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close this bookTraining Entrepreneurs for Small Business Creation: Lessons from Experience (ILO, 1988, 154 p.)
close this folder3. Organisation and administration
View the document(introduction...)
View the document3.1 Institution
View the document3.2 Staffing
View the document3.3 Financing
View the document3.4 Evaluation

(introduction...)

With such a variety of associated activities required for a co-ordinated programme for entrepreneur development and business creation, it would be difficult indeed to imagine that a single organisational format would be prescribed. If the infrastructure organisations already exist, a small group of experts to design the programme and co-ordinate the efforts of the other participants may be all that is necessary. Such a group may be constituted as part of one of the existing organisations, such as a development bank or management training institution, or be set up as a separate body. It may be simply a training body but it may also have to incorporate other functions if gaps exist in the infrastructure.

3.1 Institution

On the other hand, national attempts to develop entrepreneurs usually require an organisation with national status. Many developing countries face not only gaps in the infrastructure but also serious quality problems with those organisations that do exist. Further, entrepreneur development on a national scale, particularly when disadvantaged target groups are involved, cannot be expected to be conducted on a self-financing basis. Even if the entrepreneur development effort plays a co-ordinating role, it will need the status, prestige, a subcontracting budget that commands respect, and a position in the priorities of the infrastructure organisations. Such requirements dictate the involvement of the government.

However, government organisations have severe limitations when dealing with private sector programmes. The imposition of bureaucratic structures and the appointment of permanent staff with civil service emoluments and attitudes curtail the flexibility of the organisation as well as its credibility with small-scale business owners and the private sector. Staff with the requisite entrepreneur training expertise and private sector know-how are not likely to be attracted by civil service remuneration. At the same time, an entrepreneur development programme is likely to be rather small in budget and staff when compared to other government activities and thus it would be difficult to appoint a head of the programme with sufficient rank and status to command the respect of other co-operating government departments.

The compromise solution is usually to create a separate grant-supported body, with a board of directors including representatives from government, trade associations, chambers of commerce, commercial and development banks, small business associations, and entrepreneur associations. An example of a comprehensive entrepreneur development structure is given by India.

At present, EDP work is being undertaken by over 50 different agencies in 20 states all over the country. Some of the agencies engaged in EDP work may be grouped as follows:

1. Twenty-five Small Industries Service Institutes (SISs) set up by the Government of India. They conduct programmes primarily for fresh engineers, technical diploma-holders and unemployed science graduates.

2. Thirteen Technical Consultancy Organisations (TCOs) jointly sponsored by all-India financial institutions Industrial Development Bank of India (IDBI); Industrial Credit and Investment Corporation of India Limited (ICICI); and Industrial Finance Corporation of India (IFCI), along with State-level financial institutions and banks. TCO programmes for entrepreneurship development are meant for young graduates, educated unemployeds, and in some cases, experienced employees, traders and women.

3. Some 10 to 12 other agencies such as nationalised banks, management institutes and voluntary organisations. Universities and colleges also are now beginning to start EDPs by way of a few elective papers as part of their regular courses of study.

Recently the following central institutions have been formed.

(a) Entrepreneurship Development Institute of India (EDI-I) set up at the initiative of Industrial Development Bank of India, with support from Industrial Credit and Investment Corporation of India Limited, Industrial Finance Corporation of India, State Bank of India and also the State Government of Gujarat. EDI-I located at Ahmedabad has started functioning from early 1983.

(b) National Institute for Entrepreneurship and Small Business Development (NIESBUD) set up at the initiative of Ministry of Industry, Government of India, has started functioning from Delhi in early 1984.1

A national umbrella organisation requires a strategy for executing its programmes on a regional and/or local basis. The delivery agencies that the umbrella organisation will work with may differ from community to community but their characteristics have been well described by the Xavier Institute:2

It must be entrepreneurial in culture and outlook. This does not mean that it must be run for profit or on commercial lines but that it has the characteristics which are identified as belonging to the essence of entrepreneurship:

Characteristics of



The entrepreneur

The institution



(a) Self-employment.

(a)

Be autonomous and relatively free from outside control.



(b) Innovation.

(b)

Readiness to try out new programmes. Not be constrained in a formal system of education.



(c) Responsibility for finances.

(c)

Dispose of own financial resources, and have discretion about their use. Not depend entirely on donor agencies.



(d) Risk taking.

(d)

Risk taking.

