My empirical data, from 30+ years of working with UK SMEs divides business owners into 4 main groups:

It is the 5% HG that is truly entrepreneurial and where governments invest most money, time and effort. Government support provides good statistics and headlines, but is the result a good use of our tax revenues?   As they are more likely to succeed anyway, this seems somewhat misguided.

Characteristics of businesses

Survivors are mainly small businesses, employing a few people – small retailers or similar. They are buffeted by the day to day challenges of business life, and spend little time on planning or deeply understanding how their market works. Tomorrow’s problems are not today’s: they are consumed by today. Most are good technicians, picking up some business knowledge piecemeal as they need it. Their main problem is that they have some pieces of the jigsaw, but they don’t have the box with the picture, so they don’t relate one part to another very well.

LG businesses might be family owned or small engineering companies for example, operating with large or fixed overheads so they have a cautious outlook. They may operate in more static environments where change is gradual, and so have more traditional management processes. Many businesses still inhabit this world. Not everyone can be a headline grabbing start-up. Someone has to do the heavy lifting so that we can buy screws and milk and other necessities.

Lifestylers might start as an entrepreneurial venture, but once a certain scale is reached, the owner will reassess work life balance and reduce the rate of growth. These entities can be successful in their chosen field. They simply don’t have the aspirations to expand beyond a certain point.

It is only HG enterprises which are truly engaged in scaling quickly, maybe with a view to a possible sale, and then perhaps to do it all over again.

There are 2 other groups worthy of mention – freelancers and the self-employed, those who either work on a project by project basis or work alone. It is these last – self-employed – who are largely ignored in considering how work is changing as digitisation takes over so many jobs. Whilst they are also Survivors (as are freelancers), they tend to work on their own, with no employees.

It is the growth in Survivor numbers that has the most capacity for rapid expansion as digitisation allows small businesses to reach wider markets and personalise their customers’ experience.

Aligning objectives – the myth of an entrepreneurial workforce

HG entrepreneurs have personal and business objectives which are congruent and remain that way. My work leads me to say that it is this alignment of objectives that makes the real difference in growing a new enterprise easily and quickly.

Little account is taken of personal objectives in management thinking. It is possible that better understanding of how both owners and staff balance personal and business objectives will enable faster growth.  After all, no one has ever gone to work to fulfil a corporate objective, only a personal one by the means of corporate goals. Peoples’ personal objectives are hardly ever known to management. So it hardly surprising that employee engagement programs are not producing the level of desired improvement, or that firms bemoan the lack of entrepreneurial initiative in their workforce.

Firms want their people to be entrepreneurial, yet do their best to prevent it. Many firms, large and small, encircle their people with internal bureaucracy, push corporate objectives at them, and still use mechanical measures in preference to any other management method. Push marketing is less effective when trying to influence a better informed and sophisticated customer base, but businesses have yet to recognise that employees use the same thought processes in evaluating their job as they do when buying something. It shouldn’t be a stretch of logic, but it seems to be.

Whilst older management methods are still appropriate for businesses which are not in a dynamic environment, or which need to respond to fast changing markets using established processes, management in either case is being hopeful at best if it expects employees to act in an entrepreneurial way. Only in an environment which changes often and which tends to tailor products and services is there likely to be scope for an entrepreneurial approach throughout the organisation.

Lifelong education has been mooted as a necessary driver of better employment and business prospects. It will no doubt assist employees to keep relevant and up to date, but that is just to keep in employment. As well as learning initiatives, balancing objectives works to develop businesses by developing people, as I have proved, at least to myself. This brings natural growth, hence job retention and creation, that need not rely on government’s latest “help” or anything else.

Let’s broaden the term of who needs help and how, to inform the conversation.

About the author:

Nick Hixson is a business adviser and accountant, helping small and medium size business in strategy, leadership, management and team engagement. He also moderates the Drucker blog series.

…by which I mean they have self-belief, self-control, and self-actualisation.

But they’re not the solution to rising unemployment caused by the rise of machines. We heard a lot at the recent Drucker Forum about the rise of machines, and how natural monopolies are being eliminated as competitive advantages erode quicker. Stability is not normal any more.

So we can plan our societies for reducing levels of employment, and find things for people to fill their time with, together with a socially inclusive way of allowing them to fulfil their needs for food, shelter etc. and/or we can find ways of allowing them employment opportunities which are different from now. There is a rise in freelancing – in other words, small projects for disparate employers, and rising entrepreneurial activities now as big businesses benefits both in employment and market share eroded rapidly. We’ve argued before that small businesses will be taking over from big business and we’ve heard nothing to the contrary. Big business ways of working/models are in the main dead men walking. We want more personalisation and customisation and better experiences with the things that we buy, and big business has difficulty in providing this in a mass production and mass marketing environment.

My suggestion is that we have moved from a village economy pre-Industrial Revolution through mass production and standardisation during the industrial and technological revolutions of the last 200 – 300 years, and we are moving back now to a village economy, albeit a global village, where we can get exactly what we want made with direct input from ourselves to the maker.

