What ‘works’ for improving small business productivity?

By Stephen Roper, Deputy Director, ERC and Halima Jibril, Research Fellow, ERC on Friday, 5 February 2021.

Photo by William Iven on Unsplash

Ask anyone working with small business owners and they will tell you great stories of how mentoring and training can transform people and their businesses. Each of these stories is important in its own right. In terms of policy, however, this type of anecdotal evidence is of little value in terms of justifying public investments in training or mentoring. Policy makers would rightly ask: Was it the training or mentoring which caused the transformation? Or, was it simply the right business in the right place at the right time?

Confidently making spending decisions requires stronger evidence. The gold standard here are randomised controlled trials or RCTs. We all know about randomised controlled trials for drugs such as those for the COVID-19 vaccines which we have heard so much about recently. The same approach can also be used to test training and mentoring interventions for business although this is difficult and rarely done. Margaret Dalziel, a Canadian researcher, argues (among other things) that this is because businesses vary so much in terms of their size and ambition to grow.

Over the last couple of years, in partnership with the Cavendish Consortium, we have using an RCT approach to test a training intervention for small firms called ‘Business Boost’. This project has been supported by the Department of Business, Energy and Industrial Strategy through a programme called Business Basics.

The starting point for the design of the Business Boost intervention was that the UK has lower productivity than many of our international competitors. This has been attributed to a long-tail of low productivity firms, many of them smaller companies. Previous research also suggests that firms adopting more management tools or practices have higher productivity. Business Boost aimed to help address these issues by increasing the use of management tools or practices among smaller firms. The hope is that in the longer-term this would lead to productivity increases.

To overcome issues related to the diversity of businesses suggested by Margaret Dalziel we focused specifically on small firms with a strong growth ambition.

The Business Boost training involved a series of six productivity-enhancing workshops with a follow-up mentoring session. 280 ambitious small firms agreed to participate in the trial. Half of these were randomly allocated to a treatment group and undertook the workshops and mentoring, and half formed a control group and received no support. Firms’ use of management tools (e.g. critical task lists, business model canvas, lean business canvas, SWOT analysis) and a number of other metrics, were measured six months after the training.

What happened when we compared the treatment and control group six months after the training? Well, the evidence suggests that over six months Business Boost was effective in increasing firms’ use of management tools and their adoption of business planning. In terms of its primary objective therefore it seems that Business Boost ‘works’. However, the intervention proved less effective in making firms more likely to undertake productivity enhancing investments.

The full story of the Business Boost RCT is a little more complex than these headline findings suggest, reflecting the complexities of small business life. Nonetheless the results provide some new, robust and positive evidence that targeted training and mentoring interventions can work and can play a useful role in addressing the UK’s productivity gap. As we start to re-build business confidence and strength after the worst of COVID-19 interventions such as Business Boost have a valuable role to play.
This blog was originally posted on the Enterprise Research Centre (ERC) website on 8 December 2020.