HR and people management in Singapore SMEs

01 May 2013
Published: May 2013
01 May 2013

Four stages of transition for SMEs

SMEs are dynamic and complex, and will transition at different rates, spending different amounts of time within each stage, dependent on their individual context. Furthermore, some may choose to remain firmly in one stage over time.
Although the four stages are depicted sequentially, organisations are able to move forward or backward between the stages for good reason, by conscious choice and often not due to failure. And likewise, in difficult economic periods, an SME may choose to halt growth and focus on consolidating existing activity to ensure they are in a strong position for when the economy picks up.
In this first start-up, entrepreneurial stage, the organisation is characterised by informality and contingency, with an emergent strategy, fluid structures, flexible job roles and tacit knowledge exchange. There is usually no formal human resources role in this stage; instead, people management issues are dealt with by the owner/entrepreneur.
Learning is mainly experiential and on the job. There is an emphasis on the salary side of reward, with rates decided by the owner, perhaps supplemented with share options or equivalent, but benefits at this stage are unlikely apart from legal requirements. The owner’s vision and values drive practice.
At this stage, people’s engagement tends to be largely intrinsic, coming from the excitement of working for an entrepreneurial company, the opportunity to be involved in different aspects of the business, and both personal and organisational achievements. Recruitment is ad hoc, based on immediate skills requirements. However, applicants’ attitude also plays a large part in recruitment decisions, in particular if they are willing to be flexible to meet the changing needs of a start-up business.
This stage of organisation transition is typically characterised by formalisation of the organisation’s structure (including team structures and more formalised job roles) and introduction of processes. In addition, with people and performance issues becoming salient, the fundamental HR policies and processes are introduced. However, HR tends to be transactional in nature at this point and reactive to immediate issues, such as the need to recruit quickly, or to ensure a consistent people management approach across the business.
The introduction of formality at this stage also tends to include a more consistent approach to training for operational staff. However, as the organisation is still emerging, flexibility remains important and needs to be considered when introducing people management policies and processes.
This stage of transition is generally characterised by reflection and improvement, where organisations may choose to ‘take a step back’, reflecting on what is in place already and assessing whether it is right for their future direction or whether change is needed. The amount of time spent in this stage can be due to good reason, through conscious choice and often not due to failure. However, it can also be a product of the external context.
The business strategy now tends to be planned rather than emergent. Therefore in this stage a more forward-looking, systematic and strategic HR approach tends to be adopted, ensuring practices support achievement of the organisation’s goals and are aligned with the organisation’s strategic direction and values.
The longer-term HR focus also means the development of a more planned and embedded approach to people development. As well as developing their in-house training approach, our case studies have engaged with various training courses and general support provided by the Singapore Government, which is aimed at increasing SME capability and hence their competitiveness and growth.
In the consolidating stage organisations typically have more management layers or dispersed operations, making a formal two-way communication strategy essential. A more formal and planned approach helps to ensure the right messages are being communicated, and that employees still feel their views are heard, as in the early days when the organisation was smaller when employees would have more face-to-face communication with the owner/ founder directly.
Finally, a more systematic approach to reward is adopted, aligned to business goals.
Further cementing a focus on the long-term performance of the organisation, during this stage more HR attention is paid to internal factors and external macro trends which could affect the organisation, both now and in the future.
It is through having a deep understanding of your organisation’s unique context, including an extensive knowledge of the market in which it operates, the business strategy and the capabilities or weaknesses of the organisation, that it is possible ‘to bring to bear a unique insight into what is most badly needed to drive short- and long-term performance’ (Sears 2011).
Internally, the organisation culture, engagement and cross-function collaboration become even more of a significant focus.
HR needs to be scanning for, anticipating and responding to external opportunities and challenges in a timely way.
It is vital that the HR strategy remains closely aligned to the business strategy, facilitating the organisation’s long-term goals. Likewise, the organisation’s vision and values need to be the golden thread through all practices and approaches, including reward. A total reward package is common, with attention focused on financial and nonfinancial rewards, including job enrichment and talent development.
Also in the established stage, there is a focus on career development and succession planning.
And finally, at this stage of transition there is also a noticeable shift in our case study organisations from management training to leadership development.
01 May 2013

Insights for practice

Based on our research, we suggest six insights which we believe are important to support the sustainable long-term performance of SMEs, with implications for practice. Under each insight we pose questions for you to consider – whatever stage of transition your organisation is in – about whether your current HR practices and approaches are contributing to the long-term performance of your organisation. And there is no one-size-fits-all solution, as the most appropriate courses of action will depend on your organisation’s individual situation.
To be truly sustainable, it is not enough to just understand the current business priorities and the practices that will enable you to deliver today. Anticipation of the next stage of organisation transition, through having a deep understanding of your organisation’s context, strategy, vision and values, will enable you to revise your current approaches and avoid hitting a ‘crisis point’.

