Small and medium enterprises constitute the backbone of Malta’s economy, whereby the economy is made up of micro and small undertakings operating in various sectors, from retail, to servicing, hospitality, manufacturing and agriculture and fresh produce. In 2020, the total number of registered businesses, locally, amounted to 130,745 (NSO).
According to the Central Bank of Malta’s “SMEs’ contribution to the Maltese economy and future prospects”(1), 99.8% of the business economy sector is made up of SMEs. With a rapidly growing economy, these micro enterprises faced numerous challenges ranging from finance sourcing, to diversification, globalisation and what seems to be the biggest headache to SMEs I consult, people’s issues. In this blog I will focus on the main pain points related to Human Resources in SMEs and family-run enterprises.
As with everything in a market economy, it is a matter of demand and supply – and the same applies to the human resources market. Attracting new employees and retention of existing employees are becoming increasingly difficult to achieve, with various forces impeding or acting as hurdles in the HR equation.
The Startup, Solo Entrepreneur, Freelancers and gig economy.
Over the years, in the past decade, work has become a lifestyle in itself, and a good number of younger generation employees have opted to stir away from the 9-5 work week system and build their work life around flexibility. This is mostly the case in skilled, professional and digital roles, where contract-work is becoming the order of the day. In addition, in such cases there are no geographical boundaries, as most of the work is done online and remotely. SMEs are finding it challenging to offer perks and flexible working arrangements that are attractive enough to attract such a talent pool. An SME cannot afford the luxury of certain engagement styles, which at times (can lead to…) leads to slack or waste.
Skill Set Scarcity.
A number of SMEs have had to rethink their model and even their offerings due to lack of available skill sets. Really and truly, not everyone is an accountant, auditor or software engineer, but a sizable gap in the workforce is noticeable, wherein certain skill sets are not anymore available. The lack of trade schools does not help in this. Aid in the form of incentives, in general, are not enough to train or retrain resources to be upskilled to fit certain roles. SMEs, of say, eight to twenty employees would have limited time and budgets for training. It is the norm, for such small enterprises, to work at near full capacity, for them to make commercial sense. Importing labour from abroad, comes with its issues such as a paperwork savvy overhead, lack of loyalty, lack of integration due to cultural differences, and at times CV fraud as well. For certain skills, it is not solely a matter of talent, but of passion, interest, mindset and flair. Incentives need to be rolled-out and made available, whereby unskilled workers are incentivised to upskill. If the difference between the dole (social benefits), minimum wage and the wage of skilled manual workers is minimal, then this serves as a demotivator more often than not. The difference in remuneration creates a feeling of ‘…why should I strive to work more for just n euro more!’. Educational bodies should give more weighting to the introduction of internships, on-the-job training, having from-the-industry lecturers and introducing mandatory modules that help keep certain skills alive.
Public Sector Jobs.
Malta has a rather high percentage of its total workforce, employed directly or indirectly with the public sector. Governmental or parastatal jobs are often seen as jobs for life, so the security aspect comes out as a main attribute. It is not unheard of that workers leave their private sector job to join the public sector, even on a lower pay, but to have mind at rest that quasi no matter what they will never lose their employment. The public sector is a big competitor that SMEs can never beat or even come close to.
Structural Limitations.
SMEs are generally flat in their organisational structure, which works well for elements such as communication and to build a management – workforce rapport but provides evident limitations, when it comes to career progression and growth paths for its employees. Employees with a self-growth ambition will outgrow SMEs in a matter of a few years. Making employees feel valued and important is not enough and the fact that, in case of family businesses, family members occupy the management positions, will act as a deterrent to aspiring future leaders.
Concentration of the know-how on the few.
In SMEs the core know-how is concentrated in very few resources, so there is an evident serious over reliance on very few key personnel. This is mainly due to limited resources and a limited ability to attract more talent. This poses a tangible business continuity risk. In case that any of these key employees decides to leave, it can create a possible devastating impact to the business, with highly-negative consequences.
As a country we are constantly bombarded with messaging to unleash our entrepreneurial spirit and set up startups. That is fine. But It needs to be backed by a serious string of policies and incentives. Incentives in the form of ways to keep core workers and also, employees need to be incentivised to work for SMEs and startups. Offering these core workers, cushy jobs (mostly Government Jobs) goes (totally!) against the strategy to strengthen the SMEs in our economy which are the bloodlife of our economy.
(1) “SMEs’ contribution to the Maltese economy and future prospects” (2018) by Dr. Aaron G. Grech.
