Training needs of family businesses

 

April 2002

Small and medium-size industries (SMIs) are recognized as an important component of any nation's economy. It is more so in Malaysia, a developing nation.

The majority of the SMIs in Malaysia are patterned around the traditional way of developing and keeping business within the family and are usually run by family members or relatives.

The recent survey on family run business jointly conducted by the Malaysian Institute of Management and Shamsir Jasani Grant Thornton revealed that about 60 per cent of the small-scale industries (SSI) consider themselves to be family-run. As such, most of the SSI did not think it necessary to address the issue of improving the process and product technology. This could hinder their ability to meet the demands of globalisation and modernisation.

A definitive systematic approach to help the SSI meet these challenges is training and education on entrepreneurship, technology and human resource development. It can transform the SSI into vibrant entities to better face the demands of globalisation.

The recent survey found that 20 per cent of the SSI respondents were not taking steps to build on their skills in entrepreneurship, but made assumptions that entrepreneurship and innovation would come naturally with time and experience. A report on recent business trends in Malaysia shows that SSI face not only rapid changes but also unique problems, and that SSI need to be guided to respond and be highly innovative. It is now evident that SSI must undergo education or training on the importance of entrepreneurship and be vigilant on the opportunities and threats posed by today's brutally competitive market place if they are to continue to exist and operate profitably.

According to Peter F Drucker, “entrepreneurship has to be organized and it involves managing growth and innovation, as it is crucial for success.” Having the innate skills is not enough as the knowledge and skills of entrepreneurship and innovation need to be further developed. This knowledge and skill gap was identified in the 1990 survey of management practices conducted by Dart, Ng and Sarker (Asean Economic Bulletin, July 1990) and confirmed that the SMIs in Malaysia had very limited knowledge of the overall spectrum of managerial practices, especially in the areas of Finance, Marketing and Human Resource Management. The recent family business survey reconfirms this, as most of the SMIs are not taking any steps to enhance these skills and knowledge either by training or other means.

The success of the SMIs does not rest solely on excellent entrepreneurship; equally necessary is incorporating technology and human resource development. To have one and not the other is like having a car without a driver.

Technological development is about incorporating new innovative ideas into the process or the product. This could also mean modifying or upgrading the existing technology a business already possesses. The positive note about the survey is that 70 per cent of the respondents indicated they had taken steps to upgrade the facilities to meet the demands of globalization.

Today's SSI are classified into two groups: those with traditional technology, and those using high technology. The high technology group is mostly involved in research and development.

The raison d'etre of traditional SSI is to focus on process innovation while that of the high technology SSI is on the product technology.

Based on the country report by Wan Mohd Salleh of MIMOS, the SMI performance thus far has not been satisfactory and the sector's contribution in terms of output and value added is still relatively small. Both the product technology and process innovation require technological ability on the part of SMIs. This is quite different from having superior engineers and researchers, who incidentally may not be able to generate good technological results. Therefore, the SMIs must adopt a good system of controlling the technological direction and as a result develop a few good new products.

Process technology has to look into issues of efficiency, quality, on-time delivery and, above all, a technology that cannot be easily obtained by the competitor. Technology development for the small to medium-size enterprises (SMEs) must harness automation and information technology to increase the speed of production (process) and a high degree of creativity and innovation (product) in order to meet the demands of globalisation.

Human resource development is also very important for the SMEs as it must attract and retain skilled workers if it is to be technology savvy. High technology SSI need more skilled human resources than the traditional firms. Generally, traditional SSI will have a large number of unskilled human resources than the high technology SSIs. It is a fact that SMEs are often at a disadvantage in terms of employment of talented people as compared with large-scale industries. One sure way to overcome this with the SSI is to develop its own pool of talented people by carrying out a training needs assessment to identify the skills and knowledge gap of the employees and arrange for them to attend training courses to close the gap.

Finally, the government must build up a good basic infrastructure to assist SMEs to meet the challenges of globalisation. In Malaysia, SMIDEC (Small and Medium Industry Development Corporation), the OPP3 (The 3rd Outline Perspective Plan), and the 8th Malaysian Plan emphasise the necessity of SMIs' development in their programmes and plans.

SMIDEC provides 50 per cent grant for designated training programmes, and SMIs contributing to the HRD Fund can draw down from the training fund allocation for the training of their employees. However, there is an inadequate flow of information about these government agencies' support to the SMIs and the less-than-efficient implementation of government support schemes such as the processing of applications from them could be the major hurdle for SMI development in the country. If action is not taken to address these issues, SMIs will continue to be ignorant of all the support they can avail themselves of.

You are welcome to contact the writer Mr M. Chandra Sekaran at e-mail: mcsekaran@celcom.net.my