2.7. Performance measurement
2.7.7. Challenges of small and medium social enterprises in performance measurement
Small and medium social enterprise (SMSEs) challenges vary, depending on company size, geographic location, and economic activities. Despite the vital role of SMSEs in the private sector, contributing to economic development through their ability to provide jobs and innovative solutions, SMSEs experience challenges worldwide in general, and in developing countries.
Several studies have indicated that the numerous and severe challenges of SMSEs could be related to an internal business environment and external stakeholder requirements (Garengo et al., 2005;
Bouazza et al., 2015; Hillary, 2017). Cumbersome legal and regulatory constraints; a lack of access to external financing; low human resources capacities; a lack of management skills and training; and little technological capacity are the most critical factors affecting the growth of SMSEs in Algeria (Bouazza et al., 2015). According to Nieuwenhuizen's (2019) study on the effect of regulation and rules on SMSEs growth, maintaining government regulations and the standards imposed on the business of SMSEs is creating an environment which is hostile to business growth.
Tahir and Inuwa (2019) concluded that government policies and training are significantly and positively related to micro, small, and medium enterprises’ growth and sustainability.
Additionally, Nieuwenhuizen (2019) pointed out that, for countries like SA, where SMSEs play a vital role in contributing to GDP, creating jobs, economic stability, and growth, rules and regulations drastically impact SMSEs’ sustainability and growth. SMMEs in SA regard the regulatory requirements as one of the main obstacles to their development (Nieuwenhuizen, 2019).
Performance measurement by SMSEs is a monitoring instrument employed to design and implement business strategy, allocate resources, and build organizational legitimacy (Barraket &
Yousefpour, 2013; Ankrah & Mensah, 2015). However, several studies have identified challenges in undertaking PM (Barraket & Yousefpour, 2013; Ankrah & Mensah, 2015). These include a lack of resources (both capital and human); organizational challenges in collecting and analysing data over time; the complex nature of performance; and a lack of managerial capacity. Furthermore, the social entrepreneurs in Ormiston and Seymour’s study suggest a lack of resources; conflicting information demands from funders/donors; and the challenge of operationalizing their social missions into quantitative measurements as a challenge for proper measurement (Ormiston &
Seymour, 2011).
69 The significant constraints on SMSEs that affect the successful implementation of PMS, and just about any activity SMSEs perform, are the lack of human, time, and financial resources (Hudson et al., 2001; Garengo et al., 2005). Hybridity, which implies a combination of two institutional logics, the social and commercial, is the future for SMSEs (André et al., 2016). This hybridity requires evaluating enterprises' social and economic performance with a high financial cost, managerial capability, and time to perform a measurement (André et al., 2016). The design and implementation of PMS require management capacity with the proper knowledge and skills in evaluation. However, SMSEs have few senior managers with diversified skills, knowledge, and experience (Smith & Smith, 2007).
Small and medium social enterprises generally lack information technology infrastructure and robust data analysis to evaluate performance (Carlyle, 2013). Barnes et al.'s (1998) analysis of a new approach to performance measurement for SMSEs, emphasized the lack of sufficient understanding of operational performance measurement requirements at the design stage. In addition, Barnes et al. (1998) found that, in SMSEs, good quality data was generally unavailable, and the accuracy, reliability, and reproducibility of measurements were not continually checked.
Lack of accurate data leads PMS to use internal issue resolution instead of forward-looking decision-making (Carlyle, 2013).
Arvidson et al. (2010) stated the complex nature of SMSEs in creating environmental and social value, which is difficult to measure and questions dependency on financial indicators. Bagnoli and Megali (2011b) indicated that social performance involves considering inputs, organizational processes, outcomes, and impacts.
The leader, or top management of SMSEs, often designs strategies within the business to achieve a competitive advantage and sustain the venture. However, as Okwir et al. (2018) identified, daily business activities delay the identified functional purposes and modify priorities and implementation. SMSE directors usually underrate the time investment necessary to support PMS (Carlyle, 2013). Similarly, Barraket and Yousefpour (2013) identified that time constraints and competing work commitments are challenges in conducting performance assessment and impact measurement. Staffing, which includes limited time committed by staff to PM; a lack of skill and experience in evaluation; access to qualified personnel; and the adverse effects of staff turnover
70 on the accomplishment of duties; are challenges identified within organizations conducting performance measurement (Barraket & Yousefpour, 2013; Maduekwe & Kamala, 2016).
The complex nature of performance measurement and evaluation is a challenge for SMSEs. These challenges include what to measure, how to measure, and when to measure. Another challenge is the diversification of output and outcome, and confusion created in measuring the immediate outcomes, which are mainly long-term in nature (Barraket & Yousefpour, 2013). Challenges in measuring performance include a lack of consistency and accuracy of organizational data, a lack/of complexity in the planning, and an overview of the evaluative process in a dynamic, organizational context (Choi et al., 2018). Furthermore, Maduekwe and Kamala (2016) identified the enterprise culture and lack of higher-level management and senior staff support as challenging when undertaking PM.
The challenges SMSEs in SA are experiencing, in general, are both internal and external. Internal factors include a lack of business planning, entrepreneurial skills and mindset, creativity and innovation; and high stress and burnout (Ayandibu & Houghton, 2017). External factors include high competition levels, difficulty accessing markets, and a lack of external finance. Both internal and external factors impact highly on the sustainability of SMSEs in the business environment.
The high failure can negatively affect the ability of SMSEs to contribute to South Africa’s sustainable development (Fatoki, 2018b). In addition, in SA, the lack of knowledge and ineffective management practices are the most common challenges of SMSEs in PM (Al Khajeh & Khalid, 2018).
In addition to the challenges mentioned above, the most critical one, particularly for SMSEs, is that there is no commonly recognized technique or efficient performance measurement approach.
The effectiveness, or accomplishment, of an organization's performance measurement is based on a sound set of variables in different industries. Enterprises are challenged in matching and associating organizational strategies, culture, and hierarchy structures with performance measurements. Additionally, a lack of consensus exists regarding the nature and number of procedures used to balance the advantages and expenses of introducing and deploying performance measurement, so that the results are used and acted upon.
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