Title

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Prioritizing the Managerial Skills Needed for

Small Businesses

Ali Dehgahi‎

1

, GholamAli Rahimi

2

, Mostafa Kazemi

3

1. Assistant Professor of Economics, Shahrood University of Technology,[email protected] 2. PhD Candidate, Azad University of Shahrood, [email protected]

3. PhD Candidate, Azad University of Shahrood,[email protected]

ABSTRACT: Small businesses have an important role in countries’ economic growth. Due to the high failure rate at the beginning of these businesses, it is necessary to examine and identify the success factors to consider their growth. One of the crucial factors for successful performance of these businesses is the managerial skills. In this research, the skills of the managers will be prioritized according to their importance and usage in order to present a successful model of skills from the viewpoint of the managers. Furthermore, it will examine the effect of the triple skills of decision-making, creativity and communicational skills on the performance of these businesses. In this study, managers of companies located in Industrial City of Shokoohiye, Qom, Iran, were given questionnaires and some data have been collected based on their responses. AHP technique has been used to prioritize the skills. To examine the effect of these triple skills on the performance of these businesses, the T-Student Test was applied and to determine the effect of demographic variables on prioritization of the skills, analysis of variance was employed. The results, regarding the application for managers, set the priorities as follows: decision-making, creativity, and communicative skills respectively. Regarding the importance of the factors, the same prioritization is repeated. By taking survival as the basis for a standard performance, the efficiency of using the triple skills on the performance has been confirmed.

Key words: Priority, Skill, Small business, The process of hierarchical analysis INTRODUCTION AND STATEMENT OF THE PROBLEM

Small businesses play a substantial role in economic development and gross domestic product. Naturally, the quality of managing these businesses has a role in economic growth of a country. International studies indicate that there is a very high failure rate for these businesses in different economic circumstances; therefore, assigning qualified managers familiar with the area of small businesses can be effective in decreasing the failure rate.

Managerial skills form an effective foundation for the managers to, related to how qualified they are, apply for performing their tasks. Managers of small businesses are faced with special circumstances in their firms, so they may consider some skills which are not proved to be useful in big businesses. Therefore, on the one hand, in small businesses having a qualified manager is vital for reduction of their failure rate, and on the other hand, their diverse features require familiarity with skills of higher priority in them.

Framework

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businesses. Moreover, Argenti relates the failure of small businesses with their weak management (panseeri & Temteem, 2010).

The term ‘skill’ which is applied in this study refers to some qualities which are not necessarily intrinsic but can be developed. These qualities are reflected in the manner of performing duties not in the potential capability of one.

In 1995, in a study entitled ‘Effective management skills’ published in Harvard Business Review, Robert Katz mentioned the skills of managers. According to Katz, managers need three kinds of skills: technical, human-related, and conceptual. This classification is the most discussed and cited skills model in management literature (Patterson & Van Fleet, 2004):

• Technical skills: These mean the ability to exploit know-how, methods, processes and approaches to carry out a duty. Some believe that technical skills are secondary and some argue that there is no need for such skills in order to be a successful manager (Haysang, 2008).

• Human-related skills: By ‘human-related skills’ what is meant is the ability to work with and through

others including understanding the motivation and applying an effective leadership. Because a manager’s duty is carried out through other people’s activities (Hirsi & Blanchard, 1988:7), a manager must have the ability to work with others. Human-related skills are the ability to work with others, and to understand and stimulate individuals and groups to do the job (Robbins, 1991: 6).

• Conceptual skills: By ‘perceptual or conceptual skills’ what is meant is the ability to comprehend the complexities of the organization in general and to determine the position of one’s function in the organization (Rezayian, 2006:399).

In his book ‘The principles of management’, Harold Robbins discusses an additional skill called ‘The problem solving skill’.

• Problem solving skills: These skills express the ability to solve problems in a way that the organization’s interests are considered, because, in management, the priority is always with the organizational purposes (Kontz et al, 1988:360).

