SMEs and business schools need closer working links

 Lord Digby Jones – the former head of the CBI, the employers’ body – once said that when it comes to business schools, small and medium-size enterprises won’t pay and won’t learn. It is fair to say that decades of working almost solely with large organisations has made UK business schools appear wedded to blue-chip budgets. But this is not the true picture.

SMEs certainly will pay – if they can see value – and certainly do benefit. However, they do need some convincing and the work also has to be facilitated properly and delivered using the right kind of pragmatic language.

The relationship with smaller companies matters because SMEs are where the action is – given that 95.5 per cent of UK business comprises companies of 10 people or less and more than half of UK employees are in SMEs.

These companies hold untapped potential for economic growth in general, and in more disadvantaged regions in particular, but this “engine” of the economy still lacks the full attention and support of the professionals. That is why the latest UK government-backed review*, written by Sir Andrew Witty, to tackle the issue of how higher education and business schools should support economic growth is something of a step backwards.

The main recommendations from the report still focus on the few, picking small business winners and targeting significant funds through sector-wide (rather than regional) collaborations. In other words, to create a limited number of enterprises with the potential to be big and to be global. Yes, we need those major success stories, but what about the majority, are they really no-hopers because they stay small or medium-sized?

Business schools do drive regional growth through SMEs. At Lancaster University Management School for example, EU funding to focus on regional growth has led to the school working with about 5,000 SMEs in the past 15 years, adding an estimated £50m to the economy.

At the same time, SMEs are increasingly important for business schools, the lifeblood of enterprise in our society. That means a need for constant dialogue. Having entrepreneurs in residence is a valuable way for business schools to encourage a richer environment where enterprise and real-world SME issues are understood, felt and experienced.

There is also support for more smaller company teaching in both undergraduate and postgraduate studies. MBA students also benefit from a school’s three-part engagement with start-ups, SMEs and large organisations.

Increasing numbers of business school students want placements and projects in an SME, because they have realised that they are more likely to receive higher-level roles and opportunities to test themselves, to deliver and show resilience. LUMS is attracting more PhD students because they are interested in working with smaller company practitioners.

On a more general level, the policy environment means that higher education needs to take every opportunity to demonstrate its real-terms contribution to economic growth and to justify public investment. It is likely that universities working with SMEs will always depend on UK government funding to be viable, making careful evaluation of programmes increasingly important for the future.

David Willetts, the minister of state for universities and science, made the point at an Association of Business Schools event that there are business schools for every leading town and city in the UK and are therefore the ready-made hubs for regional growth. But the UK is held back, he said, by too much focus on the Research Excellence Framework – the system which assesses the quality of research in higher education institutions in the UK.

He pointed to the further handicaps of academics doing quantitative research with historic data in order to be published in US journals, and business schools only working with large companies with major R&D funding.

That is far too much of a generalisation – and it is more true to say that the progress being made by UK business schools and the changing attitudes of business schools to the idea of engaging more with SMEs has simply not been noticed.

To meet its goals for the economy and to provide effective direction and support, it is critical that the UK government understands where business schools are on the SME issue, what they are doing, what is working and what is not. Business schools need clarity and consistency and for funding to be available to reach the many.

One thing is clear, however, even if the mechanics of the SME engine are not yet quite working, business schools, SMEs and the economy all need each other.

The author is associate dean for enterprise, Lancaster University Management School.

*Encouraging a British Invention Revolution