After a career of working with companies ranging in size from 5 people to 25,000 people there is one thing I have learned – small businesses have different needs. Ask any owner of a start up or other small business what challenges they are facing and they will usually say one or more of the following:

  • I need to improve my product/service
  • I need to grow my customer base
  • I need to establish brand recognition
  • I need more capital

While these are all valid concerns and need to be a priority for most successful businesses, I rarely hear leaders talk about their people in the same way:

  • I need to have the right talent at the right time
  • I need to retain people and their knowledge of my business
  • I need to control my people rated costs
  • I need to define the culture and employer brand of the business
  • I need to reduce risk and liability

A strong people strategy is as important, if not more important, for a small business compared to larger organizations because the impact and the outcome can be much more severe.

Here are 5 reasons why:

#1     Hiring Too Soon or Too Late

Workforce planning can be essential to the success of any business but the impact to a small business can be financially devastating. Sales people are always the easiest example. A lot of small companies decide that they have to increase sales immediately so they hire a sales person. One of two things happen if this occurs too early. One, the sales person is incredibly successful but the product or service (and its associated bugs) can not keep up with demand. The company creates an instant reputation of poor quality product and/or service. The second scenario occurs when sales ramp up at a slow but even pace that can be well managed. Unfortunately, the sales person may feel like they are not being effective and they may be under financial strain if they are not earning the commission they anticipated. That person leaves and takes their business knowledge elsewhere.

Hiring too late can be just as bad. You will lose revenue and potential market share. You and your staff may become overwhelmed, frustrated, or even burnt out trying to do it all yourselves. This can lead to people losing trust in the leadership team, people exiting the organization, and the development of a poor company culture. Analyzing your projections and planning a specific time to hire will make you more money and save costs at the same time.

#2     Knowledge and People Retention

Having someone resign in a company of 10 people is a lot more impactful than a company of 1000 people. That’s 10% of your workforce gone in one day! The knowledge that one person has about your product, service, processes and their customer relationship is so incredibly valuable at this stage. Imagine your Developer has been with you since the beginning. He is the only one that knows the software as well as you (if not better). He gives his notice because he has been offered a management role with a competitor. How could you have avoided this? With a people strategy that anticipates risks and threats to your organization. To be successful your people strategy must identify people related pains in your business and develop effective solutions. There is no doubt that people will eventually leave your organization. The impact will depend on how well prepared you are when they do.

#3     Keeping Costs Down

Compensation costs are usually one of the highest expenses of any organization (usually only second to product/materials). You have to make it count! Large companies with great cash flow can offer a lot more to employees, so small companies need to be more mindful of their compensation structure. You need to ensure that you have your core business skills in house and look at outsourcing those that are not core or those that tend to fluctuate. For example, if you are a small technology firm, you may want to outsource payroll since it is not core to the business. Also look at Human Resources, Marketing, and Accounting since their demand tends to fluctuate. You can also hire a Marketing or Human Resource firm to assist in strategy development and then have an admin person handle the day to day.

#4     Building Culture

As mentioned above, small companies should not try to compete with large companies when it comes to compensation. Your competitive advantage as a small company could be your agility, the opportunity to learn about different aspects of the business, the close contact with the CEO, possible stock options, close work relationships, reduced bureaucracy, increased flexibility and the joy of being part of some thing new and exciting. These all contribute to the company culture. This is something that should be defined early and can include your work environment, leadership style, employee perks and learning opportunities. This is what creates a great place to work that will always win against compensation.

#5     Risk

The way in which we treat employees has improved substantially in the last 50 years. This is in large part due to legislation around hours of work, wages, discrimination, wrongful dismissal, workplace safety, etc. These are all elements that must be considered when creating policy, common practices, and overall people strategy. If you do not account for these risks you could incur huge fines or become involved in a lengthy litigation process. Neither of which will help your bottom line or the reputation of your business. If you are not aware of the risks you either have to educate yourself or consult with a human resource or legal expert.

You may choose to develop your own people strategy or bring in outside expertise to help facilitate the process. Either way, making it a priority will better position your business for growth, efficient operations, and business evolution.

Sarah Mullins is the founder of uptreeHR, a Halifax based human resource consulting firm that is passionate about helping business owners manage their people, set clear expectations and increase performance. We truly believe you can treat your employees well, create an amazing culture and not break the bank.

To book a complimentary 30 minute consult with Sarah, click here.

Sarah Mullins, CPHR
Principle Consultant


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