2/2015

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Danish Journal of Management & Business

Vol. 79, no. 2, September 2015 Formerly published as Ledelse & Erhvervsøkonomi

2/2015

Introduction

Facilitation as a management discipline to support organisational development processes

How can SMEs support growth in a low-growth region?

A longitudinal study of SME growth facilitation

Cluster Management Institutionalisation

Judgment in an auditor’s materiality assessments Editors’ Corner

Danish Journal ofManagement & BusinessDjøf Publishing 137 GothersgadeDK-1123 Copenhagen Danish Journal of Management & Business2/20

Djøf

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3 Introduction

Dana MinGaeva

7 Facilitation as a management discipline to support organisational development processes

Laura Møller and René Chester Goduscheit

21 How can SMEs support growth in a low-growth region?

A longitudinal study of SME growth facilitation

Annabeth Aagaard and Martin Senderowitz

37 Cluster Management Institutionalisation

Jeppe Agger Nielsen and Leo Normann

53 Judgment in an auditor’s materiality assessments

Rikke Holmslykke Kristensen

67 Editors’ Corner

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Introduction

Dana Minbaeva

This volume of the Danish Journal of Management and Business contains four very different papers that have only one, yet important thing in common.

The first paper by Laura Møller and René Chester Goduscheit »Facilitation as a management discipline to support organizational development processes« opens the

»black-box« of facilitation as a management mechanism. The article offers a conceptu- alization of facilitation and provides a demonstration of how facilitation may be used as a tool in organizational development process.

In the second paper by Annebeth Aagaard and Martin Senderowitz »How can SMEs support growth in a low-growth region: a longitudinal study of SME growth facilitation« posts an interesting question: what creates growth in small and medium-sized enterprises? The article describes key internal business processes (previously »black- boxed«) and identifies six key growth-facilitating themes that contribute to the firm growth.

The third paper by Jeppe Agger Nielsen and Leo Normann »Cluster Management Institutionalisation« explores a new management form – cluster management - in Dan- ish public sector organizations. By demonstrating how cluster management could be adopted and translated into a »ready-to-use« management tolls, the authors contribute to a deeper understanding of the earlier black-boxed construct and point out to the ways of its potential operationalization.

The fourth paper by Darmer et al. »Co-creating new meanings: towards the patient- centric hospital?« discusses the learning from a management experiment. The insights from this user-centered and employee-driven process confirm: when employees take ownership, change and implementation become two sides of the same coin. The authors conclude: innovation comes from people, but it requires a professional leadership to make it happen. In this respect, the article gives a good example of how management innovation happens. And it is another »black box« that needs to be opened.

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Danish Journal of Management & Business nr. 2 | 2015

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The final paper by Rikke Holmslykke Kristensen »Judgement in an auditor’s materiality assessments«, the authors are discussing one of key audit concepts – the concept of materiality. Specifically, they are interested in getting a deeper understanding of how the auditor’s judgement is made. Using audit judgement and decision making theory, the authors attempt to crack the »black box« of professional materiality judge- ments and shed lights on some of its content.

The Editorial Corner of this issue also has something in common with the above papers. Instead of asking whether we believe in management and leadership, Bukh et al. question whether we dare not believe in management and leadership. They discuss the realities of new environment. What is this and what kind of implications does it have for our understanding of the (role of) management and leadership? They conclude that what we know so far about this »new environment« or »new business space« is that it is characterized by permanent change, crisis, unknown and unstable.

The rest is a »black box«.

You have by now guessed what these articles have in common – »opening the black- box«. This refers to researchers’ attempts to understand the internal workings of a given system. In social science, we assume that the ultimate aim of scientific endeavor should be to identify and theorize the causal mechanisms – the »cogs and wheels«

(Elster, 1989: 3) – that produce the observed associations between events. In this view, cracking of the »black boxes« is our ultimate goals. Admittedly, and quite often, we conveniently allow »black boxes« in our research logic and theoretical models. And it may sometimes be justified in terms of explanatory parsimony (Coleman, 1986). How- ever, the true understanding of social phenomena requires a detailed »internal analysis of system behavior« (Coleman, 1990:3) and explanation of the underlying causal mechanisms. Let’s put this on the top of our future research agenda.

References

Elster, J. 1989. Nuts and bolts for the social sciences. Cambridge: Cambridge University Press.

Coleman, J. S. 1986. Social theory, social research, and a theory of action. American Journal of Sociology, 91(5): 1309–1335.

Coleman, J. S. 1990. Foundations of social theory. Cambridge/London: The Belknap Press of Harvard Univer- sity Press.

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Laura Møller Project Manager VIA University College Innovation and Career Chr. M. Ø stergaards Vej 4 DK-8700 Horsens e-mail: lau@via.dk

René Chester Goduscheit Associate Professor

Centre for Integrative Innovation Management

Department of Marketing

& Management

University of Southern Denmark Campusvej 55

DK-5230 Odense M e-mail: rene@sam.sdu.dk

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Facilitation as a management discipline to support

organisational development processes

Laura Møller & René Chester Goduscheit

Abstract

Private and public organisations conduct an ever increasing number of development workshops, and the focus on effective meetings and structured development processes is significant. On the basis of a literature review, this article elucidates the concept of facilitation and demonstrates how facilitation may be employed as a method to support organisational development processes. The article unfolds the concept of facilitation, identifies the processes that merit facilitation and demonstrates how facilitation work may be approached. The first step in the process is acknowledgement of the need for facilitation and ensuring backing for the work required. Preparation of the processes is a main focus of the literature in the field, and several studies stress the advantages of using a model to structure the preparation and execution of the process. Facilitation per se and serving as a facilitator both require a series of competencies, personal as well as methodological, which are very much centred around group interaction. The final phase of development processes, i.e. implementation/execution, is not a main focus in the literature despite an increased focus on this dimension in, e.g., innovation literature. This article presents a range of reflections related to the implementation phase.

