ENTERPRISE AND MANAGEMENT DEVELOPMENT WORKING PAPER EMD/19E
TRAINING AND DEVELOPMENT OF ENTREPRENEURS-MANAGERS OF SMALL ENTERPRISES: POINTERS AND LESSONS LEARNED
by A. TOLENTINO
One of the most common components of a small enterprise development programme is the training and development of the entrepreneur-managers. This is understandably so because of the key roles that they play in the operations of small businesses. Entrepreneur-managers are so closely and intimately identified with their small businesses that business development is almost synonymous to entrepreneurship-management development and vice-versa. A competent entrepreneur-manager is one -if not the most- important determinant of the success of a small business.
This paper is primarily intended to provide trainers and consultants with a concise reference material on the training and development of entrepreneur-managers of small enterprises. It synthesizes and distills the lessons accumulated by many small enterprise development organizations and specialists over long years of experience in promoting the development of small enterprises. Entrepreneur-managers can also use some of the materials contained in this paper for self-assessment. While it touches on some of the interventions often needed for the development of small enterprises e.g. development of enabling business environment, making legal and regulatory requirements less constraining and making access to supportive institutions easily available, it is not the intention to cover these other supportive and promotional interventions in detail. Those interested in these areas could refer to some of the works listed in the References e.g. ILO (1986, 1995), Tolentino (1995) and Theocharides and Tolentino (1991).
A number of well known training packages have been developed over the 40 years or so of small and medium enterprise promotion. Some have gained widespread use or have developed a number of variants and adaptations to local conditions. It is not possible to feature in a short paper such as this all of the more well-known (sometimes branded) packages. What was attempted however, is to highlight key features that are crucial in making training and development of entrepreneur-managers effective.
In preparing this paper, the author benefited from useful comments and suggestions from many colleagues in the Entrepreneurship and Management Development Branch and ILO Multi-Disciplinary Advisory Teams. Special thanks go to Mr. Masaru Ishida, Director of the ENTERPRISE Department of the ILO who, drawing from his own actual experiences in running small businesses, gave very valuable observations, comments and suggestions on the initial draft of this paper. The author also wishes to acknowledge Ms. Gabrielle Thevenon's formatting of the manuscript for publication.
TABLE OF CONTENTS
1. Introduction 1
2. Competencies required of entrepreneur-managers of small enterprises 2
2.1 The roles and functions of entrepreneur-managers of small enterprises 2
2.2.1 Entrepreneurial functions 3
2.2.2 Managerial functions 5
2.2 Unique features of small business management 8
3. Training and development needs of entrepreneur-managers 12
3.1 Needs at various stages in the life of the business 12
3.1.1 Conducive and enabling environment 14
3.1.2 Awareness and pre-start-up 15
3.1.3 Business start-up 18
3.1.4 Survival and strengthening 19
3.1.5 Growth and expansion 20
3.2 Needs of modern small enterprises in local and global production networks 21
3.3 Particular training requirements and constraints 23
4. Guidelines for effective training and development of
entrepreneur-managers of small enterprises 24
4.1 Pointers for effective training and development 24
4.2 Designing effective training and development programmes 25
4.2 Competencies required of trainers and organizers of training and
development programmes 26
5. Training and development approaches 30
5.1 Individual based approaches 31
5.1.1 Information sessions and awareness-raising seminars 31
5.1.2 Short formal training courses 31
5.1.2 Combined training and counselling approach 32
5.2 Group-based training and development 34
5.2.1 Study visits 34
5.2.2 Interfirm comparison and benchmarking 34
5.2.3 Business clinics 35
5.2.4 Action learning workshops 35
5.2.5 Combination of individual and group-based approaches 35
5.3 Integrated sector-specific approaches 37
5.4 Learning networks and clusters 37
Annex 1 A Framework for Generic Trainer Competency 44
Annex 2 Diagnosing training and development needs of entrepreneur-managers 45
A competent entrepreneur-manager(1) is one - if not the most - important requirements for the success of a small enterprise. The total performance of the business is mainly determined by the attitudes, decisions and actions of the entrepreneur-manager.
The definitions of small enterprise (SE) vary among countries and regions and are usually based on such criteria as number of employees, size of investments in plants and machineries and volume of production or sales. The definition adopted by a particular country is usually based on specific national context, e.g. the size-structure of enterprises in the industry sector in which the business operates, and on the use and objectives for which the definition is formulated e.g. for policy and legal framework, promotional and administrative purposes, etc. One characteristic however, that clearly sets-out small enterprises from medium and large ones is the management structure and system of the enterprise. Small enterprises are closely linked with the practice of entrepreneurship and where the strategic and operational management decision making primarily rests with one or two persons who, most often than not, is/are owner(s) of the enterprise. The independence of the small enterprise is also a criterion, i.e. not being a subsidiary or production unit of a larger firm. In the European Union for example, an enterprise cannot have 25% or more of its control in the hands of a larger enterprise for it to be considered as small enterprise.
Small enterprises, although very often referred to as a sector in business development literature, are very heterogenous. While some generalizations can be made concerning the characteristics of small enterprises, it is best to keep in mind that small enterprises vary in size, in the type of business they are engaged in, in the industry sector they are operating in, in the products and services produced, in the processes and level of technology used, in the specific community and business environment where they are located, etc. Thus, in addition to generic competencies, there will be particular capabilities, knowledge and skills that will be required of the entrepreneur-manager based on the specific characteristics of his or her small business.
There is very close and intimate identification between the entrepreneur-manager and his or her small business. The development of the competencies of entrepreneur-manager is closely linked to the development of the small business and the development of the business invariably requires the development of the competencies of the entrepreneur-managers. This very close identification of the person and the business leads to particular and specific nature of the resulting management style, systems and practices in the small business. Different stages in the life cycle of the enterprise require specific competencies and capabilities of the entrepreneurs manager which must be considered in formulating and implementing training and development interventions. The entrepreneur-managers also have particular orientation, preferences and constraints that must be taken into consideration.
Correspondingly, various non-training interventions aimed at developing small enterprises have direct impact on the development of the competencies of entrepreneur-managers. These non-training interventions can be at enterprise level (e.g. counselling and advising services, technology development and transfer, information collection and dissemination, and business linkages and collaboration promotion), at the intermediate (meso) level where capacities of support business development institutions are built and strengthened, and at the macro level i.e. building the enabling policy framework, creating a conducive business environment and eliminating barriers and administrative burdens imposed by the legal and regulatory system. Viewed broadly, these interventions can be seen as all aimed at developing and enhancing the capabilities of the entrepreneur-manager to start and operate a successful small business by creating enabling conditions where entrepreneurial bent can be exercised better and easier and where supportive institutional and business linkages are available to help acquire and/or develop the required managerial competencies.
The effective training and development of entrepreneur-managers requires particular competencies from the trainers and those who are organizing the programme. Not only must they have the technical knowledge and abilities, but they must also have the attitudinal, behavioural and personal competencies that will enable them to deliver the programme and the specific training intervention in such manner suitable to the learning process and preferences of the target group. In general, the training and development programme will consist of not just one standard, structured training intervention but will be made up of combinations of training and development approaches which are flexible and can be modified as the programme progresses.
Section II of this paper presents the roles and functions that an entrepreneur-manager performs in setting-up and operating his or her business. Based on these functions and the stages of the business development process, the competencies required of the entrepreneur-manager are discussed in Section III.. The competencies required of those running modern small enterprises which are participating in domestic and global networks and value chains are also presented. Section IV gives pointers and guides in the development and delivery of effective training and development programmes as well as the competencies required of those who will be organizing and delivering the programme. Finally, in Section V, some examples of training and development programmes are presented.
2. Competencies required of entrepreneur-managers of small enterprises
The management structure and independence of a small enterprise put the entrepreneur-manager in the most critical position in the running of the enterprise. The success and failure of the business depend entirely on the person's competencies. Various studies on mortality, survival and growth of small enterprises have found that failures of small businesses are mainly due to poor entrepreneurship and management.
2.1 The Roles and Functions of Entrepreneur-Manager of Small Enterprise
Entrepreneur-managers of small enterprises perform two distinct yet closely intertwined functions: entrepreneurship and management. These functions are so imbedded in each other that it is very difficult in practice, specially in the running of small enterprises, to distinguish and separate them. It is only for the purpose of analysis that these two groups of roles and functions are discussed separately here.
2.1.1 Entrepreneurial functions
There are many theories and views on what makes a person an entrepreneur. At one extreme is the view that an entrepreneur is born already endowed with the entrepreneurial traits of enterprise and business acumen. At the other end is the view that any person can become an entrepreneur when placed (or forced) in a situation which provides the opportunities (or requires) the practice of entrepreneurship. The experience and studies during the over 40 years of active entrepreneurship and small enterprise development promotion show that in reality, the development of entrepreneurial traits and behaviour is somewhere in between these extremes, leading to widespread practices of entrepreneurship education, training and development and the creation of conducive and enabling environment for the start-up and growth of enterprises.
Entrepreneurship is the quality which enables people to start a new business or vigorously and innovatively expand an existing one (Harper, 1983). Entrepreneurs are known to exhibit (always or at any particular time) some or all of the interrelated characteristics shown in Table 1. These qualities enable them to seek-out business opportunities, conceptualize and initiate business projects, gather the physical, financial, and human resources needed to start the business, set goals for themselves and their enterprises and guide the enterprise and its people to accomplish the goals.
Profile of An Entrepreneur(2)
PROFILE OF AN ENTREPRENEUR
Belief in own ability
Strong will power
Persistence and perseverance, Determination
Hard work, drive, energy
Risk assessment and judicious risk taking ability
Gets along well with others
Responsive to suggestions, criticism
Concern for other persons
Develops other people
Flexible (open minded)
Foresight, vision, perceptiveness
Entrepreneurs, being persons having internal locus of control (Ward, 1993), provide the driving force behind the small businesses based on their belief that their behaviour and action, rather than outside factors beyond their control, determine the outcome of any endeavour. They believe that environmental factors and their changes can be influenced and managed for business development. These beliefs are the source of the self-confidence in their exercise of the leadership of the small business. They provide the insight and the vision, being perceptually alert and having high ability to see opportunities and threats in the environment. This ability to recognize business opportunities and develop them makes them the source of innovations -in products and services, in new processes and work organization, in marketing and distribution, in business practices- of the enterprise.
The entrepreneur provides the links of the small business to its environment, relying on informal and formal networks of family members, friends and business people for information, support and resources essential to the start-up and running of the small business. These networks of individuals and businesses are vital to perceive opportunities, test ideas, acquire information and knowledge on best practices, and mobilize resources to create the new enterprise. They help the entrepreneur and the small business keep abreast of current trends, get to know of new technologies, assess changing customer trends and develop new ways to manage and solve problems (Tjosvold and Weicker, 1993).
The competencies required to perform these entrepreneurial functions effectively are:
·perceptiveness the ability to be alert for and identify new business opportunities
·analytical ability the ability to analyse an opportunity or a problem situation, to be able to look at the situation holistically and to break it down into components allowing the analysis of cause and effects and other relationships;
·decision making identification and evaluation of alternatives and selection of what appears to be the best solution or course of action to take;
·learning ability the ability to derive lessons and insights from experiences and to apply these learnings to other situations;
·initiative the ability to be self-driven and motivated and to keep on going without waiting to be told to do so by others;
·empathy the ability to identify oneself mentally with customers, clients, suppliers, competitors, service providers and other stakeholders in the business environment thus comprehending better their needs, expectations, apprehensions and requirements;
·persuasion the ability to communicate with others (customers, suppliers, partners, workers, government officials, etc.), make them understand and convince them on a particular proposition;
·negotiating ability the ability to discuss the various sides of an issue or proposal and strike agreements that are mutually advantageous and acceptable to all parties involved;
·networking the ability to establish linkages with other business persons and other stakeholders for mutual learning, collaborative undertakings and other joint activities aimed at achieving common objectives.
