Home / Entrepreneurship / Cultivating Competitive Advantage in Small Business

Cultivating Competitive Advantage in Small Business

Key Concept ~ Small businesses need a competitive edge to win in the marketplace.  In today’s world, people are the source of competitive advantage.  Large firms may enjoy economies of scale, high brand equity, and bloated marketing budgets, but they consistently continue to miss the mark in leadership, leadership development and associate engagement.  This is the soft underbelly of corporate and a place where small firms can outperform the multi-nationals.

The Chartered Management Institute in the UK recently released a major research study titled, “The Business Benefits of Management and Leadership Development”.  The study surveyed nearly 4,500 mid-level to senior level managers in the United Kingdom seeking to find if there were any correlations between management and leadership development programs and organizational performance.  The study also delved into the types of developmental programs that are perceived as valuable and the types of programs that deliver skills that are actually used on the job.  Some of the key findings of the study include:

~ In low performing organizations, 39% of line managers were rated as effective.  Sixty-one percent of line managers were rated as ineffective.

~ In high performing organizations, 80% of line managers were rated as effective.  Twenty percent were rated as ineffective.

~ In low performing organizations, 30% of associates reported being highly engaged.

~ In high performing organizations, 83% of associates reported being highly engaged.

No real surprises.  The findings in the UK parallel the findings of other U.S. and international studies that have been published in the last several years.  I believe this is the sixth study released in the past two years from highly respected global consultancies, universities, and institutions that underscores the state of leadership in business today.  In fact, the 30% highly engaged figure for low performing organizations nearly mirrors Gallups findings that peg associate engagement levels at 29%.  The question that begs to be asked is whether or not senior leadership is listening, and if so, what are they doing about it?

I believe some are, as we can see the much higher levels of management effectiveness and associate engagement levels in companies that are deemed high performing.  What was really interesting from this study, and should resonate with small business owners, was the misalignment between what business managers perceive as effective leadership development and what programs actually deliver the skills and tools they require to lead.  Nearly 90% ranked a business graduate degree program as the most effective approach for leadership development while only 10% of what they learned in an accredited graduate program was actually being used, day-to-day, in their managerial roles.  Programs that delivered credentials were perceived as being more effective but consistently delivered applicable skills well below the perceived level of value.  Programs that were perceived to be lower in value (i.e. workshops, short courses on leadership, conferences, on-the-job-experience, and internal knowledge-sharing networks) actually delivered consistently higher levels of applicable skills than the formal, accredited programs.  Lower cost training, coaching, and educational workshops actually deliver more relevant skills than the high-priced, accredited programs.

Another interesting finding was the effectiveness of professional coaching.  The report stated, “Coaching, either by line manager or external practitioners, appears in the top five most effective types of MLD (management and leadership development) for women but not for men. Coaching by external practitioners is identified by over half of CEOs and senior managers as something they wish they had received earlier in their careers.”  The report went on to quote a woman that had just finished an intensive, six month program as saying, “it provided me with many ‘eureka’ moments and genuinely changed my life and my expectations for my career… It had a massive impact on my competence at work.”

The conclusions of the report were clear.  Companies that out perform their competitors value leadership development.  They invest in it, senior leadership supports it, and these firms align their HR strategies with it.  This is an area where small businesses can compete on a very level playing field with major corporations.  You need not send your sales manager to Harvard to get an MBA.  Lower cost workshops, seminars, coaching, and training are available, and it is these types of programs that deliver applicable leadership skills.  Small businesses may not be able to out-muscle corporations, but they can out-lead them!  Leadership development, when properly aligned and supported, was found to explain as much as 32% of the variance in people performance and 23% of the variance in organizational performance.  Here are some of the recommendations from the study’s panel:

~ Value behaviors: coaching by both line managers and external practitioners was especially valued by senior managers, and something they would have appreciated receiving sooner in their careers.

~ Provide sufficient resources and commitment to development, even during tough times. Development is a long-term strategic investment that feeds the leadership pipeline for years to come.

~ Provide role models at the highest level with CEOs and senior managers demonstrating their personal commitment to learning.

~ Ensure managers are able to have effective career conversations to help align personal aspirations with the organization’s goals and values.

~ Align MLD to organizational performance measures to support the development of hard evidence of return on investment (ROI).

~ Create a rich organizational learning environment.

~ Provide coaching for all levels of management.

~ Build coaching capability within the organization at all levels through ‘leader as coach’ programs and accrediting internal coaches.

~ Create a culture of learning across the organization by encourage forums that facilitate knowledge-sharing, idea creation, collaboration, cross-functional working and debate.

~ Smaller organizations may need to network with other organisations to co-commission MLD and share best practice.

Once again, no real surprises.  Things that even our small firm has been speaking about for the past four years.  But as a colleague I respect once said, “Just because it is common sense doesn’t mean it is common practice.”  The great news for small business owners is there’s some low lying fruit waiting to be harvested right within your ranks.  Competitive advantage is there for the taking, and it doesn’t have to cost a fortune to implement.

About Dave Solomon

Dave Solomon is a serial entrepreneur influenced by Terry Murray, one of the greatest business mentors of 21 century. This Blog is an initiative to recollect the lessons of Mr. Murray and help aspiring entrepreneurs become transformational entrepreneurs

Check Also

The Benefits of Employees vs Contractors

Even if you start your small business alone, if your company is successful it won’t …

Leave a Reply

Your email address will not be published. Required fields are marked *