Today saw the publication of a report by Lord Young entitled ‘Growing Your Business’- one of a series of pieces by ‘The Dude’ (still don’t know why he has that nickname) to help Small Businesses in the UK. I have a lot of time for Lord Young, I’ve met him, and discussed a few ideas with him- so I know where he is coming from. On the whole it’s not a bad report with some good recommendations. Many of them have been touted for years, by people in the sector- but often it needs someone in the relevant position to push them through.
The report makes the usual comparison with the USA, stating the BIS rhetoric that ‘if we were as entrepreneurial as the US, we would have a million more small firms’ or if all the firms who employ people employed one more person it would transform the economy. Helping all the sole traders employ a person for the first time would do the same. I want to make a few comments in the general area as it is an area I know well. It is linked to the topic of graduates being employed in SMEs which is highlighted later in the report.
Some time ago (under a different government) I could not help notice, as did many people, the huge amounts of money being given to the start up ‘scene’ through the RDAs, down to Business Links and then to the various deliverers around the country. The problem was at each level a little was skimmed off for various costs.- and a little profit. Therefore at the ‘coal face’ of support, not as much money was getting through to support or start businesses as maybe it should have been- just my opinion. It annoyed me to see this happen, as it turned into an artificially state funded industry to support small business. I saw straight away that there may have been a better way to enthuse people into starting a business- and that would be to spend time in one. It also would have the added benefit of getting cash directly to the small firms. There is no better way to learning to do something- than actually seeing it done. It always bothered me as well, that there was a huge variation in the quality of advice given and the quality of advisers. I remember vividly observing a training event for an online tool that some advisers wanted to use and watching in disbelief as some of the advisers struggled to even turn a computer on. My opinion has always been that when services like this are awash with money- the quality often plummets as people need to spend the money quickly to avoid any ‘clawback’.
In 2008 I started a part-time PhD looking at the graduate experience in micro firms, and specifically whether it installed any ‘entrepreneurial intent’ in the graduate working in the micro firm. This was a direct reaction to what I outlined above, my thoughts were squarely around; if you place a graduate (or anyone for that matter) in a micro firm- does it make them want to run one, but more importantly do they learn what they need to know whilst they are there? I was theoretically thinking that if we gave a this vast amount of cash that was being spent through the RDAs on ‘business support’ directly to micro firms on the condition they employed someone for a period of time- it would do far more good than a couple of advice sessions with an advisor- and would probably cost pretty much the same. There were two real benefits to this:
1) The person being employed would have an experience second to none about life in a micro firm, learn on the job and see if it really for them
2) The business owner would have the relatively risk free experience of employing a person, get used to the idea and then find it easier the next time round.
This is a relatively simplistic explanation as there are obviously a few problems that would arise, but you can see the idea.
I’ll come to a few findings later (as I have not finished the PhD yet) but fast forward a few years and lo and behold we have things like the Start Up Bootcamp by NACUE and this very report mentioning these types of ideas. This is a real step in the right direction, but it is one that needs very careful navigation to get right.
Firstly, it takes a certain sort of person to work in an SME- particularly a graduate. On the whole SMEs pay less, have very informal processes (including recruitment), leave people to their own devices and require people to have much more general skills than you might in a corporate. If you want structure, progression and a fancy job title to impress your mum- forget it. I used to laugh when I had a corporate client who once asked me for my legal team’s names. I replied I was the legal team……I was also marketing, procurement, sales, regulation and any other business bingo word that they could think of. You cannot hide in a small firm as the impact you have is immediate. There is a slight paradox I think in this- less salary, but more responsibility. You get things wrong in an SME and it can cost livelihoods.
Secondly, in my experience most Business Schools are still teaching people for corporate jobs. Whenever I do guest lectures I always ask how many people want to work in a small firm- the answer is always the same…..hardly any. Why? Often because they have no idea what they are, or what they do- let alone how to get a job in one. Everything seems to be geared to corporate employment. Many business owners who do experience graduates will often comment how ill prepared they are for the world of work- SMEs do not have the time to prepare them, they have to be able to hit the ground running, and many can’t.
Thirdly, reference the two things above- given the choice most graduates seem not to want to work in a small firm. That really has to change. From the many graduates I have spoken to as part of my research, they loved the role at the beginning, but often when they saw friends in corporates earning more money later on, the lure was too much for them- and they were pulled down to London to try and get a corporate job. They did leave however, arguably far more entrepreneurial and ‘rounded’ than they might have been otherwise. In the same vein, I have seen many graduates over the years take steps to start a business, then apply for a job in a corporate with the lure of money and benefits- to then regret it 4-5 years down the line.
So for me, they whole ‘getting people employed in small firms’ is a good one- but there is an awfully long way to go. For many, I think it actually starts at school. We as a nation are bombarded by everything corporate, our lives are very much controlled by them- small firms actually offer choice in many cases and keep money in local economies. At every stage people should not only use, but champion small business- making them more visible. If they are the ‘life blood’ of the economy, let’s make sure they know that. Universities and colleges need to do much more to get students experienced in small firms. Whether that be working in one, running one on a simulation game like Simventure as part of their education, helping one with consultancy and getting SMEs involved and embedded in everything they do. Here are three small recommendation based on some of my PhD work:
1) Every business school and college in the country should have an SME council of local business helping to steer the learning and experiences of students to focus on SMEs and not corporates. Those people with skills for SMEs can easily work in a corporate, but it does not work so well the other way round. KTPs and link ups with SMEs are great- but it is the real experience of running and working in one that is needed. Placements have always been a great way to do this.
2) Start Up support should focus on giving everyone a real experience in a small firm before they start up- it gives the firm an experience of employing someone, and it gives the person insight into what it is like running one. Mentors are a good idea- but they often lack real experience of micro firm management. Again in my opinion, if you can’t do this in reality- again software like Simventure can play a good role in giving you the emotion of running a business.
3) Small firms need help with recruitment. The process is often informal- as SMEs are resource poor. Setting up local talent pools of people looking to use their skills in small firms is paramount to getting them in the small firms, but also if they leave, it helps replace people quickly. Saying that, for many firms the actual recruitment process is not the problem in terms of ‘red tape’ it is the fear of having to get rid of someone that often is the cause for concern. What can we do about that?
Working in a small firm is good fun- yes, it might not pay as well, and it might not have all the structure that a large firm does, but it is very rewarding. You immediately see the impact you have, and decisions can really affect what happens. It is a bumpy ride sometimes, and you fly by the seat of your pants much of the time- but I for one would not change that for anything. I have worked with many corporates and I have sat in on meetings so many times listening to internal politics – and been so happy I work in a small firm, where politics often extend to who is going to the shop to buy the milk……