Sunday, April 15, 2012

Talent attraction pose serious challenge for SMEs

The steady growth of the Indian economy over the last several years has led to serious shortage of good quality talent across every sector. The challenges in attracting good talent is more acute for SMEs due to both supply side – reluctance of many qualified professionals to join SMEs  – as well as demand side – willingness of SME entrepreneurs to hire and delegate responsibility to professionals.

The challenge for SMEs gets exacerbated by steady poaching of experienced talent by large corporates who, in the process also inflate the salary levels adding significant monetary impact on SMEs. While the challenges at lower levels of hierarchy will continue to persist, SME entrepreneurs can adopt a few innovative strategies to mitigate this challenge for developing a professional second line senior management team.

The Supply Side
There are several talented middle management people in larger companies who would be keen to move out to SMEs, looking for operational freedom, greater challenges or channelize their entrepreneurial instincts.  There are also a number of professionals who had moved out from traditional manufacturing / services sector to IT companies during the technology boom of the last decade, who may be keen to get back to their core domain. The challenge for the SME entrepreneurs is in reaching out to such talent and attracting them with a suitable package comprising monetary rewards, appropriate designation as well as authority and responsibility.  

A classic example of such reverse drain is being witnessed in the IT sector where senior professionals from well-reputed IT companies are moving out to head smaller IT companies as CEO / CXO as they hit the glass ceiling in the larger setup. A similar trend is also emerging in manufacturing sector, which SME entrepreneurs should be prepared to capitalize on.

Changing mindset
SME entrepreneurs should acknowledge the fact that the balance of power in hiring good talent for senior management position has shifted from the demand side to the supply side. They should change their mindset and be willing to spend serious amount of time and effort in identifying the correct resource. They should also be prepared to hire professionals at market-based salaries; appropriate structuring of the compensation package with significant variable pay component, profit sharing and even some equity stake if required can help bridge the gap to a certain extent, without adding significant risk to the entrepreneur. Entrepreneurs should also adopt innovative methods such as campus interviews, alumni forums, social media and online advertisements to reach out and present a compelling case for such professionals to join them.

N. Muthuraman is Co-founder of RiverBridge Investment Advisors Pvt. Ltd., a boutique financial advisory firm and can be reached at  

This is the blog of the Print Version published in Business Line dated 16th April 2012

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