It’s not less regulation we need, it’s better management!

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This was the comment from Labour MP Barry Sheerman on 24th May 2012 during Business, Innovation and Skills questions in Parliament.  He was referring to a Chartered Management Institute report which claimed that 42% of managers in the UK were rated as poor.  So is he right to assert that British firms need better management?

Perhaps.  If we look at large firms, management are normally promoted from the ranks after many years of training, mentoring and apprenticeship.

Managers in SMEs on the other hand are not so lucky.  Most managers in small to medium sized firms start the firm and grow with it.  Unless motivated to train, they learn their trade on the job.  Whilst that’s an excellent training ground, it does mean that SME managers never know what they don’t know.   They never learn what a structured apprenticeship and training course would teach.

So how can an SME manager balance the books and avoid being accused of falling into the 42%?

The answer is to make use of specialist consultants from time to time – lawyers, accountants, purchasing consultants …and in the case of people management, HR consultants like TimelessTime.  Some years ago the consultants Watson-Wyatt (now Towers Watson) estimated that an extra 26% was available on the bottom line for firms who, among other things, exploited the competence of such specialists. After all, big firms have specialist departments – why can’t SMEs have the same, just external rather than internal?

By using external consultants for specialist non-operational support the SME manager gets the best of both worlds – a broad competence without the personal training cost.

Do we need less regulation?So do we want a change in regulation?  Do SME managers want to be able to more easily dismiss staff (as suggested in venture capitalist Adam Beecroft’s report to Government)?  If the SME manager uses valid methods of predicting how recruits will perform (when selecting staff), if they manage staff through the probationary period, if they train them and manage the recruits’ performance and act when they fall short of agreed performance standards, the law is already on the employer’s side.  It’s only when none of this is done that the SME manager gets into hot water and they find themselves having to let new staff go, thereby wasting both hard cash and opportunity.

Extending the qualifying period before new staff can take a tribunal claim (as proposed by Government) is not going to reduce that loss nor add to turnover or profits.

So given that rationale, Barry Sheerman MP was right.  Tinkering with regulation is not going to help SMEs.  What’s needed is to encourage SME managers to make use of specialists to get the right recruit correctly managed.  In the legislation in question, these specialists are human resource management consultants.  Then SME managers can work the legislation already in place to their advantage.

After all, Government should only regulate to protect markets from failure.  And currently, looking from the employers’ viewpoint, the labour market is not failing.  There’s nothing wrong with the current arrangements so long as managers have the competence or have the outside help to select and manage their new staff.

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