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Market Insights Workforce insights SMEs in focus: Why SMEs lose talent
SMEs in focus: Why SMEs lose talent

SMEs in focus: Why SMEs lose talent

SMEs or small-to-medium sized enterprises are defined as organizations which employ between 1 - 250 employees at a time. In an increasingly competitive environment, SMEs are often hard-pressed to recruit and retain talent. Often, SMEs suffer from high staff turn-over for a multitude of reasons. Here are some of the most common reasons why SMEs lose talent and how they are able to combat this situation.

1) The road to nowhere

From a study conducted by BlessingWhite, more than 25% of the respondents stated that a lack of career development opportunities was a decisive factor in choosing to move on from a job. Any employee worth his / her salt is bound to expect some form of development or progression during the course of their career.

Unfortunately opportunities for career progression in SMEs tend to be rather limited due to factors like an organization's size and industry. This is because, SMEs tend to have less structured organizational structures with less roles. For example, a finance manager working in a small, family-run transport agency cannot realistically expect to be promoted to the position of a CEO when the position is held by the owner.

Thus, rather unfortunately SMEs tend to lose their more talented or ambitious candidates to larger organizations or MNCs which offer bigger salaries with promises of career progression. This leaves most SMEs in the unenviable position of training talented employees only to lose them to larger, more established organizations down the road.

How should HR professionals approach it?

Rather than resigning themselves to this fate, HR professionals in SMEs instead should focus on providing staff with opportunities for professional development and skill building. Although business owners may cringe at the thought of footing the bill for professional training expenses, the benefits of building up a highly skilled workforce are innumerable.

As we have seen previously, additional training is a useful means of boosting staff confidence and morale and means better engagement. Thus on the long-term, not only do staff members have an incentive to remain with the organization, but also the organization gains a core of highly-skilled and motivated individuals who can go a long way in building up the business.

2) The curse of small business syndrome

For better or worse, most SMEs tend to be managed directly by their owners and while this ensures that the organization is helmed by an individual who has its best interests at heart, this also exposes the business to what is called small business syndrome.

It is highly unrealistic and most likely impossible for a business owner to be skilled at managing every single aspect of the organization. However, small business syndrome tends to manifest itself in owner or family managed businesses where the owner or several key members of the organization insist on maintaining absolute control over all decisions and often refuse to grant employees any form of autonomy whatsoever.

Thus, this is highly inefficient as the business owner that chooses to lord over every aspect of his / her business will be unable to focus their efforts on growing the business further. Constant micromanagement will only lead to overly dependent employees and high staff turnover as employees feel that they are viewed as incompetent and incapable. On the long-term, the organization ends up being unable to retain talented staff and is left with overly dependent employees who are incapable of working without constant supervision.

How should HR professionals approach it?

Instead of bearing the burden of leadership and refusing to delegate responsibility, owners should focus on training and building up employees to run the business efficiently and effectively. Empowering employees to make the right decisions also frees up owners to focus on expanding the business further.

3) Still in the dark

As can be seen here and here, SMEs are often reluctant to adopt new technology and approaches in the workplace. One of the main reasons given are a lack of understanding as to h.w.organizations can benefit from these advancements and also a lack of confidence in new technology.

Besides showing a reluctance towards adopting new technologies, a problem which is particularly endemic in Asian countries is the reluctance to adopt new generation management techniques. In certain organizations, some managers even seem to have a sense of pride in their backward ways.

For example, SMEs in Asian countries tend to adopt the attitude that the owner / boss is above any and all reproach. Anything spoken by the owner / boss is to be regarded as gospel and can never be questioned. In some Asian cultures it is regarded as perfectly fine or even expected in some cases for a boss to be verbally abusive towards his / her employees. In one such case, an employee was physically and verbally abused by his boss for a period of several months. The case only came to light when the culprit was caught on video punching and slapping his employee.

Although such cases are exceedingly rare, the mindset endemic among most older generation entrepreneurs is that verbally abusing employees is part of their right as owners of the business. However, this mindset will only serve to discourage potential employees and ensure that the company will have a constantly high turnover of staff.

How should HR professionals approach it?

Instead, employers should adopt a stern but fair approach when managing employees. Rather than letting tempers flare, a more constructive method would be to approach employees respectfully and identifying any mistakes that have been made and training the employee in question. Yelling and shouting is counterproductive and will only serve to worsen the situation.

Here’s a summary infographic of what we’ve just said.

Conclusively, SMEs need to step up their game in order to remain competitive and relevant. Rather than remaining in the dark, employers should adopt newer mindsets and techniques that will help their organizations retain quality staff.

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