While these abilities are developed and honed through practice and experiences, they could also be developed by proper training e.g. through training approaches that provide opportunities for exercises and practice in business environmental scanning and analysis, market opportunity identification, creativity and innovation, problem solving techniques, communication, persuasion and negotiation and actually going through the various phases of starting the business.
2.1.2 Managerial functions
The traditional functions of managers are planning, organizing, leading and controlling. Under these general functions are specific activities and techniques which in a small business are performed essentially by one or two persons:
·Planning - analysis of the business environment, appraisal of the performance of the business, defining the goals and objectives of the business, deciding on the best route and ways of achieving them, allocating and budgeting the resources required in the performance of the work and tasks involved, and preparing contingency plans for various possibilities.
·Organizing - structuring how and where the various functions, work and tasks are to be done and how they will interact and relate with each other, coordinating the activities of the various units of the organization, and assigning responsibilities and authorities to people and groups for carrying out specific duties and tasks.
·Leading - motivating, enabling and drawing-out the talent of the people to achieve the goals of the small enterprise through good communication, building of trust and confidence, creation of the organizational climate for good performance and development of their capabilities, skills and competencies.
·Controlling - making sure that the performance is according to plans and expectations through establishment of standards of organizational and individual performance in key result areas, monitoring and measurement of actual performance and results, comparing actual performance versus expectations and taking corrective actions whether to adjust performance level or modify standards where necessary.
The entrepreneur-manager of the small business performs these managerial functions in all the key functional areas of the business i.e. marketing, finance, production, personnel, etc. Depending on the scale and complexity of the business, the entrepreneur-manager must have the required degree of competence in managing particular functional areas. An illustrative list showing how these four basic managerial functions are performed in some key areas of business is given in Table 2. The level of complexity of the functions will of course be determined by the size and complexity of the business operation. Micro enterprises in traditional sectors will involve much simplified and integrated functions whereas relatively larger modern small enterprises will have more complex and differentiated managerial functions and tasks.
Functions of Managers of Small Enterprises
Marketing & Sales Mgt
Production & supplies Mgt
Human resources/personnel Mgt
1. Establishing over-all management philosophy
2. Evaluation of the business environment and identification of opportunities and threats
3. Analysis of interests and concerns of customers, employees, suppliers, competitors, and other stakeholders
4. Setting of qualitative and quantitative medium and long-term business goals
5. Formulation of the over-all business strategies and the corresponding investment plans, financial plans, human resource management plans, etc.
6. Development of strategic management information system covering various aspects of the business e.g. development in the business environment, marketing, finance, production, personnel, etc.
1. Identification of the markets for the enterprise's products and services
2. Analysis of competition
3. Specification of the needs and requirements of target customers
4. Development of business identity and product concept to be projected
5. Determination of the size of potential demand by existing and new customers
6. Establishing sales targets e.g. by target customers, products, distribution outlet, sales persons, etc.
7. Developing the strategies (pricing, presentations, promotions, etc.) to achieve sales targets
8. Distribution network planning i.e. wholesalers and retailers
9. Setting-up sales information system
1. Based on sales targets, determine product specifications
2. Specify how the product or services will be produced,
3. Determine what equipment will be needed and how the plant or office will be laid-out.
4. Preparation of the production schedule specifying what will be produced, how it will be produced, and how much and when to produce.
5. Determining the required inputs (materials, sub-assemblies, packaging, etc.) of the production schedule
6. Preparing an estimate of the production costs
7. Preparation of inventory and stocking plans according to forecasted sales and supplies consumption
8. Developing supply sourcing strategy e.g. make or buy components, sub-contracting, etc.
9. Setting-up of good supply and stocks management information
10. Establishing system for managing
quality of products and supplies
1. Determining the needed amount to finance the acquisition of fixed assets and costs of running the business (current as well as future requirements)
2. Determining the alternative sources of funds for the setting-up and/or running the business.
3. Setting of financial goals
4. Preparing projected income statements, balance sheets, funds flow, and other financial plans
5. Determining appropriate mix of equity and debt financing
6. Preparation of budgets
7. Preparation of working capital and cash flows projections and plans
8. Setting-up of financial information and reporting system allowing good tracking of financial positions particularly cash flows and liquidity positions
1. Determining the competencies and skills required for the current and future operations of the business
2. Determining the appropriate forms and ways of organizing work, functional relationships, and other organizational structures of the small business
3. Preparation of the staffing plan
4. Preparation of staff development and training plans
5. Formulation of personnel philosophy and policies
6. Establishing communication, team building, organization development and labour relations strategies
1. Setting-up of the business structure
2. Formulation of over-all business policies as well as policies on specific areas of the business e.g. marketing, finance, investment, personnel, technology, etc.
3. Maintaining good liaison and relations with the various stakeholders of the business: customers, partners and stockholders, workers, creditors, suppliers, government, etc.
1. Setting-up the marketing and distribution system
2. Assignment of marketing and selling tasks to specific persons
3. Training the sales persons and teams
1. Assignment of specific production tasks to specific persons and production teams.
2. Make sure that the different functions e.g. purchasing, stock control, maintenance, etc. are synchronized and coordinated to meet production targets
3. Training of staff to meet skills required to deliver the quality and quantity required
4. Establishment of supplier network
5. Setting-up inventory and stock keeping and control system
1. Allocation of various funds to the anticipated uses
2. Acquisition of the needed funds and capital for present and future requirements
3. Maintaining mutual trust and good liaison and relations with bankers, creditors, partners, and other providers of funds
1. Identification, selection and recruitment of the staff
2. Assignment of tasks, functions, responsibilities and authorities to specific individuals
1.Providing the guiding vision of the enterprise
2. Communicating to the stakeholders the mission, philosophy, goals, objectives and strategies
3. Motivating the staff of the business
1. Motivating the sales team and the staff of the whole organization to achieve sales goals
2. Monitoring performance and providing advice and guidance
1. Motivating the production teams
2. Insuring coordination among the various production related functions
3. Encouraging staff to continuously improve productivity and quality
4. Maintaining good communication and relations with suppliers
1. Communicating to the staff the financial goals and targets of the enterprise
2. Motivating the staff to meet the revenue, costs and other financial goals
3. Insuring coordination of the various functional plans and operations to meet financial goals
1. Communicating to the staff the philosophy, goals, business strategy, etc.
2. Setting and performance targets
3. Providing feedback on business progress, results and evaluation
4. Creating the necessary work environment, work organization and interpersonal relationships to enable staff to perform productively
5.Training and development of the staff
1. Appraisal of the over-all performance of the business and comparing to plans and possible levels of performance
2. Identification of the key factors influencing the over-all performance of the enterprise
3. Identification of any reasons for any deviation of actual business performance from what was planned or expected
4. Taking of corrective actions in the form of revised strategies, adjustments in internal operations, or influencing the external factors.
1. Monitoring sales result and comparing with targets
2. Determination of the reasons for any discrepancy between expected and actual sales
3. Taking of corrective action to meet targets or achieve revised levels
4. Rationalization of target customers, product mix, sales efforts, etc.
1. Monitoring production quality and quantity and comparing with plans and targets
2. Determination of any discrepancy between planned and actual production: quantity, quality, timeliness, costs, etc.
3. Taking of corrective action to meet targets or achieve revised production levels
4. Monitoring and evaluating suppliers' performance
5. Strict control of over and under stocking of products and supplies
1. Monitoring of revenues, costs, interests payments, receivables, payables, cash flows and other financial results and comparing them against targets
2. Determination of the reasons for any discrepancy
3. Appraisal and rationalization of creditors and debtors
4. Taking of corrective actions
1. Monitoring of actual performance and comparing with expectations
2. Discussions and consultations with concerned staff to determine the causes of performance variances
3. Taking the necessary actions to enable the concerned staff to meet expectations
With the advent of new forms of enterprises and new forms of work organization, new managerial functions and required competencies also arise. The highly dynamic and competitive globalized business environment has given rise to new forms of enterprises -lean enterprises- that operate based on core competencies and rely on networks of suppliers and sub-contractors for sub-manufactures, components and support services. These enterprises are specialized yet flexible and adaptable, able to switch from one product model to another as demanded by the very dynamic market. New forms of work organization are also coming-up. Internal work organizations are becoming less hierarchical with less rigid job specifications and differentiations. Work groups are transforming themselves in learning organizations that are constantly learning and applying the knowledge and insights gained from earlier experiences to improve their operations and practices. Production work are organized in self-managed cells, which -to some extent- are making their own decisions on task distribution and work schedules. Production systems are increasingly knowledge-based, making human resource the key asset and determinant of enterprise competitiveness.
Under these changes in the business environment and in the organization and operations of businesses, managers and supervisors are now more process management focused, ensuring that the different business processes and interactions (internal and external) are operating properly to achieve desired results. Their functions are now seen to include:
·Enabler - developing the competencies of people and creating the work organization and environment that will enable them to achieve high performance.
·Facilitator/coordinator - creating linkages and relationships among individuals and work units that will facilitate the performance of the tasks and activities of the whole organization.
·Communicator and negotiator - making clear to those concerned the organizational goals and targets and ensuring acceptance and commitments.
·Change manager - preparing people and the organization for the constant process of change that production and organizational flexibility require.
·Internal consultant - providing individuals and work teams with advice and assistance in problem-solving and effecting improvements.
Entrepreneur-managers, particularly those of modern small and medium enterprises (SMEs), must increasingly be competent in these new managerial roles. The highly competitive and dynamic markets require that their businesses be even more flexible than before and are able to adapt quickly to the needs of the market. Increasingly, small and medium enterprises are becoming part of a more complex network-based production system through sub-contracting and supplier relationships. To be able to survive and prosper in this dynamic and flexible network, SMEs must themselves adopt work organizations and norms that are geared for constant process of change. Even independent SMEs who are producing good and services sold directly to end consumers must also make their businesses customer-oriented and be able to respond quickly to rapidly changing consumer tastes and preferences.
2.2 Unique Features of small business management
Entrepreneur-managers are closely and intimately identified with their small businesses such that business development is almost synonymous with entrepreneur-management development and vice versa. Because of this close identification, the cultural background, personality, preferences and behaviour of the entrepreneur-manager and the characteristics of the small enterprise e.g. size, sector, technology level strongly influence each other, leading to very specific and particular management practices. That is why it is not appropriate to make sweeping generalizations on the training and development needs of the entrepreneur-manager and his or her enterprise. Any training and development intervention must be based on careful needs analysis and the understanding of the particular requirements and situation of the target individual or group. This is particularly important when undertaking small business management development in specific country, industry or community.
Table 3 gives some characteristics of small enterprises and their possible implications in the management style and practices in the firm (El-Namaki, 1989). The most important characteristic that differentiate small business management and that of large enterprises is the close link of the entrepreneur-manager and the business. The small firm's management process cannot be separated from the personality set and experience of the person (s) running the business (Jennings and Beaver, 1997). The personality and behaviour of the entrepreneur-manager are reflected in the management systems and practices in the firm. The person's entrepreneurial traits such as creativity, achievement motivation, perseverance and risk taking ability are combined with personal idiosyncrasies such as approach to control, attitude to structure and standards, view of the environment, need for recognition, etc. These will strongly influence the way the business is organized and managed, and the person's preferences, prejudices and attitudes will determine the management style, structures and processes, and the interpersonal relationships within the enterprise. His or her professional and technical background and personal interest will dictate the priorities and tasks assignment, and will determine the entrepreneur-manager's degree of involvement and time allocation in the performance of the various managerial and operational business activities. For example, a person with technical background would be involved more in the production activities whereas someone with an accounting background will pay more attention to finance management and control.
