Certification & Industry-Specific Learning
Formal Education; the Capacity to Learn
Trade and Professional Organizations
Conventions and Trade Shows
Courses and Seminars
Time Spent in Training
Small-business owners and managers must possess two types of knowledge to successfully operate their firms – general management knowledge, such as marketing, accounting, and human resources, and industry-specific knowledge, such as an industry’s customs and norms, its cycles, and its technologies. The former type focuses on skills/knowledge that is readily transferable from business to business regardless of its industry and is a staple of the formal education system. It is taught in most high schools and college business schools precisely because these topics acquire a critical mass of students and faculty that makes it efficient to teach them. The latter type, that is, industry-specific knowledge, is another matter. With exceptions of law, medicine, education, and agriculture,there is usually not a critical mass for industryspecific knowledge to be made part of the formal education system. Technical schools and vocational training programs in some high schools are exceptions. But the relative lack of its presence in the public education system makes industry-specific knowledge no less important. In fact, a reasonable argument can be made that industry-specific knowledge is the more important to a firm’s operation, particularly for smaller, small firms, because it focuses on the raison d’être of the business. This issue of the National Small Business Poll therefore focuses on industry-specific knowledge, including certification of adequate amounts of that knowledge, and how it is acquired.
Formal Education; the Capacity to Learn
Small employers are better educated (formally) than is the American public as a whole. This gap is particularly striking given that small employers are on average substantially older than the population of adult Americans, a population where younger people as a group are more educated than older people. Forty-six (46) percent of small-business owners have a college degree, 15 percentage points of which have a graduate or professional degree (Q#5). Another 3 percent of current owners are now pursuing a degree or another degree (Q#5b). In comparison, 27 percent of the entire over age 25 population are college educated,1 a 19 percentage point difference. Ten (10) percent hold a graduate or professional degree, 5 percentage points fewer than small-business owners.
In addition to those graduating from college, another 26 percent of small employers either attended college for some period or have an associate’s degree. Four (4) percent possess a vocational or technical diploma. That leaves just 22 percent of small-business owners who have not accessed post-secondary training, 14
percent fewer than for the entire population. Put another way, 42 percent of owners who have no training beyond high school are 60 years and older. Yet, those 60 and over constitute 31 percent of the small-business owner population. Therefore, it appears that over time those without a formal education above the high school level are phasing out as small-business owners.
The principal area of study for those graduating from college has been business and associated fields, such as finance, management, and marketing. Forty-five (45) percent of smallemployer graduates hold a degree from the business school (Q#5a). The remainder obtained their degrees in a variety of disciplines. The social sciences are the most common major outside the business school (12%) with engineering next (10%). Fine arts (8%), the physical sciences (6%), the biological sciences (5%), law (4%) and medicine (4%) follow in that order. Six percent did not respond. Many of those were likely in education, a major inadvertently omitted from the response categories. The upshot is that most college and university training that business owners receive is general, rather than technical or industry-specific in nature. However, this modest level must be supplemented by the 4 percent with a vocational or technical training degree.
The composition of small-business owner college majors does not appear to be changing over time. The distribution of majors across younger and older owners is similar, though the comparison is cross-sectional when longitudinal would have been preferable.
Formal education passes along information, an often undervalued function. A more important function over the longer term, however, is to provide students the reasoning skills to help them learn once they have left school. Formal education, therefore, provides business owners both near-term and longterm advantages in their efforts to operate successful businesses. However, it typically does not provide the industry-specific information and learning channels that move potential owners and owners to practical, daily operation of a business.
Experience is a type of industry-specific education. One of the few predictors of business survival and success is the owner’s experience in the industry. The more familiar the prospective small employer is with the industry at entry, the more likely, within reason, positive outcomes will result. Forty (40) percent now have 30 years or more of experience in the industry of their current business and another 28 percent have between 20 and 29 years (Q#6). Roughly two-thirds of current business owners, therefore, have been in their industry for at least two decades. Fifteen (15) percent have fewer than 10 years.
For the most part, owners have been involved in the industry as an owner or employee for many more years than they have owned the business. For example, the shortest lived quartile of ownership is about seven years while the lowest quartile of industry experience is about 15 years. The respective medians run 20 years and 27 years.
