Building on Entrepreneurs’ Leadership through ‘Lean’ and Dynamic Performance Management Systems in Small and Micro Firms. Challenges and Missed Opportunities

Abstract

This paper frames the potential benefits of ‘lean’ and dynamic performance management (PM) systems for small and micro enterprises. In this context, the ‘lean’ attribute is used to characterize a different approach in applying PM to small firms, in respect to larger organizations. In fact, such systems may exploit the entrepreneur’s tacit knowledge and build on leadership, by incorporating individual attributes into organizational routines. Related to small and micro firms, direct experience and case-studies suggest that their sudden crises and demises are often a product of gradual – internal and external – phenomena that entrepreneurs are not enabled to selectively and promptly detect and counteract. To empower small and micro-business actors with relevant information and decision-support tools, formal, financial-oriented and structured accounting systems are usually recommended. Though such tools may generate benefits in terms of specific knowledge on single and isolated information needs (e.g. net working capital, product costing), they are not primarily useful to support decision-makers to figure out relevant patterns of behaviour over time, and to frame and question the causal structure affecting them, in order to support sustainable decisions. Furthermore, usually such tools are not developed by explicitly taking into account that a micro or small business has very specific and differential features, in respect to larger firms. This implies that the critical problems or issues to deal with, in order to foster a sustainable development in such firms require the use of tailored ‘lenses’ to properly frame them. We claim here that using ‘lean’ and dynamic PM systems may help entrepreneurs and their own direct collaborators in this process of ‘tailored’ and continuous scanning of crisis symptoms and detection of opportunities for their business development. To this end, based on a number of exemplary cases, we discuss the potential benefits of such systems, in respect to four specific contexts (artisan, new company start-up, established firm, and micro-giant company). Related to such contexts, we identify: 1) needs or priorities, and 2) obstacles or impediments to pursue business survival and development. This conceptual framework discloses a quite original empirical basis to outline ‘lean’ and dynamic PM systems that may provide decision-makers with a set of key-performance drivers that help them to prioritize action, in each of the four above-mentioned contexts.