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SMEs - SMEs and labour rigidity
| Guest post by: Dr. Rob Smorfitt |
Article Overview: The impact of labour rigidity on SMEs.
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Free Download - SMEs – SMEs struggling in South Africa. Why? By Dr. Rob Smorfitt |
SMEs - SMEs and labour rigidity
Left wing governments often resort to protection of their
labour forces. This is generally necessitated by political rather than economic
imperatives. This leads to rigidity in the labour markets and has a number of
negative consequences.
SMEs are generally unable to pay top prices for their staff
members, and by default feed from the bottom of the labour barrel. They cannot
offer perks such as pensions, medical etc. Therefore when it becomes too difficult
to acquire, retrench or fire staff, they simply keep it tight. They try and
reduce staff before the new legislation comes in. They tailor everything to
existing revenue streams. They simply do not have any of the assets necessary
to handle the situation. They do not have money for legal employees, or legal
advice. They cannot pay minimum salaries.
Rigid labour markets have a negative impact on economic and
job growth. SMEs are equally affected by this situation. As they close ranks in
order to reduce staff, so they reduce their ability to grow their businesses. Everyone
is a loser, including and especially SMEs. Many of them collapse during this phase, generally to the benefit of larger businesses.
This is clearly being seen in a number of African countries such as Namibia, Botswana and South Africa.
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Article Tags: labour, labour rigidity, SMB, SME, SMME, Smorfitt
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About the Author: Dr. Rob Smorfitt RSS for Dr. Rob's articles - Visit Dr. Rob's website Have an MBA and a PhD in entrepreneurship. Three key areas of ongoing research are entrepreneurship and innovation in large business strategy, the impact of legislation on SME development and SME finance. Run my own SME blog at http://sme-smb-smme.blogspot.com as well as an entrepreneurship and innovation for large businesses blog at http://innoveur.blogspot.com I have been self-employed since 1982. I have started or purchased in excess of 50 businesses since then. Most were sold again and a few were shut down because of a lack of profitability. Many were run by staff or family while I worked full time in my bigger businesses. Author of 6 books. Written articles for various magazines, newspapers and websites. Experienced in research within developing countries.
Click here to visit Dr. Rob's website  
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Related Forum Posts
Re: In-House or Outsource?
- Unfortunately, in the South African context, very few SMEs see outsourcing as an option. They believe it is too expensive, and they are paranoid that someone will "steal their ideas".
I believe that the three main functions that cannot be outsourced are marketing, sales and strategy. These must be done in house I believe. If you do not have the marketing skills then get them. Hire a consultant or attend a course, but get the skills. Even if you use a consultant, you need to understand what marketing is about, as no one knows your market like you do. Marketing is made to seem difficult and complex, but everyone who really understands their markets, can easily learn to do their own marketing.
In South Africa, labour legislation is extremely inflexibile, and consequently labour broking is a large industry. This is an ideal starting point for SMEs in South Africa, as it is a legally complex area, whih comes with severe penalties.
I say do it!
Rob Smorfitt
Try manufacturing in New Zealand
- In New Zealand you can work on a level playing field where capital and labour costs are relatively cheap, labour skilled and the ability to start a business extremely uncomplicated.
Make the product in NZ and export
take care
Re: Women and Financing - It's Difficult!
- I found this paragraph of interest (in the article from Nana's link:
[quote="Nana":3r7womqv]Other studies show that women operate more service and retail establishments than men, which might explain their difficulty in getting financing since financial institutions often consider these two sectors more risky. However, although women are generally less inclined than men to apply for financing, when they do, they are more likely to get it. According to a study by Industry Canada on SME financing in Canada, in 2000 majority female-owned SMEs obtained a loan approval rate of 82%, which is slightly higher than the approval rate for majority male-owned businesses (80%). This suggests that when they do apply for financing, businesswomen submit excellent applications. [/quote:3r7womqv]
They say, "Women are more likely to get [financing]."
But the difference is only 2 percentage points! Big deal! And, that was only for one year, 2000. I'd like to know what the 10-year average is.
Numbers can be manipulated to mean anything you want them to mean...it all depends on what you want to show.
Re: My Brags: Backlogs & Punitive Refunds
- Thanks for the feedback, guys.
@Yinka,
Nice suggestion, but in most cases, no I cannot or would not do that with "difficult" customers. I will occasionally recommend other suppliers if I cannot fulfill an order.
I am beginning to think about recruiting some of my college students as casual labour though...
Re: My Brags: Backlogs & Punitive Refunds
- [quote:29wsnscu]I am beginning to think about recruiting some of my college students as casual labour though...[/quote:29wsnscu]
Very good idea! I am sure they can use the extra money and you would get cheap yet reliable help.
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