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Over the last month I have seen a number of articles stating that the death of the Regional Development Agencies is going to be bad for business. I have read that the RDA’s (with huge budgets) have really made the difference and pulling the rug now could prove disastrous – especially in regional areas outside of London that may have a greater reliance on public sector jobs. How will we ever create private sector jobs in deprived areas has been the argument to keep them?
I still think of myself as an entrepreneur (in the smallest way I would like to add). I started a business; I have hired plenty of people and paid our fair share of tax. I have not at any point benefited from a grant or help from a public sector provider. It has never really occurred to me to search out such help, I always thought that you made your own luck – had a plan, worked hard and hoped that the rest will happen.
I can certainly see why grant aid, financial support and advice should be given to small to medium sized businesses. I imagine that advice on foreign markets and new legislation is especially valuable. What business or start up is going to turn down this type of help? However I am not convinced that this support is necessary via an expensive vehicle like a regional development agency.
Perhaps my view is slightly more jaundice. Take my local provider – Yorkshire Forward – soon to be no more. When I started Interim Partners I was in need of all the help I could get. They frequently used interim managers but do you think I could get them to engage with me? When I suggested I was based in Yorkshire and that they were using an interim management provider in London it held no sway – it didn’t get me in the door. I was told the PSL was not due for review for another 2 years.
I was recently at an awards dinner when the out going head of Yorkshire Forward was telling the audience of its achievements. The case study that he offered up was the support they gave for the building of a visitor centre at the Royal Horticultural Centre in Harrogate. Yes, the gardens are excellent, I am a regular and yes they are great for tourism but I don’t believe the RHS is short of a few bob. I don’t recall the Chelsea Flower show is in dire financial straits. Is this where tax payers’ money should be going and do organisations like this need the support of a public sector financed body?
I am sure that many small businesses will have benefited from the RDA’s and maybe swinging the axe is not always the answer. I am interested to see what replaces it. What ever it is, I will expect it to be fully accountable to those in the region and I don’t believe that it should pay someone 250k+ a year to run it.
I would like to hear from interim mangers their views on the RDA’s. Who out of our interim community has worked for the development agencies? What has been your experience? Has anyone benefited from their help? What is the future for businesses that need or rely on advice?
More importantly – what do we need to see in the SME sector that will act as catalysts to job creation?
Did anyone see our article in the FT at the weekend re rates in the SME sector? Click the following link to read:
http://www.interimpartners.com/in-the-news/ft-article-about-interims-in-smes-201110/
Doug Baird is Managing Director of Interim Partners.
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November 23rd, 2010 at 4:14 pm
Doug, ref. the FT article, baffles me why a company in your game, whose income is proportionate to those it places, would want to put a story like this out; drawing yet further attention to price instead of value? Is there an aspect to this that’s not clear to me as a speed reader?
November 24th, 2010 at 1:09 pm
Andrew
You haven’t missed anything – you are quite right in your assumption. We do make money as a proportion of invoice value – and we normally push messages around value as opposed to price. Why then do we release this news story?
We undertook some research and the findings were that many would accept far less to work in an SME if they could get performance related pay in addition. In the case of a small business, using performance related pay could be a great way to get the high quality management expertise of an interim on board without frontloading the business with costs it might struggle to afford. For a business paying someone out of increased profits or offering them a bonus/ share of upside has an obvious attraction in cash flow terms. We are not suggesting that an interim will work for nothing! We decided to share this because we want to show a balanced viewpoint and don’t want to always push messages that could be perceived as self promotion. We wanted to suggest that interims can show flexibility on reward if they are working in very small businesses. We have posted numerous articles on value and the return on investment that interims make but price (as in fixed day rate – not total reward) was the “elephant in the room”. Price is a key factor for many SME’s – now more so than any time in recent history.
Our business makes more than 95% of its income with large companies. These are the businesses that can afford interim managers and may have multiple needs. If we are working with a smaller firm it is most likely to be private equity backed. In these instances we do not see why an interim should take a cut in day rate- why do something on the cheap for a corporate or a wealthy PE? In these instances it is all about the value that the interim brings and if there is to be a bonus or share of upside this should be separate to the day rate- which should be a sensible market rate for an interim manager
On a more positive note – many in the SME sector will source interims through their own networks. This means that there is not a margin to be paid to a provider – but potentially more for the candidate. This explains why the market in the SME space is so refracted and why interim providers don’t take a larger share of the overall interim management market.
I promise no more articles on price- unless to report that they are going up.
Doug Baird
Managing Director
Interim Partners
November 26th, 2010 at 4:59 pm
I’ve worked on projects with several RDAs: NW, Yorkshire, OneNE and EMDA. I think, by and large, they were over rated and too full of their own importance. The NWRDA, for example, never seemed to do much more than produce fantastically detailed ‘strategic’ plans in 3 volume tomes, which, of course, were read by no one outside the agency.
Every RDA I came across appeared overstaffed and had a very sizeable board, often populated with local figures rather than business people. It was telling that most RDAs seemed to need a deputy for every board position; not something one finds in profit making organisations. In another example, OneNE had a team of 16 full time lawyers; that’s more than most FTSE100 companies.
There was a naivety about how business functioned and what the incentives, needs and drivers were for the people who ran SMEs and those who managed larger national companies. There was a general ethos in all the agencies, which manifested itself as ‘we think this might be good for business/the region/this disadvantaged sector’ so let’s commission yet another expensive evidence gathering exercise to ‘inform’ the establishment of some further programmes. On top of this, millions of pounds were paid to consultancy companies to investigate just about every facet of business, commerce and social issue in a region, but the outcomes were less obvious.
There was a great deal of RDA activity, which had more than a whiff of social engineering about it. Numerous intangible and dubious projects were generously funded and given to rather curious organisations to research or ‘develop’, which covered many aspects of regional social policy but which, again, did not seem to deliver much worthwhile benefit. I found most of the agencies to be short on delivery of real value, and, perhaps as a consequence, a lot of what they did was shunned by many business leaders.
Typical of the grander schemes was the, so called, Northern Way, dreamt up by John Prescott and his officials in the Office of Deputy Prime Minister. This was an attempt to create some level of co-operation between the 3 northern RDAs, but it was a hugely nebulous concept with high ideals and no real-world substance to any of the key propositions. Needless to say, regional rivalries ensured it remained entirely theoretical during its relatively short life.
As you say, maybe some small businesses did benefit, but on the whole, I don’t think we’ll miss the RDAs.
Finally, to answer your question, “what do we need to see in the SME sector that will act as catalysts to job creation?” I’m not sure the SMEs comprise just one sector. I tend to visualise manufacturing and engineering companies when see the term SME, but perhaps that’s down to my background. I reckon first and foremost we need a government, which believes that manufacturing in all its forms is essential and starts to deliver policies which support that. I have worked in Germany and it is interesting to reflect that large scale manufacturing flourishes there (in spite of high labour costs) and with it, a huge infrastructure of supporting SMEs. But I maintain the rot started in the UK in the early 1970s, when Peter Walker, as the Secretary of State for Trade and Industry, infamously said, if we were going to make money in Britain, we should not make anything else. Britain’s industrial decline can be charted from then.
November 28th, 2010 at 4:42 pm
Doug, I agree with pretty much everything you’ve said. When I was MD of the Economists Advisory Group we worked with a number of RDAs. There was definitely some rivalry on attracting inward investment – almost inevitable with the structure that was set up and the lack of teeth at the Invest in Britain Bureau (now UK Trade & Investment) and the “beggar my neighbour” temptation regarding domestic investment. As for SME support, it rarely seemed to be properly targeted, although we did help improve some of that.