Importance of Human Resource management in Small Businesses

One of the most important aspects of running any sized business is developing a sound human resources strategy that works for that individual company. This helps with efficiency, morale, costs, and the ongoing continuity of your business practices. There are many different reasons why it is so important to get right when it comes to human resource management, and here are some of the key points:

Budget Control

Having a specified person or team to ensure that staffing costs, training costs, and other HR related costs are kept to a satisfactory amount is important for the ongoing success of any small business. It is also important when working in a competitive environment that you are able to meet staff pay demands, and pitch to prospective employees with a reasonable and realistic salary level for job vacancies, based on market research of current price trends.

 Conflict Resolution

One thing that is guaranteed when you have a team of people working together with different backgrounds, ages, work experience, and personalities is that there is likely to be some form of conflict from time to time. A trained human resources manager will be able to identify and deal with any issues that may arise between staff members, and this will help to keep your workforce happy and productive. Unresolved staffing issues can result in much bigger problems further down the line, and could even lead to the need for disciplinary action.

Training and Development

Human resources managers are responsible for identifying training and development requirements for staff members, and this is an extremely important part of creating a productive workforce. This tends to be done in a systematic manner through observation, interviews and tracking performance. Improving your current staff’s skills and qualifications will help you to progress as a company and this will ultimately increase your profits. This includes placing them on training schemes, holding regular meetings and distributing useful learning material. It is possible to do this too much and to lose staff motivation, so any company’s human resources manager should know the balance between giving employees freedom to develop and guiding them in the right direction. 

Employee Satisfaction

A good human resource team should be able to adequately gauge the level of employee satisfaction within your company, and this will help you to see if changes need to be made to increase morale. A disgruntled workforce is not good for your company, and could end up being more costly than any other problems you are facing.


An efficient and effective recruitment strategy will benefit your small business no end. A thorough plan of action for recruitment and careful selection of new employees can reduce the likelihood of high turnover of staff, which can be extremely costly for small businesses, especially if in house training is required for new members. The more robust your recruitment process, the more likely you are to find high quality, dedicated staff members who are committed to the position you are employing them to take on.

Performance Indicators

A good human resources team should create and implement a performance indicator system for specific jobs roles. This will highlight any issues that you may have with certain members of staff not performing as effectively as they should be. There are a number of factors which could be leading to this low level of performance including lack of motivation, lack of adequate training, or a low skill level, all of which should be identified so that you can decide which course of action to take. In cases of low staff productivity, it is usually the human resources manager that will consult with the member of staff to determine their opinions on why they perceive there to be an issue, and to resolve the matter. Performance indicators will also highlight staff members that are performing particularly well, and this information can be used to decide on future promotions and job changes within your company.

Establishing Principles

Human resources departments are responsible for deciding on a company’s ethical philosophy and rolling out a clear and concise message to all involved that they are expected to behave in a certain way when working for and representing your company. This is particularly important when dealing with potential clients and customers, and this applies not only to existing staff members, but in the hiring process, as they will be able to identify potential employees that will fit in well to the ethical model that has been laid out. Having a strong moral base to work from helps to ensure that your employees are all pushing in the same direction and are working to give your company the image it wants.