SME managers most important entrepreneurship and business competences

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1 SME managers most important entrepreneurship and business competences Caroline Dominguez 1, João Varajão 1,2, Leonel Morgado 1,3, Irene Oliveira 1, Fernanda Sousa 4 carold@utad.pt, jvarajao@utad.pt, leonelm@utad.pt, ioliveir@utad.pt, fcsousa@fe.up.pt 1 Department of Engineering, UTAD-University of Trás-os-Montes e Alto Douro, Vila Real, Portugal 2 Centro ALGORITMI, University of Minho, Guimarães, Portugal 3 GECAD, UTAD-University of Trás-os-Montes e Alto Douro, Vila Real, Portugal 4 Faculdade de Engenharia, University of Porto, Portugal Abstract: The requirements of an increasing globalized and competitive economy lead managers to search for training solutions which can rapidly bridge the gap of their lacking skills, knowledge or competences. To assert with adequate training programs, in particular for SMEs managers, a study was conducted in six European countries with the objective of identifying the most relevant competences they need to fulfil. A literature review and several interviews with business associations executives resulted in a list of 34 competences which we organized in four categories: personal, team management, business and technical. These competencies were put at trial through a survey conducted among 154 SMEs managers who had to evaluate each proposed competence with the attribution of a relevance degree. Although we show that SME managers should be well prepared in a rich set of complementary areas to perform their job, it is clear that some of the competences are crucial for them to tackle today s challenges. This paper presents a ranking of the competences by importance as perceived by managers. These findings can help training institutions wishing to design new training programs which more in line with managers needs. Keywords: SME, manager, competences, skills, Europe. 1. Introduction SME managers are confronted with an increasingly unstable, complex and changing economic context. They must know how to combine a set of key diversified competences to lead the company on the road of competitive development. They also must adapt themselves to a set of challenges that they are not always well prepared to face. Universities and professional training institutions have a key role to play in this context. Through their adequate training offer, they can be essential partners for SME managers towards the road of success. On the basis of a previously elaborated Framework of SME managers necessary competences [1] which resulted from a study conducted in six European countries (Austria, Finland, Greece, Italy, Portugal and Romania), this article presents the outcome of an inquiry realized among managers of SMEs with the objective of identifying and characterizing the competences from the Framework that are considered most important. This should help training institutions to prioritize their educational actions towards SME managers and be more effective in their partnership towards SME s competitiveness. The

2 first section of this chapter presents the results of recent studies on this matter. The section on methodology highlights the research process used in the study. In the main section, the achieved results will be presented. Finally, the chapter ends up presenting some opportunities for future development of this work. 2. Background Between 2002 and 2007, the number of SMEs has increased by over 2 million. Most that new firms are created in the service sector and are micro enterprises [2]. Across the member states of the European Union (EU), there are about 19.6 million small and medium-sized enterprises (SME) in the non-financial business economy, with up to 250 employees, representing 99.8% of all businesses and 67.1% of the non-financial business economy workforce [3]. To support the growth and development of existing SMEs and promote the creation of new SMEs, the European Commission (EC) adopted in June 2008 the Small Business Act for Europe, reflecting the EC political will to recognize the central role of SMEs in the EU economy [4]. In spite of the important role played by such firms in the European economy, there is a lack of specific training for people heading and/or managing SMEs, and the training that is available tends to serve either start-ups or medium sized firms [5]. Furthermore, training for heads of SMEs should be different from training for employees: heads of SMEs exhibit activist and pragmatist learning styles, prefer learning by doing and favour problem-centred approaches that offer flexibility (id., p. 3). Aiming to identify the relevant competences of SMEs managers it was developed a study [1, 6] in several European countries, that comprised the analysis of several works [2, 7-13] and the conduction of interviews with representatives of business associations. From that study resulted a Framework of SME s manager competences, which were organized in four categories: personal; technical non-financial; business & financial; and leadership. In this context, the sense given to competence is the following: aptitude, ability or set of theoretical or practical knowledge necessary to achieve a certain purpose. Personal aspects are all competences related to the manager s personality that are vital in order to manage an enterprise effectively. Team management aspects are all the competences that are needed in order to create and lead a team and make full use of each team member s capacities. Technical aspects are all competences that help the manager to fulfil everyday tasks and functions in the enterprise. Finally, business & finance aspects are all competences that allow a manager to deal with the basic financial and business tasks of the enterprise. Table 1 presents the elements of each category of the Framework. Table 1. SME managers entrepreneurship competences. Source: [1, 6] Category Personal Team management Competence Attitude towards uncertainty and risk Innovative spirit Fulfilment of tasks and goals Self-confidence Communication skills Ability to discover new opportunities Conceptual ability Negotiation and decision-making Time management for own work and the team's work Communication to the team of clear expectations of performance Regular supply of feedback to the team on its performance Full use of the capacities and knowledge of the team Promote mutual confidence 275

