SME Challenges In Talent Management And How To Deal With Them

The World Economic Forum (WEF) calls small and medium enterprises (SMEs) the “backbone of economies.” Representing a large majority of companies worldwide, these organisations comprise around 70 per cent of jobs and GDP globally. In Singapore, SMEs employed 70 per cent of the workforce in 2020. Despite their contributions, however, these more modest businesses face many challenges that can hinder their growth.

According to the latest WEF report, “Future Readiness of SMEs and Mid-Sized Companies: A Year On,” one of the top challenges SMEs face is talent management. Forty-eight per cent of the respondents said that attracting the right kind of talent and finding talent with the proper skill set is very difficult. The Great Reshuffle, or this phenomenon that workers are resigning to find jobs that are better suited to their needs, isn’t helping, either.

To address this problem, SMEs must find solutions within their limited means. They are encouraged to be creative in crafting talent acquisition and retention programs and developing ideas that leverage their strengths instead of their weaknesses.

Talent management refers to how organisations recruit and retain talent. According to Forbes, it involves six steps, namely:

• Planning – determining capital, key roles, and recruitment plan

• Attracting – implementing recruitment campaigns

• Selecting – finding the best talent through a variety of assessments such as interviews and exams

• Developing – includes having an effective onboarding process to help hires settle into the role properly, as well as providing growth opportunities (e.g., training, mentoring, peer coaching) to employees

• Retaining - building employee loyalty through offering good compensation and benefits in addition to growth opportunities

• Transitioning – rewarding employees with promotions and retirement benefits

Competition with big businesses  Multinationals and SMEs often look to the same talent pool when recruiting. Unfortunately, the lucrative salary packages and brand names that multinationals usually offer are usually enough to entice jobseekers. SMEs cannot compete on this level and instead must turn to other means of promoting their organisation.

A lack of budget  Funding and access to capital are also one of the top challenges SMEs face. At the recent APEC meeting, Singapore Prime Minister Lee Hsien Loong said that, along with low-income households, SMEs may bear the brunt of an uncertain economic landscape. The lack of budget can lead to an inability of SMEs to expand, as talent acquisition is an expensive part of a company’s day-to-day expenses. According to Human Resource Executive, talent acquisition involves direct costs, such as recruitment and labour marketing, and indirect costs, such as dealing with attrition and loss of productivity.

HR's lack of manpower Because SMEs can’t afford to hire a large HR team to support all their needs, the organisation’s existing HR professionals end up double-hatting (or more) and performing multiple tasks. They could be working on recruitment, talent retention and employee relations all at once – roles that bigger organisations delegate to different workers or teams. Being spread too thin may lead to a poor focus on each task, which can cause subpar output.

Difficulty in finding good hires  The difficulty of managing talent with limited resources means there is a high likelihood that some organisations settle for a “less than ideal” hire. Employers should try to avoid this as the cost of a bad hire might be more expensive than they’re worth. Putting a bad hire in your team can also add stress, reduce morale, and limit productivity.

Inability to offer career growth  When SMEs can find and hire valuable employees, the challenge now is how to keep them in the company. If the employer cannot provide promotions, salary increases or training, good employees may end up frustrated and start looking for other opportunities.

Be creative.  Thanks to our highly digitalised employment landscape, there are now many different ways of recruitment and talent management aside from traditional methods. For example, if your company can’t afford to spend more cash on recruitment, why not beef up your social media presence? It can help spread awareness about your brand to a broader audience and can invite more jobseekers to your door, too.  

Establish a solid company culture with good values. Organisational culture can help create a competitive advantage for your firm. These days, many workers – especially those from Gen Z – put a lot of value in working for a company with a positive societal impact. Workers want their job to have meaning and purpose and look towards joining companies that share their values.

Listen to your workforce.  More than anything, individuals want to be heard. Creating a safe space where people feel like they can speak up for themselves is essential in a workplace. Seek feedback from your people so you can figure out how to help them, keep them engaged, and, more importantly, make them stay in your organisation.

Consider HR outsourcing. WEF recommends that SMEs must be pragmatic in terms of talent management, “recognising what they can and cannot offer.” These days, HR outsourcing has become accessible to SMEs due to the rapid growth of the gig economy. If your organisation can’t afford to have all your HR operations in-house, this might be a good option for you.

Leverage your strengths. An SME is a good place to work! There are many advantages to working for an SME, and these organisations would do well to highlight that in their talent management process. Having a flat hierarchy, wherein there is a smaller gap between the rank-and-file employees and the firm leadership, is a boon for an individual’s career growth. 

WEF has found that employees of SMEs report “higher than average” job satisfaction because of being close to their firm’s major decision-makers. Individuals also have a better chance of standing out by working in an SME since they have numerous opportunities to tackle massive projects alongside their leaders.

SMEs may have limited resources and budgets compared to the bigger, more renowned organisations, but it doesn’t mean that they can’t compete in talent management. If employers in SMEs take stock of their resources, leverage their strengths and engage their people, they may manage to snag – and keep – the best talent yet.

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