SMEs-IIP case study-FINAL

SMEs and Network of Centres of Excellence for Business Support
Investors in People Interactive – Case Study
Organizational Culture for Competitiveness Improvement Page 1
- CASE STUDY -
SMEs ORGANIZATIONAL ASSESSMENTS
AND CAPACITY BUILDING –
NEED FOR SHIFTING THE WORK CULTURE
Authors: Monika Begovic and Leszek Jakubowski
Case Study was carried out under the EU project:
E-business Competitiveness Improvement Programme
IPA IIIC for Regional Competitiveness
Croatia, November 2014

Table of Contents:
About the Project ……………………………………………………………………………… 3
Foreword ………………………………………………………………………………………….. 4
Design and Methods …………………………………………………………………………. 5
Case Study ………………………………………………………………………………………..11
Organisational Assessments Report – Croatian SMEs
Overview of Results ……………………………………………………………….. 13
Strategic Planning
Effective Management
Culture and Communication
Developing People
Managing Performance
Summarised Results ……………………………………………………………… 28
Conclusions and Recommendations ……………………………………………….. 29
Literature ………………………………………………………………………………………… 31
Annexes ………………………………………………………………..………………………… 32
Annex 1 – About the Authors
Annex 2 – List of Enterprise Support Institutions in English
Annex 3 – Questionnaire Investors in People Interactive

DESIGN AND METHODS
During September and October 2014 Leszek Jakubowski and Monika Begovic held 17 half-
day workshops in 17 Croatian counties. There was a high level of enthusiasm to attend the
workshops and this resulted in a total of 248 participants attending, out of which 191 were
entrepreneurs. Presentations were made on the importance of people in organisations;
comparisons of organisational culture and its importance in the global context; an outline
and principles of the Investors in People methodology; how to exploit the potential of
people in organisations and a detailed description of Investors in People Interactive as a
digital tool for organisational self assessment. All entrepreneurs present completed a
printed version of the Investors in People Interactive questionnaire. During the completion
of these questionnaires guidance and instructions on the best management practice relating
to people at work were given in order that the entrepreneurs better understood the context
of the questions. Quantitative data processing was then carried out based on the gathered
answers from anonymously completed questionnaires. The conclusions drawn from the
data together with anecdotal evidence confirmed the need for a shift in the organizational
work place culture in Croatian SMEs.

The map above shows which counties took part in this Case Study and which Enterprise
Support Institutions have been involved in organising the workshops for entrepreneurs.
List of involved agencies3
:
Razvojna agencija Zagreb – RAZA TPZ ( www.raza.hr )
JU Razvojna agencija Šibensko-kninske županije (www.rra-sibenik.hr )
JU RERA S.D. za koordinaciju i razvoj Splitko-dalmatinske županije (www.rera.hr )
Razvojna agencija grada Dubrovnika DURA (www.dura.hr )
Zagorska razvojna agencija ZARA (www.zara.hr )
Agencija za razvoj Virovitičko-podravske županije VIDRA (www.ravidra.hr )
Agencija za razvoj Vukovarsko-srijemske županije HRAST (www.ar-hrast.hr )
Razvojna agencija Sjever-Dan ( www.dan.hr ) in partnership with
Tehnološki park Varaždin (www.tp-vz.hr )
Poslovni park Bjelovar LORA
Centar za tehnološki razvoj – CTR – Razvojna agencija Brodsko-posavske županije
(www.ctr.hr )
Tehnološko-inovacijski centar Međimurje (www.ticm.hr )
Razvojna agencija Podravine i Prigorja (www.pora.com.hr )
Poduzetnički inkubator BIOS ( inkubator.hr )
Razvojna agencija Sisačko-moslavačke županije SIMORA (www.simora.hr )
Poduzetnički centar Pakrac PCP (www.pc-pakrac.hr )
Regionalna razvojna agencija PORIN (www.porin.hr )
Istarska razvojna agencija IDA (www.ida.hr )
3
Names of the agencies are in their original Croatian official version. In Annex 2 their names are translated in
English language

The quantitative section of the study addresses one primary question:
Are Croatian entrepreneurs aware of the importance of organizational culture in running a
successful and competitive business?
Additional exploratory questions refer to:
1. Will this study have significant impact on improving the competitiveness of Croatian
entrepreneurs?
2. Are Enterprise Support Institutions, especially through the Centres of Excellence for
Business Support network, going to be more efficient in offering advice to their
entrepreneur clients, after receiving data and information from this study?
3. Is this study going to be helpful in proving that there is a need to shift organizational
culture in Croatia, offering recommendations and reflecting the situation in other
countries in transition?
4. Will this study have a significant impact on the possibility of using structural funds, as
proposed in the sustainability strategy designed by the project team, in order to
change the approach to organizational culture as an important part of organizational
capacity building that improves the competitiveness of the Croatian economy?
Objectives of this Case Study
This case study shows the importance of capacity building through organizational culture by
addressing activities which strengthen knowledge, skills, competencies and abilities of
management and employees in organisations. It tackles the issues relating to attitudes in
the work place and to policy and methods in shifting organizational culture. The report
highlights the key factors in explaining how the Investors in People standard improves
organisational performance.

Target group:
The target group in this research were entrepreneurs – micro, small and medium
enterprises.
A total of 191 entrepreneurs participated in the workshops held by the authors of this study
and the survey is based on anonymous questionnaires filled in by the entrepreneurs.
Below is the total number of SMEs divided by sectors, based on the information gathered
through the lists of participants:
The following pie chart illustrates the percentage distribution between broad sectors4
:
4
For the purpose of graphical presentation and due to the very small number, agencies are listed under
service sector. Also Craft and Family Firms are not graphically presented.

