A number of interested (and interesting!) parties are keen to see what can be done to make mid-sized businesses the powerplant of growth in the British economy. Already, the Chancellor has indicated that medium enterprises will be front and centre of the Growth Review that will be announced at the end of November. And the CBI has made its contribution via the Future Champions? research it has carried out jointly with consultant McKinsey.
M Institute is not a representative organisation but, as a think tank, our insights and commentary have already been part of the inputs used across government as well as by organisations like the CBI. Our goal remains a key focus on medium enterprise: making visible this hitherto invisible segment. For more on our proposals in this area, check out Jyoti Banerjee's presentation to Mark Prisk, minister for business, Department of Business, Innovation and Skills.
What can government do to get mid-sized enterprises performing as they can? Here's a list of some of the key ideas we think government can work on:
- Making medium special / aspirational – this is about defining the space, what makes it different, and identifying the characteristics of the best companies, including celebrating the best ones. Currently, medium enterprise is not appreciated as a separate segment, and its best performers are not seen to be the heroes they really are.
- Helping medium businesses attract the best talent, through making our graduates more useful in work. At the round-table chaired by Mark Prisk, we talked about driving change in universities on issues around the priority accorded to teaching students, including making them employable through greater focus on team-based working, internships, etc. We also need to see greater emphasis on STEM (maths, science and technology) teaching. The US has already recognised that it has been left behind in this area by countries such as China and Korea, and has put in place the 100kin10 programme as a way of creating 100,000 world-class STEM teachers in its schools. Yes, the UK needs such an initative too, which enables the private sector to participate in raising the next generation of teachers for our STEM-starved students.
- Medium enterprises don't have the means of the freedom to help their managers develop world-class skills in new areas of performance. Large enterprises do this pretty well, but there just isn't the bandwidth for medium enterprises to invest in their staff in this way. We would like to see the development of opportunities for ongoing development of management capability in medium enterprises, through a collaborative programme with business schools to enable “top-up” teaching that helps middle and senior managers to grow in the areas that are significant for the improved performance of medium enterprises
- Multi-national firms have a halo effect in that medium enterprises that come into contact with them, or compete with them, have to sharpen their game. We would like government to build the impact of this through a scheme by which senior managers in large enterprises can become mentors and non-executive directors of medium enterprises, particularly when the companies operate in their ecosystems.
- We need to see the business networks develop in the medium enterprise segment so that firms access skills that are relevant to their scale of enterprise, as opposed to stuff aimed at small businesses. Let's face it: most of the target audiences for organisations like the Institute of Directors and the British Chambers of Commerce is the SME market. We need to see more action in the space above them. We think the CBI will be better placed to meet this challenge, but we also feel other organisations with good coverage in the medium enterprise space, like the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Family Business, or EEF, should all step up to the plate. Government and the various professional bodies should also encourage these businesses to understand that there are certain behavioural issues (such as professionalising their management, putting information and systems processes into place that enable the business to scale, funding options, etc) around which they can benefit from external input where appropriate.
- We think that the most likely growth opportunities for medium enterprises will be through being close to the hot growth markets. Currently, these focus around the BRIC economies in regional terms. However, there is a huge opportunity working through the massive investments that countries like China and Korea are making in the low-carbon sustainable economy. We need to see British enterprises playing in these spaces: this is not just about renewables and carbon, but is significantly deeper and wider in terms of products and services that will be needed in a lo-carbon sustainable future. The Green Investment Bank, as currently defined, does not begin to come close to the scale of commitment being made in some other countries.
- For some time, we have advocated the need for a different type of credit rating scheme for medium enterprises, as well as a debt market aimed at these kinds of companies. We feel that this area is much-needed, especially as bank finance dries up in general, but particularly for knowledge economy companies with few or no collateral assets.
Overall, we think that most of the things that government can do to help medium enterprises do not have a high price tag in terms of the need for large-scale investments. Smart focus on certain key interventions can make a huge difference, in our view.
If there is a foundational issue in this, we would say that there is a need to address the invisibility of the medium segment. A lot of the other issues will come into clearer focus if the segment is more widely recognised, appreciated, celebrated and dealt with. We think M Institute's model using behavioural characteristics helps define the segment, and lays out the stepped-growth problems that firms have to deal with. Of course, we are going to say that, but we think there are good reasons why this is so.
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