Major management implications of characteristics of small enterprises(3)
management styles and practices
Close link between the personality and behaviour of the entrepreneur and the small business
High degree of centralization
Personalized management style
Strong personal loyalty considerations
Lack of succession plans
Shortage of time for management and other tasks
Close link of the small enterprise to the family, immediate community
Strong influence of the family and community culture
Informal approach to personnel recruitment and development
Informal approach to management control
Small size of business operations
Simple and flexible processes and systems
Multi-functional role of the entrepreneur-manager
Informal communication and record keeping
Close relationship with the workers
Strong reliance on on-the-job training
Easier integration between policy and practice
Shortage in management and other resources
Narrow financial resource base
Stress on operational issues of management
Preoccupation with finance as a functional decision making area
Limited strategic planning
Focus on short-term results
Limited internal technological base
Dependence on knowledge and knowhow of particular individuals
Need for continuous technology acquisition and transfusion from the outside
Even the concept and criteria defining the success of the business cannot be dissociated from the person's personal goals, motives and reasons for undertaking the business. For example, while many would attribute profitability, expansion and growth as measure of business success, some artisan entrepreneur-managers may prefer to keep the business small and simple to maintain personal control, have a high degree of freedom and allow for more artistic expression.
By extension, there is also closer involvement and linkage of the business with family, immediate community and other social and business circles of the entrepreneur-manager. Cultural traits and values of the entrepreneur-manager's family and community strongly influence managerial practices and systems in the small business particularly in the area of personnel management and interpersonal relations. For certain communities, culture, traditions and religion have direct impact on the culture and values of the enterprise. At the extreme, specially for very small enterprise, the separation of business and family concerns is often blurred.
The small size of the business brings with it advantages such as simple structures and processes that allow for greater flexibility, adaptability and dynamism, and disadvantages like shortness of resources and shallow bench of managerial and technical competencies. While the small size of the business offers some degree of independence and higher degree of control, it also presents greater business and personal risks to the entrepreneur. These size-related advantages and constraints lead to the entrepreneur-manager doing management of practically all of the functional areas (marketing, finance, production, etc.) and even to perform some of the jobs in the production floor. While this requires and enables the entrepreneur-manager to have a holistic view of the business and to have a more centralized control, it however exerts tremendous demand on his or her time and makes it very difficult to be away from the business for an extended period of time. Supervision and control are informal and personal, communication is direct and business records are often minimal if not non-existent. The small enterprise generally rely on the technical knowledge of the entrepreneur-manager, of a technical partner or key employees thus limiting its capacity for innovation and upgrading of processes and product quality. This could limit the enterprise's ability to adjust to changing market needs. Financing of the enterprise is mainly based on the resources of the entrepreneur and his or her family, close associates and through funds generated from its operation.
The smallness of the enterprise means a narrow resource base, making the management focus on the short term, day to day operations of the enterprise, and limits or discourages long term strategic orientation. Management becomes primarily an adaptive process concerned with adjusting a limited amount of resources in order to gain the maximum immediate and short term advantages, and where efforts are concentrated not on predicting but on controlling the operating environment, adapting as quickly as possible to the changing demands of that environment and devising suitable tactics for mitigating the consequences of any changes that occur (Jennings and Beaver, 1996). The very essence of small company management, is the entrepreneur-manager's personal day to day handling of transactional and other relationships with customers, marketing channels, suppliers, bankers, workers, regulatory authorities, peers, friends, family and other stakeholders in the business environment (Gibb, 1997).
These unique features of small enterprise management mean that the competencies required of the entrepreneur-manager include not only managerial skills in the various functional areas but, more importantly, the ability to manage the complex and diverse interactions with the various agents and stakeholders in the business environment. For this, behavioural and interpersonal competencies are very important. In addition, the ability to gather and organize information and to learn from the interactions with the key agents in the environment is essential. The real challenge of the training and development of entrepreneur-managers is to raise their ability to learn from experiences and derive from them insights and knowledge that are relevant in managing future interactions and transactions. Indeed, in running a small business, the tight and synergistic combination of entrepreneurial and managerial competencies are required.
These peculiarities of the personality of the entrepreneur-manager and of the management systems and practices in small business will require care and attention on the very important aspects that will determine the success of the management development interventions: in the needs and problems identification and analysis, programme strategy and approach, design and content of specific training and capability building intervention, programme delivery, ensuring compatibility with the background and culture of the target individual or group, and in deciding what mix of training and non-training interventions to use.
3. Training and development needs of entrepreneur-managers
3.1 Needs at various stages in the life of the small enterprise
The knowledge, attitudes and skills needed by the entrepreneur-manager will vary at different stages in the life of his or her small business. The competencies required to conceive and start a small business will be different from those needed to make the enterprise survive, be profitable and grow. At the stage where the business is transforming from small to a medium enterprise, the attitudes, management style and competencies required will be totally different. A concise (but admittedly incomplete) list of the training and development needs of the entrepreneur-manager and his or her small business is presented in Table 4.
Training and development interventions must always address the needs of the particular target group. These needs will vary depending on a number of factors e.g. the sector, location, size and stage of development of the business, and the starting competency level, learning style, and learning resources of the entrepreneur-managers. Needs are also not static: they will change according to changes in the situation of the business and the changes in the business environment. The conduct of good needs assessment (Appendix 2 gives some approaches to assessing needs) is therefore crucial to the success of training and development interventions. It is important to not only be able to identify the needs but to be able to differentiate the real from the "wish" needs. The Committee of Donor Agencies for Small Enterprise Development (1997) identifies three types of needs:
·Felt/perceived needs: these are what the entrepreneur-managers perceive and say as their needs and reflect their own analysis of their own and their businesses' situation;
·Objective needs: these are the needs identified by the trainers, consultants and experts through their analysis and understanding of the SMEs' situation; and
·Demand: implies that entrepreneur-managers are prepared to pay for services addressing the needs (felt needs plus a willingness to pay).
The Committee advises that in general, training and development services should be based on demand from small and medium enterprises i.e. entrepreneur-managers feel they need the service and are prepared to pay for it. This priority towards being demand-driven should not be strictly interpreted to mean however, that demand identified through objective analysis by trainers, consultants and other experts should not be addressed. It is clearly not the case that entrepreneur-managers always know what it is in their best interest. They do not have perfect knowledge of all the factors pertaining to their businesses e.g. new products and market opportunities, development in the legal and regulatory framework, technology trends, and business practices and tools and techniques. In this case it is advised that interventions based on an analysis of the external situation of SMEs may well have to include educating and convincing the entrepreneur-managers of the potential benefits of the intervention.
Table 4 DEVELOPMENT NEEDS OF ENTREPRENEUR-MANAGERS AND THEIR SMALL ENTERPRISES
ENTERPRISE DEVELOPMENT PHASES
CONDUCIVE AND ENABLING ENVIRONMENT
AWARENESS AND PRE-START-UP PREPARATION
SURVIVAL AND STRENGTHENING
GROWTH AND EXPANSION
1.A supportive policy and regulatory environment which provides:
- rewards and incentives for entrepreneurial ventures;
-equal treatment and level playing field for large and small enterprises, and
- positive encouragement and support to small enterprises.
2. A supportive network of institutions providing assistance in matters such as:
a) market development and linkages
b) entrepreneurship and management development
c) product design and improvement
d) technology and process improvement
e) access to finance
f) accounting, auditing, taxation and registration services
g) skills training
3. A networking among enterprises of various sizes e.g. local enterprise associations
4. An enterprise culture that provides:
a) community support and encouragement on entrepeneurial ventures
b) network of business community contacts and linkages
c) opportunity to be exposed to the practice of
1. Motivational and behavioural reinforcement for the practice of entrepreneurship, enhancing entrepreneurial traits and skills.
2. Opportunities for exposure and familiarization to the entrepreneurial and managerial tasks and rewards involved in setting-up and running a small business.
3. Access to information on products and market opportunities
4. Access to information on resources possibilities and availabilities.
5. Access to information on relevant promotional and incentive schemes as well as existing legal and regulatory system
6. Self-awareness and assessment of own motivation and capacity to go onto business
1. Refinement business concept and validation of the market opportunity and product ideas.
2. Need based training on how to start a business covering
a) entrepreneurial motivational reinforcement;
b) basic business techniques and systems and how to manage a small business in general, on product and financial management in particular
c) refinement of management and business philosophy and identity
d) building networks (know who) and exposures to the real world of business
e) how to prepare a business plan/ feasibility study.
3. Competencies and capabilities on how to access and use:
a) market information
b) technical information
d) credit and finance
4. Information on sources of managerial, technical and financial assistance.
5. Information on relevant laws and regulations.
1. Continuing management development particularly on the various functional areas of managing a small business and in the performance of the managerial skills.
2. Know-how and skills on improving quality and productivity
3. Improvement and upgrading of the various internal management systems e.g. marketing, finance and production systems.
4. Technology and process upgrading.
5. Information and assistance in product improvement.
6. Access to additional fixed and working capital.
7. Information on the business trends and other developments in the business environment
8. Expanded "know-who" in the business environment
9. Networking and linkages with key stakeholders
1. Improvement in capability for strategic management.
2. Access to new markets: domestic or export, and know-how on how to conduct business in these markets.
3. Access to new technology and processes.
4. Access to additional credit and finance.
5. Ability to operate in a broader business environment.
6. Developing entrepreneurial and managerial capabilities to manage the transition from a small enterprise to a medium enterprise which involves more functional specialization, managerial decentralization and greater degree of delegation
7. Development of capabilities for human resource management and good labour-management relations
8. Linkages to broader network of stakeholders in the business environment
3.1.1 Conducive and enabling environment
The capability building of entrepreneur-managers starts with the creation of a conducive and enabling environment for small business creation and development. Such an environment not only encourages the start-up of new business and nurtures its development, but it also provides the learning environment, stimuli and opportunities for entrepreneur-managers to continuously pursue, at all stages in the development of their small businesses, self-development and enhancement of their capabilities.
It is now widely recognized that a conducive and enabling environment is crucial to the development of small enterprises (Tolentino, 1995). The over-all macro and micro economic framework, the legal and regulatory environment as well as political climate influence the rate of new business creation and their survival and growth. A healthy economic and business climate based on market principles is of critical importance for a growing and dynamic small enterprise sector. Small enterprises are, after all, just like any other participants in the economic life of a country. They will develop when the over-all environment is favourable to the growth of the whole economy. Creating an enabling environment for the development of the small enterprise sector therefore implies first of all the creation of a favourable overall policy framework for the development of all enterprises and of entrepreneurship. Such an environment must provide the possible rewards and gains for potential entrepreneurs to venture into private business, market opportunities for business viability, and a policy and regulatory regime that makes it easy for people to start and operate a business and that offers a "level playing field" to enterprises of all sizes.
Small enterprises, because of their sizes and particular characteristics discussed earlier, have certain constraints that may require them to seek assistance and support from outside sources. They are also often subject to policies and incentive schemes that are biased towards the large enterprises. To offset these disadvantages, small enterprise promotional programmes and support schemes are often necessary and the setting-up and strengthening of the supportive institutional framework (governmental as well as private) is required. These support programmes and institutions provide, on need basis, services that help and build the capabilities of the entrepreneur-managers to deal with specific business concerns such as access to markets, development of internal management systems, improving productivity, technology upgrading, etc.
The formation of the entrepreneur-manager starts with the "enterprise culture" of the person's immediate family and community and society at large. Entrepreneurship is a behavioural pattern shaped by the attitude of society towards business and nurtured by a "culture" that values and regards highly success in business. This "enterprise culture" sees entrepreneurship as a desired way of achieving economic, social and political success and provides the social, financial, technical and market support networks that facilitate people's entry into and conduct of business. Young people growing-up in this culture are exposed and immersed in business operations in their formative years. Their attitudes and predisposition to entrepreneurship are shaped and reinforced by:
a) Abundant role models and positive images of successful business persons and those who "made good" in business;
b) A community value system that puts success in business and enterprising behaviour in high esteem, thereby providing societal recognition and positive encouragement to the practice of entrepreneurship;
c) Ample opportunity for familiarization (even when still very young) with small business tasks through involvement in entrepreneurial activities of the family or the community e.g. through helping in the family's business or through formal or informal apprenticeship in small businesses;
d) A network of business and family contacts that provide a learning support environment to young people venturing into business e.g. bankers providing advice on financial management, suppliers that assist in the development of good supply chain management, clients and customers providing marketing information and advice, regulatory agencies that provide good information and extend assistance in meeting the requirements of the legal and regulatory system, industry associations providing linkages and extended networking, etc.; and
e) A business community that helps young people with business entry opportunities and provides some "incubation" support e.g. providing initial market opportunity, access to soft financing, trade credits and consignments, management and technical advice, etc.
