This guest blog has been written by Clinton Wingrove. Clinton is an HR professional; consultant, coach, trainer, author and speaker with over 30 years’ HR experience. He believes passionately in HR and its ability to make a positive and measurable impact on the bottom line of organizations as well as on the life of every individual employee.

Clinton helps others to be effective managers and leaders, either by working with them directly or by working with the HR departments to design the processes and tools that they will use. He combines skills in process design, data management, and contemporary technology during the design phases, with an ability to communicate with, train and inspire people during implementation.

The question, “Do SME’s need Talent Management?” is often asked. Frankly, this typically demonstrates a lack of understanding of what Talent Management is and a lack of understanding of SME’s.

Like many HR buzz-words and phrases, Talent Management has been corrupted to mean all things to all people. However, it is, “The process(es) by which an organisation ensures that it has the human resources needed for sustainable success.” As such, it, therefore, encompasses at least:

Determining the roles and then the knowledge and skills needed over time;

Attracting just the right people at the right time;

Ensuring excellent recruitment decisions and positive responses from those selected;

Minimising ramp-up time and maximising embedding;

Deploying and redeploying to minimise risk and maximise the return on human resources. This, in turn, demands identification of critical roles, critical people, and career, coverage and succession management;

Proactively ensuring retention of appropriate talent;

Ensuring each employee realises their true potential and that new knowledge and skills are acquired as needed.  This, in turn demands some form of career planning;

Removing blockages in the talent pipeline. 

Those all need to be supported or complemented by other HR processes such as Performance Management, Compensation and Reward etc.

What many really mean, when they ask that question, “Do SME’s need Talent Management?” is “Do SME’s need succession plans?” which, as we see above, is a much smaller question. The answer to both is clearly, “Yes, SME’s need Talent Management” but not as those processes would look in much larger organisations.

So, let’s now turn to the issue of SME’s themselves. Some of the statistics, which are widely reported with very similar numbers, are concerning and highlight the need for Talent Management e.g.:

20% of SME’s fail in their first year

50% of SME’s have failed by the end of year 5

70% of SME owners have failed by the end of their 10th year

There are many reasons that SME’s and their owners fail. Some of these do not relate to Talent Management but some do. A few examples of those that DO NOT relate to Talent Management are:

1.  Bad solution i.e., the product or service does not match a clear market need well enough

2.  Bad sales and marketing i.e., failure to connect with and convince potential buyers

3.  Poor execution e.g., inappropriate quality of product or service, or means of delivering it

4.  Cash flow e.g., insufficient initial funding, poor management of payables and receivables

Of course, these can be affected by the quality of talent in the SME, but can still be issues even with top talent. But, now to the issue of on-going Talent Management and what SME’s need there:

Most SME’s start out with one individual or a very small number of individuals with an idea and a passion for what they do. This energises them and provides the focus for success. 

Due to their small size, and often the close relationships, they can often weather many of the challenges that they face due to lack of resources, lack of specific skills, and lack of processes or standard operating procedures. Early failures are often caused by the issues described above such as poor market research, lack of cash flow, and even optimism bias. Talent Management will do little to solve these issues if they arise early. However, there is no reason why any new start-up cannot proactively review the potential for these issues and take steps to manage those risks.

For the 80% of SME’s that survive the first year (especially if they are successful and grow), establishing and maintaining an appropriate culture quickly becomes a challenge.

Founders often have little comprehensive people-management experience so struggle to find new staff who fit in well, and new recruits struggle to fit into what is usually a tight-knit team. 

As an SME moves from a handful of employees to between 15 and 25, more formal processes become necessary and hierarchies/status then become very noticeable. 

It is far more important that an SME looks ahead, determines its likely future capability needs, and creates a plan for those will be met than it is for a much larger organisation, where volume of resources can enable greater agility.  SME’s need to be very clear about how they will increase their capacity in these early stages as mistakes prove critical. The loss of a key player from such a small team or the introduction of a ‘bad apple’ can have major consequences.

SME’s should also not be complacent. Groups of individuals who are exceptionally good friends and who respect each other before they start working together can easily and very quickly become dysfunctional.  So, the quality of the initial onboarding is critically important, as are clear retention plans for critical staff.

As a successful SME moves into its second year onwards, if it is successful, further tensions typically start to arise:

1)   Founders find they have to delegate work to others and they (i) really dislike doing it, (ii) often interfere after delegating, (iii) lose some of their passion … which was the driving force behind the organisation, and even (iv) leave. Planning how they will establish a suitable structure with appropriately skilled individuals filling the people management roles is a critical Talent Management challenge.

2)   As the volume of work rises, individuals who used to have quite wide responsibilities often find that they are being asked to focus on a small remit. Whilst some find this specialisation rewarding, many find that their interest in the work reduces with consequences for engagement, productivity and even quality.

3)   Very rapidly, many who work in the SME because of the scope, the independence, the rapid change, the buzz of a new organisation, start to feel that, and I quote, “The walls are closing in on me. I have to spend most of my time managing and get very little time to do what I really enjoy and why I am here.” The Talent Management challenge in the first year was largely about having people with the technical skills and passion to launch the business. The challenge rapidly evolves into one of, “How do we manage and run this business, sustainably?”

4)   If revenue or cash flow become issues, then pressure to reduce management costs inevitably grows and attention to Talent Management decreases – at the very point in time when it is most needed.

5)   As an SME moves into the 50+ staff scale, building and sustaining a vibrant culture becomes a significant challenge.  Many SME’s experience fragmentation as groups of individuals start to create the classic silos (e.g., “It wasn’t sales’ fault; we brought in the business. It was installation who let us down.”) In the book, “SuperTeams: Using the principles of RESPECT to unleash explosive business performance,” McGraw-Hill, 2014, Marciano and Wingrove explain how the levels of trust and respect within teams and organisations dramatically impacts their overall performance over time. Without excellent people management and recruitment of staff who fit well, achieving SuperTeam status is a major Talent Management challenge.

As a successful SME moves into its 4th year onwards or a size of around 100 staff or more, many founders seek to exit the business – sometimes because of their success (they sell-out), many because they are demotivated by the evolving nature of the business, and many because they want to return to the cut and thrust of the start-up culture and to escape the leadership and management of a successful SME.

This time period can be critically important and is the now the quality of prior Talent Management demonstrates its power.  If Talent Management has been well implemented:

1)  founders may still be important but not critical;

2)   the organisation has few, if any, critical staff;

3)   the processes are well established and the knowledge and skills to perform them clearly defined;

4)   the workforce is sufficiently agile (i) to cater for all bar the most critical staff leaving unexpectedly, and (ii) to handle temporary coverage needs;

5)   new staff do not need to be the catalyst to fix the culture – they are brought in to fit with it, support it, and sustain it.

So, “Do SME’s need Talent Management?” Absolutely, probably more than many larger organisations who can cope with the consequences by virtue of the flexibility that larger workforces create. Without appropriate conscious attention to Talent Management, any SME is likely to contribute to the statistics of failures in the first few years.

Clinton Wingrove

Associate Principal Consultant

Director, Principal Consultant and HR Anarchist