Gareth Magee: Business owners can take softer approach

Recent stories concerning retailer Sports Direct have highlighted some pretty sharp practices from a high street business that has grown quickly, but at the same time allowed its HR practices to get out of control.

Gareth Magee, partner and head of business development at Scott-Moncrieff. Picture: Contributed

However, not all businesses are employing such behaviours. A recent survey of owner-managed businesses (OMBs) in the UK, undertaken by Scott-Moncrieff, uncovered valuable insight – particularly in the area of people management and development.

Our survey uncovered OMBs’ expectations for strategic change and growth, their willingness to invest and the issues they see as creating the biggest risks to their businesses.

Encouraging from the start was the growth in optimism – with 85 per cent of OMBs in the UK expecting to have a better year than last, hitting revenue and profit targets.

Expectation and optimism aside, growth has always been a key issue for OMBs, particularly how to achieve it and sustain it. Over recent years, OMBs viewed success as managing to stand still, but growth is once again at the top of the agenda, albeit with a new slant. Growth is far less likely to be connected to acquisition, aggressive business development or squeezing margins.

With 85 per cent of Scottish businesses in our survey reporting that staff development is their number one priority within the growth context, the shift from hard to soft growth strategies is clear, and encouraging for the millions of people that work for smaller businesses.

This demonstrates that a strong internal culture is recognised as a key driver of business growth. Could an unhealthy internal culture generate the opposite effect? The shareholders at Sports Direct may say so, as recent revelations, laid bare to all via the newspapers and social media, begin to influence the behaviour of more ethical shoppers.

Most business objectives used to be hard targets like turnover and gross profit, but softer targets like people development are now just as important. There is a growing recognition that by recruiting the right people and training them properly, you win their loyalty and engagement. Add to that good leadership, and your business will grow. Focus on the people, and the turnover and profit will follow.

Innovation and investment also feature as key drivers of growth, with investment in new technologies allowing businesses to free up resource, or development of new products or processes allowing smaller businesses to diversify. Over half of OMBs we surveyed expect to introduce new production techniques or undertake some other form of innovation in their business operations, such as investing in new client relationship management systems to deliver more sophisticated analysis of their customer base.

Whichever approach owners are pinning their future strategies on, it’s clear that growth is once more a realistic target, and for smaller businesses, people are at the centre of this strategy, which is an encouraging sign for all involved.

• Gareth Magee is partner and head of business development at Scott-Moncrieff