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close this bookJob Quality and Small Enterprise Development - Working Paper No. 4 (ILO, 1999, 35 p.)
close this folder4.0 Lessons from practical experience
View the document(introduction...)
View the document4.1 Increasing training and knowledge
View the document4.2 Integrating competitiveness with qualitative conditions
View the document4.3 Promoting self-help associations and collective solutions
View the document4.4 Developing enabling regulatory environments
View the document4.5 Towards a local, integrated and holistic approach

(introduction...)

The previous chapters have shown how the relationships between job quality and enterprise size are quite complex. There are a variety of internal and external influences on small enterprises that can promote improvements in the quality of employment small enterprises provide. Such influences can become points of focus for programme interventions designed to improve the number and quality of jobs provided by small enterprises.

This chapter identifies a number of experiences around the world, which provide a point of focus for analysis and offer opportunities for adaptation and transference. The four areas assessed here are: increasing training and knowledge acquisition for small enterprises and their workers; strategies to integrate initiatives that promote competitiveness with actions aimed at improving qualitative aspects of employment and living conditions; the promotion of self-help associations and collective solutions; and the development of enabling regulatory environments.

4.1 Increasing training and knowledge

One of the most important areas to address in the promotion of job quality is that of knowledge and training. This is crucial for increasing workers’ security, for meeting new competitive requirements and for moving local economies along a rising wage and rising standards path of development. Developing indigenous capability (rather than relying simply on inward investment alone) may be an important policy. In Africa, the ILO has been particularly concerned with the development of indigenous capability through its ASIST15 programme. Run by a multi-disciplinary team based in Harare, Zimbabwe, the ASIST programme focuses on labour intensive activities. Training is provided to owners, managers and workers in areas such as health and safety, productivity improvements, and the appropriate use of tools.

15 ASIST (Regional Programme of Advisory Support Information Services and Training for Labour-based Infrastructure and Transport Planning)

In East and South East Asia the successful acquisition of basic knowledge from world sources and the building upon that base to create an indigenous capability has been seen as crucial for the success of many countries. This has included Singapore, Taiwan, Hong Kong, and South Korea where knowledge acquisition has played an important role in helping move small enterprises in these countries along a higher wage path16.

16 See, for example, Hobday, 1995; Mathews, 1996.

A variety of tools have been used in the building up of such competence. These range from individual enterprises entering special licensing and technology transfer agreements to the creation of sectoral focused training institutions by local authorities. The use of special intermediary institutions to acquire knowledge of best practice from global sources and then dispersing it to local enterprises has also proved successful as has the creation of special programmes to encourage lead firms to transfer knowledge to smaller suppliers17.

17 This last approach mentioned in particular seems to be growing, and possibly reflects an increased recognition of the fact that much knowledge for enterprises comes from other firms, and also perhaps a growing perception of enterprises as occupying positions in networks and supply chains. For example, mention might be made of such programmes to encourage transfer of knowledge from lead firms to small suppliers as the Local Industry Upgrading Programme in Singapore, and the Centre-Satellite Programme in Taiwan, as well as similar initiatives in other parts of the world, such as in Malaysia, Brazil, Argentina, Mexico and countries of Europe. There are also other inter-firm knowledge transfer programmes which give more emphasis to small firms learning from one another, through benchmarking, factory visits, learning networks and other means, and/or in partnership with local knowledge institutions.

At the same time, the upgrading of knowledge capabilities and training support mechanisms is not only important for the development of indigenous enterprises, but also for attracting high quality inward investment. A case in point, in respect of industrialised countries, is the Scottish electronics cluster (providing about 65,000 jobs by the late 1990s), where attempts are being made to move the cluster up market and improve the quality of employment. In this, training and knowledge build-up are seen as crucial. A recent and important step has been to attract into the cluster a key leading edge electronics company from the USA that, it is believed, will introduce crucial knowledge to help take the cluster to higher value activities. Significantly, the crucial factor that attracted the company was not so much cash incentives as much as a guaranteed supply of high quality trained labour, provided by a consortium of higher educational institutes brought together by an intermediary institution.