Griffin adds two other skills to the aforementioned four: ‘analysis skills’ and ‘discernment skills’. In addition to the classifications above, there are more skills in management literature, such as feedback skills (Rezayian, 1997:7) and group skills (Alvani, 1992:189).

The model used in this study is that of Bathly who defined the skills in three groups (Ghaffarian, 2000:76). The distinction between this model and other models of skills presented in the literature is its detailed classification of skills in 34 defined sub-skills. Furthermore, it is comprehensive and one can find the inferable skills from the literature related to duties, roles and skill classifications of Katz and Kantz:

• Communicational skills: The importance of being skilled in interactive behavior is recommended in many of skill classifications, including: Schapper & Davy, 2002; House & Mitchel; Lewis et al; Maneroo & Tomley, 1989; Mints burg, 1973; Queen, 1988; Robbins, 1989; Whetten & Cameron, 1991; and Wilson et al, 1990.

Communicational skills include: rhetoric, letter writing, phone conversation, negotiation techniques, feelings control, feelings expressing, interactive power, assistance acceptance, gestures, effective listening, fast reading, reporting, reciting poems and proverbs.

• Decision-making skills: The ability to analyze; speed of conveying ideas (the ability to make others understand what you mean and what you want thoroughly); the ability of learning from the environment; distinguishing the main dimensions from the secondary ones; the ability to infer; the ability to settle problems; the ability to learn from experiences; the ability of improvising imaginative models (to analyze the problems through different approaches); the ability to focus on an issue; and the ability to apply principles of logic.

• Creativity skills: To have courage to express new ideas; no fear of failure; the ability to change presuppositions of a problem; to solve the problems mentally; the mental ability to seek reasons; the ability to come up with ideas; not to be satisfied with the existing solutions; having an active imagination; and the ability to take risks.

The main research question: How to prioritize necessary management skills in small businesses?

Hypotheses of research:

• Communicative skills influence the operation of small businesses. • Decision-making skills influence the operation of small businesses. • Creativity skills influence the operation of small businesses.

METHODOLOGY

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and randomly; i.e. at first, some 10 questionnaires were distributed to the firms, and a sample of 44 was selected. Finally, the participants who were unit managers responded to 47 questionnaires. Due to some ambiguity in definition of some skills and to avoid misunderstandings regarding its terminology, a short explanation or an example was given for each skill taken from studying the literature of management skills.

To respond to the main question and the hypotheses, two questionnaires were designed. In questionnaire no. 1, the data related to the three hypotheses and some secondary questions such as demographic information, the information regarding intention of owners/managers and the required data for variance analysis were collected. According to the number of skills in the model, the items 1 to 14 are related to communicative skills, 15 to 24 are concerned with decision-making skills, and the items regarding creativity skills are numbers 25 to 34. All the questionnaire items are of the closed type. The participants responded to the questionnaire number 1 through two different approaches. First, they were asked to determine which skills they have applied, choosing from a group of 34, during the years of their management. Then, due to their experience gained in management of small businesses, how much is the importance of each skill, in their opinion, for the success of this management. Their responses are measured using a continuum of ten degrees (0 to 9). Questionnaire 2 was prepared to answer the main research question. This questionnaire with 8 matrices was provided for the managers to make a paired comparison of the main and secondary standards regarding the amount of usage and their importance.

To measure validity, the opinions of experts, advising professors and readers were asked. To assess reliability, Cronbach’s Alpha method was applied to calculate the internal consistency of the tool (Sarmad et al, 2006: 169). Cronbach’s Alpha was calculated as 0.83 in this questionnaire showing its high reliability.