In a community or society where this opportunity for young people to be exposed to the practice of entrepreneurship and to the actual operations business is limited, entrepreneurship education and education for enterprise programmes are being incorporated in the educational system. Many of these programmes introduce entrepreneurship exposure and basic business training at the secondary and tertiary education levels. In order to really simulate and try to duplicate the effects of enterprise culture however, it is important to already introduce in the early stages of the education system (even at kindergarten and pre-school stage) the learning materials, teaching methodologies and learning activities that develop in the children enterprising behaviour and attributes. Using forms and media appropriate to the age levels, children could already be provided, through curricular and extra curricular exercises, orientation on how to integrate human, financial, material and technical resources in their environment to solve problems and achieve goals by means of competition and cooperation, teamwork and use of mutual learning.
3.1.2 Awareness and Pre-start-up
Small enterprise is created through a process that brings together human potential and environmental potential into a business undertaking. The human potential (for example, entrepreneurship, managerial and technical competency) combines with the environmental potential (which includes real market opportunities, availability of inputs, technology, capital, encouraging policy, etc) resulting into a value-creating and profit-making enterprise. The process leading to a successful small business is triggered, initiated and pursued by the entrepreneur who perceives the opportunity, thinks of a business idea to take advantage of the opportunity and mobilizes the necessary resources to bring his venture into reality.
At this stage in the development of the business, the training and development of the potential entrepreneur should be aimed at:
a) developing entrepreneurial skills, behaviour and attributes;
b) developing self-awareness of one's own predisposition and capability for setting-up and running a business;
c) developing real insights into the business development process, its rewards, demands, pitfalls, and competency requirements; and
d) expanding exposures to business world to sharpen business opportunity identification capabilities.
An example of a pre-start-up training addressed to youth is the Know About Business (KAB) of the ILO International Training Centre in Turin (Box 1). The purpose of the KAB is not necessarily to have young people begin their careers immediately as entrepreneurs or self-employed people. Rather it is to give them an awareness and some practice of the opportunities, challenges, procedures, characteristics, attitudes and skills needed for entrepreneurship and self-employment (Manu, 1996). The specific training and development interventions to achieve these preparation towards venturing into business will be dictated by the needs and requirements of particular target groups e.g. displaced workers, retirees, women, unemployed graduates, and youth in their formative years. For example, the issues addressed by the education programme for preparing youth for entrepreneurship are as shown in Figure 1.
KNOW ABOUT BUSINESS
Know about business (KAB) training package seeks to develop entrepreneurial skills and in the process prepare participants not only to establish their own businesses in the future but also to work productively in small and medium enterprises. The package is designed for use by trainers/teachers in vocational and technical training institutions. It consists of a Trainer Handbook and 8 learning modules. Each module presents a key area of entrepreneurship and is divided in several topics. Furthermore, each module is designed as a stand-alone package, requiring no previous knowledge of the others. The titles of the modules are in the form of questions, the answers to which the trainees should know at the completion of the module.
·What is the background and general aim of the KAB?
·Why is entrepreneurship education important?
·Scope of enterprise
·Objectives of KAB
·Target group and beneficiaries of KAB
·Modules, contents, formats and duration of KAB
·How and who to teach KAB
·Training methodology of KAB
Module 1: What is enterprise?
·Meaning and scope of enterprise
·Different forms of enterprise
·Roles people paly in enterprise
Module 2: Why entrepreneurship?
·Reasons for entrepreneurship in business
·Importance of entrepreneurship in society
Module 3: Who are entrepreneurs?
·Assessing entrepreneurial potential
·Identifying entrepreneurial characteristics
·Entrepreneurs as leaders
·Entrepreneurial decision making
Module 4: How do I become an entrepreneur?
·Competencies for successful entrepreneurship
·Key success factors in setting-up a small business
·The entrepreneurial decision
Module 5: How do I find a good business idea?
·Identifying and assessing business opportunities
Module 6: How do I organize and enterprise
·Potential problems in starting an enterprise
·Selecting a suitable market
·Legal forms of business ownership
·Obtaining money to start an enterprise
·Buying or starting a business
·Selecting a business location
Module 7: How do I operate the enterprise?
·Hiring and managing people
·use of financial statements
·Small business technology
Module 8: What are the next steps to become an entrepreneur
·Sources of further assistance
·Preparing a business plan
·Being involved in an enterprise
·Maintaining entrepreneurial outlook
SME Education for Youth - Key Issues(4)
3.1.3 Business Start-up
At this stage, the potential entrepreneur validates and refines his or her business ideas, and makes the decision whether to undertake or not the particular business venture being considered. What is really involved is a series of decision-making process where initial and tentative decisions are made on target markets, products and services, business forms and business strategies. The appropriateness of these tentative decisions are then tested in the market place through research and sometimes test marketing. New decisions are made based on findings and results, and the cycle is repeated until some confidence is reached on the viability of the business idea. Depending again on the size and complexity of the business being conceived, such decision making process could take a very short time or it could be involved and intensive. If the final decision is go, resources and linkages are mobilized to set-up the business. At various phases of this iterative analysis-decision-action process, the entrepreneur-manager requires specific competencies and capabilities. The training and development needs often involves reinforcement of the entrepreneurial attributes, acquiring basic knowledge of business systems and of how to manage a small business, developing business contacts and linkages i.e. the "know who", and development of skills for preparing, analysing and evaluating business plans.
In the choice of particular training and development interventions to be used in this stage the following issues must be considered and fully appreciated (Kubr and Prokopenko, 1989).
·The particular target group, their characteristics and needs. Small business entrepreneurship and start-up training are usually done with a specific target group e.g. unemployed youth, educated unemployed, women, workers that became redundant, retired workers, etc. Each specific target group has particular characteristics, capabilities, constraints and needs that must be taken into considerations in the design and delivery of the training activities.
·The potential entrepreneurs and founders of new small businesses come from various social environment which may lack the opportunity for business experience and enterprise culture discussed earlier.
·The persons concerned may have very different individual backgrounds as regards to education, technical skills, practical experience, family circumstances, etc.
·The standards to be achieved are very difficult to establish since they depend on a number of factors and forces influencing the development of business in the given country environment.
·In addition, many different views exist on whether and how training can help potential and new entrepreneur; the different conceptual approaches to training and non-training interventions have considerable influence on all stages of training programme design and delivery.
One mistake often made is to front-load the training programmes, aiming to impart the maximum possible knowledge and skills even before the business creation process starts. As a result, the amount of knowledge provided exceeds the knowledge actually needed in the various stages of the start-up process and the instruction remains essentially theoretical. Motivation and reinforcement through practical applications are missing. On the other hand, the programme graduates will inevitably encounter numerous problems which were ignored or not anticipated in a generalized course.
To avoid such pitfall, practitioners of entrepreneurship development suggest that training programmes and strategies be such that training is related to competency needs as they occur during the business-start-up process and that the learning situations that come-up while solving problems and difficulties encountered at various stages be exploited and maximized as capability building opportunities. In this approach, some basic and introductory training on business start-up and small business management are given at the start of the programme. The participants then embark on the iterative processes involved in starting a business discussed above. The potential entrepreneur learns by doing as he or she goes through the various steps of setting-up the business. This approach makes it possible to discriminate effectively between common training needs of all programme participants which can be met through courses, workshops, group discussions, and briefing sessions before and during the formal training programme, and individual needs which can be met in several ways ( special course, self-study, action learning, counselling, etc.) at the appropriate points of the enterprise creation process. This will also allow the effective use of a combination of training and non-training intervention and assistance to the potential entrepreneur. Training can be made to fit individual learning needs and the pace of learning which a participant is able to follow. Furthermore, training can be better focused not only on the profile of a particular individual, but simultaneously on needs related to his or her specific business idea and project. The link between the concepts and techniques to real business situation is also highlighted, leading to enhanced learning motivation and retention.
However, before adopting this pattern of tailor-made and action-oriented training, it is necessary to ascertain its feasibility from the viewpoint of time, costs, and the competence and flexibility requirements on trainers and counsellors. Generally speaking, the trainers' experiences and competencies are very important factors affecting the design of a training and assistance programme. In many cases it will be a limiting factor: a programme that is too demanding on methodology, and on the trainers' time and experience, will have to be simplified to be realistic.
3.1.4 Survival and strengthening
Setting-up a business is one thing and making it viable and profitable is another thing. In fact, small business mortality is very high during the first and second year of its operations. This is the period where the entrepreneur-manager must fully apply his or her entrepreneurial and managerial competencies to make the business competitive and profitable. It is also the period of maximum learning. The basic skills acquired from the start-up stage and the rudimentary business systems installed at the time the business was created are not sufficient to insure the successful running of the small enterprise. New or enhanced competencies are needed to improve the various systems (marketing, production, finance, personnel, etc.) as well as quality and productivity. Processes will need refinement and upgrading. New "know-how and know-who" linkages must be established and managed. In addition to the above, the managerial competencies of the entrepreneur must be developed and honed-up in the following areas:
·One very important managerial skill that is needed to be acquired and honed-up right at the early stages in the life of the enterprise is cash flow management. Small enterprises, with its limited resources, even though they have excellent market opportunities, good and distinctive products and technologies, skilled and capable workers could still fail due to lack of liquidity because of poor cash flow management.
·Another competence that will be required to be upgraded is productivity and quality management. The competitiveness of enterprises now are getting to be more and more based on product and service quality and timely delivery performance. This is particularly true for those who are sub-contractors and suppliers in a bigger production network.
·Competence in the use and application of computers and electronic communications is also getting to be essential. The cost of computer hardware is continuously decreasing and there is a wealth of business software applications that would be very useful in managing small businesses. More and more, information on market developments and technical advance are provided through electronic data bases and information services. Business communications and transactions are increasingly done by e-mail and other means through the INTERNET. In the area of marketing and distribution, it is expected that electronic marketing will be a growth area for small businesses.
Again, the training and development interventions must be suited to the learning needs and learning capacity of the entrepreneur-managers. In addition to standard short courses on functional areas such as general management, marketing and sales, financial management, and production management, training and non-training intervention must be provided addressing the entrepreneurs-managers' need for information on the business environment, further development of problem solving, communicating, leading, negotiating, and other "soft skills", and for dealing with problems and concerns specific to the industry sector where the small business is.
In some cases, training and development interventions are needed because of current weaknesses and difficulties being experienced by the small enterprise. In this particular situation, a good problem identification and improvement needs diagnosis (using some of the techniques described in Appendix 2 and other consulting tools) is required. The diagnosis will often uncover both training and non-training needs-related causes of the weakness or difficulties for which appropriate training and non-training interventions would be required. For example, the problem of lack of liquidity could be addressed by training the entrepreneur- manager in cash flow management, purchasing and stock control, credit management, etc. and by linking with sources of short term financing, trade credits and working capital.
Entrepreneur-managers of small businesses have been found to tap more their network of family members, associates, competitors, customers, suppliers and other business counterparts to learn and obtain needed information. Such sources of learning should be encouraged and utilized. In particular, learning from the experiences of other entrepreneur-managers (both of those in the same business sector and those in other trades) must be maximized. In addition to structured formal exchange of experiences (e.g having an experienced business person present his or her experiences in a classroom training situation) group based approaches described in Section V such as study visits, business clinics, action learning, bench marking, etc. could be explored. Joint programmes with industry associations, chambers of industry and commerce, and other trade groupings should be availed of to catalyse and facilitate this peer learning process. The formation of business networks and clusters to exchange ideas, information and experiences should be promoted and encouraged.