1. Introduction

The concept of facilitation is gaining an ever stronger foothold in a range of different contexts, and it has become normal to hear that development, processes and collaboration need facilitation (Harvey et al., 2002). Many organisations host facilitating workshops and their popularity among the managers that initiate facilitating workshops is based more on good personal experiences than on research-based and documented effects (Mezias et al., 2001). In addition, innovation policy initiatives tend to embrace facilitation as a means to change for instance innovation within the companies that

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are subject to the innovation mechanisms. An example is the Future Food Innova- tion¹ initiative in the Central Denmark Region, which systematically and pervasively employs facilitation with the view to strengthen the innovation power and ensure an internationally competitive food industry in the region. The present literature review is an integral part of the formative dialogue research, which is connected to the Future Food Innovation initiative.

Several research projects have demonstrated that a new need for facilitation has arisen in a range of contexts (i.e. management) along with a need for in-depth research in the field (Clawson & Bostrom, 1995; Amy, 2008). If long-term benefits are to be reaped from the implementation of facilitated workshops, organisations and managers need to think more strategically about facilitation of development and change (Grinyer, 1992; Vreede & Briggs, 2005). The establishment of novel intellectual constructs and the creation of shared images and readiness to change in the organisation are prerequisites to targeted work on development and to a successful implementation (Mezias et al., 2001; Grinyer, 1992; Amy, 2008; McNeil, 2001). And a strong focus on the establishment of novel models – intellectual as well as process-related and the use of novel methods in the management of development (including facilitation) may be instrumental in allowing organisations to harness the full potential of staff resources and therefore in achieving a higher quality and in generating more learning, more growth and increasing earnings (Ozcelik et al., 2008; Hayne, 1999). The use of facilitation as a management tool in modern organisations may therefore be considered part of the efforts needed to face a real-world context characterised by increasing variabil- ity and uncertainty (Mønsted & Poulfelt, 2007).

This article presents a literature review to elucidate facilitation as a management discipline and aims to contribute to establishing a foundation for the use of facilitation to underpin organisational development processes.

2. Definition and scope

Facilitation may be described as a process in which a person (facilitator/process manager) is dedicated to bringing into play the knowledge of the participants, and to achieving that they collaborate better and more effectively towards the established objective (Bens, 2007; Grinyer, 1992; Westley & Waters, 1988, Harvey et al., 2002; Brix et al., 2012). Facilitation is a way of assisting collaborative processes towards a shared goal by employing a range of methods and tools (Kolfschoten et al., 2007); and facilitation may occur both before, during and after, e.g., a meeting (Clawson & Bostrom, 1995). A facilitator may be likened to a conductor, whose objective is to ensure that the orchestra plays together optimally to provide a sublime concert (Hayne, 1999). The facilitator, then, serves as a catalyst of the efforts made to ensure that the participants collaborate optimally to create something new (Westley & Waters, 1988).

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Facilitation as a management discipline to support organisational development processes The transition from a rather controlling management style (management) to a more coaching management style (leadership) has spurred the need for facilitation (Yang, 2006; Clawson & Bostrom, 1995). For many years, facilitation has been used in connection with isolated meetings and development workshops, but now there is a trend towards a more facilitative management style (Bens, 2007; Amy, 2008). In this context, facilitation becomes a generalised management principle rather than a tool used ad hoc in specific contexts (Hayne, 1999; Vreede & Briggs, 2005). This is not to say that facilitation is not employed at specific meetings or workshops. It simply underlines that facilitation also forms part of other management situations such as the creation of a positive working environment and staff development efforts (Yang, 2006; Ozcelik et al., 2008; Amy, 2008). Finally, much research seems to indicate that there is a need to study how the capacity to facilitate may be trained and underpinned with a view to preparing middle-tier and senior managers so that they can meet this new demand (Yang, 2006; Amy, 2008; Clawson & Bostrom, 1995; Westley & Waters, 1988).

The coaching management style in which facilitation and facilitative properties are gaining a footing was described in several contexts in the literature – e.g. coaching and change management (Orth et al., 1987; Evered & Selman, 1989; Popper & Lipshitz, 1992; Kavanagh & Ashkanasy, 2006; Worren et al., 1999). Therefore, this article will focus specifically on how the development processes of organisations may be underpinned by facilitation as an ad hoc management discipline, i.e. through facilitation of meetings, workshops, etc.

3. Method

Literature reviews may adopt one of two main approaches: the systematic or the narrative approach (Tranfield et al., 2003). In the systematic approach, an open search is made in academic databases such as the Thomson Reuters Web of Science to identify all publications covering a specific research field or topic. The search is generally performed using a Boolean search string related to the theme, abstract, keywords and/

or the title.

In the narrative approach, the researcher performing the literature review to a greater degree employs his or her background knowledge about the research field or topic.

Most frequently, narrative reviews are based on a pivotal article (the signature article) within the given topic; and from there, the »narrative« of the topic is established by describing the signature article and any central references used in this article (up- stream references). Furthermore, the narrative approach focuses on the sources that have subsequently referred to the signature article (downstream references). The review, then, describes if any articles have been published after the signature article that extend, detail, and criticize, etc., the points made in the signature article in a manner contributing significantly to the research field or topic.