To answer the main research question on prioritization of management skills, the AHP technique was employed. The process of analytic hierarchy process (AHP) is one of the approaches for ‘decision-making with multiple standards’ (Mehregan, 2006:165). In AHP, due to the importance of rational judgment, a number is assigned to each skill; so the most important variables can be distinguished. In other words, the variables having priority can be found (Adel-Azar & Rajab-Zade, 2002:10). To analyze the collected data, the software Expert Choice was used. Due to having to apply all the 47 opinions in analysis, we had a model of group decision-making. However, due to the limitation of the software regarding the number of members (at maximum 25 individuals), a part of calculations was inevitably performed using the EXCEL software; then, based on the AHP model, the geometrical average of the responses was calculated and the final answer was entered in matrices of the EC software. There is a model for the usage and another for the importance in the software; the numbers related to the paired comparisons were entered in the software and calculations were made.

Furthermore, to test the hypotheses, the parametric method and the test of average comparison (T test) were applied; the statistics are as follows:

: is the average score in the sample;

: is the average score in statistical population; S2: is variance score; and n is the number of the participants in the sample.

Finally, to analyze the variance of managers’ skills based on sociological information, Fischer’s test was employed.

RESULTS

Results concerned with the main research question

• Prioritizing skills based on their usage by the managers

Decision-making skills have the most priority (0.35); creativity skills come after them (0.33); and communicative skills are the last one (0.31); therefore, one can conclude that: 1) the managers utilize all three skills in almost the same way; 2) though the role of innovation in survival of small businesses is undeniable, this skill does not get the first priority; and 3) despite the great emphasis on the importance of communicative skills by many experts in the ‘description of future organizations: empathy, to be sensitive to staff affaires, and the ability to have influence’ (cooper, 2005:353), and also, the ease of communication in small businesses with small numbers of staff, this skill has taken the third priority.

Below, the secondary skills have been prioritized regarding their usage:

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managers do not pay enough attention to learning from external examples and they only depend on their own experiences; 3) despite its very important role in stimulating creativity, the skill of mentally designing models gets the last priority.

Creativity skills: Its important points are: 1) the skills ‘having the courage to express new ideas and ‘no fear of failure’ are set in the above sphere of the hierarchy meaning the high risk-taking state of the managers; 2) the skills ‘solving the problems mentally’ and ‘the ability to mentally seek reasons’ take the last ranks in the hierarchy showing the reluctance of the managers to struggle mentally in order to solve problems.

Communicative skills: Its important points are: 1) the skill of consulting has taken the first priority along with the decision-making skill; it shows that learning achieved by experience and learning obtained from the environment get high ranks; 2) effective listening has a very important position according to the modern literature of management; 3) accepting assistance takes a low priority in line with lack of organizational levels in these small businesses and not having skills-related principles; 4) ‘expressing feelings’ has a high priority due to direct interaction of the managers with the staff; 5) the least usage of ‘fast reading’ in line with the nature of small businesses due to low amount of reports.

• To prioritize skills based on their importance from the viewpoint of managers

Regarding their importance, decision-making is the most important (0.34); after that we have creativity skills (0.33); and communicative skills take the last rating (0.31).

Decision-making skills: Its important points are: 1) to prioritize consistently the skill of ‘learning from

one’s experiences’; 2) negative gap in ‘the ability to analysis’, ‘the ability of inference’, ;the ability to focus on one issue’ and ‘the ability to mentally design models’; i.e. their rank regarding their importance is more than that of their usage; 3) the skill regarding the ability to analyze takes the fourth rank despite it having the highest importance regarding the usage; 4) demotion of the skill of ‘being able to mentally design models’ to the lowest rank despite the emphasis on promoting that regarding its usage; 5) the skill of ‘learning from experience’ has a higher rank than ‘learning from environment’ in line with the hierarchy of their usage.

Creativity skills:Its important points are: 1) there is a negative gap among the following four skills: ‘to solve problems mentally’, ‘the ability to raise new ideas’, ‘imagination’, ‘the ability to mentally seek reasons’; 2) the skill of ‘having a comprehensive outlook’ has the first rank as it also has regarding its usage, meaning that managers consider this outlook theoretically and practically in their problem solving; 3) the most practical and interesting point is the clear and significant gap in the skill ‘to solve problems mentally’ because of having the lowest rank of usage and the second priority of importance; 4) the skill of ‘being able to take risks’ takes last priority regarding its importance, but the skill ‘having the courage of expressing new ideas’ gets the ninth priority showing the unimportance of risk-taking from the viewpoint of managers.

