Cultivating long-term relationships | Silvio Debono

Management Consulting is generally a misnomer. What is it and who needs it?

Management Consulting means different things for different people. Technically speaking management consulting can be defined as a process through which independent and professionally trained persons will look into the business in an objective manner. Over the years, the art and skill of management consulting has diversified and today one can find an array of specialisations in the field of management consulting.  

Unfortunately, there is the idea that management consulting is generally required by those who are experiencing some critical problems in their business. Albeit that this is also true, management consulting is also highly required by other organisations who would like to grow their business strategically.

What are the current business challenges in today's financial crises?

Managing a business venture in today's critical environment is hard work, requiring diligence and patience. Most of our Maltese entrepreneurs are very conscientious and hardworking with high doses of determination and eagerness to succeed. Islanders have a particular human survival personal kit which is quite rare. In the current Maltese context, the three most challenging hurdles are most probably cash- flow problems, business opportunities (particularly in times of recession) and overcoming unnecessary bureaucracy. A good businessman looks into the future and for new opportunities to generate growth.

Most businesses in Malta are SMEs. How different are these businesses from other bigger businesses? What are their specific particularities that distinguish them from others?

Different statistics show that SMEs in Malta account for around 80% of businesses which also account to around 20% of the private sector employment. Most of these companies employ between two to 20 people. This makes this sector particularly important and peculiar at the same time. In most cases, SMEs can adapt and adopt their own business model much faster than bigger organisations to overcome an array of market obstacles. 

By nature, SMEs are very sensitive to market trends and any small change in any market condition can seriously challenge their business model. A case in point was some of the government induced costs that were not sustained by some SMEs in various sectors of the economy. By and large, SMEs do not only vary in size but also in the way they operate their business model. Over the years, different policy makers have realised the importance of the sector and how this varies from other sectors.

How can one differentiate between family and business matters in SMEs?

Most of the SMEs in Malta are family-owned with a long family tradition. Differentiating family from business matters is probably one of the most challenging issues for Maltese entrepreneurs who have their family interest very close to their heart.  Second generation family members usually inherit the business model and make some slight adaptation to meet new trends.  On the other hand, research also shows that when the third generation takes over the business operation some further drastic changes are generally effected.

At this point, the business usually reaches a critical path and it either consolidates itself, or different family members take different routes and set up their own business venture. Contrary to what one may think, there is no one possible option to be looked into since every situation is different from each other.

Nevertheless, it is also evidently clear that hiring professional managers to manage the business venture is undoubtedly one of the main solutions that offer a more rational approach. Furthermore, a personal development plan for successors is also required to ensure that both tacit and implicit business knowledge is adequately transferred and shared. If this is carried out objectively, entrepreneurs  can ensure that proper business succession is maintained.

How ready are these businesses to change their business model?

Generally speaking, SMEs are immersed in their own business model, or should I say that the business model and the structural fabric of the SME is highly conditioned by each other.

In my opinion, rather than looking into whether SMEs are ready to change their business model, it is more appropriate to look into what are the current opportunities for SMEs to change their business model.  In this light, one can point out that while it is evidently clear that SMEs have a number of advantages over bigger companies, at times, their competitive advantage is constrained by a number of internal and external factors. These include lack of internal preparedness to meet new challenges on one hand to regulatory imposed conditions on the other. In most cases, SMEs are ready and willing to adapt and adopt their business model to meet the continuous changes in the market, thus moving from a survival mode to a growth trajectory.

How much are these businesses ready to invest in training and development of their employees? What are the immediate advantages for doing so?

Investment in human capital is undoubtedly a must for every business. There is ample proof that investment in employees pays back in the medium- to long-term. For example, on a personal level, a more competent employee becomes more productive and emotionally attached to his or her work, while on a professional level, trained and competent employees can deliver more effectively and efficiently.

