Developing a social performance measurement framework for small and medium social enterprises in KwaZulu-Natal, South Africa.

Title: Development of a social performance measurement framework for small and medium-sized social enterprises in KwaZulu-Natal, South Africa. This study aims to develop a social performance measurement framework for small and medium-sized social enterprises in KwaZulu-Natal, South Africa.

Introduction

Background of the study

Overview of social enterprises and small and medium social enterprises

Social enterprises (SEs) are known to perform various activities (Arena et al., 2015a; . Littlewood & Khan, 2018b). Small and medium-sized social enterprises (SMSEs) play a crucial role in a country's development (Hillary, 2017, Choi et al., 2018).

Contribution of SEs in economy

4 responsible to support NSs and there is no regulation on the responsibilities of NSs (Defourny et al., 2021). According to the Global Entrepreneurship Index (GEI, 2017), sub-Saharan Africa has only a quarter of Asia's small businesses relative to its population; and eighth as many countries in the Organization for Economic Co-operation and Development (OECD).

Overview of performance measurement

Investment communities (investors and financiers) are often hesitant to maintain their investments in SEs due to a lack of information on their performance (André et al., 2018). 9 (funders, investors), on how performance measurement is implemented and could be promoted by SMEs (Carlyle, 2013, Choi et al., 2018).

Problem statement

In emerging economies, the concept of performance measurement and its application in SMEs is in its infancy. Therefore, this study aims to develop a social performance measurement framework for small and medium social enterprises in KwaZulu-Natal, South Africa.

Aim and objectives of the study

Definitions of key terms

Stakeholders are defined as 'any group or person who can affect or is affected by the achievement of an organization's purpose', as they have the right to actively engage and participate in the organization's decisions. (Bellucci & Manetti, 2018:156). Social Performance measurement is the measurement of how well the organization's social mission is implemented on the ground with the action of organizational integrated activities (Pierce, A. 2022:21).

Research questions

13 Small and medium social enterprises (SMSEs) are social enterprises that adopt an entrepreneurial and innovative approach to providing solutions to community problems (Cheah et al. Performance measurement is a measurement used to measure both the efficiency and effectiveness of activities and results measure (Hasan, 2018:88).

Preliminary literature review

However, the majority of SMSEs rely on grants and public funding (Bugg-Levine et al., 2012). Furthermore, the measurement of performance increases the effectiveness, efficiency, and economic and social performance of business operations (Grieco, 2018; Almansour et al., 2019; Majetić et al., 2019).

Theoretical framework

Measuring the performance of SMSE thus requires a clear definition of the various stakeholders and their requirements. Stakeholder identification enables a clear assessment of the company's social performance by these stakeholder groups.

Research methodology

Research design
Population and target population
Sampling
Data collection and analysis

After the data were collected, the researcher read each transcript and set of notes to organize the data and prepare for analysis. 22 to easily organize and structure the data and this increased the researcher's attention to patterns, themes and categories in the data.

Scope of the study

Finally, thematic analysis was employed to construct the data, recognize designs (categories, themes) and extract meaning from these designs. Narrative sections with figures and tables were used to convey the findings of the analysis.

Expected contribution to knowledge and practice

23 The study adopted an interpretive philosophy as the purpose of the study was to develop a framework for measuring social performance. Furthermore, an exploratory research strategy was considered more appropriate as there were limited studies to refer to regarding social performance measurement, as no known similar study has been conducted in relation to KZN, South Africa.

Limitations of the study

Chapter overview

Based on the existing literature, the results of the research are discussed and the main themes are identified. The financing model, business operations, stakeholder involvement and performance measurement are identified as the main themes of the study.

Conclusion

26 This chapter presents and discusses the social performance measurement framework that emerged from the study.

Introduction

Scholars stated that the business model of small and medium-sized social enterprises should not exclude profit, but more emphasis should be placed on creating social change. This section responds to the first, second, third and fourth objectives of the study by exploring the literature on performance measurement frameworks implemented in different companies.

Concept of social enterprises

Common characteristics of social enterprises

These activities include the social and economic integration of the underprivileged, excluded and low-income population at the bottom of the pyramid. Business enterprises prioritize financial performance, even though they may focus on the social impact of their activities.

Social enterprises in South Africa

However, acting to maintain financial sustainability and a primary focus on social ends are the characteristics of SEs found in SA (Daya, 2014). However, no consensus has been reached on aspects such as conceptual framing, tools and approaches that can be used to measure the performance of SEs (Ebrahim & Rangan, 2014a; Arena et al., 2015a; Mamabolo & Myres, 2019).

