Small businesses need £13m a year to boost productivity: CIPD

New research suggests that basic HR support for small businesses can help to boost workplace productivity. The CIPD is now calling for a £13m a year investment to provide the support to small firms.

Small businesses need £13m a year to boost productivity: CIPD - image of people in an open plan office
The CIPD is calling on Government to invest £13m a year to provide HR support to small businesses, as new research shows that it could be a key part of efforts to unlock the UK’s productivity puzzle.

Year-long HR support pilots improved productivity

The call is based on the evaluation of year-long ‘People Skills’ pilots providing HR support for small and medium-sized enterprises (SMEs) in Hackney, Stoke-on-Trent and Glasgow. The pilots provided up to two days’ worth of free HR support to small firms, including face-to-face advice, a telephone helpline, online information and templates, as well as group training events.People Skills was developed by the Chartered Institute of Personnel and Development (CIPD), with support from J.P. Morgan. The evaluation report found that, while much of the support provided by the People Skills initiative was fairly basic, such as establishing workers’ terms and conditions or job descriptions, there was evidence that this provided a foundation for boosting workplace productivity.

The benefits of targeted investment to improve capability

Ben Willmott, CIPD head of Public Policy, said, “People Skills shows the potential benefits of targeted investment to improve small firms’ capability around the management of people through co-ordinated high-quality, locally-delivered business support via channels such as Local Enterprise Partnerships, chambers of commerce and local authorities.”The service helped more than 400 small businesses employing between 5 and 50 employees across the three areas and was regarded as so successful in Glasgow that the city council continued to fund the programme once the research grant ran out.

Key findings

  • Online business support is inadequate unless supplemented by personalised advice and support, with face-to-face advice particularly valued by small business owner managers
  • Existing fragmented business support provided at a local level should be rationalised to prevent duplication of provision and confusion among SMEs
  • Policy makers need to re-think how they encourage SMEs to employ and train young people, in the workplace, for example through apprenticeships, as in most cases they don’t have the interest or capability to do this. Re-focusing a proportion of government investment in skills to providing enhanced business support around people management capability for SMEs would, over time, give more small businesses the capability and confidence to engage in programmes supporting young people into work in the future
  • The support provided by People Skills did not disadvantage existing private sector providers as owner managers participating in People Skills had not previously accessed HR support services
In the evaluation report, owner managers were more likely to report their organisation was better or much better than similar firms in their sector on measures of workplace relations, labour productivity and financial performance after using the People Skills service than they were prior to using it. These benefits also came through in the in-depth qualitative interviews with owner managers that participated in the People Skills initiative.    
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“If policy makers are serious about addressing the UK’s long-standing productivity deficit – particularly among the nearly 1.3 million small businesses that employ between 1 and 50 people – then they have to start seriously thinking about how to improve management quality, which the Bank of England’s chief economist Andy Haldane has identified as a key area for focus,” said Mr Wilmott.“People Skills provides a template of how to actually do this on the ground among small businesses. We calculate that about £40m from the Government’s National Productivity Investment Fund would support the £13m annual cost of running a People Skills-type service across all 38 Local Enterprise Partnerships in England for three years and could revolutionise the quality of business support for small firms.”    

Basic HR practices vital for small business success

Hang Ho, EMEA head of the JPMorgan Chase Foundation, said, “Small business success is an essential element of the UK economy and a critical component in creating thriving local communities. Today’s report shines a light on the importance of basic HR practices to the success of small businesses, whether that is improving productivity, boosting the effectiveness of the management team or handling crises.“While we hope the People Skills pilot will benefit participating companies in the long term, the findings clearly also demonstrate to policy makers a real need for HR support amongst SMEs.”For related news and features, visit our HR section.Access hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory  Get access to our free Global Mobility Toolkit Global Mobility Toolkit download factsheets resource centre

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