Small and medium-sized businesses fail to take HR planning seriously
David Woods, June 01, 2010
HR planning has been identified as key to business success but less than 50% of SMEs are taking it seriously, according to a new report.
The findings from Warwick Business School and Royal Mail found HR planning has been identified as one of six fundamental principles that small and medium-sized enterprises must undertake if they are to fully compete in today's tough economy.
And the six-month study, which compared growth rates among 500 small and medium-sized enterprises and their competitors, revealed companies with a comprehensive plan for staff development and future employment were 35% more likely to increase profitability and secure longevity for their business.
But the report also revealed that less than half of all small and medium-sized enterprises (47%) are currently undertaking effective HR planning.
Firms in Northern Ireland are the worst, with barely three in 10 (31%) admitting to addressing staff planning issues, while those in the North West of England emerging as the most likely (58%) to put staff growth at the core of their business.
The five other key factors identified by the Warwick Business School in forming a Blueprint for Success are:
· Flexibility - flexible and responsive managerial approaches enables customer expectations be surpassed
· Business process efficiency - reduce costs and improve efficiency by addressing internal processes
· Marketing - use the right marketing methods to make potential customers more aware of products and services, such as the internet and mailshots
· Growth ambition - have a growth objective to shape a business's strategy and its willingness to invest in development
· Research and development - get a thorough understanding of the markets and the best ways of delivering services, allowing a business to compete more effectively
The report concluded these five elements dictate what an HR plan should look like. First, the plan should be orientated towards supporting a growth aspiration. Second, it should be geared to increasing the firm's flexibility and responsiveness. And third, it should help the company develop its research and process change capabilities.
The report demonstrates that companies, which have successfully adopted at least half of the recommended Blueprint's six ingredients for success, have been more profitable than their competitors and have grown more quickly too. Further, by adopting these blueprint principles SMEs could contribute an extra £15 billion to the UK economy, the research concludes.
Despite appearing to be straightforward business practice to some, the report reveals the majority of UK companies are not addressing these ingredients for success. More than half of SMEs (57%) admit to undertaking no more than two of the Warwick Business School Blueprint for Success recommendations and so are risking their competitors gaining an advantage.
Stephen Roper, professor of enterprise at Warwick Business School said: "As the economy moves out of the recession and into a period of growth, adopting the blueprint will help firms make the most of the new opportunities that will emerge and so allow them maximise their growth and profit potential."