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People Challenges in SMME Organisations in 2007

People Challenges in SMME Organisations in 2007

Used with permission of the author:
Author: Marion Stone
Cornerstone Connections

The SMME sector has been actively promoted in South Africa in the last 20 years and the growth of this sector is seen as an important contributor to employment and economic productivity. SMME organisations face many challenges in order to survive and remain competitive – cash flow, regulatory requirements and effective marketing are all serious considerations. In amongst all the day-to-day activities it can be difficult to invest time on strategic matters – particularly on those matters that impact the very people that are driving those day-to-day activities!

The aim of this survey1 was to establish what the main people related challenges are for small businesses as well as to make some recommendations on how to deal with these challenges. In depth interviews were conducted with 8 SMME’s during Q4 2006 and Q1 2007.


The results do reinforce some preconceptions about this sector, but they also yield some surprises! Have a look at the summary below and see how your organisation compares…

1. Survey Data at a Glance


Number of organisations interviewed 8 (between Q4 2006 and Q1 2007)
Sectors Wholesale & Retail, Media, Services, Manufacturing, ICT
Location Pre-dominantly CT, some have links to Gauteng and KZN
Number of employees Range of 8 to 102
Average of 30 people in an organisation
Percentage of employees with a managerial role 23%
Sectors Retail & Wholesale, Manufacturing, ICT, Media, Services, NGO
Formal HR Support available? 3 out of 8 of organisations interviewed (Those with higher no’s and from manufacturing sector)

2. Results

Biggest people related challenges

  1. Attracting and retaining talented staff
    Organisations reported issues related to:
    - Retention of staff (5 organisations)
    - Lack of available talented staff (2 organisations)

  2. Paying more attention to the strategic matters
    Organisations reported issues related to:
    - Spending too much time on operational activity (4 organisations)
    - Effective use of people resources - keeping the balance between having too many people and spreading them too thin (1 organisation)

  3. Motivation of staff
    Organisations reported issues related to:
    - Create challenging and interesting roles for staff (1 organisation)
    - Motivating staff to encourage proactive behaviour (1 organisation)
    - Maintaining staff morale when targets are challenging (1 organisation)
    - Developing a sense of security when relying on funding (1 organisation)

  4. Labour relations
    Organisations reported issues related to:
    - Conflict and industrial relations (2 organisations)

HR practices


Vision & strategy exist and are clearly communicated to all staff 38%
50% have done some work on this
Managers performance is measured against targets 63%
1 organisation currently working on measures
Managers effectiveness is measured through continuous review (performance appraisals) 38%
1 organisation currently working on a process
There is planned development for managers (training plans, allocated budgets) 25%

The role of managers


Expectations of the Manager role in SMME organisations include the ability to:
  • Assess aptitudes and match the right person to the right job (2 out of 8)
  • Work competently in more than 1 area – multiskilled (3 out of 8)
  • Provide creative input – comes up with ideas, plans & opportunities (3 out of 8)
  • Define processes and systems (2 out of 8)

3. Conclusions

  1. From the survey data above you will note that employees with management responsibilities make up almost a quarter of the total employees. The role of managers in small business appears to be broader than in a corporate environment where roles have more distinct boundaries. Managers are expected to be multi-skilled to an extent where they can step in for other managers in their absence. There is also an expectation that they will contribute to problem–solving in areas of the business that may not be their direct responsibility.

  2. Few small organisations have dedicated HR support, as it is not always feasible to do so. In some cases the role forms part of the finance department (where the focus tends to be on head count costs) or more typically it is part of an MD or CEO role (where it is a challenge to fit it into their schedules).

  3. A low number of organisations have a clearly communicated vision and strategy. Increased communication in this area would have a beneficial impact on motivation. On an encouraging note, at least 2 organisations were working on this at the time of the interview.

  4. Most managers are measured against some form of targets, but their overall performance is not reviewed regularly through performance discussions and feedback. As a result there is little planned development.

  5. Almost every organisation that was interviewed faced challenges in attracting the right calibre of employee or keeping them once they had signed them up. Those organisations that had overcome this particular issue had a very strong identity that they communicated to potential employees.

4. Recommendations

There are three main recommendations that flow from the survey results:

Staff retention - define your company brand

The biggest people related challenge was the attraction and retention of talented staff. For some small organisations attracting the right people is a real concern. Often less lucrative remuneration packages and a perceived lack of career development make it hard to ‘sell’ the organisation to potential recruits. Other organisations have less of a problem recruiting and more of a challenge retaining their talented staff. Again, the reasons for turnover can often be linked back to career opportunities and remuneration.

Staff turnover is expensive and in small businesses particularly the loss of one person with a unique skills set can be very detrimental to customer relations, the ability to get work done and morale in general. So, what to do when typically you are not always able to compete with the big corporate organisations on salary and opportunities?

Firstly, salary is not the only factor that influences people who are making choices around jobs and careers. It is an important factor, but definitely not the only one. Other considerations that are taken into account include:

  • Quality of leadership

  • Meaningfulness of work

  • Organisational culture

  • Flexibility (work/life balance)

  • Development opportunities (and training courses are not the only way to develop people!)

What does your organisation offer in relation to these factors? It is important to consider what image or brand you are showing to existing and potential employees. We are not talking about your product brand here, but your company brand - the values and culture of your organisation that make it unique and desirable. Are you communicating your brand to potential employees when you recruit? Do your existing employees know what you ‘stand for’ and do they understand what benefits they are receiving? Perhaps you have flexible working or offer a share ownership scheme? Maybe you provide opportunities to develop a breadth of skills that wouldn’t be possible in a larger company.

