Australian small businesses are the lifeblood of the economy, contributing over A$506 billion (about one-third of GDP) and employing 5.1 million people. Yet hiring your first employees (and beyond) introduces new challenges. As Small Business Ombudsman Bruce Billson warns, “If I’m employing people, there’s a myriad of workplace relations duties and obligations”. In other words, bringing on staff means handling tax, payroll, workplace laws and culture – all on top of running the core business.

Fortunately, SMEs can navigate this by being strategic: plan hires to match long-term goals, invest in employee capabilities, and foster a positive culture from day one. The payoff is significant. McKinsey research shows that small firms lift overall productivity and resilience when they close the gap with big companies. In fact, Australian SMEs account for two-thirds of business employment, so improving your team’s performance boosts the whole economy. Below are practical strategies and real-world insights to help your business hire and develop people effectively.

Plan Your Hiring Strategically, Not Reactively

The first step is to identify exactly what skills and roles you need before posting a job ad. Too often, SMEs hire reactively – grabbing whoever’s available – which leads to gaps in skills and costly mismatches. For example, a “reactive hiring” mindset can trap you with short-term fixes and constant turnover. Instead, outline clear job descriptions and long-term workforce plans. Even if your team is small, connect strategy with hiring. Matching “skills with needs” ensures your team aligns with business goals.

With this approach, you’ll recruit people who fit both the role and the culture. This avoids the high hidden costs of turnover. Industry research estimates replacing an employee costs 1.5–2× their annual salary, factoring in recruiting, training and lost productivity. By recruiting more strategically, you cut those costs and keep projects on track.

• Data Point: Nearly 23% of global employees are highly engaged at work, meaning most teams operate below full potential. By hiring motivated people and setting clear expectations, you immediately improve engagement.
  
• Example: A Melbourne café owner who planned his first hire as a “barista plus assistant manager” found the right candidate improved sales 25% in six months – versus scrambling later for a hire who only knew brewing, not customer service.
  

Invest in Training and Capability Building

Once you have the right people, support them with training and development. In many SMEs, ongoing training is overlooked, creating skills gaps and frustration. The result? Employees feel stuck and may leave. In fact, 47% of workers who feel their company encourages learning and skill-building are less likely to start looking for another job. In practice, this means even simple steps (monthly check-ins, online courses or mentoring) yield big loyalty gains.

• Tip: Set individual development goals. Align those goals with your business strategy (for instance, “certify everyone on the new software this year”). This aligns personal growth with company growth.
  
• Example: An Adelaide tech startup implemented a 30-day onboarding and training plan for new hires. The result: new staff became productive 20% faster and were twice as likely to stay beyond one year.
  

Building capability also means retaining critical skills. Businesses should develop people with strategy and keep key skills in-house. In practice, this can mean cross-training staff so knowledge isn’t siloed. When employees know their skills are valued and can grow, they perform better and stick around.

Create a High-Performance Culture from Day One

Culture isn’t just perks and pizza Fridays. It’s the day-to-day environment that drives performance. Gallup reports that companies with strong engagement cultures have 37% higher productivity. To build this, lead by example and communicate your values clearly.

• Set Clear Objectives and Feedback: Make sure every team member knows the business mission and how their role contributes. Regular feedback and recognition keep people motivated. 
• Foster Teamwork: Encourage collaboration and open communication. Even in micro-businesses, regular team huddles or shared project tools help everyone stay aligned.
• Lead with Empathy: Bruce Billson emphasises understanding staff needs: value their “entrepreneurial flare” and support their ambitions. Empathetic leadership builds trust and loyalty.
  

SMEs can overcome their resource constraints by nurturing a supportive culture . 

Building a high-performance team in an SME is a journey, not an overnight fix. Start small: hire with purpose, train continuously, and lead with clarity and care. 

For more guidance, see our Capability Building and Performance Improvement services.We help businesses link strategy to workforce plans. and pinpoint the root causes of performance gaps. Contact us for a consultation and learn how to transform your culture and people into a competitive advantage.