Performance Management in SMEs

Introduction

• Organizational performance is a key factor in evaluating organizations, encompassing financial and non-financial aspects.
• Continuous translation of entrepreneurial abilities into strategic actions is crucial for achieving superior organizational performance.
• Small and medium enterprises (SMEs) in developing countries often lack clear green business strategies, despite potential benefits.
• Risk management enhances firm performance by reducing costs and improving performance.
• SMEs face heightened competition and economic uncertainties, requiring resilient strategies to enhance competitiveness.

Theoretical Background

• Resource-Based Theory (RBT) is a framework to understand how resources and capabilities contribute to organizational performance.
• TQM, GM, and Risk-taking enable SMEs to capitalize on opportunities and mitigate threats.
• Previous research has not extensively examined the impact of these constructs on SME performance.

Literature Review

• Organizational Performance: A commonly studied variable reflecting effective management and value provided to customers and stakeholders.
• Total Quality Management (TQM): Continuous improvement of all organizational processes to ensure consistent customer satisfaction, emphasis on maintenance, continuous improvement, and prevention.
• Risk Management: Firm capability to use resources effectively to reduce loss, improve performance, and minimize risks.
• IT Infrastructure: Essential components (software, hardware, network services) for business applications, crucial for global operations and efficient communication.

Hypothesis Development

• H1: TQM has a positive impact on organizational performance.
• H2: GM has a positive impact on organizational performance.
• H3: Risk-taking has a positive impact on organizational performance.
• H4: IT infrastructure has a positive impact on organizational performance.
• H5: IT infrastructure moderates the relationship between TQM and organizational performance.
• H6: IT infrastructure moderates the relationship between GM and organizational performance.
• H7: IT infrastructure moderates the relationship between Risk-taking and organizational performance.

Methodology

• Sampling Design: Quantitative study using a questionnaire survey from owner/managers of manufacturing SMEs in North-western Nigeria.
• Data Collection: Cross-sectional data collected from owner/managers of manufacturing SMEs in Kano, Kaduna, and Jigawa; employing systematic sampling, achieving a 95% response rate with 361 usable questionnaires.
• Measurement of Organizational Performance: Seven-point Likert scale to asses 10 key aspects of organizational performance.
• Measurement of TQM: Utilizing a 10-item instrument developed from prior research using a 7-point Likert scale.
• Measurement of GM: Including 14 components with a 7-point Likert scale.
• Measurement of Risk-taking: Utilizing 4 items with a 7-point Likert scale.
• Measurement of IT Infrastructure: Employing a 12-item instrument adapted from research using a 7-point Likert scale.
• PLS-SEM: Partial least squares structural equation modeling, to analyze complex relationships, adaptable to limited sample, and to analyze complex models.

Respondents Profile

• Demographics (age, gender, ownership type, firm size, industry, firm age) of the participating SMEs provide insights into the study population.
• Mostly male respondents with ages between 31–35 and companies with fewer than 50 employees.
• Firms in the food and beverage, packaging/containers, and metal industries were well-represented in the sample.

Results and Discussion

• The study analysed the direct and moderating impact of TQM, GM, RSK, and IT infrastructure on organizational performance.
• H1 (TQM and OP) and H2 (GM and OP) were supported; TQM and Green management significantly influence Organisational performance.
• H3 (RSK and OP) and H4 (IT and OP) were not significant.
• IT infrastructure moderated the relationship between GM and OP, meaning that stronger IT infrastructure is associated with greater positive impact of GM on OP.
• Lack of significant relationships for Risk-taking and IT infrastructure possibly due to innovation reluctance and improper IT infrastructure support.