Latin American SMEs need to put people first

Latin America is increasingly integrated into the global economy, but the region’s small and medium-sized enterprises (SMEs) face major challenges stemming from the competitive pressures globalisation brings, alongside difficulties recruiting the skilled workers they need. These are the key findings from two Economist Intelligence Unit reports: Latin America’s Small and Medium-sized Enterprises: The Human Capital Challenge; and Latin America’s Small and Medium-sized Enterprises: The Organisational Challenge.

The reports were based on a survey of 175 respondents in firms based in Latin America. In order to compete, Latin American SMEs need to become involved with supplier development programmes of large multinational firms or engage in innovative training programmes in partnership with the public sector. They also need to reorganise themselves from a hierarchy centred on the owner-president to a new structure which includes a clear separation of senior managerial roles. Firms that are locally owned, privately held and often family-run must develop modern, nimble and transparent management and business structures. When asked to characterise the market for qualified, high-potential employees, 63 per cent of executives complained of either an extreme shortage (10 per cent) or a limited supply (53 per cent) of talented workers. When asked to identify the three largest workforce-related challenges facing their organisations, the biggest single response (30 per cent) was the inability to attract qualified candidates.

Some promising responses to these challenges are beginning to emerge, although much more is needed.

“Latin American SMEs are trying to catch up with their competitors,” says Kim Andreasson, senior editor, Industry & Management Research at the Economist Intelligence Unit and editor of the papers. “But the good news is change is on the horizon.”