METHODOLOGY
Investors in People methodology and standard
Investors in People is owned by the UK government and managed nationally at Head Office
by the UK Commission for Employment and Skills (UKCES). The Investors in People
methodology was developed in partnership with the business community and introduced in
1991 by the UK Government. By using the Investors in People methodology businesses and
institutional organisations made substantial changes in their approach to people
management and subsequent research has shown that this approach contributed to the
British economy becoming more competitive in the global market. Currently a substantial
part of the UK workforce are employed either by organisations that are recognised as
Investors in People employers or organisations working towards achieving accreditation. By
extrapolating data over the 23 years of implementation it is highly probable that Investors in
People specialists have worked with as many as 80,000 organisations employing over 15
million people.
Today Investors in People is recognised as a world-wide methodology for achieving
organisational excellence which sets a level of good practice for improving an organization’s
performance through its people. The standard comprises out-come based evidence
requirements which follow the well established principles of change management, plan, do
and review. Organisations need to meet 39 evidence requirements in order to achieve
recognition as an Investor in People.
According to some research, Investors in People increases commitment, effort and results by
matching people development to business ambitions. Companies with Investors in People
recognition have higher level of trust, cooperation and commitment among employees than
their competitors. 5
It could be said that Investors in People delivers improved skills levels
and flexibilities.
It is pertinent to point out that the European Commission, through the European Social
Fund is about giving people the skills they need and is the central tool for investing in
human capital. 6
It is a key tool for delivery of EU policies which aim to improve the
economy and social cohesion, through investing in people.
5
Bourne, Franco-Santos, Pavlov, Lucianetti. Cranfield School of Management (2008), Impact of Investors in
People and HR Policies on Business Performance
6
Investing in People: EU funding for epmployment and scial inclusion, Social Europe Guide, Volume 7,
European Commission, Directorate-General for Employment, Social Affairs and Inclusion, June 2014

The authors of this study believe that the Investors in People methodology is ideally suited
as a means to achieving the much needed work culture shift in order to make organisations
in the business and institutional sectors in post communist countries operate more
effectively and efficiently and thereby more competitively.

Why Investors in People Interactive?
Investors in People Interactive7
is a free electronic organisational improvement self-
assessment tool and as a benchmark tool is a part of Investors in People methodology. It is
designed to guide leaders and managers through development activities, to help transform
organizational performance and improve competitiveness.
The online assessment tool is an effective way for businesses to start assessing their
management capabilities through a digital application that leads them to start thinking
about their management style relating to the people within their organisation.
Organizational culture as a leadership concept has been identified as one of the very
important components that leaders can use to grow a dynamic and successful organization.
The fact is that leaders in organisations achieve success by being consistent, sending clear
signals about the vision, goals, priorities, values and beliefs. Once positive and supportive
culture is established and accepted it is easier to run the organisation and achieve better
results.
The digital assessment tool covers five key management practices (through 20 questions as
in Annex 3):
Strategic Planning;
Effective Management;
Culture & Communication;
Developing People and
Managing Performance.
Investors in People Interactive –
e-application used for the purpose of
raising the awareness on e-business and
the importance of organizational culture
7
http://interactive.investorsinpeople.co.uk/interactive-tool

- CASE STUDY -
REPORT
CROATIAN SMALL AND MEDIUM ENTERPRISES
ORGANIZATIONAL ASSESSMENTS REPORT -
INVESTORS IN PEOPLE INTERACTIVE
Organizational culture
In today’s competitive world, many companies are striving to differentiate based on cheaper
prices and offering better products or services. However, it is becoming more and more
difficult to differentiate based on these factors. Competitors quickly pick-up on what a
certain company is doing and replicate it; and sometimes they even do it better, stealing the
competitive advantage and making it their own. One of the only things that cannot be easily
replicated is the company culture. Strong and positive company culture can help
differentiate a brand, attract and retain loyal employees, and build strong relationships with
customers, vendors, and partners.
A common definition of organizational culture is that it refers to values and behaviours that
contribute to the unique environment of an organization. It is also called corporate culture,
and it is visible in the ways the organization conducts its business, treats its employees,
customers and wider community. Organizational culture can be seen in the extent to which
freedom is allowed in decision making process, developing new ideas and personal
expressions of employees. Having organizational culture appropriate for the team, which
should be unique for every organization, affects the organization’s productivity and
performance, and is very difficult to change, once it is set up in a wrong way. Therefore,
leadership has a very important role in creating the culture that ought to be the best for the
team of people, employees. 8
8
Schein, Edgar (2010), Organizational Culture and Leadership, San Francisco, CA: Jossey-Bass

