What are the real HR challenges facing a growing entrepreneurial company?

I see a reoccurring theme amongst SME companies I work with. The primary motivation to engage me often includes some concern over ‘HR’ responsibilities. This invariably translates into concerns about employment law compliance (I have long since accepted the popular interpretation of ‘HR’ translates to little more than compliance – sorry CIPD). The thing is most companies are worrying about the wrong things…

I’m not saying employment law is not important. It clearly is important to have the basics in place to protect your business and to know your main responsibilities. However it is about perspective and in many respects straight forward risk management. The problem is the media and ambulance chasing lawyers have gone some way to creating a false perception about the true risk of employment law.  

I recently worked with a small company who had those typical HR concerns and were worried about getting things wrong. They were a smallish, expanding and successful multi-site company employing around 20 people with a strong brand and customer base. It quickly became apparent that whilst they were indeed lacking in some basic HR compliance areas, their real challenges did not lie there.  As it stood they did many things very well - they engaged people in their work (without knowing engagement is something multi nationals spend huge amounts of money on!). They had grown through a strong sense of purpose, strong enabling leadership and a committed workforce. Their challenge going forward, particularly as they grew, would be maintaining these things.

The problem is these positive organisational factors often grow quite organically and more easily when the organisation is smaller and flatter. Once the organisation starts to expand (first beyond 10 people then beyond 20 and 30), developing and continuing this simply becomes more difficult. As people move further away from company leadership, it is harder for them both to express their ideas and be listened to. The tried and tested route for an organisation to respond to these challenges is to try and impose some structure and control through greater hierarchy. However the tension here, particularly for an entrepreneurial company, is that the flexibility and autonomy people enjoyed starts to become harder to maintain.  Creativity and innovation become harder to nurture, the company starts to become diffused and in short the organisation starts to turn into just another company.

These were the challenges I highlighted to my client. Moving forward with them firstly required education in that their people challenges were less about HR and much more about organisational development and internal communication. Yes HR was part of the equation, but if anything it was the easy part of the challenge. So what to do about these problems? We’ll discuss that in the next blog…