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This article is mainly based on the narrative approach. The signature article is Mezias et al. (2001) as it is one of the first articles to provide an in-depth description of how organisations may work systematically with, e.g., development workshops. On the basis of a comprehensive data material from organisations such as the IBM, Intel and un-named larger companies within telecommunications and computer software, the article develops the so-called CHANGE model. The model is based on the below six phases: Commitment, Holistic approach, Agent, Neutral site, Group and Execution, which express the six components that need to be taken into account if an organisation is to change its collective thinking. On the basis of Kurt Lewin’s Unfreezing- Changing-Refreezing process model, Mezias, Grinyer and Guth illustrate how successful strategic reorientation of an organisation may be facilitated via the six components.

Furthermore, Mezias et al. (2001) were published in the relatively high-ranking international journal Long Range Planning, which vouches for a certain academic quality in the presented results. Additionally, the present article also includes elements that would typically be found in more systematic reviews. Thus, the authors have performed a comprehensive search in Thomson Reuters Web of Science using the Boolean search string »facilita* AND workshop*« to ensure that no »islands« of research are left out either because they are not referenced or because they do not have references to the signature article if such articles contain interesting points relating to facilitation in organisations.

4. Analysis

The review of the extant studies of facilitation as an ad hoc discipline demonstrates that facilitation is frequently implemented in relation to larger meetings and workshops where participants need to work in another manner than they are used to in order to explore new solutions (Westley & Waters, 1988; Clawson & Bostrom, 1995; Grinyer, 1992;

Mezias et al., 2001; Kolfschoten et al., 2007; Vreede & Briggs, 2005; Hayne, 1999).

Grinyer (1992) underlines the importance of planning a process in accordance with a specific model to ensure progression and a good process for the participants. Several researchers have proposed various models for the planning of facilitative processes.

One of the models developed to ensure an overview of the planning of a workshop/

process is the CHANGE model. Specifically, the model is designed to underpin a workshop on the development of the organisation’s strategic course and creation of new intellectual constructs. It is not a phased model, rather every letter (CHANGE) refers to a circumstance or a topic that the management and the facilitator should be aware of when planning a workshop to ensure organisational learning and development and to overcome any barriers (Mezias et al., 2001). In the analysis section, this model will provide the structure for our explanation of the various perspectives that an organisation and facilitator may benefit from keeping in mind when planning a facilitation process.

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Facilitation as a management discipline to support organisational development processes 4.1. C: Commitment

When initiating a facilitative process, it is essential that senior management is committed to exploring the development potential and to pursuing the identified initiatives through execution/implementation. Furthermore, it is important that the organisation – and its employees – have acknowledged the need for change. (Mezias et al., 2001). Additionally, research indicates that managers/the management need to clearly define what the objectives of the process are as this will allow for a more targeted facilitation process (Mezias et al., 2001; Hayne, 1999; Grinyer, 1992; Westley & Waters, 1988; Tan et al., 1999; Huxham, 1991). A final pivotal element presented in the literature is that both the facilitator and the employees are afforded sufficient backing and competence development, and that the whole organisation is willing to take risks, as this will yield a context of trust and signal that it is OK to commit mistakes. This will, in turn, allow the employees/participants to become involved with and committed to the development efforts (Amy, 2008; McNeil, 2001; Kotter & Schlesinger, 2008).

4.2. H: Holistic

A holistic and heterogeneous approach is needed in the selection and involvement of the workshop participants to ensure a varied input, multiple perspectives and organisational rooting. Furthermore, research by Cuijpers et al. (2011) indicates that involv- ing various departments from the organisation increases the degree of innovation.

Additionally, the group size and the group composition in part determine how effective and smoothly the participants will work (Cummings et al., 1974; Horsfall & Cleary, 2008; Mezias et al., 2001; Kolfschoten et al., 2007).

4.3. A: Agent

The process needs to involve a competent facilitator who is capable of driving the process independently. There are indications that it may be advantageous to involve external facilitators, particularly in ad hoc facilitation of strategic development processes as it may otherwise be difficult to maintain a focus on the overall objective of the process and to avoid getting absorbed in contents (Mezias et al., 2001; Vreede &

Briggs, 2005; Hayne, 1999; Grinyer, 1992). Extant research, however, points to a range of benefits and drawbacks associated with internal and external facilitators, respec- tively, and it is therefore not possible to provide a clear recommendation on this issue (Huxham, 1991; Hayne, 1999; Vreede & Briggs, 2005; Mezias et al., 2001; Grinyer, 1992).

An internal facilitator may be able to better underpin continuous learning and development, and to ensure coherent development and continued commitment and knowledge building (Amy, 2008; Vreede & Briggs, 2005; Yang, 2006). The drawbacks are that it may be difficult to maintain a focus on the process when you are involved in the issues being discussed/the contents, and that it may be difficult to escape your everyday role as colleague, manager, etc. (Hayne, 1999; Mezias et al., 2001). These drawbacks in particular are among the advantages associated with choosing an external facilitator

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who will frequently also have more experience as a facilitator and therefore may have more avenues of action at his/her disposal (Hayne, 1999; Mezias et al., 2001; Westley &

Waters, 1988; Kolfschoten et al., 2007). The drawbacks of external facilitators include lacking knowledge of the organisation, its employees and the challenges that may arise during the facilitation process (Vreede & Briggs, 2005; Yang, 2006).

A limited number of research projects have devoted efforts to determining which type of training is needed – i.e. which competencies need to be strengthened – for the facilitator to act optimally (Clawson & Bostrom, 1995). Below we present some of the competencies that need to be developed and underpinned:

Figure 1: Essential facilitator competencies

Personal competencies Methods and tools

Listen and integrate Flexibility Focus on output

Establishing an open environment

Promote a sense of ownership and responsibility Establish a framework and relationships Demonstrate self-knowledge

Support diverse perspectives Present information

Process planning and design Meeting management Conflict handling

Phrasing of questions and interview technique Knowledge of various facilitative methods and tools (for e.g. development of ideas, selection, etc.)

