Stability in SMEs: Why is cultural change key to bridging leader-worker gaps?

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With the news that FTSE bosses received an average 16 per cent pay rise last year, relations between senior leaders and employees in the corporate world are becoming increasingly strained.

Whilst this widening pay gap is not currently reflected among SMEs, the need for smaller businesses to monitor and nurture internal relationships is equally necessary in the face of continued economic challenges such as the cost-of-living crisis.

Eman Al-Hillawi, CEO of business change consultancy, Entec Si, explains that unlike big corporates, SMEs are particularly susceptible to the smallest of business changes, such as the introduction of a new digital tool, which can have a detrimental impact on the workforce and the personal relationships employees have with their senior leaders. Continually evolving the workplace culture is one vital solution to ensure that everyone remains on the same page. In adopting a back-to-basics approach through collaboration, listening exercises and sharing a deeper understanding of the workforce, SMEs can help to strengthen internal bonds throughout the most complex of change journeys.

Leveraging transparency

The years that followed the pandemic have proven challenging for many SMEs. Last year, over two thirds of SMEs were reportedly fighting for survival worldwide and thinktank data has estimated that by 2024, debts accrued during the COVID-19 crisis, high borrowing costs and the squeeze of the cost-of-living crisis could spell the demise of 7,000 businesses per quarter in Britain. These pressures have caused cost cuts and redundancies and gradually magnified workplace tensions.

Amid such disruption, it is crucial for SME leaders to address employee pain points as part of a wider effort to stimulate continuous cultural change and maintain healthy professional relationships. Transparency is fundamental in this regard, allowing problem areas to be discussed and solutions to be established. Instead of prescribing a set agenda of activities to draw out workforce hang ups, it can be more effective for senior leaders to encourage openness in a simple discussion.

Aligning with the back-to-basics approach, this could include setting aside time for the entire business to divulge concerns in one place. In contrast to the surveys that are often distributed in corporates to capture this feedback, such meetings often prompt honesty more effectively, removing anonymity and enabling individuals to provide context to the issues raised. This transparency goes both ways too, as senior leaders can use this opportunity to outline business objectives, articulate the implications of long-term strategic changes and collaborate with workers to mitigate problems that could arise from such transformations.

Addressing negative dynamics

When endeavouring to sustain working relationships throughout a business change, it is equally important that unhealthy dynamics are addressed. For SMEs, where senior leaders often make personal sacrifices and are generally closer to the workforce than their big corporate counterparts, emotional attachments and parent-child relationships between leaders and workers are common. As a result, these family-like dynamics can inherently give rise to disputes and negative feelings toward leaders and create widespread unhappiness throughout the business.

It follows that such relationships must be balanced with the empowerment of workers to actively take part in decision-making and adopt greater autonomy overall. This can be achieved by increasing the responsibilities of workers in their strength areas and having a shared knowledge of the unique characteristics and working styles of each individual. Conducting personality tests is an easy and proactive measure to take; and will provide individuals with a greater awareness of their working styles and subsequently prevent interactions which could pre-empt conflict. Identifying the unique traits of workers will also help to ensure strategic changes, such as the recruitment of new employees, cause minimal disruption to business outcomes in future.

Managing intergenerational conflict

Another source of disturbance to relationships between senior leaders and workers are generational nuances. The coexistence of up to five generations in the workplace, each of which possesses different values, perspectives and experiences, can inevitably lead to potential conflicts. This can be particularly difficult to navigate when generational rifts occur between senior leaders and workers, which can aggravate existing pain points. Such is the impact of generational conflict that research has even shown that failure to acknowledge generational differences can bring about breakdowns in communication, reduced productivity and poor employee wellbeing.

To overcome these obstacles, it is necessary to identify the real cause of tensions rather than focusing on stereotypes. Establishing clear lines of communication and avoiding templated solutions will support this by allowing individuals to openly work through difficulties. Creating intergenerational harmony stems from managing expectations of how people work and promoting honesty to dispel preconceived ideas or biases.

Encouraging self-governance

When it comes to bridging the gaps between leaders and workers in the SME world, redundancies and dismissals require particular sensitivity. Unlike large corporates, SMEs often do not have the luxury of moving employees into a different role when their current position is no longer suitable, meaning senior leaders are faced with the difficult decision of laying off staff when needed. Due to the close-knit environment of SMEs, this can have wider ramifications for the business including worker disengagement and feelings of being undervalued.

Whilst senior leaders have a duty of care to carry out the necessary legal procedures and prioritise honesty when dismissing employees, there is a degree of responsibility that lies with workers to understand if their current occupation aligns with their own aspirations. Often, senior leaders in SMEs are under pressure to develop the careers of their employees due to the parental role they occupy and whilst this is not misplaced, it is important that workers feel equally empowered to drive their own change journeys.

Collaboration and clarity are therefore essential. Workers should reflect on the challenges they experience in their role and communicate these honestly with leaders to determine if such barriers can be overcome or are an indication to move on. Equally, leaders should aim to facilitate transparency and ensure that workers are able to explore their opinions in a safe space.

Given that SMEs represent 90 per cent of businesses worldwide and contribute to more than half of the GDP in Organisation for Economic Co-operation and Development (OECD) countries, reinforcing the working relationships between senior leaders and workers is critical. Driving an ongoing evolution of cultural transformation is a must and will ensure that SMEs can weather strategic business changes in the long term.