The Background

A recent report by SFEDI and Newcastle University Business School (NUBS) highlights that whilst there is a clear case that graduates make a positive contribution to SMEs, there are a number of barriers to recruitment of graduates within SMEs.

Using evidence from Gilleard and Reichwald (2008) the report highlights that graduates can increase the intellectual capacity of the workforce, fill skills gaps, provide fresh and innovative perspectives, and contribute technical expertise and knowledge. There is also agreement that graduate recruitment to SMEs has the potential to increase management and leadership capability and enhance growth in the SME sector.

Despite this, available data highlights that graduates are under‐represented in SMEs. A recurring theme is that the majority of SMEs do not see graduates as ‘a natural source of recruitment’. The report states that this is seen to stem from a number of a factors including:

• A tendency for SMEs to undervalue the potential contribution of graduates to the business
• Cost of recruitment and associated salaries for graduates
• The perceived appropriateness of the skills possessed by graduates including limited work/practical experience
• The perceived level of supervision that graduates would require.

These perceptions seem to differ between sectors and nature of business activity and research suggests that where graduates are recruited to SMEs this often occurs in an incidental way and/or through informal networks and recruitment methods which itself can lead to the under‐utilisation of a graduate's skills.

In addition, there's the attitudes and perceptions from the graduates themselves. The report highlighted that they often have preconceived ideas around levels of pay, career progression and working conditions, despite evidence to suggest that the potential benefits of working in SMEs actually exceed graduates’ expectations, particularly with regards to levels of autonomy, flexibility and input into the business.

With relatively large numbers of vacancies and skills gaps within SMEs it is argued that these could be addressed by greater numbers of graduates working in SMEs, and as evidence shows, both have a great deal to gain.

So what's stopping SMEs and Graduates connecting? The report suggests that there seems to be three main constraints:

• Information failures - Graduates not being aware of the opportunities of working for a small business and SMEs not being aware of the benefits that recruiting a graduate could bring.
• SME capacity constraints - Owner manager often do not have the resources to recruit graduates through the traditional graduate recruitment routes and then support their induction into the business.
• Structural problems - linking large numbers of diverse SMEs with large numbers of dispersed Graduates.

The IOEE Summer Survey Results

In last month's survey, SMEs and Graduates: Bridging the Gap, we asked you what you felt were the main issues and what you thought could help to bring graduates and SMEs together. These are the results.

80% of respondents ran or worked in an SME, and 20% worked in a business support role. Amongst all of the respondents 90% of people felt that graduate's salary expectations hindered SMEs from recruiting graduates, followed by half of respondents feeling that their perceptions of 'work readiness' had an impact on their willingness to recruit graduates. Only around 20% of individuals felt that 'being able to relate the value of a graduate to the bottom line', 'recruitment issues' and 'an SME working environment' were issues that impacted their likelihood to recruit a graduate.

This reinforces one of the key findings of the report that it was perceptions on both sides that was having the largest impact in bridging the gap between SMEs and graduates.

When we asked how we could get more SMEs recruiting graduates, respondents pointed strongly to two main areas: More opportunities for students to work in SMEs before graduating and Universities working more closely with SMEs. Around half of these also thought that events and resources to support recruitment would also be useful.

We asked what one thing SMEs could do to prepare graduates for working in SMEs? Ideas focused primarily on providing more work experience and internship opportunities for students whilst at University and SMEs visiting and talking in Universities. One respondent also suggested supporting the people management skills of owner managers to encourage a positive recruitment and management experience for graduates and other employees.  This is an important element of the issue around capacity constraints in SMEs identified in the report.

Finally we asked what one thing graduates could do to prepare themselves for work in an SME. The results had two main themes, the first was around 'trying it out', i.e. gaining work experience and working in more than one SMEs to gain different experiences too. The second theme was around managing expectations, in terms of salary and career progression. A couple of people also mentioned the quality of CVs, covering letters and follow up.

We'd like to thank everyone again for contributing to the survey. The findings support some key themes around SME and graduate perceptions and how these can be addressed. Again and again the themes lead to improving communications between SMEs and graduates, providing opportunities to connect, and enabling graduates to understand more about the contribution they could make to the future success of an SME.

If you would like to find out more about SFEDI's work in this area and potential projects to respond to these issues please email Leigh Sear at SFEDI Solutions.