Against the wind: How knowledge-intensive SMEs navigate talent retention through informal and inclusive practices

Abstract

Purpose: This study aims to explore and identify effective talent retention practices in small and medium-sized enterprises (SMEs) within the knowledge-intensive IT sector. Given the need for more research on this topic, particularly in SMEs, the study seeks to fill this gap by examining how IT SMEs in Spain retain their highly skilled employees in a competitive environment.

Design/methodology/approach: An exploratory qualitative research design involved semi-structured interviews with CEOs and Chief Human Resources Officers (CHROs) from eight Spanish IT SMEs. The interviews were analyzed using grounded theory to identify and categorize the talent retention practices employed by these companies. The practices were then classified into four main blocks: workplace environment, work-life balance, career development, and work content, each mapped across two dimensions: impact on current versus future work and organizational versus project level.

Findings: The study identified 12 distinct practices SMEs use to retain talent, yielding 14 practice-block instances, as mentoring operates across 3 of the 4 blocks, despite their limited resources compared to multinational enterprises (MNEs). These practices highlight the importance of personalized employee experiences, a supportive workplace environment, career development opportunities, and a balanced work-life approach. The findings reveal that although SMEs face significant challenges in competing with MNEs, they can still enhance employee retention through innovative, human-centric strategies.

Originality/value: This research contributes to the emerging literature on talent management in SMEs by moving beyond context-specific description. By adopting an inductive approach, the study develops an integrative framework that maps retention practices along two theoretically grounded dimensions—temporal impact and organizational scope—revealing that SMEs predominantly deploy informal, relational, and inclusive retention mechanisms that differ qualitatively from the formalized, exclusive approaches documented in the MNE-focused literature. The cross-cutting role of mentoring across three of the four practice blocks further highlights how resource-constrained organizations leverage a single relational mechanism to simultaneously address workplace environment, career development, and work content.