SFA comments on management development report

Commenting on the launch today, by An Tanaiste, of the Management Development Council Report, SFA Director, Patricia Callan stated: ' it is time for the Minister to really demonstrate her belief in the importance of management development by putting sufficient resources behind it. Far from recognising the importance of management development to small firm survival rates and thus to the jobs they support, this Government has actually slashed the amount of resources it commits to this area from approx €33m to €2m this year. Short-term government cost-savings are doing long-term damage to the indigenous small business sector and employment levels.'

According to Patricia Callan, SFA Director, 'a national focus on management training is even more critical during this recession, as many owner-managers of small companies set up their businesses in the Celtic Tiger years and do not have the skills necessary to lead their businesses through recessionary times. Therefore, it is imperative that the government invests additional funding in this area to ensure that managers are given the skills to deal with a recession, and that they can come up with a plan and deliver on that plan to ensure the business survival, job retention and potential expansion into the future. It is bizarre that there is currently a €400m surplus in the National Training Fund, which is red-circled for training and upskilling and is directly funded through employer's PRSI. This should be released immediately.'

Even during the good times, 40% of small businesses were failing during their first 5 years in existence. The OECD estimated that the primary reason for this was the lack of management capacity. This report also showed that training could reduce the risk of small business failure by 50%. 'The much lauded "smart economy", based on knowledge and creativity, requires organisations to possess a level of management sophistication far above anything previously seen. It has never been more important for the owner-manager to have every possible competitive advantage in running a business,' stated Callan.

'Providing direction in an ambiguous, changing context can be challenging for any manager, but in a small business unless the owner-manager is equipped with the correct skills, many will be unable to trade out of this recession. Owner-managers must focus on cost efficiencies, building their organisation's potential for future success, as well as inspire the people who work for them and encourage them to take the kind of risks that lead to innovative new products, processes, and approaches to doing business,' stated Callan.

Those capabilities, which are essential to long term success, include the ability of small companies to: 

Innovate - to develop and exploit new products, services and operating processes.
Maximise operating efficiency - to produce products and services of the highest quality, at the lowest cost, with the maximum flexibility.
Make structural adjustments - to respond effectively to changes in the competitive environment.

An SFA survey shows that the majority of SME owner-managers do not lack belief in training and its effectiveness with 43% acknowledging that management training is 'very important', and 29% citing it as 'critical for success'.

'However, in an environment in which every cost is being closely monitored, it can be difficult for small businesses to recognise the potential return on investment to them of investing in management training, and that is why it is essential that the Government steps in to breach this market failure, in the interests of enterprise and job retention, and raising national competitiveness', commented Callan. 'While it is appropriate to provide funding for reskilling those on the live register, it is critical that funding for management training and upskilling within the workplace is also increased, as this will ensure that many more people retain their jobs, and we all know that it is much easier to retain the jobs we have than try to create new ones. It is essential that every owner-manager has the skills that will allow them develop appropriate strategies for their individual enterprises, taking account of the strengths and weaknesses of the Irish economy, to ensure jobs are maintained.'

Callan concluded, 'businesses need every assistance to enable them trade through these difficult times. Management capability in the indigenous small business sector will be one of the driving forces of future economic growth. The decision by this Minister to reduce funding for this critical sector in the midst of this recession has been detrimental and should be immediately reversed. The Minister is ignoring the opportunity to maintain business growth and jobs!'