Hobbyists and enthusiasts are likely different. They pick up industry-specific information due to intense interest and are not necessarily a formal part of the industry before entering a business in it. They likely represent a sizeable portion of the relative few that claim no prior industry participation.
States, in particular, and localities, to a lesser extent, often require small-business owners to possess a credential of some kind in order to operate various types of businesses or perform a function for them. These certifications are separate and distinct from a business license or a tax ID. A heritage of the medieval guild system, the purpose of these credentials is to certify a level of competence or skill thereby protecting the public from incompetent practitioners. Credentialing today typically covers all of the professional services, many other services, such as barbers and hair stylists, operation of certain equipment, including vehicles for hire and, various specialties in the construction trades.
Forty-nine (49) percent of small employers report that they personally or as a business owner must possess some type of credential or skill certification to operate their business as they now do (Q#1). Often their employees are required to obtain credentials as well, though the survey did not elicit information about employee requirements. For the most part, credentials are specific to an industry and require industry-specific training that is not usually part of the formal public education system. The most populous credentialed occupations and businesses, such as law, medicine, accounting, and teaching, are exceptions. Those individuals can and almost always do obtain their credentialed skills in the formal education system, though certificate-required boards and bar exams are administered by occupational authorities rather than educators. Still, most certifications small-business owners must have, including re-certifications or continuing education hours, are obtained outside the formal education system.
Small-business owners obtain the necessary knowledge and skill set to earn their credentials in a variety of places. The single most common place (27%) is an apprenticeship or on-the-job-training (Q#1a). These owners effectively learn by doing, though a classroom component can be part of the process. Apprenticeships in many electrical contracting firms are an example. Formal schooling is another important source. A university or college is the source for about one-quarter (24%); a trade or vocational school program yields credentials for 11 percent of those needing them. Many owners simply study for initial credentials on their own (13%). Seven percent take specific on-line or face-to-face course(s). Preparation for the real estate sales exam is an example. Just 2 percent obtained theirs in the military. Finally, 13 percent claim they used a combination of these sources.
The source of learning to obtain the necessary skills to obtain certification tends to be industry-specific. For example, those in construction are likely to have obtained the skills to earn their credential as an apprentice or through on-the-job training. Those in the professional, technical and scientific services industry tended to get theirs from colleges and universities. Still, small employers appear quite resourceful in acquiring the necessary knowledge to obtain their credential. They frequently avoid structured programs to learn on their own.
Credentials are not necessarily a one-time affair. Continuing education requirements are common, and appear to be increasingly so. Fifty-four (54) percent of those needing credentials must also take periodic (commonly one or two years) continuing education-type courses (Q#1b) to retain certification; 46 percent do not. But 42 percent of small employers whose certification no longer requires them to take continuing education-type courses do so anyway (Q#1b1). These owners apparently think the extra effort and expense yields dividends to them and/or their firm. Thus, about threequarters of small-business owners who obtain initial certification take some type of continuing education course(s) on a periodic basis.
Trade and Professional Organizations
Because credentials and certifications are so industry specific, professional organizations and trade associations often offer courses, seminars and similar training designed to help those in the industry. The association typically provides a critical mass of owners needing a particular skill/knowledge to make the economics of the education program work.
Sixty-eight (68) percent of small employers report being a member of a business, trade or professional organization (Q#2); 4 percent did not respond. Almost three-quarters of those who join one belong to multiple groups. Seventeen (17) percent are members of four or more. Owners of larger, small firms are more likely to join at least one than are owners of smaller, small firms, and they are also more likely to join multiple organizations. The most important business organization to a small-business owner offers a business, technical or professional training/education program to help members learn or hone their business and/or professional skills and knowledge in 64 percent of cases (Q#2a). Typically, the organization’s education program is not the sole reason for belonging (8%), but it is a very important reason for doing so (43%) (Q#2a1). Still, about one in three say that the education component of their membership is either not an important reason for membership in their most important business/professional organization or is not a reason for it. While it is possible that some who do not think the education component of their membership is valuable possess membership in another group whose education component is valuable, it is not likely to add notably to the total. Thus, about 30 percent of all small-business owners are members of business organizations that offer a continuing education type activity that owners find important to them.
Some professional and business organizations offer their own credential or certification. The credential has professional value, but is not required by the law. In fact, 57 percent of those belonging to an organization claim that their most important organization offers a credential or certification of some kind (Q#2a2). That translates into about 26 percent of the small-employer population.
