Competencies of small- and medium-sized enterprises’ owners and managers as drivers of the financial performance of small- and medium-sized enterprises in Johannesburg

Abstract

Purpose: The purpose of the research was to determine the competencies of small- and medium-sized enterprises’ (SMEs’) owners and managers and the association between these factors and the financial performance of their SMEs to help reduce the high failure rate of SMEs in South Africa.
Design/methodology/approach: A survey was conducted among SME owners and managers in Johannesburg, South Africa. Because the questionnaire used a five-point Likert scale, factor analysis was used to determine the role the various competencies play in the financial performance of SMEs and to determine a Business Success Driver Index (BSDI) based on their responses.
Findings/results: The competencies positively influence the return on investment (ROI) of SMEs, where competency is regarded as a combination of knowledge, skills, values, attitude and experience as an attribute.
Practical implications: The implication for practice is that SME owners and managers could improve their firms’ profitability and business success by enhancing their competencies by focusing on their knowledge, skills, values, attitudes and experience. The results of the study could help reduce the SMEs’ failure rate in South Africa.
Originality/value: This study is the first to investigate the combination of knowledge, skills, values, attitude and experience as competency factors driving SMEs’ profitability (measured by the ROI). The authors followed a positive approach by considering the factors contributing to success instead of the factors leading to failure in SMEs.