Is bad management preventing small business growth?

A lack of leadership skills and bad management practices is potentially holding back thousands of small businesses in the UK, new research has suggested.


A study from Warwick Business School believes that productivity is lower than it should be, with output per hour 2% lower than it was before the financial crisis.


Office for National Statistics data shows the economy to be growing at a faster pace than any advanced nation but it appears many businesses could still do more.


One of the key things identified in the study was a lack of entrepreneurial skills and poor management, both of which can hamper potential growth.


Nearly 1.3 million of the UKs five million SMEs have employees according to the Department for Business Innovation and Skills, yet badly thought-out decisions could be holding them back.


A lack of management best practice was identified among small businesses which underperform, while there was also strong correlation between those that do employ best practice and that see positive results.


Under-developed leadership skills could therefore be an issue for companies, some of which essentially lack people with the necessary experience to deal with the tasks they face.


While many of these skills can be developed over time, some of them – particular those which deal with financial aspects of business – could potentially thwart progress.


Businesses with between five and 250 staff were included in the research which highlighted the need for good skills and management relating to three key areas of performance – turnover, productivity and employment growth.


Productivity is the key as it will ultimately drive sales and improved performance, while a reduction could leave a firm in financial difficulty as it is either unable to meet orders or as a result of lost custom.


In instances where financial trouble is noted, businesses should seek advice to assess what options might be best for them.


A solution could be available that enables a firm to recover its finances and continue trading, while alternatively they might need to consider company administration or an alternative form of financial rescue.


Focusing on productivity and output in the workplace is essential for businesses that are looking to grow, which is why good management is imperative.


By Phil Smith


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