BLOG: Efficacious Oscillation Model for SME : Strategies during Covid-19

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Authors:

Dr Monomita Nandy: Reader in Accounting and Finance; Director of Internationalisation & Exchange coordinator -Brunel Business School, Brunel University London, UK. I conduct research with local and international business on emerging issues in finance and accounting. I apply interdisciplinary approach in sustainable development models.

Dr Audrey Tang: A chartered psychologist and author. Listen to her podcast Retrain Your Brain here;  watch her psychology & coaching masterclasses on YouTube Or catch her hosting Psych Back to Basics on DisruptiveTV where she and her team discuss how psychology affects our behaviours in the workplace and what we can do about it. Follow her

Dr Suman Lodh: Senior lecturer in Finance and Research Lead at the Middlesex University Business School. I work in the area of Corporate Finance, Banking and SME finance at the local and international level. My expertise includes machine learning and big data analysis using statistical software such as Stata, R and Python which complement my research in the above-mentioned fields.

Viewpoint:

The economic growth of any country is heavily dependent on small and medium-sized enterprises (SMEs) ( Burgstaller and Wagner, 2015).  As the internal organisation is very simple for SMEs, there is a high opportunity for them to adopt a change (Lavia Lopez and Hiebl, 2015).  However,  the rapid expansion of the Coronavirus crisis across various sectors in the economy, makes the SME’s existing challenges more prominent than before. From research, we know that SMEs are highly vulnerable to external events compared to big companies (Altman et al., 2010) and thus, the survival of SMEs is highly threatened  during Covid-19. As  in the private sector, more than  two thirds of all jobs are generated by SMEs (Gama and Geraldes, 2012), it is the responsibility of the government and researchers to work hard with them to identify which model the SMEs should follow in the post Covid-19 period to keep contributing to the rapid development of the economy.

When we contacted the SMEs in our network to better understand their concerns, we found that most of them are trying to find opportunities during this crisis, as they believe that by modifying their business approach they will be able to explore opportunities to survive. We find some common questions that each SME leader asked themselves during the crisis. The questions are-  How to  get the teams to be passionate beyond their job description?  How the team members can learn through their experience in order to grow themselves, not necessarily for the “reward” or promotion or a positive appraisal?  How to encourage innovation – especially at a time of crisis such as the 2020 Pandemic when with a lack of precedent, all ideas stand equal…?

When we started looking for  an efficacious model to assist the SME, we found the following  “crime triangle”  (Eck,2010)as an effective starting point to answer most of the questions raised by the SME leaders.  Like the “fire triangle” (Oxygen, Heat, Fuel)  – the Crime triangle suggests that the instigation of a (criminal) event requires all three elements.  The “crime triangle” states that for  most crimes to occur all three elements need to be fulfilled. If we remove one element then the crime  can be prevented. Thus, it indicates that if we add whichever element is missing rather than simply pushing what is already there, the crime will happen:

However, Tang (2020) examined this model in the light of a virtuous rather than vicious triangle, using “Initiative” as the outcome rather than crime.  This model states that there is a  necessity of desire, ability and opportunity for SME to survive and perform well in any situation.

Within an SME, it is presumed that the motivation (or desire) to act is always present. Thus, we propose that leaders of SMEs consider what motivation exists currently within in their team . To build the survival strategy, the successful SME should consider creating opportunity for their present team members.  The ability (often in the form of training) is often also readily available, however the opportunity to practice their skills is not .

After identifying what the leaders of SMEs should do, we find that if SMEs are able to concentrate on available opportunities with their present capacity within the team, then they can survive during the crisis in a more successful way compared to their peers. To assist the SME leaders, we develop a set of questions as follows, which the leaders can answer to identify a survival strategy by exploring the available opportunities and passion of their team members:

  • How easy is it for your team to focus on the enjoyment (desire) of the project rather than results?
  • Do you, or other potential mentors have time to train or offer support (ability) which takes time rather than offer immediate solutions?
  • Is there a need for targets (sales, financial, satisfied customers) to be made – if not by you, by the organisational culture? (Where is the Opportunity?)