  • What is your organisation’s history of change and transition, as well as your future transition scenarios?
  • What are the limits and the opportunities of your current HR approach that need to be addressed under these scenarios?
  • How will you maintain close relationships with your stakeholders through the different stages of organisation transition, hence preserving your understanding of operational issues?
  • To what extent are people in the business actively scanning the external environment to anticipate trends and opportunities?
Clearly articulated organisation purpose and values set direction and steer the organisation. But if they are not vibrantly ‘part of what we do’, they can become diluted and even disappear over time. Relentless reinforcement is required to preserve the owner/leader’s founding vision and values, which form the bedrock of the organisation.

  • How confident are you that employees identify with your purpose and are living your values? How do you know?
  • To what extent are your values threaded through your people management processes?
  • How will you enable employees to continue to connect with your purpose as your organisation changes and transitions?
A deep understanding of the owner/founder’s vision and their expectations of HR’s role needs to be coupled with HR’s detailed diagnosis of both current people management issues and future challenges. HR needs to skilfully co-deliver both of these agendas to achieve sustained organisation performance. The extent of HR’s task will be dependent on the extent of leadership appetite for the more intangible HR issues at different stages of organisation growth, for example engagement and organisation culture.
As an organisation expands and more leadership and management layers are added, a further challenge for HR is to then ensure managers appreciate the importance of the people management aspect of their role (not just the technical aspects) for the organisation’s long-term performance.

  • How aligned are the HR and leadership expectations about HR’s role? Have leadership expectations shaped your role in a way that inhibits or enhances the potential for HR to support sustainable performance?
  • What people management imperatives are on your priority list that are not on managers’, but are essential for long-term performance? And, most importantly, how will you get their ‘buy-in’?
  • To what extent are you viewed as ‘a credible business person who happens to know about HR’? How do you know?
The temptation to increase structure and process as an organisation increases in size can result in an overly bureaucratic organisation, both stifling agility and undermining the entrepreneurial spirit on which the organisation was built. Finding the right balance between structure and fluidity is a challenge at each stage of organisation transition, but ultimately the need for processes will be less when organisational values are truly embedded.

  • Are your processes and procedures consuming employees’ freedom and autonomy? How often do you evaluate this balance?
  • Does the level of trust in your organisation, and the extent your values are embraced, support or prevent having looser processes?
  • To what extent do people feel empowered to innovate and drive change in line with business goals?
As the organisation transitions between the proposed stages and the operating context changes, it is often necessary to let go of processes or aspects of the organisation’s culture that no longer support its vision and priorities. Rather than being sentimental about ‘what has always been’, don’t be afraid to bring about change for business improvement.
If organisation transition is associated with, for example, an increase in workforce size and the scale and scope of operations, it’s important that attention is dedicated to identifying the aspects of your organisation you want to retain as you grow. Selfish retention of a ‘one organisation’ mindset, characterised by knowledge-sharing, crossfunctional working and being close to the customer, is vital for sustainability. It is these attributes of SMEs that larger organisations can strive at great cost to embed.

  • Which parts of your culture are truly adding value and which have become part of ‘the way we do things round here’ but may undermine achievement of business priorities?
  • When was the last time you dropped a process that was no longer appropriate for your organisation?
  • What are the advantages of being your current organisation size that you don’t want to lose?
  • How do you maintain employees’ engagement with the business through organisation transition?
When presented with an issue, putting processes in place may solve it in the short term. However, it is important to consider whether a process-driven response alone will support the longer-term goals of the organisation. With each presenting issue there is a golden opportunity to look beyond immediate solutions and build on the organisation’s cultural foundations. For example, when putting recruitment processes in place, there is an opportunity, at the same time, to make sure you are defining ‘cultural fit’ and identifying long-term skill requirements as well as the immediate technical skills needed.

  • How often do you put a process in place and then move on to the next challenge?
  • And when did you last put a process in place without considering if it was the right thing to do for the organisation in the long term? Did the process truly address the underlying issues?
  • Thinking about a current issue in your organisation, what are the opportunities for going beyond process to develop the organisation’s culture?
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