Education and training that meets the needs of small business: A systematic review of research

Through a systematic review of existing research, this study set out to find evidence to answer the following question: ‘What intervention strategies achieve participation of small business managers and employees in education and training that meets the needs of small business?’. This topic was of interest because small businesses employ around 3.6 million people in Australia, but two-thirds of small businesses do not provide structured training for their employees.

• Strategies that work for small business are clearly focused on business need rather than driven by government agendas and funding.
   
• Lowering the costs of formal training is useful in engaging some small businesses, but financial incentives alone are not sufficient to meet small business needs. Small business will pay for education and training if they see the value in it and it is in line with their interests.
   
• Strategies which fit with the way small business learns are clearly more successful than direct or formal training. Small business learns ‘through doing’, with the focus on current or real issues in the workplace, and through social networks—learning from other business people.
   
• Successful strategies are business mentoring, networking, and collaborative or group learning with other businesses through clusters, alliances or action learning. Other effective strategies include diagnostic services such as training needs analysis, and benchmarking processes against other organisations. Programs which employ a number of these work better than those relying on a single approach.
   
• Strategies that meet the needs of the diverse range of small businesses demonstrate three essential elements. These are:
  • a clear focus on business-specific needs
  • a personal approach through a recognised local facilitator or business service organisation that is able to reach small business operators who may not be positive about training
  • flexible provision which carefully individualises training information, content and delivery to the needs of each small business.
     
• Ten factors which contribute to strategies that work for small business are:
  • providing opportunities to share skills, knowledge and experience with other business people
  • linking training to business performance—increased profit, growth or survival
  • linking training to specific stages in the business cycle (that is start-up, crisis and/or survival, growth and/or expansion and export and/or internationalisation)
  • contacting small business managers personally to analyse their business needs
  • providing ongoing business-specific support through a business service organisation
  • minimising time spent away from the workplace
  • integrating formal training and learning with informal learning processes in the workplace
  • lowering costs of training by collaborating with other businesses or through financial incentives, such as a government subsidy or ‘interest free’ loans
  • ensuring that facilitators and trainers have the appropriate networks and experience to enable them to be trusted and respected by all business participants, especially in the case of Indigenous Australian small business operators
  • planning the strategy with small businesses and business service organisations.

From the last ten years of research into small business and education and training, we hoped to find clear evidence of strategies that engage small business in education and training activities that meet their business needs. The question posed by this systematic review was therefore: What intervention strategies achieve the participation of small business managers and their employees in education and training that meets the needs of small business?

We were interested in this topic because the Australian Bureau of Statistics (ABS) estimates that at least 97% of all non-agricultural private businesses in Australia have fewer than 20 employees and these businesses employ around 3.6 million people. Two-thirds of small businesses do not provide structured training for their employees.

The ABS definition of small business, those having fewer than 20 employees (except for agricultural businesses), was used. However, research studies which used different definitions of small business were also included in the literature search.

Starting with over 2500 references, we ended up with 20 research studies for which in-depth reviews were conducted. Of these 20 relevant studies, 11 were found to be of sufficiently high quality to ‘answer’ the review question, while the other nine studies were considered to provide supporting evidence.

The findings—what works for small business

There is clear evidence that, in the education and training arena, strategies that work for small business are clearly focused on business need rather than driven by government agendas and funding. Although government funding for skills development may be directed towards lowering the costs of formal training for small business, financial incentives alone are not sufficient to meet small business needs. Many small business managers do not see a relationship between training and their business needs.

Financial incentives or subsidies are clearly useful in engaging some businesses who may otherwise not pay for training. However, there is evidence that small business managers are willing to pay for education and training for themselves and their employees, if they see the value in it and it is in line with their interests or meets their needs.

Strategies which fit with the way small business learns are clearly more successful than direct or formal training. Previous literature has shown that small business managers and employees ‘learn through doing’ and much of their learning is focused on current or real issues contextually embedded in their environment. Two other important aspects are learning from other business people through social networks and through critical reflection of their assumptions, knowledge and experiences—their own and those of business colleagues.

Small business training programs which build on business-to-business interactions are most successful. They need to reach those managers who do not see the value of education and training to their business needs. Successful strategies for engaging businesses in education and training activities included business mentoring, networking, and collaborative or group learning with other businesses through clusters, alliances or action learning. Other effective strategies were diagnostic services such as training needs analysis, and benchmarking processes against other organisations. Programs which employ a number of these strategies work better than those relying on a single approach.

Other strategies which have been shown to meet small business needs include the provision of administrative support (such as group training organisations for apprentices) and integrated support services through a ‘one-stop shop’ (such as business enterprise centre, industry or professional organisation or internet portals). Ongoing business-specific support may also include contextualised direct training provided by equipment and computer software suppliers (vendors), and that given to franchisees.

The features of successful strategies

Strategies that meet the needs of the diverse range of small businesses demonstrate three essential elements:

• a clear focus on business-specific needs
   
• a personal approach through a recognised local facilitator or business service organisation that is able to reach small business operators who may not be positive about training
   
• flexible provision which carefully individualises training information, content and delivery to the needs of each small business.
   
