This report details the findings of a qualitative assessment of the importance of skills in helping New Zealand firms meet their growth ambitions. This assessment is particularly focused on the role of ambition and skills in supporting firm growth and the extent to which skill shortages are a barrier to growth. Secondarily, the research sought to understand the role of management skills and communications in supporting firm growth
Key Results
Ambition and skills
The key finding of this research is that ambition is a key component for firm growth – without it, there is no impetus to grow the customer base or improve the performance of the firm. The willingness and ambition of companies to grow is complicated and often dependent on where they are in relation to their markets or their point in the business lifecycle. We found that companies that are more ambitious tend to funnel this ambition through strategic planning processes to create a plan for success and therefore growth. Companies with lesser ambitions are less likely to take a strategic approach to growth, are more reactive to market demands and see a greater detrimental effect from skill shortages not being addressed in a timely way.
The impact of skill shortages on growth can be significant. Our interviews revealed that companies with strategic plans around growth were more likely to bring in new staff before the business experienced productivity losses as a result of skill shortages. For many businesses, this means accepting short-term inefficiency in order to optimise the returns made possible by growth later on.
Management and communication
We know that high growth increases business complexity, thereby creating demand for leaders and teams who can efficiently and effectively adapt and react to change. Some firms that have experienced fast growth indicated that they could grow considerably faster but were unwilling because it would require implementing a management layer in the business – something they were not comfortable with. The primary cause of this discomfort is an unwillingness to cede control of elements of the company to outsiders who may have a different agenda or vision for the firm. These companies tended to be those in which the owner placed their personal ambitions ahead of any ambition for the business.
Firms that implemented management structures prior to entering periods of fast growth were among the highest-growth firms in our sample. In most cases, these firms implemented relatively flat structures that allowed the firm the flexibility to respond to change but formalised enough of the business to ensure that customer service, communication and reporting were not affected by rapid growth.
Businesses with a robust skill base are more likely to succeed in meeting the owner’s ambitions.
The skills that are used in operating the business are enablers of achievement, and these skills must work together in order to meet the demands of growth. To encourage this, firms use a range of communication tools and methods with varying degrees of formality. We find that the larger the skill base of the company, the more formalised communication is necessary. Firms with fast growth rates use communication, whether formal or informal, to ensure several things: that the vision of the company is understood by all; that the expectations of employees are clear and well articulated and that the right resources can be deployed in the right place at the right time.
Good communication is critical to ensuring the firm can successfully navigate periods of high growth without falling into chaos or collapsing under the strain of rapidly growing demand.
The remainder of this report details the findings of our qualitative research process and provides several examples (anonymously) taken from the transcripts of the interviews themselves. In addition to this report, the Ministry has been provided with a full set of interview transcripts (with identifying information removed).