By Mark Lomas, Diversity Consultant, Glen Addis, Director at East London Business Place (ELBP), Naheed Afzal, Co-Founder of Contracts IT Recruitment Consulting
Did you know that in the UK, over 99% of businesses are small and medium sized enterprises (SMEs)? More encouragingly, 20% of these SMEs are female led. Moreover in October 2015, it was announced that 26% of FTSE100 board members were female. While it’s great to see SMEs taking over the UK’s economy and women making big strides on executive boards, there is still work to be done.
Mark Lomas, Diversity Consultant, previously at BBC, added that, “Engaging with SME suppliers offers a range of opportunities for corporate organisations. The agility offered by SME suppliers and the increased focus on customer satisfaction make SME suppliers a good option for organisations. The benefits are wide ranging. Increased agility and flexibility , brand enhancement due to working with organisations embedded in the fabric of local communities and importantly, given the popularity of self-employment amongst BAME groups and women, engaging with SME suppliers can provide real benefits in relation to diversity & inclusion.” Described as employing up to 249 people, SMEs are referred to as the “backbone” of the UK economy; they employ 15.2 million people and have a combined turnover of £1.6 trillion. According to Minority Supplier Diversity United Kingdom (MSDUK), there are over 300,000 ethnic minority owned businesses in the UK representing over 7% of the total SMEs in the UK. These are great statistics for small organisations and ethnic minority owned businesses but there’s more; in general, they can be shown to have advantages over larger businesses, adding tremendous value to corporate and private sector supply chains. Here’s why:
Customer – Centric
SME’s tend to be directly involved when it comes to their customers, clients or candidates, fostering better communication and relationships between them. This direct involvement tends to happen frequently, demonstrating a commitment, trust and loyalty to those customers and candidates whilst also improving relations with business partners. SMEs can adapt and tailor their solutions very quickly around a client. Tangible benefits also derive when sustaining good customer and client relationships, as they can lead to referrals and new business outcomes.
With many transformations taking place in the markets and new opportunities on the horizon, SMEs have the ability to adapt to these fast changing environments and seize new opportunities, allowing them to stay ahead of the curve and be the “early adopters”. With larger corporate’s it is more of a challenge because it always takes longer to get the permissions and approvals from the seniors to move forward i.e. there are usually lots of layers of bureaucracy before a decision can be made. The agility of a business comes from the speed and stability of a business, this has a direct impact on the organisational health of a company. McKinsey & Co, a management consultancy, highlighted in their December 2015 article ‘Why agility pays’ that the trick for companies is to combine speed with stability- the use of SME’s have a direct impact on this. Aspiring local companies are resourceful when it comes to hiring and retaining local talent as larger companies can be less proactive because there may be internal boundaries. It can be said that SMEs are good at being flexible in the working environment, that they are consistent at delivering good and high quality services and that they are passionate about retaining their clients. Mark Lomas says “SMEs bring agility, flexibility, diversity and they have a real focus and care on great customer service”.
Better employee engagement
In a smaller business environment, you develop positive team relationships which has been proved to increase employee engagement, forming an inclusive and supportive environment to work in. McKinsey & Co (2015) found that diversity also increases employee satisfaction and fosters positive attitudes and behaviours in the workplace. According to them, “a supportive culture among colleagues and supervisors is more important than the presence of a non-discrimination policy, necessary though such a foundations is”.
Creativity, new ideas and innovation is what makes SMEs different. Quoting MSDUK, “they not only bring their unique entrepreneurial spirit to the business, they bring to the front their proven track record of innovation, hard work and flexibility that can add huge bottom line benefit to an organisation”.
The value of SMEs and diversity in supply chains Glen Addis, Director at East London Business Place (ELBP) who is running the “Ready to Supply the City Programme” discussed the value SMEs bring to larger organisations. “For supply-chain service providers (especially those who are monopoly and multi-disciplinary suppliers), SMEs can often provide a more diverse range of services which are both local and can more rapidly meet the demands of the supply-chain’s main client. Additionally, SMEs are becoming increasingly more useful in helping supply-chains refresh and market-test their own preferred supplier-lists, especially in today’s stringent procurement climate where larger buying organisations are insisting on percentages of workforce and sub-contractors to be based within close proximity of the client who requires the services or goods”.
Mark Lomas also provided a great example of how SMEs and diversity add value to a supply chain “Once a social enterprise needed to cut costs and boost their local profile. To achieve this they reviewed their supply base and found that one major supplier was responsible for a large proportion of their costs. They re-tendered for a new supply contract, targeting SME suppliers in the process. The successful supplier was a disabled led SME organisation that delivered better quality at a much more competitive rate than the previous supplier.”
Supplementing this example Glen Addis, ELBP, says “in addition to bringing a lot of flexibility, innovation and diverse offerings to larger organisations, there are also distinct benefits to using local SMEs. Local SMEs are very accessible to come in and discuss solutions to challenges and opportunities face-to-face with a larger buyer (who often has to deal with Tier 1 and ‘historical’ suppliers who may be miles away) – this is a distinct benefit which also facilitates faster-to-market solutions and more real-time negotiation on price, quality and service standards.”
The role of diversity and inclusion
It is fair to say that SMEs are playing a vital role in development and growth of the UK economy as they are generating local employment, bringing out creativity and thriving off innovation but how does diversity and inclusion fit within SMEs and the supply chains of corporates. Diversity and inclusion is a major talking point at the moment as and it will only get bigger and better in 2016 as large corporates recognise the tangible benefits they bring to their organisations. It is a business imperative which should be embedded in all organisations setting the tone at the top and downwards.
Naheed Afzal, Co-Founder of Contracts IT Recruitment Consulting believes “different perspectives, backgrounds, religions and cultures and generally different ways of doing things provide a rich mix which disrupt, invigorate and bring about greater yields. These in turn translate into better commercial outcomes for their organisations” SMEs help contribute to the diversity and the vigour of corporate supply chains, making them more successful, innovative and competitive. In addition, diversity enables companies to react more effectively to market shifts and to new customer needs. There are of course many benefits to larger organisations which can outweigh the benefits of an SME and perhaps the way to best manage this to ensure that an organisation has a diverse and representative made up of the BIG and the SMALL.