Schein also stresses how organizational culture in one organization is important for creating
general business climate in the country, and is therefore very important to start giving the
organizational culture the value it has in a business world, especially in countries in
transition, that do not have a long tradition of free market economy.9
The need for culture shift is very well presented in a book by Cameron and Quinn:
Diagnosing and Changing Organizational Culture10
in which it is stated that ‘organizations
that are not in the business of change and transition are generally viewed as recalcitrant.’
The importance of a work culture, not only for the organization, but for a country, as well,
and the responsible role of management and leaders, is inevitably key condition for growth
of business and improving the competitiveness of a certain country’s economy.11
Positive, supportive people management, leads towards the change of the work culture.
Research shows that effort invested in the changes of the organizational culture leads
towards better image and better results in the organisation. One of the many
responsibilities confronting leaders is the creation and maintenance of organizational
characteristics that reward and encourage collective efforts. The organizational culture
stands as one of the components that is important to sustaining performance and
competitive advantage, and a good reason for becoming a great company.
As this study has shown, the reason for not producing good enough results in many
companies and other organisations in countries in transition is the fact that leaders fail to
recognise organisational culture as a powerful tool that can create and sustain performance.
The cause of ethical failure in many organizations can be traced to organizational failure of
the leadership’s active promotion of good work culture which in turn leads towards the
exploitation of the potential of the people.
9
„Culture can be thought of as the foundation of the social order that we live in and of the rules we abide by.“,
Schein 2010
10
Cameron Kim S., Quinn Robert E., (2011) Diagnosing and Changing Organizational Culture, Based on the
Competing Values Framework, San Francisco, Jossey Bass
11
“Leader and managers of organizations (and societies) are creators, products, and victims of culture. And it is
one of the unique functions of leadership not only to create cultures in new groups, but also to manage
cultural issues in mature organizations.” Schein, Edgar H. (2009), The Corporate Culture Survival Guide, San
Francisco, Jossey Bass, p.xi.

- OVERVIEW OF RESULTS -
* It should be noted that the answers in the graphs and charts shown below are rated from
A to D with the best answer considered as: D.
* A Questionnaire with 20 questions and suggested answers is attached as Annex 3
1. Strategic Planning
Strategic planning sets the foundation for the development of every organisation and is
paramount as it provides a sense of direction and the basis on which measurable goals are
outlined. It is a tool that is useful for guiding day-to-day decisions and also for evaluating
progress and changing approaches when moving forward. A good strategy defines how the
goals will be achieved by exploiting its people resources. Strategic planning sets priorities,
focuses energy and resources towards achieving common goals and is responsible for
adjusting the organization’s direction in response to a changing environment.
The Investors in People Interactive questionnaire divides strategic planning into defining a
vision, developing a business plan and setting SMART objectives. Bearing in mind the
importance of strategic planning it is noteworthy that only 24% of Croatian entrepreneurs
satisfied all these aspects of strategic planning. Clearly the majority of Croatian
entrepreneurs do not understand the importance of organisational vision, planning and how
these effect the achievement of organisational success. Furthermore whilst SMART goals
were in some instances defined they were not reviewed on a regular basis or shared with all
employees. 34% of entrepreneurs that participated in this survey have strategic planning
but it is not shared and is rarely reviewed, which results in the strategic planning process
diminishing its purpose.
The pie chart below shows that 42% or around 80 of 191 entrepreneurs have no strategic
planning in their companies, have no vision or plan for the future and operate on a day-to-
day basis. The lack of planning has a negative unsettling effect on people’s motivation as
they do not have a clear understanding of their role in the organization, and these factors
detrimentally effects how the organization functions.

Clear purpose and vision
In answer to the question whether the organisation has a clear purpose and a vision which is
shared, it was found that only 26% of respondents have a clearly defined vision which is
reviewed on a regular basis by the senior management team and thereby having everyone
within the organisation being aware of why the company exists and what it wants to
achieve. 38% of respondents share its purpose and vision among employees to some extent,
but is rarely reviewed. 36% of respondents do not have a clear understanding of the
purpose of their company, do not have a vision and do not inform people what the reason
for their existence is.

Everyone within the organisation should be aware why the organization exists and what it
wants to achieve. Good practice needs to be ensured within the organisation, so that it can
develop and improve. Regular reviews and updates to the purpose and vision are key to
continuous improvement and there should always be a consistency when communicating
with people.
Business plan
In most respondents business plans are created once a year but are not reviewed regularly.
Business plans should be developed, reviewed and improved and need to include all
employees ensuring they understand what they need to do to achieve the agreed goals. The
business plan is a key to keeping management and people focused on achieving the purpose
and vision. The business plan can motivate people towards success only by regularly
reviewing, updating and communicating it to them.
The graph below shows responses to the question whether a company has and how it uses
the business plan. Only 23% of respondents answered that their plan is reviewed regularly,
is clearly defined and all employees clearly understand what they need to do. 33% of
respondents chose answer C, which shows that entrepreneurs/managers do not involve all
their people and they do not clearly understand their roles and how they relate to the
business plan. 44% of respondents have only a general understanding of what needs to be
achieved and 13% have no business plan at all.

“Failing to plan is planning to fail” is a famous quote from Alan Lakein, expert and author on
time management, who shows how important it is to plan the development of an
organisation and to share the plan with the people in the organisation. Only in this way can
a manager expect the employees to gather their forces towards a common goal
SMART objectives
Setting SMART objectives (Specific, Measurable, Agreed, Realistic and Timed) is something
in which all people should be involved. The objectives should be consistent, short and
concise to keep people focused on what is important and what needs to be achieved.
SMART objectives can ensure the achievement of the purpose, vision and business plan. It
can also act as a major tool for motivation.
This study found that Croatian entrepreneurs have different experiences in setting SMART
objectives, as shown below:
As seen in the pie chart, the answers are almost equally divided between 4 possibilities. A
concerning factor is that 47% of entrepreneurs do not have SMART objectives or if they do
they do not serve their purpose, as they are not shared nor measured. Only 24% of
entrepreneurs (those who chose D) clearly identify SMART objectives, and use them to
monitor and manage the organisation’s progress against the business plan and review them
accordingly. 29% of interviewed entrepreneurs chose answer C, by saying that the SMART
objectives have been identified for the organisation and teams but are rarely reviewed as
they do not have time to measure and feedback progress.

