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Do you think SMBs need better management?

I think small businesses (overall) are productive and working hard. Do you agree?

Economist with Treasury, David Gruen, is quoted as stating otherwise yesterday – and this has angered a lot of SMBs.

Amongst other things, he said that “family-run businesses tend to exhibit inferior management performance” and that having many small business in manufacturing impacts on Australia’s productivity because multi-nationals “tend to implement strong management practices”.

Business size and management

Note he is actually discussing results of a report showing that Australian managers ranked lower than those in many other nations, especially in people management. And that this same report showed lower managements standards in smaller companies – although only medium and large companies were studied, not small or micro businesses.

I would like a comparison done that includes small and micro businesses as well – maybe we buck the trend and are managed better than medium businesses?

Better management leads to more productivity and innovation, so management is important.

statistics for Australian small business

I like this quote from Gruen:

A  healthy economy allows experimentation by small start-ups with bright ideas, which may tend to have low productivity on average but which are likely to either exit, or improve and grow rapidly over time. It sees labour move over time towards higher productivity firms as they gain market share and away from lower productivity firms.

So Gruen was quoting from a report. If we assume the report was conducted well and reported accurately, there seems to be evidence of better management in bigger companies.

From your own experience, would you agree with that? Does your answer change if you ignore businesses with under 100 employees?

Maybe we can improve SMB management?

Instead of assuming Gruen is anti-SMBs, perhaps we can look at how we manage our SMBs and learn from the multi-nationals.

Take a constructive approach to improve our businesses, even if we don’t think the big guys have it right.

The main areas I can think of for improving SMB management are:

  1. having more written procedures to ensure consistency and efficiency
  2. outsourcing tasks to give back time for better management – or maybe go the whole way and outsource some management as well!
  3. making time to learn more – whether by reading more widely or attending seminars or doing actual courses. And keeping to that committment

In his speech, Gruen gave another partial answer:

 The level of education and skills of both managers and non-managers is positively correlated with management performance.

Unfortunately I can’t find any figures to show how educated SMB and big business managers are. It makes a certain amount of sense that further education increases your skills, but there are of course exceptions of fantastic managers and business owners with very little education.

And it’s a bit hard to make SMBs get more educated when they’re in the middle of running a business or two!

So what is good management?

How can we as SMBs improve our management?

What management practices do big business use that we can learn from?

 

By the way, you can read the entire speech transcript from David Gruen. I have no personal opinion of him other than this speech but am glad I looked it up rather than just relying on the second-hand report I first read. Anybody can sound bad with words taken out of context.

 

4 Responses to Do you think SMBs need better management?

  • Gerald says:

    Smaller businesses have the advantage (and disadvantage) of smaller management teams and so they can often respond more quickly to circumstances changing because they have simpler decision making systems – but this can also be a risk as they may be more likely to make mistakes that risk the organisation. The US ranked highest for management, but the US is a much larger market so there should be many more peer businesses to compare with and recruit staff with relevant experience (and learn from) – this would make management easier. Perhaps management attracts more good people in the US because it is more respected than it traditionally has been in Australia?
    But in one sense the topic question is rhetorical; surely all businesses need better management!

  • Joe Wells says:

    These are great questions. What is good management? How can SMB’s and even micro businesses improve management? I think management can improve if these businesses continue to educate themselves on best practice procedures and other things that business owners should be aware of. I also think that with so many resources online, It is entirely possible to do that.

    • tashword says:

      I think that sometimes just be open to ask questions and think about the bigger pictur can improve our management, too. And I agree, Joe, that there is a wealth of information online ot help us learn and grow.

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