Falcon Day Care was established in 2016 to offer day-care services for adults. Its owners had had long social services careers, but limited experience of running a business. Within 18 months, it was thriving, offering day care to 20 people with learning disabilities and mental health problems and employing six workers. The owners’ experience in social services meant that they were very aware of a range of HR policies and procedures, and how these could benefit the firm, but had limited expertise on how to set these up themselves. They were keen both to comply with employment legislation and to treat their workers well. A local business advisor put them in touch with an HR support service and, working with an HR consultant, they drew up employment contracts, an employee handbook and a brief performance appraisal process.

The owners were very positive about the support they had received and were relieved to know that they now complied with employment legislation. They also felt well prepared for the further expansion in staff numbers that they anticipated, having previously been quite anxious about this. They described setting up a business and employing people as ‘a minefield’ and wanted to be sure they were doing the right thing. Equally though, they wanted a relaxed, supportive and informal approach to the business and had been unsure how to achieve this. They were pleased that the performance appraisal system had been effective but light touch. It was a big improvement on their previous approach, asking their accountant for HR advice.

Questions 

1. What are the major challenges in setting up HR systems in SMEs?

2. The owner managers here were aware of the importance of HR from their previous career experiences. How easy is it to target those without this experience?

3. How important are effective HR practices in supporting business growth? To what extent can basic transactional practices do this?