Section 5: Access to Advice for Bulding Capability and Lifting Business Performance
Running an effective business requires marshalling knowledge about the day-to-day management of the many different functions of a firm, as well as about longer-term strategic issues. The practical skills and knowledge required to run a business are acquired through a host of mechanisms - formal training, on-the-job learning, mentoring, networks with other business owners, the expertise of employees, and external advice. If entrepreneurs and managers have difficulties in accessing or developing the necessary skills, this lowers economic efficiency and national productivity.
The time it takes to search for and analyse the information, and the limited capacity of firms to digest that information, means that entrepreneurs and small business managers often do not devote the resources required to seek out and acquire up-to-date information that might be beneficial to the business. These barriers could be overcome if access to information was made simpler and less costly3 and business operators were provided with better opportunities to acquire the skills and knowledge needed to improve their management capability.
Small businesses and entrepreneurs often cannot afford to employ all the expertise they need to get new concepts and projects up and running. They also tend to undervalue the potential contribution of expert advice on key elements of their business. Some fear that their ideas might be "stolen" if shared with others. However, without such advice, they are often unable to satisfy the requirements of investors, banks and other financiers for information, including business planning. As a result, small businesses often do not realise their full potential.
Mentoring: Management Issues
Mentoring can provide an invaluable service to SMEs, particularly in their early stages of development.
There are many mentors working throughout New Zealand, several through Business In The Community, and others operating privately or through "coaching" franchises. Many others, who are not involved in mentoring, including retired business people, would welcome the chance to pass on their knowledge to young businesses. Business In The Community already receives financial support from the government for its administration and is highly regarded for the services it provides. While the current Business In The Community customer survey shows good scores, there is still an inconsistency nationwide in the provision of "ideal" mentors. This is partly because of differences in the agencies recruiting mentors, and in mentors understanding their role. Also, many clients have unrealistic expectations of a business mentor. They often listen to the mentor's advice but do not take it, or don't have time to put it into practice. Therefore, expectations and perceptions need to be managed as well.
That funding be enhanced to Business In The Community and/or similar providers of mentoring services to upskill their mentors and mentor co-ordinators in order to provide a superior service to clients and to market their services.
Independent Advisory Boards: Governance Issues
An average SME owner is busy working in the business. They usually have an in-depth expertise in one particular area of their business: technical expertise in the products or services they are providing; marketing; or the financial management of the enterprise. Only rarely will they have the passion or skills to perform all those disciplines well.
Owners of large businesses normally have a group of specialist and/or independent advisors around them, including a board, in order to cover all the required business disciplines.
SMEs, too, could benefit from equivalent, impartial, external business advice.
That the government provide funding to
SMEs with growth potential to engage an Advisory Board to assist them in the governance of their business. The Advisory Board would typically comprise 2-4 people capable of bringing to the business an impartial eye and expertise the founder/owner does not possess.
Business Awards and Benchmarking
Businesses perform better if they know what better performance consists of and that higher levels of performance are achievable. They also respond to receiving recognition within their own community for their achievements.
These principles lie behind schemes and programmes aimed at providing enterprises with relevant benchmarked performance measures. Benchmarking systems that allow businesses to compare their performance to other similar businesses, and those that pass on information about the practices that may have contributed to the superior performance of the top-ranked firms, are particularly beneficial. The principles are also the reason we have so many national, and local, business awards. We consider that such benchmarking information should be more readily available to SMEs.
That the government support the use of existing and new local business awards programmes as a way of providing benchmarking information to firms.
Practical Tools to Assist Managers
Regulations are useless unless they are well known and understood by the audience to which they are addressed.
Small business owners do not have time to read the detail of legislation or policies. Instead they need practical assistance to make sure they have covered all the requirements of particular legislation and know how to comply with it.
The business regulatory environment can be complex and confusing. Often legislation and compliance processes are daunting and difficult to understand in the context of an individual business. More often than not the regulations have not been designed with SMEs in mind. Consequently a business owner may often avoid learning about how to comply unless forced to by law enforcement or circumstance.
Practical tools help to simplify and explain good business practices and provide support mechanisms that allow the business owner to retain knowledge and information to improve performance. Better knowledge levels lead to improved performance and practical tools provide short cuts to learning and competence.
Generally government agencies have a flurry of activity during the first round of communication of a new rule or programme - but this is not sustained, and new enterprises that start after that point cannot readily access the information they need. Too often the communication method is not suited to the SME audience or is confusing because of the different styles and approaches taken by the authors.
That there be readily and cheaply available to all
SMEs a checklist of things they need to do, and the assistance that is available, when starting and growing a business. Any help-sheets that are produced must be in a consistent and user-friendly format and be kept up to date.
Employment regulation and good employment practices are often perceived as posing insurmountable problems for SME owners. Generally they are not skilled in the complexities of staff selection and engagement. Assisting them in making better selection decisions should lead to enhanced business growth.
In recent months the Department of Labour has produced useful tools to assist businesses to establish and maintain good employment relationships with their staff. In particular, the Employment Agreement Builder located on their website is proving helpful and popular. As good human resources management is critical to SME prosperity, we would encourage the Department to make rapid strides to enhance all its aids, and pitch them at a level that suits SMEs.
That a complete checklist of issues to be considered when hiring an employee, together with supporting advice and guidance, be made quickly and cheaply available for businesses.
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