While developing the above questions, we argue that most staff members bring their own desire (motivation) and ability, but often the focus within the organisation rests with specific targets and training (ability) towards members rather than the opportunity to shine.  The more “mundane” the tasks get, the opportunity to initiate becomes absent and the desire is likely to wane. Thus, we propose that for the survival of SMEs , without investing more in training etc, they find ways of encouraging their teama to be  indulged in their passion (without focusing on targets, reward, or outcome…simply enjoying the ability to do it), which will help the business to find opportunities within the existing team. For example, if team members are motivated by a particular issue, perhaps the SME can find a way to support it in some way.  From the above argument, we find that personal growth will lead to business growth during crisis.  The Covid-19 pandemic created a situation where businesses cannot currently spend resources for personal growth. Then the crucial question is how the SME can progress by overcoming the challenge of lessened financial resources for the personal growth of team members?

To answer the above question, Tang (2020) proposed the following triangle with three components that can assist personal growth of team members without extra investments, which is suitable during the crisis. Better understanding of these components will contribute towards the personal growth of the members.

In this diagram, the  components are

  • Awareness – One needs to be aware that the current or habitual practice is ineffective. This conclusion may be reached through “going round in circles” or an astute observation within coaching, training or appraisal.  It may also come through a careless remark, or perhaps a conflict, or simply gradual disengagement of a team
  • Development Techniques – One must be given the tools to make a change should they wish. Leader cannot shout at someone for “doing it wrong” and expect them to learn the “correct method” without showing them.  The wise coach, or leader assumes that people do not deliberately choose to “misbehave” but rather that they may not know what is expected…the first chance – the opportunity to learn is always offered.
  • Opportunity to change – This includes time and a safe space. One will struggle breaking the “habits of a lifetime”, and slip ups may occur.  Support to continue on a positive route is essential.  Behaviours that make the person growing feel ashamed, awkward or defensive are of no help – leaders cannot make fun of someone and then ask them why they stopped doing what they had started.

As it is with crime, so it can be with teams taking initiative – it is opportunity that is often the most difficult to provide as it requires the greatest amount of work – and patience.  Yet, also as with crime, it is the one element  SMEs have the most control over. When it comes to committing a crime, ones has little power over the desire nor the ability of the perpetrator, but he/ she  can do a series of things that will ensure that they do NOT provide opportunity eg:

–           one can avoid wearing headphones so you can hear if youare being followed

–           one can park under street lamps and have keys ready

–           one should not leave valuables in sight

–           Install security devices

…and so on.

Yet, victims of crime, as with failing SMEs  may  often overlook the very things they  had under their control until it is too late. When it comes to teams taking initiative, again the desire comes from the team members, the ability is often embedded within training, but the opportunity must be created.  Similarly in personal growth – when people are aware they know they have a choice, options and solutions are easily offered by coaches, mentors and leaders – but the opportunity to grow needs to be created. Thus, we suggest that if the leaders of SMEs are able to assist their team members to identify the opportunities for growth as a matter of course, even with fewer resources they will have nurtured a mindset to better expedite their recovery from the pandemic.

References

Altman, E.I., Sabato, G. and Wilson, N. (2010), “The value of non-financial information in small and medium-sized enterprise risk management”, Journal of Credit Risk, Vol. 6 No. 2, pp. 95-127.

Burgstaller, J. and Wagner, E. (2015), “How do family ownership and founder management affect capital structure decisions and adjustment of SMEs? Evidence from a bank-based economy”, The Journal of Risk Finance, Vol. 16 No. 1, pp. 73-101.

Eck, J.E. (2010),  Encyclopaedia of Criminological Theory Chapter Title: “Eck, John E.: Places and the Crime Triangle” Pub. Date: 2010 Publishing Company: SAGE Publications, Inc.

Gama, A.P.M. and Geraldes, H.S.A. (2012), “Credit risk assessment and the impact of the New Basel  Capital Accord on small and medium-sized enterprises: An empirical analysis”, Management Research Review, Vol. 35 No. 8, pp. 727-749.

Lavia Lopez, O. and Hiebl, M.R.W. (2015), “Management Accounting in Small and Medium sized Enterprises: Current Knowledge and Avenues for Further Research”, Journal of Management Accounting Research, Vol. 27, No. 1, pp. 81-119.

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