A Structural Model On The Effect Of Managerial Interpersonal Competencies, Performance Management And Agency Relationships On The Performance Of Family And Non-Family Owned Smallto-Medium Enterprises In South Africa

Abstract

The purpose of this study was to establish the effect of managerial interpersonal competencies, performance management and agency relationships on the performance of family and non-family owned small-to-medium enterprises in South Africa. The often reported problem of low survival and poor performance rates by these enterprises, which have been attributed among many other reasons, to the lack of or poor managerial interpersonal competencies of the owner/managers, poor people management skills and lack of attention to agency relationships that are naturally found in family and non-family enterprises, gave impetus to this investigation. Despite such attributions and the growth of literature on managerial competencies and performance management, most previous researches have studied managerial interpersonal competencies in isolation, with little effort to appreciate their interplay with specific human resource management practices, such as performance management and the varying agency relationships obtaining in family and non-family enterprises. To close this gap in literature, a structural model relating managerial interpersonal competencies, performance appraisal, agency relationships and performance was proposed, based on reviewed literature and three predominant theoretical perspectives - agency theory, stewardship theory and the resource-based view. The study adopted a positivist epistemological and objectivist ontological stances, which made use of the quantitative approach. Due to lack of comprehensive sampling frames for both family and non-family owned small-to-medium enterprises in the province, convenience sampling was deemed most appropriate. The final sample comprised 210 SME owner/managers in Gauteng Province. The structured questionnaire containing closed-ended items was the only instrument used for data collection. Using Structural Equation Modelling, the study developed and tested a model that can be used to explain the effect of managerial interpersonal competencies, performance management and agency relationships on the performance of family and non-family owned small-to-medium enterprises in South Africa. Group difference analyses were conducted on AMOS version 24 to check whether there were statistical differences in the structural models for family and non-family owned small-to-medium enterprises. It was established that more significant relationships existed in the context of family owned small-to-medium enterprises when compared to their other counterparts. The main findings of the study indicated that owner/managers’ interpersonal competencies affected both employee innovation and profitability as measured by return on investment in both types of enterprises, and that although the quality of agency relationships in both types of small-to-medium enterprises had no effect on innovation and profitability, they were affected by owner/managers’ interpersonal competencies. Furthermore, the way employee performance was appraised affected the quality of agency relationships which in turn affected profitability only in family owned small-to-medium enterprises. Having validated the structural model, and after submitting both theoretical and practical contributions to the fledgling discipline of HR in entrepreneurial organisations, recommendations to guide practice, policy and further research were proffered.