Performance of Micro and Small Enterprises in the National Capital Region
24 Pages Posted: 2 Jan 2016
Date Written: December 31, 2014
Measure of performance of any organization is necessarily the placement of an organization as a point in the criterion space so that it may be compared with (i) its position vis-à-vis a target point, or (ii) its own position over time, or (iii) its position vis-à-vis other peer organizations. The criterian space may be single dimensional, two dimensional or multiple dimensional or, in other words, the criterion/criteria of performance measurement may be only one, two or many in number. Further, the criterion space may be fully metric (measures are in the ratio scale), fully ordinal (on the ordinal scale on which only ranking of enterprises is possible) or a hybrid of the two. Still further, the criterian space may be bounded or unbounded. Yet differently, the criterian space may be linear or curved. Performance measure of an organization such as an MSE often uses two types of criteria: (i) financial and (ii) non-financial. The financial criteria may include profits, revenues, returns on investment (Duchesneau and Gartner, 1990; Smith et al., 1987), returns on sales, etc. The non-financial measures may be customers’ satisfaction and customers’ referral rates, delivery time, waiting time and employees’ turnover, etc. (Chong, 2008). These two types of measure are complementary since any one one of them, unless complemented by the other, is only a partial criterion to assess the performance of an enterprise. However, when more than a single criterian are used, comparison (whether of the same enterprise over time or that of an enterprise with its peers) is seriously jeopardized since an order relation cannot be established in a two or more dimensional space unless the two (or more) dimensional points are mapped on to a single dimensional measure. Such mapping yields a composite measure which is some sort of (equally or differently weighted) average. The choice of weights (equal or unequal) may be subjectively or objectively decided. But, in any case, averaging leads to only partial representation of the constituent measures. It cannot be taken for granted that the loss of information due to averaging is necessarily smaller than the gain in using multiple criteria in stead of a single criterion. Moreover, such composite measures often allude interpretation.
In the foregoing analysis an attempt has been made to measure performance of MSEs in terms of profit (as ratio to the fixed capital as well as net worth of the enterprise), which is a financial criterion of measuring performance. The financial (in terms of relative profit) returns to innovativeness and intellectual capital of the enterprise have also been analysed. Alternatively an attempt has been made to measure the performance by the employees’ turnover, which is a non-financial measure.
Keywords: micro and small enterprises, national capital region, human resource management, family-based financing and management, qualitative variables, regression analysis, India
JEL Classification: L60, L70, L80, N85, R30
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