Good outcomes from business advice

Dr Kevin Mole,Warwick Business School

Outline of the Slides

• Two levels of analysis – The organization – broader or deeper? – The adviser – skills or relationships

• Using data from Business Links– evaluation survey of 3500 firms Previous categories of BLOs– 40 first interviews

• Four types of BLO• Evidence on their effectiveness from main survey of

Business Links• The first meeting

Context

• The research was part of the SBS funded Economic Evaluation of Business Link

• In Business Link’s network model of 2001 there were local franchisees.

Business Link Organizations (BLOs)• SBS wanted to explore the different features of

the local Business Link Organizations in order to make some assessments about good practice

Resource Dependency Theory

• In resource-dependency theory, the firm exists within a network of interdependencies composed of multiple interest groups (Pfeffer and Salancik, 1978).

• To govern a firm, managers have to control its internal and external environment to manage and stabilize these interdependencies (Fligstein and Freeland, 1995).

• Rather than fit with the environment; managers actively influence their environment. They do this by trying to reduce their dependence on external sources. Managers gain the power to manage.

Clustering the models

• BLO’s were cluster on the basis of four categories;– The way in which the business decisions were

made– Related to the cost per intervention, – The proportion that came from the SBS and EU – The Proportion of Intensively assisted clients.

• Cluster models could be used to classify the BLOs

Mole: Four models of brokerageHigh

Proportion ofIntensive Assistance

Low

Low HighIntensity of Assistance

PipelineForcing

Light-touch Brokerage

Managed PipelineForcing Brokerage

Managed Brokerage

Clustering Managed Brokerage (cost per intervention, %SBS funding etc)

0

200

400

600

800

1000

1200

1400

BLO

Tyne and Wear

South Yorks

Durham

N. Manch

Merseyside

Nrthumbria

E.Lancs

Herts

B'ham

Salop

All bar

Cost per intervention

Support Service Profile

• For intensively-assisted firms, significant differences were evident between the profiles of BLO assistance. The key differences between the four models of BL assistance/BLOs were:– Managed brokerage BLOs were most likely to be providing intensively-

assisted firms with business planning assistance or action plan development

– Help with raising finance was also most likely to be offered by managed brokerages;

– Managed brokerages and BLOs operating both managed brokerage and Pipeline Forcing managed pipeline forcing brokerage were most likely to be providing assistance with e-commerce and IT.

Impact Coefficients in Regression Models of Employment

EmploymentGrowth

 

Coeff t-stat  

A. Intensively-assisted firms

Light-touch 0.025 2.757  

Managed Brokerage 0.069 4.117  

Pipeline Forcing 0.018 1.275  

Managed pipeline forcing brokerage 0.035 1.754

 

Significant impacts were found from three of the four types

2.5

6.9

5.5

9.4

7.3

0123456789

10

Employment Sales Sales perjob

Light-touch

Managed brokerage

Managed pipeline

% increase

The significant impacts from the different types of BLO

• Figures in brackets show Intensively assisted firms get a 2.5% boost to employment from a light touch model 1 BLO.

• On employment growth– Intensively assisted firms - Light-touch (2.5%) and managed brokerage (6.9%)

• On sales growth– Intensively assisted firms – managed pipeline forcing brokerage (9.4%)– Other assisted firms – light-touch (weakly 5.5%)

• On sales per employee– Other assisted firms – light-touch (7.2%)

Mole: models of brokerage and impactHigh

Proportion ofIntensive Assistance

Low

Low HighIntensity of Assistance

PipelineForcing

Light-touch

Brokerage

Managed PipelineForcing Brokerage

Managed Brokerage

Employment

Sales

Sales peremployee

Broader is not better• We can cluster BLOs on the basis of their management decisions. Crudely

we find that some BLOs aim to provide more depth to their assistance whereas others aim to intensively assist more companies.

