LESLEY JOHN, ACCA Marketing and Media Relations Manager
Many businesses are born out of brilliant ideas. Owner-managers usually have a good understanding of the business sector or industry, are clear on their desired target audience and can develop a service or product that could meet the need they have identified. Why, then is it often so difficult to turn that great business idea into a sustainable, high performing company?
What are the challenges? Where do business owners, in particular small business owners go wrong? And what is the must have mix of ingredients to ensure a greater chance of long term success and prosperity?
According to statistics from the Caricom secretariat, SMEs contribute about 40 per cent to the region’s GDP and, given that the majority of Caribbean firms can be considered SMEs by global standards, contribute to 70 per cent of jobs in the Caribbean. SMEs have a critical role to play in the economic, social and environmental development of the Caribbean and their success is vital to regional economic sustainability.
The challenges facing SMEs across the region and across the world are similar in nature. World Bank publication: What's happening in the Missing Middle? Lessons from Financing SMEs states that access to adequate finance to launch, develop, and grow is a principal challenge for small Caribbean businesses. Other challenges include gaps in training in business skills; high cost of infrastructure services; inadequate physical infrastructure support; low levels of technology usage to improve productivity and lack of competitiveness.
Seeing the importance of this sector to economic development, governments and policy makers have a clear role to play in creating opportunities, providing support and developing policy aimed at helping SMEs to thrive. But SMEs themselves have an equally important role to play in terms of putting in place the correct governance structure to ensure their own survival and growth.
So, what is governance for SMEs? It is about leadership directing the organisation to long-term prosperity and thus achieving the outcomes that the organisation has pledged. In doing this, small business leaders need to introduce oversight mechanisms; align processes and procedures with the purpose of the organisation; demonstrate to internal and external stakeholders their commitment and bring them along on the journey towards prosperity and success; and exercise control to ensure that resources are used for the maximum impact.
Many may consider this a big ask for time and resource constrained SMEs but companies that incorporate good practice for running their businesses from an early stage are more likely to be resilient and to appeal to external investment.
To succeed, the leaders of SMEs need to be aware of factors both within and beyond their enterprise and take steps to build a resilient organisation.
Building a resilient organisation
Let’s start with some of the critical success drivers. According to the ACCA report How vision and strategy helps small businesses succeed, the key drivers for successfully creating a robust organisation are,
• strategy, control and process
The vision of an organisation in the simplest terms is a picture of where a company wants to be in the future, this is what determines its direction, what it represents, how it wants to be perceived by internal and external stakeholders and what it needs to be like to be successful in the future. It is dependent on many things, including ownership, financial structure and funding sources, but above all on what the organisation has been set up to achieve – its long-term value.
In as much as the vision is where the company wants to go, strategy, control and process is about how it plans to get there. Strategies break down the vision into manageable stages, set achievable goals and objectives and plan actions for execution, monitoring and reporting. Detailed processes and controls enable this to happen.
These all cannot happen in isolation and that is where people come into the picture. The right people are critical to the success of any organisation. It is their creativity, passion, drive and ideas that bring strategy and vision to life. Even with the rapid advancement of technology, AI and automation, the need for human involvement, judgement and decision making has become even more apparent and is fundamental to business growth and success. Businesses, especially those in the Caribbean, run on relationships networks and collaboration – all areas where people play a vital role.
Leaders need to be aware of how these three success drivers interact and ensure that they support each other to optimise efficiency by creating synergies.
Resilience in the face of change
Resilience requires an organisation to understand internal and external stakeholder views and interests as well as ensure their buy-in with the organisation’s vision and strategy. For this to happen, the organisation must understand and interact appropriately with its stakeholders – from its workforce to trade partners, from funders to the community in which it operates – and win their support. This can make or break the business as it goes through the economic cycle, circumvents threats and explores opportunities.
For long term success, the business must:
• nurture its relationship with external stakeholders
• align rewards and opportunities for employees with its strategy
• stay flexible, adaptable and resilient
When all parties, both internal and external, share and are committed to the organisation’s vision and strategy, they will see the future of the organisation as their own. While responsibilities and authority may differ, understanding between them will deepen as they share a common vision and strategy. This facilitates a more collaborative environment within which sharing and communication, willingness to support and complementing roles thrive; Factors which contribute synergistically to the organisation’s flexibility, adaptability and resilience.
Leaders of organisations are key to enabling such an environment. Their role goes beyond setting the tone at the top and includes communicating the goal of the business to the workforce and to the external stakeholders, explaining what ‘success’ will mean and that all parties will share the fruit of their hard work. This will go a long way towards encouraging everyone to not only understand the potential impact of their role but to also take ownership of their responsibilities, act as the eyes and ears of the organisation and help it adapt to the rapidly changing business environment.
In summary, simple but effective practice over vision, strategy and human capital underpinned by good leadership can provide companies with greater flexibility, adaptability and resilience as they grow – a huge factor in the long-term sustainability of the business.