In a recent report on the impact of leadership and management skills on entrepreneurial enterprises and SMEs, Warwick Business School’s Professor James Hayton, points out that a focus on the technical side of business development as opposed to the development of people was a major error and that a lack of attention to developing leadership capability is holding back a key section a of the UK economy.
While there is consensus concerning the value of human capital for performance, especially in early stage ventures, existing evidence has focused on broad proxies for human capital such as education and experience. Existing research has little to say about whether specific leadership and management skills play a significant role in the development of effective management practices, or which skills might be most important in improving performance.
Now Professor Hayton has evaluated the relationship between leadership and management skills and practices, and performance in UK SMEs and concluded that “under-developed Leadership and Management (L&M) skills and an associated widespread failure to adopt management best practices may be constraining the performance and growth of a large number of UK SMEs”.
Hayton cites data from the CIPD, indicating that nearly 75% of SMEs in England reported a deficit in their L&M skills. According to the Warwick Business School Executive Education team many organizations, large and small, take L&M for granted. The predominant mind-set has been that as long as we give due attention to the technical side of our business, (which Hayton identifies as the universe of “things” as opposed to people), all will be right with the world. This report underlines how erroneous that assumption can be. It concludes that L&M can have a positive correlation with enhanced turnover, productivity and growth.
The report identifies the importance of developing of an entrepreneurial capability and a strategic responsiveness that is readily able to adapt and innovate as markets and circumstances change. This emphasis on agility and innovation does not come easily to organizations that are often inhibited by historical attachments, silo mentalities and processes that discourage democratic decision-making. What is known as organizational learning can be elusive and challenging to embrace.
The report provides a framework of skills and practices which determine performance. Using this framework, the Warwick approach is to directly engage with SME clients to critique their current practices and to use this analysis to define the skills gap which needs to be addressed in order to strengthen performance.
Entrepreneurship in the SME sector and in early stage ventures is a major driver of the UK economy and one of the keys to the country’s elusive ‘productivity’ growth. We ignore these indicators at our peril.