World Economy

SMEs: the Path to Productivity

SMEs: the Path to ProductivitySMEs: the Path to Productivity

The International Labor Organization conference recently discussed the small and medium-sized enterprises and decent and productive employment creation and reached a broad agreement that SMEs are vital to achieving decent and productive employment.

SMEs account for two thirds of all jobs globally and create the majority of new jobs. Well-designed SME policies help create more and better jobs and contribute to sustainable economic growth. In view of the heterogeneity of SMEs, interventions need to take into account enterprise characteristics such as size, sector, growth or age, ILO reported.

It said, in Latin America, when they decided to set up a company that produces children’s shoes in 2008, Robinson Montoya, and his partner Oscar Tabares, envisaged to sell their products in the main retail shops of the Colombian city of Medellin.

After seven years of steady growth, they have become more ambitious, wanting to export to the entire Latin American market. The company, Calza Kids, started with two workers, today it has more than 80 employees.

“From the beginning, our goal was to provide stable employment and income for women and men and their families, while offering a quality product at a reasonable price,” explains Montoya, who currently serves as a production manager.

A great challenge to grow the company was to find ways to operate it sustainably. The route chosen was to increase productivity, competitiveness and improve working conditions as pillars of sustainable business development.

  A Participatory Approach

This new approach, which was launched in 2013 in the company, is based on sharing inputs and ideas from all employees, both management and workers involved in the production and marketing of the shoes. “Employees have been able to contribute to our success with their ideas and express their needs. So they actively participated in organizational improvements,” Montoya says.

Improving cooperation within the company is part of the methodology proposed by the ILO’s SCORE program, which supports the development of small and medium enterprises. Currently, SCORE is being implemented in nine countries in Africa, Asia and Latin America, including projects involving 545 businesses with more than 155,000 trained workers.

SCORE (Sustaining Competitive and Responsible Enterprises) promotes a change in management style, supporting working environment improvements and relations between managers and workers, with the support of the Norway’s NORAD and Swiss’s SECO development agencies.

“One of the main objectives of the program is to promote a management model that can positively impact the economic viability of small businesses, and the working environments for employees. SMEs are the major providers of jobs in Latin America, but are also the ones where decent work deficits are critical, hence the urgency to consolidate their productivity and labor conditions,” says Philippe Vanhuynegem, the ILO senior enterprise specialist in charge of backstopping the SCORE program in the Andean region.

  Comprehensive Business Package

The SCORE Center of Excellence and Methodology for Latin America provides comprehensive business training and technical assistance based on five modules: workplace cooperation, quality management, cleaner production, human resources management, and occupational safety and health–generating a culture of dialogue among employees.

“Companies that adopt this methodology address two fundamental aspects: sustainability and productivity,” Vanhuynegem said. “We propose a culture of continuous improvements within production units, both for managers and workers.”

SCORE aims to reduce defects in production, accidents and absenteeism, and promote cost savings and dialogue between employers and employees, leading to increased competitiveness and social and labor well-being. “Productivity gain is key in this process, if we wish that more businesses adopt good labor practices,” concludes the ILO expert.

This program is being implemented now in places as diverse as Ghana, China, Indonesia and Bangladesh.

In Latin America, SCORE is operational in Peru, Bolivia and Colombia. A Peru pilot program was launched in 2013 with the support of government, employers and workers, benefitting 12 agribusinesses that represent close to 3,800 workers.

In Bolivia, the SCORE program is managed by a tripartite committee supporting 14 enterprises and 4,600 workers in the manufacturing industry.

In Colombia, Calza Kids is one of 49 companies that participated in the program. Most of them are in the garment and cut-flower sectors. Once SCORE has proven its effectiveness, its methodology is intended to be institutionalized and replicated in other businesses and regions in all three countries.