Firms without employees more likely to succeed

12 Aug 2018

It is not exactly the sort of news that unemployed university graduates – and everybody else without a job for that matter – would like to hear but a study by Africa’s number one think tank says that a firm with no employees is 3.9 percentage points more likely to succeed than a firm that has employees.

“This suggests that business owners are unable to manage the labour resources in order to attain success,” says a study titled “Determinants of Informal Sector Business Success in Botswana” by Tshepiso Gaetsewe, an Associate Researcher at the Botswana Institute for Development Policy Analysis and, for what is worth, striking a more lenient note in the next breath: “However, because of the high unemployment in the country, government needs to assist in the growth of informal businesses who have more employees in order to encourage job creation. Capacitating business owners on business management skills, especially management of the human resources, is critical for the success of the businesses.”

From the study sample, 80 percent of the firms had no employees while 20 percent had at least one employee. Staffing was measured in terms of firms that trained their staff in the last three months and it was found that 96 percent of the firms had not trained staff in the last three months while only 4 percent had trained staff.

The study also found that firms that operate in the manufacturing, services, agriculture and construction sectors are more likely to succeed than those operating in the retail sector. Businesses in the services sector are 17.4 percentage points more likely to succeed than those in the retail trade sector. The former has potential for growth and having accounted for about 61 percent of total employment in 2007, is very important when it comes to employment creation.

“The sector also plays a significant role when it comes to economic diversification. Businesses in the manufacturing and agriculture sectors are [respectively] 8.8 percentage points and 5.5 percentage points more likely to succeed than those in the retail trade sector. Those in the construction sector are 8 percentage points more likely to succeed than those in the retail trade sector. Firms in the transport sector are not different from those in the retail sector in terms of the probability of business success,” the study says.

It also found that businesses enhance their chances of success if, as part of normal conduct of business, they engage the services of professional advisors such as lawyers, bankers and accountants.

“In most cases, start-up businesses only seek the services of lawyers when they face legal problems. Bankers are used when a business owner requests a loan and accountants are not used very often,” it notes.