How does this help what is becoming a rapidly disenfranchised workforce as jobs are lost through technological advances? A session at the Drucker Forum argued that entrepreneurs would provide much of the solution, but I don’t think this is the case. Entrepreneurs are self-centred. That’s a good thing if you’re an entrepreneur, as it helps you to grow businesses. But individuals cannot grow the many businesses needed to soak up the excess employment capacity that is going to be generated. And I don’t think they need to. Excluding those activities that will still work in big businesses which will maybe run utilities and transport and the like, I think there are now three classes of employment. There will still be the freelancers who work for individual projects for whoever will pay them. There will still be entrepreneurs who will employ a body of people for that activity. But I think the big rise will be in self-employment. And by self-employment I mean people who will work for themselves employing a few people in a localised manner with no real requirement to build the business into something which they will intend to sell, and then start again like an entrepreneur does.

As such I think that the word entrepreneur is being misused. Not all people want to be an entrepreneur, but most aspire to be able to control their own destiny, which self-employment (and freelancing) provides every bit as well as entrepreneurship. Most will actually be entrepreneurial in some aspect of their activities, without having to build a model which relies on rapid growth and sale, just to do that over again. That doesn’t fit with most people’s objectives and aspirations.

The technological revolution has allowed small businesses to compete on a global stage, as we’ve mentioned before, and also compete against any size business. The small business can be more flexible, more personal, and faster to respond to changes in markets. It’s also very quick easy and cheap to test markets in this digital era.

The challenge for government is to stop pouring resource into the 5% of high growth potential businesses which are going to succeed anyway, and start teaching and supporting self-employment in a way that encourages many small business owners to take on at least one extra person. Just by doing this, potential unemployment issues caused by replacement technology could be significantly mitigated.

To achieve this, education on self-employment needs a radical overhaul. Just as graduate business education needs significant changes to nurture softer skills rather than just analytical ones, so does education for the self-employment model need realignment. This is currently being taught as a series of disparate technical disciplines with no way of amalgamating disciplines to see how they interact and fit together. We are taught how to write a business plan, how to do our books, how to do social media marketing, but we are not taught how these pieces of the jigsaw fit into the picture. Essentially businesses get the jigsaw pieces but they never see the picture on the box. How then will they know where the pieces relate to one another and the overall picture, and how they can join those things together? That is the challenge for education and government.

We try in our own small way to coach our client base so they understand how things relate and how they can think better about it. By doing this we expect our clients’ businesses to be easier for them to manage, and to achieve the growth that they want. This is not necessarily the most growth achievable as it is their individual/personal objectives which are important. These may not be wholly money based and in fact they seldom are. As our values change to reflect the richness of our life, this balance of aspirations will become more important.

Entrepreneurs still have their place, as they will lead where markets will be in future. The self-employed can feed from the knowledge created by entrepreneurs of what is new, useful and interesting. But they don’t have to be as daring as the entrepreneurs to achieve their objectives. They can go near the leading edge, instead of what is often the bleeding edge with its higher risks. They may wish to balance their risk profile because of other personal factors, such as family, and community.

Government policy has to recognise this change. Most governments operate some decades behind the times in terms of how they think businesses are structured and work. They also impose and rigorously enforce rules which become increasingly nonsensical in the workplace. Apart from the changing education policy towards self-employment, there needs to be more awareness of how social change affects public policy, and an implicit assumption that policy and rules have to change a lot faster. As government’s main job is to be re-elected, they need to tune in to popular movements which involves doing two things differently. Firstly, they should listen considerably more than they talk, and secondly, they should not assume that they have all the solutions (and neither should the electorate). The American constitution starts with ‘We, the people’, not ‘We, the government’. We need looser public policy to accommodate rapid changes in demographics and work profiles, which needs a growing realisation that people, whether freelancers, self-employed, or entrepreneurs, insist on running their own lives in their own way to make it meaningful for each individual.

About the author:

Nick Hixson is a business adviser and accountant, helping small and medium size business in strategy, leadership, management and team engagement. He also moderates the Drucker blog series.

So are we managing, or just coping, in the fast-emerging digital age?

Bloggers have brought visions of dystopic societies where we are ruled by machines; worries concerning the disenfranchisement of vast swathes of the workforce when machines take away jobs; and questions regarding how developing countries may suffer most from the loss of low skilled jobs to autonomous contraptions.

These are reasonable concerns, and mirror the worries that many had during the rise of the Industrial Age, with Victorian machines changing the face of the countryside; marginalising as much as they liberated.

Others, starting with Charles Handy, wonder at how our humanness can be protected from the rise of the machine and warn that, while there are undoubted benefits of an increasingly digital working environment, there are few ‘unmixed blessings’ in the world.

This concept has been developed with interesting ideas on how to manage a workforce that can work remotely, igniting the idea that, at a fundamental level, all employees are volunteers – they are just volunteering to work for you at the moment.