3.1.5 Growth and expansion
This stage requires completely new competencies of the entrepreneur-manager. Enterprise growth could involve any or all of the following: increase in size in terms of volume of business and employment, increased diversity of product types and product lines, expansion into new markets whether domestic or foreign, adoption of new processes and higher technology (Tolentino and Theocharides, 1992). Correspondingly, new and better management systems must be installed, increased decentralization, delegation and specialization in functional decision-making is called for, and strategic matters will concern more the entrepreneur-manager. The small business transforms itself into a medium enterprise.
The middle managers and supervisors who are assuming more managerial functions in the areas of marketing, finance, production, personnel, etc. will require the build-up of their competencies in these areas. Providing short courses on these functional areas of management will therefore help in building the competency base and the managerial talent pool of small enterprises, enabling them to go through the transition process.
The patterns of relationships within the enterprise also change. Communications and interactions with workers and supervisors that used to be direct, informal and personal become more structured and formal. The ability to maintain good labour-management relations and good relations among the employees of the enterprise is now even more important. At this stage in the life of the business, human and social capital development in the form of good interpersonal relations, mutual respect and thrust, sense of community and belonging, cooperation and team spirit, etc. become very critical for the enterprise's continued growth and development, even to its surviving the internal stresses of the transition process.
As business grows, having good internal (vertical and horizontal) and external communication with customers, distributors, retailers, suppliers, banks, government agencies and local community become critically important for increased understanding, cooperation and mutual thrust. Whereas before, with the smaller size of the business, the entrepreneur-manager could devote personal time and attention to these important relationships with the internal and external stakeholders, as the size and complexity of the business increases the responsibility for contacts and maintaining good communication and relations must now be shared with the other key managers and personnel of the enterprise.
Some entrepreneur-managers find the transition process very difficult and painful. Being used to direct, hands-on management of day to day operations, and to making all the decisions, the entrepreneur-managers could find it difficult to adopt a more decentralized management style and to delegate decision making and authority. Not having enough time to attend to the ever enlarging and increasingly complex business concerns and the feeling of loss of control (apparent and may not be real) are more seriously felt. At the same time, strategic matters demand more and more of managerial time.
Training and development programmes that help the entrepreneur-managers to be aware and understand the transformations (their own as well as of their businesses) required will go a long way in preparing them emotionally, behaviourally and technically for the change process. Equipping them with skills in analysing the strong and weak points of their enterprises as well as of the threats and opportunities in the business environment, and developing competencies related to strategic corporate planning well also be useful. Interventions aimed at developing the new managerial skills required by the new forms of enterprises and work organizations such as facilitating, negotiating, team building, networking will help them prepare for the top management roles in a medium or large enterprise that their businesses have become. Growth programmes developed originally in UK and aimed at small enterprises with growth potential addresses some or most of these training needs. An example of a training programme that addresses many of these needs is the Small Firms Growth Programme of the Small Business Centre of Durham University Business School (DUBS, 1991).
3.2 Needs of modern small enterprises in local and global production networks
Small businesses (even when they are catering only to domestic or local markets) are not exempt from the effects of the increasing globalization of the economy, structural adjustments and trade liberalization that is sweeping across the world, and of the rapid advance of production and communication technologies. These trends in the domestic and international environment require even more that the entrepreneur-managers, in general, continuously upgrade their capability to enable them to adjust and adapt their businesses to the very dynamic, highly competitive environment.
There are many small enterprises who are active participants in the globalized production systems that are increasingly becoming a distinct feature of the national and international business structure. The rapid globalization of the world economy and the technological possibilities brought about by the rapidly advancing communication and production technologies have brought-up a production system that is flexible, network-based, lean and competitive to serve a very dynamic market characterized by end customer whose preferences are internationalized, with constantly shifting tastes, and demanding more product differentiation and specialization. Products and fashions not only spread rapidly across the globe but also shift and change very quickly. The product variety is thus increasing and the product life cycle of specific designs becomes shorter. In response to such market environment, domestic and multi-national enterprises alike, are resorting to production systems that are based on networks of suppliers and buyers, of alliances, and other forms of inter-firm relationships that will provide the flexibility, technical capability, access to specific markets, and achieve competitiveness and short-term and long-term viability.
The concept of global commodity chain is now being used to describe the operations of globalized production-distribution system of specific commodities e.g. apparel and garments, toys, footwear, computers, etc. The commodity is produced through a chain of input-output sequences of the production process that links the enterprises and countries together as an integrated transnational production system. For example, the design and development of a product could be done in one country, the design is then forwarded to other countries for the production of parts and components, assembly of the final product is done in yet another country close to the target markets, and the final product is distributed and sold in yet other countries. The operation of the chain can be either "producer-driven" or "buyer-driven". In producer driven chains -such as the automobile and computer commodity chain- large multinational manufacturing corporations play the central role in determining the product and its components specifications, flow of materials, technology of production, finance, and the distribution and location of production activities along the chain. These producer-driven chains are usually capital and technology intensive. There is strong control exercised by the headquarters of the main multinational manufacturing firms. On the other hand, buyer-driven chains -such as that of apparel and garments, footwear and toys- are those where large retailers, trading companies and brand marketeers are the ones determining the operations of the transnational production system. These "buyers" do not usually have their own production facilities but rather farm-out the production activities -even from product designing up to distribution and retailing - to various agents and enterprises (many of which are small and medium enterprises) all over the world. Buyer-driven chains usually involve labour-intensive activities in their manufacturing operations. Countries and enterprises are interconnected to these global commodity chains through the goods and services they supply to the world markets.
With increasing trade liberalization and under the influence of the other factors fuelling globalization, it is expected that small and medium enterprises will contribute more and more to export development. Already it is seen that the growth of small and medium enterprises (SMEs) exports is faster than that of larger firms (UNCTAD, 1995) and that the globalization of the economy presents increased export opportunities for these enterprises. Small businesses who are not or could not be directly exporting now have increased opportunities to be linked to international markets through sub-contracting, joint marketing and franchising arrangements. Those directly going international could establish joint ventures or alliances with other firms in order to penetrate foreign markets. On the other hand, globalization and networking of production also brings with it the globalization of competition with the concomitant increased competition even in domestic markets as mentioned earlier. This requires small enterprises to be constantly seeking to improve their performance in all facets of the business particularly in the areas of quality, costs and timely delivery, to constantly innovate, to find and develop new and niche markets, and to be able to operate in a networking environment.
Even within countries, the phenomenon of production systems based on networks of enterprises is also increasing. Subcontracting and outsourcing of production parts and components and even of support services are getting widespread. Instead of producing in-house product components and having departments and units performing services such as janitorial and building maintenance, packaging, data and word processing, storage, etc., big enterprises are now outsourcing them from other, usually smaller, enterprises even to micro enterprises and self-employed specialists. A new form of enterprise is emerging where the various production activities are carried out by a network of enterprises, consultants, self-employed specialists, and even temporary and part-time workers coming together for the production of a certain product or service or the undertaking of a certain project. The composition of the network is very dynamic, the number and types of enterprises in the network change as products or projects change.
Modern small enterprises are increasingly becoming part of these domestic and global enterprise networks, often as suppliers, subcontractors and franchisees of large domestic and/or multi-national enterprises. To be able to successfully operate in this new business structure and relationships, the entrepreneur-managers of modern enterprises are required to develop new competencies and capabilities such as:
·having an international perspective and appreciating the implication, opportunities as well as threats of globalized business environment
·having a good understanding of the nature of the production chain and the enterprise network where his or her enterprise currently belongs, and to recognize the key factors influencing the decision making process in the chain or network
·be constantly alert to the market changes and technical trends
·be able to manage the production system and work organization that are even more flexible than before
·be aware of changes in the technology in his line of business and be able to adapt and constantly modify production processes and technologies
·communicate effectively and efficiently with the business partners in the network specific aspects of the business such as costs, prices, production and delivery schedules, quality performance, etc.
·better record keeping and more structured management information system within the small business which follow standard norms and practices
·ability to use the "language" of the network
·better negotiating skills to be able to do business transactions with his counterparts and partners in the network.
3.3 Particular training requirements and constraints
In addition to addressing the specific competency development needs of the entrepreneur-managers, the design and delivery of training and development interventions must always take into consideration their particular requirements and constraints when it comes to training. Among these are:
·Shortage of time for attending training. Given the extreme demand on the time of the entrepreneur-managers and their extensive and intensive involvement in the operations of their business, they could not afford to be away for extended period. It is very difficult and costly (in terms of business opportunity costs) for them to be attending training activities extending over days or weeks that require them to be continuously away from their businesses for long periods.
·Being very practical, pragmatic persons, they are more used to and comfortable with learning by doing, copying and adapting and through problem solving rather than sitting down in classroom training. Practical and immediately applicable tools and techniques are more appreciated.
·Women entrepreneur-managers may have particular and specific requirements and constraints. In some culture and religion, certain training practices and arrangements may not be appropriate. Their multiple and varied roles as business persons, mothers and wives create additional constraints of time and availability for training.
·Due to the limited personal and business financial resources, many of them, specially those engaged in very small businesses, have limited capacity to pay for expensive training programmes. They also would be reluctant to pay high fees that do not promise immediate benefits and returns.
·They may not have the high academic background and preparation often required by courses in management.
4. Guidelines for effective training and development of entrepreneur-managers of small enterprises
4.1 Pointers on Effective Small Business Management Training
With rich accumulated experience in small business promotion and in the training and development of entrepreneur-managers, practitioners have identified a number of do's and don't's for effective training and development interventions. The Committee of Donor Agencies for Small Enterprise Development (1996, 1997), which brings together experiences of major international agencies in small enterprise development, have come-up with the following lessons learned:
·The target groups for training, and their training needs, must be clearly identified when designing and implementing training programmes. Training should be need and demand-oriented. Entrepreneurs' participation in training must be based on the entrepreneurs' felt needs and volition, not on compulsion or incentives (such as inducement by access to credit or allowances in cash or in kind during training).
·Training services must thus be separate from financial services. Where an organization does want to provide both, it is important that the two are separated operationally. Mixing the two often results in participants who are really just interested in accessing a loan coming to the training programme with little interest and commitment to learning.
·Training should be designed and delivered on the basis of entrepreneur-managers' learning style, modular and based on the principle of "learning by doing". Participatory methodologies are essential for effective adult learning; "on the job" training and making the trainees work on their own problem situation is more effective.
·Training must take place close to the trainee's place of work or enterprises and at time schedules that are appropriate (e.g. in the evenings or weekends).
·Course programmes must be gender sensitive and, specially when doing training of women entrepreneur-managers, their particular needs and constraints must be taken into consideration.
·Linkage between formal training and other non-financial small enterprise development support programmes and intervention must be established e.g. with assistance programmes of technical institutions, trade facilitations, etc.
·Strong trainee commitment is vital to training success and charging fees helps to gauge and strengthen trainees' resolve; entrepreneur-managers are used to transactional, value exchange-based relationships in their daily business lives and they will pay for things they see as worth the money to be invested.
·Training and development services are more effective when done by people which are close to the entrepreneur-managers; in addition to core competencies in training and knowledge of small enterprises, trainers should be close in terms of their values, language and general manners; people and institutions who convey an image of superiority or detachment are unlikely to be successful.
·Feed back forms often issued and filled-up by participants at the end of training events (often called "happiness sheets") only offer some clues on the participants immediate feelings and have of little value in assessing impacts of the training on the participants' businesses; follow-up visits and contacts of some sort are required for good training evaluation and these follow-up activities also offer an opportunity for assessing further training and development needs.
·Training should be treated in a business-like way; those who are providing training interventions and services should be asking themselves the same questions that business people are asking themselves e.g. who are our customers? In which market segments are we most interested in? what services would be needed? how can we reach the target market? what capabilities are required for effective delivery? how will we monitor and evaluate our work? etc.
4.2 Designing Effective Training and Development Programmes
With respect to the design of specific entrepreneurship/small business management development programmes, the following pointers given will help to make the training more effective (El-Namaki 1989, Gibb 1991):
·Carefully recruit and select participants and try to have some degree of homogeneity in terms of needs, learning capacity, business background, etc.
