The impact of COVID-19 on small and medium-sized enterprises (SMEs) has been significant and severe. SMEs are the backbone of Canada’s economy, yet few have the resources to deal with the skills and labour shortages they face – shortages that the pandemic has only made worse. By combining preliminary data from an ongoing survey of SMEs, associated focus group discussions, and existing research, this report highlights opportunities to better support SMEs in the pandemic recovery and after. This includes a specific focus on embracing diversity and inclusion as a key way of addressing their skills needs.
The impact of the COVID-19 pandemic has been considerably more severe on entrepreneurs and small and medium-sized enterprises (SMEs), than on larger organizations. This fact is critical to note since SMEs are the backbone of the Canadian economy, employing almost 90 percent of all Canadians who work in the private sector. It is not an overstatement to say SMEs drive economic development, growth and innovation in Canada.
But despite their importance, it is becoming increasingly clear that many SMEs are on the downward slope of what experts are calling a “K-shaped” recovery to the pandemic-induced economic crisis.
SMEs faced significant challenges even before the pandemic. Skills gaps and labour shortages have long been a feature of the Canadian economy and they remain a top concern for SMEs. Despite recognition of this challenge, we still lack a unified language to discuss skills and competencies, and there continues to be a lack of clarity as to which skills and competencies are really needed by firms and their employees.
The purpose of this report is twofold: First, it reviews existing research on SMEs’ and entrepreneurs’ skills, upskilling and training needs, and proposes options for better supporting them as they strive to recover from the pandemic and prepare for what comes next. In particular, this review highlights barriers and challenges faced by entrepreneurs who are members of equity seeking groups, especially in the context of the COVID-19 pandemic. Second, this report presents preliminary results from a survey on skills and competencies (a survey that is still in the field as of June 2021) and from a set of focus groups conducted as part of the same project.
By combining these novel findings with insights from existing research, this report provides an updated perspective on:
- The role of SMEs in the Canadian economy;
- Challenges SMEs face in terms of labour shortages, skills gaps and in identifying the skills they will need in the future;
- Impacts of COVID-19 on SMEs in different sectors, as well as on current skills demands in SMEs;
- Current human resources practices in SMEs; and
- Ways forward and areas for additional research.
A key takeaway is that preliminary survey results echo what has already been discussed in the literature, meaning much work remains to be done to better support SMEs in bridging existing skills gaps and addressing labour shortages. While some organizations have found new opportunities due to the pandemic (e-commerce or an expanded talent pool made available by the shift to remote work, for instance), firms still struggle to identify the skills and competencies they need. And even if they can find the right talent, finding the resources to nurture and train that talent remains difficult for many SMEs. Moreover, while many firms indicated an interest in seeking out diverse individuals such as Indigenous or racialized people to find previously untapped sources of skilled talent, very few had concrete plans for how to do so.
Another key takeaway is that SMEs often have limited capacity to dedicate to human resources, recruitment, training, upskilling and other functions essential to meeting their skills needs. This also limits their ability to engage in new forms of recruitment designed to better reach broader and more diverse talent pools. This limited capacity highlights how any pandemic recovery plan needs to take into account the specific realities and resource challenges faced by SMEs for that plan to be successful, let alone equitable. And, given SMEs’ central importance to the Canadian economy, this limited capacity shows why it is crucial to give these firms a seat at the table where planning for the recovery is taking place and must be supported in getting there if necessary.
This report concludes by identifying next steps to help SMEs bridge skills gaps and overcome labour shortages while building a more equitable post-pandemic world. The recommendations focus on actions that can be taken to improve human resources practices in SMEs, foster diversity and the inclusion of members of equity-seeking groups, and concrete ways to better measure impacts. Specific recommendations include:
- Increased support for SMEs that have limited human resources capacity from various stakeholders in the ecosystem, including business organizations and industry associations;
- The provision of more flexible and modular training options for workers;
- The development of shared platforms equipped with training and tools to improve access to diverse labour pools and to support skills development and career paths;
- The collection of more disaggregated data to assess the experiences of different types of SMEs, particularly those owned by women and other under-represented groups; and
- The broadening of the impacts considered by funders and supports for SMEs to include impacts on communities and social goals.