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Ewing Marion Kauffman Foundation

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The Ewing Marion Kauffman Foundation in the US is one of the world’s top organisations for research and development into the SME sector. Although care has to be taken in translating their work (largely research based in the US) to the UK, I always find their publications to be worth a read.

They have just published a report following a longitudinal study of some 5000 small firms that were founded in 2004, tracking their development through the early years. I think that the report should provide useful insights for policy makers here in the UK and national and local levels as well as for anyone in the game of small business development supporting entrepreneurs.

Here are some soundbites from the report – and the questions that they provoke for me:

  • Nearly 60 percent of the businesses had no employees in their first year. Just under three-quarters of businesses had one employee or less, while about one-quarter of businesses had two or more employees. Very few businesses (less than 4 percent) had more than 10 employees.
    • How do the stats on our start-up work compare with this? Is number of employees in year 1 linked in to entrepreneurial success? Does a ‘slow’ start lead to a ‘slow’ future?
  • More than a third of businesses (37 percent) had no revenue in their first year of operation. About 45 percent of businesses experienced a profit during their first year, while about 55 percent of businesses that experienced a loss. About 17 percent of businesses had profits in excess of $100,000.
    • How realistic are our entrepreneurs forecasts on profit and turnover?
    • How good a job do we do in helping them to develop realistic forecasts?
    • What can we do to help entrepreneurs recognise that profit may only accrue after a long period of working at the business?
  • Nearly 44 percent of new businesses had no debt financing during their first year of operation. Many businesses were started with very little debt financing: 17 percent of businesses started with $5,000 or less; nearly 11 percent started with $100,000 or more.
    • What percentage of businesses that we support are adequately financed at the outset? How can we help entrepreneurs to consider their financial structures and approach re-structuring as an opportunity if necessary?
  • About 80 percent of businesses had some positive equity investment in their business in the first year. Nearly 10 percent invested $100,000 of equity into their business, while another 33 percent invested between $10,001 and $100,000. About one-quarter of businesses invested some amount less than $5,000.
    • How does equity finance work in poorer communities?
    • What alternatives to equity finance exist?
  • The vast majority of equity invested came from the business owners themselves. Just 10 percent of the businesses used external equity sources in their first year. Parents were the most common source of external equity (3.4 percent), while spouses provided equity to 1.6 percent of businesses. Non-family informal investors and venture capitalists were used very infrequently (2.7 percent and 0.6 percent, respectively).
  • Nearly 70 percent of businesses in the Kauffman data were owned by men and just over 30 percent were owned by women. Whites owned more than 81 percent of the businesses, while blacks owned 9 percent, Asians owned 4 percent, and the remaining 5 percent were owned by individuals of other racial groups. About 6.6 percent of the businesses were owned by Hispanics.
    • How effective are we at engaging the full spectrum of race, gender, sexuality and faith in feeding their enterprising soul?
  • Just under 9 percent of firms closed in calendar year 2005, and the survival rates vary by owner demographics. For example, 88 percent of black-owned businesses survived, compared with 92 percent of white-owned businesses and 91 percent of Asian-owned businesses. Women-owned businesses had a survival rate of 89 percent, about three percentage points lower than businesses owned by men.
    • What are we doing to track survival rates and understand patterns in them that may point to problems in the quality or accessibility of our services?
    • Starting a business is (relatively) easy. Starting a successful business that provides a vehicle for personal and professional development and allows us to develop as happy human beings is a whole different ball game. How are we tracking the ‘happiness’ of the entrepreneurs we work with?
    • Are business survival, jobs created and profitability the only important metrics? or should we looking at other aspects of the entrepreneurs satisfaction and well-being?
    • If we succeed in increasing business birth rates, should we also accept an inevitable increase in business failure rates?
    • Do we understand the full cost of business failure – economic, emotional, mental etc?

Each year the Kauffman Foundation produces an excellent ‘Thoughtbook’ that summarises it research findings and showcases some of the excellent work that the Foundation funds to support a wide range of entrepreneurs.  You can request a  copy here.

Which websites and organisations do you use to access information and support?

Alien versus Predator:NCVO takes on Added Value

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Last week I attended my first ever Performance Hub event at the National Council for Voluntary Organisations in London.  The event was jointly run by NCVO and the New Economics Foundation and played to a full house.

In essence the message was:

  1. the third sector doesn’t understand ‘added value’
  2. ‘added value’ is therefore a concept that is passed it ‘sell by’ date
  3. luckily we have developed a concept that can take its place – called ‘full value’
  4. even more luckily we have managed to reduce this to a 2×2 matrix that can be explained easily.

Now the origins of ‘added value’ are pretty old and extremely well respected.  Like any models or concepts they have their uses and their limitations – but this concept has done much to drive economic development, competitiveness and strategy over the last 3 decades.  Michael Porter, Harvard Professor and father of the ‘value chain’ has just celebrated 30 years of world leading consulting developing the competitiveness agenda using the concepts of value added, the value chain and the 5 forces model.

No doubt he will be devastated at the judgements passed down on his work by the NCVO.

While I admire the nerve of the Third Sector to challenge the business orthodoxy I can’t help but think that sometimes it shoots itself in the foot.  Surely if the idea is still good enough for the Institute for Strategy and Leadership at Harvard Business School we should not be too quick to dismiss it out of hand and replace it with a dinky 2×2 matrix?

Perhaps we just need to work a little harder to help our client group understand the concept and reflect on how it maybe used to add value to our work in making our communities better places to live and work.

My bet is that Michael Porters ideas might just outlive the neat little 2×2 that NCVO suggest should be used to replace it.  I will certainly be a little more circumspect before I hop on a train to London to receive the wisdom of NCVO.

Not that the day was bad!

