Business owners typically have an idea of where their business is going. Some owners have formalized their ideas in a documented plan. But regardless of whether the path forward lies in the owner’s head or on paper, what can be lacking is identification of evolving HR needs as part of that plan.
Strategic human resource management (HRM) is what the HR function delivers in a business. This article will help you to identify what areas of HRM to focus on as your business evolves through its life cycle.
Business owners lead all facets of their business, and attention to people and culture is required at all stages.
HRM involves the planning and purposeful actions a business takes to align its people with its overall strategic plan. As a business grows, the focus changes. Keep in mind that business owners lead all facets of their business, and attention to people and culture is required at all stages. There are various ways to describe the life cycle of a business. Here, we will address the following phases, highlighting the different HR needs of each:
1. Start up or launch
2. Early development
3. Growth or expansion
5. Decline or renewal
Start up or launch. At this stage, the HR strategy should include defining the type of business you are creating and what the values and culture will be, developing an organizational structure that defines reporting relationships and the roles and responsibilities of the owners, and developing a workforce plan that identifies when you will hire your first employees and what skill sets you will need, based on your projected business growth.
Early development. Sales are likely steadily increasing at this stage and the founders are wearing many hats. It is time to hire your first employees. The HR strategy should include a robust recruitment and selection process. This starts with developing job profiles that clarify roles and the skills required. It also includes your job advertising strategy (where to find candidates) and the selection process (interviews, background checks, etc.).
In addition, the HR plan should include a well-defined onboarding process to help get new employees productive quickly, an updated organizational structure with reporting lines and defined levels of work, a performance management system with clear goals and objectives, and a workforce plan to link your recruitment to your business goals.
Growth or expansion. Businesses tend to experience rapid sales growth at this phase and require many employees in different functional and operational areas. Your staff could be approaching 50 people. You will experience some employee turnover as you look for the right skills or as the business outgrows the skill sets of some employees. Your HR strategy needs to address many areas within HR:
• Attraction of employees, which requires a lot of resources to support rapid growth and turnover;
• Creation of an employee handbook or guide outlining HR policies;
• Development of a transitional organizational chart to support the company’s growth, identifying people capable of being promoted to supervisory roles; and
• More structure in your performance management system to support supervisors and frontline employees.
In addition, your HR strategy needs to have a structured compensation framework that is transparent and sustainable and that rewards the right behaviours and performance. Your strategy will need to address management and supervisor development to ensure that you are building strong teams. Finally, your workforce planning will become more complex as you look at the right mix of generalists and specialists, link that mix to succession planning, and develop a greater understanding of your talent pipeline.
Saturation/maturity/plateau. The business’s sales will continue to increase but perhaps at a slower rate. Your first employees are now reaching 8 to 15 years’ tenure. The HR strategy should focus on identifying critical roles and critical talent, an employee recognition program, and a total rewards framework to retain your employees. Performance management is normalized within the business, and your talent management should be focused on retaining high performers and implementing a robust learning and development program.
Your HR strategy should also ensure that you are managing succession – identifying leadership potential at all levels and developing that talent. Your workforce planning should identify the skills you will need for diversification, merger, or acquisition. Your talent pipeline should be mature at this stage and your people should be ready for their next roles.
Decline or renewal. By the time your business reaches this stage, it will see a gradual or continued decline in sales and revenue. There may be a realignment of the business that involves layoffs, cutbacks, or reorganization. The HR strategy should include a clearly defined process for dealing with employees who may exit so that you do not damage remaining employee loyalty. Furthermore, a focus on change management, including a communications plan, is critical for a merger, acquisition, or diversification. Your workforce plan should identify which key people and roles you require and which roles are redundant.
Wind-up. The business will eventually be sold or wound down. This can be a difficult time for both the business and its owner. From a people perspective there are still many things to consider. If the business is being sold, it is important to communicate to employees what is happening and how it will affect them. Your HR plan should address transition planning for employees who may no longer have a role. You must understand your obligations related to severance and retiring allowances. Your HR plan may also include retention bonuses for employees you need to retain.
As a business owner, it is important that you include HRM as a supporting function aligned to your business strategy. Be purposeful with your HR strategy. Ensure all the facets of HR are clearly understood, linked, and working together. Planning will prevent people headaches and time wasted solving avoidable HR problems. Not all businesses require a formal HR function, but all businesses must focus on their people. Ensuring a focus on HR and people will set you up for success, regardless of the life cycle stage of your business.
First published in the December 2019 edition of The Business Advisor.