If particular target groups are being aimed at, the agency should relate to the local environment and people, and have good relations with the local government agencies, banks, district industries, retailers and other members of the business community. Its operation will be enhanced by the existence of a local steering committee, such as that used by the Community Economic Development Programme of the Entrepreneurship Institute for the following purposes - to:

- create linkages between the public, private and university sectors of a community, thereby enabling existing business resources contained in those communities to operate more effectively on behalf of smaller enterprises (creating the entrepreneur support network);

- reach out, identify, and select individuals with sound ideas for growing enterprises, as well as entrepreneurs who have young firms which they would like to see grow (outreach and entrepreneur identification);

- develop a mechanism to bring together the entrepreneurs with the good ideas and the entrepreneurial support network in a manner which will enable contacts to be made, information to be exchanged, and business problems to be solved so the entrepreneurs can rapidly move forward in implementing their business plans.3

3.2 Staffing

Patel has identified the manpower resources for effective entrepreneurship development programmes as of four types:4

(a) project leaders, trainers, motivators, possessing required skills and qualities to organise EDPs effectively;

(b) specialised expertise for strengthening entrepreneur selection process for EDPs and promotional institutions;

(c) motivation development expertise to strengthen training and development programmes presently biased in favour of information and management inputs; and

(d) improving entrepreneur appraisal capability of credit officers in commercial banks so as to increase the banker’s confidence in the new, first-timer entrepreneur.

The balance between expertise and motivation of the staff has often been a matter of debate, although at best one would want both characteristics and there is little reason why this should not be attainable. There can be little doubt that highly committed amateurs often accomplish a great deal at less cost in entrepreneurship development, as the record of many voluntary agencies attests:

Many would argue that the style and procedures of an intervention are at least as important as its more substantive elements. These individuals see project impacts influenced significantly, for instance, by the extent to which those most responsible for a project’s design and implementation were sensitive to the personal needs of beneficiaries, and the differences among them; and by whether they have the flair or charisma which makes their ideas attractive and the prospects for a goal achievement seem bright. Such skills may make average or even poor projects successful. They see significance, as well, in the degree to which project officials display concern and capacity for adaptation, for an accommodation of existent social and economic activities within the project framework.5

But with a number of organisations now offering very good training programmes for entrepreneur developers, there is no reason why highly committed individuals cannot also acquire improved expertise.6

3.3 Financing

Government grants will be a significant component of the operating budget of any umbrella organisation. The heavy commitments of staff time for such activities as liaison with infrastructure organisations, researching and updating practices with regard to selection methodologies, training methodologies, training materials, training of trainers, evaluating programme performance, lobbying for appropriate government policies, etc., are overheads that should not normally be recovered from participants’ fees. Programmes undertaken for specific social benefits - e.g. the development of disadvantaged target groups - should not expect the beneficiaries to bear the full cost. But government grants should not be the sole source of revenue for the organisation(s). An example of the variety of sources of funding available to local entrepreneurship development organisations is given by the Calcutta “Y” Self-Employment Centre (CYSEC).

CYSEC is operated on a day-to-day basis by a paid administrative staff, selected by the Board. In addition there is an accountant, a project superintendent, a senior project officer, three project officers, teachers and three office support staff.

CYSEC funding has come from a variety of sources over the years. In 1978 its operating budget was Rs.367,112. It received Rs.251,283 from the Mennonite Central Committee in the form of a grant for general overheads and Rs.21,000 for the Capital Fund. It received from Kanoria Chemicals Ltd. Rs.1,000; from Kothani Foundations Rs.1,000; from Union Carbide Rs.2,000; from the Government of India Rs.25,414; from sales relating to the Production-cum-Training Centre Rs.99,886; from unused materials Rs.8,242; from interest on the Revolving Credit Fund Rs.2,888 and from fees from trainees Rs.850.

The variety of funding arrangements common to the 54 programmes surveyed by Harper is summarised as follows:7

Thirty per cent of the programmes were run and paid for by voluntary agencies, and it may be significant that most of these were locally based rather than of foreign origin. Although the research contacts were naturally often involved with aid projects, only 20 per cent of the programmes were actually paid for or otherwise supported by bilateral or multi-lateral foreign agencies. Participants themselves covered most of the cost of four of the programmes, but national or state governments were by far the most important source of sponsorship.

Programmes aimed at larger-scale entrepreneurial ventures will, of course, be looking at different categories of intake. There is no reason why these programmes should not be self-funding and, in fact, generate a surplus to subsidise other target groups in part.

In the initial stages of an entrepreneurship development programme, budget allocations from a stable source such as the government or a development bank will ensure a period of time for planning. Ideally this should be sufficient to allow the programme to start with small pilot projects, building on success, until participant fees and private sector participation makes it less dependent on such allocations.

It is important that the organisation’s funding is not solely from the government and that the amount of government funding does not vary with the amount of external financing received. This allows the organisation sufficient flexibility to be somewhat independent, and to add and delete initiatives in response to changing conditions.

3.4 Evaluation

All effective entrepreneur training programmes for business creation conduct monitoring and performance evaluation. While there are substantial issues with regard to what should be measured and the appropriate methodology, evaluation is an essential tool not only for determining the effectiveness of the training but also for making continuous improvements in training, cost effectiveness, and sponsor support.8

In his survey of entrepreneurship development, Harper contacted over 100 programmes and received replies from 52, of which 33 could supply data on the success of their trainees.

As Patel points out:9

Despite a variety of programmes for diverse target groups, in most countries these are not adequately documented and evaluated. An adequate mechanism to monitor the programmes is missing, and therefore data on how many units are set up, expected to start, and among those which have started, how many are successful, what is their profile, are not available.

