Written by
Changeboard Team

Published
23 Jul 2010

How can small business owners employ HR tactics

23 Jul 2010 • by Changeboard Team

Entrepreneurial spirit

Haines Watts recently undertook an in-depth survey of the owner-managed business (OMB) sector in the UK, looking at the highs and lows of business ownership. Results from the survey showed that most owner managers (68%) felt they have a work/life balance they are happy with, and that 84% of business owners would: 'recommend running your own business to others'.

Recent times have been less than kind to the OMB sector and competition has undeniably become much tougher. Half of the businesses we surveyed have experienced destructive cost cutting from competitors during the recession, and with cash flow being much tougher to manage, 45% of businesses have made a claim through the courts for unpaid bills. Profit has become more a luxury than a necessity and 22% have had to pitch for work on a 'zero profit basis'.

Stress reaction

As well as these financial issues, there are other softer but no less important issues that are affecting many businesses. It's not difficult to imagine how stress levels of business owners may peak in these challenging times, caused by any combination of tough changes they must adopt purely for business survival. There are also stressed employees to consider, as the threat of redundancy or reduced hours is enough to change anyone's work/life balance.

The International Stress Management Association UK, a leading authority on the subject defines stress as: "The adverse reaction people have to excessive pressures or other types of demand placed on them."

Stress not only affects individual employees, but also managers, friends, family and colleagues, with the fight or flight reaction to stress easily leading to reactions that may appear to be a little more extreme than normal, or even completely out of character. For the business owner manager who is already struggling with a crippling economy, the management of stress may very easily be a Challenge too far; particularly if they are feeling the effects themselves.

Awareness of employee behaviour

Problems arise when there are reactions to stress symptoms which do not align with medical treatment. Employers might assume an emotional outburst to be entirely driven by a person's situation outside of work or even them just being unreasonable, however the reality may very easily be that the person in question is under stress with worry for the safety of their job, or that they are working much harder than they are able to for a prolonged period.

Without taking the right advice before taking action, this situation might very easily snowball into a disciplinary hearing. This is fraught with issues; mis-diagnosis of the problem, demotivation of the employee, and worst case, potentially losing the employee altogether.

Employees - life blood of SMEs

In smaller businesses, where gaps are more difficult to fill, the loss of talent and experience is significantly more destructive than in larger organisations. The Haines Watts survey showed that 68% of business owners have avoided making redundancies in the past year, and it also appears that business owners are feeling more confident moving forward. The majority (88%) predict they will make no further redundancies this year.

This should provide a boost to employee morale, but unless these figures are quoted to employees, they may still feel they are at risk. Business owners do not generally want to lose employees, as they are the life blood of SMEs (small and medium enterprises) and the knowledge, experience and relationships these valued people have is incredibly difficult to replace. How can employers make absolutely sure that their people feel valued, not just once but always?

Using business tools like appraisal and employee Benefits are simple ways to make employees feel more valued. It's very simple to see that the economic climate has done a great deal of damage to employee motivation, you only need refer to Herzberg's theory for motivation to see where the problems have arisen. Dissatisfiers or 'hygiene factors' brought about by economic conditions and business survival have had a negative impact on employees. Theory shows is that to overcome these negative effects, it's vital that the satisfiers or 'growth factors' are used by employers to balance the effect.

Employing HR tactics

There is no simple answer, but below are a few areas that a business owner should focus on:

  • Communication: group meetings, one-to-ones and appraisals with staff can help to motivate. Giving valued employees the opportunity to make their own recommendations and feeling like they are being heard makes quite a significant difference to their outlook, and may ultimately help to improve the business.
  • Performance management: this is another route which can help to motivate employees, and can be used to protect the business if necessary. Highlighting good work and making sure that people understand when they've done well, and why, is another key technique for encouraging and motivating staff.
  • Training: is crucial in boosting employee morale as people feel a sense of personal growth and achievement by learning something new. There is also the underlying reassurance that the business is investing time and resource in the employee.

HR cannot be ignored

Staff welfare is of primary concern to many employers. However, HR is not a function that often has a great deal of resource in a small business, with 36.49% relying on external HR professionals and a further 33.45% relying on their own reading and understanding to keep up-to-date with employment legislation. The time and costs associated with HR are likely to have been high on the list of costs that were cut as the economy plunged. The result, however, is also a drop in employee morale and motivation.

However, it is not just staff that benefit from greater use of HR functions within the business. 54% of business owners surveyed were over 50, and as such may need to consider their exit strategies to protect their business interests and their employees' futures. It will become much more important for these business owners to use performance management to retain employees and prepare their businesses for sale.

In short, for owner managed businesses, HR is one area that cannot be ignored. As we begin to exit the downturn, the job market will become more fluid and businesses will need to rely on solid HR practices more than ever to retain key staff, and in turn, keep their business profitable.

About Astrid Yarwood

Astrid Yarwood, service director, NorthgateArinso

Astrid Yarwood is a qualified barrister who specialises in employment law. Astrid is the service director for NorthgateArinso Employer Services.