UFHRD 2015 Working paper Submission: Stream 6


Paper type: Working Paper Submission

Submission Reference No: S6-09

Stream 6: Organisational Learning and Organisational development

Title: Can Organisational learning enhance the future of public funded SMEs? Lessons learned from the contemporary art sector in the UK

Authors: Vivek Mohan& Hazem Heswani

Organisation & Affiliation : Faculty of Business & Law , Leeds Business School, Leeds Beckett University, City Campus, LS1 3HE , Leeds, UK

Corresponding author: Vivek Mohan, Doctoral Researcher in HR & Organizational Behaviour, Faculty of Business & Law , Leeds Business School, Leeds Beckett University, City Campus, LS1 3HE , Leeds, UK. Email:

Tel: +44 (0)7927180616



The purpose of this paper is to argue that sustainability and self-transformation perspectives of Public funded Small and Medium Enterprises (SMEs) can be maximised by Organisational Learning (OL).A public funded SME in the contemporary art sector in the UK is taken as the case study as this organisation was recently detached of its funding from the Arts Council UK.


The need for self-transformation in Public funded SMEs is justified by investigating and outlining effective organisational learning outcomes as a basis for these SMEs to act as a system. The study uses the perceptions of stakeholders in the contemporary art sector in the UK and perceptions of manager-owners as a tool to investigate organisational learning outcomes.


The paper finds that the need for compatibility within the set environment of public funded SMEs should urge them to develop the ability to learn and relearn from past and potential future behaviours. Interviews with managers and stakeholders confirms how the “double loop learning” in OL literature critically reflects the public funded SMEs ability to learn over a period of time.

Practical implications

In this paper both the literature review and evaluation suggests that the knowledge gained from OL will assist practitioners and SMEs in developing practical guidelines that can assist in selling hedonic products and promoting contemporary art in the UK.

Keywords: Organisational learning, Public funded SMEs, Contemporary art sector in the UK, Stakeholder perceptions

Paper type: Working Paper

Can Organisational learning enhance the future of Public funded SMEs?Lessons learned from the contemporary art sector in the UK

(Working paper submission)

Vivek Mohan & Hazem Heswani

Faculty of Business & Law, Leeds Business School, Leeds Beckett University, Leeds, UK


The emergence of contemporary art in the UK as a vital force of change has brought with it a comprehensive notion of public funded Small and Medium Enterprises (SMEs) which act as digital platforms that promote contemporary art in the UK.Equippped with limited resources and primarily funded by the Arts Council UK,it is highly essential for these SMEs to achieve compatibility within the environment to remain competitive and innovate for long term development and survival. Althoughmuch has been written on Organisational Learning as playing an integral role in the healthy survival of SMEs(For example, Filion & Lima,2011),the SME responses to adopting Organisational learning perspectives has been mixed. Even though organisational learning is deemed important for all kinds of organisations, it is critically important for SMEs which face more resource constraints when compared with large corporations (Welsh & White, 1981; DeSouza & Awazu, 2006; Zhang et al. 2006).Equally and at a more theoretical level, scholars have long argued that the ability of organisations to learn and relearn from past and potential future behaviours corresponds to the means of a sustainable competitive advantage in volatile business environments(De Guess,1988;Lopez et al.,2005).

The importance of learning as a way of achieving competitive advantage is evident from the criteria set by the Arts Council to secure funding by art promoting SMEs. However any practical guidelines on the impact of adopting a learning philosophy or the kind of learning systems which firms should utilise to effectively manage learning process towards this objective is absent.In the absence of empirically validated benefits of applying learning as a tool towards the improvement of competitive advantage, it is reasonable to suggest that many SMEs in any sector would be apprehensive to implement the concept.

