Still blaming the skills shortage? Sure, it’s a factor. A big one. But so many elements play into why businesses struggle — particularly SMEs — and the skills shortage is just one piece of that puzzle.
The very real and stark reality is, if I waved my magic wand and solved the skills shortage tomorrow, many businesses would still experience disengagement, high turnover, and a lack of care factor from employees. Because the heart of the issue sits with the heart of the business — the owners, the leaders, the supervisors, and yes, the tradie in charge of training the apprentice.
This isn’t a comfortable conversation. But it’s a necessary one if we’re serious about heading into 2026 in a whole new headspace — for how we run our businesses and how we lead our people.
The HR hygiene factors: where most SMEs fall short
In psychology, Frederick Herzberg’s Motivation-Hygiene Theory highlights that job satisfaction and dissatisfaction aren’t opposites — they’re separate forces.
Hygiene factors are the basics: fair pay, safety, job security, supervision, working conditions, and relationships with colleagues. When these are absent, people become dissatisfied. But their presence alone doesn’t create engagement or motivation — it just prevents dissatisfaction.
In other words, getting the basics right doesn’t make people love their job. It just stops them from hating it.
And this is where so many small to medium businesses get stuck. They confuse compliance with culture. They think paying above award and hosting a Friday BBQ covers “engagement”. Meanwhile, employees are craving clarity, connection, respect, and growth — the psychological needs that sit at the foundation of meaningful work.
The psychology of work: we’re wired for more than a pay packet
Human motivation theory has evolved beyond carrots and sticks. Self-Determination Theory (Deci & Ryan, 1985) identifies three core psychological needs that drive wellbeing and performance at work:
- Autonomy: the sense of choice and control over one’s work.
- Competence: feeling capable, skilled, and able to make a meaningful contribution.
- Relatedness: connection and belonging with others at work.
When these needs are met, motivation thrives. When they’re ignored, we see disengagement, conflict, and high turnover — no matter how competitive the salary.
Gallup’s research reinforces this: 70% of the variance in team engagement is directly linked to the manager. Not the brand. Not the benefits. The manager.
That’s a leadership issue — not a skills shortage.
The leadership gap: what the data tells us
Josh Bersin’s Definitive Guide to Employee Experience describes the modern workforce as one that values trust, growth, wellbeing, and purpose over perks and hierarchy
Bersin’s framework — The Irresistible Organization — defines six elements that shape engagement:
- Meaningful work
- Strong management
- Positive workplace
- Health and wellbeing
- Growth opportunity
- Trust in the organisation
Notice how many of those hinge on leadership and human connection rather than process or policy.
Meanwhile, his Big Reset Playbook calls for a shift to human-centred leadership — where empathy, flexibility, and curiosity are just as critical as strategy. Because leadership today isn’t about control — it’s about creating conditions where people can thrive in uncertainty.
The 2025 Future of Work Outlook by Dr Ben Hamer echoes this. His data shows employees are opting out of management roles altogether — a sign that leadership fatigue, poor support, and lack of development are taking a toll. As he puts it,
“We’re not in a skills shortage — we’re in a leadership shortage.”
The culture connection: it’s not the vibe — it’s the system
Culture isn’t what’s written on your website. It shows up in:
- How decisions are made
- Who gets promoted
- What gets tolerated
- And how your team feels on a Monday morning
McCrindle’s research on work wellbeing and engagement found that trust in leadership is 3.4 times higher in highly engaged workers compared to disengaged onesShaping-culture-infographic. Investment in leadership capability and professional development is directly tied to lower turnover and higher morale.
In other words — when leaders invest in people, people invest back.
Reality check: people aren’t spreadsheets
Before we go any further, here’s the caveat: people are unpredictable.
They’re not formulas in Excel.
Personalities clash. People aren’t always your tribe. Life outside of work spills into work. And sometimes, despite your best efforts, it just doesn’t click.
This isn’t a silver bullet. But there’s a clear difference between business leaders who are all in — who genuinely want to understand and improve the human experience of work — and those who’d rather lay blame elsewhere.
Because even toxic workplaces turn a profit. Revenue isn’t a measure of leadership.
The real test is legacy.
How you made your employees feel — even the ones who didn’t like you.
How people experienced work in the day-to-day.
How your workplace impacted lives outside the office.
How your decisions shaped your community.
Signs of change
Across Australia, the signals of change are already here:
- The Right to Disconnect legislation is reframing what work-life balance really means.
- Younger generations are prioritising wellbeing and purpose over pay
- Employees are quietly measuring leaders not by profit margins, but by psychological safety and empathy.
The question is — are you paying attention?
As we head into 2026, the most successful businesses will be those that lead with intention, grounded in psychology, research, and empathy.
Because the future of work isn’t about surviving the skills shortage.
It’s about building businesses people actually want to work for.