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Charles Levy
Senior Economist
Charles  Levy

Managing success?

Authors: Charles Levy Charles Levy

18 March 2011

One of the few things we can say with confidence about the future of our economy is that over the next decade most jobs will be created by a tiny core of rapidly growing firms. Typically, only about one in 20 firms are real stars – these will drive job creation and innovation across the economy. If we had a few more of these, or if these stars could shine just a little brighter then our economy would look a lot better.
Out today, our paper Ready, Steady, Grow? How the government can support the development of more high growth firms looks at what potential high growth firms need to realise their full potential, and sets out what the government should do to ensure more firms are high growth.
We think the government needs to work harder on the basics of economic development, especially around access to finance, skills and planning. But, our research shows that many high growth firms have another special need from the public sector – support developing their leadership and management capacity.
Managing a high growth firm is fundamentally a difficult task. We think that the market fails to put the best managers in charge of our firms with the greatest potential for growth, especially SMEs. Management and leadership skills are also generally thought to be poor in the UK. These two issues represent a major barrier to the growth of many SMEs. Overcoming this demands a reconfiguration of business support systems away from light touch interventions and broad measures to improve the business environment towards a focus on leadership.
Few firms will become high growth businesses because of small hand-outs or grants. Expensive tweaks in marginal taxes such as corporation tax do not make or break the models for high growth firms – becoming a star depends on much more than that. But, if business support could focus on getting the right leadership and management skills into just a tiny fraction of the UK’s their chances of shining and living up to their potential will be that much higher.

If we manage to get this right, our future economy could look a great deal brighter.