What can SMEs learn from changing human resources management practices prompted by Covid-19?

Many Human Resource Management (HRM) policies and practices had to be changed during the pandemic to ensure businesses were able to operate as effectively as possible whilst protecting their staff. This created a huge challenge for managing or HR directors in small or medium-sized enterprises (SMEs), where often limited HR expertise is available for assistance. A pilot study conducted by the University of Liverpool Management School, in collaboration with Knowsley Chamber of Commerce, tried to respond to this challenge and discussed some key issues around adjusting HRM in SMEs during turbulent times.

The pilot project:

The study started during the first Covid-19 lockdown in England and involved a series of interviews with six SME’s HR managers or managing directors to map the changes to HRM practices they made in response to Covid-19. The interviews aimed to understand the decision-making and communication processes accompanying such changes. Moreover, the project sought to explore the employees’ experience and understanding of these HRM changes and how these could have affected their wellbeing. The employees of the six SMEs were asked to fill in a questionnaire assessing their sense-making of the HRM changes implemented and some indicators of their wellbeing, including satisfaction with life, mental health, work engagement, and attendance behaviours.

What did the study find?

  1. All the participating SMEs made significant changes to their HRM policies and practices during the pandemic, including arranging flexible working conditions, furloughing employees, providing training on virtual meetings (Teams or Zoom), and freezing recruitment and moving to e-recruitment. When talking about these changes, all interviewees stressed the importance of putting employees first and agreed that all these HR changes in nature were about people.
  2. Flexible working has been vital. In order to operate during Covid-19, all participating SMEs adopted patterns of flexible working to abide by government guidelines (i.e., “work from home if you can”) and keep their business running. SMEs realised the feasibility of implementing place and time-related flexibility, allowing employees to work remotely and, in some cases, at different times than usual to enhance their work-family balance and wellbeing. However, all participating SMEs also realised the importance of employee-management trust to make flexible working possible and effective, and reported needing more guidance and advice in implementing flexible working arrangements.
  3. Employee sense-making matters! Employees attributed the HRM changes employed during the pandemic to multiple intentions, such as to keep the business running; to take care of their well-being, or to abide the Covid-19 government guidelines. The findings found that the way employees made sense of these changes influenced their wellbeing. Specifically, when staff perceived the HRM changes were made by their employer to favour their wellbeing, they reported being more satisfied with life and were less likely to call in sick. In addition, if employees attributed the HR changes to the needs to abide by Covid-19 government guidelines, they tended to experience higher satisfaction with life and better mental health, including decreased anxiety and depressive symptoms.

What lessons can be learnt from this pilot study?

Firstly, HRM matters for SMEs during the pandemic. Investing time and resources to make suitable HR changes will pay off with more engaged and satisfied employees. When designing HRM changes, SMEs need to take account of employee HR attributions to make sure HRM changes are well communicated and understood. Having clear and honest communication about policy changes seems to be the key to ensuring happy staff.

Secondly, adopting and managing flexibility is crucial, especially in the aftermath of Covid-19. Although flexible working arrangements may not have been previously considered by many SMEs before Covid-19, it has now become a reality. Flexible working offers a win-win solution to keep business running meanwhile maximally protecting employee safety during uncertain times. On this point, SMEs’ managers need to take time to get themselves fully equipped on how to implement flexible working. Guidance on how to implement flexible working can be found on CIPD website (https://www.cipd.co.uk/knowledge/fundamentals/relations/flexible-working/factsheet#gref).

In summary, this pilot study shows that SMEs made the significant changes on HR policies and regulations to respond to the pandemic crisis. It also highlights the importance of communication and sensemaking processes on these changes. Finally, it predicts that flexible working will become a reality for SMEs after the Covid-19.


Marianna Zajac, Zihan Liu, Mariella Miraglia and Huadong Yang are academics at the University of Liverpool Management School.