Smaller firms are in an excellent position in terms of talent attraction and retention as we move on from the pandemic – but it all depends on improving their workplace experience.

Small to Medium Enterprises (SMEs) are the most common type of business organisation in the world economy. However, they often experience barriers when it comes to creating a great workplace experience and can struggle to compete with larger, better-resourced companies which have dedicated departments managing facilities, HR and IT.

However, this doesn’t have to be the case. Many SMEs can develop an outstanding workplace culture, even on very tight budgets, and this can help attract and retain talent in the long run.

We at Director Group are working in partnership with WORKTECH Academy and through this article, we hope to raise some key questions. What makes a great workplace experience? What are the barriers to SME adoption of workplace best practice? And how can small growth companies compete with bigger organisations on recruitment?

Simon Ward, Director, Real Estate and Workplace at the Director Group, explains: ‘The lion’s share of the debate around workplace innovation is focused on large corporations, which have vast resources and dedicate departments to address experience and engagement. But what about smaller firms? They’re the driving force in most economies around the world but they get far less attention when it comes to the future of work.’

What is an SME?

The European Union and UK government define an SME as a company with 250 or fewer employees and an annual turnover under 50 million euros. However, some research accepts companies up to 500 people as falling in the SME category.

Insurance company Axa calculates, in its report on the impact of Covid-19 on SMEs, that small firms make up 99.9 per cent of all UK businesses, and research also suggests that they are similarly represented in countries around the globe.

Consequently, SMEs are a central part of the world economy but often face significant barriers when attempting to develop their businesses. In particular, they are coming under increasing pressure to offer the same types of workplace experience to their employees as larger organisations are able to provide.

In the aftermath of the pandemic, which had a significant impact on the earnings and growth potential of many smaller organisations and created uncertainties such as the ‘Great Resignation’, it has never been more essential for SMEs to be offering their employees a great workplace experience. But the prospect of competing with multinational household names with deep pockets can be a daunting prospect.

Barriers to brilliance

There are three core areas where SMEs can develop interventions in order to improve their workplace experience: people, place and technology. We spoke to experts in each of these fields to gather insight into what the SME experience is like for organisations at different stages in their development and to establish what innovative solutions small firms are creating to solve the workplace experience problem.

What factors might be preventing SMEs from already offering a stellar employee experience?

The primary factor is financial. By their very definition, smaller firms make less money than larger businesses. This makes competing for premium talent a challenge as most SMEs can’t throw the same weight behind exciting advertising campaigns depicting a perfect working culture or expensive office spaces specially tailored to employee needs.

The biophilia walls, music rooms and free cafeteria you’ve seen at the large firms are not always on the menu at an SME with a tightly controlled budget, no matter how quickly they might be growing.

With less financial scope to work with, SMEs have to make decisions about where to invest their money. Often, certain aspects of workplace experience are left behind. For example, an international research study led by Angela Martin et al (2022) looked at the mental health of SME owners and concluded that ‘occupational stress programmes are infrequently adopted by small medium enterprises (SMEs) even though they are the most common work context globally’.

There is a paucity of investment in mental health and wellbeing programmes in small firms which can have a negative effect on the workplace experience of their employees.

SMEs with budgetary constraints often don’t consider that there are inexpensive, even free solutions to the problems they experience, such as high levels of occupational stress or burnout, and therefore don’t address the issues at hand. This attitude can lead to a decrease in the quality of workplace experience within an organisation and affect talent retention.

A lean, agile edge

However, SMEs have some distinct advantages over larger companies. Kahyun Lee, who works at the Entrepreneurs Hub at the Design Museum in London and has a wealth of experience working with new business owners, states that the ‘creative DNA of the founder can be preserved and developed very well in smaller companies, because they are able to be really hands on from the beginning to the end of the business…’. This gives them a ‘lean, agile edge’ over their larger competitors.

SMEs are by their very nature less constrained by bureaucracy – and they are able to pivot in new directions with ease whilst retaining their core sense of identity and integrity. When looking to develop their business and create a better workplace environment, it is important that SMEs keep these important skills in mind and work to retain that competitive advantage, leveraging their company structures for their own benefit.

Managing the return to office (RTO) is a case in point. Larger enterprises have struggled far more than smaller businesses to bring people back.  A spring 2022 survey of 160 major employers conducted by The Partnership for New York City revealed that more than three quarters of firms are set to implement a hybrid model but the larger the company, the slower the pace of RTO.

The picture is similar in Europe where a CBRE survey of 130 firms revealed that small companies with less than 100 employees were moving much faster to repopulate their offices than larger ones.

Reassessing priorities

Despite budgetary limitations, there is also a great opportunity for smaller firms to attract premium talent in an environment where people are reassessing their priorities and looking for employment that works better for their individual circumstances.

The pandemic caused a major reassessment of the values that employees wanted from the companies they worked for – more people wanted better work-life balance, more flexibility and better ESG credentials in order to make their work more meaningful and less of a chore. Professional workers began looking around for jobs in which they felt more valued.

SMEs have a great chance of attracting talent who have become disillusioned with corporate life in big firms by providing tailored benefits and allowing flexible styles of working in order to reflect a cohesive set of values with which employees can relate.

But providing these benefits and creating a great workplace environment doesn’t have to cost the earth. Across the board, making these decisions starts with consulting your staff and being honest about any financial constraints while fully committing to understanding staff needs and frustrations.

People policies, technology and office space are all important aspects in helping SMEs to improve the workplace experience and make employees feel as if their opinion matters. While large firms may require expensive sensing and data analytics systems to measure the patterns of work in their multinational property portfolios, smaller firms have the luxury of having more direct conversations with relatively small numbers of employees.

Collecting information in this way will allow firms to make clever, informed decisions about where to invest more money in order to directly target and improve the experience of their employees and thereby increase staff retention.

SME success stories

There are plenty of growth company success stories which show SME innovation in people, place and technology.

London-based digital transformation company 6point6, for example, offers a wellness allowance to its employees that is paid through the payroll. Staff use a Wellness Active Allowance fund of up to £600 per individual to purchase items that will benefit their physical, mental and financial health.

Media company Red+Plus has introduced a ‘nomad’ design concept for its Shanghai office whereby spaces serve multiple functions with sliding doors created to allow employees to work flexibly and ensure that the space can be adapted to meet changing needs.

And small UK-based engineering firm Mason Navarro Pledge hasn’t let limited funds prevent the company from investing in IT software that acknowledging their need to be data-driven in order to compete with bigger firms. As one of the owners of the firm explained to Building: ‘Although we’re small, we’ve resourced up our IT so we can offer advanced modelling and analysis.’ This approach has enabled the firm to work with major clients such as BMW and Mercedes-Benz.

In subsequent articles, we will look in more depth at the SME workplace through the lens of people, place and technology