By: Steve Crabtree Issue: Transformation Section: Business
Thriving Enterprises Creating Jobs
ussell Knudsen has been crunching some new numbers. Knudsen is the director of corporate finance for ePower Engine Systems, a small business that recently developed a hybrid drive train modification that significantly improves the fuel efficiency of large trucks. He was also one of 625 entrepreneurs and leaders in small- and medium-sized enterprises (SMEs) from a broad range of industries to take part in Gallup’s Entrepreneur Acceleration System (EAS) program in Nebraska last spring.
ePower’s leadership knew there was significant interest in its technology but had set rather modest growth targets for the first five years. The EAS program led Knudsen to realize that was a mistake—that if ePower was able to expertly manage its own performance and establish powerful relationships with customers, sales of its pioneering product could take off much more quickly than anticipated. Knudsen accelerated the company’s production schedule and now believes it can grow from 20 employees this year to as many as 500 in 2015.
Like many other EAS participants, Knudsen credits the program with helping expand his company’s horizons—and in fact ePower’s technology offers a nice metaphor for the program itself. The EAS uses Gallup’s expertise in behavioral economics to upgrade the management “engines” of SMEs that have significant potential for sustainable growth. In The Coming Jobs War, Gallup CEO Jim Clifton notes that there’s no shortage of innovations and perceived market opportunities in the United States; what America and many other countries need most is more entrepreneurial capacity to convert those ideas into winning business models—thereby creating jobs.
That critical need is what the EAS is designed to address. Gallup partners with the program’s sponsors in a given community—which may include governments, financial institutions, universities and other organizations working to promote economic vitality—to recruit SMEs that have the potential for significant growth. Entrepreneurs who take part in the annual program participate in a series of large-group workshops led by Gallup subject matter experts, and then work with Gallup-trained mentors on company-specific action planning. The curriculum is focused on five areas:
• Leveraging entrepreneurial strengths: Gallup’s strength assessments identify the innate talents of SME leaders in order to ensure that they are in roles that capitalize on those talents. Gallup’s research indicates the entrepreneurial abilities, motivations and attitudes of individual leaders are important drivers of business survival and growth.
• Creating a road map for growth: Mentors and Gallup consultants help participants outline a bold vision for the future of their enterprise. They spell out the goals that give the business and its employees a sense of purpose and direction, while creating a detailed plan to achieve those goals. • Building engaged workplaces: Entrepreneurs are taught about management principles and workplace conditions necessary to ensure employees are engaged, highly motivated and emotionally connected to the company. These attributes are proven to help businesses maintain stability and momentum even through the often-challenging early stages of growth.
• Growing an engaged customer base: Businesses grow not by adding new employees, but by adding new customers—so the entire EAS curriculum leads up to Gallup’s customer sciences. Participants gain insights about how to align all of their employees in the mission of understanding customer’s needs and establishing enduring customer relationships based not on price but on the value they’re able to provide.
• Establishing performance management metrics: Participants work with mentors and Gallup consultants to arrive at a set of highly relevant indicators, including behavioral economic measures that allow them to closely monitor progress toward their businesses’ goals and growth targets.
Each of these areas addresses vital human components of business development—make-or-break factors that traditional business incubators almost always fail to address. And the program’s mentor-based model gives Gallup the capacity to work with local and national governments, financial institutions and others pursuing sustainable economic growth initiatives.
The Employment Imperative
Small- and medium-sized enterprises have received a lot of attention in the wake of the global economic crisis because they are the primary sources of job creation around the world. SMEs account for about two-thirds of employment in Organisation for Economic Co-operation and Development (OECD) countries and a far higher proportion in developing countries. And as Clifton argues, the employment shortage gripping much of the world isn’t just the most important problem for global leaders to address—it may be the only problem that truly matters. That’s because solving it would harness the human talent needed to find and propagate solutions to all the other challenges the world faces.
Consider the possible impact if ePower achieves its amped-up growth plan and adds 480 highly engaged employees by 2015. The company’s home cities of Florence, Kentucky, and LaVista, Nebraska, get an economic boost as the new jobholders settle in, pay taxes, buy homes and cars, etc. The new jobs bring increased spending power to the communities, raising demand for products and services and likely adding even more jobs. Moreover, the entire trucking industry benefits from the addition of human resources devoted to marketing and innovation that lowers fuel costs. The resulting savings may allow some trucking companies to expand their fleets and add their own new employees. In ePower’s case, the planet itself benefits from the more rapid proliferation of a technology that significantly reduces the emissions of large trucks. All of these factors and benefits are certainly important, but recent Gallup research demonstrates the toll that joblessness takes, not just on an individual’s financial status but on their emotional well-being and the way they evaluate their lives.
