SMEs ‘held back by lack of leadership skills’

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Small and medium-sized businesses are being held back by a lack of management and leadership skills, according to research.

A Warwick Business School study, which spoke to 2,500 small and medium-sized enterprises (SMEs) in England, found many see poor entrepreneurial skills as hampering their growth.

While the UK economy is outpacing its peers’, productivity remains a problem.

Figures from the Office of National Statistics show output per hour worked is still two per cent below its pre-crisis level.

There are currently five million SMEs in the UK according to Department for Business Innovation and Skills (BIS) data. Approximately 1.27 million of these forms employ other people.

The report entitled Leadership and Management Skills in SMEs: Measuring Associations with Management Practices and Performance identified a number of reasons the UK SME sector is currently underperforming.

Professor James Hayton of Warwick Business School said: “The research shows that, when looking at the distribution of skills in the population, there is currently a ‘long tail’ of SMEs not employing management best practice.

“This is important because the research also shows that well-developed skills are associated with the use of management best practices and consequently with firm performance and growth.

“In this sense, the evidence shows under-developed leadership and management skills and a widespread failure to adopt management best practices are constraining the performance and growth of a large number of SMEs.”

As part of the research, Professor Hayton examined the association between entrepreneurship skills, leadership and management skills, the implementation of management best practices and how they impacted turnover, productivity and employment growth.

The results demonstrate leadership and management skills are relatively under-developed in many SMEs, Professor Hayton said.

““Of all of the dimensions measured, the most important predictor of positive performance is entrepreneurship skills,” he added.