STRATEGIES FOR CATCHING A SNARK: SME ENTREPRENEURS AND THEIR PECEPTIONS OF BUSINESS ADVISERS

1. STRATEGIES FOR CATCHING A SNARK: SME ENTREPRENEURS AND THEIR PECEPTIONS OF BUSINESS ADVISERS Barry Ardley University of Lincoln, Philip Moss GardmanLtd, Nick Taylor University of Lincoln

2. Agenda • Hunting the snark \capturing a solution… • What we know…about advice and SMEs • The gap and the focus • The context …SME manufacturing • Method • Findings; external advice and SMEs • Some implications

3. Hunting SMEs & Snarks….. • small firm advice is a central preoccupation of government (BIS) • A considerable amount of business policy has been aimed at supporting small firms, who it is claimed, can offer all sorts of benefits to the whole economy. • over the years, a plethora of advice schemes have been put forward aimed at capturing effective strategies that will best serve small businesses. (Hughes 2009) • Success is elusive however.

4. Carroll, Lewis (1898). In the midst of the word he was trying to say, In the midst of his laughter and glee, He had softly and suddenly vanished away— For the Snarkwas a Boojum, you see.

5. What we know… • What has been established is that generally, rather than engage with external advisers, small firms have been found to use informal methods, trusted local sources and personal networking to gather decision-making information (Brush, 1992; Brouthers et al, 1998; Burke and Jarratt, 2004; O’Donnell 2011). • SMEs are surrounded by a plethora of institutions purporting to help them, most of which they ignore” (Mole 2007, p.586).

6. A putative gap... • Copious material on SME information sources exists …but… little established research appears to exist in relation to the tendency for SME decision-makers to utilise external advice (Burke and Jarratt, 2004).

7. Focus of the paper ∙ this paper provides some insights into the perceptions of SME owner managers to seek out and accept advice from external business advisors. ∙ An understanding of both putative barriers and factors that are conducive to using external sources could be a very useful guide to policy, business strategy and future research in the area.

8. The context: SME manufacturing • The Manufacturing Advisory Service (MAS) was set up in order to provide support to manufacturing businesses in England, being funded by the department for Business Innovation and Skills. • MAS recently reported that the small and medium sized manufacturing business sector accounts for 110,000 businesses and 1.1million jobs in England. • One of the authors has over 10 years’ experience as a Managing Director and key decision-maker within an SME manufacturing business. • Subsequently, in the last 12 months, as a MAS registered external consultant, he has been involved in delivering consultancy advice to SME manufacturers and the research here is an attempt to extend the knowledge base of the area

9. Two key issues… Some evidence suggests that those small firms with developed information systems incorporating professional sources of advice do better than those without this facility (Levy and Powell 2005) Is the nature of some of this advice problematic?...... I.e. standardised non contextual prescription ((Morris et al 2002; Morrish et al 2011; Hills et al 2008; Collinson and Shaw 2001; Stokes 2000 Hackley 2003).

10. Why the apparent decision not to seek external advice? • Fear of showing ignorance (Curran & Blackburn 2000) • Fear of overdependence (Zinger et al 1996) • Credibility of adviser (Burke & Jarratt) • Trust (Brouthers et al 1998) • Cost factors (Pineda et al 1998) • Entrepreneurial self efficacy (Forbes 2005) • Environmental sensitivity (Dyer & Ross)

11. Method:interpretivist • Explored perceptions of SME owner/managers. • Perception a social phenomenon - a self narrative built around identity construction. These self narratives draw on memory, life experience, interactions, stock of knowledge and cultural context (Gergen and Gergen1983; Silverman 2013 ; Holstein & Gubrium1995). • Semi-structured interviews, which were conducted in the interviewees own workplace - lasted 1-11/2 hours. • Criteria for selection was that firms should be privately owned and managed SME manufacturing businesses within a 20 mile radius of a designated East Midlands city. • E1, E2, E3, E4, E5 - a bespoke sports garment manufacturer, an engineering and steel fabrication manufacturer, a wholesaler of animal supplies, a sub-contract manufacturer of engineering components and an engineering manufacturing company.