3 Technical non finance Business & Finance Develop autonomy of a group Raise awareness of collective responsibility Ability to build and lead a team (leadership spirit) Ability for project management Ability to create and provide strategic/tactical/operational plans Management of human resources from an organizational perspective (allocation/attribution of tasks) Management of other resources (non-human) Awareness of corporate social responsibility Knowledge of the administrative/bureaucratic process for founding a company Knowledge of the legal requirements for business Knowledge of the most important legal forms of business ownership Process analysis and change management Knowledge of general business conditions and functions Knowledge of what to think about when deciding whether to found a business or not Knowledge of foreign trade and international trade relations Distinguish the financial issues between different company sectors (manufacturing/services) Management of the different performance functions within an enterprise Understanding of different forms of financing (self-financing, external financing) Basic sales-planning skills Knowledge of accountancy and taxes Ability to plan and control: direct costs, overhead costs, cost prices, gross and net sales price, and earnings/profits For a detailed description of these competences please see [6]. 3. Methodology Objective With the purpose of identifying and characterizing the most important competences and skills that European Small and Medium Enterprise (SME) entrepreneur/managers need to be able to perform her/his job, we carried out a study with the participation of SME managers. The general methodology involved a survey that was conducted particularly to inquire which management competences/skills the participant managers are more relevant for the success of a SME, and to know among these, which they felt they needed more training. Subjects The survey, undertaken from July to September 2009, focused on small companies of six European countries. The subjects in this study consisted of the general managers of the companies. This particular audience was preferred because SMEs across the 27 members states of the European Union represent about 99% of all businesses [3]. Therefore, the use of this target group seemed most appropriate. Questionnaire A questionnaire (the survey instrument) was formulated (see Appendix A for selected portions) and sent to managers of SMEs, identified according to their gross revenue and number of employees.

4 The content and structure of the questionnaire was created based on a Framework of SMEs managers competences [1]. The proposed questionnaire was pre-tested with a sample of twelve managers from SMEs of participant countries (two per country), to validate its content and readability and to improve some aspects of the questions. The necessary changes were made to the final questionnaire, which was edited in an online survey tool. A briefing letter was subsequently sent to the participant managers regarding the scope and goals of the study, including a link to an Internet webpage which allowed the completion of the questionnaire online. Data representativeness The survey was mailed to the managers of a sample group from the universe of SME European companies by gross revenue and number of employees. In order to obtain a representative sample, we chose to use a casual sample of companies from six countries: Austria, Finland, Greece, Italy, Portugal and Romania. The total answers obtained were Most important competences of an SME manager Respondents attributed a level of importance to each presented competence of the questionnaire. This procedure permitted to order each competence as the overall result of all answers and respective graduation. The statistic analysis of the collected data allowed us to identify the competences that SMEs managers regarded as most important. As we can see in Figure 1, all 34 competences are considered relevant. A first set of competences, that we can name as the top 4, three are related to personal characteristics of managers (innovative spirit, fulfillment of tasks and goals and communication skills) and one with team management (negotiation and decision making abilities). In a very dynamic economic context, it is understandable that managers need to be able to generate innovative responses, decide in an adequate frame of time to implement them, communicate/negotiate them to all stakeholders, implement the necessary changes and put them in practice (goals) in order to challenge competitors and seduce customers. A second set of less important but still very important competences are related to business and finance (ability to plan and control costs), to personal characteristics (ability to discover new opportunities and self-confidence) and to team management (ability to build and lead a team). We stress here particularly the importance given to the necessity of planning and controlling costs in the context of increasing market pressure due to competitiveness and the recent financial crisis. The following competences in order of importance are of very mixed characteristics. The competences that are on the bottom of the list, that is to say the ones considered less important among all of them, relate to technical non financial aspects and business and financial aspects, specifically concerning the foundation of company. It is interesting to underline that knowledge about foreign trade and international relations is included in this last set of less important competences. The typical low degree of internationalization of SMEs might explain this situation. Most SMEs are concerned by issues dealing with their local, more natural economic environment. It deserves to be noted that all of the personal characteristics are considered of great importance, with five of them being at the first seven positions of the ranking. 277

5 Innovative spirit Fulfilment of tasks and goals Communication skills Negotiation and decision-making Ability to plan and control: direct costs, overhead costs, cost prices, gross and net sales price, and earnings/profit Ability to discover new opportunities Self-confidence Ability to build and lead a team (leadership spirit) Ability for project management Attitude towards uncertainty and risk Ability to create and provide strategic/tactical/operational plans Communication to the team of clear expectations of performance Conceptual ability Full use of the capacities and knowledge of the team Raise awareness of collective responsibility Time management for own work and team s work Basic sales-planning skills Management of human resources from an organizational perspective (allocation/attribution of tasks) Promote mutual confidence Knowledge of what to think about when deciding whether to found a business or not Knowledge of legal requirements for business Management of the different performance functions within an enterprise Management of other resources (non-human) Understanding the different forms of financing (self-financing, external financing) Regular supply of feedback to the team on its performance Develop autonomy of a group Knowledge of general business conditions and functions Process analysis and change management Awareness of corporate social responsibility Knowledge about accountancy and taxes Knowledge of the most important legal forms of business ownership Distinguish the financial issues between different company sectors (manufacturing/services) Knowledge of foreign trade and international trade relations Knowledge of the administrative/bureaucratic procedures for founding a company Fig. 1. Ranking of SME managers competences.

