By Daniel Hunter

Britain’s small and medium-sized enterprises (SMEs) are living up to being the growth engines they are often held up to be but there is more to becoming a leader than just financial success. These are the key insights from a new YouGov study undertaken on behalf of Vodafone UK to identify the driving factors characterising Britain’s most progressive businesses.

The survey of 1,000 managers and employees of SMEs (businesses with 2 to 249 employees) found that a third (33%) of employees in British SMEs have seen their company’s revenues grow over the last three years. Around a fifth (18%) of these are high-growth companies, according to the OECD criteria of having realised at least 20 per cent revenue growth annually over the last three financial years.

However, the survey also uncovered that financial performance alone does not make a progressive company in the eyes of those surveyed.

Only a third (36%) of all respondents listed strong financial performance and growth as a criterion for a progressive business. Even among those working for high-growth companies, fewer than half (48%) deemed it a characteristic.

Instead, customer satisfaction (61%), employee engagement and loyalty (56% each) topped the list when it came to defining a progressive business. Other highly rated factors included efficient systems and processes (47%) and an entrepreneurial, inspiring or open-minded leadership team (46%).

Nearly half of respondents (46%) described their companies as progressive, based on these criteria.

While around two-thirds of employees in progressive businesses said the company used smartphones and laptops in (64% and 66% respectively), this number dropped to less than half in non-progressive organisations (43% and 41%). Progressive businesses were also more than twice as likely to use unified communications, tablets, web-based systems, instant messaging and video conferencing.

Jonathan Kini, Enterprise Marketing Commercial Director for Vodafone UK said: “Today’s customers expect more from the people they buy from and employees expect more flexibility from the company they work for both in management style and technological ability. SMEs can tap into this by making sure their employees are able to best respond to customers while working in a way that suits them. Our report shows a strong link between responsiveness to both customer and employee needs, and the company’s ability to be considered progressive.”

By contrast, poor employee engagement (50%), restrictive or old fashioned leadership (47%) and lack of information about the firm’s performance (39%) were the three top reasons for organisations to be labelled as not progressive (42%).

While over half of those working in non-progressive businesses paid lip service to the importance of customer satisfaction in defining a progressive business (53%), only 11% highlighted poor customer satisfaction as hindering them from becoming progressive.

The findings suggest that these organisations may be lagging behind due to a lack of customer focus — an assumption corroborated by the fact that progressive businesses are significantly better equipped with the kinds of technologies that enable a greater responsiveness to customer needs.

Jonathan Kini continued: “While many of Britain’s SMEs are driving the country’s economic recovery, the report suggests that a cultural change is needed to drive true innovation and financial growth. To unlock the X-Factor, SMEs need to focus their efforts on becoming more responsive to customers, and this can only be achieved by finding better ways of working for their employees, so they can deliver great customer service.

“To achieve this, there is an overwhelming case for greater organisational flexibility and better communication both internally and externally, and technology is going to be critical to facilitating this transformation.”

While most of those working in progressive businesses highlighted their corporate culture as flexible (60%), relaxed (53%) and sociable (51%), those who worked for non-progressive businesses were more likely to describe their culture as hierarchical (37%), slow (34%) and inflexible (32%).

Nearly half of employees who said their company was not progressive also felt that it had no vision for growth (48%), and only 14% considered their job to be very important to helping their company achieve growth plans, compared with 40% in progressive companies.