Wednesday, April 12, 2006
A modern approach to Enterprise Support is needed
This paper explores the nature and extent of enterprise support from an institutional perspective and examines briefly, the inherent flaws in the mechanism to deliver consistently on outcomes. It highlights the weaknesses of the present `one-fit-all’ support model and the inadequate preparedness of some business advisers to offer expert guidance to owners of new or existing minority firms that operate in sectors that are usually reserved for mainstream companies. This paper argues for a modern approach to enterprise support to meet the ever-changing needs of economies today, particularly those that are dependent on the services sector as against the customary manufacturing or production sector. There is little literature on the subject of enterprise support and its overall implications on the production and productivity of minority firms in either regional or national economies. It is hoped that this briefing will stimulate dialogue and general discussion on one of the most challenging economic issues of concern to all firms in the 21st century.
Having been in business for a long time and dealt with hundreds of firms and examined the nature of their sectoral distribution and segmentation within key markets, I have also shared the bitter experience and frustration of entrepreneurs who have managed their firms without adequate support and/or in many instances, lack consistent and high quality enterprise facilitation. Enterprise support, whether relative or targeted, is probably one of the most controversial policy instruments in the field of economics.
There is no real hard-and-fast rule that governs enterprise support, but the majority of advisers tend to apply a generic or traditional one-fit all approach when dealing with all types of firms. The fact is, if owner-managers lack proper support, the risk of business underperformance is greater (over 50%), not forgetting the negative outcome on profit margins and the eventual reduction or loss in market share, altogether.
This paper is not intended to provide a theoretical framework for enterprise or business support but rather, to offer practical ways of turning a series of complex tasks into a simple, and yet smooth undertaking. As it is, managing a business is risky and complex, and the more targeted the support, the greater the chances of success for owners and operating staff alike. Is enterprise support necessary for all start-ups? Should it be made available only in times of crises faced by owners? Should it be a phased action according to the nature of the business cycle?
Experience teaches that business support should be continuous and particularly dedicated to areas in which the firm is most vulnerable or suspect. It should be targeted at either organisational staff or the various processes of the firm that are responsible for increase customers, higher profits, and efficiency savings and consolidated market share.
The term `enterprise support’ is defined as a `dedicated programme of services specifically targeted at all business persons irrespective of their ethnicity, social status, location, physical characteristics and gender profile. Services include a variety of activities: advice and counselling, technical support, independent business reviews, funding facilitation and so on. In the broader policy context, business support is described as a menu of assistance rendered to small and medium-sized enterprises (SMEs). It is part of a combined strategic and operational process to guarantee owner-managers’ access to all-round support to strengthen and generally, make firms more adaptable to, or compatible with `market’ competition.
There was a time when would-be business owners or entrepreneurs were unable to obtain professional business support. They depended at times, on the `sworn’ advice of accountants, bankers and experienced entrepreneurs and lay business people who had lots of creative, including different angles to approach a business start-up. Other entrepreneurs, faced with no advice at all, reckoned that a trial-and-error process might be the best bet until hopefully, they got it right. Although they knew the risks were immense, they hoped that sheer luck would rally them through. Like everything else, perceptions differed as large companies were given preferential treatment regarding financial and technical support, whilst small firms were seen as marginal units of production. If their size and composition were anything to go by, that made their position worse although the main casualties were sole traders with micro firms, usually a one-person `band’. These entities were perceived as potential `enterprise failures’, more likely to be insolvent and didn’t stand a chance of competing against the `Big Boys or Girls’.
From all indications in today’s economic environment, times have changed, but the size versus composition framework still prevails especially when dealing with business owners from different cultural and ethnic backgrounds. This situation is more pronounced in highly industrialised countries in Europe and North America where large minority communities reside and where people of African or Caribbean origin tend to experience greater disadvantage from mainstream enterprise agencies. This situation has rightly caused critics to question whether the current `ticking-the-box’ ploy has any real meaning in terms of results or positive outcomes or it’s rather an exercise in tokenism, enterprise style.
