The Difference Between Success And Failure

Management training can cut the failure rate of small and medium enterprises (SMEs) by as much as half.

This eye-opening conclusion was reached by the Organisation for Economic Co-operation and Development (OECD) in a 2003 study that covered half a dozen developed countries. The global organisation found there was "a positive correlation between the degree of management training and the bottom-line performance of an SME".

It discovered that the chance of business failure fell from one in three to just one in ten over the first three years of an SMEs lifespan if management training was undertaken.

The OECD's findings are particularly relevant for Singapore's SMEs given the recently announced package of schemes to help shape a new generation of towkays.

Mr Philip Yeo, Chairman of SPRING Singapore, noted in a speech earlier this year that local growth-oriented enterprises need to build up their management teams to enter new markets, develop new products and seize fresh business opportunities.

Speaking to the pioneer cohort of SME leaders in the SPRING-SMU SME Leaders Management Development Programme, Mr Yeo said the challenge they face is not the lack of growth opportunities but the dearth of good leaders, across all levels, who can lead their businesses to seize these opportunities.

In other words, to take advantage of the benefits that a globalised marketplace has to offer, Singapore's SMEs need to be led by bosses and senior executives schooled in management skills and savvy enough to capitalise on the opportunities that turn up.

A Start-up Enterprise survey by SPRING in 2006 found that just 40% of Singapore entrepreneurs had a basic degree and formal management training. While the rest may have been able to manage their enterprises satisfactorily so far, they are likely to find it tougher going as the business conditions become more complex and competition more intense.

Local SME leaders do recognise that it now takes more than just technical know-how to lead their businesses to success.

In SPRING's 2007 SME Development Survey, 9 in 10 SME bosses identified 4 core skills that their managers needed to develop - leadership, team-building, marketing and promotions, and business planning. This is a significant shift away from training managers in narrow, job-specific skill sets to "soft skills".

To take advantage of the benefits that a globalised market-place has to offer, Singapore SMEs need to be led by bosses and senior executives schooled in management skills and savvy enough to capitalise on the opportunities that turn up.

"I have come to realise that ongoing education is so important," noted Mr Willie Wong, Chairman of Chinyee Engineering & Machinery Pte Ltd, in a recent interview."Only through continual education can we improve ourselves to deal with the changing global business and technology situation we face these days."

Mr Low Cheong Kee, managing director of Home-Fix D.I.Y Pte Ltd, focuses on constant upgrading and training for his staff

Another SME leader who is very aware of the importance of investing in management training is Mr Low Cheong Kee, managing director of Home-Fix D.I.Y Pte Ltd.

"Being in the retail industry, the most challenging issue I face is retaining and grooming our best talent," he said.

"This is one of the reasons why Home-Fix focuses on constant upgrading and providing training support to our staff. Our philosophy has paid off somewhat, as most of our management staff started off as store assistants," said Mr Low.

The Challenge: A Lack Of Management Talent

If SMEs recognise the need to attract and develop management talent, what is preventing them from doing so?

One widely held belief is that SMEs pay poorly. But the 2007 SME Development Survey found otherwise. Some 68% of SMEs in Singapore said they paid the market average in terms of staff and benefit packages, while 6% said they paid above market rates.

A more likely reason is simply that there is intense competition for people in Singapore's small talent pool. More than 50% of SMEs covered in the SME Development Survey said that they had difficulties recruiting staff for managerial, supervisory and operational positions.

For local precision engineering firm A & One Precision Engineering Pte Ltd, this battle for talent takes on an added dimension.

"Even if you have succeeded in grooming new managers, it is very likely for others to recognise their talents and invite them to join their company with a better offer," says Mr Leong Weng Kuan, A & One Precision Engineering's Corporate General Manager. "It is especially more challenging for an SME as most of these talents are drawn away by the big multi-national companies in the region, and this trend would continue as long as the country continues to attract foreign investments."

The problem is not exclusive to Singapore's SMEs. In a 2004 paper that examined management of talent in American SMEs, the US' Human Capital Institute noted that American SMEs faced constraints such as lack of specialised expertise that were not an issue for larger firms.

