April 2020
SME’s and Mid-Caps: The Backbone of the EU Economy facing many challenges!

SMEs (0 to 250 employees), Mid-Caps (250 to 3000 employees), including family companies, are the major part of the European economy and important drivers of growth, innovation and employment. They represent 99% of businesses in the EU, employ two thirds of the active working population and represent over 85 % of job creations.

Although they are leveraging on innovation and economic performance, they are very often facing the same challenge and issues.

Difficult and slow-paced international development

Indeed, their size is often critical, and they have many projects in their domestic markets, but they have a hard time grasping international markets and their specificities. They have an opportunistic international vision that unfortunately lacks long-term structure with synergies and rich cultural mix within their teams.

More and more aware of this challenge, European Union has launched several programs (f.i. COSME) with more focus to support international development and access to markets for SME’s and Mid-Caps, but also to facilitate access to financing at all stage of their international development (f.i. specific active support of the European Investment Bank).

Managerial renewal difficulties

Mostly facing reverse pyramid of age effect in the management and executive level (with a majority of the population in the range of the 60 years), the problem of executive succession planning arises regularly.

To preserve the long-term DNA of the company and to support future expansion, these companies need to anticipate the succession planning by establishing appropriate related governance.

Supervisory Boards should, for instance, be more open to external independent advisors, to anticipate and secure successions, but also to makes some sensitive decisions easier. With specific understanding and experience with these SME, Mid-Caps and Family companies, these advisors should demonstrate specific leadership and listening skills, empathy and ability to understand the most complex and emotional dimensions of these companies.

Some Corporate functions still lacking empowerment and impact

Corporate functions (HR, Finance, Purchasing, IT,…) are still too often neglected and considered as “secondary” asset. Although, these functions play a key role in structuring and supporting the development of the company.
General Management should rely more on some Corporate functions to support their international expansion and growth.

  • CFO’s playing key role for managing the company, evaluate flexibility, securing growth of the business (financing, cash management,…) or evaluate external growth opportunities.
  • Human Resources Directors playing crucial and leading role in the social transformation of the company (transmission, cultural renewal, skills development, anticipating social conflicts,…).
  • IT Directors perceiving the digital transformation opportunities on the market, but lacking benchmarks and information in order to progress on these topics and make the right choices.

Very often SME’s, Mid-Caps are hesitant to recruit sufficiently high profiles to face these challenges, fearing the cultural difference. However, by recruiting profiles that do not have the level to tackle the strategic challenges, they take the risk of being unable to achieve a successful transformation and as such losing major growth opportunities.

Increasing attractiveness to recruit experienced executives from large groups

Stability, long term vision, freedom and agility on investment strategy, quicker decision process, are strong arguments SME’s, Mid-Caps and family companies can oppose to large international groups completely depending on stock exchange evolution and facing recurrent restructuration and rationalization programs.

The opportunities they can offer to the candidates are becoming more and more attractive to experienced executives working in large international corporation and willing to have more impact and front-end responsibilities in their next career step.
However, selection and integration process of candidates coming from large groups should be approached with maximum care as the professional context, organization and expectations are very different. Candidate should be much more polyvalent and hands-on as there is no large corporate structure to rely on; they should be self-motivated, entrepreneurial and much more evolutive in their approach. Strong adaptative skills are definitely key in this context.

In order to face all these challenges, recruitment of management and executive level has become a major challenge for SME’s, Mid-Caps and Family Companies. But as the financial impact of an error is far from being negligible, partnering with recognized international executive search network with strong references in this niche is essential.

Jean-François Mahieu – INAC Belgium

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