Small business, high performance: How can SMEs hold onto their star players?

Every business wants high-performing staff but retaining these star players can pose unique challenges for small and medium enterprises (SMEs). 

Top performers typically have distinct needs, including varied challenges and a continuous sense of learning and development. And, particularly in light of Australia’s turbulent economic climate, many SMEs are concerned about their capacity to provide these opportunities.

Employee retention is currently a concern for more than two in five SMEs globally (42%), according to a report by Employment law and HR consultancy Peninsula Group. The only concerns that ranked higher for SMEs were rising costs (84%) and labour shortages (46%).

While time and resource constraints might pose certain obstacles to an SME’s retention strategy, these obstacles are far from insurmountable, says Rob Cross, Senior Research Advisor at i4cp. In fact, according to his extensive research into high-performing organisations, the most effective retention strategies are often those that require minimal investment.

“My last book was focused on when people were really thriving in their work, and some of the factors that created that,” he says. “One of the biggest things we found was that, if people were experiencing a sense of growth, they were much more likely to stay and feel like they needed to bring their best. 

“What I find with smaller organisations is that they need to be collaborating in ways that create a sense of energy and purpose around what the organisation is up to, which creates a sense of [continuous] learning and development,” he says. “And being intentional about collaboration isn’t expensive.”

What challenges do SMEs face in retaining high performers? 

When it comes to growth opportunities, one of the strengths of SME business models is that they can offer more flexibility for high-performing employees to challenge themselves and wear multiple hats at work, says Cross.

“The happiest people [in our research] were really good at shaping their trajectory,” he says. “They found their way into work that they enjoyed. And small companies can do that.”

However, to facilitate these experiences, SME employers must be purposeful about how they structure roles to avoid healthy challenges turning into unmanageable burdens.

“Especially in rapid-growth businesses like biotech, there's a heavy tendency for the established people to progressively get overwhelmed,” he says.

“If companies haven't put sufficient structure in place in terms of roles or processes, it starts to create a negative culture, because new people that are coming in have a hard time figuring out how things get done, and the established people are too burned out [to support them].”

When it comes to turnover, these first impressions matter, he adds.

“We've seen that a lot of small companies are not doing enough to integrate the newcomers,” Cross says. “Some organisations bring somebody in, give them a policy and procedure manual and a computer and say, ‘Good luck.’”

While time or resources constraints might hold SMEs back from investing more in onboarding, the business case for doing so is irrefutable; research shows a strong onboarding process can improve new hire retention by 82 per cent.

By understanding how to work with their constraints and leverage their unique value propositions, SME employers can turn the size of their operation from an obstacle into an asset.

Practical ways for SMEs to hold onto their best players

Given the importance of collaboration and networking in ensuring top performers feel fulfilled, Cross has found that one of the most effective ways for businesses to develop and retain high-performing employees is to focus on facilitating connections rather than on tools and systems.

“If somebody comes into the team, and the leader sits down with them, and says, ‘How do I help you engage with the people and the networks you need [to connect with]?’, that has a huge impact on the success of the team over time,” Cross says.

SMEs are also advised to take a strategic approach to reward and recognition. When it comes to financial incentives, Cross has found that the most effective rewards are those which tie the employee’s success to company performance to ensure top performers can see their place in the organisation’s trajectory. 

Creating this connection with the business and its objectives can be achieved more effectively through tailored support and mentorship.

“[For example], we’ve found that leaders who run their one-on-one meetings [effectively] often allow the individual to start with their issues,” Cross says. “Fifty percent of the time, this will be off-task, but [this approach] creates greater engagement and helps shape the nature of the work in a way that generates more enthusiasm.”

By implementing these strategies to foster a culture of collaboration, provide growth opportunities and recognise employees' contributions, SMEs can create a supportive and dynamic work environment that not only attracts top talent but also keeps them engaged and committed.