Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

The growth aspiration achievement gap


Published on

A paper which explores the concept of growth. It argues that there is no automatic link between growth and employment. It further argues that emtrepreneurs are not necessarily driven by a desire to grow big buinesses with large numbers of employees. The paper goes on to look at whether growth is automatic looking in detail at the barriers to growth. It finally addresses the issuesof whether entrepreneurs are born and not maade asking whether it is possible to teach entrepreneurialism. It concludes by focussing on the concept of linkage between a whole series of factors and the role that chance or uncertainty plays in all this. This is why wellhead strategies are important - small turns in the tap of growth by very big companies can massively benefit and lead to subsequent growth in the direct and indirect suply chain. This cascade model is particularly relevant to Lancashire which is home to a range of wellhead companies.

Published in: Business
  • Be the first to comment

  • Be the first to like this

The growth aspiration achievement gap

  1. 1. The Growth Aspiration Achievement Gap By Ged Mirfin
  2. 2. For the vast majority of Business Owners, based on a large tranche of research, growth is not an objective. Whateverassistance is available from growth hubs or accelerators, recruiting and hiring additional employees is not their objective. In one of the largest studies of its kind conducted by the Cambridge Small Business Research Centre in an article entitled "Identifying Fast Growth Small Firms" Hakin found that at any one time 55% of firms had no plans for growth in even the most favourable economic conditions. In comparison 15% of Business Owners were looking for significant expansion. The study reported that of these 22.5% of small firms within manufacturing and business services saw their objective as being to grow substantially whilst 64% sought moderate growth. The key issue is that the proportion of firms seeking growth is much much higher than the proportion of firms actually achieving growth. Indeed those Business Owners which are not actively seeking growth are reluctant toadmit this to researchers. This leads to an over estimation of the amount of growth potential which is present in the economy. It also calls into question the amount of dedicated resource which is being invested in cultivating a growth mindset campaigns within growth accelerators and business hubs. The latest defence of such growth acceleration now offers the assertion that growth is somehow organic - that businesses grow within themselves because it is independent of external stimuli or forces. The reverse is also true - that long-established businesses grow primarily by means of merger or acquisition. Whicheverexplanation one subscribes to it is clear that growth measures are not correlated with each other. What we need to do better is to understand the constraints - the barriers to "growth achievement". There is a failure to understand both the risk and opportunity structures which are inhibiting business growth. This raises a number of questions in itself about the nature of growth and where it comes from. Is entrepreneurialism simply another way therefore of characterising someone who is a "go-getter" or "willing to have a go"? In their groundbreaking study "Barriers to Growth in Small Firms" Barber, Metcalfe and Porteus identified three categories of barriers to growth: Management and Motivation, Sources of Finance and Market Opportunities and Structure. Lack of motivation was something which was an entirely internal barrier togrowth. What however constitutes motivation? The concept lacks definitional precision. There is a difference between negative and positive motivation - the difference between avoiding unemployment as a reason for establishing a firm and a conviction in achieving success - the desire to make money or establishing a nice lifestyle for one's self and one's family. The problem is that motivation is difficult to establish or prove because it is individual to the business owner. Indeed many entrepreneurs claim not tobe motivated by financial gains. In an article entitled "Finding the High-flying Entrepreneurs: A Cautionary Tale" Birley, Muzyka, Dare and Russell offer 5 typical reasons why people set up in business. First, freedom to take advantage of an opportunity. Second, tocontrol their own time. Third, it made sense at
