Four different employment approaches from large organizations, SMEs and family businesses

Arne Barends

Large organizations, SMEs and family businesses each face different job-related pitfalls.

Four different employment approaches from large organizations, SMEs and family businesses

World-class Workplaces put seven secrets into practice, including valuing specialists and pursuing an attractive mission. They maintain a healthy balance between social, organizational and individual interests.

This is how they energize their company, so employees can perform at their best, customers get what they needand the organization can fulfill its social role with passion. This in turn motivates employees to go the extra mile for the success of the organization.

The challenges for large organizations, family businesses and SMEs

Large organizations, family businesses and SMEs also face different pitfalls. 

First a word of warning: these differences are not always as clear as described below and there are always exceptions. But, from experience, many business owners, board members and HR managers will be familiar with the following challenges.

1. The Quality of Management

Large organizations: pay a great deal of attention to the quality of their management

Multinationals carefully monitor the quality of their management teams and won’t hesitate to dismiss and replace poorly performing managers. Budgets for management development are generous and large organizations will put a million euro on the table to get the ball rolling if cultural change is needed.

Family businesses: reward loyalty

Family businesses nurture their experienced employees. People who have been with the company for long time and do their job well are rewarded with a promotion in the long run. So, a good sales representative will become a sales manager and a competent production worker will become head of production.

It’s clear that the Peter principle of every employee rising to their level of incompetence is given free rein in family businesses. Although this is a nice thing to do, in practice it often leads to mediocre management because not everyone is a good manager.

Family businesses also have very little budget for management development and aren’t great believers in expensive, external training, preferring to learn on the job. That’s why managers of family businesses often draw on their own professional experience. If a sales manager has always achieved good results by making visits and handing out business cards, they will continue to expect this from their team, even though market practices moved on a long time ago. 

As a result, younger and more innovative employees often come up against a wall of conservatism. And even when family businesses become aware that they need to act, they often don’t know where to start. Freeing up the budget to change the company culture is beyond most family businesses.

SMEs: the character of the founder determines the quality of management

The quality of management varies greatly in SMEs and depends very much on the owner’s personality. This means that some SMEs have very good and enlightened leaders and others have autocrats. Some SMEs give their employees an incredible amount of space for their own initiatives and others have owners who are old-fashioned bosses, possibly supported by a small group of trusted people.

Because SMEs shy away from the cost of management development, in a worst case scenario, managers are free to inflict any traumas from their youth on team members. This is why some SMEs have a high turnover rate. If the labor market is tight, then this can quickly cause a huge manpower shortage.

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2. Short or Long-Term Vision

Large companies: react nervously

Short-term thinking usually prevails in large corporate organizations. One reason for this is that members of the Board of Directors are only in post for a certain term, so they want to use that time to do a good job and fulfill their mandate from shareholders through the Supervisory Board. This can lead to a great deal of nervousness. 

Anything that goes wrong causes immediate panic, followed by direct intervention. This is then followed by reorganizations, for example, which resolves some of the problems but usually causes major damage. Employees lose confidence in their managers and organization and it can take a long time for the resulting wounds to heal.

The company changes course over and over again. One moment the offering needs to be overhauled, then the focus is on cost reduction and then management wants to go all out on tapping into new customer groups. This policy of vacillating can cause a lot of unrest and seriously reduce employee commitment.

Family businesses: think at least five to ten years ahead

Once family businesses have set their course, they tend to stay on it for the next five to ten years. They don’t let themselves be distracted from their long-term vision by temporary circumstances, such as a dip in the economy.

They know that crises come and go and are confident that the company will come through. As children, managers of family businesses will have seen their fathers or grandfathers going through a difficult time and then recovering, so they have the foresight to stick to their policies.

Small and medium-sized businesses: are often on an unpredictable course

SMEs often suffer from a short attention span where everything depends on how the boss is feeling that day. What happens that afternoon may be determined by the morning newspaper that they read, the radio station that was on in the car, or the conference they attended the previous week. As a result, SMEs can sometimes react erratically to change.

3. Dealing with Poor Performance

Large companies: deal rationally with employees who are not doing their job properly

Large corporate organizations have no issue with laying off employees who no longer performing well. They understand that acting may incur costs but will ultimately be worth it. They take a rational approach, balancing what an individual will cost in the future against what they actually deliver. If the balance is negative, they intervene.

This approach does not lead to staff shortages in large companies because the organization is financially able to bear an overlap period. This allows them to hire or train a new employee well before the old one leaves. 

The public sector: tolerates mentally disengaged employees for too long

Public bodies are an exception as many are too cautious about employees who are not doing their job properly. They get to stay where they are, even though they do not add any value or are demotivated. 

Unfortunately, their negative influence does more damage than their poor performance. Bitter or mentally disengaged employees drag their heels and hold everybody up. Everyone knows that they have clocked out mentally and are just marking time until they retire, so these people also demotivate other well-intentioned employees.

Family businesses: prefer to promote under-performing employees out of the way

Family businesses are often on first-name terms with their employees, as some may even have worked for the current manager’s father or grandfather. This can make it very difficult emotionally to dismiss someone, even if that person has been contributing little or nothing for years.

Managers prefer to come up with special projects, so that the person still has some sort of responsibility rather than dismissing them, so they make them head plant waterer or car park manager. For the same pay, of course, because this rarely involves a salary reduction. This approach costs family businesses a lot of money.

SMEs: are powerless in the face of under-performing employees

SMEs often have little financial room for maneuver. They don’t have the budget to hire a new employee before the old one leaves, but they cannot afford to leave positions temporarily unoccupied either, so dismissing staff is a huge step.

Imagine you have an account manager who isn’t performing properly. If you fire them, you first have to deal with the notice period, then a time-consuming selection procedure followed by the onboarding process. So you’re looking at around six months before your customers get to see an account manager. Of course, you can leave that task to the manager or another employee, but they may not have the time and perhaps no inclination either.

This means that SMEs are often powerless in the face of under-performing employees. They simply don’t know what to do because every potential approach is totally outside their comfort zone.

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4. Personal Development for Employees

Large organizations: budget for development

Large organizations usually have a generous training and development budget. They are able to carry this in financial terms, even though not all employees undergo training every year. They often have ground rules relating to training and they understand that investing in personal development pays for itself. 

They also have no problem putting all employees through the same training process, or setting up programs to achieve cultural change, for example. 

SMEs: prefer not to budget for personal development

SMEs often have little room in the budget for personal development. If an employee earns EUR 3500 gross per month, then SMEs begrudge spending the same amount on training. This may mean that an employee receives no training for five years and certainly not in the field of personal development. 

Family businesses: often see personal development as nonsense

Family businesses often fail to see the added value of personal development but understand the benefit of functional development. This could be training on how to operate a particular machine, or an Excel course. They also believe in learning on the job. 


Both SMEs and family businesses are currently struggling to recruit new people. This is strange, because many employees have had enough of the corporate culture of large organizations, often finding them far too power-driven and mercenary.

The working population is looking for more meaning. This gives not only new and idealistic startups but also SMEs and family businesses a competitive edge in the employment market. They are often failing to exploit that opportunity.

If you want to find out how well your organization is dealing with the pitfalls described in this article,

one approach would be to schedule an hour’s meeting to look at each of the above pitfalls for 15 minutes and think about how you do things.

This may help you identify why some candidates aren’t attracted to your organization or why new employees leave soon after they join. And you’ll also get instant points of reference about what you can do to improve organizational culture and become a more attractive employer.

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