Small and medium enterprises (SMEs) account for 99.3 per cent of all private sector businesses in the UK, according to the Federation of Small Businesses, and they contribute significantly to the economy of the country.
While big corporates often hog the limelight, SMEs constitute the backbone of the country’s production system: they generate wealth and are great implementers of innovation to support future growth. During the most recent economic crisis, many small businesses sprang up – often as an alternative to unemployment – offering a source of new ideas and practices. Key to the success of many SMEs are their flexibility and adaptability, as these enable them to be competitive and stand out in the market.
From a business management point of view, this suggests that, at least in theory, SMEs should be great users of project management methodologies to implement change and support development. Yet, SMEs are actually less inclined to use formal project management than their bigger counterparts. So, what are the reasons for this?
The majority of the strategic activities that SMEs carry out in order to develop their business, expand their market presence or increase their efficiency and productivity could be considered as projects.
In many cases, they are not perceived that way by the organisation itself, however. As a result, they are managed internally in an informal way, which often results in the lack of a structured approach and planning.
More formal tools are usually used when it comes to ‘external’ activities whose outputs are mainly created for the benefit of clients and/or stakeholders outside the organisation. This entails the development of more structured project plans and communication strategies to report and monitor progress. Similarly, the need for specific technical or strategic expertise is also a reason for using more formal project management methodologies. Nevertheless, most of the time SMEs run projects as part of their business-as-usual activities without feeling the need to use formal project management techniques.
In many cases, the reason for this is that, having never used project management practices and tools before, SMEs might not see how they could benefit from them. From their point of view, formal project management methodologies can appear quite complex and costly. An organisation might not have the budget and the resources to hire an external project manager or to train internal staff. Time is another issue: implementing a more structured process feels like overburdening the organisation with even more work that might interfere with the performance of daily tasks. SMEs prefer small-scale, short-term, one-off initiatives to long-running, costly and time-consuming projects. The latter are perceived as highly disruptive and a waste of resources that could be allocated more effectively to other activities.
Benefits to SMES
If used properly, however, project management could be key to the successful development of an organisation. By definition, an SME is characterised by its ability to easily adapt to market changes and by its lean organisational structure. This results in the creation of a more dynamic environment and a quicker decision making process, both favourable elements for the implementation of change.
Still, flexibility and adaptability often lead to a lack of a formal strategic plan and to an inability to quickly convert ideas into action. Failing to implement change could be detrimental for SMEs and getting a project wrong could have serious long-term repercussions for the organisation. Project management tools can be instrumental to introducing key elements such as formal planning and risk and resource management, and to give a structure to otherwise scattered activities. In these cases, it would be very useful for SMEs to use project management tools and methodologies and/or have professionally trained individuals within the organisation.
Overall, the opportunity for SMEs to capitalise on the benefits offered by project management is substantial. The challenge, however, is to find a way to make project management more readily accessible to SMEs.
This article first appeared in the 2015 Autumn edition of Project Journal.