Behaviour and motivation of businesses: qualitative insights
Report on research to understand attitudes and behaviour of SME owners in Scotland in relation to business growth.
7 Recommendations
As detailed in section 2.2, four half day workshops were conducted with key stakeholders from services and agencies active in providing advice or support to SMEs in Scotland, to faciliate the identification of practical recommendations flowing from the research.
Each workshop began with a presentation of the key research finding by Ipsos MORI. The presentation was followed by a series of group-based exercises, also led by Ipsos MORI, designed to elicit a progressively nuanced shortlist of recommendations.
As described in Section 2.1.2, the research employed the COM-B model of behaviour change (Figure 7.1). The model classifies different drivers of behaviours into Motivational, Capability and Opportunity dimensions, and links these to specific ‘intervention functions’[13] which, in turn link to broader ‘policy categories’. Accordingly, stakeholders were asked to consider potential recommendations in relation to the policy categories; namely:
- Legislation and regulation: making or changing law, or establishing rules or principles of behaviour or practice
- Fiscal levers: using the tax system to affect behaviour
- Environmental and social planning: changes to the physical or social environment
- Support and advice: delivering or changing a service; or creating documentation that recommends or mandates practice
- Communications and marketing: using print, electronic, telephonic or broadcast media
Figure 7.1: COM-B Behaviour Change Wheel
Having identified an initial long-list of potential recomendations for each of the policy categories, the stakeholders were invited to work in small groups to consider how realistic and achievable these were and, on that basis, to develop a more nuanced list of recommendations that might be taken forward. This included giving consideration to:
- Who would or should be responsible?[14]
- Any barriers or enablers?
- What resources or support would be required?
- Timescales – how long would the recommendation take to implement?
The final recommendations proposed for each policy category are summarised in sections 7.1-7.5 below. More detail on on the recommendations, including stakeholders’ thoughts on who might lead on taking them forward and associated timescales (where suggested), is provided in tabular format in section 7.6.
7.1 Legislation and regulation
The recommendations falling under this category primarily related to UK or EU legislation. While the Scottish Government does not have the devolved power to enact these recomendations, it can adopt a role in encouraging and influencing review.
Across the workshops, stakeholders repeatedly identified a need to review legislation or regulation that might inadvertently be impeding growth among SMEs (particularly ‘micro’ and ‘small’ businesses) and that might be outdated or unnecessary. There was a specific focus on the current cost and time-burden of compliance with some legislation/regulation – for example, in relation to financial reporting, PAYE and pension provision – with some stakeholders suggesting exemptions where possible for ‘micro/small’ or ‘young’ companies. More broadly, there was also reference to the importance of minimising barriers to international trade.
At the same time, there was reference to the potential for new legislation that might help promote growth – stakeholders referenced the example of the Small Brewers Relief Scheme, which they felt had been key in the expansion of the brewing and distilling industries.
The post-Brexit period was identifed as an opportune time to undertake a review of legislation and regulation – though stakeholders acknowledged that this could not happen until the outcome of Brexit was known.
On a different point, stakeholders suggested legislation to mandate entrepreneurial education in schools. They went on to outline several alternative delivery models for such education, which included: its being a) taught as a separate subject or b) weaved through different parts of the curriculum; and its being delivered by a) by the current teaching workforce or b) specialist visiting professionals.
7.2 Fiscal levers
Under the fiscal policy heading, stakeholders focused on measures that they felt would improve the financial position of individual SMEs and thus help position them for growth. Recommendations included lowering the rate of Income Tax; introducing temporary tax exemptions or holidays for new business owners (for example in relation to Corporation Tax); and reducing business rates. On the latter point, there was specific suggestion that current rates meant that businesses with physical premises were significantly disadvantaged compared to online businesses. Again, some of these changes are outwith the remit of the devolved Scottish administrations so the role of the Scottish Government would be one of supporting change at the UK Government level.
In addition to these suggestions, stakeholders working in rural areas called for subsidised, affordable housing to help alleviate difficulties experienced by rural businesses in recruiting and retaining staff – which they felt were, in part, caused by a lack of housing options locally. More specifically they contended that the Scottish Government should subsidise the cost of house purchases and construction, and that local authorities should be able to fund the development of new housing through low cost or low interest borrowing.
