Following succession of government-initiated business improvement programmes directed particularly at small businesses, most of which achieved only marginally positive outcomes, it is refreshing to report on more promising new project.
Officially branded as an initiative of the portfolio Economic, Industry and Regional Development, much of the credit for its inception can be attributed to Stephen Knuckey, principal adviser to Economic Development Minister Jim Anderton. The project is, significantly, managed by Fran Wilde, immediate past CEO of Trade New Zealand – since renamed NZ Trade & Enterprise – and now an independent consultant. What distinguishes this exercise from its predecessors is that it draws on the opinions of key sector representative organisations. Previous economic development projects were dictated from the government down, which, perhaps, accounts for their relatively low take-up.
The 11 delegates who assembled on July 21, were proverbial who’s who of business collectives which, if the three absentees are included, could be regarded as full pack in line-up that made it significant occasion in the economic history of New Zealand. Bringing everybody together for the first time. Indicated, I think, willingness to put aside parochial differences and work in partnership with government for common good.
The assembled delegates set the strategy for the implementation of priorities based on set of stated objectives including:
* Drawing together sources of research with data provided by MED, industry sectors and Massey University over the next two months;
* Identifying the target market, using the lifecycle approach, and defining gaps in delivery;
* Confirming management capability building needs;
* Identifying and defining existing service providers and their capabilities;
* Identifying gaps in access and availability;
* Developing campaign to promote the need for capability building, promote available services, devise government-private sector services to fill identified gaps with geographic/fiscal specific, capable solutions, and
* Providing advice on required research and policy.
The overall objective of the project is “management development leading to better business practices”. steering committee was selected and stakeholders were asked to assess their key capabilities and likely contribution.
As participant in the process it struck me that we had perhaps, reached the end of long journey of discovery and failed attempts to identify the causes and effects of the SME sector’s history of low growth. It is encouraging to see government acceptance of the need for new approach. Involving broad spectrum of the private sector certainly raises expectations of an outcome, but it also requires sincerity and commitment by all stakeholders to succeed. It will take concerted three-year effort to achieve buy-in from the target sector.
Research into SME manufacturing growth by the Small Enterprise Association of Australia and New Zealand and based on 871 samples, identified three relatively stable business development pathways with traditional (low), capped growth (moderate) and entrepreneurial (high) growth patterns. About 70 percent of surveyed firms fell into the low growth cycle, 25 percent into moderate and five percent (high) – finding that corresponds with international trends.
Without underestimating the important local economy role of traditional SMEs, placing greater emphasis on supporting innovative growth companies in the upper-median to top-end range will deliver better and faster outcomes.
Professional management is, however, the critical factor in building business capability. Provided enterprise founders can successfully adapt to professional management regime, there is no need to replace them. Unfortunately, entrepreneurial business owners tend to resist systemised management structures. Progress toward full professional management only happens when this reality is overcome. There is compelling evidence that suggests SMEs led by tertiary qualified managers are more likely to reach their potential in planned, progressive steps than those headed by exclusively trade/technically skilled founder/owners.
The transition from entrepreneurial to professional management presents the greatest challenge in converting capped to high-growth companies. The attitudinal shifts required to facilitate the transition from entrepreneurial to professional management must figure prominently in bringing “project collaboration” to fruition. Without it, the move to build business capability is doomed to fail.
Ralph U Penning, FNZIM, is the executive trustee of the Independent Business Foundation.