In respect of newly industrialising and developing countries, Singapore has deliberately marketed itself as a location offering high quality services and labour. It has been very successful in attracting inward investment. In Costa Rica the provision of assistance in training is said to be one of a raft of support provisions, which is said to have influenced a major $500 million dollar inward investment decision by the electronics company Intel (ILO, 1998)

4.2 Integrating competitiveness with qualitative conditions

The integration of small enterprise development initiatives with the promotion of qualitative aspects of employment is a central theme. This can be addressed on a number of levels. One possibility is to consider geographically based schemes that provide broad social protection and form part of a holistic community-based economic development strategy. Within informal sector settings in particular, living conditions and working conditions often overlap and so worker productivity and the ability to earn a living income may be affected by factors such as housing inadequacy, sanitation, and other community aspects. Joshi, for example, asserts that since working conditions in the informal sector cannot be addressed in isolation from the living conditions of the urban poor, efforts to improve working conditions should be ‘integrated with efforts to improve the environment of urban poor communities, including housing, sanitation, and access to water and electricity (Joshi, 1996)’. Thus, efforts to improve enterprise competitiveness need to include attention to broader social conditions and issues of social cohesion at the community level, as well as in the enterprise context.

An ILO initiative that goes some way to developing a holistic approach was the regional ILO Asia programme WIDE (Work Improvement and Development of Enterprises). This pilot programme designed and implemented the concept of simultaneously addressing an integrated and coordinated manner, business development and improvements in the working conditions through productivity improvements at the micro-enterprise level. The programme worked through local business development service providers as well as local institutions delivering services in occupational safety and health, and linking up micro-enterprises to these institutions. Intermediary and self-help organizations were helped to improve their capacity to provide development services and to become engaged in policy networks and to advocate their needs.

The principal outcome of the pilot programme was the training package IWEB (Improve your Work Environment and Business). The package, consisting of an Action Manual and a Trainers’ Guide, promotes practical action to improve the business of very small and micro-entrepreneurs though concrete activities that have an immediate impact on the business performance and its working conditions.

In addition, the ILO WISE (Work Improvements in Small Enterprises) programme is a training method that provides practical advice on how to improve working conditions through low cost solutions, which also improve productivity, quality and profits. The technical content of each training programme depends on the specific problems and opportunities existing in the participating enterprises. Typically the core issues addressed are: materials storage and handling; work station design; productive machine safety; control of hazardous substances; lighting; welfare facilities and services; work premises; work organisation; and worker involvement (Di Martino, 1995).

WISE has been introduced in Asia, Africa and Central and South America, and the results have been encouraging. For example, follow-up workshops after WISE training courses in Thailand and India found that the rates of achieving proposed improvements within a few months were as high as 80 percent or more (Kogi, 1994). While in various countries of Central and South America participants in WISE have reported introducing numerous working conditions and productivity enhancing improvements (Hiba, 1994).

Programmes that integrate competitiveness with job quality can also be carried out by intermediary institutions that promote knowledge transfer along supply chains (See for example, Pyke, 1997a). In these cases, the intermediary institution acts as a broker between lead firms on the one hand and suppliers on the other, guaranteeing to all parties interventions (such as training) to raise capacity and maintain standards, whilst ensuring fair trading is carried out.

Whether as part of the above initiative or separately, intermediary institutions can, and do, promote cooperation and collective activities. This may include activities that aid learning and improve quality, innovation and business growth amongst limited groups of cooperating small enterprises. Many countries now have such programmes including, for example, Norway, Chile, Italy, Korea, Mexico and Taiwan. Typically, agencies providing programmes will, in addition to brokering inter-firm cooperation, offer either directly or through linkages to specialised agencies, a range of services such as training, and could include assistance in the implementation of measures to raise the level of working conditions.

Some institutions target, on a larger scale, whole sectoral clusters. For example, a well-known case is that of the Garment Industrial Development Corporation of New York. This tripartite governed institution was established to help the many small enterprises in New York’s garment industry to introduce new organisational practices to raise productivity, improve fashion content and engage in just-in-time delivery. Training plays a major role. In Europe, various labour institutes are helping public and private organisations modernise and introduce new practices on a basis of consensus. One of the newest institutes, for example, is the Institute for Labour in Bologna in Italy, which also has a tripartite advisory board.

4.3 Promoting self-help associations and collective solutions

Increasing the capability of small and micro-enterprises, and their workers, to engage in collective solutions to the problems that individual enterprises (by virtue of their limited resources and scale) find difficult to achieve alone, is an important component of a quality enterprise development strategy. Thus, through associational activity, small enterprises can benefit from a range of business services. They can organise for the provision of social protection and welfare schemes, and can improve occupational safety and health standards. They can also increase their involvement in policy networks and social dialogue at the local area as well as at even higher levels.