Not all job creation has the potential for ripple effects this far-reaching. But the broader point is that successful entrepreneurship puts more people to work finding and propagating solutions—whether those solutions are as simple as selling parkas in a mountain village, or as complex as implementing a new inventory system for a major retailer. That’s why the EAS’s ultimate objective is to help SME’s fulfill the all-important task of entrepreneurs everywhere in understanding and meeting the needs of potential customers.
That focus provided a moment of clarity for Dan Shundoff, founder and president of Intellicom, a business technology company based in Kearney, Nebraska. “You start to really look at the relationships between managers, employees and customers and the level of engagement you have, and you start to understand that we could do more. We could be more efficient, we could create more value—not just revenue, but value.” After participating in the EAS program, Intellicom’s leaders turned their five-year growth targets into two-year targets, and they are well on their way to meeting them. The company’s key performance indicators showed a 20 percent increase in employee productivity and a 24 percent increase in profits in the first half of 2011. And, the growth allowed them to add two full-time employees.
A Healthy Dose of Confidence
The EAS’s potential impact on SMEs has been evident from the program’s beginnings in the city of Puebla, Mexico. Working with the Puebla government in 2007, Gallup consultants adapted the sciences the company had been using for decades with large corporations to the needs of entrepreneurs and SMEs. The results were dramatic in some cases. Participants whose small businesses were struggling improved their day-to-day operations and sales growth, and just as important, experienced a renewed sense of confidence.
Blanca Garcia, a Gallup consultant who with Efrain Morales leads the EAS initiative in Mexico, tells the story of a husband and wife who were running a cartridge recycling business. They’d had serious problems and were considering shutting the business down. Learning about their strengths made them realize they had conflicting leadership styles, which left employees confused and disengaged. “She found out she is great selling and he at managing the operations,” Garcia says. “They split [those tasks], and now the business has grown. They not only improved their finances and created jobs, but found stability within their family.”
Other, more established businesses have been revitalized through their participation. Jagusa was a hospital cafeteria management company before enrolling in an EAS program in Toluca, Mexico. As a result of the experience, they revisited their vision for growth, and the company now provides nutrition consulting to hospitals and large companies. It opened two new client sites in 2010 and added 60 employees. “We were lost and we worked a lot,” says José Arturo López Jacobo, Jagusa’s head of quality. “Because of Gallup we work less hours, but we achieve more. We are more organized because of our new action plans. We know how to act and how to motivate ourselves.”
Boosting entrepreneurial capacity may literally change the course of history in countries with severe structural employment problems. The Middle East, for example, faces widespread joblessness among its large youth population, an issue that has fueled social instability in many countries. Even in those countries with high average education levels, job creation can be scarce. And if that education fails to give young people an entrepreneurial mind-set, along with the skills to design and implement effective business models, they are in dire straits. A number of countries are addressing the problem with targeted education reforms, but they also need shorter-term solutions. They need strategies that go right to the heart of the problem—empowering the untapped human potential that already exists within communities. “This whole initiative is organic,” says Gallup partner Todd Johnson of the EAS’s grassroots approach. “If you’re going to generate sustainable job creation, you’ve got to identify, engage and accelerate the entrepreneurs in your ecosystem—be it a city, a state or a country.”
Gallup closely tracks the feedback and progress of all EAS participants in order to continually increase the program’s value to SMEs and their communities. In addition to reporting on key performance indicators such as net sales, profits, employee counts and employee turnover rates, participants take a survey assessing their own level of confidence in the future growth of their companies—a factor that has itself been proven to impact entrepreneurial performance.
Ultimately, Gallup will gauge a program’s success not only by the growth of participating SMEs but by how well it cultivates entrepreneurial ecosystems in the communities where it is implemented. That means aligning the efforts of various stakeholders with potential to boost the community’s entrepreneurial activity, including new and established entrepreneurs, mentors, subject matter experts, industry specialists and local governmental and nongovernmental agencies.
Fundamentally, however, the EAS helps build those ecosystems one business at a time, by sparking the kind of momentum described by Teresa Johnson, CFO of the Nebraska-based Phoenix Web Group. She says, “When we walked away from the table, for the first time we had a unified and clear understanding of how we wanted our business to grow. No more ‘cross our fingers and hope it works.’ We had clear steps to take. We were energized!”