CHAPTER 3: PERFORMANCE MEASUREMENT IN MSMES
In the previous chapter definitions of performance, business performance and performance measurement were presented. The chapter also explored the concept of performance measurement from the accounting perspective, marketing perspective, operations management perspective and supply chain perspective. The theories underpinning the study were revealed and the most prominent performance measurement frameworks presented.
The measurement of performance is crucial for the success of any enterprise irrespective of the size of the enterprise. As argued in the previous chapters, there seem to be limited performance measurement frameworks developed specifically for for MSMEs. There is also an argument that MSMEs are not a scaled down version of large enterprises. This chapter therefore, reviews available literature relating to performance measurement in MSMEs. Section 3.2 portrays the characteristics of MSMEs and Section 3.3 focuses on performance measurement frameworks for MSMEs. Section 3.4 identifies the critical success factors for the performance of MSMEs while Section 3.5 looks at the relationships between the critical success factors. Section 3.6 identifies the variables defining the critical success factors and Section 3.7 identifies the key performance indicators for each variavble defining the crtical success factor. Section 3.8 identifies the research gaps and Section 3.9 brfiefly outlines the features of an ideal performance measurement framework. The conceptual framework is presented in Section 3.10. The chapter concludes with a summary in Section 3.11
CHARACTERISTICS OF MSMES
Literature seems to point to the conclusion that most of the available performance measurement frameworks were developed for large enterprises and may, therefore, not apply to small enterprises (McAdam, 2000; Garengo et al., 2005; Chong, 2008; Taticchi et al., 2008; Taticchi et al., 2010; Ahmad, & Alaskari, 2014; Zerfass & Winkler, 2016). One may argue whether the size of the enterprise matters. Does it make any difference whether a performance measurement system is designed for a large or a small enterprise? This section looks at the characteristics of MSMEs which may have an influence on the development of a performance measurement framework.
The MSMEs’ business environment
The business environment for MSMEs is highly unstable (Garengo et al., 2005; Barrows & Neely, 2011; Pekkola et al., 2016). The MSMEs have a reactive approach to the changes in the business environment (Hudson et al., 2001; Garengo et al., 2005; Cocca & Alberti, 2010; Nudurupati et al., 2011; Pekkola et al., 2016). This reactive approach is characterised by poor strategic planning (Ahmad et al., 2015; Pekkola et al., 2016) and an informal process of making decisions as well as short-term orientation (Garengo et al., 2005). Hence, a performance measurement system for MSMEs may need to be flexible and able to incorporate the changes in the business environment.
The MSMEs’ customer base
MSMEs have limited customers and are usually closer to these customers making it possible to develop more personal relationships with them (McAdam, 2000; Garengo et al., 2005; Hutchinson et al., 2015). This closer relationship with customers implies that there may be a need for designing a framework that maintains such relationships for a long time. This may promote long-term success of the enterprise. However, Hudson et al. (2001) argues that having limited customers may lead to unbeneficial relationships with the customers. They argue that the MSMEs become subservient to the customers, especially in an environment where the enterprises is facing stiff competition and relies on large enterprises for the marketing of its products. As a result, the MSMEs may not be able to negotiate more favourable terms of payment. It is, therefore, essential to consider the management of relationships with the customers when designing the performance measurement framework.
Affordable information technology
Most MSMEs lack information technology related resources (Garengo et al., 2005; Middleton & Chambers, 2010; Bouazza, Ardjouman & Abada, 2015). The majority of MSMEs in Zimbabwe are still operating a manual system of recording, analysing, and storing data (Wadesango, 2015). A simple and easy to use performance measurement framework may help to better the situation. It is plausible that such a framework may not depend on the extensive use of complex Information Technology resources as this renders it unusable to the MSMEs
The MSMES informal and unplanned performance measurement
The major difference between MSMEs and larger enterprises is that MSMEs tend to have informal and unplanned measurements of performance, which often is not based on any pre-determined framework (Bourne, Mills, Wilcox, Neely & Platts, 2000; Klovienė & Speziale, 2015). Phillips and Shanka (2002) also argue that MSMEs by their nature are small, have very informal strategies and usually do not keep formal records. Most MSMEs are managed by owners who sometimes do not document their formal strategies (Sainidis, Gill & White, 2001). These MSMEs measure performance when they want to solve specific problems and the performance measurement system grows out of this need and is not a result of proper planning (Ates et al., 2013). They continue to state that where there is planning the performance measurement is limited only to operational levels and strategic planning is often not considered. Therefore, there may be a need to carry out a baseline study to establish the situation on the ground with respect to performance measurement practices focusing mainly on selected retail MSMEs in Zimbabwe and to develop a framework which encourages strategic planning.
MSMEs focus on past activities
Finally, performance measurement in MSMEs usually focuses on past activities (Garengo et al., 2005). However, measurement of past performance may not give information about future performance (Otley, 2002; Marcy, 2008). The characteristics of MSMEs discussed in this section may suggest that the performance measurement systems in MSMEs aim to gather information which supports the control function. It ignores the strategic planning function which focuses on the future and may be crucial for the success and survival of an enterprise
CURRENT RESEARCH DONE ON PERFORMANCE MEASUREMENT FRAMEWORKS FOR MSMES
Literature indicates that a number of studies have been carried out on performance measurement. For example, a study by Neely (2005) through the technique of citation/co-citation analysis using Sitkis software on a dataset constructed using the ISI Web of Science database showed that there were 1,352 papers on performance measurement published in 546 different journals between the period 1981 to 2005. Eighty four per cent (84%) of these journal articles were published since January 1995. Taticchi et al. (2010) replicated the citation/co-citation procedure carried out by Neely (2005) on a dataset constructed using the ISI Web of knowledge database in an attempt to update Neely’s (2005) work. Taticchi et al. (2010) found that there were now 6,618 papers on performance measurement published in 546 different journals, the same number of journals as in Neely’s (2005) study. Their citation/co-citation analysis considered papers published between 1970 and 2008 and 91% of the publications were as from January 1991.