·Design the training based on thorough analysis of training needs of the participants, making sure to clearly differentiate between needs that can be met by training and those that require non-training intervention and assistance. Keep in mind that needs assessment is not a one-off activity conducted only at the beginning of a training intervention but rather, it should be a continuing and sustained activity undertaken over the whole duration of the training programme.
·Focus upon business problems and opportunities and the related knowledge and skills needed to solve the problem or grasp the opportunities.
·Adapt inputs, training techniques and methods to the requirements and context of the particular group of participants.
·Use the right language and level of instruction dependent upon the educational background and level of sophistication of the participants.
·Concentrate on the "know how" and not just on the "know what". Focus upon the conversion of knowledge and skills into action, using illustrations and cases closely related to (if not actually drawn from) the real problems being faced by the participants; move from presenting general principles (e.g. of marketing) to specific applications (e.g. product labelling and display).
·Maximize the opportunity for peer-learning through sharing of knowledge, experiences and information.
·Use highly participative styles of teaching building upon the "learning by doing" style to which the entrepreneur-manager is accustomed to; use more simulation, role playing, critical incident analysis, problem solving cases, group learning and other similar methodologies.
·Be as company specific and as industry sector specific as possible.
·Be more holistic and multi-disciplinary in approach rather than concentrating and limiting to narrow functional specialisation; even when the course is on specific functional area, make sure to show the relationship with the other aspects of the business, e.g. a course on financial management should show how the function affects other areas such as production management, stock control and supply management, marketing, etc.
·Be flexible in the learning approach used, to deal with learning problems as they arise and as articulated by participants no matter what the original topic schedule and sequencing of the training design is.
·Provide adequate material for participants to take away to serve as memory aid and future reference materials and to indicate key points to follow-up for application and implementation of the learning points of the training event.
·Whenever possible, use a combination of training and consultancy.
·Use the institutional and resource network (e.g. bankers, suppliers, public administrators, technology centres, schools, small enterprise development organizations, successful entrepreneurs, etc.) in the environment that is relevant to the issue being discussed; this will help the participants to be familiar with available and accessible learning resource and build the "know who" network; this will also help improve their access to post training advice and guidance.
·Use convenient venue for training, within easy reach, provides an environment conducive to learning, and makes possible the use of practical learning projects and exercises.
·Design the training structure, format and process such that the programme can be conducted at convenient and suitable times that accommodate the operational constraints of the participants.
4.2 Competencies required of trainers and organizers of training and development programmes
The above characteristics and features that training and development programmes must have in order for them to be effective require specific competencies from those organizing and actually delivering specific sessions and components of the programme. In real situations, the trainer often performs the functions of training organizer, training manager or coordinator, and training delivery by handling and facilitating specific sessions. Following are some key competencies that must be developed among trainers and organizers of training and development programmes of entrepreneur-managers.
1. Ability to design appropriate training and development programmes
a) Ability to specify and characterize the target groups:
i) Establish the profile of the target group in terms of personal characteristics such as gender, age, educational attainment, reason for wanting to go into business, skills and other competencies, present economic activities, economic and income strata, access to resources e.g. finance, etc.
ii) Relate the characteristics of the target groups to the socio-economic profile of the community and geographic area where they belong e.g. the main economic activities, infrastructure available, linkages to markets, local cultures and traditions, laws and regulations affecting the setting-up and running of small business, etc.
iii) Determine the general training and development needs by relating the characteristics of the target group to the phase of business development (i.e. pre-start-up, start-up, survival and growth) where the members of the group are, sector where the businesses are in (or will be), size of business (existing or to be set-up), technological level, ownership structure, etc.
iv) Establish good rapport and earn the confidence of interviewees and respondents through good listening, communication facilitation, and sound discussion based on good background business knowledge and information.
b) Ability to conduct diagnosis of improvement needs of a small business:
i) Characterize the business in terms of comparison with other small businesses in the industry sector and sub-sector, main products, main customers, linkages with other enterprises, size, technological level, etc.
ii) Identify key areas needing improvement e.g. over-all business performance, marketing, production, finance, personnel, etc.
iii) Analyse causes of present unsatisfactory performance or inability to achieve higher performance levels or take advantage of new opportunities.
iv) Relate these business problems and opportunities to competencies required of entrepreneur-managers, supervisors and workers.
v) Differentiate between needs that could be addressed by training and those that will require non-training interventions.
c) Ability to undertake training and development needs analysis of participants individually and as a group:
i) Have a good understanding of the entrepreneurial and managerial processes involved at the various stages in the development of a small business and be able to relate them with the competencies required of the entrepreneur-manager.
ii) Use different tools and techniques of training needs analysis (questionnaires, interviews, group meeting, task analysis, critical incidents, observations, role plays, etc.) to determine present levels of competencies compared to levels required by the business, and obtain specific information on the needs i.e. what the participants cannot do now that they should be able to do and what prevents them from doing what they should be doing.
iii) Determine not only the needs but also how and in what ways the participants would prefer these needs to be addressed; identify learning styles, learning constraints, and other learning preferences of the participants/target groups.
iv) Listen, empathize and communicate based on good understanding of the problems and constraints faced by entrepreneur-managers thus contributing to the building of trust and confidence of the participants.
d) Ability to design the training and development programme:
i) Set realistic and attainable learning objectives with specified indicators of achievements which are verifiable . These objectives could be for the whole training programme or for specific components/training modules.
ii) Use and incorporate in the design various training and development approaches (examples of these are in Section V) best suited to the needs, constraints, learning styles and preferences of the participants/target groups.
iii) Balance the "scope" and "depth" of the training according to the learning capacity of participants/target groups, the time available and resource constraints.
iv) Select the location and schedule of training activities suitable to the requirements of the participants/target groups.
v) Use the training resources and learning opportunities in the business environment e.g. using resource persons and experts from banks, technical institutes, business assistance centres, government regulatory offices, trade and business associations, and other business persons, and availing of learning opportunities offered by trade fairs, exhibitions, business conferences, etc.
vi) Use and adapt already existing and available training materials, manuals, and guides relevant to the particular training and development programme.
vii) Determine the various costs involved and to design the training and development programme within budgets and in the most cost effective manner.
2. Ability to manage the implementation of the training and development programme
a) Ability to organize the training inputs e.g. venue, training aids and equipment, resource persons, handouts and training materials, etc. and have them available when needed.
b) Ability to identify and select good resource persons.
c) Ability to conduct meetings or to brief trainers and resource persons on learning objectives, profile and needs of participants, and inter linkages among the various programme components to insure coordination of various modules and topics.
d) Ability to constantly monitor the progress of learning of the participants and to modify the programmes at short notice, as the need may be.
e) Ability to establish rapport with participants so that their progress, needs, apprehensions, problems, and even personal situation bearing on learning could be monitored and acted upon.
f) Ability to solve problems that come-up during the programme implementation.
3. Ability to use training delivery tools and techniques suitable to the needs of the particular target group:
a) Ability to use a good understanding of the process with which entrepreneur-managers learn more effectively (discussed in Section 3.3) in the training delivery.
b) Ability to be constantly aware of the learning processes and dynamics happening in the session particularly of the participants level of interest, involvement and participation, and absorption of key learning points.
c) Ability to innovate and adapt delivery styles and approaches to the prevailing mood, needs and preferences of participants.
d) Ability to use cases, example and problem situations drawn from the participants themselves as take-off point for discussions or as cases to illustrate application of specific managerial approach or technique.
e) Ability to maintain two-way communication and encourage participation:
i) Use of participatory problem solving techniques e.g. brainstorming and small group discussions.
ii) Use of questioning techniques to prompt participants to contribute to the discussion, share experiences and exchange views.
iii) Use of business games, role plays and simulation.
f) Ability to be more of a facilitator of the learning process which involves exchange of experiences, sharing of knowledge and information, joint problem solving, and shared experiences rather than using mainly a one-way flow of ideas and information through "lecturing".
g) Ability to be "integrative" i.e. have a holistic view of the small business, to relate the specific subject area being covered in the session e.g. marketing or financial issues to the totality of the business concerns, and to handle problems and issues that cut across functional areas of management.
h) Ability to provide small business counselling to the participants, helping them to define and analyse their own business problems, look for solutions and to formulate and implement the needed course of action.
i) Ability to link the participants with right support institutions and individuals who could deal with specific needs and concerns.
4. Ability to assess and evaluate training and development programmes
a) Ability to asses the results of the training and development at various levels:
i) Assessment, at various points in the training and development programme e.g. at the end of each module or session and at the end of the whole programme, of the participants' reaction and perception of the programme e.g. whether they like it, whether they learned something, whether the training was effective, how they liked the timing, venue, food etc., whether the resource persons were good, and their suggestions on how the session or programme can be improved.
ii) Assessment of the learning obtained by participants by comparing the levels of knowledge before and after the training programme, and/or determining acquired abilities to use particular entrepreneurship or managerial tools and techniques e.g. preparation of a business plan or undertaking a market feasibility study. This level of evaluation could be facilitated if the learning objectives and the indicators of achievement are properly and explicitly formulated in the programme design.
iii) Assessment of the impact of the training on the behaviour of the entrepreneur-manager, on the improvement of the business systems e.g. production layout and processes, financial management systems, corporate planning, etc., and on over-all business performance. This type of assessment can be done only after a certain period of time has elapsed between the completion of the training and the impact evaluation.
b) Ability to asses how efficient the implementation of the training and development programme was in terms of being able to deliver within the budgets or at minium costs while meeting the required quality, whether the inputs were available at the required place and time, whether the implementation was "smooth", etc.
5. Ability to undertake continuous self-development
a) Ability to undertake self-diagnosis and assesment of own training needs.
b) Ability to keep abreast with the developments in the management and small business development field, and assess their relevance to one's own area of concern and specialization.
c) Ability to maintain contacts with other trainers and small enterprise development professionals through professional networks and associations.
Annex 1 gives a framework for the generic small business trainer competencies which was developed by the European Centre for the Development of Vocational Training (CEDEFOP, 1990). The source CEDEFOP publication includes checklists with which the trainers and organizers of training programmes can do self-assessment of their competencies.
These required capabilities among trainers and consultants are acquired through participation in formal training programmes such as Training of Trainers (TOT) and Training the Management Training (TOM) programmes and through practice and experience. An essential component of the training and development of trainers and consultants is extensive actual exposure and direct experiences in small business operations. For continuous professional development, it is important for trainers and consultants to learn from experiences of other trainers and this could be facilitated by networking with professional organizations, small business development institutions, and other resource institutions. While the specific approaches and methodologies for training and development of small business trainers and consultants are not covered in this paper, many of the pointers on conducting effective training of entrepreneur-managers equally apply. There are a number of excellent materials on training the trainers some of which are listed in the References.
5. Training and development approaches
Various entrepreneurship and management development approaches, processes, tools and techniques can be used singly or in combination with each other in the training and development of entrepreneur-managers provided they are adapted to the particular requirements and constraints discussed earlier. The choice of the specific approach, format and timing or of a particular combination of approaches and methodologies will essentially be dictated by the learning objectives set-out for the specific learning event or programme. It will also depend on the stage of business development where the participant or group of participants is i.e. whether in the pre-start-up or start-up stage or whether they are already managing existing businesses. The learning objectives can range from the simple and direct acquisition of information to the complex and integrative attitudinal and behaviour modification as illustrated in the following list:
1. Acquisition of basic facts and information- this refers to the participants becoming acquainted with or acquiring basic information on e.g. major changes in the legal and regulatory environment such as changes in labour laws, trade liberalization, changes in tax structure, exchange rate, environmental regulations, and in commercial and technical areas such as advances in computer applications in SMEs, trends in energy prices, etc.
2. Awareness and appreciation raising- the participants are made cognizant of specific needs and opportunities, as well as of the range of tools and techniques available to address the concern e.g. productivity management, environmental management.
3. Acquisition of skills to use or implement a specific technique or system- at the end of the training event or programme the participants are expected to be able to use specific techniques such as market study, book keeping, product mix analysis, methods improvement, or to install specific business systems such as financial management system, production planning and control, personnel administration.
