Good outcomes from business advice

Good outcomes from business advice Dr Kevin Mole, Warwick Business School

Outline of the Slides • Two levels of analysis • The organization – broader or deeper? • The adviser – skills or relationships • Using data from Business Links • evaluation survey of 3500 firms Previous categories of BLOs • 40 first interviews • Four types of BLO • Evidence on their effectiveness from main survey of Business Links • The first meeting

Context • The research was part of the SBS funded Economic Evaluation of Business Link • In Business Link’s network model of 2001 there were local franchisees. Business Link Organizations (BLOs) • SBS wanted to explore the different features of the local Business Link Organizations in order to make some assessments about good practice

Resource Dependency Theory • In resource-dependency theory, the firm exists within a network of interdependencies composed of multiple interest groups (Pfeffer and Salancik, 1978). • To govern a firm, managers have to control its internal and external environment to manage and stabilize these interdependencies (Fligstein and Freeland, 1995). • Rather than fit with the environment; managers actively influence their environment. They do this by trying to reduce their dependence on external sources. Managers gain the power to manage.

Clustering the models • BLO’s were cluster on the basis of four categories; • The way in which the business decisions were made • Related to the cost per intervention, • The proportion that came from the SBS and EU • The Proportion of Intensively assisted clients. • Cluster models could be used to classify the BLOs

Mole: Four models of brokerage High Proportion of Intensive Assistance Low Pipeline Forcing Managed Pipeline Forcing Brokerage Light-touch Brokerage Managed Brokerage Low High Intensity of Assistance

Clustering Managed Brokerage (cost per intervention, %SBS funding etc) Cost per intervention

Support Service Profile • For intensively-assisted firms, significant differences were evident between the profiles of BLO assistance. The key differences between the four models of BL assistance/BLOs were: • Managed brokerage BLOs were most likely to be providing intensively-assisted firms with business planning assistance or action plan development • Help with raising finance was also most likely to be offered by managed brokerages; • Managed brokerages and BLOs operating both managed brokerage and Pipeline Forcing managed pipeline forcing brokerage were most likely to be providing assistance with e-commerce and IT.

Impact Coefficients in Regression Models of Employment

Significant impacts were found from three of the four types % increase

The significant impacts from the different types of BLO • Figures in brackets show Intensively assisted firms get a 2.5% boost to employment from a light touch model 1 BLO. • On employment growth • Intensively assisted firms - Light-touch (2.5%) and managed brokerage (6.9%) • On sales growth • Intensively assisted firms – managed pipeline forcing brokerage (9.4%) • Other assisted firms – light-touch (weakly 5.5%) • On sales per employee • Other assisted firms – light-touch (7.2%)

Mole: models of brokerage and impact High Proportion of Intensive Assistance Low Pipeline Forcing Managed Pipeline Forcing Brokerage Sales Light-touch Brokerage Managed Brokerage Sales per employee Employment Low High Intensity of Assistance

Broader is not better • We can cluster BLOs on the basis of their management decisions. Crudely we find that some BLOs aim to provide more depth to their assistance whereas others aim to intensively assist more companies. • Most operate a light-touch approach. • Those Business Links that provide the most intensive assistance have th strongest effect on jobs • those that seek to increase the proportion of intensive assistance have great variation in the impact making no significant impacts. • In terms of the number of significant impacts – light touch brokerage seems to provide a reasonable impact. • There are impacts from non-intensive assistance also weakly on sales but also on sales per employee. • The evidence is consistent with the suggestion that the selection into intensive assistance by clients is important.

Influencing clients in the first meeting • First meeting critical (Bennett and Robson 2003) • Business Link moved towards Information, Diagnostics and Brokerage (IDB) (theory from Turok and Raco, 2000; Hjalmarrson and Johansson, 2003; Lambrecht and Pirnay 2005) • Financial pressures compressed these diagnostics into the first meeting

…this brings up issues.. • Trust – how does an adviser get to the heart of a business problem in 67 minutes? (Meyerson, Weick, and Kramer 1996) • Power – do you need to share power to get buy-in? (Schein, 2002)

Methods • The research was based on an analysis of 41 first diagnostic meetings between adviser and client taped by all 17 advisers working in a Business Link. • The clients that advisers worked with were: • 4 recent start-ups • 15 companies were struggling • 2 companies were in exceptional circumstances • 1 5 companies were growing slowly • 5 companies were very high growth and high growth potential; two were AIM listed

Methods and Analysis • Advisers were not able to predict whether this would turn out to be a good meeting or not. These were live meetings, not a drill • The evidence presented was subject to the assessment of two qualified colleagues who performed the same task and a consultant who’s expertise was in this area (and had experience)

Criteria used in the study

What constitutes a good meeting?

Criteria Met?

Particular differences were found in the way in which the process of the meeting was managed. • Preparation for the meeting • Preparation by the client • Managing the meeting • Managing the conversation

Growing or struggling firm made little difference to the adviser’s influence

When the client had power the adviser was not influential

Ragin’s Qualitative Comparative Analysis (QCA) • Ragin (2006) argues that much of our concepts in social science are composed of sets: the set of males, the set of experienced managers, the set of business owners. • The primary objective is to show how an outcome is the result of a combination of causal conditions

Crisp set QCA • Causal conditions (as variables are known) are categorised with values of either 1 or 0. These categories are developed into a ‘truth table’, which lists all the combinations that are possible • Having identified all the possible outcomes, QCA uses a Boolean algorithm to reduce the causal conditions to those that are necessary and those that are sufficient to result in the outcome (Ragin, 1987).

QCA Four ways to the influential adviser Pre Social Rapport Pre Adviser not under pressure Pre Pressing Problem Pre Well-structured meeting The Influential Adviser Client Prepared Candid Responses Social Rapport

What happens in the first meeting • The adviser can be influential when there are a combinations involving a pressing problem, client being prepared advisers not under pressure, a well-structured meeting, social rapport and candid responses

Discussion • How does business adviser gets to the heart of a business problem in 67 minutes? • Those meetings that went well were where the client had a pressing problem and the adviser conducted a ‘business-like’ meeting • What is not important is of as much interest as what is • The relative power of the client was better kept in check • Advisers were as influential with high growth businesses as with struggling start-ups

Conclusion • The way to good outcomes from advice is for organizations to let the private information work with the programme • Only the SME managers know whether they have a pressing problem • Once you are working with a firm then they may work on other elements ‘more deeply’ • Outcomes from advice are produced by changes in the way SME managers behave

Good outcomes from business advice