The funding model for social enterprises

Social enterprises provide innovative solutions with less strategic focus on returns or the formal structure of recording their business activities, leading to poor statements and reports about their investments (Arena et al., 2015a). If SEs structure their financing to consider charitable donations as a means of capital that pursues social, not financial, returns, the investment community, including banks, mutual funds and bond funds, can provide access to financial sustainability through transferred risk and return, providing SEs' is opportunity to thrive and grow (Bugg-Levine et al., 2012).

The business operation of social enterprises

The lack of funding opportunities is one of the challenges social enterprises face (Bielefeld, 2009; Battilana, 2018; Bengo & Arena, 2019). Furthermore, the business operations of social enterprises can be related to the definition of social enterprises.

Figure 2.1: The Social Enterprise Spectrum (Dees, 1998)

Small and medium enterprises

Definitions
Characteristics of small and medium social enterprises
The position of SMEs and SMSEs in the economy
The funding model of small and medium social enterprises
The business operation of small and medium social enterprises

Thus, the business operations of small and medium-sized social enterprises should not only focus on profit generation. For small and medium-sized social enterprises, defining their business model is a challenge due to the dual social and economic goals (Berbegal-Mirabent et al., 2021).

Table 2.2: Definitions of SMMEs given in the National Small Business Act, 1996 Sector and sub-sectors

Stakeholders' identification and engagement with social enterprises

Relevant stakeholders in SMSEs

Furthermore, the sustainability of any sector depends on its ability to sustain itself independently of the government and public authorities (Samsuddin et al., 2021b). In small and medium-sized social enterprises, stakeholder participation can influence the strategic factors for raising and obtaining capital and resources, such as support, participation and skills (Samsuddin et al., 2021a).

Stakeholders' information and their needs

Stakeholder involvement in the operation of social enterprises enables social enterprises to adopt and maintain a culture related to stakeholder needs (Mason et al., 2007). The inclusion and involvement of stakeholders in the strategic decisions and operational activities of social enterprises indicates the democratic and ethical characteristics of the social enterprise (Samsuddin et al., 2021b).

Performance measurement

Defining performance measurement systems

Generalizability (part of validity) is "the likelihood that the results of the study findings are applicable to other subjects, other groups, and other circumstances". Based on the conclusion of Guest et al., (2020), the base size analysis unit is the data collection event; the analysis items are unique codes that represent themes.

Figure 2.4: The SE balanced scorecard (SEBC) of Somers (2005)

Performance measurement: origins and evolution

The rationale for performance measurement

The field of PM has advanced in response to global industrial, commercial and societal trends (Bititci et al., 2012). In the performance measurement literature, the purpose of PM is to improve the productivity and management of organizations (Neely, 1999; Franco-Santos et al., 2012).

Rationale: from a social enterprises’ perspective

If the researcher fails to do this, "the precise nature of explanations provided may be lost and general points of value" (Saunders et al. Furthermore, according to Social Enterprise 3's interviewee, government institutions, such as "the Department of Labor , the National Youth Development Agency (NYDA), Social Development Agency” are stakeholders involved in the company's activities.

Issues in measuring performance

The concept of performance measurement in SMSEs

Despite the increasing attention paid to measuring SMSE performance, empirical and theoretical research is limited (Garengo et al., 2005; Langwerden, 2015). Research has shown that performance measurement plays an important role in improving management effectiveness in SMSE firms (Garengo et al., 2005; Taticchi et al., 2008; Ankrah & Mensah, 2015).

Challenges of small and medium social enterprises in performance measurement

Barnes et al. (1998) analysis of a new approach to performance measurement for SMSEs highlighted the lack of adequate understanding of operational performance measurement requirements at the design stage. Moreover, in SA, the lack of knowledge and inefficient management practices are the most common challenges of SMSEs in PM (Al Khajeh & Khalid, 2018).

Performance measurement system for social enterprises

Social return on investment (SROI)
Balanced scorecard (BSC)
A multidimensional model
The Performance Measurement System (PMS) model

SROI extends CBA by including broader socio-economic and environmental outcomes (Banke-Thomas et al., 2015). The financial perspective is extended to emphasize sustainability (adding environmental and social impacts) (Arena et al., 2015a).

Social performance measurement

91 Figure 2.10: Consulting and Training Creating social values through the theory of change The product in the theory of change processes the result obtained from the process of moving activities into action. Impact of change theory highlights the measurement of the effect on the root causes that lead to the maintenance of a significant change.

