News Effective people management ‘is vital to solving SME productivity crisis’

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Effective people management training for small businesses is essential in solving the UK’s ongoing productivity problem, experts have told an influential group of MPs.

Small and medium-sized enterprises (SMEs) account for more than half the UK’s turnover and employment, but evidence sent to the business, energy and industrial strategy (BEIS) committee as part of its inquiry into small businesses and productivity suggested there were a number of barriers preventing them from achieving better productivity.

The CIPD argued in its evidence that the majority of SMEs required sustained external support to improve their management and development capabilities, which the government should be prepared to offer.

“Many owner-managers [of SMEs] have very limited experience around managing people and, if you ask them about the challenges facing their organisations and businesses, they won’t say they’ve got people management issues, they will talk about the business challenges,” Ben Willmott, head of public policy at the CIPD, told People Management.

“But if they talk to an HR consultant who recognises these challenges as people issues, they can have that ‘eureka’ moment. This is why a relationship with an HR consultant can, for SMEs, be as important as a relationship with an external accountant.”

In particular, the CIPD called on the government to support a national roll-out of its piloted 2015 People Skills programme, which provided small businesses with access to HR support and advice. The CIPD found that access to basic people management functions supported many small businesses in achieving sustainable growth.

Other evidence submitted echoed the CIPD’s suggestion to upskill managers, but also stressed the need for a system that accommodated SMEs’ diverse needs.

“If we are to improve management capability, it is important to recognise that not all SMEs are the same and they require training and support targeted to their specific needs,” Professor Mike Wright, fellow of the British Academy of Management, told People Management. “My evidence focused on family-owned firms, as they account for two in three small businesses in the UK, but only 30 per cent survive beyond the first generation.

“There is a need to develop support mechanisms that improve the high-level management skills of family-owned SMEs, and enhance their understanding of governance options through better training.”

Meanwhile, Tej Parikh, senior economist at the Institute of Directors, said access to digital skills was an easy way to upskill managers without taking them out of their place of work.

“Skills challenges are one of the biggest obstacles and hurdles for businesses, so it’s important to provide the infrastructure digitally for businesses to access flexible learning and online training,” he said.

The inquiry, which was announced in January, will take oral evidence from experts, including the CIPD, on Tuesday 5 June.

“Small businesses are the lifeblood of our economy and it’s vital that that we get the business support right to boost innovation and the productivity of our SMEs,” said Rachel Reeves, Labour MP for Leeds West and chair of the BEIS committee.

“The written evidence we’ve received highlights a range of issues that hinder small businesses and damage their productivity, but two main themes emerge – the often crippling impact of late payments by major companies and the lack of effective management training.”

The BEIS department launched a consultation last week on business productivity. The consultation call for evidence paper suggested that organisations could improve their productivity if they automated some of their functions, including some of their HR tasks.

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