Here's what SMEs need to know to compete more effectively

Small- and medium-sized enterprises (SMEs) contribute more than half of Singapore’s economic output and employ about 70% of the country's workforce. With the age-old saying that companies that win the war for talent win the war, it is important that SMEs work towards building a quality workforce, one that is comparable to their MNC counterpart.

We recognise the challenge, as the brightest are often attracted to brand-name MNCs. When I ask my students at the Singapore Management University (SMU) where they would like to work after graduation, few will name SMEs as their preferred choice.

The disparity in workforce quality between the two groups of companies translates eventually into marketplace outcome differences.

Raising productivity for SMEs
Government bodies have long stressed the need for companies to increase their productivity. This was reiterated by Manpower Minister Lim Swee Say in his May Day message this year when he said, "Manpower could become a bottleneck of our future growth unless we speed up efforts to become a more manpower-lean economy and a more productive workforce."

Workforce productivity refers to the efficiency of workers in an organisation. The government had taken huge steps to spearhead productivity growth in Singapore.

SPRING Singapore was set up for this purpose. It was formerly known as the Productivity and Standards Board (PSB) and was formed through a merger of the National Productivity Board (NPB) and the Singapore Institute of Standards and Industrial Research (SISIR). Its initiatives appear to bear fruit, with many companies today placing more emphasis on training, innovation, and other HR initiatives to fuel their productivity growth.

The quest for productivity improvement has led some experts to suggest the use of HR analytics to better manage their workforce. They point to the weakness of the age-old practice of using gut-feel approaches for workforce management and provide support for the more objective HR analytics approach in HR management. HR analytics optimises human capital use in the company, leading to better business outcomes.

Today, HR analytics is regarded as the next big thing in workforce management. Companies use it for recruiting, retaining, and motivating employees. However, the degree of enthusiasm in its adoption among SMEs seems muted.

If SMEs do not match their MNC counterparts in enhancing the value of their workforce, they risk lagging further in their competitiveness. SMEs should be more open to such transformative HR practices.

The use of Human Resources analytics
The Society of Human Resources Management (SHRM) defines HR analytics as the process by which the value of an organisation's people is measured and improved for the purpose of enhancing organisational performance. Companies have employed its use in myriad ways.

JetBlue compares employee engagement at various branches and intervenes in those that are underperforming.

Harrah's identifies the characteristics of high performers in various job functions and subsequently matches 'right' employees to 'right' jobs to improve performance outcomes. Additionally, it also evaluates the effects of its health and wellness programmes on employee engagement and bottom line.

Starbucks examines the impact of HR initiatives on other business outcomes that include the value of its customers. The company then predicts the returns from these initiatives and implements those with the greatest impact.

AT&T employs HR analytics extensively in recruitment and finds that the ability of staff to take initiative is more important to business outcomes than academic achievements.

In Singapore, Nation Employment adopts HR analytics as part of its growth strategy. The SME is a leading foreign domestic worker employment agency offering placement services for workers.

In its quest to enhance its human capital, it identified organisational factors that have significant effects on staff performance and, subsequently, focused on those whose effects are the greatest. It also identified factors that were important to prospective employees.

The real issue
As academics, consultants, and seminar speakers, we interact often with senior level management staff of various SMEs. We find a key reason for the slow adoption of HR analytics among this group lies in not knowing how they can leverage on this approach.

Materials on HR analytics applications are widely available. There is also no shortage of HR analytics programmes today. Singapore Management University offers a human capital analytics module through its structured human capital master programme for those interested in a more formal route and a two-day HR analytics workshop through its continuing professional education arm.

Expertise for analytics
Some companies perceive HR analytics to be an expensive undertaking, pointing to the need for a highly specialised HR analytics group to be assembled. However, there are better value options available to companies. They can work with external specialised HR analytics firms.

The complexities of analytical methods vary depending on the desired insights to be obtained. Specialised HR analytics firms are usually staffed with sophisticated analytical professionals who have deep knowledge of the various analytical methods and can also offer useful recommendations to their clients. The availability of analytical expertise in these partner firms removes analytical constraints and, hence, allow for more useful insights to be obtained.

Another benefit of this approach is the opportunity to learn more about the applications of HR analytics from these partners and, over time, extend its use in the organisation. This approach was taken by the SME, Nation Employment, in its foray into HR analytics.

Take the first step
SMEs need to become more competitive. As a first step towards this end, they need to attract good workers and maximise the value of their human capital. HR analytics offers them this opportunity. They can begin with smaller HR analytics projects and then move on to bigger ones as they gain more confidence over time. But they must take the first step soon!