Knowledge gaps in SMSEs performance measurement

Due to the impact of the company's performance on the local community, the environment, and internal and external stakeholders who interact with the company, non-financial performance is also multidimensional (Arena et al., 2015c; Grieco, 2015). 94 is an agreement that companies should measure and report inputs, activities and results (Andrews et al., 2010).

Conclusion

Based on these identified gaps, this study aims to develop a social performance measurement framework for SMSEs. Considering PM's internal and external purposes, the study aims to provide SMSEs with a social performance measurement framework built on consistent, effective and standardized organizational social performance valuation.

Introduction

Research design

A hypothesis is formulated to establish causal relationships within the variables involved in the study and to find the difference in the target population of the research study. Explanatory research emphasizes the study of the phenomenon, situation or problem to explain and elaborate the relationship between the variables under study.

Research process onion

The research philosophy

The positivist paradigm
The post-positivism paradigm
Pragmatism
Realism
The critical theory paradigm
Interpretivism paradigm

They are “frames of reference that we use to organize our observations and inferences” (Babbie, 2007:31). As indicated in Table 3.4, the epistemology of critical realist philosophies asserts that understanding the real social world is possible only if we understand the social structure of the phenomena we seek to understand.

Table 3.1: The positivism research philosophy Ontology

Research approach

The interpretive philosophy allows the researcher to consider the knowledge and use of performance measurement by small and medium-sized social enterprises (Collis & Hussey, 2013). The inductive approach was implemented to design the social performance measurement framework based on the literature review and the empirical findings of the existing performance measurement practices of SMSEs.

Research strategy

The case study development and definitions
Philosophical orientation
Types of case studies
Critics and advocates of the case study strategy
Justification for the use of the case study strategy

The researcher selects one issue or concern in a collective case study (multiple case studies) (Creswell & Poth, 2016). For this study, the researcher chose a multiple case study design to respond to the research questions and achieve the study's objective.

Research choice

The characteristics of qualitative research
Ontological assumption of qualitative research
Epistemological assumptions of qualitative research
The methodological approach in qualitative research

The researcher chose a qualitative research design based on the purpose of the study and the nature of the research questions. Given the purpose and objectives of the study, qualitative research is appropriate for this study.

Time horizon

It was consistent with the aim of the study to develop a social performance measurement framework for small and medium-sized social enterprises in KwaZulu-Natal. The case study approach provided in-depth and rich descriptions, explorations and insights into measuring the social performance of small and medium-sized social enterprises.

Research process, techniques, and procedures

Description of participants
Research question and the process of inquiry
Data collection
Data analysis

This type of sampling lends itself to a qualitative case study because it allows researchers to pursue categories where "the process being studied is most likely to occur" (Denzin & Lincoln, 1998; 202). For the next study run add the new topics for the next two interviews, 5 and 6 (note the overlap of interview 5), resulting in a sum of three. the number of new threads in the last run. three) and divide by the number of subjects in the core set (40).

Figure 3.2: Summary of process, base line and run length options (Guest et al., 2020)

Reliability and validity

The study chooses an inductive approach that codes and themes originate from the content of the data itself, on the other hand what is drawn up by the researcher at the time of data analysis is closely related to the content of the data. The advantage of qualitative data is that it allowed the researcher to explore themes, patterns and interrelationships within the data and understand the performance measurement phenomenon.

Ethical considerations

In qualitative research, the anonymity and confidentiality of the participants is the most important part of ethical requirements (Ketefian, 2015; Arifin, 2018). The researcher includes the ability to understand English as inclusion criteria for the selection of the participants.

Conclusion

Given that English is the formal language in South Africa, the researcher assumed that most founders or directors of SMSEs were able to converse and express their ideas in the English language. The University of KwaZulu-Natal (UKZN) Code of Ethics for Conducting Research was used by the researcher to prepare an application for ethics approval.

Introduction

The primary and initial funding sources and income-generating activities of the participating social enterprises are explained in more detail. The for-profit organizations established and managed by the owners of the social enterprises are identified as the primary funding source for supporting the social enterprises.

Background of participant social enterprises

Firmographics

In addition, Social Enterprise 6 respondents stated that the company's vision is: “to become a key provider of business development for cooperatives in the next five years”. Interviewees of Social Enterprise 5 stated that the for-profit company had a vision to “establish a business in rural areas that creates jobs and minimizes the shift of resources from rural to urban areas.

