The Ulrich Model - it's success and it's Suitability for an SME

Way back in the 1990s when I first studied for my professional qualifications, the concept of the Ulrich model was a common thread amongst all HR (and Personnel Professionals!). It was a concept that became regularly used and drove many HR professionals to use the original version to transform their HR functions in the late 1990's and 2000's. 

More than 20 years later and times have changed. Is the Ulrich model still as relevant and influential today as it used to be? In the past 20 years, we have seen an increased investment into HR Shared Service operations with employee self-service, HR information systems and centres of expertise becoming more and more common. The title of HR Business Partner has become synonymous with any progressive HR model - yet when you dig deep into the duties and behaviours required in the re-badge it is rare that the role is anything more than HR generalist activity.

The Need for HR in an SME

There are 2.2 million more (+63%) new private sector SME businesses in 2018 compared to 2000. (Federation of Small Businesses).

The growth in the SME market place in the past twenty years in the UK is an interesting development as businesses growing rapidly need to consider the best HR model for their needs. 

We now have to wonder, to what extent have businesses large and small adopted the Ulrich model and whether it is fit for purpose for the SME market place. 

For a larger business, the value is clear in regards to the economy of scale and significant investment in an HR Information System and potentially Shared Service structure can bring. At the SME level however the question is one of scale and working to limited resources. 

From our experiences dealing with the SME market place, we do not believe there are genuine savings to be made and simply re-titling people as Business Partners, (which we have seen on too many occasions) and to expect them to continue to provide HR admin or reactive HR measures, fails to make HR more of a strategic value-added partner - the original designs for the Ulrich model.

With regards to SMEs, Jill Miller (CIPD) released a research report in 2014 which focused on how to maximise impact as an HR professional within an SME. Out of the report came some interesting insights into the dilemmas that smaller enterprises face. Miller suggests that there are four stages of SME transition: 

The Miller model suggests that at each stage, an inflexion or tipping point is reached, where the previous way to manage people is no longer seen as a viable option moving forward. So let's take a look at each stage in a little more detail;

Entrepreneurial Edge

At the Entrepreneurial Edge stage, people practices would be managed by the owner or founder and are often seen as informal.

Emerging Enterprise

With the Emerging Enterprise stage, the scale of the business now requires teams to be hired, or the management of teams by staff other than the SMEs owner or founder. During this phase, performance management tends to become prominent, with the decision often taken to hire someone to look after people practices because:

• The business has reached a size where policies and procedures are needed to guide work and create a sense of fairness.
• The owner or founder feels that people issues are taking up too much of their time.
• People management is seen as vital for the growth of the business, in order to achieve the company's vision or objectives.
• There is a specific people issue that needs to be addressed. For example, tribunal cases, skills shortages or high turnover.

HR Activity at this stage tends to be at a transactional/reactionary level.

Consolidating Organisation

According to Miller, the Consolidating Organisation stage is characterised by reflection and typically taking a step back. This ensures that people practices within the organisation support the longer-term ambitions of the business. At this stage, HR tends to be in-house and is filled either from an outside hire, or as an opportunity for someone in the business to become professionally qualified.

Both outside hires and internal promotion routes do have certain benefits; external appointments often coming with years of experience of different businesses, while internal candidates will have a wealth of knowledge on the company or industry.

Though the internal hire will lack the experience or behaviours of someone experienced in HR, their knowledge of the company and industry can be invaluable. Thinking back to the Ulrich model though, how can such a person become the strategic HR partner when they have payroll and standard admin to produce? Again it is a question of scale and breadth of role.

Established Organisation

At Miller's Established Organisation stage, people practices need to be strategic. 

There is a maturity to the processes and people management practises within the business and perhaps at this point there will be the scale to deploy the Ulrich model with a variety of roles fulfilling admin expert, through to strategic partner.

SUMMARY

In her research, Miller identified that the transition from tactical to strategic people activities was found typically between the Emerging and Consolidating stages.

It's quite clear that without the resource for the Ulrich model, we're able to find individuals attempting to provide all four facets of the original Ulrich model, whilst also seeking commercial justification for all things HR.

That's like the commercial director, doing cold calls, meeting established clients and winning 10-100k deals in the same day!

At the SME level there are many dedicated HR professionals trying to develop people initiatives within a tight budget, yet still needing to show commercial value. Their closeness to the business can be a considerable asset to becoming a strategic partner or adviser, but the fact is, their limited experience of different businesses and HR approaches can be a limiting factor. Their styles and expectation of HR activities can be a limiting factor to both the professionals' career development and their ability to go beyond 'business as usual'.

When looking solely at SMEs, the HR model isn't yet fully developed; the varying objectives and successes of SMEs mean that even should an HR model start to gain traction, it's likely to be inconsistent across different sized organisation and industries.

The Miller research shows that the reliance on following the Ulrich model is no longer straight forward. The growth in SMEs shows that it's not a one size fits all anymore and that external support will almost always be necessary, especially in the ever-changing worlds of SMEs.

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