Like all other businesses, people are the most important asset for Small and Medium Enterprises (SMEs). People are the driving force behind every business. Without them, even the best company in the world will not be able to function. Despite the importance, SMEs continue to find it a great challenge when it comes to managing talents within their companies. Firstly, they don’t have quality human capital due to difficulty in hiring. Secondly, talents who are already with the company don’t seem to stay long and prefer to join other organisations.
SMEs understand and readily acknowledge the talent management challenges that they are facing and they have to find workable solutions – without quality people, the business will not move up to the next level.
Let us understand the human capital dilemma faced by the SMEs of today:
Who Are The ‘Talents’?
By definition, talent is the natural ability of a person to perform something well. In management terms, talent refers to someone who has both the right aptitude and attitude in delivering results by performing a given task effectively and efficiently. Right aptitude bestows the readiness and swiftness in learning and executing plans. Aptitude without the right attitude is as good as nothing. One must possess the right attitude to be able to think and deal with something willingly, enabling the attainment of a desired outcome. In a nutshell, talent is someone smart, hardworking and willing to strive for excellent results. This is the reason why it is so important to have the right talents in companies.
Why People Leave?
According to studies, people leave their jobs mainly because of line managers, instead of companies. They are not satisfied or could not work well with their line managers. In general, reasons causing people to leave their companies for other jobs elsewhere can be broadly categorised under the pull and push factors. Simply put, pull factors are benefits or values that an employee sees in another company which encourages him to leave for greener pastures. Push factors relate to things that people dislike in their current organisation resulting in them looking out for new opportunities. These are normally negative influences of the organisation.
Following are some key pull factors contributing to staff attrition:
Who does not want to work and learn from great leaders? In other words, good leaders do attract talents wanting to join their companies. Therefore, people do leave a company to join one that is managed by leaders whom they admire and want to be associated with.
- Company Reputation
Given the choice, people want to work with companies with astonishing reputation. They feel good and proud to be part of these companies. This has become a factor causing people to leave a company.
- Better Remuneration
Undoubtedly, remuneration has always been a contention for people to change jobs. It may not be the main reason to leave but it does carry weight in people’s consideration for a career change.
- Career Progression
It is always tempting to be able to assume a bigger role in another place. It is more so when the present employer fails to realise the potential of this person. After all, there is much to gain by taking on this new opportunity.
- New Skills
People do leave because of wanting to learn new skills. Young and dynamic engineers could be attracted by the latest range of technology embraced by certain companies. When the present company fails to provide the opportunity to advance their skills and knowledge, they will eventually leave for one that can fulfill their desire to improve.
Internally, there could be push factors creating a sense of dissatisfaction leading people to look out for opportunities. Some of the common push factors are:
- Unclear Business Direction
Without knowing the company’s business direction, people will not be able to contribute effectively. If the situation persists, they would become frustrated and look out for companies that share clear business direction with the staff.
- Mundane Activities
Even for production workers, their roles are rotated regularly to avoid boredom leading to higher error rate. The same applies to other roles in the company. If a person is performing a similar role for too long, he will get bored of the mundane activities. Unless they see the opportunity to take on a new role soon, they would be open to looking out.
- Glass Ceiling
This is common among SMEs where most key roles are assigned to family members. No matter how well the staff performs, there is limitation on career progression. There is a glass ceiling obstructing the progress of the staff. Good and talented staff would not stay long in this kind of organisations.
- Company Not Performing
Non or poor performing company means no or less bonus pay-out. This will drive good people away, no surprises here. Furthermore, a non-performing company would provide job uncertainties to employees.
- Non-conducive Working Environment
No matter how good a person is in terms of aptitude and attitude, they need a conducive working environment to have peace of mind to perform and deliver results. Without this, the talent would seek for better place to demonstrate his ability.
How To Attract And Retain Talent?
Talent management is a sub-set of human resource management. A dynamic and proactive stance of human resource management plays a critical role in attracting and retaining talent within the company. This process involves four key aspects:
- Addressing Pull & Push Factors
Understanding the pull and push factors from the employee’s perspective is important to identify flight risk of the respective employees as early as possible. Flight risk is derived from the collective perception of the pull and push factors. A person with high rating on both pull and push factors is likely to leave the company for greener pastures elsewhere. On the contrary, someone who is rated low in both these factors is likely to stay on. This can be gauged through frequent and close communication with the staff. Early identification of flight risk enables the company to take necessary actions in retaining the talent.
- Effective Organisation Structure
The right organisational structure is important to ensure balanced span of control and proper dissemination of authority. These structures can be implemented based on the nature and complexity of the businesses. It can be implemented based on functional basis, divisional, geographic or matrix which involves the combination of these.
- Fair Performance Appraisal
As the company grows, many SMEs find it challenging to appraise staff performance, more so in allocating fair performance rating to each of them. If this performance appraisal is not carried our systematically and fairly, it would create dissatisfaction among the staff that may lead to staff attrition.
- Competitive Reward System
Good performance reward is one key aspect leading people to remain with a company. This reward can be in both monetary and non-financial terms, both of which are equally important. A simple lunch with the line manager for a job well done will bring great sense of satisfaction and joy to a staff. Companies must review their reward system regularly to stay competitive with market offerings.
Human resource management is complex as it involves people who can make decisions based on both rational and irrational factors. Line managers play an important role to understand the staff and if need be, take remedial and prompt actions in retaining quality talents who plan to leave the company. Human resource management is about understanding the behaviour and ability of staff with the aim in getting them to highlight the needs for resolution.
The writer is a former senior banker with over 26 years of direct dealings with the SME sector. He currently provides advisory and consultancy services to the SMEs in elevating their business performance to the next level. He is completing his book on challenges faced by SMEs in Malaysia.