  3. 3. the time. Fourth, economic and financialsecurity. Fifth, businesses are often vehicles for meeting family, personal, social or environmental objectives. The problem is that not everyone is an entrepreneur. Are entrepreneurs born and not made is the question posed by the old conundrum are individuals born with iherent entrepreneurial skills or are entrepreneurial skills acquired throughout the course of owning and running a business? If an entrepreneurial mindset is something which is inherent within individuals (and no this is not simply a propensity for risk taking behaviour - if that were the case all we would have to do is to encourage gambling in growth accelerators in the belief that some gambles will ultimately pay off even if the majority don't) then we are unlikely to be able to teach entrepreneurial skills - no matter how much we try. There is another more fundamental issue and that is the lumpy nature of the concept of growth. Overall there is no consistent or accepted way of measuring growth. Indeed according to Gibrat's Law Growth is a random variable implying a powerful role for chance or luck. Growth can refer to an increase in amongst other things: sales, profits, financial ratios, employment, market share, the income and emolluments of Directors, Business Owners and Shareholders or a Combination of all adjusted for the Cost of Sales, Inflation and Capital Investment. Ultimately one can end up with a very sophisticated measure of Growth (GVA) that the layman will neither understand nor make sense, particularly if one ends up with a perception that Growth is based on the precarious and uncertain delivery of a wafer thin sales margin within increasingly competitive marketplaces and/or huge levels of capital investment which need tobe paid back in the distant future. Growth, but at what cost? Nor is there a linear relationship between different stages of growth. Much depends on the period of time over which growth is being measured. However, as Paul Ormerod points out in his excellent book "The Death of Economics" growth is neither automatic, nor predictable because growth in one period within a timescale is not necessarily related to growth in another period either following or proceeding because of the different internaland external factors that may or may not be in play. Such an approach calls into question the relevance of macro-economicanalysis by idenifying the need to identify linkages between a whole host of micro-economictrends not all of which will ultimately be related to each other and several of which may actually have a negative impact on each other. There is therefore no such thing as evolutionary growth where growth in one period is associated with growth in a later period. Sales are the most commonly used and easily understood measure of growth.Sales is a concept which applies to all businesses. Sales are the primary source of growth for businesses. A growth is sales proceeds and is necessary for growth in the assets of the firm. It is also apriori/pior to an increase in the numberof employees working within or for a business. Another measure is bigness either in the Turnover, the number of Trading Locations of a Business but the key measure of size or bigness is the number of employees working for a
  4. 4. business and is the ultimate determinant of the measure of business size whether the business is Small (less than 10); Medium (10-50); Large (50 to 250); Very Large (over 250). The current policy agenda is dominated by the notion that it is Small businesses that are the ultimate source of employment growth. Never matter that Small businesses that grow to become Medium sized or Large businesses are both extraordinary and also part of a trend which has existed since time immemorial. All businesses unless they are off-shoots or spin-offs start Small and grow Large. As Paul Ormerod reminds us the relationship between growth and employment is at best indeterminate at worst there is no direct correlation between the two. We should disaggregate the relationship between growth and emloyment and admit that changes in the rate of growth will not automatically lead to changes in either employment or for that matter unemployment. Employment creation activities should be regarded as a discrete and separate policy sphere from growth promotion or should that be acceleration promotion. The problem is if you can't really be expected to be able to change the mindset of business owners significantly how do we achieve growth? As on this question and much else beside I pay particular regard to what Malcolm Evans, the CEO of the UK Manufacturing Acceleratorwrites and has to say. He put the point to me in a very simple way a couple of years ago. We can either expand a vast amount of effort carrying out a lot of very small and largely unproductive activities trying to improve trading conditions on the ground which have yet to be proved tohave any significant impact whatsoever apart from drawing attention and advertising the efforts that are already taking place within a small number of businesses that are successfully utilising business support services without all the froth and self justification that growth hubs and business accelerators require to justify their existence. Or we could do a number of small things which have a very significant effect on trading conditions indeed which will ultimately effect the growth potential of a very large number of businesses. He has dubbed this a "wellhead" strategy. A few turns of the taps on the pipeline fuelling business growth will get the economy flowing much faster. To quote Malcolm from a pivotal and hugely influential article entitled, "Cluster Not Bluster - A Strong Way Forward for NW Digital", "Wellheads anchor investment capital deep into a region, they drive a far reaching research & development agenda, they