By Rosie Campbell, Thrive. 23rd December 2024

Every SME owner understands the value of protecting their assets. You likely have insurance for your property, equipment, and even cyber threats — safeguards that protect your business against the unexpected. But what about your most valuable asset? Your people.

Strategic Human Resources (HR) is not just about compliance or addressing problems as they arise. It’s a proactive investment that drives productivity, reduces costs, and positions your business for long-term growth. When done right, HR is your business’s insurance policy for resilience and success.

The Tangible Benefits of Strategic HR

The question I often hear from SME owners is, “What’s the real value of HR?” It’s a fair question. After all, small businesses don’t have the same budgets as larger organisations. The answer lies in data. Let’s explore how strategic HR delivers measurable results that impact your bottom line.

1. Enhanced Employee Engagement and Productivity

Employee engagement is a term often thrown around in HR conversations, but let’s break it down. Engaged employees are those who are emotionally committed to their work and aligned with your business’s goals. They’re not just clocking in and out — they’re actively contributing to the success of your organisation.

Here’s the hard truth: only 50% of UK employees are engaged at work [1]. This means half of your workforce might be operating below their full potential. That’s a lot of untapped productivity.

Businesses with highly engaged employees experience:

• 23% higher profitability [1].

• 21% greater productivity [1].

• A 66% improvement in employee wellbeing [2].

For example, one SME we worked with struggled with low team morale after a leadership change. By introducing clear communication channels, regular feedback loops, and recognition programmes, employee engagement scores improved by 35% within a year. Productivity rose, and absenteeism dropped by 40%.

Engagement doesn’t happen by accident. It requires intentional strategies such as:

• Leadership training for managers to improve communication and motivation.

• Tailored employee development plans.

• Regular engagement surveys to act on employee feedback.

At Thrive., we specialise in designing these initiatives, ensuring your team is motivated and aligned with your goals.

2. Reduction in Underperformance Costs

Underperforming employees are a significant cost to UK SMEs. Poor hires, inadequate training, and ineffective performance management lead to lost productivity and high turnover. UK businesses collectively lose £39 billion annually due to poor hiring decisions alone [3].

For SMEs, the average cost of a poor hire is £39,500 per year, factoring in recruitment expenses, lost productivity, and team disruption [3]. Strategic HR minimises these risks by:

• Implementing robust recruitment processes, including competency-based interviews and psychometric testing.

• Offering probationary review frameworks to ensure new hires meet expectations.

• Establishing performance management systems that focus on support and improvement, rather than punitive measures.

One of our clients, a manufacturing SME, was facing a high turnover rate due to misaligned recruitment practices. By revising their job descriptions, refining interview techniques, and introducing a structured onboarding process, they reduced turnover by 28% in 12 months, saving over £120,000.

3. Improved Employee Retention

It’s often said that employees don’t leave companies; they leave managers. High staff turnover is one of the most significant drains on SME resources, with recruitment and training costs estimated to be £12,000 per employee [4]. Beyond the financial impact, losing experienced staff disrupts operations and damages team morale.

Companies with strong HR practices experience a 50% reduction in turnover rates [5]. Here’s how strategic HR improves retention:

• Effective onboarding programmes ensure new hires feel supported and confident from day one.

• Career development opportunities give employees a reason to stay. Businesses with clear progression paths see a 25% higher retention rate [6].

• Workplace culture audits identify pain points and opportunities to improve employee satisfaction.

In one case, a client in the retail sector was losing frontline staff at an alarming rate. Thrive. introduced structured exit interviews to identify root causes, resulting in changes to scheduling flexibility and manager training. Retention rates improved by 32% in under a year.

HR as a Strategic Partner: Preparing for the Future

Much like insurance, strategic HR protects your business from costly surprises while positioning you for future growth. Let’s delve into three ways it achieves this:

1. Aligning HR with Business Objectives

When HR aligns with your business strategy, it’s no longer just an administrative function. It becomes a driver of growth. For example:

• Planning workforce needs alongside business goals ensures you’re never caught short-handed.

• Succession planning identifies future leaders within your organisation, reducing reliance on external hires.

2. Mitigating Legal and Compliance Risks

In 2023, UK businesses paid over £5 million in tribunal awards due to employment law breaches [7]. Many of these cases stemmed from inadequate policies or poorly handled disputes. Strategic HR ensures your business stays compliant by:

• Keeping policies up to date with UK employment laws.

• Providing manager training to handle sensitive situations, such as grievances and redundancies.

• Acting as a mediator to resolve issues before they escalate.

3. Fostering a Positive Workplace Culture

Culture is often seen as intangible, but its impact is very real. Businesses with a strong workplace culture see 76% higher employee loyalty and a 30% increase in productivity [8].

Thrive.: Your Trusted HR Partner

At Thrive., we understand that every SME is unique. That’s why we offer tailored HR solutions designed to:

• Boost Employee Engagement: Through bespoke initiatives that align with your team’s needs and goals.

• Reduce Costs: By improving recruitment practices, reducing reliance on occupational health services, and cutting turnover rates.

• Improve Compliance: By providing up-to-date advice and policies that protect your business.

Strategic HR isn’t just about avoiding pitfalls; it’s about seizing opportunities to grow. By partnering with Thrive., you’ll gain a trusted advisor who’s as invested in your success as you are.

Contact us today to learn how we can transform your HR function into a competitive advantage.

References

[1] Engage for Success. UK Employee Engagement Survey 2022. Available at: https://engageforsuccess.org

[2] CIPD. Health and Wellbeing at Work Survey 2023. Available at: https://www.cipd.co.uk

[3] HR Review. Underperforming Employees Cost UK SMEs £39,500 Every Year. Available at: https://hrreview.co.uk

[4] Oxford Economics. The True Cost of Employee Turnover. Available at: https://oxfordeconomics.com

[5] CIPD. Resourcing and Talent Planning 2023. Available at: https://www.cipd.co.uk

[6] Gallup. The Benefits of Career Development on Retention. Available at: https://gallup.com

[7] UK Government. Employment Tribunal and Awards Report 2023. Available at: https://gov.uk

[8] Deloitte. The Workplace Culture Report. Available at: https://www.deloitte.com