The SMART objectives should be communicated by leaders ensuring that people understand
what they need to do to assist in their achievement. Agreement should be reached in every
organization to monitor and manage the organisation’s progress towards the objectives, by
involving all people.
Relationship between the organizational culture and strategic planning
The results of the organizational assessments relating to strategic planning show that there
is a requirement for capacity building relating to not only the fundamental need for
developing a vision and business plan but also how paramount it is that leaders and
managers in Croatian organisations value the importance of people and their contribution
to organisational success. There exists a misconception by entrepreneurs in Croatia that it is
the strategy that drives the behaviour in an organisation by providing a framework with
benchmarks and milestones against which progress may be measured. However in reality it
is the organisational or work culture and particularly the attitudes, shared values, norms and
belief systems within an organisation that dictate how effectively people work together and
indeed how they contribute to the success of an organisation.

2. Effective Management
Management is about people. Managers should lead, motivate, inspire and encourage the
people within their team in the organisation so that they give their best contribution to the
achievement of the organisational goals. Putting it simply managers should care about their
people. Effective management skills in communication and developing team cohesion are
fundamental to the creation of an organizational culture that leads to success. The key to
managing people within an organisation effectively is by helping them to meet their own
personal needs and aspirations in a way that also meets the organization’s needs or goals.
Question (6) whether managers understand their role in leading, managing and developing
people shows that 47% of respondents think that the majority of managers only understand
their role but do not have plans for their own or their team’s development.

ABOUT THE PROJECT
This case study was carried out as part of a four year E-business Competitiveness
Improvement Programme project which consisted of two phases and delivered at regional
level throughout all counties in Croatia.
The overall objective of the project was to enhance the competitiveness of Croatian
enterprises through increased utilisation of and participation in e-business activities. The
purpose of the project was to encourage and support small and medium enterprises (SMEs)
to use e-business solutions and thus improve their efficiency and productivity, product
quality and services, and access to information and markets through increased awareness.
Local Enterprise Support Institutions, representing each county, were partners in the project
which was implemented in cooperation with the Ministry of Entrepreneurship and Crafts in
the Republic of Croatia Government. The final beneficiaries were Croatian SMEs and
entrepreneurs.
The project raised the capacities of the twenty selected Enterprise Support Institutions in
supporting SMEs by enhancing the utilisation of e-business opportunities through the
dissemination of quality information and delivery of training and advice to SMEs in order
that they become more competitive in the global market.
A major output of the project was the creation of a network of 20 Centres of Excellence for
Business Support within the existing enterprise support infrastructure. As part of the
sustainability strategy and in order to create coherence and give a common purpose to the
network of Centres of Excellence for Business Support 17 Investors in People Interactive
workshops were delivered. An awareness raising campaign promoting the use of Investors
in People Interactive as a free e-business tool for organizational self-assessment that leads
to business competitiveness and in institutions organisational efficiency and effectiveness
was also delivered. This case study and report describes the outputs from the 17 workshops
and clearly defines the need for organisational culture shift in SMEs in Croatia.

3. Culture & Communication
Organizational culture affects the way people and groups within an organisation interact
with each other, with clients and with their managers. People should be encouraged to
contribute ideas for the improvement of the organisation in which they work. The
leadership should promote a culture of openness and two-way dialogue which will reflect
that all employees in the organisation are involved in and contribute to the development of
the organisation. In such a way the work culture becomes a vehicle through which
individuals coordinate their activities to achieve common goals.
People should be encouraged to contribute ideas relating to their own and the organisations
performance improvement. In the survey, only 29% of people are encouraged to do so, and
41% of respondents think that strategies for their development are not established across
the whole organisation. 30% of respondents see that their ideas are not taken seriously, or
they have no chance of presenting their ideas at all.
It is important that all people have equal opportunities to develop within the organisation.
By regular communication, which should be a part of the organisational culture, people
understand how their roles fit within the larger picture and are able to contribute to
improvements in organisational performance.

A summary of answers given under this management section is shown as below:
Whilst there appears to be some understanding of how communication affects business
performance the importance of an organizational culture where all people are engaged in
and fully committed to the aims and objectives of the organisation is lacking. Managers
should update team members on a regular basis on how the team is performing against the
business plan and what needs to be achieved in the future. An effective two way
communication process should be in place that ensures everyone knows what the
organisation has achieved, how it is performing, what still needs to be achieved and how
their activities will support the plans.
Managers and good leaders need to encourage all employees consistently to take
ownership and responsibility and to engage in decision making. Appropriate policies and
strategies on better communication should be established and embedded throughout the
whole organization.

4. Developing People
Investing in learning and development needs of employees, improving their skills and
knowledge is what every organisation should have as part of its strategy. It is crucial to
business improvement and increasing business results. This study has identified that a
common problem for most of the entrepreneurs is that they do not have plans and
resources in place to meet those learning and development needs. The problem is that
organisations do not involve their people in planning their own development.
Leaders and managers are responsible for making strategies for developing people within
their teams. Good managers attract candidates, drive performance, engagement and
retention, and play a key role in maximizing employees’ contribution to the organisation. All
needs should be prioritised and addressed in line with the organisation and team objectives.
Everyone should have a fair access to support and development to improve performance.
Answering the question whether the organization has plans and resources in place to meet
learning and development needs that link to the achievement of the objectives, as the pie
chart below shows:
only 15% of respondents have plans clearly defined and reviewed on a regular basis, having
all needs prioritised and addressed in line with the organisation and team objectives. Most
entrepreneurs (52%) rarely implement plans, and rarely develop plans, as they depend on
many issues coming from senior management without prior consultation.
33% of entrepreneurs claim they do not need plans because they have a clear
understanding of what particular skills the organisation needs to support the objectives, not
realizing that creating a realistic plan will allow the organization to prioritise the needs and
ensure everyone has fair access to support and development which in turn will improve the
organisation’s performance.

