SMEs losing war for talent

by 29 May 2007

SMALL BUSINESSES in Australiaface unique challenges when seeking to attract and retain quality staff, requiring them to innovate and adapt in order to compete with large organisations in a skills-short market.

For such businesses, carefully tailored benefits are key to attracting jobseekers; and delivering on promises, as well as engaging employees from day one, are integral to successful staff retention, recent research has found.

New employees decide to leave an SME in a much shorter timeframe, compared to those at larger organisations, with over half deciding in the first month. In fact, 8 per cent of SME employees decide on the first day of their new job, compared to just 1 per cent of employees from larger organisations.

But once they stay, SME employees generally stay for longer than their larger company counterparts, with around a quarter of staff in larger organisations leaving in the first two years, compared to just 10 per cent of SME staff.

“This shows just how vital it is that small business owners get it right from day one. It’s all about delivering on the promises made to jobseekers during the hiring process, and about making new employees feel welcomed and part of the team as quickly as possible,” said David Reynolds, executive general manager of Chandler Macleod Consulting, which conducted the research.

“Without the large budgets for staff perks that large companies might have, it is more about the time taken by management to regularly connect with new staff to see how they are settling in. This kind of personal attention won’t go unnoticed by new employees, and will go a long way to securing their ‘buy-in’ of the company and promote longer tenure.”

The research revealed significant differences in how SMEs and big businesses attract candidates. Smaller companies are more likely to outsource to recruitment agencies or use employee referrals than their larger counterparts.

In fact, twice as many SME respondents listed referrals from existing employees as a primary channel for attracting candidates, with 10 per cent of SMEs relying on referrals compared to only 5 per cent of large companies.

When it comes to adapting employee benefits to attract candidates, it seems SMEs might not be willing or ready to change and improve their benefits as compared to large employers, with 55 per cent of large companies planning to change their benefits to attract jobseekers – 5 per cent higher than SME respondents.

This should prompt small businesses to change some of their strategies so they can compete more effectively and aggressively with large companies for talent, Reynolds said.

“Even though many SMEs may not be able to compete on salary levels or generous bonus schemes, with careful consideration and consultation with staff, small business owners can ensure their benefits count and that they are really addressing the specific and individual needs of their staff,” he said.

“This is the great benefit of SMEs – they can be much more nimble when it comes to offering tailored benefits, and have much greater capacity to respond to changing needs of individual employees.”

In contrast to the findings on plans to change benefits, SMEs are strongly embracing efforts to become recognised ‘employers of choice’, with 33 per cent of SMEs wanting to become employers of choice within the next 12 months, compared to 22 per cent of larger organisations in Australia.

“It’s encouraging to see that smaller sized employers are keen to step-up their efforts to offer an attractive workplace for their employees, however they will need to consider carefully what it is they are actually hoping to achieve, and what changes will need to be implemented,” Reynolds said.

“Also, given the fact that candidates are sceptical about the title of ‘employer of choice’– many have had promises broken or benefits that never came to fruition – SMEs must be prepared to follow-through and truly deliver an employment environment of choice for their employees, otherwise it could be money and resources ill-spent.”

Given the fact that 61 per cent of SMEs surveyed listed current or previous employees of a company as having the greatest influence on a candidate’s decision, Reynolds said word-of-mouth can be hugely beneficial, but can also be very detrimental if companies are not ready to deliver on employee promises.

“If your staff are happy in their roles and feel valued as team members, then they’ll be your best ambassadors and promoters,” Reynolds said.

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