Small Business Development Center Reorganizes
Reacts to Funding Crisis

HILO – Reacting to a long-term funding crisis, the Hawai`i Small Business Development Center Network (SBDC) is reducing staff and cutting back on services. One of its six service centers—the West Hawai`i Center in Kailua-Kona (opened in 2001)—will be closed on November 1, 2003. The remaining centers are located in Hilo and on Kaua`i, Maui, and O`ahu.

The Hawai`i SBDC Network is losing its West Hawai`i Center Director and the Honolulu Center Director. Three administrative assistants are also being laid off—one from the State Office in Hilo and one each from the Maui Center and the West Hawai`i Center. All are highly trained, long-term staff. With the exception of one person, they have worked for the Hawai`i SBDC Network from six to 10 years. Hawai`i SBDC Network consultants have MBAs, small business experience, and a wealth of consulting experience.

The Hawai`i SBDC Network is a partnership program established in 1990 between the University of Hawai`i at Hilo and the U.S. Small Business Administration (SBA). To a base-grant provided by the SBA, the Hawai`i State Legislature puts up matching funds. According to Darryl Mleynek, state director of the Hawai`i SBDC Network, “State funding has never been adequate to support the Hawai`i SBDC Network program, and its last increase in state funds was in 1999. Since then, there has been a steady erosion of funds through budget reductions and restrictions.”

In 2002, the Hawai`i SBDC Network reduced the salaries of all of its staff and cancelled salary increases scheduled by the Research Corporation of the University of Hawai`i (RCUH). Other expenses were then reduced by 24%. At the same time, the Hawai`i SBDC Network launched a new statewide strategic training and organizational development initiative called the Triad for Success. As part of that initiative, the Hawai`i SBDC Network secured a nationally recognized business-planning program, NxLeveLtm, that is presently being taught across the state. It also secured an exclusive license to a program series entitled, World Class Performance, that teaches organizations how to successfully execute plans in a short period. The World Class programs carry an unconventional return-on-training investment guarantee. These programs will continue as part of the Hawai`i SBDC Network’s ongoing efforts to seek additional revenue sources to subsidize its core consulting services, which are free to small business owners and those starting new ventures.

In a recent “Talk Story” event in Hilo, Governor Linda Lingle agreed with the statement that Hawai`i’s highest priority is economic development. “The irony,” according to Mleynek, “is that the Hawai`i SBDC Network is arguably the best economic development program in the state, returning to the state $6.73 in new taxes for every dollar the state invests. Because the Hawai`i SBDC Network works with small businesses, its results are true economic development, not just temporary economic stimulus, as with publicly funded construction and tourism. Governor Lingle has yet to exploit this state resource.”

Mleynek added: “While the University has been under tremendous financial pressure, President Evan Dobelle and Chancellor Rose Tseng have acknowledged the value of the Hawai`i SBDC Network and provided support where feasible.”

The SBA recently announced that in Hawai`i 83% of all net new jobs are created by the state’s small businesses. Clients of the Hawai`i SBDC Network, according to a survey taken last winter, hired 32.6% more employees than the average business in Hawai`i. They also had sales increases 40.2% higher than the average business in Hawai`i. Prior to the reduction in staff, the Hawai`i SBDC Network was contributing $55 million in annual economic impact to the state. Since 1994, the Hawai`i SBDC Network has brought into Hawai`i $27 million in federal funds. Its current funding from the State Legislature is $638,000.

The Hawai`i SBDC Network is the State’s only statewide technical assistance provider to small businesses. Through its service centers it provides consulting annually to over 1,000 small business owners and those interested in starting new business ventures, teaches over 140 workshops for more than 1,800 attendees, and through its Hawai`i Business Research Library responds to over 1,200 research requests from small businesses. It is the only State funded organization that is regularly accredited by a third-party national accreditation team and annually measures and publishes their return-on-investment results to the State. Its consultants are also certified under a program developed by the Hawai`i SBDC Network.

Commenting on the Hawai`i SBDC Network reorganization, Jane Sawyer, SBA’s assistant district director for business development, said: “To implement these strategies to reduce expenditures and reorganize staff present us with the opportunity to preserve the statewide service network while firmly establishing the income producing activities to support the Hawai`i Small Business Development Center Network.”

“While the loss of jobs for these highly educated, professionally trained and experienced consultants and other staff members is disruptive to their lives and careers,” said Mleynek, “the loss of their contributions to the state’s economic development is an appalling failed opportunity for the state. However, like any good small business, the Hawai`i SBDC Network is reorganizing, focusing on its clients, and will continue its commitment to small businesses and to meeting Hawaii’s highest priority, which is building the economy.”