However, since the last two recessions in the late 1970s and 1980s, out of economic necessity, there has been clearly, a felt need by public institutions to implement sounder and fairer enterprise support systems to benefit firms involved in both manufacturing and services. What has been responsible for this tactical shift?
According to an experienced food producer, “reality has kicked in”; market forces command a heavy presence and influence changes in national policies and programmes relating to businesses and social enterprises respectively. For example, market forces dictate the type of workforce, technical expertise of owner-managers, quality of technology, levels of income and investment opportunities and portfolios, customer-buying decisions, along with policies aimed at freeing-up economies that eventually give way to a rapid growth of service firms.
Using a sample average, at least 70% of business owners advised at the start-up phase of their operations, should be guaranteed enterprise support in all areas of business development. If there is a business plan (and there should be one at every start-up business phase), this document should be used as the basis for planning a comprehensive enterprise support system that lasts throughout the business lifecycle. The lifecycle is a set of critical phases and or periods a firm goes through – ranging from the recruitment of quality staff, gaining product- market recognition, break-even profit margins and developing new products to maintaining market share in the particular sector the business is operating within. Each cycle of the firm’s demands a unique type of support measure whether that firm is a production or service entity. Firms that are gearing for growth and expansion into new product markets particularly, require tailored or customised support since despite their apparent experience, they are still inherently vulnerable to market forces. Failure to position themselves effectively in a particular sector that is highly competitive, could have dire consequences for businesses that may have tremendous growth potential, but lack key managerial, strategic and technical forms of support.
By their very nature business operations are unpredictable. A downturn in the economy, underinvestment and poor market judgement, can bring about disastrous results for firms with relatively small market share. This situation is common among micro firms in business segments such as catering, plumbing, electrical engineering and personal training among others, that might be operating in small ethnic neighbourhood markets where income levels are low and deprivation is quite high. Another consideration is the existence of distribution and supplier chains that might be pretty expensive or beyond the budgetary reach of micro business owners.
Official estimates from leading business agencies, suggest that less than 10% of minority firms access enterprise support and when owners do, their concerns are not dealt with effectively and therefore, there is much to be desired by advisors. The problem has to do with a lack of cultural orientation, limited knowledge and experience of particular sectors and business segments, inherent prejudice based on stereotyping, institutional weaknesses and confused priorities across the entire business and social enterprise support structures, locally and nationally. Scores of surveys have been done to test the effectiveness and efficiency of enterprise support agencies and their impact on business clients. Independent evaluations have also proved that there is a recurring trend in the way advisers deal with cultural and ethnic issues from a business standpoint.
The usual solution tends to be more `ethnic’ training', but can this alone help resolve an inherent flaw in non-culturally sensitive enterprise support systems? Again experience shows that no amount of ethnic training can guarantee optimum delivery by advisers especially if initially, they lack the necessary tools to make good of their job. Part of these tools should include sound education and training in conflict management, understanding multiple cultural systems, high level of experience in sector management techniques, quality technical expertise and the capacity to handle differences. If as it appears, enterprise agencies are only interested in focused `paper-type’ models to maintain their funding stream, then it is more likely that their determination to sustain a modern and practical sector-based enterprise support programme, will be undermined.
Indeed, businesses of all types do require consistently highly quality support; whether that support is in the form of information, advocacy, lobbying, training, procurement, quality control, organisational structure, marketing, customer relationship, production processes and so forth. The failure to implement a proactive sector model of enterprise support in the 21st century is a failure of policy-makers. It is equally too, a collective failure of both institutional providers and their operatives. More than anything else, it is a considerable loss for owners, managers and staff of businesses and social enterprises whose confidence, faith and trust in the system to deliver can be eroded.
Today, despite their apparent size and composition, cumulatively, SMEs make a sizeable contribution (more than 60% ) to economic development, including job creation, new knowledge bases, new product ideas and services, and most importantly a range of high level market segments. In this author’s estimation, these firms are `economic saviours’ in areas where community deprivation and the culture of social exclusion are enjoying a `field day’ at the expense of the Establishment.
© Christopher A. Johnson, April 2006