12. Customers and advice • All businesses placed considerable value on feedback from customers as evidenced by this quote from E1, in responding to a question about information sources; • “Market opportunities?....definitely customers.’’

13. Entrepreneurial self efficacy and advice • None of the entrepreneurs displayed evidence of excessive over-confidence. • Some were candid in disclosing their view of their own fallibility. This was summarised in the response of E 3 when it was stated that, “You don’t know what you don’t know… (laughter).” • The research found that all interviewees displayed levels of confidence, but not of over-confidence. All contributors were conscious of their own limitations and weaknesses. • Most displayed little resistance towards the need to rely on others, either internally or externally, to improve decision-making. • In terms of being aware of the usefulness of advice E3 noted that “One thing that I’m wary of is becoming insular”.

14. Advice, strategy and knowing the business • E-5 …“The one place we wouldn’t go to is business advisers. I get the feeling that they don’t really understand what the business is”. • E4…“I wouldn’t use them (consultants) for strategy. What do they know about our business? We operate in 40 countries around the world.” • E3… “Some of them come in and it’s like Heinz 57….I think, how can you be a provider of such a broad spectrum of advice?”

15. Specialist targeted advice & credibility • E2... And … a MAS funded consultancy project that addressed a specific production/process issue….“We’re not specialists in everything. So, if we can get someone and they’re specialists at it, then we let them get on with it.” • E2 was asked about the nature of the experience and indicated that it was….. Good, (and) you don’t have to listen to everything, take the things that are relevant to your business”. • E3, …. “It varied according to who it was. We did BITs training and put 40 odd people through it…….excellent!I’ve had others come in and frankly they’ve replayed back to me what I knew. Then we had another one who came in and built our capacity model for us. He came in and timed everything and our production planner uses that matrix every day”.

16. The cost of advice • E3"As net borrowers we need payback in around 2 years otherwise it doesn’t work for us.” • If a grant is available? • When there’s a grant behind it there’s a hell of an incentive because these people do charge a lot of money.”

17. Trust, credibility and advice • E2…“We have someone who comes in to us every month and he is someone that my business partner and I have worked for in the past. He has been MD of big companies.” ….he is fantastic….he makes us take risk at times that we otherwise wouldn’t; he does it because we’re friends”. • E1 notes that in terms of legacy, “I think it’s important…. that they have a heritage….and they have a proven past.”

18. And again, trust • E4 discussed a positive experience from partnering with local universities in a consultancy context. • It was explained how the specialist knowledge derived from university academics, combined with a high level of student engagement, had proven to be highly beneficial. • Great value was placed on the long term relationship that had been built with a particular academic.

19. implications • Evidence exists that the owner entrepreneur recognises the value of external advice. Perceptions of risk and the environment….? • Value recognition is contingent - with major inhibitors to accepting external advice being trust and concerns over the credibilityof the advisor. • Some scepticism about the general non contextual knowledge base of some consultants • External forms of funding for SMEs may be better focussed on developing more long-term relationships between SME/owner managers and business advisors than short-term intervention projects. • MAS - As well as initially selecting appropriate advisers, the organisation could act as a trusted intermediary between the company and the adviser much more than they do at present. MAS could be of help here in initiating the relationship between the firm and the consultant, taking a role in screening out those advisers who might only be interested in financial returns

20. "It's a Snark!" was the sound that first came to their ears, And seemed almost too good to be true. Then followed a torrent of laughter and cheers: Then the ominous words "It's a Boo—" In terms of the Snarkanalogy…… it is suggested that in order to successfully ‘capture’ an appropriate policy it has to be tailored to the specific context of the organisation in terms of owner manager’s views and the nature of the dialogue built with the adviser. Otherwise the resulting initiatives might produce something else that is unwanted; i.e. a Boojum…….