Latest from SME People Insights - Issue Five

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For the forward-thinking SME C-Suite | For enlightened HR Professionals | For a growing world of Fractional Executives

Welcome to an ever-growing community of forward-thinking SME business leaders who are actively reshaping how work happens in organisations just like yours.

 Whilst we can’t prevent complexity buffering our businesses, we can create organisations that can withstand and flourish in the face of any unpredictable change.

 In this issue, we explore why financial hardship should force businesses to rethink their change strategies. Why today’s Executives aren’t all-knowing heroes, just decision-makers, culture shapers and capability builders. Why Workplace wellbeing initiatives often mask deeper systemic issues rather than solve them, and instead of relying on rigid outdated hiring models, SMEs should build out flexible resourcing as the way ahead.

In these tough times, finding your path through these changes tough? Many leaders are.

If you're looking for tailored guidance from a Fractional HR Executive on implementing these and other strategies, let's connect and discuss your specific challenges!

Following the money to help Shape Workplace Changes

For the SME sector, the rising cost of doing business in the UK, driven by increases in National Insurance, inflation, and economic uncertainty, pose a significant challenge for the sector striving to maintain profitability and growth. Add in the wider external factors such as low growth, climate change (it hasn’t gone away you know), stagnating productivity, the long-term impact of Brexit and our emerging multipolar world under the Donald’s new monopoly board approach to global relationships.

What do you get? Reactions too often like this:

• Threat responses from leaders. No finer example of this than the Return-to-Work mandates under some strategy that presenteeism and the force of numbers under one roof will help turn things around.

• Anxiety levels from employees, as science tells us the fear of something bad happening (i.e., risk of displacement) far outweighs the actual decision, when we switch to being back in control of our destiny.

• Generational views of what good looks like in the workplace, as the new workforce becomes increasingly built around the growing numbers of Gen Z, led ultimately by boomers, and kept together by Gen X.

Finally, the growing influence of technology, from its ability to push polarising narratives into our consciousness, to differing views of digital communications platforms versus in person dialogue, and the rising scepticism outside the LinkedIn bubble for widespread adoption of AI.

Resistance is often framed in old tropes about growth potential or ‘othering’ people on both sides and as we turn to cost cutting and the rise of the dreaded green banner on profiles. Part of the unspoken problem here is that too many leaders frame these initiatives around employee experience or productivity, but their ultimate success hinges on complex financial undercurrents and economic inequality that often remain unacknowledged, such as:

• Spacious home offices for the Executives while lower-paid staff struggle with inadequate setups.

• Values statements ring hollow when bonuses reward contradictory behaviours.

• Economic calculations drive decisions about which roles require physical presence, often reinforcing existing hierarchies and access to opportunity.

• Even people invested in the Company’s attempts to change are still impacted by rising costs of travel and subsistence to get to the workplace.

Too often, and certainly at this time, the basic value of the economic contract between employer and employee ultimately shapes culture more profoundly than any planned HR initiative.

Now the good news is that SMEs succeeding in workplace transformation acknowledge these economic forces transparently. They recognise that sustainable workplace initiatives must balance organisational financial needs with genuine employee benefits. They address economic equity alongside experiential improvements. Most importantly, they understand that pretending economic factors don't drive workplace decisions undermines trust more than acknowledging the complex financial realities shaping today's work environment.

At the end of the day, you can’t eat a mission statement!

The Wellbeing Gap that HR Can't Solve Alone.

Whilst the pandemic turbocharged the issue of Wellbeing into our consciousness, and with good reason, its rise within corporate land started around 2017 as a fad, when the usual big consultancies took a run at it for revenue reasons. 

It has thrived and flourished due to the fact, as Paul Sweeney points out, too many businesses go into the following doom-spiralling pattern:

Step one: Trigger the business by focusing on our aversion to uncertainty. High industry numbers, lost productivity, corporate risk, and the subliminal message that the very future of your business is uncertain.

