Engaged employees are more likely to stay and perform well, writes Massey University's Jim Arrowsmith

Q: How important is employee engagement for SMEs?

Employee engagement is both attitudinal and behavioural. It means employees are well-disposed to the organisation and committed to their work, and this translates into a willingness to go the extra mile.

It is important for all organisations because engaged employees are more likely to stay and perform well, but it is particularly vital for SMEs. A smaller workforce means individual employees have a disproportionate effect on outcomes. They contribute relatively more to overall performance, and attitudes and behaviours (whether positive or negative) can potentially impact on the workforce as a whole.

Poor engagement, such as absenteeism and employee turnover, are also usually more disruptive and costly for SMEs. Engagement is particularly important for SMEs in the service sectors because more staff are customer-facing, and for firms with skilled and professional employees because of the higher discretionary effort in their work.


Q: Is it easier or more difficult to manage engagement in smaller firms?

In some ways engagement can be easier for SMEs because relations between management and the workforce are closer and less formal. There can be greater unity of purpose, easier communication and mutually beneficial give-and-take.

Yet it can also be more difficult, not least because SMEs have faced tough times in recent years. More competition and cost-cutting, such as not replacing staff, can lead to work intensification, job insecurity and employee stress. Smaller firms also usually have no dedicated HR expertise nor established mechanisms (including trade unions) for staff to raise their concerns. They must feel confident enough to do so personally with the company owner or manager. A problem for many SMEs is high labour turnover. One in five workers in firms with under 50 employees had been there less than six months, compared to one in 20 in larger organisations. This churn can unsettle work teams and relations with management.

Q: How are SMEs faring in terms of engagement?

A survey by Clarian HR and Massey University showed almost all managers recognise engagement as important. But when it comes to whether they believe their employees are engaged, there is a significant difference between smaller and larger organisations. For example, 90 per cent of managers in firms with under 50 employees believe most of their workers to be engaged or fully engaged. This figure falls to 76 per cent for the 50-99 group, and 61 per cent for those with between 100 and 299 employees.

However, there were no such differences from the employee sample, either concerning their own engagement or how important they think it is to their organisation. That means managers in smaller organisations probably think their employees are more engaged than they really are.

Q: How can SMEs improve employee engagement?

As in all organisations, a key factor is management capability. This is because engagement is a product not just of personal traits but of context - how employees view the organisation, their working conditions and the quality of leadership. In their comments, employees said they want to be treated fairly and as adults, with their views listened to and taken into account. They also emphasised the need to manage performance in a clear and consistent way. Perhaps even more fundamental is the need to inject more fun into work.

Managers of SMEs are well placed to deliver effective communication and a positive team culture because they are usually working alongside their employees - but this proximity means that much depends on the personality and preferences of individual owners.

Jim Arrowsmith is a professor of human resource management at Massey University.