By and large, SMEs are willing to look into the needs of their employees, though in addition to financial constraints, they are also shackled by manpower problems. SMEs require to double their effort to engage their employees on external training programmes or otherwise to organise internal programmes, since limited manpower disturbs the operational activity. Once again, policy makers should address this need and ensure that there are schemes that are specifically addressed to meet the needs of SMEs rather than offer one solution for all businesses.

What are the main hindrances for these businesses to compete with bigger fish in the market or do these business operate with their own niche' markets?

I am a firm believer that there is a place for big businesses and equally a place for smaller players in the market, though this does not imply that small businesses should not aim in getting bigger. From my experience it is obvious that some of the main hindrances for SMEs to compete with bigger players are investment opportunities, issues related to economies of scale, physical structural issues as well as externally imposed conditions.

While most SMEs find themselves working in a niche market, it is evident that a leading strategy for these businesses should be based on creating economies of scope, rather than economies of scale. SMEs cannot compete on basis of numbers, but rather on the differentiation of their products and services. When doing so, SMEs can thrive on their own success rather than condition their growth on their own constraints.

Some argue that SMEs require better networking while others are more in favour of franchising? What is your opinion about the different avenues SME can take to optimize their potential?

Networking and franchising opportunities do not exclude each other. While networking remains to be the key for exploring new contacts, franchising (particularly looking into foreign markets) has become a perennial step for SMEs to grow beyond their own shores.

In a small island state, where the business community members are known to each other, networking remains to be considered as the order of the day and one does not exclude that a substantial amount of business transactions are carried out on the basis of personal contacts and personal recommendations.

This is also part of our anthropological characteristic that is part and parcel of our societal beahviour. It has become an accepted norm. Nevertheless, bigger growth can be experienced over a shorter period of time if SMEs look into franchising opportunities outside Malta's shores.

In order to do so, however, Maltese SMEs need to look into their current business models and internal practices. Above all they must be well-organised to take their business model lock, stock and barrel to other destinations and generate even more success by involving others.

There is no one magic solution which generates results. SMEs, like most other businesses, should be encouraged to look into different options and create the best mix that best suits their needs based on their willingness and readiness to grow.

De Bono at glance

De Bono graduated Doctor of Business Administration from Maastricht School of Management specialising in Organisational Behaviour and Organisational Development. De Bono also holds a Master of Philosophy from Maastricht School of Management and a Masters Degree in Human Resource Management from the University of Malta and other management-related undergraduate degrees. He is the co-author of management books and management articles. He lectures with Maastricht School of Management, Grenoble School of Management and the University of Malta in HR Management Issues, Change Management, Organisational Development and Transformation, Cross Cultural Management and The Consulting Process.  He has gained professional international experiences in Europe, Asia, Africa, South America and the Gulf. His research interests are in strategic human resource management and development, managerial competencies, leadership and change. He also carries training programme in industry in Malta and abroad.

He has been directly consulting businesses for the past 18 years and among other professional activities he is the managing director of IDEA Management Consulting Services Limited. Most of consulting assignments are directly related to HR issues, organisational development and transformation, change management and business process re-engineering. Over the past few years he has been actively involved in working with a number of SMEs and family businesses in re-directing their business opportunities. De Bono also specialises in business process re-engineering with particular interest in introducing technology related solutions to ensure effective business turn around. He has been directly involved in the privatisation processes and participated in bond issues. He has also served as director in several companies in the management and technology related fields.

About IDEA Management Consulting Services Limited

IDEA Management Consulting Services Limited (www.ideamalta.com) was set up in 2005 to provide professional consultancy services and executive training to clients in Malta and overseas. Our team is composed of well-seasoned professionals with substantial years of experience in consulting and hands- on experience in different areas of management.

The raison d'etre of our consultancy model is based on building a professional relationship with the client. We believe that different clients have particular needs which can never be generalised. To this effect, while adhering to international consultancy benchmarks, our team boasts of looking into individual clients' needs and jointly develop an action plan in line with the needs and the client expectations and commitments. It is imperative to point out that during the past years, our organisation has been actively involved in a number of consulting and training projects in Malta other countries in Europe, South America, Asia and Africa and the Mena region.