In this paper, we aim to make two significant and inter connected contributions. Firstly, by drawing on very recent developments on Strategic Management of SMEs through Organisational Learning(For expample,Filion & Lima,2011-16),we argue that the “double loop learning” concept proposed by Argyris & Schon(1978) when applied to public funded SMEs in this scenario, will help them self-transform and avoid failure. Secondly, from a practical perspective, we provide a framework for the Organisational Learning which has transpired after the SME has been detached of its primary source of funding which of course is the aid from the Arts council UK. Given the ability of Organisational learning to effectively consider the characteristics of SMEs, such an approach through this working paper is likely to provide a basis for future research agenda in terms of learning perspectives in public funded entrepreneurship and small business management.

Public funded SMEs in the UK and OL perspectives

It has been well documented by Rae & Carswell (2000) that learning in SMEs is often based on the context and previous experiences. While it is important to realise the fact that SMEs follow a pattern of contextualised learning through action in their own natural environment, such kind of learning cannot always be recognised as explicit learning since it is very much random as pointed out by Devins & Gold(2004).Prior research has stated that the rate of uncertainty in which SMEs operate in the UK have often urged organisations to respond quickly all the while being scrutinised to maintain uncompromising quality and service(Choueke & Armstrong,1998).Public funded schemes are often aimed at assisting SMEs under well specified conditions. In our case, such ‘Well specified conditions’ coupled with the volatile and saturated nature of the contemporary art sector in the UK, puts public funded SMEs in a precarious situation.As a result, such SMEs often move into a situation they engage in learning through everyday practise all the while failing to realise that learning has transpired. It is clear from Clarke et al.,(2006) that such organisations remain in the cycle of adaptive learning rather than generative learning but is this clearly the sole reason for a crisis or failure of such an SME and what kind of learning actually transpires during a crisis? Fiol and Lyles (1985) clearly points to three characteristics of Organisational Learning namely the need for environmental alignment, the distinction between Organisational and individual learning the role played by four contextual factors on learning process namely culture, environment, structure and strategy. Organisational Learning can be triggered by challenges and problems (Kleiner & Roth, 1997) and it is argued that such events can have transformational effect on the functioning of an organisation (Reuber & Fischer, 1993; Appelbaum & Goransson, 1997). Significant changes in learning orientation due to challenges/crises emanate from the understanding that learned responses and habitual ways of behaving can be ineffectual in tackling the crisis (Marsick & Watkins, 1990). Even though this is one of the major ways by which transformative learning can take place, learning may be achieved through problem solving, experimentation and coping (Gibb, 1997), trial and error (Young & Sexton, 1997) and making mistakes (Gibb, 1997).

Crisis or Failure of Public funded SMEs

Crises or discontinuous learning events can trigger different kinds of learning (Cope, 2003) as it demands individuals/organisations to question their taken for granted beliefs and assumptions (Schon, 1983).They also can serve as stimulation for organisations to unlearn, or to undertake new higher level of learning leading to re-adaptation (Fiol & Lyles, 1985). However most organisations, whether small or big do not capitalise on the learning opportunity offered by failures (Sitkin, 1992; Leonard, 1995). This is the case even with companies which have invested heavily to become learning organisations but struggle to change the basic mindset and activities so as to learn from the failures (Edmondson, 2002). As far as the public funded SME learning is concerned, importance seems to be placed on subjective and context specific knowledge which is in contrast to the traditional way of learning - objective and decontextualized (Gibb, 1997; Goss & Jones, 1997).However Devins & Gold (2004) mention of the drawbacks of context specific learning in the case of SMEs that even though such learning is meaningful and have direct relevance to the issues pertaining to work, its adhoc and randomness can fail to acknowledge the learning that took place and contribution of such learning to organisational competitiveness. Further as such learning is not the outcome of reflection or critical analysis it cannot help an SME to move forward or the SME get stuck at a certain stage of learning. Thus the SMEs which follow adaptive learning may lose competitiveness in the long run as opposed to generative learning. Generative learning enables organisations to find new and innovative ways of managing business (Senge, 1990). In this regard, Gibb (1990) contends that to improve the competitiveness of SMEs it is vital that a higher level of learning should transpire which makes effective use of experience. Thus an ideal organisation learning process associated with SME should be reflective, critical and generative. Critical reflection can enable SMEs to go beyond adaptive learning (Schon, 1983). Argyris and Schon (1974) state that the mental models, theories of action and assumptions that individual maintain shape their view of the world and influence the way they respond to situations and review such responses.