Selecting and preparing »the right« methods and tools

Our adaptation based on Clawson & Bostrom, 1995 s. 185

As illustrated in the above figure, a range of personal competencies as well as a series of more methodology-related competencies need to be supported. Nevertheless, it is important to mention that facilitation is a competence that is built up over time through hands-on experience (Westley & Waters, 1988; Hayne, 1999; Kolfschoten et al., 2007), but competence development (knowledge, methods and tools) within a range of professional areas helps prepare the facilitator for the task (Hayne, 1999; Clawson &

Bostrom, 1995; Grinyer, 1992; Amy, 2008; Kotter & Schlesinger, 2008).

In processes that serve to trigger development and where the output is therefore not known or clearly defined in advance, it will, as described above, be of great value to involve a facilitator (Vreede & Briggs, 2005; Mezias et al., 2001; Grinyer, 1992), whereas if the issue at hand is well-defined or known in advance, a facilitated process is bound to fail, regardless of the level of experience and the facilitator’s preparation.

These points are summarised in the figure below:

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Facilitation as a management discipline to support organisational development processes Figure 2: Situations where facilitation makes sense

Open problems (output not known in advance/predefined)

Closed problems (output known in advance/predefined)

Acceptance and openness in the group

and organisation Process amenable to facilitation Inform rather than facilitate Rejection and distancing in the group

and organisation Hard process, but facilitation possible Process not amenable to facilitation Own presentation based on Hayne, 1999; Westley & Waters, 1988; Mezias et al., 2001; Grinyer, 1992; Amy, 2008; McNeil, 2001;

Vreede & Briggs, 2005

4.4. N: Neutral

Some researchers note that the workshop/process should be held away from the participants’ daily workplace to ensure that the participants are dedicated to working on the process and do not become bogged down by everyday work tasks. Furthermore, a neutral venue may underpin the participants’ mind-set and willingness to do things in new ways (Mezias et al., 2001). Another aspect is the facilitator’s approach to guid- ing or managing the process. As described, the facilitator’s task is to enable others to work with commitment and motivation towards a shared objective. This applies to the facilitation of meetings, workshops, groups, learning, creating a positive working environment, etc. (Hayne, 1999; Vreede & Briggs, 2005; Kolfschoten et al., 2007; Mezias et al., 2001; Cooper, 1990). The facilitator therefore maintains a strong focus on the process – rather than the contents – and serves to initiative and underpin the activities that are needed to achieve the desired goals (Tan et al., 1999; Hayne, 1999; Liu et al., 2003). It may be perceived as something of a paradox that the facilitator needs to be neutral and at the same time plays a central part in the efforts to enable participants to act freely and trust their personal capabilities – i.e. needs to be visible and invisible at the same time (Tan et al., 1999).

4.5. G: Group

It is the group as a whole that develops the contents and builds a sense of ownership towards the contents (Mezias et al., 2001). To optimise the commitment and involvement of the participants/group, several research results indicate that a process divided into several, clearly distinguishable divergent-convergent phases may help to reduce complexity and increase the participants’ focus and capability to contribute produc- tively to the process (Liu et al., 2003). Furthermore, group size and group composition are important in achieving efficient and smooth collaboration between participants.

Studies indicate that the optimal number of participants for facilitated workshops may be about 20 persons, and that the optimal group size is 4-6 participants. (Cummings et al, 1974; Horsfall og Cleary, 2008; Mezias et al., 2001; Kolfschoten et al., 2007).

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4.6. E: Execution

Mezias et al. (2001) makes evident the importance of working with execution/implementation of the results achieved at the workshop (and the planning hereof) itself to increase the likelihood of success. This aspect is not very well described in the facilitation literature, even though implementation is increasingly a focus area of innovation literature in relation to ensuring success (Cumming, 1998). According to Cumming (1998), innovation definitions tend to extend beyond the creative process and the inventions themselves to include the aspects of implementation and value-adding. Innovation, then, has not been achieved until the results have been implemented and have triggered added value (e.g. new processes and technologies in the organisation) and external innovations (e.g.

client-targeted products and services) (Damanpour & Gopalakrishnan, 1998).

5. Discussion

The elements that are not addressed in the CHANGE model, but which other literature considers to be important important to facilitation of ad hoc processes, are primarily focused on the facilitator’s role – including the process sequence, facilitation competences, the composition of the team and initial establishment of the framework and scope of the process. These elements may be absent in the article on the CHANGE model because the authors found it expedient to involve an external facilitator, and therefore it is not necessarily the organisation that is facing these issues. Furthermore, the CHANGE model fails to address several aspects relating to the initial considerations the organisation should make concerning the objective of the process and knowledge of the organisation’s strategy and objectives. These aspects are elucidated in the below to supplement the CHANGE model.

The objective of the process and the desired output should be established in collaboration with the organisation and the person responsible for the facilitation process (Mezias et al., 2001; Kolfschoten et al., 2007). A clear statement of the objective and agreement on the desired output (not the contents, but the type of output – e.g. a catalogue of ideas, concepts, action plans, etc.) are instrumental in ensuring a shared understanding of what needs to happen and why. Furthermore, these elements help realign expectations and provide a clear framework (Mezias et al., 2001; Hayne, 1999;

Vreede & Briggs, 2005; Kolfschoten et al., 2007; Grinyer, 1992).

