Power to your people: why small businesses should invest in staff

Small businesses can tackle underperformace in the same way that many large companies do - by investing in their staff

The Investors in People standard, which celebrates its 15th anniversary next month, has become an accepted weapon in the battle against underperformance and low productivity. More than 60,000 organisations in the public and private sectors use it as the basis for developing their staff and it has also been adopted by businesses in 27 countries around the world.

The fact that achieving the standard involves assessment to ensure an organisation has in place strategies for improving business performance, the means of implementing those strategies and a mechanism for evaluating and adjusting these strategies suggests that it is the preserve of large businesses with the resources capable of managing such activity. But June Williams, Investors in People (IIP) UK director, responsible for small and medium-sized businesses, insists that this is not the case. About 15,000 organisations with 50 staff or less work with the standard at present, she says.

Acknowledging that many smaller businesses might initially be reluctant to become involved, she says one of the ways she and her colleagues use to win them over is stressing the support that is available. In the early stages, very small businesses can obtain a great deal of help via the internet or through the Government's business support services free of charge. Help is also available from companies that are already using the standard. Even the assessment stage - usually the expensive part - should only cost a few hundred pounds for a business employing fewer than 50 people.

"It isn't about systems or processes. It's about getting people to think about how they can perform better," she says.

In fact, the average costs are difficult to calculate because it depends on the approach taken by the company. For the smallest companies, many parts are free, including the online diagnostic tool that helps a business get started on the people development route. Also, there is an online human resources manager, designed for organisations too small to have their own HR department.

IIP's approach places people development at the heart of business performance and competitiveness - a message that has produced an enthusiastic approach from a wide range of smaller businesses. At Café Spice Namaste (see panel), the small restaurant group that is an IIP champion, owner Cyrus Todiwala says that the standard has become a part of the business's devotion to training, "but also makes us aware of our shortcomings".

Happy, the London-based IT and software training company that started life as Happy Computers and is now an IIP ambassador, was also drawn by the opportunity to benchmark its performance against other businesses. Cathy Busani, managing director, says: "We used other organisations to see whether we were on the right track."

It is an approach that continues at the company, for which it has won many awards. Happy now offers its expertise in people development as a consultancy service. "More and more organisations have worked out that you need to care about your staff. It needs to be more than policies. As a result, it is ever more important that you don't fall behind. For us, [the standard] is about keeping our edge."

Businesses have historically tended to be keen about training and developing their staff when the times are good. But having a highly committed and motivated staff can really pay off when conditions worsen. A few years ago, Happy was faced with having to make redundancies as a result of a downturn in business. The whole company discussed the problem and the staff opted for a salary freeze in lieu of job losses. One member of staff who had been planning on leaving a few months later even offered to leave early to help the business. "We worked out a long time ago that if you don't look after your people they won't look after your business," says Busani.

Certainly, IIP itself stresses that any businesses concerned about the cost of signing up should be aware that the benefits far outweigh the costs. "The big thing is the value they'll get from it," says June Williams. While pointing out that the key is to focus on a particular business's needs, she says that the business improves because the people are more committed and motivated. "It's about getting their staff to do more so staff feel committed to the business and not just going there to work." Training and developing the workforce is also more likely to encourage them to take responsibility and to innovate, adds Williams.

This is what Farrelly Facilities and Engineering, another IIP ambassador, found when it signed up for the standard in 1999, six years after beginning operations. The company was concerned that, despite high pay, staff turnover was very high and that morale among those who stayed was low.

The directors used the standard to give all employees a stake in the company through greater involvement in deciding their day-to-day work. There were also new approaches to appraisals and development reviews were made much more frequent. Staff turnover and absenteeism rates have been slashed, while sales and profits have both improved significantly.

Williams believes the standard can help smaller businesses deal with some of the issues associated with growth. Managers of growing businesses need to think about management and development for themselves and their people. In particular, communication can become key because what was very simple when there were only a few employees becomes more complex as the workforce expands. "It's very much about providing an infrastructure for growth and development," she says.

The IIP standard can also help productivity by addressing the much talked-about skilled shortages. Much is made of training employees in IT and financial matters, but some companies can have more basic needs, such as reading and maths, and the IIP programme can help identify these and provide solutions.

Accepting that many smaller businesses exit on a "hand-to-mouth" basis and that this can make investing in something such as Investors in People difficult, she urges proprietors to think "not about the cost but about how the business will improve".

For further information see www.investorsinpeople.co.uk

'We have zero staff turnover'

Ever since setting up Café Spice, a restaurant on the edge of the City of London serving food from the Asian sub-continent, in 1995, proprietor Cyrus Todiwala has been devoted to training.

Coming from the educated and highly skilled environment of India, he was shocked to find low standards of skills in England. He started by providing staff with English lessons, on the grounds that they would be serving English customers. From there, he moved on to offering training in information technology, health and safety and customer service. "Our most perishable commodity is manpower. It's a high-density manpower business. If you don't invest in it, you start to sink," he explains.

Mr Todiwala admits that his Asian staff were initially resistant to the idea of continuous learning. But they have gradually warmed to the idea and training opportunities are now snapped up. "Training is part of our religion. It's part of our culture," he adds, convinced that it is a key factor in the success of a business that now includes another restaurant in north London, a café in west London and an outside catering business.

"The hospitality business is riddled with dissatisfied staff, high staff turnover and skills shortages," he says. In contrast, he has lost only one member of staff since he set up the business - and that was someone that the group helped set up his own business. "We have zero staff turnover. That must speak for something," he says.