Business well-being Indicators for Small and Medium Enterprises

Sponsored by Anew New Zealand

Draft only – 21/06/2006

What is the BWI?

What? The BWI are indicators and learning tools for individual

SMEs, associations of SMEs and the SME sector as a whole – to assess and develop their present and future health and well-being, and their contribution to a healthy and sustainable world that supports them.

Why? The purpose of the BWI is to enable individual SMEs,

associations of SMEs and the SME sector as a whole to be healthy and sustainable during these times of great change.

Purpose of this presentation

To describe the basic model of the BWBI and a plan for taking it the next step.

To create formal partnerships with organisations active with SMEs to develop a pathway for definition of a fundable project. This project will: undertake a research, development, design, test improve

cycle with partner organisations involving SMEs; integrate into a communications programme and website; engage broader groupings of SMEs to complete the design;

and set up an implementation plan and means.

What is in this presentation and who is it for?

For the project team – it summarises thinking around the structure of the indicators and the pathway forward

For potential partners – it engages you in thinking about the value of the BWBI opportunity to your organisation and SME constituency

It covers: A statement of the problem and opportunity An outline of a conceptual approach to SME indicators An outline of a pragmatic approach to using SME indicators

to further their well-being and that of the nation Some proposed next steps

Who is Anew New Zealand and why are we promoting the BWI?

Who is Anew NZ? An independent, non-partisan trust to create and facilitate a network of

networks (business, civil society and government), for Addressing issues critical to the future of the country through the Formation of an informed, deliberated shared public vision and action

programme for building a new New Zealand

Why are we promoting BWI? SMEs are the dominant form of business and economic activity in NZ They are a driver for creative solutions to both economic, social and

environmental issues that face us in the future AnewNZ believes SMEs could be more effective through enabling tools

to assess and develop their present and future health and well-being We see our role to help through facilitating thinking and action via

organisations that have an interest in SMEs, aiding integration and synthesis across diverse settings

What do we mean by health and well-being of SMEs?

A cluster of concepts: Healthy; viable for the people involved, the SME itself and role

within its broader networks Resilient; able to adapt and thrive within change and adversity well-being; a sense of happiness, connection, stability,

contribution Sustainable; both now and into the future Richness; fullness, vibrancy, excitement

Core assumption Good indicators guide more than just the functioning of the

SME; they help balance personal and business within broader concerns of community and environment

What is the issue?

SMEs are the largest form of business activity by number, by people employed and contribution to the economy

SMEs are also, by definition those where there is a close personal connection between individuals, their aspirations, values, well-being… and their enterprise

They are a potential force for positive change in balancing macro-economic, environmental, social and personal aspirations

Yet SMEs are generally time poor, niche specialists, deriving limited utility from tools such as triple bottom line

Could there be a way to have usable indicators as guides for SMEs to realise their potential as drivers of a balanced, positive, dynamic society?

What is the opportunity?

Indicators that use our best knowledge of what health and well-being mean

That are structured on our best knowledge of what viable and sustainable organisations require

That are simple and useful to SMEs as people in business, as individual entities, and as part of broader communities

That could help networks, associations and public policy better understand SMEs, better support SMEs

Creating an environment for SMEs to realise their potential as drivers of a balanced, positive, dynamic society

How might BWI contribute?

Indicators usable for: SMEs self analysis, improvement - easy to use, providing

levels suitable for different situations, skill, time availability Networks and associations of SMEs - wanting to

understand the issues in a more systemic way Policy makers - as a tool to help provide aggregate

information on the SME sector A common framework for thinking about SMEs

Conceptual framework that helps make sense of the data Facilitation of inquiry, research debate

A framework for action by SMEs through targeting self-help and support resources Networks through developing of resources for SMES Policy-makers through influence on thinking and policy

Conceptual framework

Framework for defining business well-being includes a

balance of four levels:

1. Individual owners and family

2. SME business itself

3. Close community of stakeholders: employees, customers, suppliers, etc.

4. Broader socio-political, economic and natural environment

Individual owners,staff and families

A Small/Medium EnterpriseSME

The SME within its close community of stakeholders

The SME and its community within the broader socio-political, economic and natural environment

Typically SMEs are thought of as being similar to large organisations… only smaller

However because of their sizethe personal situation, needs and values of the owners and staff, as individuals are more evident and persuasive. SMEs and personal well-being are closely interdependent.

