Zbigniew Piekarski delves into the meaning of small businesses
"Change is the law of life. And those who look only to the past or the present are certain to miss the future."
- John F. Kennedy
When a bear market has become established, and just before it starts to do its worst, two things happen: public service workers go on strike and the politicians and press rediscover the vital role played in any economy by the SME (small to medium sized enterprise). It is then that they begin to realize that governments do not create wealth, businesses do; governments merely redistribute the tributes that they extract after creaming off a share for their own appointees.
The response of the State to this periodically repeated revelation is always the same. A committee is set up to examine the problems faced by the SMEs and to propose solutions. By the time the committee draws up its "solutions," either the economic cycle has changed or another political party has been elected and the proposals are left on the shelf until another recession comes along when the whole cycle is repeated.
This time the bear market won't go away. It may cease to growl for a while and there will be profitable interludes, but it will return, presenting new problems that have to be faced and overcome. This time the whole world is facing the common problems of overcapacity and deflation and the countries that will prosper are the ones that facilitate those individuals who make change possible; namely, entrepreneurs.
A recent survey into the SME sector by Grant Thornton reveals that whilst the majority of entrepreneurs in the world (48 percent) complain about competition from their peers as being the most important factor that inhibits their expansion, in Poland only 33 percent complained about it.
Polish entrepreneurs perceive that the major obstacle in running a business are "legal requirements and bureaucracy." This was mentioned by 58 percent of respondents and compares with an average of only 35 percent in the total world sample.
I normally take surveys with a degree of skepticism as questions can be phrased to elicit pre-planned answers. Therefore, I was particularly impressed with the reversal of the question. When asked what was considered to be the least important barrier for business, only 7 percent of respondents in Poland saw "legal requirements and bureaucracy" as being a small problem, compared to 38 percent worldwide.
One can therefore conclude that 93 percent of the individuals running SMEs in Poland are dissatisfied with the way in which the State inhibits their endeavors. If I were a budding politician, I would take heed of this survey for the simple reason that SMEs are the large companies of the future. In fact, they are the future.
However, there is also a question as to whether the future lies with the present generation of "Polish entrepreneurs." Another survey by Grant Thornton on family-run enterprises compares the attitudes of the owners within Europe, the United States, Canada and Japan.
Only 41 percent of the declared owners of family SMEs in Poland saw the enterprise as family company. The highest proportion, at 99 percent, was in Japan, while Italy was the next lowest after Poland, at 50 percent. However, 71 percent in Poland believed that the greater the number of family members involved in the enterprise then the stronger the company (compared with 73 percent in Italy and 18 percent in Japan).
Although only 41 percent saw the business as a family concern, a massive 53 percent insisted that the business provide an income for the whole family once they are no longer involved (compared to 41 percent in Italy and 9 percent in Spain).
Fifty-six percent of the respondents were not worried about disagreements with others (compared to 58 percent in the U.S. and 18 percent in Belgium), while 70 percent were unconcerned about the financial consequences of divorce (71 percent in Italy and 32 percent in Switzerland).
The above evidence leads to the following conclusions: 59 percent of "family" companies have hidden participants and are therefore not viewed by the listed owners as a true "family enterprise," although the company is seen as a "milk cow" providing rewards for the whole family, even in retirement.
Polish owners feel more comfortable in maintaining feudal-style relationships in which the family members are used to retain power. As child labor is acceptable, the relationship between employer and employees still leans towards the master-servant type rather than the flat egalitarian systems which are a prerequisite of innovation and individual responsibility.
Real innovation will have to be left to the next generation of entrepreneurs, as a high percentage of SMEs formed by the present generation of "owners" exist in order to benefit from hidden contacts rather than independence of endeavor. A fine example has been given within the media sector, where one family member directed the programming of a former state enterprise and gave most of the work to a company in which his daughter is the major shareholder and his wife the president of the board. (She is registered as president under her maiden name, of course.) Their web page does not appear to have been updated since 2001, implying that they have all the business that they can handle. The pansy "Pan Prezes" of the main enterprise knew nothing of this arrangement, naturally.
Meanwhile, the "Sour Flower Power" generation seems to have begun facing reality by promising lower corporate income tax rates. Now they have to take a further step and reduce the far greater hidden costs of "legal requirements and bureaucracy," as even their own business partners find these to be a major hindrance.
On the WSE: Recent statistics indicate the start of an economic revival. I wonder whether they emanate from the same people who imply that 97 percent of the population of Poland can read and write. Should this be the case, then why did I witness "The Voice" reading Polish subtitles, word for word, on an American film on TV? Should I assume that it was for the benefit of the blind?
