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

This report identifies the training and development needs of the manufacturing sector through desk research of literature. Whilst preparing this report the opportunity was taken to discuss the emerging findings and the management capabilities of SME manufacturers with many individuals who have experience in the field. A list of the organisations and individuals contacted during the search for existing studies can be found in appendix 1. As it neared completion the report was circulated to the industry based staff teaching in the in the University of South Australia manufacturing management programme. Although there are not many studies that directly address the training needs of the managers of manufacturing SMEs in Australia there is plenty of evidence that there is a need for training in both hard and soft skills in the industry. This report takes the view that responding to the needs of small firms would be more difficult because of economic and structured constraints associated with their size.

In order to manage SMEs effectively in a highly competitive, rapidly changing and knowledge based economy a manager would require a wide range of both hard and soft skills. There is a growing recognition that a commitment to life-long learning or continuous learning is imperative in today’s economic climate. The Industry Task Force research in 1995 recommended the combining of hard and soft skills with life-long learning for managers and also indicated a blurring of manager’s and worker’s skill needs in future. The findings of this study are similar to the recommendations made by Rand in the Karpin report (Source: 33). In today’s economic environment it does not seem possible for any successful enterprise to have specialists with hard skills only or specialists with only soft skills. It is imperative that all managers have well-developed soft skills, in addition to the hard skills that are related to the specific manufacturing processes for which they are responsible. With the continuing trend towards leaner organisations and rationalisation of work, teamwork is inevitable and consequently it demands multiskilled workforces in all work processes including management. Some of the soft skills as identified in the present study are listed below. They are often grouped together as people management skills - skills required to effectively manage and develop human resources for high productivity. Under this category a number of specific skills were identified –

• Leadership skills
• Communication skills
• Cultural diversity management skills
• Interpersonal skills
• Problem solving skills
• Analytical skills
• Skills for managing pressure and emotional problems
• Network management skills

The training needs identified for hard skills are those related to lean and agile production, quality management, supply/global supply chain management, quantitative marketing skills and skills related to information technology.

There is a strong evidence in the sources studied that the Australian managers lack the understanding of concepts such as total quality management and continuous improvement. TQM is both a philosophy and an attitude towards management and at the same time includes specific approaches and methods. It is grounded in the principle of CI. The sources studied indicate that the majority of managers associate TQM with product quality rather than a philosophy of management and CI with improvement of product rather than a holistic and proactive approach towards improvement in all processes of management and functions. This is evident in the finding that SMEs are particularly slow in adopting the TQM and have not moved beyond ISO 9000.

Some of the industry specific studies indicated shortages in design skills, material management skills, product development skills and technology management skills in addition to lean and agile production management skills. An increasing need for computer literacy skills has also been identified.

Specific capabilities in various aspects of supply chain, logistics and inventory management are identified in some sources as the need for SME managers to understand how to work effectively in collaboration with suppliers, customers and competitors and enhance productivity.

Innovation consistently emerges as a driving force behind business prosperity and economic growth. The sources studied reveal a shortage of managers skilled in innovation and entrepreneurship indicating that the ideas are not being commercialised to their full potential.

The impact of e-commerce and its potential to enhance the productivity of manufacturing SMEs by reducing transaction costs through networks and global supply chains is highlighted (appendix 3). A separate section has been included under the heading of e-commerce and IT skills to highlight the importance and urgency of the skills required.

Creation of a learning culture throughout the economy is seen as essential for economic growth and to keep up with the changing needs. Firms need to become learning organisations that have capacity to continually learn from their experiences and to translate that knowledge into improved performance and competitive advantage (Source: 13). Human capital and skills are becoming increasingly important in a knowledge-based economy with technology and resources becoming more and more mobile. Training practicing managers is one way of improving the efficiency and productivity of the firms and realising their full potential. Although training is considered critical for competitiveness for Australia, there is evidence that the employers are spending less on training (Section 5.3 )

The Karpin report indicated that formal management education was considered as too time consuming, expensive and difficult to access. The VET system was viewed as rigid and not flexible enough to cater to the changing demands of the industry. In particular, the manufacturing training was based on traditional methods and did not recognise the changing needs of the industry. The literature also indicates that employers may not be able to appreciate the need for training and the relationship between training and productivity, which could be one of the reasons why the employers do not prioritise training.

This raises the issue for training to be demand driven and matched with the demands of the industry. The sources studied indicated that less formal, short term and more focussed delivery methods were popular and that training should be relevant, flexible and affordable. In order to make training more user friendly and demand driven, Smartlink has decided to undertake an evaluation of all events that take place.

It is very important to recognise that SMEs, particularly small enterprises, in the manufacturing sector are very important to the economy. This study recommends further research to be conducted to identify critical areas where training can play a role in their success.