When you hear Small & Medium Enterprises (SMEs), perhaps you’d imagine small ‘mom & pop’ shops, little factories, or boutique programming offices with a handful of application developers. While you wouldn’t be all wrong, you’d only be partly right.
SMEs have been playing an increasingly critical role in the evolution of global economies, particularly in the Middle East. They already contribute to more than a quarter of the GCC’s cumulative GDP, and some countries including Saudi Arabia plan to increase this contribution to over 35% in the coming years by way of legislative easing, infrastructure development, and encouraging inclusion.
SMEs tend to focus on a niche market to differentiate from larger players, but with this, comes the challenge of attracting and retaining talent with the right qualities and skill sets. The staff cost for SMEs often range from 40% to 50% of their total cost base. The primary people challenge for SMEs is to maintain a balance between compensation levels and attracting niche talent, between centralized control and employee empowerment, and between agility and governance. The ability to achieve such goals boils down to having a well-developed, strategic HR strategy in place.
What should the SMEs retain?
Proximity to leaders
Aon’s Global Trends in Employee Engagement 2017 survey shows that senior leaders impact employee engagement more than the direct managers. As SMEs generally tend to be flatter in hierarchy, junior staff have great deal of exposure and accessibility and are comforted by the level of open communication and proximity to the senior management.
Smaller organizations value generalists and provide them with opportunities to manage multiple roles. While this can be challenging at times, the opportunity to partner with and learn from other colleagues with diverse experiences is a great motivator, especially during the formative years of someone’s career.
Given the high visibility of employees, managers and senior management at all levels, a higher level of individual performance is easily recognized and rewarded through incentives, faster career progression, development and/or compensation.
SMEs tend to be faster in decision-making as compared to their mid- and large-sized counterparts. Some of the reasons for this agility are heavy involvement of the founders/owners in the operations, a high level of trust in employees and the flatter organization structure. In high-performing organizations, employees value such attributes and see this as employee empowerment.
How should SMEs change?
While agility is a key attribute of SMEs, the unpredictability and ad-hoc nature of key decisions can lead to serious organizational culture issues. We have found that SMEs struggle to make people-related decisions in a fair and consistent manner because of various reasons—legacy, ethos, or trust, instead of capability. This is why SMEs must develop authority matrices to manage routine decision-making, while also ensuring proper change management for high-impact decisions.
The shroud of ambiguity around role requirements results in employees at SMEs to not agree on their performance goals. Furthermore, frequent changes in responsibilities lead to a mismatch in expectations of the managers and employees. To resolve these conflicts and avoid future ones, SMEs should establish a formal organization structure and set out clear job descriptions and/or job families. This will also strengthen the performance management system, career development system, and training need analysis.
Even well-known organizations have operated for years without formal HR Policies. A well-drafted HR Policy Manual is not only a ready reference for all employees on their eligibility of benefits and processes, and helps the organization communicate to employees on what it values, it’s also a document that clearly states the EVP (Employee Value Proposition).
SMEs in the Middle East value the contributions of their colleagues in achieving business results, and are actively evolving in their HR practices to demonstrate this. As HR evolves from a functional role to a strategic one, SMEs are leading the way when it comes to increasing investment in developing and implementing people practices that best serve their employees as well as their business.