An alternative to the linear model of learning is social learning (Lave & Wenger, 1991; Brown & Duguid, 1991). According to the social perspective, individuals as social actors are also part of a network of social actors who develop a collective understanding of the environment around them and learning takes as an outcome of these interactions (Gherardi et al. 1998). This is why Brown & Duguid (2001) maintain that individual learning is inevitability dependent on the context in which the learning and subsequently put that into practice. The context dependent nature of learning can be better understood if the impact of crises on learning is taken into consideration. It requires individuals/managers to reflect on the crises and as the adaptive learning does not suffice to tackle the crises, demand new higher level of learning (Fiol & Lyles, 1985; Reuber & Fischer, 1993; Cope, 2003). Thus social learning is mentioned as a way of confronting issues which are context specific which demand an individual or organisation to combine reflection and experience to produce solutions (Gheradi, 1999; Chiva & Alegre, 2005). Easterby- Smith et al. (2000) contend that social learning leads to the development of new ways of sustaining and fostering learning processes. SME learning is considered as highly context specific (Gibb, 1997; Goss Jones, 1997) and if they fail to apply reflection in their practices, they may fail to take powerful decision concerning their future (McGill & Beaty, 1995). The success of an organisation can be dependent on the manner in which it responds to learning opportunity like crises. Zhang et al. (2006) mentions that an organisation may respond to learning trigger with different degrees from little to significant changes to organisational norms and values. This then signifies how well the organisation responds to environmental calls for learning.

However social learning in SMEs could be constrained by context specific factors as well. Further resource constraints are one of the main challenges SMEs face (Welsh & White, 1981; DeSouza & Awazu, 2006; Zhang et al., 2006). This is a situation where in SMEs learning could be limited by fund constraints and the resultant learning could be fragile with limited impact on the re-adaptation. Thus it can be argued that triggers for learning can be opportunities for higher level learning and at the same time can place constraints for such learning.Higgins & Aspinall (2011) maintain that action learning is context specific and reflective. Marquardt (2000) contends that action learning derives its power from the non-isolation of dimensions from the context in which managers’ work. Clarke et al. (2006) state that action learning is evident in SMEs as the focus there is action in the context of owner/manager, critical reflection on important events and the provision of a social environment. In action learning, pertinent time is provided for doing, questioning, understanding and critically reflecting (Higgins & Aspinall, 2011). Action based on reflection to resolve critical issues is the key feature of action learning (McGill & Beaty, 2001). Clarke et al. (2006) opine that a characteristic aspect of SME learning that can prevent it from action learning is the lack of critical reflection on the part of owner/managers.

Thus ability to critically reflect and offer solutions for context specific issues is one of the main features of action learning and Marquardt (2000) maintain that action learning develops the whole leader for the whole organisation. As mentioned by Clarke et al. (2006), action learning is assimilated in an organisation wherein the needs of social learning such as dialogue, critical reflection and interpersonal communication as tools to resolving context specific issues are acknowledged.

