Abstract
The purpose of this study is to devise and trial a measurement tool that will enable a government agency to demonstrate the impact of its funding of small business training interventions.
Traditionally, the health of a business is measured using standardised financial statements. This allows external parties to view the performance, position and cash flow of the business over time. This standardisation also allows parties to make inter-company comparisons and identify operational problems by scrutinising the financial statements.
Small to medium enterprises (SMEs) form the vast majority of businesses in all developed countries. Their contribution to GDP and employment is well documented. Because they occupy a central position in the economy of a nation, most governments have policies and programmes to support SMEs. The nature and extent of this support varies from country to country.
It is difficult to measure the impact of the support by using standard financial metrics because it is difficult to attribute a change in performance solely to the support initiative to the exclusion of all other factors in the business environment. The difficulty is exacerbated by the characteristics of the SME sector. Unlike larger enterprises, SMEs cannot be treated as a homogenous group. They do not typically have the resources, skills or governance systems of larger enterprises. Without the regulating mechanisms of corporate governance to guide managerial decision-making, the SME is vulnerable to the individual preferences and whims of the owner. Because of this highly individual character of the SME, it is counter-intuitive to speak of an “SME sector”.
This study attempts to find a compromise between the idiosyncratic nature of SME performance and the requirement of government agencies to provide standardised reporting on the impact of their SME support programmes.
This study uses clients of an SME support programme in New Zealand, the Capability Fund, as its population. The Capability Fund is administered on behalf of the central government through a network of 14 Regional Business Partners (RBPs), which are typically regional economic development agencies. SME clients apply for a range of support options, but this study focuses on the support provided to improve their skills through various training or coaching interventions.
Because of the broad nature of small business studies, this thesis starts by defining and differentiating between the terms “SME” and “entrepreneurship”. The economic justification of government support for SMEs is considered in a brief discussion of institutional economics before a historical review of how global and New Zealand SME policies have been applied. This review places the current support programme in a historical context. The challenges of measuring SME performance are considered in relation to the techniques used by various countries and international organisations with reference to examples of best-practice and a review of framework measures. After a discussion of goal-setting theory, a set of eight ideal measurement characteristics is identified that assist in designing the measurement tool used in this study. Measurement components that would contribute to the ideal measurement tool are identified in the literature review.
The measurement tool is structured as a two-part questionnaire that is completed during the course of an interview between the researcher and the participant. One part is completed before and one part after the training intervention. The interviews take place via video conferencing, where both parties can see each other and can see the questionnaire, which the researcher completes, based on the answers provided by the participant. Among a range of questions, the participant is asked to identify their most pressing business challenges and to explain how the training intervention will address these challenges. Next, the participants are asked to suggest pieces of evidence that will prove that the training intervention has been successful. Each piece of evidence is rated three times: the current status (at the time of the first interview), the expected status after the intervention, and finally, the attained status, which is measured in the second interview after the interventio n has been delivered. Although the participant uses a five-point rating scale for these items of evidence, there is no externally determined value attributed to each of the five points. As such, the scale is a personal evaluation of the participants’ current and expected state. However, the fact that these personal evaluations are rendered numerically allows for subsequent computation and comparison. The process aims to replicate, as closely as possible, the existing RBP process with the addition of the person-centric questionnaires and associated interviews.
The measurement tool was modified through the interview process in reaction to various participants’ responses, and the final versions of the questionnaires are considered robust. The results show that it is possible to measure the impact of training interventions in small businesses.
By using the eight components of ideal measurements that were previously identified, the study pro-duces a tool that can be used by the RBP network not only to measure deeply personal aspects of an SME business but also to translate this data into numerical results. These results can be used to compute an improvement in business capability as perceived by the business owner.