Step Two: Create the illusion of sense-making: It’s all the organisation’s fault (i.e., your fault as leaders). You’ve allowed this to happen through your uncaring approach as an employer with long hours, demanding managers, pressured tasks, etc. What were you thinking?*

 Step Three. Promise control over the future: We can help you to fix your wellbeing through this range of interventions. Here’s the cast-iron business case for the investment. Trust us; we’re a big 5 consultancy. We know what we are doing. This will cost you £X but will return almost £5X. Happy Days.

 In the world of SMEs, leaders want to do the right thing by their people and not for a moment am I suggesting that burnout, anxiety, and other wellbeing issues aren’t a reality in today’s high-pressure work and life environment. They are. The issue remains that our approach remains flawed, given the following 2 reasons:

1.    Lack of evidence coupled with too much virtue-signalling. The cost of operating the business gets higher as the SME feels compelled to manifest something from its strategy – duvet days, yoga classes, mindfulness or that colleague’s dog that roams the office shitting on the carpet.

 Adding a nail to the proverbial coffin, on the issue of RoI, Oxford University’s Wellbeing Research Centre published in 2023 on the effect of wellbeing interventions across 143 UK companies with 28,000 employees. The report’s author, Dr William Fleming, says:

"The analysis estimates the effect of a range of common initiatives, including mindfulness, resilience training, stress management and wellbeing apps. No evidence is found to demonstrate that these strategies improve worker mental health across multiple employee mental health measures". 

2.    Ownership residing with HR.  Unqualified yet well-meaning, this hobbyism opens the business up to risks on data, flawed diagnosis and for the HR professional often their own burnout as they take on the burden, sometimes beyond work hours.

 This capability gap creates a dangerous scenario where wellbeing initiatives can become superficial checkbox exercises.

 How do we resolve this?

Thankfully there’s evolving clever “Technology for good’ (such as Woebot - an AI-driven mental health chatbot with strong clinical backing) offering a promising path forward when the focus is preventative - Advanced analytics platforms tracking work patterns, identifying early warning signs of burnout before they escalate. The best ones will help customise resources aligned with individual needs and work contexts, at the point of need. This is a terrific upgrade on the one-size-fits-all whale music apps of the last decade.

 More powerfully, this is also about working the organisational system. The causes of poor wellbeing and not merely the symptoms. Problem-solving for systemic issues like workload management, toxic leadership and organisational practices, and unrealistic performance expectations.

 The future of workplace wellbeing lies in this augmented approach where we combine human expertise with technological capabilities. Clinical practitioners, not HR, providing specialized knowledge, technology providing the scalability needed to support entire organizations and HR experts creating better experiences to thrive a work with.

 And anyway, as the AI pessimists would tell us, we’re only 3 years away from the end of the current iteration of labour-based capitalism and that machine will never need a counsellor.

I (don’t) need a hero, I just need an Executive that gets the right things done.

Whilst the SME leader is rightfully expected to wear many hats in the enterprise, it’s the existence of the White hat-only, heroic leader that might just be inadvertently holding it back.

As we’ve seen, when the future is uncertain, anyone and anything that can offer some kind of certainty looks attractive. In a complex world that allure is strong and those who fall into that trap, create a kind of organisation that will not thrive in today’s environment.

The heroic leadership archetype. The tireless, all-knowing figure who single-handedly steers the organisation through stormy waters is a dangerous trope. Research consistently shows these "hero leaders" often create dependency cultures, stifle innovation, bottlenecks and ultimately burn out.

Instead, the context of SME success today is predicated on the following, according to Pflaegling:

• Acknowledging the existence of three co-existing organisational systems that absorb complexity  – (1) the hierarchy (i.e., we still require oversight and stewardship), (2) the informal network (i.e., you can’t stop the influencers influencing or the watercooler conversations) and the most important, (3) the value-creating one (i.e the periphery. Where the magic takes place with the market/customer).  

• The value-creating organisation demands leaders who understand their business models now require agility, distributed expertise, decentralised decision-making, and collective intelligence, increasingly augmented by Technology. No more 1-person heroics required.

"Organisations don't need heroic leaders. They need everyone to lead." - Niels Pflaegling

To flip to this state requires both acknowledging uncomfortable truths, ditching ego and being willing to both unlearn and learn new thinking:

• No single person possesses sufficient knowledge to navigate today's complex market landscapes alone.