Communicative skills: Its important points are: 1) ‘rhetoric’ has the same rank regarding both its

importance and usage for which there is an emphasis in management literature; 2) demotion of ‘feelings control’ and ‘expression of feelings’ despite their rank on the basis of their usage and their thread due to their importance in modern leadership.

In all the models above, rate adjustment has been zero showing the high quality in the adjustment of participants’ judgment. Because the adjustment rate of this research is lower than 0.1, the results are confirmed.

To summarize, the results related to the main research question are as follows:

Prioritization of the triple skills based on their usage: decision-making, creativity, and communicative skills

Prioritization of the triple skills based on their importance: decision-making, creativity, and communicative skills

Deductions related to the research hypotheses

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To examine the first hypothesis: the results of the average test for the first hypothesis are shown in table 1:

Table 1: Testing of the first hypothesis

Triple Management Skills Average Standard Deviation T Statistics P-Value

Communicative Skills 5.97 1.18 8.558 0

Table 1 shows that the average of the scores of the managers regarding communicative skills is 5.97, and so higher than 4.5, the acceptable average. In conclusion, there is a 99% certainty that the communicative skills affect the performance of small businesses.

To examine the second hypothesis: the results of the average test for the second hypothesis are shown in table 2:

Table 2: Testing of the second hypothesis

Decision-making Skills 6.55 1.06 13.25 0

Table 2 shows that the average of the scores of the managers regarding decision-making skills is 6.55, and so higher than 4.5, the acceptable average. In conclusion, there is a 99% certainty that the decision-making skills affect the performance of small businesses.

To examine the third hypothesis: the results of the average test for the third hypothesis are shown in table 2:

Table 3: Testing of the third hypothesis

Creativity Skills 6.34 1.14 11.09 0

Table 3 shows that the average of the scores of the managers regarding decision-making skills is 6.34, and so higher than 4.5, the acceptable average. In conclusion, there is a 99% certainty that the creativity skills affect the performance of small businesses.

Therefore, all the three research hypotheses are confirmed proving that the triple management skills including communicative, decision-making, and creativity skills have positive influence on the performance of small businesses.

Furthermore, the results obtained from variance analysis show that the experience of managers, their education, and major do not affect their application of the skills and the importance they consider for these skills.

CONCLUSION

The influence of the skills on the performance of small businesses: The present study shows that the triple skills including communicative, decision-making and creativity skills have an influence on the performance of small businesses. However, in this research, the performance is considered based on the organization survival index. The results show that managers obtained a score higher than the average in each group of skills, for their continuous performance of their units.

Priority of the triple main skills regarding usage and importance:the main result of the research proves that decision-making has the first priority in regarding the main research question. The triple management skills are prioritized both by their usage and importance. The main point is that these prioritizations are consistent. Prioritization of the skills regarding their usage explains the current situation. Assessing the risks of the current situation is the most important achievement of these results.

Priority of decision-making skills: The first priority of decision-making shows that the managers continue to consider decision-making the most important function of the managers. Of course, the little difference between the coefficients of these skills shows that, fortunately, these managers use all the skills at the same rate.

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Not considering the skill of learning from the environment: Another important issue regarding the decision-making skills is that the skill of ‘learning from the environment’ is not considered important and useful. However, social learning is one of the most important ways to learn and due to the especial nature of operations performed in small businesses, utilizing the experiences of other managers is vital. It seems that the lack of facilitating conditions for interaction between the managers is one of the main factors of this deficiency which can be overcome by strengthening or creating widespread management webs.