The tie between legal need for certification and trade associations is strong. Those requiring certification are much more likely to be a member of at least one (73 percent compared to 64 percent) and they belong to more on average. Moreover, those requiring certification are more likely to belong to groups where the education component of the organization’s activities is an important reason for membership (71 percent compared to 55 percent). Thus, trade/business/professional associations play an important role transferring industry-specific information generally, but it appears particularly important for those in industries requiring certification.
Conventions and Trade Shows
Conventions and trade shows are other activities often sponsored by or associated with business organizations. Both foster the dissemination of industry-specific information, including products and technologies, that members will likely find relevant as well as more general businessrelated information. While some conventions or trade shows may be massive, national gatherings, others are local, chapter functions. In the last 12 months, 53 percent of association members attended at least one convention or trade show sponsored by the organization they identified as most important to them (Q#2b). Forty-six (46) percent also indicated that they had attended a business-related convention or trade show sponsored by another organization, private business, etc. Thirty-three (33) percent attended at least one of both kinds while 34 percent attended neither.
Membership in an organization is not necessarily a requirement to attend a convention or trade show. Indeed, many are sponsored by groups other than business organizations. Thirty-two (32) percent of small employers who are not members of a business organization or professional association attended at least one in the last 12 months (Q#3). Thus, 48 percent of small employers report attending a convention and/or a trade show in the last year.
Small-business owners as a group think attending conventions and trade shows are a plus, but they do not appear wildly enthusiastic about them. Just 9 percent regard conventions and trade shows as essential to keeping abreast of industry and business developments (Q#4). However, 64 percent think they are helpful, yielding a total of 73 percent offering positive marks. Ten (10) percent think them not helpful and 15 percent claim they are a waste of time and money.
Not surprisingly, those who attended at least one in the last year had a much more positive view of conventions and trade shows than those who did not. Fifteen (15) percent of attendees think they are essential while 75 percent think they are helpful. In contrast, 22 percent who did not attend termed them a waste of time and money and another 15 percent called them not helpful. No relationship appeared between attendance and one-year profitability or three-year change in employment, questioning the amount of help (or advantage) attendance actually provided.
Courses and Seminars
Thousands of seminars or courses are presented on business-related subjects daily. A small-business owner in a major metropolitan area could spend his life personally attending them, and that is before counts of Internet and correspondence courses are made. The opportunities in rural areas are not as great, but they still are substantial. Yet, most do not use them.
Thirty-six (36) percent of all small employers availed themselves of at least one course on a business-related subject that lasted at least four hours in the last year (Q#8). Those located in mid-sized to small cities were about 10 percentage points more likely to take one than small employers located in large metropolitan areas and their suburbs or rural areas. The most frequent sponsor of the last course or seminar taken was a business or professional association. The latter sponsored the course/seminar in just over one-third (36%) of instances (Q#8a). The second most frequent sponsor was a supplier (26%). Suppliers often offer seminars on the use, repair, or installation of their product(s). These sessions can resemble a sophisticated version of the “do-ityourself” classes held for consumers at Home Depot or Lowe’s. The third most common sponsor is government (14%) followed by a school or university (11%). The eclecticism exhibited in these data indicates that small-business owners care considerably more about the subject, venue, etc., of the course/seminar than its sponsor.
The purpose of course/seminar attendance is most often (66%) a general upgrade of skills(Q#8b). The upgrade could be either a general business skill, such as inventory accounting, or a technical skill, such as repair of a widget. Business/professional associations and suppliers disproportionally provided this latter type of course content. Another 25 percent took the course/seminar to get or stay certified or accredited. This type of training too was most commonly provided by business/professional associations and suppliers. However, it was the type of course/seminar government (N = 37) most often provided. Just 3 percent attended a course/seminar to resolve a specific problem or issue they faced.
Seventy-three (73) percent took the course face-to-face, in effect the traditional classroom, or in a field instructional location (Q#8c). The number rose to 84 percent among owners of the largest, small businesses. The Internet was used by one in five (20%). Five percent still used correspondence instruction.
