Leadership issues in SMEs and social enterprise
Authors: David Child
David Child, Entrepreneur
15 August 2012
My first significant interest in leadership came about as a result of involvement in urban regeneration and Richard Rogers’ Urban Task Force. As a result, in March 2000 I gave a presentation at the Building Centre Trust Symposium entitled 'My Kind of Town'. I saw cities and towns as motors of growth and innovation. If we were serious about urban renaissance, a few thoughtful answers were needed to a few simple questions:
- Where are the people with vision, ambition and leadership across the various walks of life in our cities?
- How do we encourage the new century’s wealth-creating activities to thrive - and recycle it?
- How do we reshape schemes and resources to meet business and peoples’ needs? How do we really empower the next generation of doers?
Since then, we have had a boom and bust and a lot of poor leadership, unfortunately characterised by a manifest loss of morality, ethical decay and even downright corruption across the civic spectrum. Examples are easy to find: in business (especially arms bribery); construction (price fixing); finance sectors (malpractice in many areas of business and customer service along with so much more); religious institutions (abuse); care sector (abuse again) and governance (MPs expenses). Greed and fear seem to have driven appalling leadership devoid of honesty, integrity and human values.
Yet, most people I know and meet in SMEs, social enterprises and civic life are decent and honest. They are invariably hard working, struggling to do better and care about their people. Most SMEs and SEs are led by people who are driven by but who have not consciously thought about or practised leadership skills. All the evidence indicates that SMEs and SEs face similar challenges and problems, especially around finance and cash flow management, growth, marketing and customer care. These test individual and lone leaders to their very limits and beyond. Indeed according to yesterday's ( 14 August) Financial Times, more than one in ten British small and medium sized businesses say that they’ve considered closing down in the past three months.
The key difference is the driver in terms of social and civic values. This is a leadership choice. Quite a number of SMEs convert to social firms during their growth years. BIS research and Scottish experience suggests that SEs have slightly better, leadership and strategic planning, medium term growth and survival prospects, and also generate better multiplier effects than SME counterparts.
Twelve years on, we need a new brand of leadership that also encompasses team playing, succession planning and legacy thinking. Legacy is a really important ingredient in my leadership recipe; how do I leave my organisation, patch, town and city at least a little better than when I started it all? This is also about good governance combined with an executive leadership team. Just think about the difference in the banking world, and the economy now, if their boards had exercised good governance and effective audits. You can have good executive leadership with poor governance but you can’t have bad leadership without also having poor governance.
Good leadership depends on the ability to stand back, analyse and reflect; assessing the options, risks and longer-term strategic plan with the ability to then act and adapt. Just as in the Olympics, I believe that levels of leadership and team performance can be measured. To progress you need to practice, develop the right mental and emotional attributes and be determined and resolute once the way forward has been agreed. For many ‘leaders’ of organisations the adrenalin sparked off by the ‘hurly-burly’ of being busy at every moment is all too hard, and is often regarded as ‘not proper work’ or a ‘luxury we can’t afford’. Faced by endless challenges such as unhelpful banks, creditors chasing, skills shortages, debtors paying slowly (or not paying at all) it is easy to see why.
The other ingredient in the mix is how a leader can encourage a culture of collaboration and trust with partners, supply chains, clients, customers, and service users. Yes, there is usually a competitive aspect (even in the social economy), but it is hard to grow without a leadership team ethos that is committed to adding value and improving, whatever we do.
Probably, the big learning for me is the difference between management and leadership. Management needs to focus on systems, processes and outcomes. Good leadership creates the opportunities for people to perform, innovate and add value to the organisation. It defines the legacy.
David Child is a director of three SMEs and two recent SEs.
He is a board member and Chair of the Council of Sheffield Chamber of Commerce and Industry.
The views expressed in this blog are his personally, not representative of any organisation
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