This positive step forward signals that skills shortages are no longer being treated as a secondary concern for business owners, but have become a strategic business priority which, in turn, is accelerating meaningful change across industries.

However, there is still work to be done to ensure that skill shortages continue to decline, and small and medium enterprises (SMEs) and startups are uniquely positioned to play a pivotal role in this transformation.

The underlying challenge is that leaders of SMEs continue to grapple with finding the right skilled talent to fit business needs, with the vast majority (90%) expecting to face skills shortages this year.

It's clear that a shift in mindset is required when it comes to SME leaders and their approach to workforce development and skills acquisition. But what are the key factors they must consider to achieve this?

The three-layer skills architecture that drives business success

Today's business landscape requires a more sophisticated approach to workforce capability. Rather than viewing skills as isolated competencies, SMEs and startups should consider adopting a three-layer framework that recognises how different types of capabilities work together.

Core workplace success skills form the foundation – these are the human capabilities like critical thinking, communication, and adaptability that enable everything else. These aren't just "soft skills" but essential capabilities that contextualise to different business environments whilst remaining transferable.

Technical domain expertise provides the specific knowledge that delivers immediate value – whether that's financial analysis, digital marketing, or healthcare delivery. This layer builds on the core foundation to create specialised capability.

Emerging challenge competencies represent the future-focused capabilities that keep businesses ahead of disruption – particularly around AI, cybersecurity, and sustainability. These cross-cutting skills are becoming universal requirements regardless of sector.

For example, a fintech startup requires core adaptability skills to navigate regulatory changes, technical financial knowledge to deliver their service, plus AI implementation capabilities to automate processes and sustainability awareness for ESG compliance. These layers work together to create complete professional capability.

The stackable approach to emerging skills

Areas such as sustainability, digital literacy and AI capabilities are no longer sector specific. They are now becoming universal competencies and are particularly relevant to the workforce structure of SMEs and startups.

However, not everyone needs the same level of engagement with these emerging challenges. Here at BPP, we recognise that people engage with complex capabilities like AI, cybersecurity, and sustainability at different levels – from everyday users through to strategic overseers.

The power lies in how these capabilities can be combined. A finance manager might need AI implementation skills for process automation, cybersecurity awareness for data protection, and sustainability knowledge for ESG reporting – stacking these emerging capabilities alongside their core financial expertise.

For SMEs, this creates clarity about capability development. Rather than generic training programmes, you can target specific capability combinations that align with business strategy and individual career goals.

The AI reskilling imperative through practical capability levels

The urgency of skills development for business leaders has been magnified by the rapid growth of artificial intelligence.

Recent research has shown that employees not already using AI are at risk of falling behind in their roles, which underscores the vital nature of integrating AI in the workplace. It is also essential to recognise that the economy will not thrive if we're replacing the human workforce with machines. Instead, we must empower employees to work alongside AI tools to enhance their productivity.

For SMEs and startups, this presents both a challenge and an opportunity, irrespective of their sector. Larger businesses may have dedicated resources for comprehensive AI programmes, but smaller businesses can focus on developing practical AI capabilities that deliver immediate value.

Starting with everyday AI usage – using generative AI for content creation, applying AI tools for productivity improvements, and mastering effective interaction with AI systems. This foundation provides immediate business value and is achievable for most employees.

Building from there, some employees can develop implementation capabilities - customising AI tools for specific business processes, creating AI-enhanced workflows, and supporting others in AI adoption.

In this way, AI becomes an integral part of the workforce through structured capability development, rather than an intimidating technological hurdle.

Career flexibility through transferable skills

Across the UK workforce, we're increasingly seeing career progression become less linear and more focused on skill development across different areas.

Rather than traditional career ladders, professionals are building diverse capability sets that create opportunities for lateral movement and varied experiences. A term we’re increasingly seeing being used for this phenomenon is ‘squiggly career’.

This trend is particularly relevant for startups and SMEs, where opportunities for vertical progression can sometimes be limited.

The key insight is that foundational workplace skills – like critical thinking, communication, and adaptability – provide the transferable foundation that enables this career flexibility. When these skills are properly developed and applied in different contexts, they create genuine mobility between roles and functions.

For smaller businesses, embracing flexible career development can be a powerful way to retain and develop the existing workforce. Employees can explore different aspects of the business, develop diverse capabilities, and find renewed engagement with their work without necessarily needing traditional promotions.

Embracing capability frameworks over fixed job descriptions

The UK workforce is becoming more reliant on the concept of talent flexibility. This is based on the idea that roles designed with transferable competencies in mind contribute to a much more flexible workforce, allowing for greater efficiency overall.

Rather than traditional job descriptions that lock people into narrow functions, forward-thinking SMEs are adopting capability frameworks that recognise how skills combine and stack in practice.

For SMEs, this doesn't mean stretching employees beyond their limits, but rather, strategically mapping the core enablers that make people effective across different contexts, combined with stackable persona development that builds future-focused capabilities.

Within this framework, certain capabilities possessed by employees can be deployed throughout an organisation as needed, creating a more flexible and resilient business structure. This approach is particularly valuable for startups, where team members often wear multiple hats and need to adapt quickly to changing business needs.

By investing in employees' transferable core skills combined with stackable emerging personas, SME business owners can build internal capability while creating clear pathways for development and retention, which will allow their business to flourish.

Final thoughts

The convergence of these new trends, from stackable skills and flexible career development to the adoption of AI capabilities, creates a strategic imperative for SME leaders. As smaller firms continue to lack the resources and networks to compete effectively for skilled talent, internal capability development becomes not just valuable but essential.

The future belongs to leaders that view their workforce as a portfolio of adaptable, continuously evolving capabilities rather than fixed roles and responsibilities. By adopting a three-layer skills framework combined with stackable persona development, SMEs can create workforce capability that is both immediately valuable and future-focused.

For SMEs and startups willing to take this approach, the rewards extend far beyond filling skills gaps – they create a solid foundation for sustained innovation, growth, and competitive edge in an increasingly complex economy. The question isn't whether to invest in capability development, but how quickly you can implement a framework that turns skills into strategic advantage.

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