The use of non-financial performance measures by small and medium enterprises operating in the hotel industry, in the Cape Metropole

Abstract

Small and Medium Enterprises (SMEs) operating in the hotel industry in South Africa are perceived to be failing/underperforming partly due to their reluctance to use Non-Financial Performance Measures (NFPMs). The main purpose of this study was to determine the extent to which SMEs in the hotel industry use three categories of NFPMs, namely; customer oriented, internal business process as well as learning and innovation, for running their businesses. This objective requires quantitative data to determine the percentage of SMEs in the hotel sector that make use of NFPMS. Specifically, the study aimed to determine the types of NFPMs used by the SMEs, the purposes for which these measures are used, the perceived effectiveness of the NFPMs currently used, as well as the factors that inhibit SMEs from using NFPMs. To this end, a questionnaire survey was administered on owners/managers of 100 hotels operating in the Cape Metropole. Purposeful sampling method was employed. Test of reliability of questionnaire was done during the experimental stage to ensure the stability, consistence, repeatability, or reproduction of the same results if questionnaires were to be administered to the same population using the same methodology at different times. The results of the study revealed that customer oriented measures were the most frequently used NFPMs, while learning and innovation related measures were the least frequently used NFPMs by the sampled SMEs. Concerning the purpose for which SMEs use NFPMs, the results revealed that SMEs used the NFPMs mainly for: improving the profitability of their business, improving productivity and effectiveness, as well as for improving decision–making. As far as the perceived effectiveness of the NFPMs currently used by SMEs, the results revealed that customer oriented measures were perceived by the sampled respondents to be the most effective of the three NFPMs. With respect to the factors inhibiting SMEs’ use of NFPMs, the results revealed that the main factors were high cost of implementing these measures, incomparability of the measures to those of other SMEs due to their entity specific nature, difficulty in quantifying the NFPMs measures, as well as employee resistance. This study fills a gap in the literature by making a significant contribution on the usage of NFPMs by SMEs. The study provides useful information on the usage of NFPMs that the Department of Small Business Development and Small Enterprise Development agency(SEDA) can use to inform the development of interventions aimed at reducing SMEs’ failure. These findings may also help SMEs to improve their usage of NFPMs in order to capitalise on the benefits gained from using these measures. Furthermore, these findings may help SMEs to overcome the factors that inhibit them from using NFPMs.