Final performance analysis of the enterprises is an important test of any entrepreneurship development programme. Whatever the quality of selection or training, if the units do not survive long enough to face the environment, something is wrong somewhere in effort, and it is in this critical area that most EDP organisations are silent. No judgement therefore can be passed on the effectiveness of their target groups, selection methods, training inputs, follow-up, support system, etc.

But even where such performance measures exist they are usually the result of a co-ordinated package of services such as indicated in the above discussion of infrastructure. This global measure may mask deficiencies in individual components. Comparison of the performance of those trained with those who applied but were not selected is rare, while comparison of performance given various combinations of achievement motivation training, management training, technical training, selection techniques, business planning, financial assistance, and extension services is not much more common.

Furthermore, each component can vary considerably as well. Are programmes which use interview techniques to select applicants more successful than those which use application forms or psychological measurements? Which topics in marketing, production, finance and personnel should be covered in the management training component? Are some combinations more successful than others? Do training programmes of different lengths have different results? Some of these questions were addressed in the Harper research previously cited. But in general insufficient data existed to reach firm conclusions and much research remains to be done on these and other questions.

While occasional examples of such evaluation can be found, much remains to be discovered. Good programmes recognise this need and include rigorous evaluation as an important part of their ongoing activities.

The Bangladesh Management Development Centre programme is an example of a programme which not only uses global measures but also attempts to assess the effectiveness of each of the components.10 While a comparison between those selected and those not selected is not made, other evaluations are conducted. The object of the programme is to have trainees achieve self-employment. The object of the selection and training scheme is to have trainees produce viable proposals for self-employment projects. The selection component is assessed on its ability to differentiate those who will produce a valid project proposal from those who will not; the training programme is assessed on the proportion of trainees producing a project proposal acceptable to the Project Appraisal Committee; and the credit component is assessed on the proportion of valid projects implemented and doing well in practice. Thus:

- 306 youths selected, of which 300 submitted project proposals after training.

- 228 projects approved by Project Appraisal Committee, therefore efficiency of selection + training = (228/306) x 100 = 74.5 per cent.

- 177 doing well in business, therefore efficiency of credit component = (177/228) x 100 = 77 per cent.

- 177 out of 306 selected doing well in business, therefore the efficiency of the programme = (177/306) x 100 = 59 per cent.

No doubt this type of monitoring and critical self-appraisal contributes to a success rate significantly above the average for entrepreneur training and business creation schemes.

Most developers will be familiar with the difficulties of getting business people to keep financial records so that they know how well they are doing and can make decisions on changing what they are doing. They will also be familiar with the next task, which is to get them to set budgets for monitoring future performance. The same thinking should be used by developers themselves and applied to decisions about their programmes. Objectives must be set for each component of the programme, measures of performance should be formulated and performance should be monitored. Just as a successful business will find certain departments not performing up to a standard and take action to make changes, so too must an entrepreneurship development programme be prepared to change, add or delete a component in accordance with a measured analysis of its contribution to the overall objective.

Those entrepreneurship development programmes reviewed in this monograph which have the longest record of success are all characterised by this emphasis on research, performance measurement and the documentation of results. They are prepared to subject their work to critical review and in so doing not only improve their performance but also earn the respect and support of their sponsors and clientele.

Notes

1 Patel, V.G.: Entrepreneurship development programme in India and its relevance for developing countries, paper prepared for the Economic Development Institute of the World Bank (Ahmedabad, Entrepreneurship Development Institute of India, 1985).

2 Xavier Institute of Social Services: Training village entrepreneurs: Guidelines for development workers (Ranchi, India, 1980).

3 The Entrepreneurship Forum is used for business opportunity guidance in the programme offered by the Entrepreneurship Institute, Columbus, Ohio, United States.

4 Patel, 1985, op. cit.

5 Hunt, Robert W.: The evaluation of small enterprise programs and projects: Issues in business and community development (Washington, DC, Agency for International Development, Office of Evaluation, 1983); and idem: Approaches to small enterprise development for PLAN International. Draft of a paper prepared at Illinois State University (Illinois State University, 1984).

6 For example: International Centre for Advanced Technical and Vocational Training, Turin, Italy; Entrepreneurship Development Institute, Hyderabad, India; University of the Philippines Institute for Small-Scale Industries, Manila, Philippines; Cranfield School of Management, Cranfield, Bedford, United Kingdom.

7 Harper, Malcolm: Entrepreneurship for the poor (London, Intermediate Technology Publications, 1984).

8 Goldmark, Susan G. and Rosengard, Jay: Evaluating small-scale enterprise promotion: State-of-the-art methodologies and future alternatives (Washington, DC, Development Alternatives, Inc., 1981); and Johnson, Peter and Thomas, Barry: “Training means (small) business: An economic evaluation of the new enterprise programme”, in Employment Gazette (London), Jan. 1983.

9 Patel, 1985, op. cit.

10 Chowdhury, A. Momin: A behavioral model of entrepreneur-ship development for self-employment of educated unemployed youth in Bangladesh (Dacca, Bangladesh Management Development Centre, 1981).