In answering the question of how does the organisation involve people in planning their
own development, as the pie chart below shows:
only 23% of entrepreneurs always involve people in identifying, planning and evaluating
their own development and support. 33% think that it is enough to provide information on
development opportunities and ask people their opinion, without checking whether
everyone believes they have an active role in identifying, planning and evaluating their
development and support. 44% of respondents do not involve or are not involved in
planning their own development.
Looking at the overall picture of the management practice: Developing People, it can be
seen that only 17% of the entrepreneurs clearly understand the importance of their people.
They know that employees need to understand the processes involved in the development
cycle and their role in them. Those processes and strategies should be consistently
implemented throughout the organisation to ensure this happens effectively.

The pie chart below:
shows that 48%, consider that they do not need to carry out a formal evaluation of the
investment made in developing people and their plans are rarely fully implemented. It is
concerning that 35% of respondents do not have development plans or think they do not
need plans for developing people, they do not involve people in creating their own
development plans, or they don’t evaluate development activities.
All people within the organisation need to be aware of how the organization has improved
as a result of the investment made in the development of its people. Managers should know
that people make a critical difference between success and failure. The effectiveness with
which organisations manage, develop, motivate, involve and engage the willing contribution
of the people who work in them is a key determinant of how well those organisations
perform.
Although everybody agreed during the workshops that investing in people is very important
for organisational performance, not many work on changing the culture of the organisation
in order that all people are aware how the organisation has improved as a result of the
investment made in the development of its people.

FOREWORD
In broad terms this case study deals with the need for a shift in the organizational culture in
both private sector organisations and governmental institutions in a post communist
country in transition which recently became a member of European Union.
Whilst this study focuses specifically on the analysis of the need for a change in approach
and attitude to people at work in Croatian SMEs, the authors believe that the findings are
representative of all other post communist country members of the European Union. There
is no evidence that the governments of post communist countries such as Poland, Bulgaria
or Romania have dealt with the need for organisational culture shift as a means to
enhancing the productive capacity and competitiveness of its SMEs in a holistic, direct and
positive way. Unlike countries with a long tradition of free market economy, where good
organizational culture is accepted as one of the fundamental aspects of increasing
competitiveness in the market and business success in general, the importance of working
with people and creating the right work culture is neglected.
In the early 90’s when Britain faced a deep recession the British Government, together with
the business community, developed the Investors in People 1
methodology. The Investors in
People methodology provides a best practice people management standard, is still owned
by the UK government, managed by the UK Commission for Employment and Skills (UKCES)
and supported by the Department for Business, Innovation and Skills (BIS).
Investors in People -
methodology owned by the
British Government (UKCES)
The project team used only one part of the above methodology – interactive online
assessment tool – Investors in People Interactive 2
to show entrepreneurs the best way to
use this e-business digital application to carry out organizational self-assessments and
thereby highlight gaps in capacity building management areas described below. The authors
would like to thank the Ministry of Entrepreneurship and Crafts and people in the Enterprise
Support Institutions, who freely took part in this study, for their enthusiasm and
commitment in organizing the workshops and inviting entrepreneurs.
1
http://www.investorsinpeople.org/ , http://www.investorsinpeople.co.uk/
2

Regarding the importance of giving recognition to people’s contribution (under Question
18), the results are as presented in the pie chart below:
only 30% have a clear approach where everyone knows when they have made a positive
contribution to the organization. The feedback on the performance of the organisation and
its people should be against the Business Plan12
and shared with all people. 17% have no
clear policy or approach when a certain employee deserves recognition, and 25% recognise
people’s contribution only through financial rewards. 28% of respondents think that
people’s contribution is recognised, but is inconsistent, and dependent on who the manager
is.
Answers to Question 19 relate to feedback provided on the performance of the organisation
against the Business Plan and the results are as shown below:
12
It is visible how Strategic Planning is important for all aspect of management sections

Performance appraisals or performance evaluations are essential for the effective
management and evaluation of staff. Appraisals help develop individuals, improve
organizational performance, and feed into business planning. Formal performance
appraisals should generally be conducted at least once a year for all people in the
organization. It is important for the appraisal to be a two-way process in which every
employee can give her/his comment on the evaluation received.
Performance evaluation is a tool that is used to help enhance the efficiency of the team.
This tool is a means to help ensure that the maximum potential of people within the
organisation is exploited. Employees can use it as a clear indication of what is expected of
them before they are told how well they are doing and then as feedback of how well they
performed. Based on performance evaluation, a manager can measure actual performance
against expected performance (going back to strategic planning), identify employee training
and development needs, support employee goals. Performance evaluation process also
provides an opportunity for open communication about performance expectations and
feedback. Benefits of having regular performance evaluation are referred to being able to
control the work that needs to be done, enhance employee motivation, commitment and
productivity, but it also gives an opportunity for a manager to satisfy the need of every
employee for recognition (see question 18). Performance appraisal is important for staff
motivation, establishing better communication and aligning individual and organizational
aims.
As is shown above (p.26), only 14% of Croatian entrepreneurs clearly provide people with
feedback on their performance. 41% compile it and communicate on ad hoc basis.
However, 45% of respondents monitor the progress, but do not communicate it, or they
think if they still have a job then everything is all right and there is no need to discuss
anyone’s performance.