4. Development of managerial skills in specific functional area- the participants are expected to be able to perform the various managerial functions related to a functional area e.g. over-all business management, marketing, finance, production, personnel (see Table 2 in Section 2 for examples of these functions).
5. Development of entrepreneurial-managerial personal skills- this includes the development or reenforcement among the participants of their perceptiveness and sensitivity to their economic, social and business environment, analytical and problem solving abilities, decision making, creativity, interpersonal and social skills, risk assessment and risk taking ability, self-drive and motivation; among others.
6. Development of learning networks and linkages- this includes the development of the participants ability to interact and collaborate with other entrepreneur-managers and other stakeholders in the environment to collaboratively solve problems, address common concerns and share knowledge and experiences for mutual learnings.
Correspondingly, the training and development approach can range from simple straightforward information dissemination to complex long term process involving combinations of various approaches and techniques.
An important note to remember is that, because of the very close and intimate relationship between the entrepreneur-manager and his or her small business, the training and development interventions will necessarily involve elements of small business development. In fact, because of the pragmatic and action orientation of the entrepreneur-managers as well as their keen interest in immediate applicability of techniques learned, enterprise development (specially of their own respective enterprises) serve as a very effective platform for their own training and development.
5.1 Individual based approaches
5.1.1 Information sessions and awareness raising seminars
These are very short sessions and are mainly used for awareness creation and the giving of information. These are also used to provide opportunities for exchange of experiences. For example, a small business association could organize regular (say once a month) evening meeting to have invited speakers to talk on particular developments in the business environment or to have pioneering members talk of their experiences in the use of specific approach or technique e.g. TQM.
5.1.2 Short formal training courses
Short training courses in general management and in specific functional areas which are offered in convenient time for entrepreneur-managers (e.g. evenings, weekly one-day or half-day sessions, weekend sessions) could be cost effective for building their competencies. The courses should be practical and application oriented rather than theoretical, highly participative, and incorporating opportunities for the participants to work on real problem areas of their enterprises. The content and methodologies should be flexible and easily adaptable to the specific training needs of the participants.
5.1.3 Combined training and consultancy approach
In the combined training and consultancy approach, general and functional courses are given in very short sessions and are aimed at providing specific knowledge and skills that can be used immediately. Participating entrepreneur-managers then carry-out activities and applications under the guidance of the trainer or consultant. The cycle is then repeated addressing a different management development need or area that logically follows from the results of the application of learning from the earlier cycle. This approach is very effective when introducing new management systems and practices e.g. new bookkeeping, information system, maintenance management, quality control, etc. Flexible learning packages and modular programmes such as the ILO Start and Improve Your Business (see Box 2) fit in very well in this highly participative, hands-on approach.
The Start and Improve Your Business (SIYB) programme of the ILO is a system of interrelated training packages and support materials for providing small enterprise entrepreneur-managers with training in basic management skills. The SIYB programme provides institutions, such as small business development institutions, employers' organizations, training institutions, non-governmental organizations, and individuals who are involved in training of persons owning and running small enterprises with a comprehensive set of materials dealing with various topics related to small enterprise development interventions such as training, business extension, follow-up capability building, and monitoring and evaluation.
SIYB Training Materials:
Start Your Business package develops skills necessary for starting a small business. It uses participatory training methods and helps the potential entrepreneur systematically think and go through important issues and processes related to starting the business. One practical result of the training is a feasibility study for the potential business in a form which can be presented to a credit institution.
Improve Your Business Basics is intended for the training of entrepreneur-managers of micro and small enterprises with relatively low formal education background. The manuals cover essentials of basic business management presented through step by step explanations with plentiful illustrations drawn from real life situations the trainees can identify with.
Improve Your Business Handbook and Workbook are aimed at entrepreneur-managers of small businesses in the formal sector. The materials are suited to those with relatively higher formal education background. Just like the IYB Basics, the materials are highly flexible and can be adapted to training needs of particular target groups.
SIYB Supporting Tools:
The Business Game for use in both Start Your Business and Improve Your Business training programmes The game is an excellent dynamic tool for creating a simulated environment where the trainees can experience the consequences of their business decisions.
Business Extension Service is a system for providing follow-up training and advise. The system consists of intervention varying from group based approaches to individual counselling.
The Monitoring and Evaluation System provides clear standard tools for the evaluation and monitoring of training programmes and follow-up services. It also provides useful tools for assessing needs for follow-up training and extension services.
The IYB Trainers' Guide provides trainers with a comprehensive and easy to use tools and practical tips for organizing and conducting IYB training and follow-up activities.
The IYB Training the Trainers Kit is a tool for IYB master trainers for training other trainers on how to organize and deliver IYB training.
SYB Trainers' Guide provides trainers with a comprehensive tool for promoting the SYB programme, selecting potential entrepreneurs/participants, and organizing and conducting training for business start-up. The guide also includes tools for monitoring and evaluating aspects
The Institutional Framework: Experience has shown that the sustainability of SIYB programmes requires institutionalizing it based on a network of interrelated institutions each assuming specific roles. This network consist of an programme advisory board to provide the policy and strategies for the programme, a Focal Point to provide the coordination and promotion of the programme, and Delivery Organizations which will be the ones actually providing the SIYB training, follow-up and other related support activities to the entrepreneur-managers.
V.2 Group-based training and development
One of the best sources of learning for entrepreneur-managers are their peers, clients, and suppliers. Training and development interventions that bring together in a group entrepreneur-managers in similar or related businesses and facilitate their sharing of experiences and expertise are very effective specially when combined with experts inputs as required. Group based approaches are more effective if the members share some common problem and interest and if they are prepared to work together which may involve sharing of some business information. They require high level of confidence and trust among participants, the building of such must be an essential element of the techniques and approaches to be used. They are easier to implement when done in cooperation with small business associations, trade associations, or employers' organizations.
5.2.1 Study visits
Entrepreneur-managers are very observant and perceptive individuals. They can easily see how a certain management approach or technique can be applied in their businesses. Study visits and observational study missions are organized way of exposing the participants to contrasting management practices, good and bad, and to learn from the practices of others. In one design of the programme (Tolentino, 1985) participants coming from the same industry branch (e.g. garments manufacturing), and of businesses of almost same sizes were first given very short classroom sessions on key management and production practices to observe e.g. materials management, lay-out, quality control, production management. Visits were arranged to three types of enterprises in the same business: smaller, same, and bigger and better than those of the participants. Discussions with the host entrepreneurs were also arranged for more sharing of experiences. The visits were then followed by group discussions by the participants to share their observations and lessons learned. Follow-up evaluations, the first one was after six months and the second one was after a year, showed significant transfer of management practices and techniques. The approach is best done with trade associations and small business associations or be done in conjunction with association-building programmes as it requires high level of trust and willingness to share among the participants and host enterprises.
5.2.2 Inter-firm comparison and benchmarking
Interfirm comparison is a process whereby key performance indicators for a group of small enterprises engaged in similar activities, e.g. transport operators, garment manufacturers, are presented in such a way that allows any enterprise to compare its own performance with those of other enterprises in the group, with the group's averages and with the best performer in the group. The performance indicators are selected to be those that are of critical importance to the participating enterprises, e.g. labour, energy, materials productivity. The members of the group agree to collect data on their own performance and have these compiled and put in formats that will allow easy comparison. The members of the group can then compare regularly (e.g. quarterly or every six months) performance figures on their own individually or during group's seminars. Differences in performance indicators are analysed, causes identified and suitable remedies (which could include and not limited to training) considered. This process is very effective in building-up the entrepreneur-managers' problem solving competence while at the same time helping them set-up a good business performance monitoring and evaluation system in their respective enterprises. Just like the other groups approaches that involve sharing of information and ideas, interfirm comparison requires high level of trust and confidence among the participants. It is best to implement this approach in cooperation with associations of small businesses. Some coding and masking of participants' enterprise identities may be required at the start of the process although experience showed that at later stages, participants get to be more open in sharing information including even the identity of their enterprises.
The broader approach of benchmarking can also be used by the group. In this process, the participating small enterprises identify and target key improvement areas within their respective enterprises, identify and study best practices by other enterprises (not necessarily member of the study group) in these areas and then implemented in their respective enterprises improvements to enhance their performance.
5.2.3 Business clinics
This is an arrangement whereby a group of small business entrepreneur-managers meets to get advice from trainers and consultants and exchange experiences on how to deal with the problems commonly faced by all of them. It can be a one-off exercise (e.g. an afternoon session) or the problem may require a series of meetings. The group may decide to meet regularly where they would tackle specific problems per meeting. A business clinic can be combined with interfirm comparison and benchmarking. Just like the study visits, it is best to organize this in cooperation with trade associations or the local small business association.
5.2.4 Action learning workshops
Participants in these workshops get together in order to work collectively, and gain from each others' experiences, in solving problems faced by their small enterprises. As a rule, the workshop focuses initially on problem identification and on selecting those problems which are of common interest to most participants and thus should be examined collectively. The problems selected are then analysed in greater depth by the whole group or its subgroups. The group comes-up with one or more possible solutions. The group could meet once a week and continue to have short meetings for some eight to twelve weeks. In between meetings, the members of the group could undertake information gathering and even experimentation and testing of some ideas. If the group's knowledge and experience are not enough, the group defines information and training requirements that are then met by the consultant acting as facilitator or an expert invited for a specific purpose.
5.2.5 Combination of individual and group-based approaches
These various individual and group-based approaches can be used in combination. An example of a training programme that makes use of combination of study visits, action learning, and some form of benchmarking is the ILO WISE (Work Improvement in Small Enterprises) training programme (see Box 3).
ILO WISE Training
Higher Productivity and a Better Place to Work
The WISE training programme equip entrepreneur-managers of small enterprises with systematic approach to raising productivity and working conditions in their enterprises. The content and coverage of a specific training event is flexible depending on specific problems and opportunities found in the participants' enterprises but in general the broad coverage of the training includes such topics as materials storage and handling, work-station design, productive machine safety, control of hazardous substances, lighting , work organization, and other topics related to improvement, etc.
It is based on the "action learning" approach using local examples, practical activities in the participants' enterprises and the formation of groups for mutually supportive consultancies. The following steps are generally followed in preparing and delivering the training:
·recruitment and selection of participants
·trainers visit participants' enterprises and develop course materials (specially slides) reflecting good practices
·Visit of all participants to a factory where they identify areas for possible improvement, which are then discussed in groups
·Half day workshops covering main technical content
·Participants form "consultancy groups" and visit each others' factories, preparing improvement action plans
·workshops to discuss how to implement the various action plans
·implementation of selected improvements in participants' factories
·final workshop to present and exchange experiences and to award recognition to best applications and practices
V.3 Integrated sector-specific approach
An integrated and comprehensive package of training and development programmes that focuses on a specific group of small enterprises and their entrepreneur-managers in a particular industry sector is very effective in developing not only individual enterprises but also the linkages and networking among them, in developing mutually beneficial linkages with larger enterprises and in bringing the small enterprises in closer association with the support institutions in the environment. It is however, a long term approach and can involve any or all of the following: sectoral small business groups and association building, undertaking studies of the problems and constraints faced by the small enterprises in the sector (policy and regulatory framework, technological, managerial, etc.), promotion of business linkages such as sub-contracting and franchising, technology support services and integrated and holistic management development programme which focuses on general and sector specific management development requirements. The FIT Programme of the ILO (Box 4) is an example of a micro and small enterprises development programme that uses this approach. It is developing new, non-financial services for small businesses, based on the recognition that the entrepreneur-managers of small businesses are the ones best placed to diagnose their own immediate needs and contribute towards possible solutions to these needs. A major innovation is in FIT's primary focus on developing support services which are sustainable. A FIT's measure of success in introducing new services is the extent to which the services are financially self-sustaining (where micro and small enterprise beneficiaries are willing to pay for the services or someone else is willing to pay for the services at commercial basis) so that their duration of their extension and outreach are not limited by the external funds available(5)
V.4 Learning networks and clusters
While not exactly a training approach in the traditional sense, the building of learning networks from where the small enterprise and its entrepreneur-manager could learn is essential in their development. As indicated earlier, being very practical and pragmatic persons, the entrepreneur-managers of small enterprises learn by doing where each experience, each transaction is a learning exercise. Small enterprise management involves day to day personal handling of varied transactions with clients and customers, suppliers, service providers, competitors, bankers, family, business associates and peers, regulatory agencies, etc. (Gibb, 1997) Based on the experience, information gathered, feedback and results from these interactions, business strategies and operations are adjusted accordingly. The future competitiveness of the small business will therefore depend on its ability to "learn" from these agents and stakeholders with which the business interacts with. Better understanding by the entrepreneur-manager of what and how to learn from these important elements in the business environment will make each of them easier to deal with. At the same time, better understanding by these key stakeholders of the nature, strengths and weaknesses, and constraints and opportunities of the small business will make them in a better position to provide information and knowledge to its entrepreneur-manager.
