The Hindu Business Line : SMEs may not be Lions but can be Kings of jungle

As the labour market gets more and more difficult and the task of hiring and retaining people more challenging, it is the SMEs (small and medium enterprises) that are likely to bear the brunt of the problem. How can they overcome it? While the SMEs have many problems in competing successfully in the labour market, the one that is most unique is their self-limiting belief about staffing. How small enterprises can survive the staffing battle?

If you have watched Lion King the movie, you will certainly remember the famous words of Shenzi the Hyena: "Look at you guys, no wonder we are dangling at the bottom of the food chain... you know if it weren't for the lions, we'd be runnin' the joint."

Quite often I find SMEs (small and medium enterprises) in the same mental state as Shenzi — at the bottom of the chain in the staffing market and feeling envious about the hiring clout of the larger players!

It is my opinion that as the labour market get more and more difficult and the task of hiring and retaining people more challenging, it is the SMEs (small and medium enterprises) that are likely to bear the brunt of the problem.

What is the exact nature of staffing challenges that SMEs face and what can they do about it?

Before we examine this question, it would be useful to first agree on a working definition for SMEs.

While there is no singular approach to define the nature and characteristics of SMEs, the German phrase Mittelstand used to describe SMEs in that country offers an interesting definition. By that view, Mittelstand involves a unity of ownership, management, liability and risk, characterised by the fact that they are quite often owned and managed by the same person or group of persons who are responsible for and involved in all aspects of the organisation's management.

Nature of challenges

Getting back to the question, while the SMEs have many problems in competing successfully in the labour market, the one that is most unique is their self-limiting beliefs about staffing. Three of these self-limiting beliefs are worth mentioning:

Trapped by loyalty: Most SMEs find it difficult to re-examine the value they attach to loyalty. While most SMEs have a core group of loyal employees who give them the sense of comfort and assurance, their dependence on this loyal group inhibits their ability to go out and bring in new talent. For one, they are worried about the inability of the loyalists to accept the new talent and not feel threatened. They also suspect the ability of the new talent to accept the loyal group for what they are worth. For fear of losing the loyal group, many SMEs avoid making any serious efforts to get the talent their business demands.

Fear of paying market compensation: The second self-limiting belief is that they cannot afford to pay market compensation. While many of these SMEs readily invest in plant, machinery and other infrastructure, they suddenly develop cold feet when it comes to paying for talent. Their inability to value intellectual and human capital as much as they are able to value physical capital robs them of their ability to attract the right talent.

Their concerns of affordability are merely excuses for not taking that leap of faith and recognising the realities of market compensation. This reluctance is reinforced by the fact that their loyal employees have quite readily accepted below-market pay for a variety of reasons including personal comfort and latitude for mediocre performance.

My style is the best style: The third self-limiting belief of the SME leader that every new hire should talk and act like him. The SME leader fears that any behaviour that is different from what he is used to would be detrimental to the culture he has built. As a result he expects conformance to his personal idiosyncrasy, suffocates and stifles the new hire and hastens his exit. SME leaders fail to realise the need to offer some elbow room and some scope for diversity in styles.

What can SMEs do about it?

It is obvious that SMEs will need to first overcome these self-limiting beliefs if they want to survive in the competitive labour market of today and tomorrow. Look at some of the most successful SMEs of recent times and you will realise that at the foundation of their success is a "talent-ready" mind-set. SMEs will also need to do the following:

Outsource wisely: SMEs can be great beneficiaries of wise outsourcing. They should focus on building only their core skills and learn to use a network of external resources for all other non-core specialist services.

Be creative and flexible in staffing approaches: Compared to larger organisations, the SMEs can afford to be more creative and flexible in their staffing approaches and thereby address a much larger talent pool.

This includes hiring older people who might be tired of working for large organisations and hiring people with diverse profiles who may not fit into the rigid criteria of large organisations.

Let your passion show: The advantage that the SMEs bring to staffing is the personal touch! SME leaders can share their vision, passion and quest for excellence and their uniqueness much more strongly to prospective candidates.

This will mean that the leader directly drives the staffing process and does not delegate it to a recruiter.

Network vigorously: Look at some of the most successful SMEs and you will realise that their leaders demonstrate great PR savvy, good network capabilities and, most important, the ability to foster partnerships with educational institutes, research organisations and even recruitment firms. Visibility can quite surprisingly compensate for size!

You still have to pay market compensation: Having done all these SMEs cannot get away from paying market compensation. Some of the most high profile SMEs which continue to demand a place of pride in the labour market have all followed the policy of paying market compensation.

Having worked closely with several SMEs, I am convinced that they have enough ammunition to survive in the fiercest labour market conditions. The SMEs may not be Lions but can still be Kings in their jungle!

(The author is the founder and CEO of totus consulting, a strategic HR consulting firm that designs and implements HR systems and process for organisations across diverse industries. He can be reached at ganesh@totusconsulting.com)