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Why aren’t more graduates going into SMEs when they leave college or university?

  • 13 July 2022
  • By Lucy Haire and Laura Brassington at HEPI in conversation with Clare Adams, Joanne Patterson and Michael Harbaugh at Handshake

By Lucy Haire and Laura Brassington at HEPI in conversation with Clare Adams, Joanne Patterson and Michael Harbaugh at Handshake. Handshake are on Twitter @joinhandshakeuk.

Around 500,000 new graduates are leaving UK universities and colleges up and down the country this summer. Those long years of study, never-ending nights of revision and the plethora of life-changing experiences – including gaining a place at college in the first place – are coming to an end. But, what’s next for the class of ’22?  

Employability is at the forefront of many of our minds: so much so that HEPI has dedicated a weekly blog to the topic for the last three months. The killer question that piqued HEPI’s curiosity during a recent lunch with Handshake’s UK leadership team was: how many graduates take up jobs in small- and medium-sized enterprises (SMEs)?  

The thinking behind Handshake, a digital platform helping students and employers find each other, is that many students have neither access to personal networks of potential employers nor a breadth of experience of what the labour market has to offer. Students living and studying in far-flung places might struggle to get to traditional recruitment fairs or have fewer opportunities to see first-hand what, say, distant cities have to offer them. Founding member of Handshake David Shull draws on his own experience at Michigan Technical University in Houghton, USA, to explain in a podcast that universities and colleges without the biggest brand names can often get ignored by traditional graduate recruiters. The result is that recruiters do not encounter bright and able students at a wide range of institutions. The picture is even more bleak for SMEs who do not have sufficient resources to cast their net wide to find talent.

Of course, some students simply do not yet know what they want to do on finishing their degrees. The COVID-19 pandemic exacerbated these challenges, and this year’s graduates have had the toughest of times in terms of their experience of campus lockdowns. Handshake was designed so that employers can easily share job opportunities with a whole network of universities. The key idea is to democratise access to connections and opportunities.

University and college careers services work alongside academic staff to support their students’ progression into the workplace, yet in a fast-paced labour market where change is a constant, everyone needs as much ingenuity as possible to match employers and students for mutual satisfaction. That there are up to one million unfilled graduate roles in the UK labour market only reinforces the need to double down on the employer-graduate matchmaking process and remind us that those who say the UK churns out too many graduates are simply wrong.

Handshake is all about helping you build relationships without a network.

Handshake Co-founder, Garrett Lord

As our lunch with Handshake progressed, we chatted about the old ‘milkrounds’ which involved companies and large organisations touring campuses to showcase their opportunities and engage with future employees. Virtual forms of milkrounds have been around for some time and digitisation was accelerated by the COVID pandemic, but this has not necessarily levelled the playing field of opportunity. Handshake described this problem of ‘netpotism’ in their blogfor HEPI just over a year ago. 

HEPI report showed how the focus on graduate employment in recent years has fundamentally changed the way universities operate, and this has been reinforced by current Government announcements that higher education institutions must increase their efforts to ensure that graduates progress to graduate jobs. The definition of a graduate job is hotly debated, yet the fact that criteria could reasonably be used reflects, in part, the sheer diversity of the higher education sector and the attributes of the people partaking in it. Handshake has invested heavily in designing a platform that can handle the complexity, volume and dynamic nature of the graduate labour market, recognising that graduate talent should not be left untapped, wherever it is. 

So, back to our killer question. According to Luminate, while 73 per cent of graduates would prefer to work for SMEs rather than larger companies, in 2016/17 only 30 per cent of graduates actually found work in one. In the last comprehensive Government study, published in 2012, the Department for Business Innovation and Skills (BIS) reported, ‘there appears to be a consistent view that graduates are under-represented in SMEs’ and a ‘low level of recognition of a need for graduates within SMEs’. Why should this be? 

The case for graduate recruitment by SMEs is clear. A paper by the Association of Graduate Recruiters suggests that new graduates have the capacity to provide fresh insights, technical talent and knowledge. Luminate points out that graduates are highly-motivated, ‘good for growth on a budget’, and come to SMEs without pre-formed ‘bad habits’. But the Government report found that where graduate recruitment to SMEs does take place, it often occurs through informal networks. That old ‘nepotism’ again. 

Back in 2012, BIS recommended the creation of a web-based recruitment platform to level the playing field and solve the ‘information failure’ between new grads and SMEs. The idea of signposting students to as wide a range of roles as possible, and helping employers identify those with the skills, knowledge and attributes that they value has lots of appeal. As global economic pressures mount, the case for bringing SMEs and graduates together has never been more compelling.

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1 comment

  1. albert wright says:

    The apparent failure of SMEs to employ more graduates (and apprentices) is less of a surprise when you check the data and discover that around 50% of the 5 million do not have any employees at all and are one person businesses. Taking a graduate as your first employee is a big risk.

    Very few of the remaining 50% are large enough to offer career progression or prosperous enough to afford a salary of over £20,000 a year for their next employee.

    In many cases the skill set of new graduates does not match / is too narrow to meet the needs of micro businesses with fewer than 10 employees.

    I wish Handshake success in a tough market.

    As an investor in several graduate recruitment start ups (which failed) I have to say it is a hard nut to crack.

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