6 5. Conclusions and future work Through a survey applied to 154 SME managers of six European countries and its subsequent statistic analysis, it was possible to put at trial 34 competences that were previously listed as necessary and order them by their level of importance. Although results show that all competences were classified as relevant, it is possible to identify that the first top eight relate essentially to personal and team management, although they include one business and financial one, the ability of planning and controlling costs. The competences at the bottom of the list concern the ones dealing with company s foundation and internationalization. Subsequent work will consist in analysing the results of a survey which had the objective of identifying the competences in which SME managers need more training and cross this information with the one that was here presented. It will be also tested if these results depend on some SMEs managers characteristics like age, experience, activity sector. That will enable educational agents to format their training supply to meet the more pressing needs according to the specific characteristics of the SMEs managers and target groups. References 1. Velegrakis, G., et al., SME managers required entrepreneurship and business competences (poster), in CENTERIS - Conference on ENTERprise Information Systems. 2009, UTAD: Esposende, Portugal. p Audretsch, D., et al., First Section of the Annual Report on EU Small and Medium-sized Enterprises. 2009, European Commission, Directorate General Enterprise and Industry, EIM. 3. Schmiemann, M., Enterprises by size class - overview of SMEs in the EU. 2008, Office for Official Publications of the European Communities: Luxembourg. 4. EC, Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - Think Small First - A Small Business Act for Europe. 2008, European Commission Directorate-General for Enterprise. 5. NJM European, A Study and Analysis of Management Training~Techniques for the Heads of SMEs, particularly Using the Information and Communication Technologies (ICTs). 2000, Report for the Directorate-General for Enterprise of the European Commission under contract DGENT 99/C/A3/31 S Velegrakis, G., et al., SME managers required entrepreneurship and business competences, in E-Business Issues Challenges and Opportunities for SMEs: Driving Competitiveness, M.M. Cruz-Cunha and J.E. Varajão, Editors. 2010, IGI-Global. 7. BCC, Annual Report on the SME sector in Romania. 2008, Bucharest: Bucharest Chamber of Commerce Publications. 8. HRAKK, Description of the main contents of the Finnish entrepreneurs. 2009, Hyvinkaa: HRAKK Publications. 9. Pichler, J., SME-SPECIFIC "PROFILES", STRATEGIC POTENTIALS AND ATTITUDES TOWARD INTERNATIONALIZATION IN THE ENLARGED EU DIDA, Description of the Italian enterpreneurs. 2009, Rome: DIDA Publications. 11. Tampere, Finnish Survey on Collegiate Entrepreneurship. 2006: Tampere University of Technology 279

7 12. Klen, E., A. Pereira-Klen, and C. Gesser, Towards the sustainability of virtual organisation Management, in APENDICE XII ARTIGO ANEXO AO QUESTIONARIO VALIDACAO ETAPA Pais, C., As representações da Liderança Eficaz no contexto empresarial do Norte de Portugal. Dissertação de Mestrado em Psicologia Social e das Organizações. 2003, Universidade Fernando Pessoa: Porto. Appendix According to your experience, what management aspects do you consider relevant for the manager of an SME? (For each of the following aspects, please select the answer that better reflects your opinion.) Not important Little important Competence Important Attitude towards uncertainty and risk Innovative spirit Fulfilment of tasks and goals Self-confidence Communication skills Ability to discover new opportunities Conceptual ability Negotiation and decision-making Time management for own work and the team's work Communication to the team of very clear expectations of Essential performance Regular supply of feedback to the team on its performance Full use of the capacities and knowledge of the team Promote mutual confidence Develop autonomy of a group Raise awareness of collective responsibility Ability to build and lead a team (leadership spirit) Ability for project management Ability to create and provide Strategic/tactical/operational plans Management of human resources from an organizational perspective (allocation/attribution of tasks) Management of other resources (non-human) Awareness of corporate social responsibility Knowledge of the administrative/bureaucratic process for founding a company Knowledge of the legal requirements for business Knowledge of the most important legal forms of business ownership Process analysis and change management Knowledge of general business conditions and functions Knowledge of what to think about when deciding whether to found a business or not Knowledge of foreign trade and international trade relations Distinguish the financial issues between different company sectors

8 (manufacturing/services) Management of the different performance functions within an enterprise Understanding of different forms of financing (self-financing, external financing) Basic sales-planning skills Knowledge of accountancy and taxes Ability to plan and control: direct costs, overhead costs, cost prices, gross and net sales price, and earnings/profits 281