By Mike Cotton, talent development specialist for MindLeaders ThirdForce

For SMEs, a closer alignment between business goals and employee performance is crucial in a challenging economic climate. While larger businesses may have financial capital to fall back on, for the SME it is human capital that often makes the difference between success and failure. But how can companies best maximise the potential of their ‘human resource’? Mike Cotton, talent development specialist for MindLeaders ThirdForce, examines the business strategies that SMEs should look to implement to help them stand out in a crowded marketplace.

According to research conducted by the Government’s strategic skills body UKCES(2009), companies that train and develop staff are two and a half times less likely to face closure during difficult times, but are better placed over competitors to save money, improve motivation and increase employee retention. Documented people management strategies are also a large contributing factor to improved revenue performance, according to PricewaterhouseCoopers (PwC). Based on this, one might assume that ensuring effective, structured HR strategies are in place would rank high on the list of priorities for SME managers and owners. However, this is frequently not the case.

Structured and formal processes must be in place to enable effective management of all resources. Where accounting and finance systems are vital to a company, so too are people management systems. In short, visibility is key.

Visibility and accountability

Performance appraisal is a crucial process for all organisations. Visibility on high performers has multiple benefits across SMEs. Performance appraisal processes, particularly online systems, can increase accountability across the company, giving employees ownership over individual career goals and giving management insight into performance. Amongst the most important benefits, however, is the alignment of the individual’s goals to the company goals. Engagement in shared responsibility is a key factor in organisations that prove successful even in difficult economic times. Strength in numbers is an often over-used expression but, as research suggests, if every employee in an organisation is aware of the company’s goals and their role in achieving these, organisations will ultimately gain a crucial competitive edge.

Retention and performance

Good people management reduces absenteeism, increases productivity and assists with retention of key personnel. Research by Chartered Institute of Personnel Development (CIPD), PwC and the US-based Bersin and Associates demonstrates that these are unarguable business benefits that either save or make money for a company. One recent survey showed that the majority of employees leave their jobs because of a lack of progression opportunities, rather than leaving because of a low salary or a bad manager. With this in mind, it is vital that key performers are nurtured to ensure that they remain with an organisation, working towards the company’s objectives. The performance appraisal process helps with the visibility of high performers, ensuring that they are recognised and developed within the organisation. While the system identifies those who are underachieving, it also provides the tools necessary to ensure that they too learn and develop, and ultimately become better performers and employees.

The future

Maximising the potential of employees is fundamental for the success of any business. Deploying the right people to the right tasks, developing the skills of your employees in the competencies needed to complete their goals and effective succession management are all tasks that are fundamental to maximising the full potential of human capital. Solutions which provide a streamlined and effective method of managing these tasks will ultimately ensure a company is well-placed to compete in today’s challenging marketplace.