Human Resources Management: The Strategic Factor of Business Productivity in SMEs – Connect HR Strategy. Atlanta

Human Resources Management: The Strategic Factor of Business Productivity in SMEs

“If you don’t know where you are going, you’ll end up someplace else.”- Yogi Berra
January 14, 2020
Why is the Administration of Human Resources So Important?
February 13, 2020

According to the World Intellectual Property Organization (WIPO), “small and medium-sized enterprises (SMEs) are the driving force of a large number of innovations and contribute to the growth of the national economy through job creation, investment and exports." Undoubtedly, their success is essential to promote the economic development of a country.

However, in countries such as Brazil, just over 60% of small and medium enterprises fail in the first five years of existence, according to IBGE (Brazilian Institute of Geography and Statistics). While in the USA, 20% of SMEs close during the first year and another 50% cease to exist in the first five years. This is a discouraging panorama in the demanding labor market of the globalized world.

In both SMEs and large companies, any problem that affects staff affects the development of business. Typically, in small and medium enterprises, the human resources department is limited to payroll and administrative procedures, and is not involved in developing and implementing strategies for managing its personnel. Through effective people management, companies can improve productivity, achieve efficiency and consequently improve their profitability.

Among the functions performed by the human resources department in an SME, we find the following:

  1. Recruitment: Planning, selection and integration of employees.
  2. Administration and Personnel Management: All administrative and bureaucratic tasks such as payroll management, contracts, leave, vacation and benefits.
  3. Compensation Management: Studies and designs compensation systems in line with company budgets and market supply, as well as flexible incentive policies, benefits, and compensation plans, which are important for retaining talent.

Leaving people management in the hands of the CEO, whose capabilities and duties are different, means that HR policy is limited to administrative issues and training. It is a very common serious mistake. This often results in a lack of strategy, business development, internal clutter, quality neglect, uncoordinated and inflexible workflows, uncooperative attitudes, bad working environment, business optimization, and so on.

Regarding the profitability of the business, the overarching factors in HR administration should be:

  • The strategy, aiming to improve the level of service and quality.
  • Processes integrated and flexible workflows, able to adapt to each situation.
  • Technology, with ability to integrate all areas of the company and ensure its distributed management.
  • People who define strategy, design processes, choose technology and contribute their capabilities in a collaborative activity.
  • Operational: Motivated, excited, engaged, and productive employees creating effective, efficient environments. In short: attract, retain, and develop talent.

Despite so many benefits, many SMEs are unaware of the scope that a good HR management policy might entail because "hiring a specialist is a cost they can't afford." There are different solutions as costs decrease, one of which is incorporating an Interim Manager who temporarily covers this role. Another option is to hire a human resources consultant to diagnose needs and design solutions and interventions at an economical cost that will be recovered through improvement of the business, by improving efficiency and profitability.

We at Connect HR Strategy can do some or all of this work for you; we have expert professionals who can design effective organizational structures, select people, train and develop knowledge and skills, set career path guidelines, establish compensation criteria, address work relationships in an enriching way, foster motivational leadership, create internal communication channels, culture and healthy organizational climate, etc. Contact us now for a free consultation!