7.3 Environmental and social planning
Environmental and social planning was conceived of in fairly broad terms across the workshops. Indeed, in discussing this policy category, stakeholders repeatedly identified a need for general increased efforts on the part of policy makers to enable and encourage entrepreneurial mindsets and activities. A range of measures were suggested but, in particular, measures to promote an evolution of working patterns/culture to create greater ‘space’ for individuals to develop businesses alongside existing employment or personal commitments; and efforts to change attitudes towards ambition and failure so that both are viewed in a less negative light – and do not ultimately serve as barriers to growth.
There was also a significant focus on a perceived need for environmental restructuring at a local level – specifically for increased efforts on the part of local authorities and their partner agencies to promote their respective areas and business communities. Some stakeholders felt that local partners should also do more to promote business growth.
Alongside these suggestions, stakeholders highlighted a need for both national and local agencies to create more opportunities for businesses to interact, network and share experiences and ideas.
7.4 Support and advice
Across the workshops, the stakeholders agreed with the view advanced by businesses that the existing support and advice landscape was too “cluttered.” They felt the situation was exacerbated by the fact that different agencies had different areas of interest, and worked to different priorities and targets. There was a consensus that the landscape needed to be streamlined, with different agencies working in a more co-ordinated and joined up way. Some stakeholders also felt that support needed to be made more accessible, including outwith office hours. Stakeholders generally agreed that the Scottish Government had an important role to play in such changes. At the same time, some suggsted that this role should be a primarily facilitative one, with the Government stepping away from directly providing support, in the interests of further streamlining the ecosystem.
Specific solutions proposed included the creating of a national or regional support hubs through which businesses could be triaged to appropriate agencies or forms of support – though, in one of the workshops, this idea was taken a step further, with stakeholders suggesting the consolidation of existing support agencies into a single body – and the development of shared targets and metrics.
Beyond these structural changes, there were calls for changes to criteria for accessing support and, specifically, for tieing these more to business’ level of ambition rather than their turnover. Stakeholders also favoured the creation of an online support “hub” or an App through which businesses could access support 24 hours a day. A perceived potential subsidiary benefit of such a digital resource was the freeing up of advisors’ time to work with the most ambitious and higher potential businesses.
There were also various suggestions for improvements to the nature of support and advice provided by agencies – in particular, an increased focus on individual/ company-centric support rather than on delivering support ‘products’; and on the promotion of business growth mindsets and ‘softer skills’, such as risk-taking. Stakeholders in the Inverness workshop highlighted, in addition, a need for more tailored support for family businesses, and for efforts to encourage potential young entrepreneurs to remain in the region rather than going elsewhere to set up a business.
Finally, a number of recommendations were made in relation to the financial support available to businesses in the form of loans and grants. As well as identifying a general need to increase awareness of current funding streams, stakeholders suggested changing the approach to the provision of finance to address difficulties businesses experienced in this area and wider, cultural issues such as aversion to risk and fear of failure. Their suggestions included: lending to businesses that, on the surface, may appear ‘riskier’ but that advisors feel have high ambition and potential; and offering ‘bounce-back’ funding to businesses that fail at their first attempt.
7.5 Communication and marketing
Stakeholders’ recommendations in relation to communication and marketing were predominantly concerned with instilling a greater sense of ambition among current and potential business owners. They felt there was a need for a large-scale campaign, involving the use of case studies and/or positive role models to inspire and enable businesses to initiate positive change – and, in the process, to become less reliant on external agency support.
The new BBC Scotland channel, due to launch in February 2019, was identified as a possible platform for such a campaign, on the basis of its
national reach and the fact it would likely be looking for content. Stakeholders suggested that a campaign could combine advertising with a series of documentaries on successful and inspiring Scottish businesses.
A broader suggestion made in relation to communications and marketing aimed at SMEs was that the language used must instil ambition and must be accessible and free of jargon. Futher, stakeholders emphasised that, for mamixum effect, the language must be applied consistently across the business support community.
7.6 Detail of recommendations proposed
Table 7.1: Recommendations relating to legislation and regulation
Insight(s) |
Intervention function(s) |
Recommendation |
Potential barriers |
Lead agencies |
Timeframe |
|---|---|---|---|---|---|
SMEs growth has seen to have been impeded by the time and expense associated with compliance with legislation. |
Enablement, Environmental restructuring |
Review of UK business legislation – e.g. that relating to financial reporting, PAYE and pensions. The review should involve consideration of the potential for exemptions for ‘micro/small’ or ‘young’ companies (A positive example of a change in legislation cited was the small Brewers Relief Scheme that facilitated the growth of the craft brewing and distilling industries) Any upcoming changes to legislation/regulation should be communicated in a timely manner to ensure businesses have ample opportunity to respond appropriately. |
Governments not prioritising such a review. Obtaining cross party support |
UK Government and HMRC (Scottish Government to express support for/encourage review) |
Post-Brexit |
Perceived barriers to international trade |
Enablement, Environmental restructuring |
Reduce perceived barriers to international trade e.g. the cost of importing and exporting |
Uncertainty around Brexit Complexity of the issues and the number of organisations that would need to be involved |
EU and UK Government Scottish Government and SDI to express support for/encourage |
Post-Brexit |
Lack of business growth mindset among some businesses, coupled with an aversion to risk taking |
Education, Training |
Implementation of mandatory entrepreneurial education in schools Preferred option was for such education to be weaved through existing curricular strands rather than being taught as an additional subject. In terms of who might provide the training, two options were suggested: training the existing workforce or developing an additional network of trained professionals to visit schools |
Requires complete reform to existing education system which has associated barriers; in particular: competing demands on the school curriculum; potential skills gap to deliver Financial investment to fund training |
Scottish Government, working with local authority education departments |
If delivered by teaching profession can be integrated into teacher training by 2020 and current workforce trained by 2022. |
Table 7.2: Recommendations relating to fiscal levers
Insight(s) |
Intervention function(s) |
Recommendation |
Potential barriers |
Lead agencies |
Timeframe |
|---|---|---|---|---|---|
Many SME owners are very averse to financial risk. This aversity may also be reflected among potential SME owners Micro/small businesses sometimes struggle to grow as they cannot afford to take on additional employees |
Enablement, Environmental restructuring |
Lower rate of Income Tax for business owners or Tax holidays or exemptions for new business owners – for example, exemption from paying Corporation Tax on profits for first two years |
Associated loss of tax income |
UK Government and HMRC (Scottish Government to express support for/encourage review) |
Could be included in budget in any financial year |
High business rates hampering growth |
Enablement, Environmental restructuring |
Review and reduce business rates (including in relation to the fact that ‘physical’ businesses with premises may be disadvantaged compared to digital businesses due to the rates system not having been reviewed for a number of years) |
Tax intake reduction for local authorities who are already struggling financially |
Scottish Government |
Several government cycles |
Recruitment and retention issues in rural areas linked to a lack of affordable housing |
Enablement, Environmental restructuring |
Affordable housing interventions/ subsidies in rural areas Scottish Government should subsidise cost of house purchase and construction Local authorities should be able to take on debt to build houses. |
Finance Agreeing definition of ‘affordable housing’ |
Scottish Government |
Table 7.3: Recommendations relating to environmental and social planning
Insight(s) |
Intervention function(s) |
Recommendation |
Potential barriers |
Lead agencies |
Timeframe |
|---|---|---|---|---|---|
Potential and prospective new business owners find it difficult to carve out the time necessary for business planning and entrepreneurship more generally |
Environmental restructuring, Enablement, |
Efforts to change Scotland’s working patterns/ culture with a view to making it easier for people to develop a business – e.g. promotion of a four-day working week and more flexible working generally. |
Scottish Government |
10 years but with annual targets |
|
Fear of failure can serve as a barrier to risk-taking – and to entrepreneurship more generally |
Environmental restructuring, Persuasion, Enablement, |
Efforts to change general attitudes towards both ambition and failure in Scotland, including through education in schools (see Table 7.1 and next row); effective marketing and communications (including the use of case studies - see Table 7.5); mentoring schemes; and change in the way banks/other investors deal with new businesses (see Table 7.4). |
Scottish Government – but all relevant agencies need to reflect this new mindset in their policies and communications |
25 years (because there is likely a generation dimension to attitudes) |
|
Environmental restructuring, Education, Enablement |
More focus on entrepreneurship and business skills in schools – but not just ‘hard’ skills such as business planning – also meta skills such as the value of innovation/trying new things, and resilience in the face of setbacks |
||||
Some businesses, particularly those that are more locally based, have small markets that they struggle to grow themselves |
Environmental restructuring, Persuasion, Enablement |
Better promotion of ‘place’ and local business communities to attract prospective customers |
Local authorities with input from Scottish Enterprise/HIE and Scottish Government |
3 years |
|
Lack of business growth mindset among businesses, low awareness, and perceived low availability of relevant support and advice |
Environmental restructuring, Enablement |
Increased focus on, and promotion of, business growth by Community Planning Partnerships (CPPs) and local authorities Specifically, through: 1) Community Planning partners pooling their respective skills and resources more rather than all providing their own version of the same support. 2) Local partners developing more creative and efficient approaches to providing business support (e.g. in relation to licencing, health and safety, planning). The example was given of the ACTIVA model in Barcelona, under which business advisors are based in the same building as local authority staff, enabling them to easily signpost/introduce business owner to the relevant LAs as appropriate - e.g. if the business has encountered a barrier in relation to planning permission. |
Culture change within local government and partners Different political priorities in different LA areas, and between LAs and City regions, can prevent such ‘local’ actors from working together effectively where there is scope and for and potential benefit from them doing so. |
Local authorities, Scottish Government to encourage |
2-5 years |
Environmental restructuring, Enablement |
Local partnerships to regenerate public spaces so they can be used by fledgling businesses - for example, use of former public library spaces as business incubators |
Local authorities and partner agencies |
|||
Create wider opportunities for like businesses to interact with each other - whether face to face or online - to network and share experiences, learnings and ideas. |
Local authorities and/or Scottish Enterprise/HIE |
Table 7.4: Recommendations relating to support and advice
Insight(s) |
Intervention function(s) |
Recommendation |
Potential barriers |
Lead agencies |
Timeframe |
|---|---|---|---|---|---|
Low awareness of existing support agencies (other than Business Gateway); a perception that the landscape is confusing; and misconceptions concerning types of support available |
Environmental restructuring, Enablement |
A streamlined support landscape and improved join up between agencies via the creation of national or regional hubs through which businesses could be triaged to the most appropriate support or advice, and the development of shared targets/metrics. Or: Consolidation of existing agencies into a single body |
Complexity of the existing landscape. Unwillingness on the part of agencies to buy into the new system. Will take time for advisors to learn about the range of products and services available and where best to signpost businesses accordingly. |
Scottish Government, working with Business Gateway, SE and HIE |
2-3 years |
Enablement |
Change criteria for accessing certain strands of support so that level of ambition (rather than just minimum turnover) is taken into account. |
Possible resistance to change on the part of some agency staff |
Local authorities and Business Gateway in discussion with SE |
By 2020 |
|
Environmental restructuring, Enablement |
Increase level of support for, and communication with. growth businesses below account management level e.g. automated CRM emails to remind them of the nature of support available to them, and to keep communication channels open |
Obtaining cross party support Governments prioritising it Establishing responsibility for maintenance of the resource. Question around whether businesses will use it. Will they still want face-to-face contact? |
|||
Environmental restructuring, Enablement |
Creation of a self-service online platform or a Siri-style app offering 24/7 support. This would also help free up agency staff to work more closely with the most ambitious/high potential business. Stakeholders felt that a multimedia advertising campaign would be required to raise awareness of any new digital resource. |
Scottish Government or Scottish Enterprise working with support agencies |
1 year |
||
Business growth negatively affected by the time and expense associated with compliance with legislation |
Environmental restructuring, Enablement |
An online support tool to streamline resources on business legislation and regulation – a ‘one-stop shop’. Mygov online was cited as example of good practice – advice could be obtained from its creators – but there was also suggestion of creating a tool in pilot form initially to provide scope to innovate and experiment. In the Brexit aftermath, this could be supplemented with a VAT and tax ‘helpdesk’ specific to post Brexit queries |
As above |
UK Government, with support from Scottish Government and business support agencies, FSB, Chamber of Commerce, industry bodies |
2 years |
Perceived inability of agencies to provide support that is sufficiently tailored/relevant |
Enablement |
Increased focus on individual/ company-centric support rather than on delivering support ‘products’ – at the moment metrics/targets are linked to products |
Support agencies |
2-3 years |
|
Lack of business growth mindset among some businesses, coupled with an aversion to risk taking |
Education, Enablement |
An increased focus on promoting business growth mindsets and ‘softer skills’ – e.g. risk-taking. |
5 years |
||
Lack of business growth mindset/ambition specifically among people who have inherited a business –participants in the Inverness workshop felt this was particularly an issue in their region. |
Education, Enablement |
Tailored support for family businesses to develop and grow – e.g. in the form of high quality and suitable mentors; executive education support; succession planning |
Level of appetite for such support among the business owners concerned. |
Support agencies. |
Needs to be started immediately |
Perceived variation in the quality of advisors |
Training |
Introduction of a ‘Premier Advisor’ qualification/ recruitment of advisors who have an entrepreneurial background to improve, and increase consistency of, the quality of support and advice provided. |
Cost |
Local authorities |
By 2020 |
A drain of potential and prospective young entrepreneurs from rural areas. |
Enablement, Education |
Efforts to inspire potential young entrepreneurs to remains in their areas – e.g. through “bringing business into the classroom”; a mentoring network; technological solutions that connect young people to role models outwith their area. |
Parents, schools, local businesses (through the provision of mentors) |
Needs to be started immediately |
|
Difficulties accessing finance |
Education, Enablement |
Increase awareness of available funding – e.g. smaller investment deals, business angels market, funding specifically for women |
Scottish Enterprise Financial Readiness Team |
||
Enablement, Environmental restructuring |
Consider changing criteria for lending /providing grants to ‘riskier’ businesses rather than solely those who meet the current criteria. This might involve giving the advisor more autonomy to make a decision on the basis of ‘getting a good feeling about a business’ |
Mindsets of senior professionals involved in making this change Reputational risk |
Public sector agencies and lenders |
By 2020 |
|
Environmental restructuring, Enablement |
Increase the available funding by creating a stronger venture capital base in Scotland |
Attracting Venture Capitalists to Scotland |
All stakeholders |
3-5 years |
|
Incentivisation |
More competitions for businesses to win funding, Funding would be the incentive but businesses would also learn from the application and pitch process and would also benefit from meeting other businesses/ networking |
Financial |
|||
Fear of failure/aversion to financial risk |
Enablement, Environmental restructuring |
‘Bounce-back’ funding for those whose business fail at the first attempt |
Finance Risk |
Scottish Government |
Table 7.5: Recommendations relating to communication and marketing
Insight |
Intervention function |
Recommendation |
Potential barriers |
Lead agencies |
Timeframe |
|---|---|---|---|---|---|
Low aspiration |
Education, Enablement, Modelling |
A campaign to encourage business growth/new businesses. As well as adverts. this could include documentaries on high profile, ‘exciting’ companies. The new BBC Scotland channel presents a possible platform for the campaign, given its national reach and the fact its creators and likely to be looking for content. |
Funding |
A with coordinated approaches from key business agencies, working with BBC Scotland |
6-12 months |
Risk averse, fear of failure, low aspiration |
Enablement, Modelling |
Publicise positive role models, case studies – rather than agencies doing things for businesses, this would encourage businesses to aspire to the success of others and empower them to make changes |
All agencies |
2019 |
|
Low aspiration Jargon used in language off-putting |
Review of language used in communication and marketing to ensure it instils ambition and is sufficiently accessible. Ensure the language is applied consistently across the ecosystem |
All agencies |
Contact
Email: EIDEEBSPEnquiries@gov.scot
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