The effects of performance measurement on small and medium enterprises’ performance in the hospitality industry in Cape Town

Abstract

Small and medium enterprises (SMEs) in the hospitality industry in Cape Town are failing to make use of adequate performance measurement systems (PMSs) that aim to collect, analyse and report information regarding the performance of these industries. This lack of adequate PMSs has a direct negative impact on products, processes and services that are delivered in the industry, which in return affects SMEs’ overall performance to attain industry goals. Considering the impact that SMEs in the hospitality industry have on South Africa’s economy, this research investigated the effects of performance measurement on SMEs’ performance in the hospitality industry in Cape Town to assess the high rate of failure of these entities. Furthermore, the research determined the extent to which performance measurement is utilised by SMEs in the hospitality industry and to find out a comprehensive approach to motivate SMEs in establishing or making use of adequate performance measurement tools. The quantitative research approach was used. It allowed the researcher to measure variables existing in the social context. The research found that SMEs in the hospitality industry in Cape Town inappropriately use the Balanced Scorecard (BSC) measures by focusing only on well-known traditional aspects. It was also found that lack of resources, lack of quality personnel, misconception of performance measurement, the focus on short-term rather than long-term strategies by SMEs, and lack of time, were the factors influencing the SMEs in the hospitality industry to not use performance measurement. It was recommended that for SMEs in the hospitality industry to improve their performance, they must use appropriately and match both financial and non-financial measures. The research concludes that due to SMEs being in the hospitality industry environment, the use of performance measurement is inevitable; organisations should know that their success comes by balancing and properly using the aspects of BSC. Lack of adequate use of this system will always negatively affect the evolution of the organisation’s performance against their initial expectation, whether in occupancy rate, return on investment or meeting budget targets.