PurposeThis study examines the mediating effect of an effective knowledge management (KM) in the relationship between talent management (TM) and organizational performance. This study was operationalized among the small and medium enterprises (SMEs).Design/methodology/approachA cross-sectional survey design was used to collect data from a sample of 260 SMEs business. The data collected was analyzed using correlations and hierarchical regression to test the mediating effect of KM on the relationship between TM and firm performance.FindingsThe findings show that KM mediates the relationship between TM and firm performance. They also suggest that TM contribute to enhancing performance through improvements in KM.Research limitationsThe sample used in the research is not representative of all the SMEs operating in Uganda. This limitation presents the challenge of generalising and we therefore suggest caution when interpreting the results. We note the challenge of a skewed sample. For instance, most of the respondents to our study were confined to tailoring and design and metal and fabrication sectors. The skewed sample is a notable limitation of the research. The study was limited to Uganda only hence it did not capture information relating to other geographical settings, which may limit the effectiveness of the findings therein.Practical implicationsBased on the findings of the study, the managers of the SME can use the study results to develop strategies and interventions that can enable their firms to improve on their performance even in the harsh economic environment through adopting positive practices such as KM.Originality/valueThis paper contributes by filling a gap in HR management and SMEs literature, in which empirical studies on the relationship between TM and firm performance have been limited until now. This may create better research opportunities for cross-disciplinary papers that should be done by human resource, small business management and KM scholars.