In order for the facilitator to plan the process optimally and to achieve that the participants focus on the topic at hand, it is important that the facilitator knows the organisation well and is familiar with its strategic objectives and the decision-making competence delegated to the process (Mezias et al., 2001; Grinyer, 1992). It is also important to know the processes and any decisions that lie ahead of the current process in order to build on the existing basis rather than starting from square one (Vreede &

Briggs, 2005; Hayne, 1999). In connection with the planning of the process, it is also

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Facilitation as a management discipline to support organisational development processes important that the facilitator knows how much time has been allocated for the process (is aware of the scope of the process) so that he or she may plan a series of activities each of which builds onto the previous one while also ensuring the desired output (Hayne, 1999; Kolfschoten et al., 2007; Mezias et al., 2001; Westley & Waters, 1988).

Additionally, when preparing a facilitative process, the facilitator needs to develop the process design, including – among others – thoughts as to which activities will be included and their sequence, and which methods and tools will be used to support each activity. In relation to process design, several researchers stress the importance of initially establishing the objective of the process, and only then proceed with the planning of the process. Finally, the methods and tools that best underpin the process and objective are selected (Hayne, 1999; Kolfschoten et al, 2007; Vreede & Briggs, 2005).

This approach is presented in figure 3.

Hayne (1999) focuses on the facilitation of meetings and states that: »The meeting goals would drive the choice of process, in turn determining the structure support, and then the exact tool to be used.« (Hayne, 1999 p. 78), which is in line with the above figure. Several research results also indicate that the better prepared the facilitator is, the more flexible he or she can be (Bens, 2007; Westley & Waters, 1988; Kolfs- choten et al., 2007).

Figure 3: Preparation of a process

Selection of methods and tools

(to underpin the process design)

Process design (to underpin the objective)

The objective of the process (guides all other elements)

Own adaptation based on Hayne, 1999; Kolfschoten et al., 2007; Vreede & Briggs, 2005

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6. Conclusion and future research

This literature review on facilitation as a management discipline to support organisational development processes provides the basis for the below model that presents the phases and considerations that may assist the planning and facilitation of ad hoc processes.

As figure 4 shows, the organisation initially needs to consider a series of issues before starting the planning of a facilitated development process. Once the organisation has decided that a facilitated development process is relevant and that it should be executed, the planning of the process is initiated. In this process, it is essential to be aware that the objective of the process guides and determines how the process is structured including the choice of methods and tools. Furthermore, it is considered beneficial to consider the elements of the CHANGE model at this point to optimise learning and development in the organisation. As a whole, the preparations provide a framework and a direction for the facilitated development process. During the execution of the process, focus is on the actual facilitation, teamwork and contributions made by the team and on documentation. After the execution of the process, focus should be on implementing the results, which, among others, include further development and project management during the transition from the development to the operational stage.

Figure 4: Phases and considerations in the facilitation of ad hoc processes

Implementaon

Follow-up and further development Project management

Execuon

Facilitaon The group Documentaon

Preparaon/planning

Establishing a process The CHANGE model Establishing framework and scope

Inial consideraons

Knowledge of the company/the strategy Type of issue and prevailing atude in the organisaon

Own presentation based on the sources of this review.

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Facilitation as a management discipline to support organisational development processes The problems that may arise during the execution phase of development processes and which a facilitator should be able to handle are very much centred around the group of people involved, but they also include conditions that the facilitator may influence in advance (Hayne, 1999; Westley & Waters, 1988). Figure 5 presents potential facilitation process challenges in relation to the CHANGE model.

As shown in the above figure, the main focus in the literature on facilitation of ad hoc processes is on preparation, execution and the facilitator’s role; however, as mentioned under E in the CHANGE model, implementation is also an important focus area. The lacking acknowledgement that implementation is essential for the success of facilitated processes is, as mentioned previously, reflected in the innovation literature where definitions have tended to only include creativity and generation of ideas (Axtell et al., 2000; Cumming, 1998; Damanpour, 1997). However, this attitude started changing in the late 1980s (Cumming, 1998) when Van de Ven (1986) and others defined innovation as the development and implementation of new ideas. More recent research indicates that the lacking focus on implementation and realisation of value may be the decisive factor causing failure (Klein & Knight, 2005). This indicated that there may be a need for an increased focus on and in-depth research into the implementation aspect of facilitated ad hoc processes.

Figure 5: Challenges of facilitative processes

The group is the cause The facilitator him-/herself is the cause C Lack of commitment and sluggishness

Participants are freewheeling and non-productive Resistance to change

Hidden agendas

At variance with the group’s wishes

H One or more group members dominate the process Participants compete for status

A Poor information

Poor coordination Lacking process design Poor wording of questions

N »Production block« due to lack of time

G Tendency to assess and self-criticize

Participants do not listen to the facilitator or to each other

Participants forget what others have said

Lacking inter-group socialisation

E

Own presentation based on Hayne, 1999 s. 77; Westley & Waters, 1988 p. 138 and 139

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A limited number of studies focusing on the relationship between facilitation and project management indicate that facilitation combined with project management methods may be very effective (Vreede & Briggs, 2005; Male et al., 2007). This aspect also warrants further research in the future and will be integrated into the formative dialogue research, which will be carried out in the context of the Future Food Innova- tion initiative in the Central Denmark Region.

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Notes

1. www.futurefoodinnovation.dk

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Annabeth Aagaard Associate Professor, Ph. D.

Department of Ledership and Strategy University of Southern Denmark Campusvej 55

DK-5230 Odense M e-mail: aaa@sdu.dk

Martin Senderovitz Assistant Professor

Department of Ledership and Strategy University of Southern Denmark Campusvej 55

DK-5230 Odense M e-mail: mse@sdu.dk

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How can SMEs support growth in a low-growth region?

