Management and Leadership Council

SMALLER BUSINESSES' MANAGEMENT AND LEADERSHIP THREATENS UK PERFORMANCE AND PRODUCTIVITY, WARNS GOVERNMENT BODY

15 May 2002

The most comprehensive study ever conducted into the supply of and demand for management and leadership capability in the UK finds that current management and business leadership development is "a dysfunctional system", and that the UK's economic performance, among small firms as well as big companies, is being held back by a shortage of appropriate and practical leadership skills.

These skills are "in short supply from the top to the bottom of organisations", despite a rapid expansion of formal management education in the last 20 years, according to the final report of the Council for Excellence in Management & Leadership, published today, 13th May 2002.

Small businesses vital for Britain
The Council looked in detail at Britain's small and medium sized enterprises (SMEs) sector. A special Working Group was set up , consisting of entrepreneurs - a make-up deemed vital to ensuring that the recommendations reflect the reality of small businesses and not just the observations of experts and academics. They concluded that helping improve the quality, calibre and capacity of these businesses can have a significant impact on the British economy. And they came up with practical recommendations.

Small businesses are recognised as the backbone of the British economy, accounting for more than half of the UK's turnover. Businesses employing fewer than 50 people account for 37 per cent of UK turnover and 44 per cent of private sector employment. But failures are frequent and often are thought to be due to management and leadership weakness. In addition, smaller businesses have little time to navigate through the confusing variety of training schemes available, and are often unable to cope easily with the way training is delivered. New techniques are required, the Council found.

Good management is good for the UK
At a presentation attended by Estelle Morris MP, Secretary of State for Education and Skills, and Patricia Hewitt MP, Secretary of State for Trade and Industry, (whose predecessors established the CEML in April 2000), the Council's chairman, Sir Anthony Cleaver, reported that although the past two decades have seen an explosion in management education, this quantitative leap has not resulted in the development of the kind of practical management and leadership skills most conducive to entrepreneurial-led economic growth. The report makes an explicit connection between management and leadership quality and economic performance, and argues that the link between the two should be tracked over time in order to achieve continuous progress.

Sir Anthony Cleaver, who chaired the Council during its two years work, said: "We set out to be a catalyst for change. Above all, we looked for practical recommendations to overcome the many gaps and blockages which exist between current management performance in the UK and where we need to be in the future. There is much to do; but I believe that the UK can match any country in the world in the quality of its management and leadership, provided our recommendations are implemented."

The main report - along with others focusing on management hot spots like the small firms sector ("Joining Entrepreneurs in their World : Improving Entrepreneurship, Management and Leadership in UK SMEs ") is the culmination of two years of wide-ranging consultation and analysis across the UK's public and private sectors and the professions. It says that while there is a consensus that good management and leadership skills are pivotal to quality of performance, investment, productivity and delivery of service in all enterprises, these business-enhancing capabilities are not as widespread as they should be in the UK.

Business schools and other training providers come in for criticism, for being light on leadership development and, in general, being insufficiently flexible to customise themselves to match organisations' or individuals' needs, most notably those of Britain's 3.7 million smaller businesses, where entrepreneurs frequently have little time or money to attend courses that may not seem relevant to their own needs in running a business. As one entrepreneur told the CEML in the process of producing this report: "You have got to start with a clean sheet of paper and you've got to start developing things that entrepreneurs and small businesses actually feel are appropriate and stop packaging solutions that have been developed elsewhere for large companies and just throwing them at small firms and hoping they work."

The report - "Managers and Leaders: Raising our Game" - also warns that the need for stronger management and leadership abilities will increase as the pace of change hots up, and as consumers and other stakeholders demand better performance. The implication is that much of the money spent on management training - both in the public and private sectors - has little impact on outputs. Thus, according to the report, the MBA degree has "succeeded as a qualification but has not necessarily developed future leaders."