A majority paid for their course, either personally or through the business, which is effectively the same thing. Fifty-nine (59) percent paid, 35 percent paid personally (Q#8d). However, 39 percent obtained it free. The two sources most likely to provide the course/seminar free were government and suppliers.
The subject matter of these courses/seminars was most often technical or professional issues. Forty-three (43) percent cited that topical area and a substantial number of the 9 percent who gave an “other” answer also identified topics that often seemed industry-specific (Q#8e). Further, the 10 percent who noted operations or purchases undoubtedly contain a large number thinking about industry-specific procedure and goods/services. The second most common issue area proved to be sales, marketing or customers (18%), problems likely associated with the lingering poor sales associated with the Great Recession. General topics that have broad applicability with the exception of marketing were not of frequent interest. For example, personnel or HR issues was the topic for only 4 percent. The same percentage identified legal matters.
Time Spent in Training
While 30 percent of owners spent less than one hour within the last 12 months attending or participating in a business-related course/seminar or training of some type, the median number of hours spent by those more engaged was about two days (16 hours) (Q#9). In fact, more than one in five (22%) spent four or more days in courses and/or training over the last year. Employee size of business did not differentiate the amount of time their owners spent. A modest (not statistically significant) relationship does appear, however, between the amount of time spent and both increased profitability from the prior year and net employee additions over the last three years. Owners of younger businesses spent modestly more time engaged in these activities than did owners of older ventures.
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The Internet has opened a major new avenue to reach information, particularly technical information, that might not have been readily accessible previously. The new avenue not only allows the small employer to explore material in an up-to-date, world-wide library, but to interact with colleagues and exchange ideas or information. Forty-three (43) percent of owners claim that once a week or more they now go to a Web site(s) to ask a question or have an e-mail conversation about some aspect of their business, excluding the purchase of products or services (Q#8). Another 13 percent do so once or twice a month though 15 percent do it a few times a year. Just 28 percent indicate that they never do so.
A more traditional means of gathering information is business/professional/trade magazines and journals. Fifteen (15) percent subscribe to and read, at least in part, five or more of them with owners of the largest, small firms 10 percentage points more likely to do so than owners of the smallest, small firms (Q#10). Another 10 percent subscribe to and read four, 15 percent three, 20 percent two, and 11 percent one. But 28 percent subscribe and read none of them.
The medium appears not to be a critical issue. Those who use the modern technology, that is, the Internet, are also more likely to use the traditional means, that is, periodicals, more frequently and vice versa. For example, 55 percent who subscribe to five or more periodicals are also on the Internet several times a week. Meanwhile, 47 percent who do not read periodicals, also never use the Internet for reaching out to other owners and colleagues.
Policy-makers and business schools typically focus their business information and training interests on general topics, those that can be employed by business owners regardless of industry. While that focus is understandable due to scale economies, it also is incomplete. Industry is a hugely important differential among businesses both in terms of the information small-business owners require to operate their firms and the channels they use to obtain it. Government required certification is only one example of that. The result is that owner questions and information requests are most frequently industry-specific with a public capacity to respond typically limited to nonindustry-specific inquiries.
The transfer of industry-specific information occurs largely unnoticed outside members of the industry. Still, membership in trade/business/professional organizations, particularly those with an important education component, attendance at conventions and trade shows, consultation with suppliers and other business owners, trade journals, and now the capacity to go on the Internet to communicate rapidly and frequently with industry colleagues offer small-business owners the critical channels they need to fill their industry-specific information and education requirements. Whether these are adequate or sufficient to satisfy reasonable small-business demands likely varies by industry, and certainly by the individual owner.
Certification or credentialing, a minimum standard for industry-specific knowledge, is often sought by established business owners and their industry representatives both to upgrade the trade/profession and to protect its consumers. Sometimes, the idea actually works that way. Few would care to be operated on by an unlicensed surgeon. But, there are sometimes other, unspoken reasons for certification. Principal among these are limiting the number of entrants, which in turns raises selling prices to the advantage of incumbent firms, and freezing the state-of-the-art, which limits the costs associated with change also to the advantage of incumbent firms. Neither serves new business entrants or consumers well. The result is that certification is the proverbial “double-edged sword”. It forcibly raises the general level of industry-specific knowledge, though the amount it raises that level is an associated, but different question. Yet, it also curbs competition and innovation, though the amount it lowers that level is likewise an associated, but different question.