M class (continued…)

In a recent SME Blog post I stated that there are 26,000 medium-sized companies (or M’s) in the UK. Jyoti Banerjee in his recent post asks is this right?  I’ve taken my answer from UK government statistics.  Jyoti takes his from using a broader approach and his figure comes to 150,000. 

Jyoti and I use different definitions for an M and not surprisingly come up with different answers.   Malcolm McLelland contacted me from the US.  He believes that definitions are important.  He comments:

To me one of the most important outcomes of getting our business taxonomies right is that we never collect data until we define the business units for which we're collecting data. And without such data, we don't really know much of anything about certain classes of businesses (as you all suggest!). This means government policy and things like business credit policies might be less than economically efficient.

In the states we have data on revenues, wages, employee counts, and firm counts by "standard industrial code" (now "NAICS" code) by a finely graded series of *firm employee count sizes*; running from 1 employee to 1-4, 5-9, 10-19, 20-99, 100-499, and 500+. So in the states the only apparent problem is in the industrial coding of firms; i.e., how best to develop a taxonomy by economic characteristics such as production inputs, production functions, or production outputs.

His comment on the connection of government policy and data collected is particularly fascinating. Good management needs relevant, up to date information with which to make decisions and that must be the same for governments and policy making.

I recently met up with Paul Druckman (former Institute of Chartered Acountants in England & Wales president). Paul is clearly aware that there is a need for relevant data to seek to focus government attention on the challenges facing medium-sized businesses.  He and Jyoti are involved in the M Institute.  The M Institute is a new organisation, with the objective of being the trusted information source and support infrastructure for medium-sized businesses.

Why are M’s important?  This is one area I think both Jyoti and I agree.  M’s have superhero powers.  They pack a powerful economic punch and are invisible.  Unfortunately, being invisible is one superhero power M’s could do without.

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Philip Woodgate

Comments

[Jyoti Banerjee]

Philip, I entirely recognise the foundation you use for your analysis. Government stats look at things like annual turnover, employee numbers and asset size to define which companies make it into the medium definitions. This is quantifiable and a good basis for policy work.

My argument against numerical definitions is that measures such as annual revenues and employee numbers are only proxies, and not very good ones in many situations. For the last ten years or so, the academics have been trying to come up with new definitions because it is clear that numerical proxies have limitations.

Let me illustrate the point. I know of a seven man company in Twickenham that is arguably not a small company in its behaviour as it has formal systems and processes, wide access in its chosen market, empowerment of its employees, etc. Yet I also know of a 150 man company that runs like a small company because of the tight control exercised by the owner-manager on all staff.

Dealing with such problems is the basic reason why behavioural definitions are such a lodestone. But I freely admit they are difficult to work with.

Glad you met Paul. He and I share a keenness to put M organisations on the map.

[Philip Woodgate]

Many thanks for your thoughtful comments Jyoti.

We clearly need categorisation and definitions. Part of the problem I see for M's is that they are often grouped in with small businesses for UK governmental purposes. The government's Small Business Service includes M's. You would think that they would call it the SME Service at the very least!

Your illustration on the 7 person company is one I entirely recognise. I've experience of a particular company that has not changed in size, but changed in management style. It's now more like the 7 person company you describe in style. The other change is it is now more profitable.

[Peter W]

Yes we need a much more organised approach overall in Britain. If Chambers of Commerce were really dynamic and resourced lobby groups they could provide such a lot of data and support. Instead there is a plethora of agencies and groups who claim to have insight.

Trying to find a company to buy in this country is so time-consuming compared to the USA with the sysem being so fixated on Plcs and the SMEs being treated like rabbits hiing in fields of wheat

Germany has more SMEs than the rest of the EU combined and many in machine-tools etc are world leaders, in fact family business is the backbone in Italy and Germany with high export quotients.

Here both Media and Govt treat SMEs as pests which have not yet been aggregated into corporates - threy like to deal with businessmen who are more like civil servants than people who actually know what their company does and the names of those doing it

The Chambers of Commerce should e under local control and networked into Warwick University as a research centre with databases and information

[Philip Woodgate]

Hi Peter

Speaking personally I've only ever used the London Chamber of Commerce for networking events - which I no longer go to. If I'm looking for particular data I either buy it in or use the internet.

I like your idea about networks to university research institutions. Better still put it on the internet. Warwick University do some great work on SME's, but there is nothing on their site at http://www2.warwick.ac.uk/fac/soc/wbs/research/csme/
They are not alone. We should have easy access to the information. Putting a pdf copy of a report on the web is a simple task. How about one government funded supersite collecting all the relevent information e.g. business link, CofC's, DTI, regional development centre, universities etc. A one stop shop of easy to navigate information for SME's.