Thus, one of the approaches to small and medium enterprise development that is getting widespread is the promotion of networks and clusters. Such networking and clustering could be among small businesses in similar or related businesses, or could be broad-based encompassing the key stakeholders mentioned above. The objectives of the networking could range from joint marketing and promotion initiatives to design and development of products, technologies and business processes. For example, in the European Union, this clustering and networking is being encouraged and supported to help small and medium enterprises cope with increasing globalization, promote technology transfer and help SMEs internationalize(6). Local enterprise development agencies, universities, and non-profit commercial organizations are some of the promoters of SME networking. They encourage enterprises to join the network and organize mutual learning activities such as workshops, conferences, seminars and other events that enable the network members to have face to face contact for sharing of experiences and knowledge as well as get to know each other better. Electronic networking for sharing of information through the INTERNET is also being used. In other cases, the promoter actively assist in transferring technologies and processes between sellers and buyers members of the network. Experience so far shows that for a promoter to be effective and successful in building and sustaining a network, it is essential that it must have a very good knowledge of the industry sector where most of the members of the network belongs, that it should be able to earn the trust and confidence of the network members and that initially networking is promoted to address a limited and specific set of objectives.
The ILO FIT Programme
The FIT Programme focuses on the development of micro and small enterprises engaged in the manufacturing of farm tools and implement and of food processing equipment. It aims to develop innovative approaches to ensure more effective and financially sustainable support services to small-scale metal working and food processing enterprises. The following are examples of FIT's activities:
·Sectoral and sub-sectoral studies of the problems and opportunities facing the target small enterprises.
·Strengthening of public and private support institutions and service providers through implementation of the various activities of the programme.
·Building and strengthening of sectoral associations which can play an important role in the provision of support services specially in the area of technological upgrading and development.
·Provision of marketing tools such as guides for rapid market appraisal and how to organize trade shows and exhibits.
·Bringing together and building closer communication between small enterprises and their clients, suppliers, and resource institutions towards more participatory product and technology development.
·User-led innovation exercises where users/clients and small enterprise producers come together to discuss improvements on the products which are desired by the users and possible to be implemented by the producers.
·Study visits to encourage small businesses to share valuable knowledge and experiences.
·Information dissemination to make technical and commercial information available in self-supporting and sustainable ways.
(FIT's primary focus is on developing support services that are financially sustainable i.e. the beneficiary micro and small enterprises are willing to pay for the services or shoulder the costs of the activities)
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A Framework for Generic Trainer Competency(7)
Diagnosing Training and Development Needs of Entrepreneur-Managers(8)
Because of the nature of small business management and the key roles that entrepreneur-managers play in the over-all management of the business, environmental analysis is a basic component of any assessment of training needs in the small enterprise sector. Its purpose is to relate training to actual opportunities and constraints that characterize a particular business environment. It will indicate key competencies, information, and linkages that an entrepreneur-manager will need to have to be able to operate the small business successfully in such an environment. If a standard training package is planned to be used, environmental analysis helps to adapt it to local needs.
The issues covered include:
·political climate and the policy and regulatory environment affecting business creation and operations;
·established ways of doing business in the community;
·cultural values and traditions related to business and entrepreneurship;
·existing and potential markets (including competition) and forecasts of demand;
·resources that are available or can be mobilized
·infrastructure and technical services;
·availability and forms of credit;
·information, training and advisory services available;
·economic activities in the community;
·linkages among the enterprises in the community, e.g. trade associations, business networking.
The training and development of the target entrepreneur-managers will have to take these issues into consideration both for new enterprise creation and for strengthening of existing small businesses. A proper time perspective is important: the analysis not only has to identify the factors and forces that operate in the current period, but should also aim to reveal or predict future developments.
Assessment of the entrepreneur-managers personal history and background
This assessment will reveal a great deal of information on the individual training needs of prospective participants to the training and development programmes. In training and development programmes for business start-up this could also be used to assess the participants entrepreneurship potential and identify what assistance would be required to help them launch their businesses. This assessment could be carried-out through questionnaire, interviews and tests.
The main issues covered include:
·family and community (as appropriate) background with focus on business exposure and experiences and value system e.g. exposure to entrepreneurial culture;
·previous education and training;
·personal experience and skills (trade, vocational and technical skills, administrative work, business experience, etc.);
·social activities and connections (knows other business people, knows many people in the community, is active in social, religious, sporting or other organizations, etc.);
·pre-training level of knowledge and understanding;
·other indicators of entrepreneurial traits.
When interviewing existing or would-be entrepreneurs, it is useful to keep in mind that informal and "indirect" interviewing combined with providing immediate advice and help tends to produce better results than lengthy and highly structured interviews organized as a separate exercise. This can be achieved, for example, by asking questions that can reveal training needs while discussing a new business idea or a problem situation faced by the interviewee. It is important for people running small enterprises to understand the purpose and implications of the interview and to be assured that they have no reason to be suspicious about the use of information provided to the interviewer.
Tests and questionnaire could be used to select participants (e.g. for business start-up training) and to determine present level of knowledge (pre-training level) in general business management and in specific functional areas. The same tests could be administered after the training and by comparing with the pre-training test results could give indication on the effectiveness of the training given.
Generally speaking, psychological and behavioural tests should be used cautiously. Their design, selection, administration and interpretation of results require professional background and experience in behavioural science.
Diagnosis of improvement needs of the small business
The training and development needs of entrepreneur-managers of existing small businesses can best be determined by analysing the over-all performance of the business as well as of the effectiveness and sufficiency of specific business systems e.g. marketing, production, finance. An analysis of the causes of unsatisfactory performance or of opportunities that could be taken advantaged of will indicate training and non-training needs of the business and the corresponding competencies required of the persons running the business.
The following assessment techniques could be used:
Records and reports analysis. As compared with larger businesses, the study of business records and reports (e.g. financial statements, sales and receivables, production records, rejects and scraps reports) for the purpose of training and development assessment is more difficult to apply in dealing with small businesses particularly the informal ones. It is well known that, specially for very small businesses, that the quality of financial records and other records kept by small business is often less than what would be desired, or there may be no useable records whatsoever. This very fact is quoted by some analysts of small business as obvious evidence of training needs: the entrepreneur-manager ought to be trained to become aware of the importance of good records and to learn the basics of accounting and record keeping. Such conclusions however, should not be made hastily. There is little point in keeping records for their own sake, or suggesting complex and elaborate records if simple ones suffice. Thus, the need for training in better record keeping can be considered as real only when it can be established what records are actually necessary for improving the performance and viability of the business. When records are available, say for modern small enterprises, various analytical techniques can be used e.g. analysis of financial ratios, trends analysis, product mix analysis, and productivity analysis.
Benchmarking and comparison. Here, the performance and practices of the subject small enterprise are compared with those of other small and medium enterprises in the same sector or the same business. This not only allows comparing the enterprise's current practices and performance with the "best practice" in the sector but will also give good reference information on what is possible and feasible. When doing the comparison however, it is important to always take into consideration the differences and similarity of particular situations and characteristics of the enterprises being compared in order to avoid indiscriminate and rash comparisons.
Observation of business operations. A quick visit to the small business' premises and workshops will indicate to the experienced observers the improvements required and give an indication of the training and development needs of the entrepreneur-managers. How the premises are laid-out and maintained, the technology and processes being used, the amount of finished and in-process inventories, how clean and orderly the workshops are, how the workers are behaving, how supervision is being done, etc. give clear indication of how the business is being managed. These visits to the businesses of the participants will also give the trainer the opportunity to use some of the actual situations observed as case studies and examples (with prior consent of the entrepreneur-manager) for discussions in the training sessions, or to suggest as practice project of the particular entrepreneur manager.
Counselling and advising. These are essential tools for improving the performance of the small business and building the competencies of the entrepreneur-manager. Through working with and helping the entrepreneur-manager in the identification and analysis of the weaknesses and problems of the business or of a specific functional area, finding and implementing the solution and evaluating results, the trainer will be able to identify the competencies that must be built-up or strengthened through training. Encouraging the entrepreneur-manager to develop and justify his or her own approaches can be of immediate help in improving competencies and also in identifying training needs.
Assessing training and development needs of groups of entrepreneur-managers
The following techniques could be used in analysing common training needs of a group of entrepreneur-manager:
Action learning exercise. Here, the needs assessment is undertaken in conjunction with problem identification, analysis and solving exercise by the group. As the process involves the sharing of experiences and knowledge, the participants in the action learning perform the roles of "training needs analysts" and resource persons. If the group's own knowledge and experience are not enough, the group itself will specify the information and training requirements to help the group proceed with its work. The training needs may be perceived as common or specific to particular members of the group. Individual needs would be covered by individually arranged consultations.
Interfirm comparison. Here, the training needs are identified by comparing and analysing the levels of key performance indicators. For example, for passenger transport operators, the differences in kilometre-passenger per litre of fuel performance could indicate needs to improve maintenance management, scheduling, or drivers skills. When expanded to include benchmarking and comparison with "best practice", these group exercises could indicate needs for upgrading of specific small business management system and practices.
Business clinics. Business clinics, while organized to provide advice and exchange experience on how to deal with a specific common problem, could be structured as a joint problem solving exercise similar to an action learning group. Through the process of brainstorming and exchange of experiences, the training and information requirements are identified.
1. The term entrepreneurs is used in business literature to refer to those who create new business ventures, assume the personal and business risks associated with the new business and continue to actively manage its operation. Small business managers, on the other hand, are those that assumed the management responsibility of an ongoing small business by, for example, buying, inheriting the company or being hired to run it. In this paper, the term entrepreneur-manager is used to refer to both of these two groups of persons. As discussed in the various sections, their training and development needs, preferences and constraints are different and must be consciously considered in designing and delivering specific interventions.
2. Adapted from "The Practice of Entrepreneurship" by G. Meredith, R. Nelson and P. Neck, ILO, 1982.
3. Adapted from "Management Training for Small and Medium Industries: A cross-country analysis of characteristics , constraints and catalysts" by El-Namaki, M. in Management Development of Small and Medium-sized Enterprises in Asia, Foundation for Asian Management Development, Tokyo, 1989.
4. From "Training for Enterprise: the role of education and training in small and medium enterprise (SME) development" by A. Gibb; paper presented in the Italian Presidency Conference of Ministers from the Member States of the European Union and the Countries of Central and Eastern Europe, Central Asia and Mongolia, Turin, Italy, 28 March 1996.
5. Various documentations on FIT and the interventions and activities of the programme can be obtained from the Entrepreneurship and Management Development Branch of the ILO.
6. Various papers presenting experiences on promoting networking and clustering of SMEs were presented in the Conference on Networking and Small and Medium Enterprises organized by the University of North London and Università degli Studi di Bologna, 19-20 June 1997.
7. Taken from "Training for Small Businesses in the European Community" by the European Centre for the Development of Vocational Training, Berlin, 1990.
8. This Annex draws heavily from "Diagnosing management training and development needs" by M. Kubr and J. Prokopenko, ILO, 1989.
Updated by GT. Approved by HH. Last update: 24 January 2000.