Table 4.1. shows that most enterprises are located in KwaZulu-Natal province, South Africa

Demography of participant

The interviewee of Social Enterprise 4 indicated that the enterprise was mainly engaged in "the reintegration program that helps substance abusers and ex-offenders reintegrate back into society after leaving rehabilitation. As it is known, many people who come out of prison or who come from drugs, have a lot of difficulties to find a job and to start again after this institution.

Enterprise objectives and main activities

To provide business support for hundreds of small business development annually, mainly funded by NPC cement company to the community around KZN. To provide infrastructure such as one training room for poultry, aquaculture, hydroponics and training facilities.

Objective One: to investigate the funding model of small and medium social enterprises

Initial source of funding
Primary source of funding
Revenue generation activities
Business development phases
Business priorities
Allocation of resources

For example, 20% of the profits generated by Mankho Events are invested annually in the sponsorship of his social enterprise (Social Enterprise 2). Social Enterprise 6 Consultancy: generating income from services provided to clients through a skills development project by NT Pty.

Table 4.4: Funding Model of Social Enterprises

Objective Three: to analyze the SMSEs’ relevant stakeholders and their information needs

Level of stakeholders' involvement

Stakeholder interests
Stakeholder contribution and influence

Social Enterprise 6 Assist with the development, monitoring and implementation of the operational plan, nominate the business for the small business programme. Only one company (Social Enterprise 7) indicated that their stakeholders' involvement in supporting the company's operations was low, as well as their influence in the company.

Table 4.9 shows that most participants indicated that stakeholders exercise considerable influence in their enterprises

Communication with stakeholders

However, it is axiomatic to believe that all stakeholders associated with a given enterprise may not necessarily have the same level of influence on that enterprise. For example, financiers may not have the same level of influence as non-paying suppliers and beneficiaries.

The nature of information shared with stakeholders

163 Table 4.10 shows that information about business operations of companies (including beneficiaries) is shared primarily with stakeholders. Participants revealed that at the beginning, stakeholders, especially traditional authorities, requested information about the goals and objectives of the companies; justification of the necessary resources (eg why the land was needed); and the potential value of the business.

Objective Four: to explore performance measurement frameworks used by different

The rationale for conducting performance measurements
Starting point and frequency of conducting performance measurements
Mode of performance measurements
Factors affecting performance measurements
Perceived benefits of conducting performance measurement
Essential performance measurements for small and medium social enterprises
Shifts in performance measurements

For example, Social Enterprise 3 reported that the frequency of their performance measurement varies depending on each client and project. The company's performance measurement also focuses on changes in the quality of life or standard of living.

Table 4.11: Rationale for conducting performance measurement

Conclusion

It is not clear how participating performance measurement companies experienced or used this practice. However, at least one company indicated that there has been a change in how performance measures are implemented.

Introduction

175 benefits of performance measurement, and factors affecting performance measurement; as well as the performance measurement tools or indicators considered essential for small and medium social enterprises, and shifts experienced in performance measurements, are discussed in detail with literature in this section.

Background of participant social enterprises

Firmographics and demographics of participant social enterprises

Social enterprises' main objective is to deliver social value to the beneficiaries of their social mission (Doherty et al., 2014). It can be argued that the nature of social enterprises in South Africa is reflected in the enterprises in the.

Objective One: to investigate the funding model of small and medium social enterprises

Initial source of funding

First, social enterprises encounter a unique governance challenge: balancing the trade-off between their social and commercial activities to generate enough revenue without losing sight of their social purpose (Ebrahim et al., 2014). Second, when social enterprises receive a grant or donation from private and public institutions, they become accountable to their stakeholders to achieve their mission (Erin et al., 2018).

Primary source of funding

The operation of social enterprises ranges from the sale of goods and services; to maintain the charitable activities of non-profit organizations (Defourny & Nyssens, 2014); to the creation of new ventures that combine for-profit and for-profit businesses in a hybrid form (Grieco, 2015; Lall, 2017). In addition, social enterprises have difficulties in meeting all the needs and expectations of stakeholders and providing them with formal accountability (Karamoy et al., 2017).

Revenue generation activities

Most of the participating social enterprises are engaged in consultancy as an income-generating activity. The production of goods and services was the second most important activity for income generation mentioned by the participating social enterprises.

Objective Two: to explain the business operation of small and medium social enterprises

Business development phases

Specifically, social enterprises in South Africa develop skills or endorsements for education and literacy through consultation (GIBS, 2018). The discussion above indicates that participants were aware of the challenge of differentiating income-generating activities from their non-profit activities.

Business priorities

Allocation of resources