Small business productivity boosted by good quality HR support


Small business productivity boosted by good quality HR support

There is a growing body of evidence suggesting that improving people management capability can help tackle the UK’s productivity problem. Analysis by the Bank of England’s chief economist, Andy Haldane, has identified management capability as likely to be one of the drivers of the long-tail of poor productivity firms in the UK. There is also growing evidence suggesting that people management practices in particular, are material to improving workplace productivity. In 2018 the Office for National Statistics (ONS) published the results of a survey of 25,000 businesses in Great Britain looking at structured management practices and productivity. The study reinforced earlier findings on the link between management practice and productivity and noted:


‘Among the four broad management practices categories, we find that practices relating to continuous improvement and employment management – such as those relating to promotions, performance reviews, training and managing underperformance – were most correlated with productivity.’


While identifying that improving people management capability may be one of the ways of boosting productivity growth is relatively straight forward, establishing how to do this in practice is much more difficult. Small firms in particular face challenges to improving their people management practices as many owner-managers will have little knowledge or expertise in this area, as well as limited resources and no access to HR support.


In response to this challenge the CIPD has secured Government funding for new research which will explore the impact that providing HR and people management support to small firms has on firm-level performance and productivity. The project is funded by the Government’s Business Basics Fund, established to help test and evaluate new approaches to boosting the performance and productivity of small firms.


The People Skills project, which is being run in partnership with Greater Birmingham Chambers of Commerce, will enable businesses in Birmingham that employ up to 50 people to access up to two days of free face-to-face and telephone HR advice and online support. Businesses will be able to specify the support they’d find most useful. Examples include help with drawing up employment contracts and job descriptions, managing absence and performance, and improving training and development provision for staff.


The project will provide evidence for policymakers on the impact that the provision of high quality HR and people management support has in supporting improvements in productivity and firm-level performance. It will also provide new evidence on how to engage hard-to-reach SMEs which don’t currently belong to any local networks that support business growth by testing different approaches to messaging and outreach to see which resonate and engage owner-managers in this kind of business support.


The project will run for a year and is expected to benefit up to 500 local businesses. It follows successful pilots run by the CIPD in Hackney, east London, Glasgow and Stoke-on-Trent between July 2015 and October 2016. The evaluation of these earlier pilots showed that the provision of high quality HR support was highly valued by small firm owner-managers.


It showed that the majority of the demand was for more transactional support, such as ensuring firms had written employment contracts, job descriptions, basic policies and had people management practices in place on appraisals, absence management and recruitment. There was also evidence that this type of fairly basic people management support was associated with reported improvements in workplace relations, labour productivity and financial outcomes.


Our initial pilots also found that the vast majority of participating small firms had never paid for any HR support before and provided some evidence they were more likely to invest in paid-for HR support after participating in the project because they had greater understanding of its value.


The latest project is being rolled out against a wider context where productivity growth has broadly flat-lined since the financial crash of 2007, according to the ONS. There is growing evidence that one of the reasons for this is the relatively small number of highly productive businesses in the UK – dubbed ‘frontier’ firms and the long tail of too many low-productivity businesses, or ‘laggards’. The gap between the top and bottom performing companies is larger in the UK than in France, Germany and the US.


The People Skills pilot in Birmingham will provide further valuable evidence of whether providing a finite amount of accessible, free and good quality HR support at a local level can help improve people management capability, small firm performance and boost demand for greater investment in this type of support by small businesses. CIPD has argued that there is a case for rolling out an HR support service for small firms based on the People Skills model by having the Government fund £13m a year to enable all 48 Local Enterprise Partnerships and Growth Hubs to embed this type of service within their core business support offer. The evaluation of the project in Birmingham will provide further evidence of the case for this. We will also be looking to engage with policy makers in Scotland, Wales and Northern Ireland on the findings and insights coming out of the project.


Read about the first People Skills pilots and visit the CIPD on stand D80 at Festival of Work to explore our People Skills Hub, designed to offer practical advice and resources to help you manage your workforce effectively and improve productivity.


This article comes courtesy of Ben Willmott, Head of Public Policy at the CIPD.


Get involved:

The CIPD’s Festival of Work (12-13 June 2019, Olympia London, promises to be a landmark event for both people professionals and business leaders. By focusing on the most innovative strategies in management, technology and learning, the festival will help you, and 7,000 of your colleagues, to harness the latest transformations and drive a human future of work. With 7,000+ attendees, 160+ inspiring speakers, filled with inspirational live experiences and challenging ideas, it’s the ultimate celebration of people in the workplace.

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