• Ten factors which contribute to strategies that work for small business are:
   
• providing opportunities to share skills, knowledge and experience with other business people
   
• linking training to business performance—increased profit, growth or survival
   
• linking training to specific stages in the business cycle (that is start-up, crisis and/or survival, growth and/or expansion and export and/or internationalisation)
   
• contacting small business managers personally to analyse their business needs
   
• providing ongoing business-specific support through a business service organisation or training adviser
   
• minimising time spent away from the workplace
   
• integrating formal training and learning with informal learning processes in the workplace
   
• lowering costs of training by collaboration with other businesses or through financial incentives, such as a government subsidy or ‘interest free’ loans
   
• ensuring that facilitators and trainers have the appropriate networks and experience to enable them to be trusted and respected by all business participants, especially by Indigenous Australian small business operators
   
• planning the strategy, and its implementation, with small businesses and business service organisations.
   

Final comments

This review found only a small number of evaluation studies of mostly government-funded programs. However, these studies normally did not include the impact, particularly the long-term impact, of the strategies used. Undertaking long-term evaluations or impact studies would be beneficial for identifying which strategies are more effective in embedding formal training in small business planning and integrating formal learning with informal learning processes.

Through the review, we were also able to identify some gaps in our knowledge. Notable is the lack of research on training provided by vendors or that given to franchisees. Other potential research areas are the specific training needs of family businesses, owner–operators, or micro-businesses with fewer than five employees.

The core studies

Five Australian studies and six from the United Kingdom provide sound evidence to answer the review question. The following are the 11 evaluation studies:

1999: Big pictures from the small end of town: 1998 Small Business Professional Development Programme evaluation report (Kearney, P), Tasmanian Office of Vocational Education and Training for the Australian Government.

1999: Business mentors: Supporting small business in Tasmania and on the Central Coast of NSW, Dusseldorp Skills Forum, New South Wales, Australia.

2000: Size matters: National summative evaluation report of the Small Business Professional Development Best Practice Programme 1996–2000 (Kearney, P), Tasmanian Office of Vocational Education and Training for the Australian Government.

2002: Small Business Smart Business Get Smart—Get into training: Final report and evaluation (Dufty, P), Western Australian Department of Education and Training with support of the Small Business Development Corporation, Australia.

2004: Small Business Smart Business: Final report (Walker, B & Webster, B), Small & Medium Enterprise Research Centre of Edith Cowan University for the Western Australian Department of Education and Training, Australia.

1997: TECs and small firms training: Lessons from Skills for Small Businesses (GHK Economics & Management), Research report 27, Department for Education and Employment, United Kingdom.

1999: Evaluation of the Small Firms Training Loans Scheme (Maton, K), United Kingdom Research Partnership Ltd, Research report 97, Department for Education and Employment, United Kingdom.

2002: ‘Engaging SME managers and employees in training: Lessons from an evaluation of the ESF Objective 4 programme in Great Britain’ (Devins, D & Johnson, S) in Education and Training, vol.44, issue 8/9 pp.370–7, London, United Kingdom.

2003: Evaluation of the pilot Small Firm Development Account (Hirst, A, Lefaucheux, M & Rinne, S) by Cambridge Policy Consultants, Research report 466, Department for Education and Skills, United Kingdom.

2005: Evaluation of the Pilot Small Firm Development Account Year 2 (Hirst, A, Lefaucheux, M & Rinne, S), by Cambridge Policy Consultants, Research report 619, Department for Education and Skills, United Kingdom.

2005: Talking the right language: Can further education offer support for business innovation? Feasibility study report (Hughes, M & Stanton, G) by Learning and Skills Development Agency, United Kingdom.

Supporting evidence

Five Australian and four European research studies provide supporting evidence through specific case studies. These case studies emphasise the strategies used by small business to learn new skills and highlight the factors which are required in planning, promotion and implementation of successful strategies. The following are the nine research studies:

1996: The Enterprise Training Mentor Program: An effective strategy for a mentoring program for on-the-job trainers in smaller enterprises in the Geelong region and a proposal for expansion (Gordon Consulting), Rohm and Haas Vocational Education and Training Research Unit, Gordon Institute of TAFE, Geelong, Australia.

1998: Working and learning in micro-enterprises in the printing industry: A comparative research study into the relationship between technological and organisational developments and training activities in micro-enterprises in the printing industry in four European countries: Synthesis report (Van den Tillaart, H, van den Berg, S & Warmerdam, J), CEDEFOP, Thessaloniki, Europe.

1999: Women in Small Business Mentoring Program (Holgate, J), Professional and Career Development Unit, Western Australian Department of Training, Australia.

2000: Entrepreneurial training for growth of small and medium-sized enterprises: Lessons from Central and Eastern Europe: Report, by European Training Foundation, Office for Official Publications of the European Communities, Luxembourg.

2000: Our business, our way: Indigenous perspectives on small business learning (Research Australasia and ResolveNorth), Tasmanian Office of Vocational Education, Australia.

2001: What convinces enterprises to value training and learning and what does not? (Figgis, J, Alderson, A, Blackwell, A, Butorac, A, Mitchell, K & Zubrick, A), NCVER, Australia.

2002: Working towards skills: Perspectives in workforce development: Research report (Hughes, M, Keddie, V, Webb, P & Corney, M), Learning and Skills Development Agency, United Kingdom.

2003: How small business learnt about the goods and services tax: Lessons for vocational education and training (Billett, S, Ehrich, L & Hernon-Tinning, B), NCVER, Australia.

2005: Employers’ collaboration to raise skills in supply chains and clusters (Confederation of British Industry), CBI, United Kingdom.