A longitudinal study of SME growth facilitation

Annabeth Aagaard & Martin Senderowitz

Abstract

The objective of this paper is to obtain application-oriented knowledge of what creates growth in small and medium-sized enterprises (SMEs). The paper aims at identifying and describing key internal business processes that contribute to growth through a longitudinal study of eleven SME case companies located in a low-growth region. The findings of the study reveal six key growth-facilitating themes that are critical when actively supporting firm growth in a low-growth region.

Key words

Growth factors, small and medium size enterprises (SME’s), longitudinal multiple case study

1. Introduction

In recent years, a large number of studies of small-firm growth have been performed and reviewed (Delmar, 1997; Wiklund and Shepherd, 2003; Sadler-Smith et al., 2003;

Davidsson et al., 2010; Love and Roper, 2014). Although the topic of small-firm growth has received quite extensive attention, several reviewers deliver with relatively critical accounts. The criticism concerns both theoretical and methodological shortcomings (Storey 1994; Gilbert, et al., 2006; Davidsson et al., 2010; McKelvie and Wiklund, 2010;

Wright and Stigliani, 2013). In spite of the longitudinal and process nature of the concept of »growth«, many growth studies are cross-sectional. In growth and entrepre- neurship research, there is a general wish for more longitudinal »real time« research (Davidsson et al., 2010; Wright and Stigliani, 2013). As described in the theory section below, a large number of firm growth factors exist (Gilbert et al., 2006; Davidsson et al., 2010). These growth factors can both be internal/organisational factors and external market factors and they can act both as positive drivers of growth and as nega- tive barriers or obstacles for growth.

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Extant growth and SME literature has extensively addressed how firms’ grow is related to favourable external conditions and how firms do not grow due to unfavourable market conditions (barriers) (Wright and Stigliani, 2013). However, current empirical research on firm growth in adverse conditions is scarce, and knowledge of how firms may grow (i.e. the mechanisms and drivers) in spite of generally unfavourable, external conditions is limited (Bamiatzi and Kirchmaier, 2014). This explorative study investigates key drivers of growth for SMEs in an external context characterised by low growth and economic recession. The study investigates how a number of Danish SMEs have achieved high growth rates in spite of unfavourable external conditions.

These SMEs are facing the specific challenges of few highly specialised employees, low funding opportunities for SMEs, few large companies from which to attract larger groups of employees, and educated/specialised citizens moving to high-growth regions with more possibilities. Growth in the context of low-growth regions is an unexplored area within SME and growth research, and the findings presented here are relevant and applicable for managers in SMEs as well as for policy makers and institutions supporting growth and business development in low-growth regions. This paper provides insight into the key facilitators of growth in Danish SMEs in a low-growth area.

The research question of this paper is: »How can SMEs in low-growth regions actively support firm growth and which facilitating activities are applied?«

To answer this research question, we examined eleven Danish SMEs over a period of 18 months within a specific region of Denmark characterised by low growth and a less favourable socio-economic situation compared to growth rates and the financial situation in the rest of the country. In the next section of the paper, we discuss and elaborate on the theoretical perspectives of firm growth and SMEs, including internal and external growth factors. After the theoretical discussion, we present the methods applied in the study. We then present the empirical findings, and we conclude with a discussion of the results and the implications of the study.

2. Firm growth and growth facilitators

From the review of growth studies (Penrose, 1959/95; Gilbert et al., 2006; Garnsey et al., 2006; Davidsson et al., 2010; Senderovitz, 2010; Wright and Stigliani, 2013), it is clear that growth factors can make out a very long »laundry list« of factors that may facilitate or hinder growth. Growth factors can roughly speaking be divided into internal (within the firm) and external (environmental) factors, even if it may in some instances be difficult to determine what is truly external and truly internal (Davidsson et al., 2010). The industry development is usually seen as an external factor, whereas in a Porterian world, industry affiliation is seen as a strategic choice made by the firm (Porter, 1980, 1985). Similarly, opportunities may be viewed as external factors, i.e. factors »out there« to be discovered, or as factors that the firm should create and develop internally (Shane and Venkataraman, 2000; Dew et al., 2009).

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How can SMEs support growth in a low-growth region?

2.1 Internal growth factors facilitating or hindering growth

In her seminal work on firm growth, Penrose (1959/95) argues that firm resources play a key role in achieving growth and competitive advantages. Limited resources mean limited possibilities for growth. It is through the internal resources in general and management resources in particular that the firm may develop unique entrepreneurial (managerial) services which are, in turn, seen as a prerequisite to firm growth and to achieving competitive advantage. According to Penrose, the internal resource use is a key determinant of firm growth. Internal inducements to expansion arise from the ex- istence of currently unused productive services, resources and specialised knowledge which, according to Penrose, are always to be found in any firm (Penrose 1959/95, p.

66). The issue of management capacity has been elaborated on and categorised by Storey (1994) as management motivation, education, management experience, number of founders and functional skills. A number of studies have investigated the relationship between growth aspirations and actual growth. These studies in general find that managers with higher aspirations achieve higher actual growth. In this view, it is up to the management of the firms to lay the foundations for growth (Wiklund and Shep- herd, 2003; Delmar and Wiklund, 2008; Stam and Wenneberg, 2009).

2.2 External factors facilitating or hindering growth

External factors also influence growth. These factors include macro-economic development, market conditions, environmental dynamism, access to external financial capital, access to other external resources and network, and access to general human capital (education level) and specific human capital (experience) (Wiklund and Shep- herd, 2003). Growing ventures are highly dependent on the local environment for resources needed for their operations, and the ability to acquire resources locally has substantial implications for the levels of growth the firms will attain. The growth of the individual firm is also influenced by the growth of the industry and the economic and financial situation of the country and region as well as the industry dynamism (Gilbert et al., 2006; Bamiatzi and Kirschmaier, 2014). In general, firm growth appears to correlate with the general macro-economic and regional financial trends.