The state of secondary skills of creativity: The most fundamental gap among all the skills belongs to creativity. The skill of ‘the capability to mentally solve problems’ gets the last priority regarding its usage. Regarding its importance, it takes the second position. Furthermore, the skill of ‘being able to raise ideas’ has the third priority regarding its importance. These two skills can be taught to a large extent; therefore, they must be taken seriously in training plans. The main point about creativity is that those skills that can be acquired get higher priority than the intrinsic ones such as ‘having the courage of expressing new ideas’, ‘the risk-taking ability’, and ‘no fear of failure’. It shows that training courses can be effective in development of the creativity skills.

The state of the secondary skills of communication: Among communicative skills, ‘rhetoric’, ‘negotiation skill’, ‘effective listening’, ‘assistance acceptance’ and ‘interactive power’ take higher priority regarding their importance and usage. The high importance of communicative skills along with the nature of small businesses requires their consideration in promotion of the managers. Due to the lack of organizational layers, the managers of these economic units have more direct interactions with the staff, so the communicative skills have higher importance. Furthermore, another important point regarding these skills is that no attention is paid to emotional issues. ‘Feeling expression’ and ‘feeling control’ take the lowest priority both in their importance and usage which shows unscientific and nonacademic view of the managers regarding the emotional and spiritual aspects of organizational behavior.

The skills that can be acquired have priority to intrinsic abilities: The skills that can be acquired or are not intrinsic take high priority. If more researches prove the previous statement, one can rely on this issue in compiling social macro-strategies. In Entrepreneurial literature, there are two attitudes including content and certain attributes. In content attitude, behavior of the entrepreneur is analyzed, and in certain attributes attitude, the characteristics of the entrepreneur are considered. Due to the previous statement, the policy-makers of entrepreneurship and the ones administering small businesses can get to the basic principle that the success of managers of small businesses and entrepreneurs is more dependent on factors that can be acquired, and not on the intrinsic abilities. The experiences the managers have in their position as a manager, their academic degrees, and their majors have no effect on their skills. Therefore, designing training programs is easier because demographic diversity of managers based on the three factors mentioned above, does not make any difference in the usage and importance of the triple skills.

SUGGESTIONS

The main purpose of this study is to prioritize skills in order to design a plan for the progression of managers of small businesses. Therefore, the main suggestion of this research can briefly be paying more attention to certain skills when compiling training courses for the managers of small businesses. Furthermore, two infra-structural suggestions are presented in references areas and related divisions to improve establishment and development of small businesses. The first four suggestions are for current managers and the two last ones are for the will-be managers:

• To compile training courses to promote skills such as ‘the ability to analyze’, ‘to apply logical principles’, and ‘inference ability’ is one of the results of this research. It is natural that promotion of these skills cannot be fulfilled simply by holding theoretical courses, but by creating an environment similar to those in which a manager has to decide; which is vital for learning to occur.

• The skill ‘to solve problems mentally’ is one of the skills in which even current managers feel a wide gap, so holding workshops to promote this skill is one of the training priorities. Unlike the mentioned skills, communicative skills such as ‘rhetoric’, ‘negotiation techniques’, effective listening’, ‘assistance acceptance’, and ‘interactive ability’ take high priority; so, to improve them, communicative principles can be presented theoretically.

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• Learning from the environment is another skill for which less than enough attention is paid. To provide

conditions to create more interaction between the managers of small businesses through related governmental organizations may lead to web making and providing an opportunity to learn from the environment.

• Higher failure rate in small businesses as well as the results of this study show that there are two major defects in this field: firstly, there are few supports for these businesses, even these little helps are limited to financial aids, though the results show that this units need specialized information and managerial consultation. Therefore, it is suggested to establish specialized centers in the management field of small businesses and to provide free consultant services for these units to increase exploitation of financial and technical supports.

• Secondly, there is no official authority to evaluate the applicants for establishing small businesses. This authority should examine weaknesses and deficiencies of establishers of these units from their beginnings (both technically and management-related) comprehensively, then based on their examining provide them supportive services. Therefore, it is suggested that an official authority be established in the ministry of industry whose members are experts in small businesses in order to evaluate applicants who want to establish such businesses both managerially and technically and support them from the very beginning if required.

•

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