Leading SMEs into the future

Owner-managed small- and medium-sized enterprises (SMEs) usually have the following strengths:

They are customer-oriented and accustomed to providing service and carrying out small orders

They are quite agile in their everyday work, because the division of labour is less pronounced in them than in corporations

They and their employees react flexibly to new (customer) requirements

These strengths are often countered by the following weaknesses:

A systematic business development does not take place

There is no foresighted competence development

Further training takes place largely on an ad hoc basis

Lack of strategic thinking in the personnel area

Many SMEs have deficits in all areas related to systematic personnel and organisational development. One reason for this is that their personnel managers, who are often also responsible for further training, have a very broad range of tasks. Therefore, they hardly have time for conceptual, strategic work.

In many SMEs, this is reserved for the “owner-entrepreneurs” anyway. They often regard answering basic personnel policy questions, including personnel development and remuneration, as their original task. For this reason, the competence of personnel managers is often limited to operative tasks.

Many HR managers in SMEs show seemingly contradictory behaviour. Although they emphasise the necessity of strategic personnel work, in everyday life they are primarily occupied with personnel selection and personnel controlling. And they only deal with the subject of further training if there is an acute operational problem, such as excessive costs.

New personnel and management

concepts in demand

However, SMEs are increasingly changing their mindset – not least because many of them have developed from small craft businesses into highly specialised niche providers offering their customers complex, tailor-made solutions to problems. This is reflected in the structure of their employees. Today it is much more heterogeneous than at the turn of the millennium. In addition, their employees more often have an academic degree – for example, as an engineer, computer scientist or business economist. And these employees make different demands not only on their work but also on their leadership compared to those made by employees in the past.

In addition, medium-sized companies in particular, which are often “hidden champions in the provinces”, are feeling the effects of demographic change. It is becoming increasingly difficult for them to find highly qualified and motivated employees and to retain them in the long term. This is another reason why many SMEs are currently putting their personnel management and development concepts to the test.

The central question here is: How can we modernise our personnel work and our corporate and management culture in such a way that, on the one hand, they meet the (labour) market requirements and, on the other hand, we retain the typical strengths of a medium-sized company? After all, it would be a mistake to transfer the personnel development and management concepts of the corporate groups – in a simplified form – to SMEs. This would not meet their needs. In addition, the identity of the SMEs would be lost. Therefore, they have to develop their own tailor-made solutions.

New understanding of oneself

and leadership necessary

However, the smartest development programmes are of little use as long as the owner-entrepreneurs do not change their attitudes and behaviour – also because the managers among them orient their behaviour towards that of the owner-entrepreneurs. This is why they shape the (leadership) culture in the entire company with their appearance and personality.

Many SME owners are technicians by nature. And this is where their passion lies. The fact that they are also “bosses” of a larger number of employees, on the other hand, is more an expression of their striving for independence and the need to make a difference than the result of a deliberate will.

Accordingly, often one hears from them complaints such as: My work ... and/or being an entrepreneur would be much more fun for me if it wasn’t for the personnel stuff. Accordingly, they attach little importance to leadership work – also because it is so “human-centred”. Actually, they prefer to deal with facts and figures and the development of new solutions.

At the same time, however, it is difficult for them to let go and delegate at least parts of the management work – because they identify so strongly with their “child”, the company. On the contrary! Often, they interfere in everyday business in the areas of competence even of their (senior) executives. For example, by giving instructions to employees without first coordinating these with their immediate superiors. Or by torpedoing plans of their managers and employees – en passant and thus signalling to them: I’m in charge here. This frustrates young, highly motivated employees in particular, which is why they often change employers after one or two years.

Putting management behaviour to the test

This will only change when owner-entrepreneurs (and their subordinate managers) accept for themselves that – due to the growth of their companies and the changing expectations of their employees – they will have to invest more time in leading their employees and change their leadership behaviour. They therefore need regular feedback on their leadership behaviour and its (unintended) effects.

In theory, their employees could give them this feedback. In practice, however, this is only possible to a limited extent, especially with owner-entrepreneurs. Employees (including managers) are aware of their powerful position in the organization and their existential dependence on them. For this reason, most employees are right to be very cautious about giving feedback. If something bothers them, they will, at most, hint at the problem to the “boss”.

Therefore, it is recommended, if the management culture is to change in real terms, that an experienced management coach be brought on board, for example, who also points out to the owner-entrepreneur his blind spots in the area of management and works on these with him.  

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