What are they and what do they aim to do?
Business mentors (or coaches) are experienced business professionals who provide advice to SMEs. Business mentor programmes typically serve as coordinating hubs that place SMEs in contact with mentors. The programme may assess both SMEs and potential mentors to determine their suitability to work together. The programme may also provide financing (or partial financing) as well as training for mentors. The role of the public sector, therefore, is not to provide advice directly but to play a financing and ‘matchmaking’ role.
How effective are they?
The limited evidence available suggests that mentor programmes can improve firm performance in terms of sales, value added and productivity. There is also some evidence for increased asset value and financing. However, the only study that examines innovation (patents) finds no effect.
There is no evidence on employment outcomes at the firm level. One study (from outside the OECD) finds that a programme targeted at individual entrepreneurs does increase the probability of self employment, but at the same time decreases wage employment by approximately the same amount.
How secure is the evidence?
Generally, the evidence base on business mentors is quite weak, meaning that conclusions on effectiveness are based on a limited number of studies. More rigorous studies are required. We found no systematic reviews of the effectiveness and no meta-analysis.
We found four studies that examined the effectiveness of business mentors as a form of business support. One of these was from outside the OECD, included only because of the overall lack of evidence. The non-OECD study is a randomised controlled trial, and the remaining three OECD studies are based on cross sectional comparisons of firms who received support with firms who didn’t (controlling for observed characteristics of firms).
None of the studies comes from the UK.
For a full list of references and summaries of their findings see the Annex in the PDF download below.
Are they cost-effective?
Only limited conclusions on cost effectiveness can be drawn given that just one evaluation (229) provides cost information. This evaluation suggests the business mentoring programme is cost effective. The total program cost per hour of advice was £43.60 in 2008. This means for all firms with initial sales of £640 or more, the benefits of a 6.8% boost in sales (the estimated programme effect) exceeds the cost of one hour of advice. However, while this may be cost-effective from the firm’s point of view, if these additional sales come at the expense of other local firms, this may not be cost-effective from an area point of view.
We found no evidence that tells us whether business mentoring programmes are cost-effective in terms of generating employment or improving productivity.
Things to consider
- How much contact should business mentors have with SMEs? For some other forms of business advice (e.g. public advisors) there is some evidence of diminishing returns to the number of hours spent helping a particular business.
- What type of firms should be enrolled on the business mentoring programme? One study suggests that, for example, service firms may benefit more from coaching than manufacturing firms.
- What is the objective of the business support programme? We currently have no evidence on whether business mentoring is a cost-effective means of increasing employment or productivity.
- Are additional sales likely to come at the expense of other local firms? If so, this will reduce the net-benefits of the programme. This is more likely to be a problem for firms that tend to serve local markets (see our evidence review on other Area Based Initiatives).