Overall, the results in this management section: Managing Performance, are shown below:
Only 19% of institutions realise how important it is to give feedback on performance, to
recognise people’s contribution to the organization and to do so in a consistent and not ad
hoc manner. Ongoing evaluation of management, development and performance usually
result in a range of improvements within the organisation.
The problem with Croatian entrepreneurs is that most appraise performance on an ad hoc
basis, not realising how important it is for managers to constantly communicate and interact
with their people.

SUMMARISED RESULTS
The results of the assessments based on the Investors in People Interactive questionnaire
that covers five fields of organizational development (Strategic Planning, Effective
Management, Culture and Communication, Developing People and Managing Performance)
clearly show that the changes in organizational culture are needed in order to exploit the
potential of people in SMEs in the best possible way.
Based on a deductive method, it seems reasonable to infer that this picture reflects the
Croatian society at large and more specifically its entrepreneurs, institutions and business
community. This is not altogether surprising as it is likely that nearly all the post-communist
countries in the European Union are still in a state of transition when the organisational
culture that relates to shared beliefs, values and ethical behaviour is considered.

CONCLUSIONS AND RECOMMENDATIONS
This study clearly indicates that a change in approach to organizational culture would bring
about a significant positive outcome in raising the competitiveness of Croatian
entrepreneurs. The results of the separate analysis of each management section in the
Investors in People Interactive questionnaire show conclusively that changes in work culture
need to occur in people management areas relating to planning, communication,
motivation, engagement, recognition and review.
It was encouraging to find, through the anecdotal evidence collected at the Investors in
People Interactive workshops held in 17 Croatian counties, that most entrepreneurs and
other participants in the workshops clearly understood the problem of a lack of appropriate
organizational culture in their organisations and in Croatia as a whole. Furthermore there
appeared to be a clear understanding that an improvement in the organizational culture,
particularly relating to exploiting the potential of people within organisations, would
contribute to better organisational efficiency and effectiveness and thereby an
improvement in competitiveness in the business sector.
There is ample evidence, both qualitative and quantitative, that the British government
owned Investors in People methodology is the optimum tool for shifting the attitude and
behaviour of people in the work place in Croatia. The British government approach in using
Investors in People as a means of improving work place and management culture since the
ninety’s has been proved to work very effectively and the authors of this study believe that
this know how, knowledge and experience should be cascaded to all post communist
countries in transition in European Union and beyond. As an independent study on
Investors in People by Cranfield School of Management has shown improvements in
organizational culture in all countries in transition should be made by using already tested
methodologies that have proven positive effects13
.
The use of Investors in People practices leads to more supportive human resources policies
and practices which in turn lead to a positive organisational climate and increased human
capital flexibility that means people in the workplace adapt and change in order to give their
best to the achievement of the organisation’s objectives. This change automatically leads to
better non-financial and financial performance. There is no need to reinvent the wheel as
13
Bourne, Franco-Santos, Pavlov, Lucianetti. Cranfield School of Management (2008), Impact of Investors in
People and HR Policies on Business Performance

Investors in People is a tried and tested methodology that changes the way organisations
and institutions operate.
Changing the organisational culture in Croatia, which is paramount if economic success is to
be achieved, presents leaders and managers in both the institutional and private sectors
with formidable challenges. There is little written on the most appropriate models of
organizational change in developing countries, as Anthony Montgomery has written in his
article on why culture change is needed in developing countries14
in which he states that
Croatia still relies a good deal on state involvement and thus the future is still somewhat
fragile.
Change of organisational culture is not the result of just one action or decision but the
outcome of a lasting process over many years in which the attitude, beliefs and behaviour of
people are gradually shaped. In the ‘90s, when the post-communist countries adapted to
the free market economy all concentrated on development and enhancement of their
knowledge base on management practices and skills to the exclusion of any attempt to
change in a rational and methodological way the culture in organisations. It is indisputable
that countries in transition need to introduce processes of change that result in
organizational culture shift and this needs to be done in an ever changing environment.
Today the lack of any attempt to shift organisational culture presents a major obstacle
towards the development of entrepreneurship and in turn levels of competitiveness in a
country in transition.
It is recommended that South East European Centre for Entrepreneurial Learning (SEECEL) is
the lead partner in the implementation of Investors in People methodology in partnership
with the UK Commission International Quality Centre (ICC2). The proposed Investors in
People Croatia implementation project will span over a three year period and clearly
complement the work that SEECEL is doing in developing entrepreneurship and a culture of
exploiting the potential of people through training. In the third year of the project an
Investors in People Quality Centre will be established in SEECEL and this will act as platform
for introducing the methodology into the Western Balkans and furthermore into the ten
countries who were a part of the 2004 and 2007 European Union enlargement.
14
Montgomery, Anthony (2013), Culture and Change in Developing Western Countries, in: Skipton Leonard H.,
Lewis Rachel, Freedman Arthur M., and Passmore Jonathan: The Wiley-Blackwell Handbook on the Psychology
of Leadership, Change and Organizational Development, First Edition, John Wiley & Sons

