The Impact of Consultants on Small Firm Strategic Planning

Abstract

THE IMPACT OF CONSULTANTS ON SMALL FIRM STRATEGIC PLANNING Several researchers have indicated that a lack of strategic planning by small firm owners or managers may contribute significantly to a small firm's failure. Evidence indicates that the use of sound, sophisticated planning systems, tailored to the needs of the firm, may enhance the firm's chances of survival and success. Many small firms are now turning to outside consultants for assistance in the development, implementation, and control of strategic planning systems to guide their small firms. Outside advisors may even provide a surrogate for the planning function in small businesses. Consultants to small businesses provide expertise in the areas of finance, marketing, management, operations, and accounting. The small business owner who feels inadaquate in one or more of these areas may summon a consultant or group of consultants to assist long or short term. Consultants have played a significant role in the management of organizations of all sizes. A considerable body of literature indicates the importance of consultants in improving the financial performance of firms which existing strategic planning systems. However, little empirical evidence supports the contention that consultants improve the financial performance of small firms by assisting in the development, implementation, and control of strategic planning systems. Furthermore, most studies of outsiders and their impact on small businesses center on new firms or firms in highly dynamic environments. Often, casual relationships are hard to ascertain. In studies of the value of the Small Business Institue (SBI) program and the management assistance officer (MA) program, Anderson and Smith found that outside consultants involved in the firm's strategic planning process were not beneficial. Trombetta and Robinson, however, found a positive relationship between sales and the use of outside financial strategic planning consultants. The use of outside accounting services was positively correlated with the level of perceptual success among Potts' sample of small firms. Robinson investigated performance differences between 100 small manufacturing, service, and retail firms that utilized Small Business Development Center (SBDC) in-depth counseling and 100 firms that did not receive assistance. He reported significantly higher financial performance among the SBDC-assisted businesses. O'Neill and Duker examined successful and unsuccessful small firms that used different types of consultants to assist them in the planning process. No diffeence in the general content or the overall quality of advice was found for firms that used lawyers, bankers, board members, customers, and suppliers. However, there was a significant, relationship between level of accounting advice and success. An examination of research concerning the outsider's role in small firm planning reveals numerous methodological problems. Some of these problems are: small sample size, inappropriate and nonrobust statistical procedures, nonhomogeneity of data, and inappropriate financial performance measures. Other shortcomings of past research include a failure to distinguish between entrepreneurs and small businesses; between young and old firms; and failure to account for firm size, stage in product life cycle, and the dynamic or static nature of the firm's environment. Furthermore, the use of planning consultants by small mature businesses has been almost entirely overlooked. STUDY OBJECTIVES This study examines two major hypotheses. (1) There is no significant difference in industry-specific financial business performance data between mature small firms that employ planning consultants and those that do not employ planning consultants. (2) There is no significant difference in industry-specific financial business performance data between mature small firms that use planning consultants (with or without similar planning orientations) and firms that do not employ planning consultants, regardless of planning orientation. …

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