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Human Resources Fundamentals for SMEs

Read about how Human Resources departments manage and support the most important part of any business; the people behind it.
Human Resources Fundamentals for SMEs

Updated on 14/10/2020

Perhaps the most important part of any business is the people behind it. That’s what the Human Resources (HR) function looks after by managing, recruiting, and supporting staff. HR is a fundamental discipline from a company’s formation and is equally important as Marketing, Sales or Operations.

Having a ‘Head of People’ or HR lead internally to recruit the best talent early on can have a huge impact on a business’ success. After all, anyone can have good ideas and aspirations, but good execution determines whether those ideas are implemented in the right way. That’s where a knowledgeable and experienced HR lead specialises, and they may even make key hires early on, such as bringing on the right technical lead to drive business growth.

HR itself is an age-old discipline that huge companies dedicate a lot of resource to. It’s well studied, and the principles behind it are constantly being updated and evolving to best understand employee needs and behaviours. That being said, there’s no reason why small or medium sized business can’t apply the advanced principles of HR to their own workforce, in a bid to make them feel more supported and happier.

What are the first steps in implementing a HR strategy for a small business?


If you’ve never really considered the relevance of HR to your business before, then the two key areas to start thinking about are people and culture.

While ‘people’ is about getting the right talent through the door to position you for success, ‘culture’ is about setting the shared values that your team will operate with. Culture can unite staff behind a common goal, create a feeling of inclusion and involvement, and serve as the bedrock of your team.

In more ‘business-y’ terms, though, a good culture will allow your team to make the right decisions more often and make those decisions faster. How so? Well, when building a culture, you determine a standard for:

  • Business communication (internally)
  • Business etiquette
  • How meetings are conducted
  • How clients are treated
  • The team’s work-life balance

Then, with these key characteristics of a business’ culture in place, you may find that you benefit from having a shared communication style which reduces confusion, a commonality in how you approach and treat stakeholders or clients, and shared values which new employees can see and relate to, making likeminded individuals gravitate toward your company and new starters integrate more easily.

One additional aspect of your company culture which may help encourage new talent to apply and one you could seriously consider in your business is whether your team perceive you to have a diverse and inclusive culture. Check out our blog on diversity and inclusion if this is something you’re looking to assess, implement or improve upon within your own business.

What do human resources departments do?


Now that we have established some of the background behind why HR matters, let’s look at some of the key HR functions that contribute to the ongoing success and continuity of a business.

Recruitment & selection


With an understanding of what roles need filling within a company, HR teams are often responsible for recruiting the right people to fill those roles. The recruitment process itself can involve advertising roles on different platforms (such as jobs boards), liaising with external recruiters, interviewing potential candidates and making key hiring decisions to determine which candidates can fulfil the job description while also being well suited to the company’s culture.



A good recruitment process will mutually benefit the employer and the employee. However, it isn’t always easy for new recruits to join a business and immediately be effective at what they do, though.

An effective onboarding process will see new employees integrate with the team properly, in a consistent way. It should help them build an understanding of company values and processes and leave them feeling confident that they know how to conduct themselves, communicate with colleagues, and go about their daily business.

Onboarding can be difficult for SMEs who do not have huge resource to allocate to HR, and so sometimes a more personal onboarding process is required, especially for smaller businesses. In these circumstances, often with smaller teams, building a personal connection with new employees may help to smoothen out the process and make communication easier. Check out our guide on how to onboard new employees remotely for more tips.

Performance management


Are all teams feeling motivated? Are they engaged with their work, satisfied, and empowered to achieve results? Performance management is a key HR function which sees HR teams evaluate and assess whether employees have the necessary skills and working conditions to complete their tasks. An advantage of having HR within as SME is that with smaller teams, more personal connections are often formed by these teams typically spending more time together, which may make performance management a little easier.

Training and development


Finally, training and development is often something a HR lead within an SME will oversee. By giving employees long-term and short-term development goals, you remind them that you (as a business) are investing in them while they invest time and energy into your success. Having a development plan for employees can help you to plan out who can potentially acquire which new skills, and reconciling this plan with your general business plan could help you reach a place where you’re able to prepare yourself for new business opportunities in advance. For example, if your sales team are keen to learn more about marketing and you are planning on running some advertising activity on a new product, there may be an opportunity for you to upskill team members in a way that aligns with your overarching business strategy.

Disciplinary actions and dismissals


One of the perhaps more challenging aspects of Human Resources is handling employees when things don’t go exactly to plan. Sometimes employees fail to meet the contractual obligations they agreed to when signing their employment contract, and under these circumstances it is often the role of HR staff to have sensitive conversations with employees which aim to get to the bottom of what has happened and figure out how to move forward.

If no steps are taken to correct issues identified in disciplinary meetings, HR staff must also deal with dismissals under certain circumstances. The role of HR is much broader than simply being punitive, though, as HR staff may undertake responsibilities which guide staff in following proper company policy. This can include assisting with wellbeing training or providing GDPR guidance if the HR team are qualified to do so.

How can I improve HR within my small business?


It may be worth running through each of the elements we’ve described today to assess whether you’ve implemented effective HR policies within your business. Try to be intuitive and step into your employees’ shoes. As a new starter in your own business, what would your onboarding experience be like? Do you really discuss company culture and values?

By identifying your own perceptions of your HR policies and strategies, and then comparing that against the experience a new employee is likely to have when joining your business, you can identify what the difference is and take steps to minimise that difference. Doing so could see you refine your HR processes in a way that unites your staff around a shared vision for how you would want your business to conduct itself.

Human Resources FAQs


What does HR stand for?


Human resources.

How can human resources improve the performance of a business?


By putting the right people into the right jobs, creating the right culture, and supporting all staff, HR teams can help employees feel more motivated and better equipped to succeed. This can improve business performance, whatever their KPIs.

What human resources skills are needed for success?


Clear communication, good people skills and attention to detail are some of the typical traits you may find in a developed HR lead.

How could Esme help?

These are difficult times for many businesses, so it’s important now more than ever, to take good care of yourself and your team. If you’re concerned about your business being impacted financially due to coronavirus, visit our FAQ's page for information about how we may be able to support you.