LITERATURE
Books, articles, documents, research papers:
Bourne, Franco-Santos, Pavlov, Lucianetti. Cranfield School of Management (2008), Impact
of Investors in People and HR Policies on Business Performance
Cameron Kim S., Quinn Robert E., (2011) Diagnosing and Changing Organizational Culture,
Based on the Competing Values Framework, San Francisco, Jossey Bass
European Commission, Directorate-General for Employment, Social Affairs and Inclusion:
Investing in People: EU funding for epmployment and scial inclusion, ESF, Social Europe
Guide, Volume 7, , June 2014
Montgomery, Anthony (2013), Culture and Change in Developing Western Countries, in:
Skipton Leonard H., Lewis Rachel, Freedman Arthur M., and Passmore Jonathan: The Wiley-
Blackwell Handbook on the Psychology of Leadership, Change and Organizational
Development, First Edition, John Wiley & Sons
Schein, Edgar (2010), Organizational Culture and Leadership, San Francisco, CA: Jossey-Bass
Schein, Edgar H. (2009), The Corporate Culture Survival Guide, San Francisco, Jossey Bass
Websites:
http://www.investorsinpeople.org/
http://www.investorsinpeople.co.uk/

ANNEXES
Annex 1:
Monika Begović, MSc, Project Manager and Consultant
Extensive and diverse experience at domestic and international level in organizational
development, project management and coordination, including twelve years of service for
the United Nations. Specific expertise in creating a network of scholars willing to share their
knowledge on the EU through the non-governmental sector. Among other activities,
currently is the President of the Association Invest in People, which has a vision and a goal to
work on development of people’s skills needed for better performance in entrepreneurship.
Expert in using the application Investors in People Interactive, through building the Network
of Centres of Excellence for Business Support in Croatia. Gained Masters of Science (MSc) in
International Relations and MA in Journalism.
Leszek Jakubowski, FCIS, Senior Consultant
A motivational entrepreneur and leader whose roles have included Managing Director and
owner of group of six companies employing over 150 people, Chairman of CambsTEC
Training and Enterprise Council, President of Cambridgeshire Chamber of Commerce and
Industry, Chairman of British Polish Chamber of Commerce. In 1991 Leszek was personal
advisor to the Polish Prime Minister. Leszek became a Fellow of ICSA after completing
Business Studies and Economics at Hallam University in Sheffield England. For the past 23
years Leszek has worked as an International consultant in countries in transition including
Poland, China, Bulgaria, Romania, Armenia and four years in Croatia.

Annex 2
List of Enterprise Support Institutions in English:
Development Agency Zagreb – RAZA TPZ ( www.raza.hr )
Development Agency Šibenik-Knin County (www.rra-sibenik.hr )
Development Agency Split-Dalmatia County (www.rera.hr )
City of Dubrovnik Development Agency DURA (www.dura.hr )
Zagorje Development Agency ZARA (www.zara.hr )
Virovitica-Podravina County Development Agency VIDRA (www.ravidra.hr )
Development Agency Vukovar-Srijem County HRAST (www.ar-hrast.hr )
Development Agency Sjever-Dan ( www.dan.hr )
Technological Park Varaždin (www.tp-vz.hr )
Business park Bjelovar LORA
Development Agency Brod-POsavina County CTR (www.ctr.hr )
Tehnološko-inovacijski centar Međimurje (www.ticm.hr )
Development Agency of Podravina and Prigorje (www.pora.com.hr )
Business incubator BIOS ( inkubator.hr )
Development Agency Sisak-Moslavina County SIMORA (www.simora.hr )
Entrepreneurship Centre Pakrac PCP (www.pc-pakrac.hr )
Rijeka Development Agency PORIN (www.porin.hr )
Istrian Development Agency IDA (www.ida.hr )

Annex 3:
Questionnaire Investors in People Interactive
Investors in People Interactive Diagnostic
Questionnaire covers 5 key management practices
1) STRATEGIC PLANNING
Q 1 Does your organisation have a clear purpose and vision which is shared?
A No we don’t have a clear purpose and vision.
B There is something written down, but it is rarely reviewed. Our people do not really
understand it.
C It is clearly defined, shared to some extent with our people, but rarely reviewed.
D It is clearly defined and reviewed on a regular basis by the senior management team.
Everyone within the organisation is aware of why we exist and what we want to
achieve.
Q2 Do you have a plan for the business?
A No. We do not plan for the future – we operate on a day to day basis.
B The senior management team have a general understanding of what needs to be
achieved.
C We have a plan that is reviewed on an regular/annual basis. Our people have a general
understanding of what needs to be done.
D Our plan is clearly defined and reviewed on a regular basis by the management team.
All employees clearly understand what they need to do

Q3 Do you have SMART (Specific, Measurable, Agreed, attainable and achievable,
Realistic and resourced, Timebound) objectives that will ensure the achievement of the
Purpose, Vision and Business Plan?
A No, we have nothing in place.
B Yes, these have been identified by senior management for the organisation but they
are not shared or measured.
C Yes, they have been identified for the organisation and teams but rarely reviewed. We
don’t have time to measure and feedback progress.
D Yes, they are clearly identified at organisation and team level. We use them to monitor
and manage the organisation progress against the business plan, and review them
accordingly.
Q4 Are there constructive relationships with representative groups and are they
consulted when developing the plan for the organisation? **Please note if you do not
have any representative structures in your organisation please select answer "d".
A We have not identified any representative structures in our organisation.
B We have representative groups but relations are minimal.
C Relations are good with our representative groups and we involve some people from
them in the planning process
D Relations are very good with representative groups and there is an agreed process to
ensure appropriate consultation with them / We have no representative groups and
therefore this is not applicable in our organisation.
2) EFFECTIVE MANAGEMENT
Q5 Has the organisation defined and communicated to Managers what they should
know and be able to do, consistently well, in order to manage people effectively?
A No, this has not been defined and senior management haven’t really thought about it.
B There is an informal understanding, but it is not seen as important.
C Yes, they are understood by senior management but not discussed or consistently
used.
D Yes, they are clearly defined and understood. They are used as a basis for developing
managers and we have a plan to make this happen.

