Cashflow still the biggest risk to business but concerns around profitability continue to rise.
Insight
Staffing is the biggest pressure point for small businesses today, according to a new NAB report. Executive of Business Direct and Small Business Krissie Jones shares her thoughts on tackling the labour difficulties holding back our small businesses.
Whether it’s home builders or honey makers, IT firms or local solicitors, over the past few months we’ve sat down with small business customers around Australia to better understand how they’re travelling.
One issue that stands out is the ongoing challenge of hiring and retaining staff. Even though it’s being felt in different ways in different places, the problem is a persistent one that’s affecting a wide range of industries.
The size of the challenge is supported by the data: the vacancy fill rate for small businesses was just 52 per cent last financial year, according to NAB’s new SME Insights report, Backing our businesses: Unlocking growth for small and medium enterprises, well below the 65 per cent fill rate for large businesses.
Despite this, speaking to NAB customers also gave us good cause for hope. Most small businesses are doing everything they can to solve the problem – and often with considerable success.
Sometimes the answer can be relatively simple. For instance, the right wording of an ad – flipping the benefits to be upfront rather than the role description – has been a game-changer for some customers.
Then there are more novel approaches. Take one of our customers in Tasmania – a berry farm. Determined to find more workers after being unsuccessful locally, the owners set up an adjacent recruitment business. Now their job agency is successfully sourcing overseas workers for their own and many other farms that have a need as well.
Another customer in Queensland – an IT retailer – has also taken an innovative approach. Struggling to source staff with a good mix of technical and communication skills for its online support function, the business has turned to AI technology to help with the phrasing of customer service chats, successfully bridging the communication gap.
It’s not simply a matter of attracting staff; retaining them is also highly challenging.
For instance, one of our customers in NSW, a pool and spa supply store, has lost valuable employees not just to other pool businesses, but to entirely different industries such as law firms and mining companies.
With the expansion of their store from 350 to 1,000 square meters a couple of years ago, the issue of staff retention has become particularly acute – today, they’re still searching for much-needed staff, including a store manager. This has left the owners no option but to take the role on themselves, leaving little time to further expand their business.
Such examples show why it’s more important than ever to encourage staff loyalty.
Staff wellbeing is key here. One business we spoke to is focused on making sure their people feel connected to their workplace – that they’ve built friendships and are doing activities outside the workplace to create that connection and culture. The response has been highly positive, according to our customer.
Then there’s the gym owner who, rather than carrying out all the business development himself, has incentivised his team to find and sign up new clients. On top of making a material difference to the business’s performance, it’s also improved the type of people he’s hiring and their ongoing commitment.
Yet for all these success stories, it’s important to remember that small businesses can’t do this on their own – and they shouldn’t have to. We all have a big role to play in finding solutions, including banks, governments and industry groups. After all, SMEs make up more than 99 per cent of Australian businesses and employ two-thirds of the country’s workforce. Without them our entire economy is impacted.
Policies that could help include allowing the Fair Work Commission more flexibility around modern awards, potentially providing small businesses with greater access to skilled workers.
More assistance hiring their first worker would also alleviate some of the financial burden small businesses face. One recommendation is for the Federal Government to continue its development of targeted guidance for small and medium businesses and to invest in ‘regtech’ tools and platforms, such as the Hiring Employees Checklist and the Employment Contract Tool, to help simplify recruitment.
In addition, more could be done to increase the transparency and accessibility of Australia’s skilled migration program for small businesses.
As a large institution, NAB can also be part of the solution by making it much simpler and faster for small businesses to deal with us – to reduce the complexity of processes wherever possible and move with greater speed on decision making. We know that labour shortages take precious hours away from small businesses; if we can give these customers even a little bit of that time back, it will put them in a better position to meet the other challenges they face.
Ultimately, we need to listen more and respond better – to provide new thinking to old problems and do all in our power to be part of the solution. That way, we can help Australia’s small businesses thrive and, ultimately, unlock greater growth.
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