"In the past, an SME could be comfortable just serving the local market. Today, for SMEs to survive, they need to grow regionally or even internationally. Hence, the challenges that a SME leader faces today are more multifaceted. He or she has to be more aware of the various internal and external issues that could impact the business, and also the different ways a business operates in each country." ~ Ms Annie Yap, chief executive officer of human resource consultant The GMP Group

But, the institute added, SMEs had some innate advantages that bigger firms lacked. Since SMEs had fewer management layers, high potential performers could be dealt with on a case-by-case basis when crafting their development needs. Also, such individuals would have a stronger sense of belonging to the SME as their contributions would be highly visible and would more easily have an impact.

In the case of A & One Precision Engineering, the way to tackle the challenge is to empower management staff with greater decision-making authority in addition to developing its own training programme for staff.

"Hopefully one day, we will be successful not only in grooming talents but can attract talents to join the company too," adds Mr Leong.

The challenges faced by Singapore's SMEs are also mitigated somewhat by the proactive support by the Government for local enterprises, said Ms Annie Yap, chief executive officer of human resource consultant The GMP Group.

SMEs should capitalise on this support by putting in place a strategic talent management framework to the key processes of sourcing, recruiting, and training and developing talents, she said.

SME leaders today face a different set of business demands and new skills are needed, Ms Yap added.

"In the past, an SME could be comfortable just serving the local market. Today, for SMEs to survive, they need to grow regionally or even internationally. Hence, the challenges that a SME leader faces today are more multifaceted. He or she has to be more aware of the various internal and external issues that could impact the business, and also the different ways a business operates in each country.

"Many of the latest management ideas still originate from the West. It takes some time before the management skills reach us. Local SMEs tend to be a bit slower in adopting these skills and practices especially among the more traditional businesses.

"For example, overseas SMEs have been observing fair employment practices for a number of years, whereas in Singapore, we are only starting to advocate the importance of it. The sooner we adopt good management skills, the faster we are able to cope with the different global challenges," said Ms Yap.

The Solution: Creating a Pipeline Of New Towkays

In January this year, SPRING embarked on a concerted effort to arm current SME leaders with management training and groom the next generation of SME bosses.

Pumping S$60 million into its Business Leaders Initiatives (BLI), the agency expects to create by 2012 a pipeline of 1,000 trained SME bosses and senior executives while cultivating another 500 aspiring executives.

This will boost the talent pool of Singa-pore SMEs and help growth-oriented enterprises build management teams with sound management know-how.

Spanning the entire spectrum of SMEs' talent development needs, the BLI has programmes targeted at different gr oups of learners.

For instance, SME bosses and senior executives can enrol in the Advanced Management Programme to study for postgraduate degrees or take short term courses in a variety of business and management topics. They can choose from courses jointly developed by SPRING and the National University of Singapore (NUS), Nanyang Technological University (NTU), Singapore Management University (SMU), or SIM University.

These courses for SME head honchos will be customised for the Asian business context and will address key business issues. They will also be flexible enough to fit into the busy schedules of these SME bosses.

For up-and-coming SME executives, there are sponsored postgraduate degrees at NUS, NTU or SMU under the BLI's Management Development Scholarship (MDS).

These executives, once they have completed their postgraduate studies, will be expected to join the high-growth enterprises that sponsored their studies. The aim is that they will eventually take over the mantle of leadership at these companies. The other initiative - Executive Deve-lopment Scholarship (EDS) - seeks to mould future Singapore entrepreneurs and SME leaders.

Young undergraduates are sponsored for their bachelor degree courses and then exposed to work that brings them in close contact with successful SMEs and entrepreneurs in Singapore.

Ultimately, these EDS scholars are expected to form the next wave of entrepreneurs and SME leaders when they move on to set up their own businesses or join growth-oriented SMEs. These are, in other words, Singapore's next generation of towkays. ET

Cover Story 2: DBS Launches First-of-Kind Loan Scheme to Help SMEs Develop Management Talent