Summarising, from a theoretical perspective we argue that achieving growth may be a matter of management capacity, growth aspiration, willingness and skills, but that fun- damental facilitators and obstacles in the environment play a key role for firm growth.

3. Methodology and empirical context

The objective of the paper is to obtain application-oriented knowledge of what creates growth in SMEs. To investigating this, we use an exploratory longitudinal multiple case study design. This article is based on a research project conducted in collaboration with Danish Regions (Danske Regioner) with an aim to enhance SME growth in a low-growth region. The research project falls in two phases. The first phase identi-

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fied growth processes in SME growth companies in the specific low-growth region of South and Western Zealand in Denmark, where 38 randomly selected companies were contacted. The case companies were selected based on their size (private SMEs) , their location in or in close proximity to the region of South and Western Zealand, a positive growth record during the past 3 years, and, finally, case companies were selected representing different industries. The fourth criterion was included because in- dustrial characteristics may affect growth potential. We contacted 38 case companies, expecting that approximately half of them would accept the invitation to participate in an interview. Out of the 38 case companies, 20 companies accepted to participate in the project and through site visits and individual interviews with the CEOs and other key personnel, we made extended company portraits of these 20 companies. The data collected during the interview sessions were analysed using meaning categorisa- tion (Kvale and Brinkman, 2009), where similar statements from the interviews were grouped within related themes, and six key growth themes were derived through an abductive process (Danermark et al., 2002), going »back and forth« between theory and the empirical evidence (company portraits and data from the interviews).

These themes were explored further during the second phase of the project in which 11 out of the 20 firms were selected for further in-depth longitudinal analyses (see Figure 1). The eleven firms were selected based on relevance to the project objectives, variation across different industries (four production/retail, five service/knowledge service and two building & construction), and willingness and ability to participate in the in-depth studies.

We investigated the 11 firms over a period of 18 months, where management and employee representatives were interviewed to explore the specific contents of the identified growth themes and the actual growth-facilitating activities involved. The data derived from the interview sessions were analysed through meaning–categorisa- tion, and the facilitating activities within each of the six growth themes are explained in detail in the findings.

3.1 The empirical context

The firms in this study are located in the Southern and Western part of Zealand. The four key growth and social-economic challenges of this region are related to low pro- ductivity in the region’s own businesses; globally oriented industries gradually moving to other regions; difficulty attracting and retaining highly skilled employees; and finally that innovation is concentrated on a few, but very innovative companies. In addition, the region is challenged by the demographic development. If the projections of the age composition hold, the reduction in the number of people in the working age (as predicted by 2015) will significantly decrease the level of prosperity and growth in the region (Copenhagen Economics, 2005).

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4. Findings

In the following section, we will describe the growth facilitating activities according to the six growth themes and the contexts in which the activities unfold for the respective firms. Figure 1 shows the case companies with an indication of primary and secondary growth themes as some growth themes were of higher priority in some of the case companies. The identified growth themes include: 1. Strategic thinking, 2.

Self-managed teams, 3. Management of public fundraising, 4. Open source innovation, 5. Middle-sourcing and 6. Local and regional networks.

Figure 1: Company overview and growth themes

Company Industry Offerings No of

employees

Primary themes

Secondary themes Westrup Production A global export and production company of

agricultural machinery

80 1;4;5 2;3;6

Toftebo maskinfabrik

Production A small blacksmith shop manufacturing its own products in stainless steel and specializes in

playground equipment

9 2;6 1;3;4;5

RM Fintech Production A precision engineering workshop that specializes in the machining of precision components and

other precision mechanical productions.

26 2;5;6 1;3;4

Ostebørsen Retail/

production

A small trading company that buys and sells luxury cheese and carry out events

18 1;2;6 3;4;5

Geocenter Møns Klint

Service An experience and conference center with more than yearly

500 events, 3D cinema, expeditions, snorkeling trips and nature walks

25 1;2;3 4;5;6

Vilcon Service A conference center, which consists of three centers

15 1;2;4;6 3;5

Kragerup gods Service A conference center with a Go-High activity areas and an integrated course program

70 2;3;4 1;5;6

Gerlev legepark Service An activity park that is part of a Sports Academy that offers different play projects to the private

and public sector

12 3;4;6 1;2;5

Casalogic Knowledge service

A consulting company that provides It-infrastruc- ture services and solutions to companies using

‘Open Source’ systems

12 4;6 1;2;3;5

Urhøj Smedie Building and construction

A smithy that supply plumbing, ventilation and other energy preserving solutions

26 1;5;6 2;3;4

Altan.dk Building and construction

A construction company, which designs, supplies and installs balconies on existing blocks of flats.

85 1;2;6 3;4;5

After a description of each growth theme, we present a small real-life narrative to illustrate how SMEs may work with the specific themes in practice.

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Growth facilitating theme 1: Strategic thinking What does working with strategic thinking imply?

Existing research underlines that the SMEs’ approach to strategy is inherently different from that seen in large companies (Hofer and Charan, 1984; Sadler-Smith et al., 2003; Evald and Senderovitz, 2013). The management in a small firm usually consists of a single or very few individuals who then, naturally, have to carry out all managerial and strategic tasks and responsibilities. One of the important issues in terms of strategic thinking is how to balance the tension between strategic planning and goal setting for setting targets and giving the firm a clear sense of direction on the one side, and to stay flexible and improvisational for being able to explore and exploit the unexpected events and contingencies on the other side. Managing this balance may be one of the most important factors influencing smaller firms’ growth and competitive advantages (March, 1991; Hitt et al., 2011).