• Sustainable growth emerges from resilient teams, not heroic individuals.

• The executive's primary value lies in asking better questions and fostering environments where solutions emerge organically.

Working with Executive teams this is typically the hardest part of any change programme. Repositioning years of limiting beliefs about the leadership role and ensuring individuals go on their own personal change journey as a result.

Sure, there is a role in the future, but it’s limited, and more SMEs are concluding that the seductive power of an Executive team is increasingly an illusion.

I hire, therefore I am. From fixed to fluid Talent

Further to that issue of unlearning, a theme of mine that I return to often, representing the cleansing of so much unsubstantiated BS holding us back, is the outdated and limiting idea of sourcing talent into our SMEs.

Too often hiring is one dimensional. Permanent is king and Queen. Backfill is when the process kicks into gear. Executive becomes temporary hiring manager but this traditional approach of building teams through full-time hiring alone creates dangerous rigidity, leaving SMEs vulnerable to rapid market shifts and specialized skill gaps.

In those moments where contractors appear, the temptation is to ‘other them’. There are the internal permanent people and there’s those “not of us”. Regardless of the typical fully loaded cost of the internal employees, there’s an almost apologetic feel to the rationale for the temporary resource providing much needed expertise and mastery the internal team have failed to keep up with.

And all this within, despite the job market screaming skills mismatches and by putting digital into analogue laden SMEs there’s a real struggle for talent. In today's volatile markets, those SMEs that rely exclusively on just permanent hiring find themselves increasingly constrained by self-inflicted talent limitations.

What should SMEs do instead?

Good news is that progressive organisations re showing the way:

1. Unlearn the old ways of recruitment and reframe into the Talent Production line.

2. Provide consistent responses to the following questions from the CEO:

·      What capabilities do I need to succeed in the future?

·      How can we build Capability?

·      What Capabilities do we need to win, and by when ?

·      How do we get access to a bench of high performing talent at the point of need?

·      How do we make this happen?

3. Build a Workforce Planning muscle and systemise it, when the case is proven. Everything without this is just guesswork.

4.    Build a new philosophy, engaging the organisation on new skills adoption, giving the internal employee base a north star when it comes to relevance for the future. This is important as the machine cannibalises the job.

5.    Finally, consider building solutions out of the plan under the following 5B approach:

This flexible talent architecture enables SMEs to rapidly scale capabilities up or down in response to market conditions without the overhead and commitment of permanent expansion. Rather than viewing talent as a fixed asset, progressive leaders treat it as a configurable resource that can be optimised for current business needs.

Implementing this model requires SMEs to develop new muscles, both in terms of skills to execute and the adoption of new technology to create a single point of truth that provides the capability to:

• Rapidly identify capability gaps.

• Determine the optimal talent channel for each need.

• Integrate diverse talent sources into cohesive teams and collapse effectively when market needs dictate.

This may feel a stretch. It might be for the ‘good enough’ HR in post, but not for an expert #fractionalHR, and the return can be substantial:

• Enhanced market responsiveness.

• Reduced fixed costs.

• Access to a bench of specialised capabilities to tap in to at the point of need.

• Ability to experiment with new business directions without overcommitting resources.

In short, precisely the agility SMEs need in increasingly complex markets!

You might be interested in these....

• Further changes to ground breaking Employment Law has taken place as a result of consultation and as this will impact all SMEs pretty substantially into 2026, I’d recommend keeping an eye on it. I’ll return to it in the near future but in the meantime here’s Brightmine’s timeline and free resources to check over here.    

• Had the pleasure of sitting down with Dominique at Frazer Jones (forgive the slouching 😊 ) to talk about #FractionalHR and what it means for clients out there. Find the video here.

I’ve articulated just a few of the many problems coming at us thick and fast and whilst SMEs can’t influence that, they can build responses that proactively manage the cultural shift – creating organisations that can withstand any of our uncertain futures.

Until next time.

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Barry

 Barry Flack is an award-winning Fractional HR Leader who wants to use this platform to ensure that as many SMEs as possible know how to make great workplaces! Subscribe if you want insights or just interested how these apply to the world of work in SMEs.

Learn more about Barry's services by visiting his website.

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