Dangers facing SMEs out of recession Feb 18, 2015

Out of recession, most businesses are growing and in many cases experiencing a surge of pent-up demand as investment starts to make up for lost ground.

The big danger for owner-managed smaller/medium sized businesses is 2-fold:

  • They cannot continue to grow by simply working longer and harder – that’s not sustainable;
  • Customers are very sensitive to signs of suppliers under strain. They cannot risk failing their own customers as a result of their suppliers failing to deliver on time and on spec.

In the coming months many SMEs will lose their new customers and their established customers by not properly re-engineering their businesses to cope with sustained growth.

So what does ‘re-engineering’ mean for SMEs to enable them to keep growing profitably?

It requires a cultural change from top to bottom, and more importantly from bottom up.

It means communicating to everybody in the company what the new priorities and performance standards are when operating at full capacity. How often do companies tell their customers “Quality is our top priority” but Production tell their workforce “Just get it out of the door”? The mismatch of priorities is very common and very dangerous. As the workforce become tired, less able and willing to do more overtime, and managers have less time to train new operatives, management generally becomes reactive and increasingly short term.

Customers pick this up straight away. When the phone rings for longer before it’s answered, when people are slow to ring back and are less precise about achievable delivery dates, and when quality dips and dates are missed, it’s time to think about other suppliers. At that stage the goodwill pool (customers’ tolerance) rapidly disappears.

When that happens senior management have limited time and scope to respond. Their options rapidly become limited.

The only solution is to allow everybody in the organisation to take ownership of the solutions and the process to deliver them.

Initiating that process to deliver sustainable growth and release the potential energy and initiatives from the workforce requires outside skill. It’s a cultural change. The management that allowed the problems to arise surely can’t be entirely trusted to deliver the solutions on their own, can they? If the solutions come from senior management as a directive, that’s not a cultural change. So it probably won’t work longer term, will it?