Adding to Donald Rumsfeld’s famous quote, there are unknown knowns, the chief of which is our inability to get the best out of the people we work with. We know this, and we often try to manage it with more or better systems, be they digital or not. Yet we also know that increasingly customers are demanding more from us – a deeper understanding of their needs and wants, and drivers of their behaviour.

This can be aided by big data, but not defined by it. The data still needs strategic assessment because people still have a need to deal with people – people well informed by big data perhaps, but clearly people who have the time and empathy to really listen, and are empowered to act.

To achieve this, we need to engage the people within organisations at all levels, not just at the top. Specifically, line managers and supervisors need to fully understand how and why our colleagues work with us – which is again the volunteer principle.

To do this, we need to understand both their personal and work objectives and align these where possible. If this cannot be achieved, we need to have a grown up conversation so that both parties get enough of what they want and need. If a compromise cannot be reached, this still allows both parties to find some form of closure.

Aligning the business then becomes easier, as does growth, with everyone understanding and working together for a common goal of customer satisfaction.

This blog first appeared in the Chartered Management Institute‘s Insight section, and relates to blogs posted on the Global Drucker Forum blog series, moderated by Nick Hixson

The oft quoted case study at the Forum was of Morning Star – a California tomato producer which employs 4000 people with a very flat management structure. So flat in fact that anybody can make a capital expenditure proposal, and if it is validated by their peers, it happens.

But still it felt to me that there was something missing. Reading the Morning Star case study by Gary Hamel on the Harvard Business Review blog, it struck me that yet again only corporate objectives have had any credence. We all talk about engaging our employees better, but we don’t seem to bother to find out what objectives those employees have in coming to work. If we simply brush this off as they get paid and incentivised to do better whilst at work, then we’re not that far from the Henry Ford model even after a hundred years. We are still only paying lip service to employee engagement, because we’re still using a simple measure which is money or money equivalents to buy somebody’s time and engagement. If we don’t know what that person values, then we may be missing an opportunity. Dov Seidman spoke at the Forum about How matters in an organisation, and yes it does. But I contend Why matters more and that seems to be ignored by most corporates.

Other sessions at the forum focused on the Mittelstand model, which includes a view of a more extended family to include employees and their families such that sustaining profits is more relevant than maximising profits. The idea is to ensure future generations can benefit from the company model – both future generations of owners, and also employees. This indicates an informal way of understanding employee positions, and isn’t far away from the employee benefits at campuses such as at Google and Nordstrom. These concepts were pioneered by Victorian factory owners such as Lord Lever at Port Sunlight and Cadburys at Bourneville. These paternalistic solutions worked well but left little to employee choice, which at the time was virtually non-existent. Employees have more choice now, and a better standard of living, and might appreciate less paternalism and more inclusiveness.

We do a lot of work with strategic planning for small businesses and always start with personal objectives in detail. That simply doesn’t mean how much money they want but why they want it and what they going to do with it. We drill down to deeply understand what fulfils them as human beings. Aligning business and personal objectives generally produces significant improvements. Then, looking at the business from the customer’s perspective, and aligning this with personal and business objectives produces subtle and powerful forces for change. Businesses become easier to run, with a team that understands themselves, each other, and the business better, and they produces a clear and consistent message to their marketplaces.

Peter Drucker looked for ways of building a more inclusive entity in Management in the 21^st Century (1999) “We will have to redefine the purpose of the employing organization and of its management as both, satisfying the legal owners, such as shareholders, and satisfying the owners of the human capital that gives the organization its wealth-producing power, that is, satisfying the knowledge workers. For increasingly the ability of organizations — and not only of businesses — to survive will come to depend on their ‘comparative advantage’ in making the knowledge worker productive. And the ability to attract and hold the best of the knowledge workers is the first and most fundamental precondition.”

But no methods of doing that as part of core strategy are commonplace. We all talk about employee engagement whereas we put should perhaps be talking about employee capability – discovering all the abilities and drivers that each individual can bring so that business and personal objectives can be better understood and overall performance improvements obtained.

There is a lot of talk about customer engagement as well. It is clear that customers don’t want mass produced, push marketed products. Most have enough things- they now want personalised solutions to their needs. If we expect to do this for our customers, why wouldn’t we expect our colleagues to have the same desires, and expect the same attention to them from their employers?

There is a simple structured way of discovering personal objectives, which can be easily integrated into a performance appraisal meeting, such that HR departments could be at the forefront of driving business improvement. There will be mismatches, and those will have to be managed. But it would be better to find those out and manage them explicitly than wonder why capable people continue to slightly underperform or even leave. Some will show scope for improvement and they will need some support. Whatever the results, having the conversation and sharing business objectives will enable managers to get their people very much more onside, much more engaged, and much more able to take decisions which can be trusted. This will help to build a flexible and agile workplace with less need for rigid bureaucracy, so more able to adapt to a fast changing world.

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A blog following the Global Peter Drucker Forum 2014. An opportunity to share experiences and learn from one another in the context of The Great Transformation.