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Why an HR Strategy is Critical for Small Businesses

Human Resources (HR) strategy is an essential part of any business, regardless of its size, but for small businesses it can be a critical component that supports effective growth.

Companies that are looking to scale always need to plan: they plan how they will market their product and how they'll build a sales pipeline, and they need to plan how they'll get and keep the people they need to do the work.

Developing an HR strategy is just as critical as your Sales & Marketing strategy. If you don't envision where you want to be and then plan for it, how do you know what you need to do in order to be successful?

In an HR strategy, the things you consider are your organizational structure -what it should look like and what positions you will need and by when; where you plan to find your team (onshore, offshore, employees or contractors, remote or onsite) and how you'll be sure you hire the right ones (because turnover is costly); what compensation you'll be able to offer, and what benefits - and what your plans are if you can't compete with salary alone; how you plan to keep your team engaged and happy (because, again, turnover is costly!); how you'll ensure that everyone gets the training they need to meet their goals; and how you will deal with underperformance, conflict, or conduct issues. It's really answering the main question of: What type of workforce do you want to create, and how will you do that?

HR strategy involves the development and implementation of policies, programs, and practices that are designed to hire right, manage well, and keep your team motivated and engaged as well as continuing to develop their skills to meet their own personal goals but also those of the company. Small businesses, in particular, need HR strategies to help them attract, retain and develop their workforce, and remain competitive in their industry.

Key Reasons Small Businesses Need an HR Strategy

1. Attracting and Retaining Talent

In today's competitive job market, small businesses must be able to attract

and retain talented employees. HR strategy can help small businesses create

a strong employer brand and offer competitive compensation and benefits

packages to attract top talent. HR strategy can also help small businesses

create a positive work environment that fosters employee engagement and

loyalty, leading to increased retention rates.

2. Legal Compliance

Small businesses must comply with various labor laws and regulations, such as equal employment opportunity laws, wage and hour laws, and workplace safety regulations. HR strategy can help small businesses stay up to date with these laws and regulations and ensure that their policies and practices are compliant.

3. Employee Development

Small businesses need to provide employees with opportunities to develop their skills and grow professionally to remain competitive and retain their top performers. HR strategy can help small businesses identify training and development needs, enabling them to focus on creating the right training programs to develop employee skills, leading to increased productivity and employee satisfaction.

4. Performance Management

Having a strategy around how you'll measure, and manage, performance is key. Expectation setting, coaching, and support for your team is critical to your organization's success.

5. Culture and Values

I often talk about 'how' people do their work in addition to 'what' they do. How your team works and behaves will drive the culture of the organization. By establishing your values, and the behaviors you expect (see expectation setting, above) you will create the organization's culture. Small businesses need to be sure their values align with their mission and goals, and having an overarching HR strategy can help small businesses create a positive work environment that fosters collaboration, innovation, and employee engagement, leading to increased productivity and job satisfaction.

Practical Steps to Develop an Effective HR Strategy

  1. Assess your current HR practices: Conduct an HR audit to identify your strengths and weaknesses in your people practices. This will help you identify areas where you need to improve and develop an HR strategy that meets your business's unique needs.

  2. Develop policies and procedures: Develop clear and concise HR policies and procedures that drive alignment with your values and your business goals and that also comply with the labor laws and regulations of your region (or your employees' regions).

  3. Develop a compensation and benefits strategy: Develop a compensation and benefits strategy that is competitive in your industry and meets the needs of your employees as best you can. Get creative if you don't have a ton of cash. Time off, employee discounts, etc.

  4. Develop an employee development strategy: Planning for professional growth within your team is crucial to retention but also to helping keep your company competitive. Develop a plan for employee training and development that aligns with your business goals and provides opportunities for employees to develop their skills and grow professionally.

  5. Develop a performance management strategy: Set clear expectations. Coach. Provide regular feedback. Goal set with your team. Having a performance management strategy will help outline how you want all of these activities to happen, and what systems you'll need to support it.

  6. Develop a culture and values strategy: What are your values? What do you want your company culture to be? Creating a strategy that documents and plans your vision in this area will be instrumental in bringing it to life.

Sadly, many small businesses don't think to create an HR strategy until a tipping point: difficulty attracting and/or retaining staff, poor performance, low morale, or other issues. Taking the time to give thought to how you want to hire, train, retrain, and engage your team ahead of time will help your company grow faster and more seamlessly. It also has a great ROI by reducing organizational risk.

woman writing strategy on a board
Creating Your HR Strategy

Not sure where to start? That's okay, because we do! Book your no-obligation, free consultation today!


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