Management Capabilities and Training Needs in Australia's Small-to-medium Size Manufacturing Enterprises:
an Analysis of Existing Reports and Studies

by Manjit Monga, PhD

1.1   Purpose of the report

Manufacturing is an important part of the Australian economy employing about 13 percent of Australian workers, more in the manufacturing states of New South Wales, Victoria and South Australia. The economic significance of the manufacturing sector is partly a result of its size as it is one of the few sectors which are large enough to make a significant impact on the current account deficit (Gelbar 1998). The significance is also a result of the potential for the sector to be a leader in the introduction of new methods in management and technology. The importance of this capacity for innovation is acknowledged in the vision for Australian industry described by the Industry Task Force (The Karpin Report). According to Karpin, by 2010:

• Knowledge, the ability to learn, to change and to innovate in this new marketplace, will be accepted as the more relevant criteria for selecting managers than gender, ethnicity or even prior experience.
  
• The ‘learning organisation’ will be the standard philosophy for many Australian enterprises and a major way they cope with change and turbulence.
  
• Managers will create conditions conducive to learning for both individuals and the enterprise as a whole, within and between groups, across individual business units and between enterprises and their external environments. Employees will be more motivated and skilled.
  
• Quality will act as a guiding light within all organisations with a customer first mentality being all-pervasive. This focus will help improve productivity and profitability in enterprises through a concerted commitment to continual improvement.
  
• Most Australian enterprises will earn higher rates of return on investment than in 1995 and successfully defend and expand their position in the global marketplace.(1995)

Despite the Karpin report’s vision, and efforts to make advances in management capability since that report, there remains a widely held view that the management capability of the small- and medium-sized enterprises (SMEs) in the Australian manufacturing sector is below that needed to meet the competitive pressures which come from an increasingly global economy. Small- and medium-sized firms provide a substantial portion of the value-added and employment of the sector. 45% of manufacturing employees are employed in firms with less than 100 people, and these firms contribute 43% of the value which is added by the manufacturing sector. (ABS Cat No 8221.0)

Improved management capacity is essential if the sector is to contribute effectively to economic growth. One way to bring about further improvement is through training and development of existing managers, and this report is an examination of the training needs of this group. It’s principal intention is to contribute to the development of modern management capabilities, best practice and a learning culture among SMEs in the Australian manufacturing sector by determining which management training and development needs have top priority for them.

It also meets a requirement of the Technology Diffusion Program (TDP) grant provided by the Department of Industry Science and Resources (DISR) to assist in the establishment of Smartlink: The National Institute of Manufacturing Management.

1.2   Scope of the report

In recent years there have been a number of studies which have addressed, either directly or indirectly, the management capability of Australian manufacturing SMEs. These studies form the principal basis for this report.

This report is clearly focussed on Australian SMEs in the manufacturing sector. A formal cut-off for ‘small- and medium-scale’ has been defined as enterprises employing less than 200 workers, consistent with the definitions of the Australian Bureau of Statistics (ABS). However a number of the recent and relevant studies have either not been rigid about the definition of an SME or have adopted similar but not identical definitions. For example, restricting themselves to firms with less than 100 employees, or defining the target in terms of ‘tiers’ in the automotive industry supply chain. In some cases the cut-off point is 100 employees. The purpose of this report is not to obtain statistically homogeneous data, but to identify the most widely accepted management capabilities and training needs.

‘Manufacturing management’ is taken to include the management of the strategic, market, design, engineering, materials, operations, brand, commercial/finance and promotional aspects of manufacturing and manufactured products including software. Once again, not all prior studies define manufacturing in this way and some of the studies included in the report are concerned with SMEs in all industry sectors. Where the findings of such studies are relevant they have been included. A complete list of the sources along with the scope of each study or report can be found in Section 4.

In looking at training needs this report considers both the content requirements, what capabilities need to be improved, and methodological requirements, which is how should the

training and development be done. It looks at needs on an Australia-wide basis. Some of the underlying studies are based on individual states. Although there are differences in the character of manufacturing in various states, there is no evidence to suggest that there are significant differences in either the actual or required management capabilities across the states.

Changing global market conditions and technological change act to render obsolete studies which have been done some time ago, and thus any assessment of training needs made today cannot rely too heavily on studies made at earlier times and in different conditions. Only studies completed since the Karpin report which published in 1995, have been considered. While a later cut-off date would have been preferable, the number of available studies would have been significantly reduced, by a say, 1998 cut-off, and Karpin provides a widely recognised water-shed in the study of management in Australia.

As described in the introduction, and in accordance with the requirements of the TDP contract, the report assesses the management capabilities of Australia’s manufacturing SMEs based on existing studies and identifies gaps in those capabilities that may be filled with some educational direction.

The steps undertaken in the preparation of the report are:

• Identification of existing studies;
• Development of a classification scheme for identification of capabilities;
• Analysis of the studies and collation of the findings;
• Drawing conclusions, including a comparison of the identified priorities with those listed in the Smartlink TDP grant submission.

Existing studies were identified by discussion with authoritative sources in government departments, other agencies and in industry, and by library search. A classification scheme was established which divided the training needs into three categories – hard skills, soft skills and diffusion methods. This classification was based on the training literature.

The academic literature also provided a basis for assessing the relative position of Australian SME managers with their international counterparts. The priority needs that were established by the third phase of the study were then compared to the list of priority needs included in the submission to DISR which were -

• Lean and agile production
• Supply chain management
• People Management
• Management of networks and collaboration

2.1   Identification of existing studies

A list of those contacted as part of the search appears in Appendix 1. A frequent comment, particularly from industry representatives and managers, was that there was very little formal study done in the area. As the table shows only two sources were identified which specifically address the management capability of SMEs in the manufacturing sector of the Australian economy.

Table

A = Australia
S = Specific findings for SMEs
M = Manufacturing sector
G = General management
L = Large enterprise
F = Individual state focus
I = International comparisons
T = Training, diffusion, and delivery

However, the table explains why other sources have been included – they address management in SMEs without singling out manufacturing, or make international comparisons, or address manufacturing management capability in Australian industry without specifically identifying SMEs as a distinct group, or report on studies carried out in a single state or region. These sources include reports commissioned by various State and Federal Government agencies, and academic research done in this domain. In addition to this published data, other less formal Australian sources have been included to enhance the current assessment of needs. A list of the sources and a summary of the relevant material from each source is presented in Section 4.

3.   Classification of training needs

The vision for Australian industry expressed in the quote from the Karpin report (cf Section 1.1) alerts readers to the fact that successful managers need a wide range of skills, from an understanding of quantitative methods (e.g. accounting and statistical methods of quality control) to issues which might properly be included under a heading such as philosophy (e.g. one’s own approach to learning and change). This seems in itself to be a useful finding, and to emphasise it the report adopts a two-fold division of training needs into hard and soft skills. Hard skills include the functional skills required for manufacturing processes such as total quality management and continuous improvement and soft skills include the people management skills, interpersonal and leadership skills and cultural diversity management skills.