The Importance of HR and Governance for Small Businesses

By Sharon Pegg, Director Northern Powerhouse Consulting Ltd


You may think governance is all about big corporations, but it’s relevant for businesses of any size, whether you have 10 employees or 1000.

In a nutshell, governance is about making sure your business complies with the rules and regulations, and that it operates with the best interests of your employees, customers, and your other stakeholders at heart.

If you think that governance is not relevant for a small business, think about the impact of a large financial penalty for failing to comply with the law on a business without a huge legal department or large amount of capital, or the impact of losing valuable staff members when you only have a small team.

HR governance

For a small business in particular, your employees are your most valuable resource, and this is why having robust HR policies and practices in place is one of most important things you can do to make sure you comply with the law, keep your employees safe and happy, and make your business as diverse, inclusive, and competitive as possible.

Where to start:

When it comes to having good HR practices in place, it can all seem a bit confusing, especially if you’re new to running a small business. Here’s where to start so you hit the ground running.

Develop HR policies

These should include policies around things like sickness absence, disciplinary and grievance procedures, equality and diversity, health and safety, and any other polices relevant to your place of work. Many small businesses opt to give their employees a copy of relevant policies and procedures in the form of an employee handbook, so they have everything at-a-glance.

Remember, too that policies and procedures are living documents. They should be read and understood by all employees and reviewed and updated regularly to reflect any changes in the law or in your business practices.

Put them into practice

Policies don’t mean anything if what you actually do is not aligned with what’s written down. People fall into bad habits, and over time, standards can fall short of what’s deemed acceptable in your policies. Before long, this can become the way things are done in your business and then along will come a problem and you’ll realise just how important it is to adhere to what’s in your policies.
Carry out regular reviews and audits of your policies and practices
To make sure your business practices stay aligned to what’s written down in policy (and remain compliant with the law), you should carry out regular reviews and audits. This is where you might want to bring in an HR consultant to assist you if you don’t have a dedicated HR professional on your team. An HR expert can guide you on the roles and responsibilities of everyone in the business as well as helping you put a robust HR governance framework in place.

HR essentials

If you’re not convinced about the importance of HR for a small business, here are some HR functions that are essential for any SME.

Hiring the right employees

The cost of hiring, inducting, and training employees is one of the biggest costs for a small business, so there’s a lot of pressure to get it right. To hire the right people, you need a clear, engaging, and inclusive job description, knowledge of what you can and can’t legally ask for/ask people in interviews, and an attractive offer when you find your perfect candidate-this is all HR.

Providing them with a great induction and training plan
If you give your employees a great induction and job training plan, they’ll hit the ground running and be more likely to stay with the business for longer. The minimum new employees need to know is a brief introduction to your business and values, practical employment information on things like pay, leave, and company policies, and what is expected of them in terms of responsibilities and behaviour.

Putting comprehensive policies in place

If you have a team of five and you’re more like family, it can be hard to see the point in having arbitrary policies in place-until something happens that is. To avoid the potential of running into legal and personnel problems, it’s a good idea to provide your employees with a handbook containing your most important policies at-a-glance like:
· Your health and safety policy
· Your equality and diversity policy
· Information on pay, annual leave, parental leave, and other types of leave
· An employee code of conduct
· Disciplinary procedures
· Termination of employment
· Any other information that may be relevant to your business

Carrying out performance reviews

Performance reviews are helpful for you and your employees. They’re a chance for both sides to talk about what’s going well and what’s not going so well, and they also provide the opportunity to talk about expectations, concerns, and goals.

Providing quality training

If employees are allowed to continuously learn and develop, it’s better for your business as you’ll have a more skilled team, and it’s also good for employees as they’ll see you’re investing in them and they’ll want to stay. If you think traditional training is too much of a financial outlay, consider other ways that you can enable your employees to learn, like e-learning programmes.

Complying with the law

Is your business compliant with employment law? Ensuring your business doesn’t flout the rules and face disastrous consequences is the domain of HR.

Solving interpersonal problems

Having employees with different personalities, backgrounds, and experiences means that interpersonal conflicts are inevitable. In a small business, they might be dealt with informally, but you’ll still need to understand the principles of effective conflict resolution, nonetheless, as left unchecked, they could cause real harm to your business.

Promoting diversity and inclusion

Even if you have a small team, you should aim to have a diverse workforce that represents the customers you serve. If you’re unconsciously (or even worse, consciously) excluding particular people, you could be breaking the law and robbing your business of access to a much wider talent pool.

And finally, handling termination of employment correctly.

Whether an employee has handed in their notice or you’ve had to let them go, you need to make sure that you follow the rule of law when you’re handling the termination of their employment.

At NPHC we provided HR services to a number of small businesses. Let us support you and keep you legally compliant and up to date with employment legislation. Sometimes it’s the small things that matter.