Adapting to the Talent Shortage: How Small Companies Can Compete

Avomind
Jun 25
5 min read

In today's competitive labor market, small and medium-sized enterprises (SMEs) are increasingly feeling the pinch of a growing talent shortage. While this challenge spans industries and geographies, it can be particularly acute for smaller organizations that often lack the resources, brand recognition, or recruitment infrastructure of larger firms. However, with the right strategies, SMEs can not only adapt to talent scarcity—they can thrive through it.

The Unique Challenges Small Companies Face

SMEs, despite their agility and close-knit teams, often find themselves at a disadvantage in the talent war. Studies of Australian SMEs during periods of economic growth and low unemployment revealed persistent skill shortages among firms with 5–199 employees. Notably, these shortages were frequently “complex,” involving multiple causes—such as increased production needs, high turnover, or an inability to offer competitive wages.

Another barrier for SMEs is the difficulty in distinguishing between a true skill shortage and a skill gap. Many employers misidentify internal training deficiencies as broader market shortages, while others fail to attract candidates simply because their compensation doesn’t meet market expectations. Furthermore, a lack of comprehensive data—on hard-to-fill roles, skills in demand, or industry benchmarks—leaves many small business owners navigating recruitment blind.

Market dynamics compound the issue. Companies in highly competitive sectors experience more intense skill shortages, often due to wage pressures or fear of investing in employee development only to see talent poached by larger firms. Centralized decision-making and the reluctance to use external training services further limit an SME's ability to respond proactively to these issues.

Proactive Talent Management: The Underrated Advantage

One major opportunity for SMEs lies in embracing proactive talent management. In many markets, few companies—regardless of size—have comprehensive strategies for acquiring, developing, and retaining talent. For SMEs, developing even a simple framework can provide a competitive edge.

First, maximizing the output of current employees—though not a long-term solution—can provide short-term relief. This often goes hand in hand with increasing wages and improving working conditions, a proven tactic to transition from simple to complex shortages. Internal training becomes essential here; larger SMEs with more structured processes are often better equipped to build workforce capabilities from within.

Subcontracting, outsourcing, or employing short-term contracts also provide flexibility, particularly when navigating highly specialized or temporary gaps. At the same time, businesses must be cautious about over-relying on these solutions, as they may affect team cohesion or institutional knowledge.

Perhaps most importantly, reputation matters. SMEs that invest in employee development, foster positive labor relations, and offer a compelling workplace culture signal their value to potential hires. In tight markets, employer brand can be a differentiator.

Skills-First Strategies: Leveling the Hiring Field

A “skills-first” approach emphasizes what a person can do, not just what they've done or where they've studied. For SMEs, this can unlock significant hiring potential without the need to compete head-to-head with enterprise firms on salary alone.

Here’s how SMEs can implement this shift:

Broaden the Talent Pool: Remove unnecessary degree requirements from job listings. This opens access to underrepresented groups, career changers, and international talent.
Audit Roles for Flexibility: Identify roles where formal qualifications can be replaced with demonstrated capabilities. Use frameworks like ESCO or O*NET to avoid starting from scratch.
Reframe Hiring Practices: Use skills-based interviews, hands-on assignments, or project portfolios to evaluate candidates more effectively than with traditional resumes.
Invest in Internal Development: Provide continuous learning opportunities and allow employees to shift across roles to grow organically within the organization.
Tap Into Skills-Based Job Platforms: Leverage tools like Workday Skills Cloud or public platforms in France, Belgium, and Denmark that match candidates based on verified skills, not just past job titles.
Promote Skills-Linked Career Paths: Reward performance and learning with clear progression opportunities—not just tenure-based promotion.

This approach not only widens access but also reduces hiring bias, increases role fit, and improves employee motivation and retention.

Micro-Credentials: A New Era in Fast Upskilling

Micro-credentials are gaining momentum as a rapid and accessible way to develop specific, in-demand skills. They are particularly attractive to SMEs seeking targeted capabilities without waiting months—or years—for degree-qualified applicants.

These digital certifications allow for:

Rapid Response: Quickly close skill gaps in emerging technologies or tools relevant to your industry.
Inclusive Access: Micro-credentials are ideal for working professionals, caregivers, or others who need flexible learning.
Partnership Leverage: Collaborate with training providers offering recognized micro-credentials aligned to real job requirements.
Internal Growth: Use micro-credentials to build structured, scalable internal development tracks without relying entirely on external hiring.
Recognition Through Standards: As more governments support micro-credentials via learning accounts or qualification frameworks, SMEs can trust in their relevance and quality.

With the right attitude and openness to alternative credentials, SMEs can transform upskilling into a key part of their hiring and retention strategy.

Fostering Inclusion to Expand Talent Access

Another way SMEs can address talent scarcity is by intentionally expanding who they consider as talent. Underrepresented groups—such as women in tech, ethnic minorities, youth, and migrants—are often overlooked despite being rich sources of skills and potential.

Practical ways to build inclusion into hiring:

Partner with organizations that support diverse jobseekers
Run micro-internship programs to provide accessible pathways into employment
Publicly promote diverse role models and stories within your company
Train hiring managers in unconscious bias and inclusive communication
Offer flexible work arrangements and support structures (e.g., childcare subsidies)
Adopt clear diversity goals and hold leadership accountable

Diverse teams don’t just solve hiring problems—they perform better, innovate faster, and are more resilient in change.

Consequences and Competitive Edge

Interestingly, research shows that not all skill shortages negatively affect business performance. In fact, companies experiencing "simple" shortages often outperform peers in terms of sales, possibly due to stronger demand or specialization.

However, when shortages become “complex”—with multiple overlapping causes—they’re more likely to disrupt operations and lead to serious consequences like output reduction. This makes strategic adaptation crucial.

By investing in internal training, diversifying hiring approaches, and embracing flexible skill development methods, SMEs can turn challenges into long-term advantages. What was once a barrier can become a catalyst for innovation, culture-building, and sustainable growth.

How Avomind Supports SMEs in Tackling Talent Shortages

At Avomind, we understand the urgency and complexity of today’s talent landscape—especially for growing businesses. Our recruitment strategies are built with SMEs in mind: agile, insight-driven, and tailored to attract top talent across commercial, strategy, and analytics roles.

Whether you're facing a short-term hiring crunch or planning long-term team expansion, Avomind provides access to a global talent pool, inclusive hiring practices, and scalable recruitment support. We help our partners not just fill roles, but build future-ready teams that thrive—even in a tight market.

Let us help you turn talent shortages into competitive advantages!