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Do we understand small businesses?

Simon Bridge, Northern Ireland

August 2011

Northern Ireland's economy is dependent on its businesses, and therefore those who are charged with the task of promoting our economy must be able to relate to those businesses and to understand their needs.

Traditionally we have recognised two main components in the economy: the public sector and the private sector, and we think that the private sector is, or should be, focused on profit, while the public sector is, or should be, focussed on service. There are business people and civil servants and we expect them to have different cultures and, where there are different cultures, we can also expect problems in communication.

Sometimes, in reality, the gap does not seem to be that big and we find that people accustomed to a public sector culture can often relate well to people in a business, or at least in a big business, culture. As Graham Bannock has pointed out, they have a lot in common. Both civil servants and big business representatives are salaried and therefore have regular and relatively secure incomes, they both have regulated discretion in their work, and they both see their jobs as separate from themselves as people. There are also hierarchies on both sides, so higher level people can talk to each other to agree the main points of a deal, and then leave their subordinates to sort out the detail.

However, because public sector people can relate to these businesses, they are tempted to think that they can work with all businesses, small as well as big. After all both small and big businesses belong in the private sector and therefore, while there may be differences between them, surely they are not as great as the differences between both of them and the public sector? So, if public servants can cross the cultural divide and relate well to some businesses, is it not reasonable to expect that they can relate well to all of them?

But small businesses are not small big businesses and they do not behave like them. Nor do they share much in the way of an organisational culture. Small business owners do not have an assured and regular income and they do not have lots of subordinates to look after the detail. They do, however, have total discretion and they are intimately involved with their businesses. They may be in the private sector but they have a very different culture from big businesses and they need a particular approach based an understanding and appreciation of that difference.

It is fifty years since Dame Edith Penrose pointed out that the differences in the administrative structure of the very small and the very large firms are so great that in many ways it is hard to see that the two species are of the same genus. We cannot, she said, define a caterpillar and then use the same definition for a butterfly. That is a striking analogy for the difference but, unlike caterpillars, most small businesses are not pre-determined to change into something else and are not going to turn into big businesses however long they are left.

Northern Ireland has a small business economy, and there is considerable evidence that small businesses are good for an economy. So our economic development bodies need to relate to small businesses. One size however does not fit all: just as it has been argued that entrepreneurship and small businesses are different things, and need different policies to address them successfully, so too small businesses need a different policy approach from that for big businesses.

We used to have a separate agency for small businesses, but Invest NI was formed to bring it and its big business counterpart together into a common framework. Now however Invest NI does not even seem to have separate teams for small businesses, so where in the system does the understanding of their different needs now reside?

Invest NI was formed six years ago and it is recommended practice to evaluate new projects after a period to see if lessons can be leant. Have we had an evaluation of Invest NI to see if it has done what it was supposed to do for small businesses, or what else it might have done? This would not be to criticise Invest NI or to try to re-invent it, but to guide where we might like it to go in the future.

It is not just that our small businesses deserve appropriate support, distinct from that provided for big businesses, but that, if they don't get it, our economy could suffer.

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