The report additionally stresses the value of informal development and mentoring practices, as an additional means of assisting time-poor entrepreneurs, in both larger and smaller companies, in their search for practical and relevant management skills. The report finds that the need for management and leadership skills is greatest in the SME sector, but that this is precisely where the access to relevant learning is the most difficult. The recent explosion in business education appears to have by-passed many if not most small firms, whose entrepreneurs say that the plethora of available business educational support is "confusing", "bureaucratic" and "irrelevant" to their needs. The report says that suppliers of management and leadership training need to match demand with relevant supply. To ensure that SMEs - which are 99 per cent of all the UK's companies - have the managers, leaders and entrepreneurs of the future, the report says there is a need to
¨ Stimulate demand amongst entrepreneurs
¨ Enable entrepreneurs to assess priority development needs
¨ Sign-post entrepreneurs to potential solutions
¨ And make it happen, through a network of intermediaries from both public and private sectors to help implement the report's proposals as they affect SMEs

Smaller firms need to choose their own learning systems
Sarah Anderson, Chief Executive of Mayday Group, who chaired the Small Firms Group, said: "Our recommendations are realistic and feasible, because we were a team of real business entrepreneurs who understand the enormous pressures and time constraints that weigh on people who run smaller businesses, without the back-up and systems that larger companies take for granted. Entrepreneurs are not impressed by formal qualifications: they know that the crucial skills needed to build strong businesses are people abilities and strategic and analytical thinking abilities. The key to building these capabilities is to join the entrepreneurs in their world and to tap seamlessly into the activities that they would be undertaking as a normal part of running their businesses. The emphasis should be on letting entrepreneurs chose partners they trust to help identify their priorities and challenges. This is might be their accountant, bank manager, lawyer or a trusted 'mentor'. Many initiatives launched in good faith by governments in recent years have missed their target."

New management plan for the UK
The report tables a strategy, developed by the CEML over the last two years, for the UK to create a more encouraging environment for the development of world-beating managers and leaders. It looks at how to increase demand for better management talent and training (including within the professions and the small business sector); how to improve supply (ranging from business schools, further education, private providers and informal learning down to creating more opportunities for the acquisition of basic management and leadership skills through schools and universities); and how better to match supply and demand.

The study argues that management and leadership skills are integral to the development of the workforce as a whole, and are not simply bolt-on benefits confined to the UK's 4 million managers. The report states: "It is our view therefore that the development of management and leadership abilities needs to be integral to the Government's workforce development plans."

It contends that this economically vital issue requires solutions on both the supply and demand sides; that just as the suppliers of business education and training need to make their activities more pertinent to the business environment, so too must greater attention be paid to the requirements of managers and leaders of companies.
Patricia Hewitt, Trade and Industry Secretary said:
"This is an important report which takes a significant step forward in defining a coherent and realistic approach to tackling the UK's deficit in management and leadership capability.

"Management and leadership is a skills priority area for the UK which has a vital knock on effect on our levels of enterprise, innovation and business growth in the UK. There is also strong evidence that this is a factor which adversely affects UK productivity in comparison with our main international competitors.

"Although there are concerns about the quality and supply of managers, the DTI can help to make a difference by taking a lead role in stimulating demand for better management skills from employers, and in encouraging them to deploy skilled people more effectively. By improving management and leadership skills and by establishing stronger links between employers' investment in skills and improvements in their productivity we can significantly improve the competitiveness of many individual firms.

"This report will assist Government and Business in establishing the UK as a world leader in developing and deploying management and leadership capability by 2010."

Estelle Morris, Education and Skills Secretary said:
"Management and leadership skills are vital to economic success yet the CEML report paints a disappointing picture of both their supply and demand. Some 140,000 new managers are required each year but at the current rate of progress only 20% will achieve management qualifications. There are 4 million managers in this country, but they are disproportionately white and male.

"It is important that we get the leadership culture in this country right which is why we have introduced the new Sector Skills Councils which will ensure high standards of management and training across occupational sectors and why £30 million from the Budget will be used to boost the number of small firms working towards Investors in People status.

