Small businesses with under 50 employees rarely have HR support.

That’s because many startup founders and CEOs see HR as just another extra cost. But without dedicated HR support small businesses can, and do, fail. Sharon Fishburne has written before about companies facing so-called ‘talentmageddon’. It’s time all companies looked at the real costs of not retaining HR professionals.

1. When things go wrong with employees – they go wrong fast

In a small business everything is accelerated. If an employee is demoralised or unhappy, feels undervalued or excluded you know about it straight away. After all, as the boss of a startup or small business, you’re probably sitting at the desk next to them.

But what if these behaviours are symptoms of a much bigger problem? What if that staff member is actually being bullied or harassed? It’s a serious problem with one in eight UK employees reportedly affected by bullying at work. Suddenly, literally within a few minutes, a founder or CEO can be faced with a completely unfamiliar and distressing situation. And that’s when big, costly mistakes occur.

Startups and small businesses tend to be relaxed environments where boundaries are fluid. But if things go wrong there are fewer chains of command and fewer formal structures in place, so they go wrong very fast indeed. In most small businesses, no one has full knowledge of the appropriate steps to take – and if they do, they tend to be vague and unpractised.

All small businesses need HR support to ensure that they never reach the point where an employee feels they must make a formal complaint, or leave and go to an employment tribunal. And if they do, the CEO has experienced professional help they can turn to.

2. It’s harder to tackle poor performance when you’re small

The dynamic in a small business is critical. It’s vital that everyone is motivated, performing well and pulling in the same direction. If just one person is underperforming for whatever reason, be that through absence, a lack of training or they’re just the wrong fit for the job, it can skew the entire company results.

But the irony is that it can be much harder to tackle poor performance in a small business. People naturally shy away from conflict and confrontation in the workplace. According to a 2017 survey, 44% of all managers found giving negative feedback stressful or difficult. And in small businesses, discussing performance issues can be incredibly hard. 

Small businesses with HR support have someone one step removed from the day-to-day operations to turn to; an impartial, objective expert with the experience required. And HR is more than just about disciplining staff appropriately – the best HR professionals can advise on strategies to overcome performance issues before they become a real problem, and help support staff to improve and reach their potential.

3. Small businesses can’t afford costly mistakes 

Startups and small companies are on a tight budget. They can’t afford to make mistakes, and the two biggest mistakes for many are hiring the wrong person and not being able to retain existing skilled employees. Churn rates in small businesses are a problem. In fact, according to recent figures from Aldermore, 67% of SMEs in the UK find it difficult to hire qualified people or retain existing talent, and one in five report problems with a high turnover.

It’s easy to find excuses not to retain HR support – mostly to do with costs. But when it comes to hiring and retaining the right staff, having HR support can pay for itself. The Recruitment and Employment Federation reports that 85% of companies have made a bad hire, and if they’ve hired the wrong person on a salary of £42,000 it can cost the business more than £132,000 overall.

HR professionals know where to look to find the right employees with the right skills at the right salary level. They also know how to attract these talented people and how to retain them too using personal development strategies, career progression and redefining company culture.

The vast majority of startups and small businesses don’t have dedicated, in-house or retained HR support. Keeping costs low and formal structures to a minimum can feel like the right way to go when you’re small. But in reality, you could be storing up a whole heap of costs and trouble. HR support is vital no matter the size of your company.

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