Small business: Training staff a win-win for SMEs

Professor Jane Parker, from Massey University's School of Management, says a preoccupation with short-term survival and a lack of time for training are challenges for small businesses.

Several small businesses tell how their workers' new skills have added value for employer and employee.

Darren Parlato, who owns Foxton's only chartered accounting practice, is clearly chuffed at the outcome of staff training recently undertaken by his only employee, office manager Stella Vockins.

Vockins wanted to grow her knowledge and gain a formally recognised designation, so undertook training to become an accounting technician, an assessment of competence via the Accounting Technician College of the New Zealand Institute of Chartered Accountants.

Parlato says Vockins' upskilling has added value to his business, boosting client perception of his brand and justifying a lift in fees - as well as boosting Vockins' knowledge and confidence.

Parlato and Vockins opted to take a formal training path in this instance, but small businesses in general are less likely to opt for formal training paths than their corporate counterparts, says Professor Jane Parker, of Massey University's School of Management. Parker says a greater reliance on informal HR practices in SMEs means they're more likely to plump for informal training practices. A few of the businesses interviewed this week have come up with training methods unique to their organisations.

Sachie Nomura, founder of Asian cooking school Sachie's Kitchen, periodically sends a staff member on an overseas trip so they can experience one of the cuisines the school teaches.

They return, says Nomura, filled with new knowledge, and also enthusiasm to share authentic stories about the cuisines they teach. At OptimalBI, a Wellington-based business intelligence firm, staff all set a goal each year to become an "expert" in a particular area, with the business supporting a training roadmap to help them achieve their goal. Last year one of the company's data miners, for example, set the goal of becoming an expert creator of infographics.

Her skills are now adding value to the business, which can add this service to their offering. Win-win is a term you hear a lot about staff training and Parlato says it's the most powerful way to retain staff.

"Even though you're helping build and advance their career prospects with the risk they may leave, they're actually far more likely to leave if you don't support their growth," he says.

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Small firms struggle to upskill their workers

Professor Jane Parker, from Massey University's School of Management, talks about some of the issues for SMEs when it comes to staff training.

What areas are small businesses needing staff training for?

There's scant, integrated research on SMEs in New Zealand in relation to training but recent works are beginning to highlight the gaps that need to be examined.

What is known is that, here and overseas, SMEs use informal and formal training but are less likely than large enterprises to provide their employees and managers with the latter. A greater reliance on informal human resource management (HRM) practices in SMEs also encourages informal training practice.

Also, many SMEs use turnover and/or recruitment rather than internal HRM functions to acquire the new skills they need; they often look to draw people with capabilities from the market or other organisations.

According to a 2013 OECD cross-national study of SMEs and training, more high-skilled employees than low-skilled employees in New Zealand are being developed in technical skills. For all countries under analysis - the UK, Belgium, Canada, Poland, Turkey and New Zealand - management training is the most identified area of skills training needed by firms.

What are some of the major challenges for small businesses when looking to train staff?

A preoccupation with short-term survival among SMEs is one challenge, as training requires employers to play the "long game" in terms of HRD planning and seeing the related benefits.

A lack of time is another. Also, their small scale means the related absence of HR departments in many SMEs means they lack well-developed strategic HR processes. It can also mean that managers do not have the resources or expertise available to train in-house.

On the other hand, proximity to staff can enable SME managers to have a good grasp of their employees' development needs - if not a strategic response to them.

Some SMEs may also be concerned that, after training up an employee or manager, they'll lose that person - and therefore a considerable investment - to another entity, given they often look externally for required skills. Research on Canterbury-based SMEs found that, as well as short-termism and using the labour market to meet skill needs, training costs and a feeling that training benefits a particular SME less than it helps the wider economy or individual employees are considerations.

How do small businesses overcome these challenges?

Some SMEs may opt to adopt a "best practice" approach and come to regard or maintain a view of training as a key facet of organisational and HR strategic planning and activity. More broadly, sustained organisational success is often based on what the International Labour Office calls "decent work" and staff development is an integral part of this. Some government agencies and departments provide employment and development information and advice. There are also sector-based trade associations, national associations and national professional bodies among others that give training advice and assistance tailored for SMEs.

Some UK research indicates, though, that SMEs tend not to have strong links with external agencies, seeing the advice they offer to SMEs as too generic.

How do NZ small businesses stack up internationally when it comes to training their staff?

The 2013 OECD study doesn't delve much into direct country "rankings" but there are some comparisons for the six nations under examination. For instance, with formal training and skills development, as in other countries, the two groups of employees in New Zealand that appear to have the highest participation levels in training are high-skilled employees and those aged 25 to 49 years. The report suggests this implies a widening of the skills and qualifications gap between higher skilled and prime-aged employees compared to younger and/or less skilled employees with consequences for future knowledge levels within the workforce in a context of the increasing knowledge intensity of developed country workforces. It's interesting to note that a good proportion of New Zealand firm respondents did not state a response to certain survey questions - for example, around using accredited trainers for training activities or the extent to which training results in a formal qualification - frustrating country comparison.