Can MBAs Revolutionize SME Sector in A ‘New Normal’?

The article was an outcome of ‘introspective conversations’ about post-MBA career possibilities with Ricardo Braz, a great friend and my esteemed colleague at The Lisbon MBA

A robust Small & Medium Enterprise (SME) sector enhances the economic prosperity of a nation. It, in many ways, weaves its socioeconomic fabric.

From creation of jobs and boosting GDP, to shaping social clusters around their periphery, SMEs are often a defining aspect of a nation’s entrepreneurial identity. Institutions such as the IMF, the World Bank and the OECD have drawn a great deal of attention on the critical importance of SMEs in economic development & better wealth distribution.

Yet, rarely do these companies/outfits enjoy the influence of large enterprises or the agility of startups.

As Covid-19 ravages the global economy, SMEs face a disproportionately high degree of brunt, owing to their higher exposure to end-consumer facing businesses such as hospitality or retail.

Uncertainty and an uneven economic recovery amplify legacy issues such as adequate access to capital, infrastructure, technology, and most importantly, highly skilled talent, for SMEs.

From the fragmented Hotels, Restaurants, Cafes (HoReCa) industry to the comparatively better structured b2b industrial ancillaries, SMEs across the gamut face unprecedented risks. Indeed, some of these headwinds are beyond their control, but then many so, well within.

However, the pandemic-induced pain offers SMEs a rare opportunity to pursue newer ways to organize, operate & leverage their influence. A good place to begin would be to seek out quality talent that can break barriers to transform their business.

One of the defining characteristics of SMEs is it’s higher, immediate focus on profits than growth at all costs. Many of these companies may not necessarily have a convincingly differentiated value proposition or, even exist in a highly commoditized product/service domain.

Institutional data and anecdotal research indicates that many SMEs are in fact, born small, operate small and unfortunately, eventually cease to exist while still in that phase. But it doesn’t need to be so.

Enter the MBA — B-school graduates are often typecast as those seeking careers or a stronger foothold in fields such as Management Consulting, Investment Banking, Finance and Marketing. Of course these are largely dominant, and justifiably so, to match their aspirations.

But where the MBA pips other postgraduate degree courses is its focus on equipping candidates with a secularly functional toolbox, that could be used across varying industries and functions, of course, with certain customizations.

These include augmenting existing transferable critical-thinking, creative problem-solving and interpersonal skills, as well as core business functional skills across Finance, Marketing, Management, and strategic discipline amongst others.

What does this mean? An analysis of candidate intakes across the top 100 global MBA programs (namely Financial Times and The Economist rankings), suggest that the cohort composition is way more diverse than just a mix of engineers, accountants, bankers and management consultants. This is a recent shift, when one compares to the cohort mix in the 80s, 90s and in some cases, even early 2000s.

In the classroom this synergy of different professions (such as those revolving around law, medicine, physical sciences, arts & literature, combat, technology etc.) and business concepts, in solving case studies and in peer-to-peer exchange is something that is unique to the MBA.

Intensive training in such extensive disciplines creates a rare blend of astute professionals who learn to proactively engage with situational uncertainty through proactive interdisciplinary problem solving.

The modern-day MBA provides an additional edge by exposing students to new age fields such as Big Data Analytics, Environment, Social & Governance (ESG) among others.

It may be apt to liken an MBA graduate to MacGyver’s versatile Swiss Army knife rather than Rambo’s oversized survival knife.

Indeed, every year flocks of MBA gather to join the Big Three in Management Consulting, the Big Four Auditors, the unanimous FMCG giants or the FAANGs (Facebook, Amazon, Apple, Netflix, Google). Also, some of the well-heeled startups (barring those with a musky odor), PE & VCs seeking exponential growth have been eager to sign up MBAs.

But the same cannot be said of SMEs — even the largest of these outfits have hardly ventured out to hire MBAs. One may attribute factors such as capital constraints towards hiring manpower, limited inherent understanding of the MBA skillset, among other factors.

In the GMAC Corporate Recruiters Survey 2019, 94% of large companies (10,000 or more employees) were projected to hire MBA graduates; compare this to only 51% for smaller companies.

However, for a sector that forms the backbone of most economies globally, hiring promising b-school talent can yield high returns for SMEs.

Especially in the current environment where a cocktail of pandemic-driven corporate cost-cutting and automation are reducing the number of job openings in the large enterprises, SMEs can very well offer a new frontier for b-school graduates to showcase their acumen in business-focused innovation, high accountability and growth.

By their very nature, SMEs have the advantage of higher flexibility, scope for growth and centralized control, that provide a fertile ground for MBAs to unleash their skills to tap business growth opportunities.

Unlike the highly specialized division of labor that large corporations adhere to, SMEs can offer greater exploratory freedom to the MBA, which is empowering.

Assuming better capital discipline and well-developed profit centers, the focus of ‘hustle’ in an SME could shift towards ensuring longer-term, sustainable business goals. In the near term, it could be ‘Covid-19 proofing’ operations in the short term, and ensuring sustainable business goals in the long term.

Additionally, as business sophistication and innovation evolve in an SME, they can tap into non-conventional sources of financing such as private equity or SPACs. In other aspects such as access to Global Value Chains (GVCs) and hyperlocal go-to-market focus, an MBA graduate would be instrumental in ensuring success.

One of the best bets for SMEs to hire MBAs would be to have a hiring process, wherein graduates are provided a platform to showcase their ‘Swiss knife’ skills. A platform to perform, to be acknowledged and eventually to see their skills yield business success, is a reward that is rare.

However, this may demand some structural changes. B-Schools could go further in including SMEs in career management engagements, and SME hiring teams could be more aware of the skills and profile that MBA graduates possess.

With every crisis comes numerous possibilities and new opportunities. Maybe it’s time for SMEs to tap into MBA power. Maybe it’s time for the MBA to scale up the unsung virtues of the humble SME.

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