There is evidence that employer and worker organisations are showing increasing interest in going beyond their traditional representative and bargaining roles. They are becoming more involved in developmental activities that add value to the economic development process. For example, an international survey carried out by the ILO three years ago found that the social partners expressed interest in providing developmental services to small enterprises and in becoming involved in regional development activities (ILO, 1997).

In industrialised countries, an example of a small firm association that has a strong developmental orientation is the Italian National Association of Artisans. This Association provides small artisan enterprises with a broad range of services that include both enterprise development services (such as consultancy services, access to finance, and training) as well as welfare and social services (such as pension and health schemes).

In developing countries, self-organisation by informal sector groups is said to be growing (Aryee, 1996). For example, a prominent case of a social protection scheme organised by a self-help association is that of the Self-Employed Women’s Association (SEWA) in India. In the Philippines, Joshi (1997) reports on the existence of large self-help groups such as SAMA-SAMA, which could ‘easily be used to increase awareness about working conditions’, as well as carrying out other promotional and developmental activities. Trade unions also, are reported to be showing increased interest in representing the sector. For example, in the Philippines several trade unions have amended their constitutions to enable them to operate in the informal sector and to extend membership and services to those who work in it. Actions to extend membership and take initiatives in the informal sector have also been reported in Tanzania and Colombia (Aryee, 1996)

4.4 Developing enabling regulatory environments

A fourth component in the promotion of quality employment is the design of an appropriate regulatory environment. The complaints, often justified, of stifling bureaucratic regulation on small enterprise are well known, and the need to remove unnecessary ‘red tape’ is clear. There is often a need for more flexible regulatory frameworks, which can be adapted to specific circumstances without undermining basic objectives or core protective measures. The introduction of new regulations may be most usefully combined with promotional actions that improve conditions and increase enterprise capacity and competitiveness in an integrated fashion.

Assistance will be needed by entrepreneurs, workers and the self-employed to understand both the social and economic value of regulatory measures. The development of manuals, the promotion of training programmes and the use of self-help associations to share costs and organise assistance should figure prominently in these efforts.

Assistance might also be given in removing blockages or disincentives to the introduction of measures that raise standards. This may include, for example, measures that counter pressure from customers, such as lead firms, to reduce incomes and conditions, where lead firms are competing strongly on price factors and short-term cost cutting approaches18.

18 For example, as part of a strategy to move the San Franciscan small firm garment industry away from a cost cutting competitive strategy to one based on higher quality and higher value, initiatives in the mid-1990s to provide training and other technical assistance, as well as improved working conditions, were accompanied by efforts to promote compliance with labour regulations. In the past the pressure to not provide adequate working conditions, and not comply with labour laws, is said to have come from a tendency by suppliers to win orders from manufacturers by keeping prices low. Contractors blamed manufacturers for paying insufficient rates, whilst manufacturers said the issue was outside their control and lay in the province of the suppliers. However, manufacturers and contractors were persuaded to come together and cooperate by signing a written agreement which specifies a number of conditions, including, for example, delivery schedules, and compliance with labour laws - including the proper payment of overtime. Surveys have found that between 1992 and 1995 compliance with labour laws rose from 12 percent to 61 percent (Pyke, 1997a).

These situations underscore the fact that a key to the success is through systemic approaches rather than ones that focus entirely on an individual small enterprise supplier or sub-contractor. Within this context, powerful lead firms can play an important part by promoting better conditions in small enterprise suppliers and sub-contractors, sometimes referred to as Ethical Sourcing Strategies. This is where lead firms, possibly through negotiation with trade unions, commit themselves to only source from suppliers around the world that meet certain basic standards, such as, the core standards of the International Labour Organisation19.

19 Within the UN system, the International Labour Organisation has developed an international code of labour standards for member States to use as guiding principles for their own legislation. Of these, 7 are seen as ‘core’ or basic standards, of which nearly 100 states have ratified at least five of them, being: Conventions 29 and 105 on the abolition of forced labour; Conventions 87 and 98 on the rights to freedom of association and to bargain collectively; Conventions 111 and 100 on the prevention of discrimination in employment and equal pay for work of equal value; and Convention 138 on the minimum age for employment (child labour). Source: (ICFTU: 1996)

4.5 Towards a local, integrated and holistic approach

The four components highlighted above may be incorporated into a local holistic approach to developing competitive enterprise and improving the quality of employment and living conditions. A holistic approach such as this aims to develop a coordinated and supportive set of policies, programmes, and institutional actions that share common goals of constant improvements in competitiveness and conditions. Thus, the aim would be to embed small enterprises within an environment and culture that improves competitiveness and raises standards.

