In an exclusive interview with My Business, Professor Boris Groysberg (pictured below) of Harvard Business School in the US said that, by their very size, SMEs are able to be more nimble than large, bureaucratic corporates, and this in itself can be used as a recruitment tool.
“What is the best compensation system in 2016? That’s not the right question. The right question is: ‘What are the right rewards in 2016?’. Rewards come in lots of shapes and sizes,” he said.
“Money is not a long-term solution. Start-ups [and small businesses] can look at this and do something different.
“Yes, of course you have to get compensation right, but you have to get many other things right. I think too many companies focus [solely] on compensation.”
According to Professor Groysberg, this includes the ability to offer flexible working arrangements, the power for employees to really shape the direction of the business, and also being at the forefront of innovation.
Being innovative is an attractive proposition
“Disruptive technology more commonly comes from small companies. Many small businesses and start-ups look [at problems] differently,” he explained.
“And not just products and services, but also [issues like] talent management. Some of my biggest learnings come from smaller companies. They have a very fresh perspective. They are innovating how we organise ourselves: teams, engagement, hiring processes, performance management, technology etc.
“Even some of the most famous companies in the world, you could make an argument they should have put systems in place much faster.”
Don’t promote staff above their skillsets
Professor Groysberg also said that many companies, particularly larger ones, promote people into management positions who don’t actually know how to manage.
“They were very good producers, but they don’t know how to manage,” he said, suggesting that this can be detrimental for the individual and those working beneath them, as well as the performance of the overall business.
“Failure rates [for businesses] are really different by industry. I think some businesses run out of money; some get to a point where there is no proof of concept; and some [fail] because of a lack of talent management.”
A business is more than a single person
Another point he makes is that businesses can fall into the trap of imitating their founders too closely.
“There is a difference between cult and culture, but I think some people don’t understand that differentiation,” Professor Groysberg explained.
“How do you create a culture outside of the founder? Even with a great founder, their strengths become [the company’s] greatest liability. For example, Apple and Steve Jobs. With Jobs, it was a cult initially, but now it is creating a culture. It is in its 2.0 form.”