Exploring Informality: Training and Development in the Small Firm

It is recognised that training and development is less likely to be addressed in small firm contexts that exhibit a high degree of informality (Taylor 2008). Matlay (2000) found that owner-managers have limited awareness of the availability of external sources of training, despite their abundance and, at that time of writing, knowledge among policy makers of specific training needs of owner-managers was in need of review.

Storey and Westhead (1997) argue that there is a low incidence of training in small firms compared to larger ones because there is little motivation for an owner-manager to train and develop their staff. This is accounted for because the owner-manager may be fearful of

32 spending on training and then losing those trained staff to larger firms that can offer higher salaries. Furthermore, such training is encouraged by an internal labour market, whereby employees engage with it in order to progress in their managerial careers within the firm; such opportunities are clearly limited in small firms.

In a quantitative study that examined take up of training in the tourism sector, Jameson (2000, p43) found that a ‘relatively unsophisticated management style characterise the approach taken toward recruitment and training’ in the sector and that an ‘informal’ approach towards HRM was also common. Further, she found that staff development was particularly excluded from extant training provision and that such approaches hindered the development of an internal labour market in small firms, which is consistent with the findings of Storey and Westhead (1997). Jameson’s (2000, p45) research is significant because the majority of her sample were ‘independently owned single outlet’ businesses and were therefore more likely to examine behaviours in under researched micro- firms.

Storey and Westhead (1997) also argue that, since small firms do not benefit from economies of scale, engaging in training is relatively more expensive. Taylor (2008, p437) is critical of the argument that limited take up of training in small firms is due purely to ‘market failure’ and recognises that there are a variety of small firm specific training programmes available free of charge, provided by government or publicly funded initiatives to support small firm training. Indeed, Matlay (2002, p4) states:

…in relation to both scope and availability of funding, government-sponsored initiatives could represent the most important and consistent source of training for small business owner/managers. Typically, this kind of training opportunity is widely available, well-resourced and is supported by specialist expertise as well as an extensive administrative and marketing base.

The most recent UK government initiatives also extend to supporting the use of experienced business owners as mentors for new start-ups and an attempt to seek out, encourage, train and support graduates wishing to start fast growth businesses (Department for Business, Innovation and Skills, 2013; www.entrepreneurfirst.org.uk).

In a study examining the outcomes of eight entrepreneurship training programmes in five European countries, supported by a longitudinal analysis of the experiences of 35 entrepreneurs over a three year period, Henry et al (2003, p188) argued that such interventions were worthwhile, particularly given the high representation of small firms in the European private

33 sector. Their recommendations were rigorous and involved a three stage programme of intervention, consisting of a ‘pre programme’ process that tested potential participants; a ‘during programme’ process that involved incubation, mentoring, training and access to ‘seed capital’; and a post programme evaluation that tracked outcomes and offered follow up support (Henry et al, 2003, p189). It appears that the Entrepreneur First programme has utilised a similar approach but it is too early in its execution for the development of meaningful empirical research.

Yet, while acknowledging the limited amount of research into training in micro- firms, Matlay (2002) found that the take up of government funded Industry Training Organisations (ITOs) were limited, with 9.79% of 4,737 micro firm respondents reporting use of such training. In a later paper, Henry et al (2005) note that the confusion surrounding differences between fast growth entrepreneurial ventures and small business training and the difficulty in measuring outcomes, particularly in terms of finding agreement on longer term benefits. This has not encouraged uniformity in the development of entrepreneurial training programmes and may account to some extent for the limited utilisation of such programmes.

Kotey and Sheridan (2004) note that small and medium firms, in an attempt to maintain an organisational culture, were ‘more likely than micro firms to provide orientation training for new employees’ (Kotey and Sheridan, 2004, p481). Their study also found that while on the job training was carried out by either owner-managers (in micro-firms) or supervisors (in small and medium firms), little externally based training was considered. It appears from this study that as the firm grows the owner-manager becomes preoccupied with middle management training as opposed to operational level training.

Bacon and Hoque (2005) found that firms with unskilled labour were less likely to consider training and development than those with skilled employees and note that small firms, particularly micro firms, are more likely to employ the former than the latter. Patton and Marlow (2002) support this argument and further suggest that, as small firms are short term focused, they are less likely to include training as part of any Human Resource Development plan. Indeed, their study of twenty manufacturing firms that had invested in training found that training was often undertaken in reaction to an emergent problem rather than being seen as a strategically beneficial, preventative measure.

34 Where training could be seen as proactive and strategic at a senior management level, there was a dichotomy in the motives for that training. Whereas the owner-manager introduced proactive training to ‘improve current management processes in the business’, managers employed by the business owners proposed different kinds of training that would ‘strengthen their personal profiles’ (Patton and Marlow, 2002, p267). The latter kind of training was more likely to be personally developmental and long term. This would indicate that there is a difference in objectives between the owner-manager as an employer and his or her employees. This further supports the division identified by Bacon and Hoque (2005) between training offered to skilled and unskilled employees.