The case organization and context of work in progress

The organisation in context is a UK based digital organisation that promotes contemporary art in the UK.Since the organisation’s inception in the early 1990s, it has responded creatively to artistic practice and technology in order to furnish its mission of promoting artists in the UK.The Arts Council UK provides around £350 million a year regular funding to 880 arts organisations. This represents almost three quarters of the Arts Councils investment in arts and is perceived as the most significant way in which the Arts Council supports art in the UK.The organisation was established in 1991 and was one of the first to develop a multimedia database of UK artists and was one among many organisations which was fully supported by funding from the Arts Council, UK. Within a decade, the organisation had set up its trading company along with an online forum for artist members. The vision of the organisation has always been to lead the digital presentation of contemporary art practice in the UK,creating opportunities for exchange and interaction that would benefit a wide constituency of artists and art professionals and strengthen the contribution of visual arts to the society. It is interesting to note that even though the organisation had attracted more than nearly 4.5 million page views from 200 countries and advertised opportunities for artists worth more than £30 million the previous year, it failed to secure funding from the Arts council for the corresponding year. The Arts council puts forward a standard set of norms through which they urge organisations to work towards fitting these set guidelines for securing funding on a regular basis. However it is not the reasons behind the loss of funding that interest us but the aspect of learning that transpires in this organisation, more specifically the role of double loop learning in such a public funded SME.Given this scenario, the organisation is in the state of transition or crisis as it has been stripped of its primary source of funding. In the wake of such a change process, we investigate the aspect of learning which has transpired over a period of about 8 months after the organisation’s loss of funding.

Is “Double loop” the final piece of the puzzle?

Argyris & Schon (1978) describes that double loop learning occurs when a change of action is associated with a change in the members’ logic of action which in fact can be termed as “theory in practise”. An Organisation’s learning remains one dimensional when the members do not make changes in their action logic but only to correct errors(Argyris & Schon,1978) and this is termed as single loop learning. Filion & Lima(2011) suggests that the Organisational Learning process is cyclic and that members action generate changes in the inner and outer realities and further go on to confirm that the process of double loop learning involves a change in the logic itself and is often triggered by negative feedback. Using a practise based approach through this paper, we investigate whether the organisation in question can adapt to the double loop learning process to avoid a crisis.

Diagram 1: A Perspective for adapting “Double Loop” learning in public funded SMEs

The model in Diagram 1 shows a perspective for adapting the double loop learning process in the context of public funded SMEs: The manager/owner approach and single loop learning followed before crisis and the change in approach after loss of funding. The prospect of reflective/generative/social/action learning is speculated by detailed semi structured interviews on managers of the organisation. Lima (2004) states that owner-managers play a prominent role in these processes. At this point, such a prospectivemodel, when developed with double loop learning will act as a generator for learning and is highly useful in understanding and analysing how the elements are formulated by the members of the organisation in the context of a volatile business environment such as the contemporary art sector in the UK.

Design of the study and conceptualization

The literature delineated the context specific nature of SME learning and the influence of broader factors in the process associated with their learning (Goss & Jones, 1997). This implies that research to divulge the learning process in SMEs should entail the collection of SME specific factors thereby effectively informing the research process. In this regard, even though SMEs in the art sector in UK cannot be considered to have a highly unique nature as far as learning is concerned when compared with other SMEs, they face unique industry specific challenges; say for example, to remain competitive enough to secure funding from the Arts Council of England. As mentioned earlier, loss of funding can be considered as a crisis which is highly context specific for SMEs in the art sector in UK and can act as an impetus for organisational learning notwithstanding the factors that enabling an SME in this sector to remain competitive in a highly saturated market. The case study organisation, excepting the previous year, had been able to successfully secure funding from the Council. This loss of funding can be considered as a major trigger/crisis/failure which can have significant ramifications for organisational learning in the form of the imperativeness of obtaining an enhanced critical understanding of the prevalent learning processes, thereby determine its efficacy and questioning taken for granted beliefs (Schon, 1983) so as to embrace higher, generative, reflective and context specific learning leading to enhanced organisational competitiveness. However such learning need not necessarily be a natural corollary of crisis as it is argued that many organisations fail to capitalise on the learning opportunity offered by a crisis (Sitkin, 1992;Leonard, 1995) and if learning is triggered, then the post crisis innovative behaviours serve as a means to corroborate it (Fiol & Lyles, 1985).