Q6 Do you think Managers understand their role in leading, managing and developing
people?
A No, Managers do not seem to understand their role.
B Some do understand, but we do not make the time to develop those that do not.
C The majority of Managers understand and are actively developing themselves as
Managers
D Definitely, they are clear about what is expected of them in effectively leading,
managing and developing people to achieve the organisation’s business plan. All
Managers have agreed plans for their own development
Q7 How do your people describe their Managers?
A Ineffective.
B They have expert knowledge but no interest in their people.
C They have good relationships with their people.
D The consistently lead by example and demonstrate the agreed skills, knowledge and
behaviours.
Q8 How do Managers ensure that the organisation continues to improve?
A They don’t. They are too busy getting the job done.
B They pick-up on what has gone wrong and find a fix.
C They talk to their teams about what improvements can be made and then implement
them.
D They identify the improvement that should be made, take action, measure the effect
and communicate the improvement to everyone.
3) CULTURE AND COMMUNICATION
Q9 Are your people encouraged to contribute ideas for the improvement of their own,
and other people’s performance?
A Not really. There are few opportunities to make suggestions.
B We do make suggestions, but often ideas are not taken on board.
C Yes, there are appropriate policies and strategies in place that we follow but it is not
established across the whole organisation.
D Yes, the organisation has strategies in place to ensure that everyone is encouraged to
continually improve themselves, their teams and the organisation.

Q10 Are the needs of different people recognised and does everyone have the equality of
opportunity to develop in the organisation?
A No this does not happen
B Some people do get opportunities but only a few.
C The majority of people get opportunities and individual needs are recognised most of
the time.
D Yes the needs of different people are recognised consistently and everyone feels that
there is an equality of opportunity for development within the organisation.
Q11 How do you promote a sense of ownership and responsibility across your
organisation?
A We don’t do this.
B The senior management team has ownership and responsibility. They are solely
responsible for the planning and performance of the business
C We encourage all employees to take ownership and responsibility; some employees
are involved, whilst others are less interested.
D We actively promote a sense of ownership and responsibility by encouraging all
employees to engage with the decision making throughout the organisation.
Q12 How effective is communication within the organisation?
A In need of improvement; communication is generally on a need to know basis.
B Not as good as it could be, but people do receive an annual update on past and future
performance.
C Good. Managers update team members on a regular basis on how the team is
performing against the business plan and what needs to be achieved in the future.
D Very good. We have an effective two way process in place that ensures everyone
knows what the organisation has achieved, how it is performing, what still needs to be
achieved and how their activities will support the plans.

4) DEVELOPING PEOPLE
Q13 Does the organisation have plans and resources in place to meet those learning and
development needs which link to the achievement of the Objectives?
A No, this is not needed. We do not plan development activities – we address them as
the need arises.
B We do not need plans because the senior management team have a general
understanding of what particular skills the organisation needs to support the
objectives.
C Yes. We plan on a regular basis but due to time and resource they are rarely fully
implemented.
D Yes, our plans are clearly defined and reviewed on a regular basis by Senior
Management. All needs are prioritised and addressed in line with the organisation and
team objectives. Everyone has fair access to support and development to improve
performance.
Q14 How does the organisation involve people in planning their own development?
A We don’t.
B People are informed as to how they will be developed
C We provide information on development opportunities and ask for their opinions.
D They are always involved in identifying, planning and evaluating their development
and support.
Q15 Has your organisation improved as a result of investing in the development of your
people?
A No.
B Don’t know. We don’t evaluate development activities.
C We think so. Although we have an idea of how new skills have helped the business to
improve, we do not carry out a formal evaluation of the investment made.
D Definitely. The development of new skills has helped our business achieve our
objectives. We can demonstrate the cost benefits and everyone can give examples of
the improvements in individual, team and organisational performance.

Q16 How do you introduce new recruits into their roles?
A They are expected to get on with the job and learn along the way
B They are given a short organisation induction (i.e. facilities, tour of building,
introductions etc).
C They are inducted into the organisation and the role that they are expected to
perform.
D Everyone who has changed job roles or is a new recruit is given a full induction
programme which is then reviewed to identify continuous areas for improvement.
5) MANAGING PERFORMANCE
Q17 To what extent do people get constructive feedback on individual performance?
A They don’t. They only hear from the Manager when they have done something wrong.
B It is given but it is one way and they do not get an opportunity to input
C It is given on a regular basis as appropriate.
D There is a two way regular process in place. It is very constructive and useful to both
the individual and the Manager.
Q18 Does the organisation recognise peoples’ contribution?
A There is no clear policy or approach.
B People's contribution is recognised through financial rewards to those who exceed
targets.
C People's contribution is recognised but is inconsistent and dependent on who your
Manager is.
D We have a clear approach in place, and everyone knows when they have made a
positive contribution to the organisation.
Q19 Is feedback provided on the performance of the organisation against the Business
Plan?
A No, but we still have jobs so it must be OK!
B The Senior Management team monitors progress but it is not communicated.
C It is compiled and communicated on an ad hoc basis
D Yes, it is clearly given to people on a regular basis and their understanding is checked.

Q20 Are improvements continually made as a result of evaluating the investment made
in managing and developing people?
A Changes are made but we do not know why.
B There is a lot of talk about the investment made but we do not see any direct
improvements as a result of it.
C Improvements have been made in how we develop and manage our people.
D It is part of the culture. Everyone can give examples of how ongoing evaluation of
management, development and performance has resulted in a range of improvements
within the organisation.

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