develop and shape an exponentially deepening skills agenda and knowledge base and they feed a succession of startups and breakouts which challenge, sharpen and renew." I wholly concurr. Achieving growth is about a small number of policymakers delivering significant impact both in terms of Access to Finance for Large & Medium Sized Business, Foreign Direct Investment from Multi-National Corporations locating intothe North West Region and Strategy Advisers working with Large Prime Businesses so that the benefits of Economic Growth are cascaded down to the Primary Supply Chain and ultimately tothe Secondary and Tertiary Supply Chain. The key to the spread of economicgrowth therefore is economic enablement, driving the key economicenablers: capital, skills, transport and that is most effectively delievered by working with and through the Wellheads - the Prime Businesses that dominate the Commanding Heights of the Economy of the Region tofinish with a Corbynesque flourish. It is another thing altogether to actually deliver economic
  5. 5. enablement. The Northern Powerhouse will only ultimately succeed if those big infrastructure projects materialize within a defined timescale that will cascade growth right across the region and sustain and perpetuate the nascent growth that is already present in the economy. This means moving quickly from the ephemeral visions contained within blueprints for growth toactualy putting bricks in the ground. In the meantime there is a real danger that we can all look very busy supporting business aspirations that will never materialise. From an information perspective Lancashire is home to a significant number of well established private sector employers in the county that employ large numbers of people. They range from some old established firms to large multi-nationalorganisations. Many retailers and financial institutions such as Tesco, Asda, Marks and Spencer, HSBC etc., are major employers in the county but it is impossible to derive figures for the number of people they employ in the county. One financial institution with a national presence is the Co-operative Bank which employs many hundreds of people in Skelmersdale. Among the well established locally owned companies that are significant employers, Booths has its headquarters in the county and a number of supermarkets in Lancashire. James Hall & Co is a major wholesale distribution company in Preston. The most important multi-national company in the county is BAE Military Air Solutions. The company has two major sites at Warton on the Fylde coast and Samlesbury between Blackburn and Preston. In 2011, the two sites were designated as local enterprise zones and this will attract additional employees to the sites. Eric Wright Construction is an important employer in the construction sector with its HQ in South Ribble district. Other significant private sector employers in the county include Leyland Trucks, Rolls Royce with a site in Barnoldswick and Aircelle in Burnley Barnoldswickis also home to Silentnight which is said to be UK's largest manufacturer of branded beds. The nuclear industry has a very important presence in Lancashire. In particular, EDF Energy operates Heysham 1 and Heysham 2 nuclear power stations whilst nuclear fuel is manufactured at the Westinghouse Springfields site near Preston. The Nuclear Industry Association produces a yearly jobs map that lists all the companies and employee numbers that are connected with the nuclear industry. Analysis of the results highlights the employee total for the two EDF nuclear power stations in Lancashire and the employees at the Springfields site. Both figures in January 2012 were in excess of 1,000 employees. The manufacturing sectorin the county contains a number of sites belonging to major national and multinational organisations. These important local employers include Burton's Foods, Fox's Biscuits, Warburtons, Cott Beverages, Graham and Brown, Eka Chemicals in Blackburn (part of Akzo Nobel) Ashi Glass Fluoropolymers, Andrew Industries, Turtle Wax, Synergy Health UK LTD, Tensar International, Trelleborg Offshore, Hanson Heidelberg Cement Group, Victrex, Dixon Group Europe, TRW, Alstom Transport, Cobble Blackburn and Accrol Papers. A fast moving private sectorcompany that now is now a major local employer in East Lancashire is the business telecoms service provider Daisy. Another is Homeserve in Preston an emergency insurance group that employs a large number of people at its claims management centre. The county has a very important agricultural sector that encompasses a range of farming, fishing and horticultural activities. Many of the businesses are well established, but as with a number of other sectors it is a challenge to identify the largest employees. Of note however are Flavourfresh Solfresh Group of
  6. 6. Banks, West Lancashire, a leading UK salad producer, and HuntapacProduce Ltd, growers, packers and distributors of organic and conventional root vegetables, brassicas and salads. Agency staff, hired during the busier parts of the growing season, will significantly add to the permanent workforces at these and other majorlocal employers in the sector.