
2. Develop an employee handbook for better human resource management
In addition to documenting your policies and procedures, an employee handbook can help onboard new staff. Some of the topics to include in this handbook are:
- Welcome note and information for new staff
- Background and culture of the company
- Mission and vision statements
- Code of conduct and standards of behaviour
- Confidential information and privacy policies
- Disciplinary Procedures
- Equal opportunity policies
- Grievance procedures
- Health and safety policy
- Hours of work
- Internet, social media and email policies
- Leave processes and procedures
- Performance standards
- Company rules
- Termination (ending) of employment
- Training and development
- Use of company property policies, such as vehicles and laptops.
Many free templates are available to help you get started with creating your own employee handbook. Here’s an employee handbook template from Wonder.Legal.
3. Set KPIs for the business and employees
HR management includes setting goals and measuring progress for the business and individual employees. Key performance indicators will depend on the role and should be something that’s easy to track and measure. For sales roles, it could be the sales volume or number of closed sales. For a manufacturing role, it could be the number of units produced over a set period. Setting benchmarks will enable you to measure improvements and declines in performance, and take steps to address these if needed.
4. Conduct performance reviews
Meeting with employees to discuss performance is a key step in effective human resource management. The term “performance review” can be frightening for some. But it should be viewed not as a confrontation but a conversation in which successes, challenges and ideas for improvement are discussed openly. Staff can bring up any issues that are affecting performance so that these can be addressed. It’s also a good time to discuss learning and development to determine.
5. Training and development
Based on performance reviews and needs assessments, create training plans that will enable employees to do their work more effectively while enhancing professional or vocational development. Offering development opportunities also increases employee retention. According to Lorman Training Solutions, 70% of employees would be somewhat likely to leave their current job to work for an organization known for investing in employee development and learning, and 34% of employees who left their previous job were motivated to do so by better career development opportunities.
6. Implement an HR software solution
Human resource software can help manage HR for small business. These include tools to describe, monitor and manage many aspects of human resources such as recruitment, onboarding, leave management, policies and procedures, performance reviews, and training and development. A few examples of these solutions suitable for SMEs are Happy HR, Namely, JazzHR and BambooHR.
Financing your HR initiatives
Implementing HR essentials for small business, such as hiring new employees and offering training programs, are one of the top reasons SMEs seek business loans. Some business owners are hindered by the complicated application process or lack of property to secure a loan. Unsecured business loans from Moula are a quick and easy alternative to traditional business loans. After completing a short application online (which takes around 7 minutes), you’ll get an answer within 24 hours.
Also, use our business loan calculator to get an estimate of principal and interest repayments for small business loans.