How do SMEs work with strategic thinking in practice?

Ostebørsen’s ability to improvise and make quick iterative moves according to the changes in food trends and customers’ taste has made them competitive and able to achieve high growth rates. However, as the organisation is growing, the management feels that too many decisions are made going in various directions; and they need to become more structured and have a more formal, clear strategy and work in one, unified direction. The challenge is to plan ahead and remain flexible and agile. In this process, the two owner managers have started mapping the individual functional areas of the company including the related actions and each employee’s required competences and responsibilities while leaving room and flexibility for each team of employees to make their own independent decisions. They thereby try to maintain a balance between improvisation and planning.

Growth facilitating theme 2: Self-managed teams

What does the establishment of self-managed teams imply?

Establishing self-managed teams means deliberately giving autonomy and formal decision-making power to a team of employees without the classic direct supervision of a line manager. By giving responsibility to small teams of employees and allowing them to exercise a high level of self-management, the team should – according to the firms – carry out key decisions without management’s involvement and the firm thus attain a higher level of flexibility and efficiency. The informants from all eleven case companies indicated that they had been able to ensure higher growth through the application of self-managed teams in different functions of their organisations.

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How do SMEs work with self-managed teams in practice?

GeoCenter Møns Klint applies self-managed teams in its development and innovation function. In this function six people with very different skills (e.g. biology, geology, project management, financial management and creative skills) are put into play by their collaboration on specific projects. The growth potential in the application of self-managed ad hoc based teams at GeoCenter Møns Klint lies in the benefits that come with the small and flexible organisational way in which the event-oriented businesses of the company are organised. This allows them to be more efficient, more flexible and have fewer fixed costs than would be the case with a permanent development organisation.

Growth facilitating theme 3: Management of public fundraising What does management of public fundraising imply?

SMEs’ ability to attract external funding for development projects, particularly from the public sector, is a way to overcome the regional resource scarceness within the private sector. Public funding can help the SMEs obtain growth by financing and supporting firm-b ased development projects serving, e.g., a cultural or a leisure-oriented purpose. Some of the companies have experienced declining sales in recent years;

however, with effective project management targeted towards public project funds, the companies have been able to develop and grow strategically into other businesses and industries. In order to obtain adequate public funds, it is important to duly prepare project descriptions, which includes integrating »administrative« public procedures and obtaining public-private-collaboration experience with new technologies; and it is important to develop personal relations (local, regional, national) for project collaboration and fundraising.

How do SMEs manage public fundraising in practice?

Kragerup Gods has developed and created growth through an investment project in an experience centre offering »Go-high activity areas« and they have developed an integrated course programme. Owing to a publically funded investment project, Kragerup Gods has been able to develop and attract new business and reach new tar- get groups, which has improved their competitive advantage and corporate branding in comparison to other, traditional conference centres.

Growth facilitation theme 4: Open source innovation What does working with open source innovation imply?

Open source innovation focuses on the interaction between producers and users of innovation, and employee-driven innovation is focused on innovation initiated and facilitated by staff. These two innovation approaches conceptualise companies’ processes of interactive learning at the micro level (Lundvall, 2009). Both research and practice show that both a formal and an informal approach to these innovation processes may

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be taken (Smith, Ulhoj & Kersting, 2012). In the present cases, active and continuous dialogue with customers to detect their needs is a key growth-facilitating activity that generates new solutions. The customer is, indeed, the key driver of the innovation processes, providing input for tailored services and products to suit the specific needs of customers whenever possible. This approach gives smaller firms a potentially competitive advantage compared with larger companies with more formalised processes that lend themselves less readily to such flexibility.

How do SMEs work with opening the innovation processes in practice?

Vilcon is experiencing a growth dilemma: the owner is a key driver of the business innovation processes, but may become a bottleneck hampering the company’s continued innovation and growth. The solution for Vilcon has been to create an open and forthcoming culture, where ideas can come from anyone inside or outside the organisation; and once »matured« the ideas may be integrated quickly and efficiently owing to the firm’s flat and team-oriented structure which promotes the implementation of user-producer and employee-driven innovation. At Vilcon, customers’ needs and requests and customers’ interaction with the employees often initiate ideas for new products or services.

Growth facilitating theme 5: Middle-sourcing What does working with middle-sourcing imply?

Middle-sourcing occurs when similar production/operations are taking place simulta- neously in two (or more) different – but collaborating – companies. Middle-sourcing may be seen as an »alternative« to outsourcing, where the production of (part of) a product is removed completely from the focal firm. In SMEs, outsourcing may be counter-productive for various reasons; first, because transaction costs may be higher than expected; second, because smaller firms may encounter difficulties dealing with the management challenges of international outsourcing co-operations; and, finally, companies which have experienced ongoing improvements and efficiencies in a Danish context, may find that this may not necessarily continue when production is outsourced to foreign countries. To address these challenges of outsourcing, middle- sourcing is emerging as a viable alternative that achieves competitive advantage and flexibility while minimising production-related risks and maintaining the potential for continued improvement.

How do SMEs work with middle-sourcing in practice?

The two companies FM Fintech and Hardi are in the same line of business and they produce similar (albeit not identical) products. Originally, Hardi planned to outsource their production completely to FM Fintech. However, the two firms decided to engage in middle-sourcing instead to stimulate the flexibility and the competitive advantages of both companies. By applying middle-sourcing, they assist each other in gaining access