Almost two thirds of SMEs are not investing in HR: Why that is a mistake

SMEs are shunning human resource investment, with a recent survey revealing 63% of SME owners admit they are not conducting regular training or development with staff.

The finding is among those outlined in a report released at the end of July by Prosperity Advisers Group, which is based on a surveys of 2700 small business owners conducted by more than 175 accounting and financial planning practices.

The study also found more than half of small businesses are not reviewing human resources performance in terms of employee job satisfaction and only 11% have formal strategies for staff recruitment, retention and motivation.

Chief executive of Prosperity Advisers Group Allan McKeown told SmartCompany the report’s findings are not surprising given small business owners are “hard at it”.

“Most SMEs’ business plans are about still being a business next year rather than planning strategically,” McKeown says.

McKeown says small business owners have to find ways to do things “smarter rather than harder”, which might mean taking time to be briefed or train themselves on the benefits of HR programs.

“They’re not investing in it because they’re not understanding the benefits,” he says.

“We note they’re not paying attention to upskilling themselves.”

Sitting down and having someone else look at human resources is also worthwhile.

“It’s useful to have an advisor in that process… they can be a sounding board,” McKeown says

McKeown says the study delved into why small businesses are failing, which he says comes down to lack of planning, management skills.

“Interestingly, when SMEs do seek professional advice, its not around the top five needs of their business,” he says.

“It will engage a lawyer to review property lease, but in terms of major things keeping them awake at night, like declining sales, improving profit margins, they seem to be relying on their own gut instinct.”

If SMEs take time to seek more advice in those areas, the report suggests this might alleviate some of their concerns and stress levels.

McKeown says SMEs could take advantage of a number of organisations which were starting to come into the market place offering online HR services, contract or advisory services.

 “It can help keep them on track in managing staff,” he says.

Founder and director of HR specialists wattsnext Sue-Ellen Watts told SmartCompany this morning the results are not surprising but added SMEs “absolutely” need to be investing in human resources.

“I think they need to be spending time on it,” she says.

“A lot of SMEs don’t know what to do.”

Watts says many SMEs think HR is just about compliance rather than seeing the importance of it for the culture of a business, training staff, providing regular feedback and performance reviews.

“Really what they need to be focused on is looking at people and how do we build performance and more of a return on investment,” she says.

Watts says people needed to be very high on an SME’s priority list.

“Two things that keep businesses awake at night are cash flow and people,” she says.

“They’re not investing in people, yet without them they wouldn’t survive. Staff are in front of our customers… they’re your front line.”