Article: Developing high potentials in SMEs

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Developing high potentials in SMEs


While the government is making it easier for SMEs to conduct business, they face widespread challenges on the talent front. It is, thus crucial for them to scrutinize how they should identify and nurture high potentials.
Developing high potentials in SMEs

In today’s age of technology, digitization and AI, it is human capital that continues to give organizations their sustainable competitive edge. In particular, high potentials (HiPo) play a critical role in safeguarding the future of businesses. These HiPos are the identified pool of leaders on whom organisations place their confidence to lead in times to come. Organisations, pan industries, bet on identified HiPo’s within their organisations and focus on developing them to take on business challenges and ensure sustainable growth of the business. The strategy holds meaning for small and medium-sized enterprises (SME’s) as well as large corporates. 

SMEs are the backbone of the Indian economy. They account for ~40% of the Indian workforce and contribute ~45% to the country’s GDP. They are largely responsible for driving innovation and competition in countless economic sectors. As part of the business ecosystem, they are equally impacted by the changes in technology and political environment. Each change, be it demonetization, digitization or the rise of e-commerce, brings in the need for greater agility and innovation to the SMEs. While the government is making it easier for them to conduct business, and grow through initiatives like ‘Make in India’ and GST, they face widespread challenges on the structural as well as the talent front which could potentially limit their growth. It becomes crucial for them to scrutinize how they should identify and nurture internal talent, specifically high potentials.

Large corporations may tend to enjoy several advantages over SMEs e.g. formal reporting structures, mature performance management systems, wide variety of opportunities for career growth, exposure to other geographies and available capital for investing in the workforce. Conversely, SMEs still work with informal structures and processes to a large extent, especially with respect to performance management, succession planning, recruitment and selection, talent development etc. The issue further continues with the workforce looking for a well-charted career path.

The need to focus on developing HiPos remains just as important for SMEs as it is for larger corporations.

SMEs are often seen to struggle in their search for top talent who are easily acquired or poached by MNCs and ILCs with higher paying capacities. Further, SME performance management systems are subjected to biases and favouritism of managers. Indian SMEs largely function in a hierarchical and bureaucratic manner. All of these could lead to a lethargic and demotivated team who do not see much scope for career progression or development. Identifying and formally recognizing high potentials in a fair and objective manner in such organizations could help motivate and retain the larger workforce and provide them with the incentives to improve their performance. HiPos are also known to return the favour and help develop others within the organization through informal coaching/mentoring. This is likely to help foster a learning culture within SMEs where L&D often gets de-prioritized.

Succession planning has come up to be a major concern for SMEs across industries. The HiPo’s in these organisations may require being identified and developed differently, given the context of the segment. Formal assessments could take precedence in their identification as internal performance scores may not be regarded as objective enough. Their development could involve them getting exposure to all areas of the business and operations to ensure holistic development of their leadership capabilities. This may enable them to attain readiness for future leadership roles within the organisation. These organisations could look at capitalising on mentorship programs and coaching by senior leadership for knowledge and skills to be passed on to HiPo’s in the absence of formal knowledge management systems. 

How an SME performs, in the long run, depends largely on its individual employees. SMEs are expected to see progressive developments in the industry in the coming years and hence, it is imperative that leaders take decisions with utmost caution. Identifying and developing the right pool of talent so as to adapt to and/or overcome the emergent changes in the market becomes critical. It is a point of reflection for SMEs whether their HiPo programs are married to the overall business objectives. HiPos tend to be more strategic and innovative than their counterparts; hence, SME’s could look at capitalising on their capabilities to solve high-impact business problems. If leaders concentrate on developing HiPos effectively, it will go a long way in creating winning businesses of the future.


Indian SME trends- the year gone by and 2017- The Economic Times

Understanding the importance of high potentials employees in 21st century enterprises- The Economic Times

Recruiting and developing talented people for SME growth

Career Development in SMEs- Liette Goyer, 2010

HR Challenges and Solutions for SMEs- ADP Employer Services (ES) International

Leading SME’s of India, 2016- Dun & Bradstreet, RBL Bank, 2016

DBS India Blog

Indian SMEs contribute 45% to country’s GDP: Report

HR Challenges in SMEs

Leadership Development in SMEs: Designing a customised solution- Richard Bolden, 2007

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Topics: Entrepreneurship, Talent Management, #HiPoWeek

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