People and culture a crucial part of mid-sized businesses

19 August 2020 Consultancy.com.au

In the time of coronavirus, and beyond, placing focus on people and culture is becoming more important than ever, according to the ‘Business Radar’ report from Pitcher Partners. Gavin Debono, a partner in the firm’s private and family business, explains why.

For the report, a cross-section of 400 business owners were interviewed about their experiences operating mid-sized Australian businesses. The independent research drew out both quantitative and qualitative data to understand the challenges faced by mid-market business owners and their approach to managing their success.

The leaders of Australia’s mid-market businesses, who typically employ between 20 and 200 people, are typically conscious that they are responsible for the livelihoods of their employees – and given the small scale of the workforces, they know their people well. The gravity of providing employment to so many people while managing job satisfaction, KPIs and complicated employment laws and remuneration structures can weigh heavily on business leaders.

Seeing a high staff turnover is such a prevalent issue that many business owners are simply resigned to it. Despite feeling that their destiny is in their hands when it came to their success, the business leaders we spoke to admitted they had trouble imagining a future without a personnel problem.

People and Culture

Some business owners adopted a more bullish attitude and a thick skin when it came to their staff. One CEO of a growing company told the researchers: “People come and go, but I stay.”

However, an increase in ‘people and culture’ titles, particularly in highly successful firms, points to the importance of getting the balance right. Human resource management requires specialised knowledge which is often outside a mid-market business owner’s expertise.

Creating the right blend of people and culture is increasingly recognised as a key way to ensure a company's success. A 2018 feature in the Harvard Business Review opined that strategy and culture are the two main levers at a manager’s disposal.

HR fundamentals

For seed or growth stage businesses, it’s crucial that before they hire the right people for other parts of their business, they get their human resources function right. Without this foundation, employers could see dire consequences, especially when it comes to maintaining compliance with employment law and shifting regulations.

Mid-market businesses know they should enact a workforce plan to increase capabilities and ensure that their best people remain with the company. Despite the elusiveness of nailing down a consistent company culture, a lack of focus on this area is one of the key reasons why employees become disgruntled and go on to seek greener pastures.

Human resource management was cited in the Business Radar report as one of the major issues that kept business owners awake at night. Respondents across almost all sectors said that “accessing appropriately skilled labour” and “human resource management” were major challenges they were facing in the near term, and over the next five years.

Despite this, only 28% of the businesses had sought human resources management related advice in the last five years, and a fewer 26% indicated that they would consider seeking advice on the subject in the future. This shows that there is a key gap between acknowledging that a challenge exists and taking the necessary steps to resolve it.

People and culture in the time of coronavirus

We’re seeing HR and people & culture teams be tested now as businesses need to make decisions around staffing and profit margins in the face of the coronavirus pandemic.

It’s easy, too, for business owners to feel panicked about the impact of the subsequent economic shocks on the future of the business. Business operators are faced with an almost impossible compromise between pre-emptively cutting costs and maintaining morale and trust within the workforce.

One of the key takeaways from the report was perceived challenges are sometimes also opportunities, given that business leaders are able to take a step back, look at things objectively and ask the right questions. While there is an emphasis, and rightly so, on taking a cut and dry approach to decisions like culling or standing down segments of your workforce over this period, there are emotional and cultural considerations that also bear thinking about.

For family businesses, there is an extra impetus to manage and address the dynamics between family and non-family employees. In any case, maintaining communication with your people, from managers down to your most junior staff, is crucial.

Showing your people that you understand their concerns, and that you are doing what you said you would do will maintain a necessary level of trust to motivate staff and build long-term loyalty within your business. The business owners concerned with attracting talent in the future will need to consider that the experience of working through a global pandemic will be a talking point among current and future employees for years to come.

Savvy business owners are demonstrating to their staff that they are supportive of their transition to working from home and are ‘in the same boat’. When tough decisions need to be made, they are handled with care.

Once this bedrock of trust throughout a crisis is built, it will enable business owners to begin taking proactive measures to shock-proof their workforce against future crises. Many of my clients are now thinking about proactively upskilling and cross-skilling key members of their workforce to allow for greater flexibility.

By focusing on increasing capabilities during a time of uncertainty, business leaders can ensure they have a competitive edge and can bounce back stronger when the worst is over.


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