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Do we need the RDAs?
The Taxpayers' Alliance would like the regional development agencies abolished. M Institute co-founder Jyoti Banerjee studies their report - he likes their data but disagrees with their recommendation.
Understanding M
Mid-size enterprises are the powerhouse of the UK economy.
Despite their sterling performance, mid-size enterprises are nearly invisible.
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What makes an organisation medium-sized?
In a sense, any definition of medium business must be about size. Medium is neither small nor large. Two questions emerge from this sort of approach: a) what size is a mid-sized organisation, and b) is size a good arbiter in this issue?
Defining the size limits of a medium-sized organisation is a matter of debate but the UK government and the European Commission share a similar understanding. The European definition of medium-size is any organisation with employee numbers between 50 and 250, annual turnover of between €10m and 50m, or a balance sheet between €10m and €43m in assets.
Mid-sized organisations are categorised in most UK analytics as part of the SME grouping. This is certainly tautological in terms of size as SME seems to cover any companies that are not large, but it does not provide any analytical insight on the behaviour of such companies as they are different from small and micro enterprises in a number of significant ways.
A number of researchers have done work on establishing if there are behavioural characteristics that improve our understanding of medium organisations, The links below provide further information on the studies carried out in this area.
In 2005, the Institute of Chartered Accountants and BDO Stoy Hayward conducted a research study among 183 mid-sized UK enterprises and identified seven key dimensions in which mid-size businesses are different from others in the SME grouping.
M Institute extended the ideas in the ICAEW / BDO Stoy Hayward report to contrast medium enterprise with small and large organisations in nine different areas. Interestingly, in many ways, medium business is rather more like large business in its behaviour and characteristics, which makes it even more incongruous that medium business is compartmentalised with small business via the SME definition. These differences are summarised in the table below.
| Small business | Medium business | Large business |
|---|---|---|
| Owner-managed | Owners plus professionals in key leadership roles | Professional management |
| Micro-management of employees | Empowerment of employees | Freedom to act within corporate guidelines |
| Informal processes | Formal processes | Formal structures and processes |
| Short-term planning horizon | Longer-term planning horizon | Short-term results / long-term planning horizon |
| Low external input | External input from professionals | Governance structure separate from management |
| Equity held by founder / family | Wider equity base | Diversified equity base |
| Small customer base | Diversified customer base | Diversified markets with diversified customers |
| Limited personnel development opportunities | Culture enables employee / management development | Multiple career development paths |
| Low borrowing requirement – government support possible | Borrowing needed long-term / funding available shorter term | Wide pool of funding sources |
Behavioural differences between small, medium and large organisations, M Institute, 2006
These behavioural differences,rather than size, are particularly important in helping distinguish medium organisations from small and large organisations.
