Excellent people management is vital for long-term performance in SMEs, according to recent research by the Chartered Institute of Personnel and Development (CIPD). ‘Sustainable Organisation Performance through HR in SMEs’ highlights how effective people management can help cultivate entrepreneurial culture and deliver competitive advantage.

Given the importance of SMEs to the UK economy, how organisations cement and reinforce an entrepreneurial spirit through stages of business growth is key.

It is important to achieve the right balance between introducing structure and process versus preserving innovation and entrepreneurship as a business grows.

The temptation is to keep adding more people management systems and processes to coordinate the effort of an increasing workforce. But in effect, too much red tape will undermine and erode the desired culture and stunt agility and change.

Innocent, the healthy food and drinks company, was one of the case studies in the research. Having effectively embedded the entrepreneurial spirit of the three founders into the organisation as a whole, Innocent’s growth story presents useful insights for SMEs in the grocery sector.

When Innocent gained its first supermarket listing in 2004, and the team started to grow significantly, some ways of working became inefficient. So it set out to make the structure and processes as simple as possible by, for instance, limiting the number of performance objectives everyone is set to no more than five. It also tried to resist creating additional processes and procedures, so as not to stifle innovation and change.

When faced with operational issues, there is a golden opportunity to look beyond immediate process solution. Innocent’s entrepreneurial culture was a significant source of attraction and engagement for people in the early days, and it has worked hard to retain this part of its culture through growth.

It is relentless attention to people management issues that will really add value in an SME and support sustainable growth.