I met some wonderful people.  We were all reminded of the importance of the unforeseen benefits of our work as well as the hard outcomes that we were paid to achieve.

The Challenge of Becoming a Better Manager

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Dark Arches
(Image supplied by Deborah Benbrook – a great ‘Leeds’ photographer – click the image to see some more of her work)
I work with managers who are trying to get better at their craft. Much better. They want to be the kind of manager who supports a team to do amazing work. To help others to really deliver to the best of their potential, both individually and as a team.
We use a set of management tools and techniques that could be described as ‘enlightened’. They are certainly based on an assumption that people are intrinsically good and want to perform well and develop their potential. However this means facing a dark truth – especially when talking about managing under-performers. No-one knowingly recruits an under-performer. And very few new recruits start off that way. There is something about the work context, something about what we as managers do that influences some people (sometimes the majority) to settle for less than their best. And it can be easy for managers to collude with them especially if that is the ‘culture’ of the organisation.
There are several reasons why making a transition to being a significantly better manager can be so difficult.
  • Firstly you have to be prepared to be obsessed by high performance, improvement and making the most of potential. Organisational rhetoric will always advocate this. However, in practice the rhetoric of excellence is dropped in favour of more pragmatic and easily achieved compromises.
  • Secondly, enlightened management practices can feel very uncomfortable especially to begin with. They are not our default management style. Our spontaneous management style is an expression of our deeply held, often subconscious, values and beliefs. And sometimes these are driven by more more traditional management concepts of power and control and more of a focus on the task than on developing the potential of the team to deliver excellence. So we wrap ourselves in the tools and techniques of enlightened management but underneath there is always a little voice saying ‘Just give a few orders, crack a few heads and get things done’. Only if we persist will we recognise that relationships are improving, more initiative is being shown, teams are performing better and genuine progress is being made. Only then will the nagging voice encouraging us to revert to the old fashioned ways start to fade away. And this is a process of substantial personal development. It is the process of becoming a different person with different attitudes and beliefs about what ‘excellence in management’ is all about. Now the tools and techniques of ‘enlightened management’ feel much more congruous with who we are as a person.
  • The third difficulty is the response of your team and the wider organisation to your changing management style. You start to use regular 121s, you give and seek feedback – frequently. Furthermore you expect it to be acted upon. You start coaching – everyone in your team – and expecting things to get better on a weekly basis. And you delegate consistently and well – not from a place that says ‘I can get some of my work done by others’ – but from a place that says ‘giving people the opportunity to take on these challenges will help them to develop and keep them interested an fulfilled in their work’. And what response do you get? Often it is a combination of surprise, discomfort, antagonism and disbelief. Usually there is a hope that if we can just keep things quiet for a while you will get over whatever training programme you have been on and things will get back to the mediocrity that passes for normal.
So the challenge of becoming a better manager is not an easy one. However it is not about mastering tools and techniques or acquiring new skillsets (although there maybe a little of this stuff). It is actually about recognising that there is a better way to manage and having the commitment and the discipline to pass through the discomfort of putting it into practice.

Maslow on Management

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Maslow on Management

First published back in the 1960s Eupsychian Management made neither the best sellers list nor the bookshelves in airports and railway stations. In fact it barely sold its first modest print run. No doubt this was in part because the business book industry had yet to take off, and in part because of his obscure choice of title. Re-published as ‘Maslow on Management‘ almost 40 years later it seems to be creating a bit more of a stir.

Maslow was one of the the fathers of ‘Third Force’ or ‘Humanistic Growth’ psychology. (First force psychology was that of the Freudians and Jungians; second force was that of the behaviourists – Skinner and his pigeons.) Third force or human growth psychology was developed by Freud, Rogers, Fromm, Adler and Maslow as a serious attempt to understand human potential and how it can best be realised.

In the early 1960s Maslow spent a summer observing life in a business and maintained a journal that reflected his observations and thoughts on  the practice of management and the relevance of third force psychology to the world of commerce – and vice versa. This journal became ‘Maslow on Management‘.

Maslow was a contemporary of Drucker and one of the things he found was that much of what Drucker had written about effective and efficient management as a theorist and consultant with no psychological training was aligned with Maslow’s own thinking. Management theory and Third Force Psychology converged on a set of ‘truths’ about management and the realisation of human potential – individual, team organisational and social. Wow!

As Maslow said:

…this is not about new management tricks or gimmicks or superficial techniques that can be used to manipulate human beings more efficiently. Rather it is a clear confrontation of one basic set of orthodox values by another newer system of values that claims to be both more efficient and more true. It draws on some of the truly revolutionary consequences of the discovery that human nature has been sold short.

PMN at Hamara Healthy Living Centre

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Images from Hamara

The Progressive Managers’ Network is coming to South Leeds, in partnership with the Hamara Healthy Living Centre.

Would you like to learn a management tool that is guaranteed to:

  • Save you time
  • Increase levels of trust in your team
  • Improve communication
  • Make you a noticeably better manager
  • Get more done – more quickly
  • Accelerate the professional development of your team, and
  • Reduce the pain of performance reviews?

The launch event, Brilliant 121s, which will be free of charge is to be held on April 29th with other dates planned as follows:

28th May – Giving and Getting Great Feedback NB -date changed from 27th

24th June – Practical Coaching for Progressive Managers

15th July – Effective Delegation

At the event you will get a free gift to help improve your management worth more than £25.

Places are strictly limited so please book your place online here. Or call me for more information on 0113 2167782.

The first event is free of charge.

Subsequent events will be charges at £120 per session. We will be offering a limited number of reduced price places at just £20 per session. Please get in touch and make your case to secure a reduced cost place.

If you know of a manager who might be interested please forward them a link to this page.