A possible means of achieving this coordination could be through a range of representative organisations and agencies. Beyond the usual tripartite members, these organisations should include bodies such as local authorities, universities, and various types of self-help organisations, regulatory authorities, welfare agencies, and financial institutions. A feature of such approaches is that they often bring together people from institutions that might not otherwise come into contact. Thus, members are required to address a number of social, educational, infrastructure and regulatory issues related to local enterprise competitiveness in a coordinated fashion.

Partnership approaches might involve representation on local or regional strategic development committees. In transitional countries, such an institution in the Czech region of Ostrava-Karvina is the Union for the Development of Northern Moravia and Silesia. This Union contains representatives from a range of organisations and is reported to be leading the regional process of change. The opportunities for consensus building and coordinated action facilitated by this institution is said to have helped restructuring and reduced the potential for major social conflict (Nesparova, publication forthcoming).

In advanced industrialised countries, processes of socio-economic dialogue have been largely decentralised, particularly in Western Europe and North America. Such processes are reported to have played significant roles, for example, in regions such as North Rhine Westphalia in Germany, Silicon Valley in California, and in parts of Italy (See: Patti Territoriali, Box 3)

Box 3

Patti Territoriali

The aim of the Patti Territoriali programme in Italy is to encourage a process of consensus building and partnership at the local level. Here representatives of employers’ and workers’ organisations, local administrations, specific enterprises, financial institutions and other interest groups come together to elaborate a written strategic development plan of action, to which all ‘partners’ formally agree to contribute, and from which all are expected to benefit. In such a pact or agreement, different institutions can agree to do different things, appropriate to their competence. For example, provincial and municipal administrations might promise to reduce ‘red tape’ and agree to specific times for providing authorisation from different regulatory bodies for new investments. Trade unions might agree to new flexible working practices or maybe assistance with training programmes. Employers might also agree to make specific investments such as new plants, or new production lines, or new machinery to improve productivity or quality, or to take on more workers; financial institutions might agree to provide credit, and provide it at favourable rates. By making such agreements, it is said, partners are given greater confidence to proceed with investments or other commitments; development strategies can be better-focused and coordinated; and more rational use made of possible funds and resources.

Source: Pyke, 1997b

An ILO initiative that goes some way to developing a holistic approach is the WIDE/IWEB initiative. IWEB seeks to address issues connected to business development and improvements in working conditions in an integrated and coordinated fashion. This includes the development of a regulatory framework appropriate to micro-enterprises. As part of IWEB, a range of initiatives are introduced. Training packages to teach improvements in business capacity and working conditions in tandem have been developed. Micro-enterprises are being linked up to business services. Intermediary and self-help organisations are being helped to improve their capacity to provide development services and to become engaged in policy networks. Supply chains and other network linkages are being strengthened with the aim of promoting equitable large and small enterprise exchanges and creating win-win situations. Attempts are also being made to improve the regulatory environment and compliance with regulations through a process of consensus building. This involves representative organisations, service providers, government actors and others (Miehlbradt, 1998b)20.

20 An assessment of a pilot implementation of the WIDE programme in Nepal, Malaysia and the Philippines was encouraging. Participating enterprises were reported to have introduced numerous improvements in both business development areas (marketing, finance, management, and production) and in working conditions within firms; also improvements were noted in areas such as family safety and living environments (Miehlbradt, 1998a)

Such kinds of local promotional initiatives aimed at raising enterprise capability and work conditions can also be linked into area-based social and welfare schemes that are suited to the situation of small-scale enterprises and their workers. This may include addressing the concerns of mobile labour forces associated with contingent or unstable work patterns.

In this latter respect, the idea of social security being provided on an area basis is being tested by the ILO for informal workers typically employed in micro-enterprises in Africa, India and Central America. Such schemes are aiming at full coverage within a specified area and are mainly run by local government in collaboration with a variety of possible social security partners (van Ginneken, 1998; 1999). Thus, through consensus building and coordination, job quality issues can be linked to a range of strategies to promote economic change. This can develop productive, high quality small enterprises associated with rising incomes and conditions.