"I welcome the report's suggestions for better matching supply and demand - the Government will publish a full formal response to this in the summer."
Proclaiming a positive vision of the UK as a potential world leader in developing and deploying management skills, the report carries 30 detailed and specific recommendations for change, and presses upon government an urgent need for the establishment of a new, over-arching Strategic Body for Management and leadership.

Notes
¨ Photo of launch event available in CEML folder on www.papicselect.com
¨ Texts of Summary and other Council reports on: www.managementandleadershipcouncil.org
¨ Members of the Council for Excellence in Management & Leadership are: Sir Anthony Cleaver (Chair), Chairman, UK eUniversities Worldwide Ltd; Ms Sarah Anderson CBE, Chief Executive, Mayday Group; Dr Neville Bain; Dr Tony Hayward, Group Vice President Finance, BP plc; Mr C Humphries CBE, Director General, City and Guilds; Professor Amin Rajan, Chief Executive, CREATE; Sir Martin Sorrell, Chief Executive, WPP Group PLC; Professor Stephen Watson, Principal, Henley Management College. The Council's policy consultant is Mrs Liz Amos.
¨ The Council has conducted its work through an extensive network of Working Groups, Advisory Groups and Taskforces. Particular areas of study have included large organisations (under the direction of Dr Tony Hayward , Group Vice President Finance, BP plc); small and medium enterprises (under the direction of Sarah Anderson CBE, Chief Executive of Mayday Group); the professions (under the direction of Sir Michael Bichard); Higher Education including business schools (under the guidance of Sir Martin Sorrell, Chief Executive of WPP Group plc and of Professor Stephen Watson, Principal of Henley Management College); Further Education (under the direction of Chris Humphries CBE, Director General of City and Guilds).
¨ Members of the Small Firms Working Group were: Sarah Anderson CBE (Chair SME Working Group), Chief Executive, Mayday Group; Tony Cann CBE, Chairman, Group of Private Companies; Viki Cooke (Chair SME Taskforce), Joint Chair, Opinion Leader Research; Ram Gidoomal CBE, Chairman, Winning Communications; William Kendall, Chief Executive, Whole Earth Foods; Paul Kiss, Managing Director, Abbey Pynford plc; Keith Moxham, Managing Director, M & F Components Ltd; Professor Ken O'Neill, Professor of Entrepreneurship and Small Business Development, The Management Institute, University of Ulster; Andy Powell, Chief Executive, NTO National Council; Tony Robinson OBE, Chairman, SFEDI; and Chris Steel, Managing Director, Steel Design
¨ The Council's main report - "Managers and Leaders: Raising the Game" - is accompanied by other reports released simultaneously, on:
¨ Joining Entrepreneurs in their World : Improving Entrepreneurship, Management and Leadership in UK SMEs
The Report of the SME Working Group
¨ The Contribution of the UK Business Schools to Developing Managers and Leaders
The Report of the HE Advisory Group
¨ Management and Leadership: Building Future Supply
The Report of the Non-HE Advisory Group
¨ The Council will also be releasing a series of recent research reports, including a paper prepared for the large organisations group on Managing Diversity for Strategic Advantage, and a paper on Measuring and Reporting on management and leadership capabilities.
¨ The Council for Excellence in Management & Leadership, 211 Piccadilly, London W1V 9LD. Telephone: 020 7830 9780; Fax: 020 7830 9781; Website: www.managementandleadershipcouncil.org
¨ Media enquiries: contact Patrick Roberts on (020) 7629 8771 (email: proberts@ahadden.com).
¨ Media enquiries for the DTI: Bradley Smythe (020) 7215 5965 (Bradley.Smythe@dti.gsi.gov.uk)
¨ Media enquiries for DfES: Sally Claughton (020) 79255102 (Sally.CLAUGHTON@dfee.gov.uk)