Gill South: Better management skills the key for small businesses

New Zealand's poor productivity record comes down to a lack of management skills among small to medium-sized enterprises (SMEs), says an organisation representing such companies.

"What is holding New Zealand back is a widespread lack of management and leadership skills among SME owners, which translates to disengaged workers and low productivity," says Grant Hally, chairman of the Independent Business Foundation (IBF).

The IBF believes New Zealand has too few large companies employing best-practice human resource and development programmes in which aspiring business owners can learn effective management techniques. And some small-business managers simply don't know what support is available, says Hally.

Euan Purdie, manager of business development at New Zealand Trade and Enterprise, commented on the issue last week: "We're very conscious that in order to grow, New Zealand businesses need to boost their skills - and that the courses on offer need to be as relevant and accessible as possible, to maximise the time allocated by busy people. There's an ongoing focus on understanding and addressing business needs, in order to grow the number of firms keen to build their capability - which is key to improving productivity and the capacity for growth."

There are some very good training programmes around, says Purdie. For SMEs, the first port of call is www.business.govt.nz. It contains details of business courses across a range of topics, from central and local government, chambers of commerce, Business New Zealand, regional employers associations and private training providers. Hally says one of the problems is that managers of small businesses get totally caught up in day-to-day issues and the pressure to meet deadlines.

"They don't take the time out to review where they are. They make decisions on the fly and in haste. If they sat down with their fellow directors or financial advisers, they may well have made a different decision. They don't seem to put enough time into the planning.

"A lot of these small businesses don't have many staff, they have got to be a jack of all trades and it's not working."

The chartered accountant suggests entrepreneurs should not be allowed to go into business unless they have some business training first, and IBF is lobbying the Government on this. "New Zealand is the least bureaucratic place for starting up a business, maybe people should have to pass a basic course [before forming a company]."

Hally says one idea is that there should be an incentive for entrepreneurs to do a basic course.

IBF trustee Ralph Penning says that for many SMEs, the solution can be found in systemising what they do.

Penning, a mentor for a number of businesses, recommends the Q-Base quality system - a lower level version of 1SO9000, specially designed for NZ's small companies. It makes you write everything down and it's not an expensive process, he says. "People operate haphazardly because they are under pressure; Q is well proven, it's a system of quality certification."

Meanwhile, Fred Stewart, a Tauranga-based company doctor with 30 years' experience and author of a number of books including Business Wise, is creating a number of business information DVDs for inexperienced managers, to be made available in the next three months. Acknowledging the lack of time these people have, he says a DVD is something they can sit down to at the end of the day with a beer.

He is putting the DVDs together with the support of banks including Westpac, the Government, Microsoft and Telecom.

SME managers need practical tips, he says. "We need to educate them on the risks of having their own business." Stewart, who works with the Registered Master Builders Federation and the Master Plumbers Association, says a new business does not to boost their productivity

cost very much to set up, but that's just the beginning: "It's a balancing act."

Many SME managers do not necessarily have tertiary educations, he says, "they just want to get on with the job". But they do need to systematise things and know the fundamentals of economics.

"It's about understanding patterns, the real basics," he says.

Steward cites the figures that 75 per cent of all new New Zealand business ventures fail within the first year and 95 per cent within three years.

"The people who fall by the wayside are those who think they know better," he says. Senior management in small and large companies can be quite arrogant, he believes. When Stewart goes in to do a turnaround, he "removes the barriers" in the operation. "If you want to find out what's happening, go and have a cup of coffee with the boys on the floor. Spend 50 per cent of your time walking, talking and listening," he says. However some senior managers just "throw rocks at people".

Stewart says that small business managers do know there are resources available, but are not using them because of time pressures.

The company doctor doesn't agree with making training mandatory before starting a business. He understands entrepreneurs just want to get on with things, and their ideas should not be held up.

"We are not getting enough entrepreneurs out there. They are the ones who come up with the ideas - you don't get many academics who come up with ideas," he says.

Stewart, whose website is www.businessdoctors.co.nz, warns that if inexperienced business owners turn to a business mentor for help, they should choose carefully. Some mentors are just doing it to earn some good consulting fees but have never had true success in their own right, he claims. Stewart says if he is earning $100,000 to help a company, then that company has to generate more than that. "Otherwise I'm not doing my job there."

"You ask most mentors to do that and they'll run a mile," he says.

Stewart says everybody should look at their business internally and there should be continuous improvement. "Although you never reach it, you are constantly working toward it," he says.

"The future of our country are the SMEs, not the corporates."

Better business

The Independent Business Foundation's recommendations for changing New Zealand business attitudes:

* Business incubators attached to every tertiary institution to provide management education.

* Business skills to be included in every apprenticeship training scheme.

* More emphasis on quality systems such as ISO and Q-Base.