Universities and smaller businesses: a case of market failure or a failure in marketing?

On my first day as a Research Fellow at the then newly designated Nottingham Trent University, part of my overall staff induction included a pleasant hour with the University’s Industrial Liaison Officer, who excitedly told me that, “SMEs were the future” and that’s where I should focus efforts if I wanted to identify more placement opportunities for our students. He was unable to disguise his irritation and frustration when I innocently asked, “what’s an SME?”

That was in 1992 and a lot has since changed. SME engagement is of course commonly accepted practice now and there are an awful lot more people involved than ever before. But I think we still have a conundrum here: why if it is commonly accepted good practice, do Universities and small businesses still find it so difficult to engage with each other? Such a challenge in fact that universities are now resorting to offering cash direct to smaller businesses in an effort to persuade them to engage and employ their graduates. This begs the question as to whether this is market failure or simply a failure of marketing!

While there’s been plenty of research looking at the theme of engagement in recent years, and plenty of policy recommendations there hasn’t been so much focused on the actual views of smaller businesses themselves, or students for that matter. That’s where this piece of work came in. Working closely with our partners at GTI Media (the team behind TARGETjobs) and supported by the CIPD and NUS, we wanted to survey the views and experiences of a broad range of smaller businesses and also current students and recent graduates. The report we have just published is based on the responses of 250 smaller businesses and 1,000 students and recent graduates.

What’s an SME?

The term SME may be useful shorthand for policy based discussions but is not helpful if it simply lumps together incredibly diverse businesses that have little in common other than the number of employees they happen to have at any one time. Of course ‘number of employees’ itself is not a particularly helpful indicator of value, success or potential. We preferred to focus therefore on ‘high-potential’ businesses. It’s all very well exhorting Universities to engage with SMEs, but if they don’t actually know who they are, or what they might want, it’s probably not going to be a particularly effective form of engagement.

What we found:

Smaller businesses are taking on more graduates for permanent jobs and work placements than previously:

• 45 percent had recruited at least one graduate to a permanent position in the last year, up 20 per cent since 2010

• 41 percent had offered at least one graduate work experience opportunity in the last year, up 15 percent since 2010.

And significantly in terms of future plans, over 80 percent said they intended to recruit at least one new graduate.

This doesn’t sound like market failure to us and we saw no indication of high potential smaller businesses necessarily needing a cash subsidy to take on a graduate.

Smaller businesses did however find it difficult to promote their opportunities and fill their vacancies and most would value closer contact with local universities to help them promote their graduate opportunities:

• 59 per cent found it ‘a challenge’ to recruit graduates from universities
• 42 per cent had either never or only very rarely been contacted by a university.

Smaller businesses have several good business reasons to recruit graduates. The majority, 38 per cent, said it was to address an immediate or specific requirement however, one fifth mentioned their ‘potential as future managers’ and a similar number ‘the knowledge and (usually technical) skills’ that their business was lacking. 20 percent referenced a more general need for ‘fresh ideas and thinking’.

Smaller businesses’ views of graduates in terms of what they could bring to the business, was overwhelmingly positive. They praised graduates for their enthusiasm, technical knowledge, communication skills and flexibility to handle multiple roles. If graduates had weaknesses, they tended to be around a lack of commercial awareness and commitment.

Despite perhaps a perception among students that training and development was going to be better in larger recruiters, our smaller business respondents were passionate about the quality they offered:

• ‘Our graduates regularly attend seminars/training programmes, as well as conferences.’
• ‘On-the-job coaching and mentoring, an individual training plan according to the graduates needs, external training workshops and training days tailored to their needs.’
• ‘Regular appraisals to determine what skill gaps they have and address through specific job-related training, and also personal development training and soft skills.’

Most smaller employers said that they were ‘happy’ or ‘very happy’ with their recent graduate recruits. 82 per cent said they were ‘happy’ or ‘very happy’ with the quality of graduates taken on in the last five years, and half of respondents thought that graduates were better than they were five years ago, compared to 30 per cent who considered them worse.

We’ve made a number of relatively simple, practical recommendations for Universities to consider, as well as some for small businesses, students and policy makers. Among those for Universities to help them give smaller businesses a collective presence and visibility on campus, we suggest they consider for example appointing a smaller business champion within the careers and employability team who would be charged with ensuring the smaller business perspective is always considered and supported across any business or recruitment-related events and to assist colleagues in understanding the range of career opportunities available across small business sectors locally and regionally.

But there are a number of other ways that engagement can be improved and be more effective for both sides and this is something we have looked at in some detail in the report which is now available. It can be downloaded here

The report was also the subject of a national AGCAS conference in November and all the workshop and plenary presentations can be viewed and downloaded here

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