Why Does a Small Business Need a HR Strategy?

Follow us on social media

Small business owners wear a lot of hats.  They are the operations manager, CFO, CIO, HR manager, Safety Manager and Head of Sales.    You’re across everything in your business and running at it full tilt.  Why would you need a HR strategy for your business?  The typical small business has less than 14 employees so why would they spend precious time on a HR strategy?

Simple HR Strategy for Small Business

I am not suggesting that you go to uni and complete a HR degree.  I am suggesting that you put some basic frameworks in place to help you to:

  • Get and keep good employees
  • Build trust with your team
  • De-risk your business by having simple structures in place to avoid legal argument or safety issues
  • make sure your business is scalable with less pain

Pay Structure

A pay structure is important for a few reasons:

  1. You set a range that gets the right person through the door and to stay with you
  2. A structure helps your decision making as you replace or hire new staff.  You’re not thinking how much will I pay this person as you will have built a simple structure
  3. Transparency of pay creates an environment trust
  4. Knowing your range will help you in the pay negotiation with prospective new hires

The first thing I recommend is that you don’t fixate on one number.  You are buying someone’s time, experience and, hopefully, commitment & energy.  Working out an individual’s pay is a little like trying to work out the value of your house.  You’re not really sure of that price until you sell the house.

In Australia, we have minimum wages set by a system of Awards.  There are over 120 Awards in Australia.   This means your pay range must be between that minimum and the amount you need to pay to get the right person through your door.  Some businesses set their entry level at the Award plus an arbitrary percentage with an upper limit.  For example,  ACME Pty Ltd is run by Wylie Coyote who decides the pay range is Award Rate + 10% and up to Award Rate +20%.   Don’t forget your superannuation guarantee charge on top of that!  It is also okay to decide to simply pay the Award.  Remember, this is the minimum so don’t expect the best candidates unless you’re hiring at a lucky time.

You may also consider incentives and recognition schemes.  Incentives are typically triggered by business productivity whilst recognition program acknowledge length of service, birthdays or other individual achievements.  Incentive schemes can take the form of gain-share arrangements, percentage of pay paid once a year based on business performance or ‘on occurence’ schemes that are triggered when something occurs e.g. annual sales target is met.   Recognition programs also take many forms.  In some cases, it can be simple as a cake or gift voucher.  More sophisticated programs use third party providers that administer a points scheme like frequent flyer points which can be redeemed.   The principle consideration for the business owner is “What is the return on investment (ROI) for the business?”.  These are typically tangibles like increased sales and intangibles like increased commitment to the business, motivation or sense of achievement and purpose.

Position Descriptions

Your first hire will likely be the result of you being overwhelmed.  If that is the case then the last thing you’re thinking is “Wow, let me get right to that position description before I do anything else”.     Here’s why I suggest you do it:

  1. Helps you figure out what you really need to get done before putting someone on the payroll.  How will this new person add value in my business?
  2. Provide role clarity from the get-go for people applying for a role (Yes, even if they are a family friend!)
  3. Helps you think about job goals.  What will success look like for this person?
  4. Guides your pay decisions before you meet the perfect candidate and end up making an emotional decision and paying over the odds.
  5. It helps you identify the right Award and classification so you don’t underpay.  I have dealt with many workplace arguments about someone’s classification under an Award.
  6. Helps you frame your feedback and coaching against established criteria in the position description.

Keeping You and Your Team Current

Stephen Covey’s seventh habit is “sharpen the saw”.  This means taking the time out to make sure you’re still sharp.  A sharp saw becomes blunt over time and less effective over time.  We’re the same. As people, we get run down and start to become less effective.   Have a plan to tackle your development and the development of people working for you.

What does that mean?

For your team it might mean:

  • You taking time to coach them through a difficult job that stretches them.  This may make them uncomfortable but with your help they will grow through it.  They benefit by increasing their personal value and you benefit as they become more effective and more utilised in your business
  • Send them to a conference on new products
  • Send them to training.  Make sure that they return to do work that uses the training so they don’t forget it.  It is a waste of money to send someone on Excel training and then not have them use it within a few weeks.  They will forgot most of what they learnt and both of you lose out.

Your development might be:

  • Upskilling to get more effective at running your business.   You could learn about cash flow analysis, get more efficient with Xero or go to that product conference with your employee if the timing works for you both to be out of the business
  • Leadership development for you. You’re the captain and coach of the team in your business.  You can really sharpen the saw for you and your team with the right leadership development at the right time.  It might be as simple as joining a webinar or a short three or four hour session with your local business association.  You may also want to engage a coach who helps you navigate specific issues in your business.

The basics I strongly recommend for business leaders are:

  • Giving feedback (to develop and grow your people).  There are models out there for this including DESC, GROW and a myriad of others.
  • Delegation.   Delegation is an important development tool for your people.  It helps them grow.  It will also free you up, eventually, to spend more time “on” the business rather than “in” the business.  The key here is to have a system of delegation that is well understood by you and the person being delegated to.   Be patient, take your time!  They will not be as good you at whatever it is straightaway.  Persevere and add new capability into your business!


What Now?

If you planning hiring or growing in the next 12 months or have people already then grab a coffee and take the time to:

  • draft out a Pay structure (maybe takes an hour without thinking about an incentive scheme)
  • Choose a position description template for your business (baby steps!)
  • Book in time with yourself to do a position description for your business – maybe start with your own
  • Work up a people development plan with your team to cover the next six to 12 months.  Keep in mind what your business needs now and in the future and what you can afford



Contact us if you need help implementing your HR plan for your business or follow us on Facebook for blogs


Subscribe to our blog

Share this post on social media

Share on linkedin
Share on email
Share on facebook
Share on twitter
Share on whatsapp
Foresight HR

Foresight HR

Foresight HR helps businesses improve their productivity, culture & performance to deliver sustained bottom line results.

All Posts »