ISJ Exclusive: SMEs and the security sector – it’s all about “stuff”

International Security Journal hears from Howard Leedham MBE, Managing Director, ESID DMCC.

The World Bank assesses that Small and Medium Enterprises (SMEs) represent about 90% of businesses worldwide and employ more than 50% of the global workforce. So, although accurate statistics regarding SMEs’ representation in the security sector is scant, it’s probably fair to say such small businesses represent a significant proportion of our industry.

When I think about the role of SMEs in the security sector, I’m reminded of a past role when I accepted a position as the number two in a $4 billion company. On my first day in the office, the CEO and owner told me I could disregard most of my job description because, it was better summed up that my real job was to simply do all the “stuff” that he didn’t want to do. Perhaps therein lies the rub for those of us who own or lead SMEs in our sector – we typically endeavour to do all the stuff that others don’t want to do or, moreover, can’t do.

During the COVID-19 pandemic, many SMEs in the security sector had to manage profound change in order to meet business and market dynamics. The pandemic forced small companies, whether consciously or unconsciously, to align with the McKinsey Sustainable Speed Model and to streamline decisions and processes, empower stakeholder ownership and suspend slow-moving hierarchies.  

The UK’s CIPD (2020) assessed that of private-sector employers, 48% had frozen or delayed wage increases, many of which fell below the threshold for government pay and business grants. Hence, any SME that wanted to survive needed to position itself as a “future organisation” by innovating, adapting and responding quickly to changes… it was the consummate practical lesson in change management.

Post-pandemic, like their larger counterparts, SMEs face constant and multiple business risks and the downside of being an SME is our vulnerability to experiencing concurrent adverse business events.  Dependent on size and scale, an SME can typically survive up to two simultaneous negative events.  However, if such events keep coming concurrently, the survivability curve inevitably becomes more of a death spiral.

However, on the flip side, an SME’s strength, particularly in the security sector, is its agility and ability to change to its client’s needs and to focus on “real and present” revenue producing lines as opposed to speculative, cost-burden activities that can sometimes distract larger businesses. Concurrently, because an SME’s organisational entrepreneurship by its very nature entails creating and developing a commercial culture in business to improve an organisation’s innovative capacity, successful SME leadership readily re-energises with a focus on offering client driven service lines, often within unstable environments, whilst embracing local workforce availability.

Mitigate risk and maximise adaptability

In seeking to achieve change, the CIPD (2021) states the somewhat obvious; unlocking business improvement and achieving change can occur when there is a realisation that change is needed.  SMEs, by necessity, must possess few silos, whereby the breaking down of existing structures can be affected quickly in response to market demand. This empowers the SME leader to make rapid decisions unhampered by hierarchies and bureaucracies, which in turn results in revenue and healthy margins.

In order to mitigate risk and maximise adaptability, security sector SMEs can do a lot worse than adopting a “VUCA operating environment” which defines “Volatility, Uncertainty, Complexity and Ambiguity.” The definitions within the environment can enable the SME entrepreneur to readily recognise a change and the nature of change within their operating environment and to respond or mitigate in kind.

Security industry SMEs, by their very nature of being driven towards adopting an entrepreneurial orientation, take on a persona that is linked to risk-taking, opportunity seeking and decisive action – it could be argued that without such leadership style, SMEs are unlikely to adopt or succeed in a globalisation focus.

However, when the security sector SME achieves an entrepreneurial goal, it is probably through doing the “stuff” that larger competitors don’t want to do. Not least because security sector SMEs can be readily undermined by unethical or larger organisations that can absorb reduced profit margins. SMEs are particularly vulnerable to predatory tactics and by keeping to the “stuff” advice, they can actively guard against this vulnerability. 

A further comparison of owning or leading an SME is one of owning a vintage car, in that rust never sleeps! An SME’s leader has to be fully involved in the performance management process. It is not just important; it is arguable such leadership immersion is the very lifeblood of the SME and it is debatable whether any such small, globalised business could survive without a constant upkeep of energised leadership, daily performance and brand management.  

Security sector SMEs must adopt a top-down support process to the entire organisation and human resource management (HRM) strategies. The HRM “three E’s” are crucial to service line implementation, i.e. empowering, enabling and encouraging. Even ACAS (a UK government body) that is wholly aligned with large organisations cites relevance to SMEs when they recommend that workers require clarity around expectations of them in terms of standards of performance and behaviour and that they need consistency in the application of processes.

In any security sector, SME “entrepreneurial leadership is the ability to influence others to strategically manage resources, with the aim of emphasising both opportunistic and profit-seeking behaviour” (Covin and Slevin).

And, regardless of SME structure, the academics cite eight entrepreneurial leadership characteristics as crucial to SME organisational growth: The ability to motivate; achievement orientated; creativity; flexibility; patience; persistence; be a risk taker; possess vision. Arguably, a security sector SME with these qualities can flourish – without them, it simply won’t.

Competency, flexibility, responsiveness, speed

Networking and its contribution to organisational and business innovation is vital to an SMEs business strategy. Influence from outside in regard to opportunities or even ideas is a prerequisite to achieving growth. “Value networks” refer to loose network structures where the aggregation of benefits takes on a progressively stronger relationship with little or no cost to those who are part of the network. The concept is that knowledge accrued through an effective network can result in tangible value for the SME.

My own SME is globally focused, and since COVID, it’s been a productive discovery that geographic proximity is not required to establish a value network contributor, nor do cultural differences appear to be a barrier to collaboration. Instead, external influences have helped to promote the company to an appropriate client base while influencing ongoing innovation within the company.

No matter how we cut it, a security sector SME must have four dimensions: Competency, flexibility, responsiveness and speed. These were essential to the survival of my own company during the pandemic and I apply them just as much today as during those trying times. Our company strapline is “your unusual is our usual”. We steer clear of doing the “stuff” that our larger competitors like to do with a view that we’d rather be bought out than taken out.

Of course, each SME within its sub-specialisation has its own strengths and challenges; having worked for large and small companies, I’m now firmly in the latter SME camp, not least because an SME can react to challenges and pick its path towards a desired destiny… all while doing its own “stuff”.

This article was originally published in the March 2023 edition of International Security Journal. To read your FREE digital edition, click here.