How can smaller firms win the battle for talent?

Talent retention is a hot topic for companies worldwide. This is particularly true for small and medium-sized enterprises (SMEs), which face more challenges than larger businesses. In this article, Ada Zhang of Goglio outlines some of the steps SMEs can take to retain their staff.

According to LinkedIn’s 2023 Workplace Learning Report, 93 per cent of organisations worldwide are concerned about talent retention.[1] Significant impacts of employee turnover on organisations include increased recruitment and training costs, decreased productivity due to new hires, damaged customer relationships and decreased employee morale.

Employee retention challenges

SMEs often have limited resources to offer remuneration and benefits comparable to those offered by large enterprises. This puts them at a disadvantage when it comes to attracting and retaining talent. Large enterprises usually have stronger brand influence and are able to attract employees with better skills; SMEs are relatively weak in this regard and need to compensate in other ways. Compared with large enterprises, SMEs may offer more limited career development paths, which may affect employees’ long-term career planning.

Increased employee expectations

With China’s ageing population and changes in the labour market, the new generation of employees will pay more attention to factors such as a company’s corporate culture, employee experience, working environment and management, which places higher requirements on the enterprise. Companies that are not able to satisfy the expectations of the new generation of employees will be unable to retain new recruits or motivate existing employees.

How can SMEs address these talent attraction and retention challenges?

1. Maintain a compensation structure that is competitive in the labour market and fair internally

A fair compensation structure is the foundation of employee retention. One way companies can establish a compensation structure that motivates existing employees and that is competitive in the labour market, is by using the ‘3P model’ developed by MERCER consultancy.[2] The model takes into account an employee’s position, performance and individual skills, while also seeking to factor in the labour market rate of pay. A company’s position in the local labour market should be determined, with salaries for key positions set not lower than the median market salary to ensure that talent can be recruited and retained.

2. Flexibility and fast decision-making

The organisational structure of large enterprises is relatively complex, and the decision-making process is long and cannot adapt to ever-changing market demands. SMEs are able to react quickly to changes in the market due to their short decision-making chain, and this agility allows them to quickly iterate their products and adjust their strategies to meet customer needs, thereby attracting and retaining workers that want to work in a fast-paced environment. Shorter decision chains also mean that decisions can be implemented quickly, and problems and challenges can be quickly identified and resolved as they do not need to go through multiple levels of approval processes. This efficient implementation can increase job satisfaction levels as employees can see their work’s direct impact and results.

3. Allow employees greater autonomy and more development opportunities

Companies can provide a platform to encourage employees to organise their own development opportunities. Giving employees more autonomy and opportunities to participate, as well as allowing them to complete tasks at their own pace, can make work more flexible and improve efficiency. At the same time, it also helps to make employees feel trusted and respected, and facilitates cross-departmental communication at all levels. This open communication environment helps to break down the barriers to information, so that employees can better align their personal goals with the organisation’s goals. What companies need to do is establish an effective reward mechanism that encourages employees to create mutually beneficial results for both the company and the individual. In this case, SMEs need not be limited by their size when it comes to providing managerial positions to their employees. Instead, they can offer more autonomy to their employees to create value-added results.

4. Work to build company culture

It is very important to tell a company’s story and to spread its culture. This is a key part of the long-term and continuous work to attract and retain staff, enhance the employee experience and strengthen brand value. American management scientists John Kotter and James Heskett (authors of Corporate Culture and Performance)[3] spent 11 years researching the relationship between corporate culture and business performance. Their research showed that companies that emphasise corporate culture perform significantly better than those that do not, with the former outperforming the latter by four times in terms of average revenue growth and more than 10 times in terms of stock price appreciation.

Companies need to clarify their core values and sense of mission so that employees understand the importance of their work to the company and enhance their sense of belonging and responsibility. This can be achieved through the establishment of open communication channels and regular feedback to enhance employees’ sense of participation and identity. It is important to recognise employees’ outstanding performance and contributions to encourage their enthusiasm and creativity. By ensuring employees are consistently recognised companies can help to ensure their job satisfaction and loyalty.

In summary, the key to hiring the right employees and retaining them is to offer sustainable development paths and the ability to work across disciplines, an opportunity that is rarely available in larger organisations. Company culture is an important part of talent retention. Building a company culture is a long-term endeavour that needs to be managed, and is especially important for winning the hearts and minds of new generations as they enter the workforce.

Ada Zhang is human resources director at Goglio. She earned her MBA from Nankai University and has more than 20 years of experience in human resource management at manufacturing companies.

Goglio is a family-owned multinational company established in Milan in 1850 that specialises in packaging solutions. The company’s Fres-co system for coffee and fruit enables processors to expand the shelf life of products and reach more markets. Goglio’s most iconic product is its one-way degassing valve for coffee packaging: in the 1970s its introduction dramatically extended the shelf life of roasted coffee beans.

[1]2023 Workplace Learning Report, LinkedIn, 2023, viewed 12^th November 2024, <https://learning.linkedin.com/content/dam/me/learning/en-us/pdfs/workplace-learning-report/LinkedIn-Learning_Workplace-Learning-Report-2023-EN.pdf>

[2] 3P Salary: The Most Standard Way Of Calculating Salary For Employees, talentnet, 17^th October 2022, viewed 15^th November 2024, <https://www.talentnetgroup.com/vn/featured-insights/rewards/3p-salary-most-standard-way-calculating-salary-employees>

[3] Kotter, JP, and Heskett, JL, Corporate Culture and Performance, Free Press, 2011