Felicity Hawksley, journalist

The past few years have seen large companies commit to spending millions on diversity and inclusion (D&I) as social issues come into the corporate space. But what of SMEs? As the engine of the global economy, representing around 90% of businesses and 50% of employment – and even more informally – how they respond to these issues is surely even more important.

In fact, while the business case for equality and diversity is well articulated for large companies, the same is not true for SMEs. According to a report commissioned by the European Commission (EC), while a large majority of SMEs acknowledge the business benefits and relevance of diversity, only a minority actually adopt formal HR strategies to address the issues.


The kind of diversity championed by listed public and large private companies is not relevant for the vast majority of SMEs

First, the data

To develop a D&I framework, a business first needs to know the state of affairs under its own roof. In the UK, the Greater London Authority (GLA) has issued guidance for SMEs that suggests they start by asking for diversity data from employees, but advises caution in how to approach this.

Where a company has not asked for workforce diversity data before, it makes sense to first float the idea with employees to see which approaches might be welcome – and which might not. Very small companies should be clear that they cannot promise anonymity, and should appoint, perhaps pay, and certainly train a D&I officer who has named senior staff support.

The GLA says that there are plenty of free resources for companies to use to determine things like sample size, and that other SME contacts are a valuable resource for advice. Making the D&I policy employee-led will, says the GLA, ‘give the organisation permission and ability to go further’.

Too small?

There are good reasons for this failure. The characteristics of smaller companies make taking account of D&I a challenge.

For a start, SMEs are overwhelmingly local and operate regionally, with few engaging in crossborder trade. Most employ fewer than 10 people (often family members only), making them too small to incorporate a range of individuals with diverse backgrounds.

The upshot is that the kind of diversity championed by listed public and large private companies, which centres on the management of already diverse workforces, is not relevant for the vast majority of SMEs.

Look beyond recruitment

In its survey of 1,200 SMEs across 27 European countries, the EC report found that a number of practical obstacles stand in the way of SMEs developing formal D&I approaches. Among the most frequently reported are low levels of staff time, few financial resources, economic insecurity and the absence of a formal HR management process.

So how should SMEs approach the issue? The answer is by applying a D&I lens to other areas of the business such as customers, products and market development.

The key, according to the European Institute for Managing Diversity, is to ensure that policies respond to local concerns at a local level. Where a company is unable to recruit diversely for ‘acceptable’ reasons – such as being a family business, or requiring physical labour unsuitable for, say, the less able-bodied – there is an alternative avenue to support D&I: by ensuring diversity in customer focus, marketing, products and services.

For example, respect, empathy and concern for the customer perspective can be made priority skills for customer service staff. Products and services can be tested thoroughly on a diverse range of people. And the marketing effort can be set up to achieve inclusivity and avoid stereotypes, superficiality, tone deafness and cultural insensitivity.

Tackle what you can control

The experience of Jordeson Timber, an importer and distributor based in York in the UK, illustrates some of the obstacles.

‘Diversity is important to us, and of real benefit,' says finance director Ben Scarborough. 'But we have around 20 employees, so it’s clearly not possible for us to represent every aspect of diversity in our workforce.’

'However, we employ a good proportion of women and we check to see whether we have a gender pay gap – something that isn't actually required of SMEs of our size.’

Diversity dos and don’ts

  • Don’t make diversity feel like a cost – identify how it leads to business benefits
  • Do offer work-life programmes – these can encourage mothers or people with disabilities who can only work part time to join the company
  • Don’t discard cultural differences – a good understanding between employees will help to develop and maintain mutual respect
  • Do set behaviour standards by using role models – exemplary behaviour from managers and older employees will be adopted by others
  • Don’t recruit someone just because they have a different background
  • Do always employ someone because they are the most qualified person for the job

Source: Diversity for Talent and Competitiveness: The SME Business Case for Diversity report

Jordeson also employs non-graduates and is age-diverse, Scarborough adds. ‘Ultimately, we are most concerned with finding competent people, regardless of background, but we do have a diversity policy related to recruitment, of which our interviewing managers are aware.’

He adds that seeking to show D&I through the company’s customer base is also tricky, given the overwhelmingly male nature of the UK construction industry. ‘It's neither appropriate nor realistic for us to try and change that,’ he says. ‘But we can control some diversity issues on our own patch.'

Scarborough reports that this year the business drew up maternity policies for the first time since a management buyout in 2012. ‘That was a no-brainer for us, and we have been able to offer benefits additional to the statutory minimum,' he says.

'We spend time training our staff and we want to retain them. We want parents and parents-to-be to know that we are a supportive employer.’

Put it in writing

For most SMEs, the starting point for D&I is a written and publicly available policy covering relevant legislation, expected behaviour, employee integration and dispute processes. It is important that companies keep revisiting the policy to check that it is not only up to date legally but also moves with the times.

For example, in the context of recruitment, the European Institute for Managing Diversity’s survey reveals that over 60% of SMEs believe that ‘good mental health’ is ‘very important’. But how many companies have policies on what ‘good mental health’ in their staff looks like? And would their policy be legal and inclusive? Moreover, have those with recruitment responsibilities been trained not to discriminate on an issue where views and understanding have evolved greatly even over the past five years? It seems unlikely.

Ultimately, to be successful, says the institute, diversity ‘needs to be linked to SME business operations and contexts’. This should be their north star in developing policy. ‘Don’t have a closed mind,’ the institute’s report advises, ‘and be prepared for surprises!’

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