· 2 min read · Features

SME leadership: how far have we come in 40 years?

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Policy recognition of the economic, political and social importance of small firms in Britain traces its roots back more than 40 years to the publication of the Bolton Report in 1971.

If their survival as an organisational form was the issue in 1971, the concern today is how small and medium-sized enterprises (SMEs) can meet the high expectations that have been set for them.

In particular, SMEs are now being heralded as crucial to providing the jobs and growth so urgently needed to jumpstart the UK economy. Yet, surprisingly, many of the problems plaguing the SME sector in 1971 still hold true today.

The transcript of a debate on the Bolton report in the House of Lords from 1973 provides insights into some of these issues. Inability to carry out large-scale marketing and distribution to support export activity, access to finance and government regulations were identified as some of the problems. However, one of the major factors identified as crucial to the future existence and growth of small firms was that of good management.

Entrepreneurial and technological skill does not always sit easily with the ability to organise. People who have built up small firms frequently find it difficult to delegate authority down the line, with the reins for running the business left in the hands of just two or three people.

The Work Foundation's recent event, Developing management and leadership skills in SMEs, yet again highlighted the skills issue as a major barrier to SME growth.

Growing from a team of two or three people to managing a team of 15 to 20 clearly requires a specific skill-set separate to that required for setting up the business in the first place. As Rajeeb Dey, founder and CEO of Enternships.com pointed out, "I've only recently started considering the issue of leadership seriously, due to the growing size of my team." Yet unfortunately, while access to finance, support for increasing export activity and reduced regulation remain on the government's agenda for SME growth, leadership and management skills development seems to have fallen off the radar.

Of course, it may be argued that the government can only provide so much support if SME owners themselves don't invest time or money in their own development. However, there does need be an explicit recognition of the important role of leadership in the growth of SMEs. As pointed out by Mike Cherry, national policy chairman of the Federation of Small Businesses, "There is evidence to prove that SME firms whose owners seek advice and support for their self-development are more likely to grow." Yet all too often, the daily pressure of running the business takes priority over taking the time out to invest in leadership development.

The 1973 House of Lords debate highlighted a lack of formal qualifications and management ability in small firm owners as an impediment to business growth. In this case, the debate highlighted access to consultancy services and management education as the solutions to tackle these issues. Forty years on, the 'formal qualifications and management ability' problem has morphed into the 'leadership skills development' problem within the SME. However, the desired outcome remains the same - high growth.

It is precisely this issue of SME leadership skills development that is being tackled through The Work Foundation's new LEAD London programme, starting in September 2013. Based on extensive research into entrepreneurial learning developed by Lancaster University Management School, where the original programme started, LEAD has nine years of evidence to demonstrate what works. Since 2004, it has been successfully delivered to over 2000 SMEs across England and Wales, not only improving leadership skills for SME owners, but also leading to increases in turnover (55%), productivity (65%) and profitability (70%).

After forty years, it is time to turn the debate into action and apply tactics that actually deliver results.

Rohini Bhattacharya is Business Development Manager for Leading Enterprise and Development (LEAD)