Understand what you are offering and make sure that your company brand is clear to everyone. In the absence of dedicated HR support, who is going to take a strategic look at the motivation and retention of your employees?


In the survey, these were some of the reasons why employees would seek out or remain in the employment of a smaller organisation (from most mentioned to least mentioned):

  • Scope for the individual
    They are involved and feel like their work has impact
    Family environment – they count
    Flexible working

  • Scope for impact
    Flexible processes and procedures so there is scope for initiative (more of an entrepreneurial environment)

  • Scope for passion
    Employees have a passion for what they do
    Creative egos can be accommodated

  • Scope to learn
    Provide unique mix of experience –sometimes too desirable!

(For more information on this subject, read Take Two – Managing the Careers of Technical Specialists and 'Talent on Tap'.)

Performance management - focus on the right things

It is the determination of the business founders that lead to success in the first place, however if the MD is still doggedly hanging on to tasks that should have been delegated a long time ago, then there is a problem! The organic growth of small businesses means that those who lead have a very good knowledge of all the jobs and tasks that need doing. This is great for flexibility, but the temptation to do the operational stuff and neglect the strategic will therefore always be strong. A good way of managing this and making sure that you make the best use of the skills and talents of all your employees is by having effective managers and a good performance management process.

Employees with management responsibilities make up almost a quarter of the total employees and they have an exceptionally important role to play as they influence retention, employee motivation and performance. Unlike in corporate organisations where there are many managers and a less effective one can be balanced out by a number of stronger managers, every person counts in a small organisation and so they must be effective at what they do.

In general, employees want to do a good job and you are doing them a disservice if you are not telling them what your expectations are within that job. In the absence of articulated expectations, people will do whatever comes across their desk. But how do you know that what comes across their desk is actually important and will help you achieve the business objective? By not setting objectives, you are setting up your employees for failure whereas a good performance management process will drive performance by making sure employees (and managers) focus on the right things. Not one of those once a year tick-in-the-box paperwork exercises, but where there is a clear vision and strategy for the business, where individual objectives feed into the business strategy and where behaviours support the organisational culture.

If you want a performance management process that makes a difference, it should include the following elements:

  • Commitment to the process

  • Clear, business aligned objectives

  • Balanced feedback

  • Regular reviews

  • Development plans

  • Capable managers

(For more information on this subject, read Six Steps to Effective Performance Management.)

Know your employees (so you can motivate them)

You must know your employees in order to motivate them. One of the key roles of someone managing staff is understanding what the strengths of their people are and making sure that they are matching the right people to the right jobs. Now that is motivational! There is nothing worse than a daily struggle with someone who is simply not suited to the work that they have been given.

Another aspect of motivation is that of reward. A chocolate bar might be of interest to me as a treat whereas it will give another person a migraine! Some people like public praise and acknowledgement and others don’t. Everyone likes to be paid a fair wage, but for some the money is motivational (think sales team on incentive pay) and for others it isn’t. Beware of making false assumptions when it comes to reward as it can backfire badly!

A useful piece of HR theory is called Hertzberg’s Two Factor Theory2 that separates "motivational factors" from "hygiene factors". Hygiene factors are the foundational requirements for an employee to feel valued e.g. salary, working conditions and status. If they are absent or undermined, the foundations of motivation will be compromised however typically they do not intrinsically motivate. Motivational factors include opportunities for personal growth, recognition for achievement and the freedom to make a difference or leave a mark.

5. Final Comments

This survey shows that good organisational practices are being implemented by small organisations however not in a particularly consistent manner. For example, managers appear to be measured regularly but don’t receive the development they need to improve. Also, there are some outstanding examples of best practice in the small business arena that completely dismiss the stereotype that organisational development is the preserve of larger organisations.

The question is, which one would you like to be . . . the stereotype or the best practice organisation?

1 The organisations interviewed were voluntary participants and their responses were accepted as correct.
2 http://www.valuebasedmanagement.net/methods_herzberg_two_factor_theory.html 13/9/06

Marion Stoneis an experienced training and development consultant with over 10 years of experience both nationally and internationally. Her comprehensive understanding of training strategy and practice has been acquired in various sectors including manufacturing, FMCG, construction, media and travel. Her work has focused predominantly on middle managers although she has worked with various levels within the business from the shop floor to senior managers. Marion holds a first degree in chemistry (UCT) and an MSc in Strategic Training and Development (University of Surrey Roehampton ). She is accredited by the South African Board of Personnel Practitioners as a Chartered HR Practitioner. Her diverse background ensures a practical approach to development activities that are joined up with organisational goals and processes.She can be contacted at marion@cornerstoneconnections.co.za.For regular newsletters from Marion click on 'Subscribe to newsletter' onwww.cornerstoneconnections.co.za.

Cornerstone Connectionsbuilds connections between the organisation and it’s employees and between managers and their teams. Consultancy and training are offered in the areas of:

  • Talent retention

  • Personal and career development

  • Performance management

  • Coaching and feedback

  • Team effectiveness

Short description
This survey was done to establish what the main people related challenges are for small businesses. Some preconceived ideas were confirmed, while other results were surprising. It makes some recommendations on how to deal with these challenges.

Keywords and related phrases
Development, labour relations, learning, management, motivation, people resource, recruitment, retention, skills, SMME, strategy, talent, 

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