It may appear that a significant number of papers considered by Taticchi et al. (2010) were published after Neely’s (2005) study. This is based on the fact that the difference in the number of papers between the two studies is 5,266 papers, representing an increase of 390% papers. The studies on performance measurement seem to be continuing even after the last citation/co-citation analysis performed by Taticchi et al. (2010).
Taticchi et al. (2012) suggest that research on performance measurement in large enterprises seem to have reached maturity since the number has decreased in the last few years. The same authors point out that research on performance measurement in MSMEs is still immature. Their argument may be valid considering the increase in the number of researches on performance measurement in MSMEs noted in the literature.
Table 3.1 shows some of the frameworks which were developed to focus on performance measurement in MSMEs. Only those frameworks which apply to MSMEs were considered. Taticchi et al. (2010) suggest that most of the available performance measurement frameworks for MSMEs were adapted from frameworks originally developed for large enterprises. The framework which has been adapted the most is the BSC developed by Kaplan and Norton in 1992 (Neely, 2005; Taticchi et al., 2010). Table 3.1 also indicates the strengths and weaknesses of the frameworks as well as what can be borrowed in developing the framework proposed by this study
1 CHAPTER ONE: BACKGROUND TO THE STUDY
1.2 BACKGROUND TO THE STUDY AND THE PROBLEM
1.3 RATIONALE FOR THE PROPOSED STUDY
1.4 THESIS STATEMENT
1.5 PROBLEM STATEMENT
1.6 RESEARCH OBJECTIVES
1.7 RESEARCH METHODOLOGY
1.8 ETHICAL CONSIDERATIONS
1.9 DELINEATION AND LIMITATIONS
1.10 DEFINITION OF TERMS
1.11 UNDERLYING ASSUMPTIONS
1.12 SIGNIFICANCE OF THE STUDY
1.13 CHAPTER OVERVIEW
1.14 SUMMARY OF CHAPTER
2 CHAPTER TWO: LITERATURE REVIEW: PERFORMANCE MEASUREMENT
2.3 DIFFERENT DISCIPLINES’ PERSPECTIVE OF PERFORMANCE MEASUREMENT
2.4 THEORIES UNDERPINNING THIS STUDY
2.5 A REVIEW OF EXISTING PERFORMANCE MEASUREMENT FRAMEWORKS
2.6 SUMMARY OF CHAPTER
3 CHAPTER 3: PERFORMANCE MEASUREMENT IN MSMES
3.2 CHARACTERISTICS OF MSMES
3.3 CURRENT RESEARCH DONE ON PERFORMANCE MEASUREMENT FRAMEWORKS FOR MSMES
3.4 CRITICAL SUCCESS FACTORS FOR BUSINESS PERFORMANCE OF MSMES
3.5 RELATIONSHIPS BETWEEN THE CRITICAL SUCCESS FACTORS
3.6 VARIABLES DEFINING THE CRITICAL SUCCESS FACTORS
3.7 KEY PERFORMANCE INDICATORS FOR THE VARIABLES DEFINING CRITICAL SUCCESS FACTORS
3.8 KNOWLEDGE GAPS
3.9 FEATURES OF AN IDEAL PERFORMANCE MEASUREMENT FRAMEWORK FOR MSMES
3.10 CONCEPTUAL FRAMEWORK FOR THE STUDY
3.11 SUMMARY OF CHAPTER
4 CHAPTER FOUR: RESEARCH METHODOLOGY
4.2 PURPOSE OF THE RESEARCH
4.3 RESEARCH METHODOLOGY
4.4 RELIABILITY AND VALIDITY
4.5 RESULTS OF THE PILOT TEST
4.6 ETHICAL CONSIDERATION
4.7 SUMMARY OF CHAPTER
5 CHAPTER FIVE: DATA PRESENTATION, ANALYSIS AND DISCUSSION
5.2 QUANTITATIVE STUDY
5.3 QUALITATIVE STUDY
6 CHAPTER SIX: THE PROPOSED PERFORMANCE MEASUREMENT FRAMEWORK
6.2 THE PROVISIONAL FRAMEWORK EMERGING FROM QUANTITATIVE AND QUALITATIVE STUDY.
6.3 PERCEPTIONS OF SELECTED OWNER/MANAGERS ON THE UTILITY OF THE PROPOSED PERFORMANCE MEASUREMENT FRAMEWORK
6.4 THE FINAL PROPOSED PERFORMANCE MEASUREMENT FRAMEWORK
7 CHAPTER SEVEN: SUMMARY, CONCLUSION, AND RECOMMENDATION
7.2 SUMMARY OF CHAPTER
7.3 HOW OBJECTIVES WERE ACHIEVED
7.6 LIMITATIONS OF THE STUDY
7.7 RECOMMENDATIONS FOR FUTURE RESEARCH
7.8 SUMMARY OF CHAPTER
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