Similarly, the small scale of SMEsstrengthens the power of personal relationships with suppliers and customers. SME well-being is interdependent with the well-being of this close community

SMEs and their stakeholder community is embedded within a broader socio-political, economic and natural environment. Individually SMEs may have little discretionary time for broader issues, relying on associations or networks in this area

Understanding SMEs

Individual owners,staff and families

A Small/Medium Enterprise (SME)

The SME within its close community of stakeholders

The SME and its community within the broader socio-political, economic and natural environment

The lesson from this nested view of SMEs is that we cannot see SMEs in isolation

The health of an SME is both driven by its internal well-being, and its healthy relationships with the bigger or smaller wholes of which it is part

•Sustainable cash flow can be seen as an important property of an SME•But if the commitment, energy and motivation of its owners flags,•- or, it abuses key customers or suppliers

Then its contribution to the health of the whole is jeopardised

Using the nested view

Motivation/Energy

Sustainable cash-flow

Sustainable valuerelationships

Sustainable wealth and well-being

With the close personal nature of SMEs, our understanding of their health and well-being must encompass both the external, objective components and the subjective ‘interior’ world.

For example – take two SMEs both with a negative cashflow, owners taking little or no money from the business

•In one the owner is stressed and demoralised, the team is feeling low

•In the other there is still stress but confidence and forward-looking vision within the team of what is possible

Health is both internal and external

External / ‘Objective’Internal / ‘Subjective’

A set of well-being indicators based only on objective criteria would miss this critical difference

Keeping the analogy going…

Two SMEs both with a negative cashflow, overdue on payments to suppliers…

•In one, the owner is avoiding being open with suppliers, not communicating

•In the other, the owner is communicating, taking suppliers into confidence, building trust

Health is both internal and external

External / ‘Objective’Internal / ‘Subjective’

There are critical internal correlates of well-being that apply at each level - personal - SME - SME within its close network - SME and network within broader society

While cash flow in the short term is controllable by a SME

Health of both ‘wholes’ and ‘parts’Objective view of SMEs as a ‘part’ in isolation

Objective view of SMEs as a‘whole’ in relationship to others

That is based on value created with customers and suppliers

In the medium term it depends on a sustainable surplus between costs and revenue’

Based on capabilities and practices that are sustainable and legitimate within the broader community

Efficiency Indicators(Do things right within the SME)

Effectiveness Indicators(Do the right things withinthe network of customers/suppliers)

Legitimacy Indicators(Fulfil purpose within service of larger whole)

While motivation and commitment in the short term is controllable by an individual

Health of both ‘wholes’ and ‘parts’People in SMEs viewed as a ‘part’ in isolation

People in SMEs viewed as a ‘whole’ in relationship to others

That is based on fairness and balance of value for the time, effort and return to those people within the context of their personal/family life

In the medium term it depends on shared understanding and purpose of people within the SME

Based on capabilities and practices that are fair, sustainable and legitimate within the broader community interests

Efficiency Indicators(Do things right as individual)

Effectiveness Indicators(Do the right things with others)

Legitimacy Indicators(Fulfil purpose within service of larger whole)

E.G. - Putting the framework together

Sustainability of personal income

Personal health and mental well-beingBalance of work, personal, family

Personal sense of purpose, commitment

Individuals within the SME

Internal External

Part

Whole

E.G. - Putting the framework together

The SME

Sustainability of cash-flow

Effective business systemsQuality of staff relationships

Clarity of SME purpose and values

ExternalInternal

Part

Whole

E.G. - Putting the framework together

The SME and its close communityof stakeholders

Sustainability of added valueand profitability

Quality of product and servicesQuality of network relationships(Suppliers / Partners / Customers)

Sense of shared identity and values

ExternalInternal

Part

Whole

E.G. - Putting the framework togetherThe SME and its community within the

broader socio/natural environment

Ecological sustainability of value chain

Quality of industry / system structure and design

Quality of community relationships

(Professional / Industry / Local)

Sense of community identityshared principles, values

ExternalInternal

Part

Whole

E.G. - Putting the framework together

Sustainability of personal income

Personal health and mental well-beingBalance of work, personal, family

Personal sense of purpose, commitment

Sustainability of cash-flow

Quality of product/serviceQuality of staff relationships

Clarity of SME purpose and values

Sustainability of added valueand profitability

Quality of design and innovationQuality of network relationships(Suppliers / Partners / Customers)

Sense of shared identity and values

Ecological sustainability of value chain

Quality of industry / system structure and design

Quality of community relationships

(Professional / Industry / Local)

Sense of community identityshared principles, values

ExternalInternal

Part

Whole

How could the indicators work?