• Most operate a light-touch approach. • Those Business Links that provide the most intensive assistance have th

strongest effect on jobs• those that seek to increase the proportion of intensive assistance have

great variation in the impact making no significant impacts. • In terms of the number of significant impacts – light touch brokerage

seems to provide a reasonable impact. • There are impacts from non-intensive assistance also weakly on sales but

also on sales per employee. • The evidence is consistent with the suggestion that the selection into

intensive assistance by clients is important.

Influencing clients in the first meeting

• First meeting critical (Bennett and Robson 2003)

• Business Link moved towards Information, Diagnostics and Brokerage (IDB) (theory from Turok and Raco, 2000; Hjalmarrson and Johansson, 2003; Lambrecht and Pirnay 2005)

• Financial pressures compressed these diagnostics into the first meeting

…this brings up issues..

• Trust – how does an adviser get to the heart of a business problem in 67 minutes? (Meyerson,

Weick, and Kramer 1996)

• Power – do you need to share power to get buy-in? (Schein, 2002)

Methods• The research was based on an analysis of 41 first diagnostic

meetings between adviser and client taped by all 17 advisers working in a Business Link.

• The clients that advisers worked with were:– 4 recent start-ups – 15 companies were struggling– 2 companies were in exceptional circumstances – 1 5 companies were growing slowly – 5 companies were very high growth and high growth potential; two were AIM

listed

Methods and Analysis

• Advisers were not able to predict whether this would turn out to be a good meeting or not. These were live meetings, not a drill

• The evidence presented was subject to the assessment of two qualified colleagues who performed the same task and a consultant who’s expertise was in this area (and had

experience)

Criteria used in the studyCriteria Definition Related to Concept in table 1

1 Breadth Was the meeting wide-ranging enough to uncover the major needs and check for problems in the key functions?

Agency of both agents and process used by business adviser

2 Depth Did the adviser user deeper question when a topic merited it and develop a view of causes?

Agency of adviser

3 Data sufficiency Was the adviser soliciting factual performance and market data to supplement opinions and self assessment by theclient?

Trust of adviser by client

4 Quality ofQuestions

Were the questions penetrating when they needed to be?Were they phrased and sequenced effectively?

Adviser’s process

Criteria Definition Related to Concept in table 15 Engagement To what extent was the client

engaged? Demonstrated by:active participation in the conversation, speculating (ratherthan just imparting information), asking the adviser questions,expressions of enthusiasm and tone of voice.

Trust of adviser by client

6 Actions To what extent were actions described in SMART terms?What firm verbal agreements were made? How enthusiasticwas the client about these agreements (indicated by the clientadding or modifying details and by tone of voice)?

Outcome

7 ReportedSatisfaction

It was customary for the client to either volunteer or be asked whether they were happy with the meeting. To what extent were they?

Outcome

Criteria Definition Related to Concept in table 1

8 Pressing problem Did the issue that caused the firm to seek advice require immediate attention?

Structure of client

9 Prepared Did the adviser ask the client to prepare information for the meeting and did the client do so?

Confidence, agency of adviser

10 Structured Was the meeting structured with a set agenda focused on the issues at hand?

Confidence, agency of adviser

11 Adviser under pressure Was the adviser under pressure from their organization to deliver an output?

Structure of adviser

12 Candid Were the responses to the questioning candid?

Agency client

13 Agreed actions Was the outcome of the meeting a set of agreed actions?

Outcome

Criteria Definition Related to Concept in table 1

14 AdviserInfluential

Did the client believe that the adviser’s conversation make a difference to the way that the client thought about their business

Outcome

15 Power Was the power in the hands of the client, the adviser or shared equally?

Agency of adviser and client

16 Airtime The proportion of time that the client and adviser talked in the meeting.

Agency of adviser and client (Swift trust, Meyerson et al. 1996)

17 Previous performance Did the firm seeking advice have a successful previous performance?

Structure of client

What constitutes a good meeting? 1 Breadth Was the meeting wide-ranging enough to uncover the

major needs and check for problems in the key functions?

