Mental Health in Small & Medium Businesses: Paths to Sustainable Success

Small businesses make up over 97% of workplaces in Australia. They are vital for their significant contributions - they drive employment opportunities across diverse sectors, create innovative ideas across many industries and hold global market competitiveness. They help to bolster local economies through supporting other businesses and suppliers, enrich consumer choice with their unique products and services and encourage an ‘entrepreneurial spirit’.

Let’s start with the positives…

Small and Medium Enterprises (SMEs) boast several advantages that contribute to their resilience and success. Despite their size, SMEs often excel in creating team Connection, diverse Leadership, and Work Design, as evidenced by findings from the Indicators of a Thriving Workplace (ITW) 2023 report by SuperFriend.

SMEs scored significantly better than their larger counterparts for the Domains of Leadership and Work Design and came in higher than the national average scores as well. Employees from SMEs also reported higher Connectedness scores on average than those from larger organisations. In other words, SMEs tend to demonstrate:

higher quality interpersonal relationships
better manager support for mental health
show more flexibility with work arrangements to fit with individual worker circumstances.

Unlike larger corporations, SMEs tend to operate with smaller, tightly-knit teams frequently collaborating where team members work closely together to achieve common goals.

SME leadership is often more hands-on, with leaders more commonly, more intimately involved in understanding the strengths and contributions of each team member, thus facilitating a cohesive and productive work environment to get things done.

Teamwork illustration 2

What are the struggles for small to medium businesses?

In the world of SMEs, the spotlight is increasingly turning towards the often neglected yet critical aspect of workplace wellbeing. Smaller business owners, who can be time-poor and overwhelmed with competing responsibilities, can also find themselves facing a significant challenge - the preservation of their own mental health.

We get a hint of this when we look at the lifetime prevalence of a mental health condition, which was found to be 37% for business owners versus 35% of senior managers (from the SuperFriend 2023 ITW dataset). Other mental health outcomes data from the Indicators of a Thriving Workplace show that the incidence of psychological distress for SME employees on average is considerable, with over 1 in 3 (38%) with high/very high psychological distress. Interestingly, both business owners and senior managers of SMEs are faring just as well as their junior counterparts in their organisations for psychological distress, and the current self-reported mental health relative to 12 months earlier. This challenge not only affects individual wellbeing but also reverberates through the entire business structure, impacting productivity and employee morale.

Other studies reveal that mental health issues plague a significant portion of small to medium business owners and operators, with depression and anxiety being primary concerns. Nearly 1 in 3 SME owners have experienced stress, depression or anxiety in the past 12 months (Deakin, 2023). These issues, if left unaddressed, can turn into a multitude of challenges, from decreased productivity to strained relationships, both personal and professional.

Despite the recognition of these challenges, SMEs often face barriers in accessing the support they need. Limited time, overwhelming to do lists, and the lack of effective strategies compound the issue, creating a scenario where mental health takes a back seat to the demands of running a business.

Teamwork illustration one

The weight on small to medium business owners

Running an SME can be a double-edged sword. While it offers a sense of achievement and independence, it also brings with it high levels of stress, financial pressures, and the blurring of boundaries between work and personal life (MYOB, 2023).

The impact doesn't end with the owners themselves. The stress and anxiety experienced by business owners inevitably trickles down to affect their employees, creating a ripple effect throughout an organisation. Neglecting mental health in this context can lead to decreased job performance, lower morale, and increased turnover rates, further exacerbating the challenges faced by SMEs. Our Indicators of a Thriving Workplace data specifically for SMEs indicate that those with definite symptoms of burnout are more likely to report high levels of psychological distress, report taking leave for that distress, having made a claim for mental health, and that they do not intend to stay with their current employer for the next 12 months.

Building a supportive environment

Recognising the importance of mental health is the first step towards fostering a supportive environment within SMEs. Cultivating open dialogue, providing access to resources, offering flexible work arrangements, investing in training and development, and implementing regular check-ins are crucial strategies.

Leveraging external support resources such as Employee Assistance Programs (EAPs) can provide timely interventions and support mechanisms for both business owners and employees. SuperFriend’s data highlighted that large organisations had a much higher score (64) than both small (57) and medium (61); meaning that small and medium businesses are falling under the national average within the Domain of Capability, thus reflecting their greater capacity to provide things like internal training and confidential counselling for their employees.

Protecting our assets

The importance of prioritising SME mental health and wellbeing cannot be overstated. By investing in the wellbeing of their employees today and tomorrow, SME leaders are not only laying the foundation for a healthier, more resilient workforce but also positioning themselves as forward-thinking organisations capable of thriving in an ever-changing environment. SME’s have the unique advantage of having oversight of the entire organisation, being across who is being recruited and where there might be gaps in skills and styles. Whilst resourcing can be a common challenge for small and medium businesses, this is where the old adage of working smarter not harder comes into play.

5 actionable steps small to medium business leaders can take to create mentally healthy workplaces:

1. Role model prioritising your own wellbeing

Whether a sole trader or a medium size business leader, knowing your own wellbeing needs and conducting a wellbeing action plan is helpful to maintaining wellbeing. Not only is this important for individual mental health, but it also sets the tone and culture of your business, showing that this is something you value and is part of what you expect of others. Try our free Wellbeing Check-in & Action Plan to create your own tailored self-care action plan.

2. Know your own strengths and look to recruit people who can complement them

Having strong self-awareness and emotional intelligence can be helpful here (and if you think you lack it, employ someone who’s EQ is high!). Understanding what you bring to the table and enjoy as well as your personal preferences in the way you work will not only allow you to structure your day and work in such a way that you can be most efficient, but also when it comes to recruitment you can identify what gaps need filling and the style of person who is going to be a strong fit for your SME.

3. Outsource

While resourcing can be a barrier, conducting an assessment of where your business and personal strengths and weaknesses lie, finding the most budget suitable, efficient areas you can outsource to reduce stress is beneficial. Remember that whilst parting with money to outsource an area that you may feel you CAN do, can be viewed as an investment to free you up to prioritise the areas of the business where you add the most value.

4. Build your own community

Connectedness rated above the national average for SME’s, yet small business owners can still benefit from intentionally seeking out other small business owners to develop a peer group to share ideas, challenges and social time with. Look for forums and small business networking groups in your area, such as Australia Local Small Business Network or find a network based in your state or territory.

5. Find decision making frameworks and models that suit your business and style

As much as possible, working on efficiencies and automating things can make life more streamlined in any business, but especially in an SME. This can also be applied to decision making. Find a filter that can be used to help you make important decisions that will help free up your time, and potentially reduce the mental load that big decision making can cause.

Finally, know what support is available: