TECHNICAL ASSISTANCE IN SME DEVELOPMENT PRESENTATION AT “VENTUREPOINT 2004”

Richard Joseph
Caribbean Business Services Limited

Anyone involved in business faces a continual stream of changing problems – how do I get new customers, how do I keep existing customers, how do I keep my costs down, how do I develop new products and services. Whether you are in the USA, China or Trinidad and Tobago you face the problems. And they come at an increasing rate. And the solution that worked last week may not work this week. And you still have to keep control of the parts of your business that are working while you solve the problems that do not seem to face solutions. You cannot run away because all your savings are invested in the business or your house is mortgaged as security for the business loan or there is not anything else that you think you can do.

Whether large, small or tiny, all businesses faced with problems that they do not know how to solve have to seek help from someone else. In the case of the large company, consultants would be hired. In the case of small companies, that someone may be a supplier of equipment or raw materials, a customer, a friend or even a competitor. Whatever the source, this help is known as “technical assistance”, and is a consulting service, whether formal or informal, free or for a fee. “Technical assistance” can be described as any advice that is received that helps to improve the operations of a business. For the purposes of this presentation, routine advice in the areas of legal, taxation and accounting will not be considered, only advice related to operations.

The general point to be reinforced here is that all business, regardless of size and sophistication use technical assistance or consulting services at some time or another. For many that have not used it before, the decision is not easy, and raises several issues that must be resolved.

Some business people believe that using such services are an indication of failure, that they do not know what they are doing or that their staff is incompetent. Frequently, Managers see consultants as threats, and decline to co-operate. In reality, no company has the expertise to address all the challenges it is faced with, and technical assistance/ consulting services should be used when there is a need to be met that does not require a full time in-house resource. The same way that a company may hire a crane or an excavator for a particular job, it would use technical assistance/ consulting services to solve a particular problem or carry out a particular assignment for which the required resource is not needed on a full time basis. Since most providers of these services (consultants) are specialists in particular areas, their skills may not be required on a full time basis, and they do not threaten the job security of full time employees, unless the employee cannot do their job. For technical assistance/consultancy projects to succeed, it is very important that people within the organisation do not feel threatened, and see the project as a form of assistance to help them do their job better, and to help the business to go forward. If considered necessary, the owner of a business may have to spend a lot of time convincing staff that the consultant is not a threat before bringing the consultant into the organisation.

Another issue to be resolved is that of confidentiality. Many small business owners fear the risk that a consultant may take their business secrets and give or sell them to a competitor. These fears are normally unnecessary for several reasons. The first is that most business operations and processes are standardised within an industry, and can be developed by competitors without access to information from other companies. Even products based on propriety designs or formulations can be reverse engineered to determine their make up. In other words bringing in a consultant does not increase the risk of a competitor finding out sensitive information. Second, most reputable consultants maintain an ethical code that prohibits the disclosure of confidential information, and would willingly sign confidentiality agreements. Third and in my opinion, most business success depends largely on the mix of skills and personal attributes of the entrepreneur, and not on any particular secret. If a business has a unique formulation or process that gives it considerable advantage over its competitors, it may be appropriate to protect it with a patent. The requirement for confidentiality in one particular area should not prevent the company from solving other problems necessary for its overall success.

Businesses that have not used consultants are usually concerned about whether the consultant would cheat them, or if they would get what they are paying for. Technical assistance is a service and therefore intangible, but as with any other business transaction, the purchaser must have a clear idea of the need to be satisfied, and how much they are prepared to pay to satisfy it. If the potential user does not understand the business and what is required to succeed in it, continued survival will probably be an ongoing challenge.

As mentioned above, obtaining technical advice effectively requires defining a particular need to be met as a task to be carried out. In practice, most businesses would depend on the consultant to analyse the problem and suggest what is needed to solve it. Someone in the business should be an active participant in the process of analysing the problem, and should have a sufficient understanding of the issues and how they will be addressed. This element is known as defining the scope of the work and setting the terms of reference, and the end result is a clear definition of the problem and the steps that will be taken to solve it. This is communicated to the business by the consultant in the form of a proposal. If the consultant cannot communicate proposals in an easily understandable form, the consultant probably cannot give value for money and should be discarded.

Before contracting with a consultant, a user should always find out the level of qualifications and experience. Persons offering technical assistance should be able to describe similar situations they have faced in the past, and how they were able to deal with them successfully. References should be obtained and followed up with regard to competence, and integrity especially with regard to confidentiality.

To get the best possible deal a user should always get more than one quote, and letting consultants know that they are competing usually helps keep prices in check. A careful evaluation should be made of all quotations received. It is useful to determine in advance what would be the preferred characteristics of the winning quote, whether price, or quickest performance, or experience with the company or the problem. The quotation should clearly set out how much time is to be taken in hours days or weeks, and how much it would cost.

When a consultant is selected, a formal contract should be prepared. This contract should describe carefully what is to be done and what the company expects as an end result, e.g. a manual of procedures, a new organisation structure, improved quality of something that is produced etc. As far as possible, the consultant’s output should be measurable, so that there can be no misunderstanding as to whether or not the service has been delivered. If responsibilities for the supply of information and resources are to be shared between the business and the consultant, these should be clearly assigned, so that there is no doubt as to who is to provide what. There should be clear deadlines for the delivery, including interim deadlines for the delivery of any individual components of project if required. The contract should clearly set out the price and how it is to be paid, e.g. part in advance and part on completion, or as negotiated. Finally a well-prepared contract should also set out the grounds on which the contract would be terminated prior to completion, and the process for resolving any disputes.

Once the contract is signed and work has started it is very important to appoint a person in the business to supervise the project and to monitor progress closely. This person should make every effort to absorb as much knowledge as possible from the consultant, so that external assistance would not have to be sought again if a similar problem arises in the future. Regular contact should be maintained with the consultant and any issues that might delay completion should be resolved promptly. Care should be taken to avoid delays that are the responsibility of the business, so that the consultant would not spend more time than contracted and be in a position to claim additional fees.

A technical assistance project should not end with the delivery of the final report. The arrangements for ensuring implementation should be given as much attention as the assistance project. Reports that are just filed and are not acted upon are a waste of time and money and may make the business unwilling to bring in external assistance in the future. Any such situation means that there has been a breakdown somewhere in the processes of defining the problem, selecting the consultant, defining the expected result of the assistance, or in supervising the consultancy assignment.

It may be possible that proper implementation of the recommendations may be beyond the resources of the business. If this is anticipated at the contract stage and the consultant is suitable, it may be appropriate to provide for additional time for the consultant to assist in implementation, and include exactly what is required for implementation in the contract. Alternatively, implementation may have to be the basis of a separate contract for which the same process described above should apply. It should always be remembered that hiring a consultant is not the solution to a problem; only implementation of agreed recommendations can cause results.

Technical Assistance is a tool, and as with any other tool, the business must have a clear understanding of what it is being used for, and what is the expected result. It should be understood that there is the normal relationship between what is paid and what is received. Someone must be responsible for its use, and that person should maintain control over what is being done. Technical Assistance should always be considered whenever there is a problem that the business does not have the internal resources to solve. Effectively and efficiently used, it can make the difference in achieving superior performance.