2 Depth Did the adviser user deeper question when a topic merited it and develop a view of causes?

3 Data sufficiency

Was the adviser soliciting factual performance and market data to supplement opinions by the client?

4 Quality ofQuestions

Were the questions penetrating when they needed to be?Were they phrased and sequenced effectively?

5 Engagement To what extent was the client engaged? Demonstrated by:active participation in the conversation, asking the adviser questions, expressions of enthusiasm and tone of voice.

6 Actions To what extent were actions described in SMART terms?What firm verbal agreements were made? How enthusiasticwas the client about these agreements (indicated by the clientadding or modifying details and by tone of voice)?

7 ReportedSatisfaction

It was customary for the client either volunteer or be askedwhether they were happy with the meeting.

Criteria Met?

Criteria Met? Number Percentage

Met all criteria for a good meeting

9 21.95

Met more than half the criteria 28 68.29

Met fewer than half the criteria 4 9.76

Total 41 99.99

Particular differences were found in the way in which the process of the meeting was managed.

• Preparation for the meeting• Preparation by the client• Managing the meeting• Managing the conversation

Growing or struggling firm made little difference to the adviser’s influence

Adviser Influential

Adviser Not influential

Total

Growing firm 9 12 21Struggling firm 5 10 15Total 14 22 36

When the client had power the adviser was not influential

Adviser Influential

Adviser Not influential

Total

Adviser or balance of power

13 7 20

Client has power

4 17 21

Total 17 24 41

Ragin’s Qualitative Comparative Analysis (QCA)

• Ragin (2006) argues that much of our concepts in social science are composed of sets: the set of males, the set of experienced managers, the set of business owners.

• The primary objective is to show how an outcome is the result of a combination of causal conditions

Ragin’s Qualitative Comparative Analysis (QCA)

• Ragin (2006) argues that much of our concepts in social science are composed of sets: the set of males, the set of experienced managers, the set of business owners.

• The primary objective is to show how an outcome is the result of a combination of causal conditions

Crisp set QCA

• Causal conditions (as variables are known) are categorised with values of either 1 or 0. These categories are developed into a ‘truth table’, which lists all the combinations that are possible

• Having identified all the possible outcomes, QCA uses a Boolean algorithm to reduce the causal conditions to those that are necessary and those that are sufficient to result in the outcome (Ragin, 1987).

Sufficient combinations for an adviser to be influential

Raw coverage

Unique coverage

Consistency

Pressing problem, client prepared for meeting, meeting well structured, adviser NOT under pressure

.5294 .2941 1.0

Pressing problem, client prepared for meeting, meeting well structured, and the meeting was ‘deep’

.2941 .1176 1.0

High social rapport, client prepared for meeting, meeting well structured and ‘deep’ meeting

.2941 .1176 1.0

Pressing problem, with high social rapport, meeting well structured, adviser NOT under pressure

.2941 .0589 1.0

Solution coverage .8235

Solution consistency 1.0

QCA Four ways to the influential adviser

The Influential Adviser

PreWell-structured

meeting

Adviser not under pressure

Social Rapport

Candid Responses

PrePressing Problem

Client Prepared

Social Rapport

Pre

Pre

What happens in the first meeting

• The adviser can be influential when there are a combinations involving a pressing problem, client being prepared advisers not under pressure, a well-structured meeting, social rapport and candid responses

Discussion• How does business adviser gets to the heart of a business

problem in 67 minutes? – Those meetings that went well were where the client had a pressing

problem and the adviser conducted a ‘business-like’ meeting• What is not important is of as much interest as what is

– The relative power of the client was better kept in check – Advisers were as influential with high growth businesses as with

struggling start-ups

Conclusion

• The way to good outcomes from advice is for organizations to let the private information work with the programme– Only the SME managers know whether they have a

pressing problem– Once you are working with a firm then they may work

on other elements ‘more deeply’

• Outcomes from advice are produced by changes in the way SME managers behave