Medium-sized enterprises hold the key to Australia’s future economic fortunes and can generate much needed employment quicker than other sections of the corporate sector, according to international business expert Professor Jana Matthews.
And with an innovative program at the Centre for Business Growth at the University of South Australia, Matthews is helping to unlock the potential of companies from around Australia, often tapping opportunities that have gone unnoticed by chief executives and senior managers.
The program comprises a series of three, three-day modules, spaced three to four months apart, for chief executives and two other members of the executive team. Participants engage with “growth experts” on a range of business topics, including inhibitions to growth, staffing issues, delegation and communication in the workplace, marketing and branding, teamwork and leadership.
Matthews, the ANZ Chair in Business Growth and director of the centre, tells The Vanguard that upper-small and medium-sized firms comprise only 3.8 per cent of companies nationally but generate 24 per cent of employment and 23 per cent of the ‘value added’ (after tax profit minus cost of capital) of the corporate sector.
Matthews says companies with revenue in the range of $5-50 million and five to 200 employees offer a “sweet spot” for leveraging further sales, profits and jobs growth.
“There is no question in the short-term, the leverage point for Australia is the upper-small and medium sized companies,” Matthews said.
“They have a product, they have customers, and they have revenue. If they can just be taught how to drive growth, we can quickly create jobs.
“There are more than 250,000 of these companies in Australia. If we could unlock their growth potential, the benefits to the economy would be enormous.”
While a ‘micro firm’ with 1-4 employees might grow 50 per cent, that only takes employment numbers to a six, so the upper-small and medium sized enterprise can add more staff, more quickly.
Matthews said the 10 companies who participated in the program last year have already added 114 extra jobs and expect to add a further 322 this year – a 41 per cent increase in employment.
The first iteration of the ANZ Business Growth program was supported by the ANZ Bank and sourced the candidates from its client base. While the bank is supporting a second cohort this year, the program is also being expanded to invite candidates from non-bank clients.
Matthews said the first group of enterprises in the program had reported an aggregate increase in revenue of 24 per cent, taking earnings from $132 million to $164 million, since engaging in the program from November 2014 to July 2015.
The companies expect to boost revenue in the current financial year by 37 per cent to $225 million and, Matthews says, the 10 companies expect to be generating $615 million in revenue within three years.
Matthews said one of the successful features of the program is to raise the ambitions of business owners. She cites the example of a company that had turnover of between $8-10 million with the CEO thinking in terms of increasing sales to perhaps $35 million over three years. The program team thought the company could increase turnover to 10 times that amount.
“We have found in this program that people are thinking way too small and they are also thinking primarily of selling into Australia instead of going global,” Matthews told The Vanguard.
“So we are expanding the possibilities for them by the things that we suggest they think about,” she said.
Another finding from the program is that many CEOs feel they have to take responsibility for too many of the enterprise’s activities.
“CEOs think they have to do more as company grows but it gets to the point that I call the ‘ceiling of complexity’ where they can’t do any more,” Matthews said.
“They must learn to delegate, to make some choices.
“We have to get them to think what is best for the company, and that’s a different mindset.
“It’s almost like giving them a map. When you start out driving from Adelaide and you don’t have a map and you don’t know what the roads are, you are a little reluctant to drive too far.
“But if you know exactly how to get to Sydney, then you are willing to go, and get more gas and go again.”
Continuing the metaphor, Matthews said “we would never let people go out on the road in a car when they hadn’t learned to drive and yet we let them bank years of their lives, waste years of their lives, use up all their savings on a company, with no training.”
“I think there should be a whole lot more focus on helping people make a job, and create companies, not just take a job.”
Grant Tinney, chief executive of Adelaide-based Precise Advanced Manufacturing Group – which provides rail points and crossings, moulds and dies, precision machining, fabrication, components and assemblies to a variety of customers in Australia and the US – attests to a change in thinking that occurred as a result of completing the ANZ Business Growth program.
“Our business was trying to move forward on a broad front giving equal concentration to all five business divisions,” Tinney told The Vanguard.
“The program emphasised the need to focus to maximise the opportunity for overall group growth. We have structured our business to deploy over 80 per cent of our management and capital resources into two areas which has resulted in impressive gains.
“Our business goal prior to the program was to achieve 20 per cent growth per annum over the next three years. Via the mentors and rubbing shoulders with other successful businesses in the group we have reset what we believe is possible with our target now tripling the size of the business over three years with the same margin target.”
Jana Matthews has also changed course over her academic and professional life. After studying at University of London and later Yale, Matthews describes herself as an “English major gone bad” – switching her interest to business and entrepreneurship.
With a doctorate from Harvard, Matthews was a foundation member of the Kauffman Foundation Centre for Entrepreneurial Leadership in the 1990s and later a Global Thought Leader for SAP working in China, India, Singapore and Sydney. Matthews has also consulted widely to major US corporations.
In 2012 Matthews was attracted to Australia from the US to lead the ANZ Innovyz Start accelerator program for start-ups. After two years, she realised that her real strength was in working with medium sized firms “which have products and customers, a team and a CEO who wants to grow”.
After discussions with the SA Economic Development Board chairman, Raymond Spencer, and others, Matthews was invited to be the inaugural director of the Centre for Business Growth at UniSA last year.
At a time when South Australia is facing high unemployment and an uncertain economic outlook, Professor Jana Matthews and her team at Centre for Business Growth are playing an influential role in raising the aspirations and achievements of the corporate sector and boosting jobs in the process.
The Vanguard is a weekly column highlighting innovation in South Australian business.
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