The indicator framework invites peole to think their way from the personal attributes of being inside a SME out to the larger

wholes of the business, its networks, its community

Imagine a website based ‘survey’ (it could work on paper too)where the first questions were more like a personal inventory.

Feedback could show how you stand versus others in like situations, you could dig in deeper if you felt it important, or get pointers to

assistance for issues of relevance to you

How could the indicators work?

Using a metaphor of “ripples spreading out in a pool” the website would invite you to analyse

your SME.

The first step might be to aggregate the personal inventories completed by others in

the SME, creating an opportunity to seedifferent perceptions, understand each other

Next, key parameters of the SME itself would be the focus. Connections between attributes

could be highlighted in feedback, patterns from similar businesses could be portrayed

At the next level it could be possible for key suppliers and customers to be invited to give your SME feedback via a web questionnaire,

adding to your own evaluations (like a 360 degree survey)

How could the indicators work?

At the final step you would be asked to think more broadly, to ask yourself how your SME

connects into its community, contributes to and is sustained by that community

It may well be that only some SMEs get to this

stage without help and prompting from members of that community; professional

bodies, industry associations, local government

This represents an opportunity for organisations that aim to support SMEs to

work together beyond traditional definitions of interest using common frameworks tuned and

adapted to their SME environment

While behind the scenes there is a repository of data that is available, on an anonymous basis, for research and policy development.

How could the self help work?

Indicators/self analysis helps focus attention Links from each area to existing resources and service

providers Use of self-organising mechanisms SME ratings of helpfulness to guide improvement

How could it work for a partner organisation?

As a web-based system, SMEs would go to the web and Assess their lives and their businesses Obtain guidelines for improvement Network with other SMEs about relevant issues, and Obtain aggregated results

As a industry association, local government/community you could use the BWI to:

Add value through a new way of building member capability Provide a distribution medium for SME resources, both yours

and those available elsewhere Use as a tool for identifying patterns and needs Work along side others to develop effective partnerships that

support SMEs

Next Steps?

Establish basic

propositions

Acquire institutional

Partners

Acquire Funding for

PhDCandidate

Co-develop and test tools

with SMEsbuild web site

Develop and use SMEnetworks

Review trial and Plan

Implement-ation

1 2 3 4 5 6

Completed 2006

• Core concepts• Draft framework• Proposition• Draft

implementationplan

AUT Faculty of Business support plus seek financial support from:• Corporate sponsor(s) wanting to

support their supplier network• Industry Assoc.• Sustainable Business Network• NZ Business Council for SD

• Engage SME development partners

• Draft indicators• Self analysis tools• Feedback tools• Self help directories• Web site• Communication

materials

• Programme design• Communications• Initial full trials• Feedback from SMEs• Evaluation of

framework and benefits of process

2006 2009

Steering GroupInitial steering group to guide process through to more formal structure

including partner representation

Robb Donze – MD Interface New Zealand Ltd – Member of NZ Business Council for SD.

Phil Gandar – Synergia Ltd, Systems Consultant – Designer and technical consultant for project

Dr. John Craig – Professor of Environmental Science – University of Auckland Professor Kate Kearins - Professor of Management – AUT Professor Trish Corner – Professor of Strategic Entrepreneurship - AUT Dr. Anne deBruin – Professor Economics, Commerce Department – Massey Annette Lusk – Board Member, Sustainable Business Network, works at MFE Sandra Crosby – Enterprise North Shore Peter Townsend – CEO Canterbury Chamber of Commerce Clare Feeney – Business Care Ray Skinner – Consulting accountant, Founder of Sustainability Working

Group Lisa Er – SME, Founder and MD of Lisa's Middle Eastern foods Dave Breuer – Director Anew NZ

In conclusion

The BWI are indicators and learning tools for individual SMEs, associations of SMEs and the SME sector as a whole – to assess and develop their present and future health and well-being, and their contribution to a healthy and sustainable world that supports them

The project so far has laid the foundation of concepts, process and plans

Partner organisations who value the outcome of healthy SME are the next step to drive the project forward

This requires funding for a formal project That can engage SMEs in co-development while using

the skills and resources of partners and specialists