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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 4, NO 12

Effect of managerial Skills on Growth of Hotel Based

Micro and Small Enterprises in Keroka, Kenya

Zablon Osinde Ongoro
School of Human Resource and Development, JKUAT
P.o Box 373(40202), Keroka, Kenya

Esther Mugure Kiragu (Corresponding author)

School of Human Resource and Development, JKUAT
P.o Box, 268(40200), Kisii, Kenya

Sarah O. Simwa (Corresponding author)

School of Human Resource and Development, JKUAT
P.o Box, 268(40200), Kisii, Kenya

Abstract

The purpose of this research was to investigate effect of managerial skills on growth hotel based MSEs in Keroka
Town, Kenya. There are limited studies on how managerial skills influencing growth of MSEs particularly in the
hotel sector. Most of the studies have concentrated in large towns and therefore, this study was therefore an
endeavor to fill the gap particularly for those Hotel MSEs operating in small towns like Keroka. From, the results,
above 70% of the respondents agreed that managerial skills stimulate enterprise growth. Therefore, managerial skills
however much other people don’t consider them they substantially contribute to MSE growth. Thus, managerial
skills have a strong, positive and significant influence on the growth of MSEs. It was recommended that, there is
need to organize for Hotel MSEs not only in Keroka town but country wide to impart the required management
skills so as to enhance growth in the sector.

Key words: Growth, Managerial Skills, MSEs and Keroka.

1. Introduction

1.1 Background of the study

Micro and Small Enterprises (MSEs) are defined as income generating activities that employ between 1-50 persons,
(Government of Kenya 2005). They play a significant role in the development process of Kenya. It is observed that,
during the early stages of economic development, these enterprises manifest unique opportunities for wealth and
employment creation. In the year 2003 the MSEs were estimated to employ 5.1 million people (Government of
Kenya 2003). However, MSEs are considered to be the key in promoting an entrepreneurial culture as well as
technological adaptation (Government of Kenya 1986). Thus, the development of the MSE sector is very important
in poverty reduction in our country Kenya.

The Australian Bureau of Statistics (ABS) defines a small business as an enterprise employing up to 99 people. A
medium enterprise employs between 100 and 199 individuals and organizations with more than 200 employees are
considered large businesses. This brings that, ABS definition is the de-facto definition of SMEs in Australia.
According to the study done in 2001, more than 1.2 million organizations fell into this category according to the
ABS (Macgregor, et al. 2007). The United States bases its definition on the position of the organization within the
overall marketplace. According to the United States Small Business Administration (SBA), Section 3 of the Small
Business Act of 1953 defines an SME as “one which is independently owned and operated and which is not
dominant in its field of operation.”

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The definition can be based on a threshold in revenue, like it is the case in Canada, it can be based on number of
employees, as in the UK, or it can combine the number of employees and turnover for legal and statistical purposes
like in Portugal. The Slovak Republic, Mexico and Greece use the number of employees as criterion.

The Micro and Small enterprises (MSEs) are actually accepted as the engine of economic growth and play an
important role in the equitable economic development of country. The sector has employment potential at low
capital cost thus, serving as its major advantage. The labour intensity of the MSE sector is much higher than that of
the large enterprises, thus the MSEs constitute over 90% of total enterprises in most of the economies and are
credited with generating the highest rates of employment growth and account for a major share of industrial
production and exports.

Therefore, for one to start and operate a small business/ a microenterprise there is always a likehood of success or
failure. This is simply because of simple management mistakes performed and their small size. According to
Longenecker, et al (2006), lack of planning, improper financing and poor management have been detected as the
major hindrances to the growth of micro and small enterprises. Consequently, lack of credit facilities has been
pointed out as one of the serious problems facing MSEs and hindering their growth (Oketch, 2000; Tomecko &
Dondo, 1992; Kiiru, 1991).

1.2 Statement of the Problem

The Hotel industry in developing countries is dominated by very small and informal enterprises, and the majority of
them grow only when they are young, (Collier and Gunning, 1999; Tybout 2000; and Bigsten and Söderbom,
(2006). Sleuwaegen and Goedhuys (2002) and Bigsten et al. (2004). Studies by Nautili, (2003) and Namusonge have
shown that few entrepreneurs in this sector have demonstrated potential for growth. But there are limited studies on
how managerial skills influence growth of MSEs particularly in the hotel sector (Naituli, 2003). Most of the studies
have concentrated in large towns Naituli (2003), Namusonge (1995), Oketch (1999), and McCormick (1996). This
study was therefore an endeavor to fill the gap particularly for those Hotel MSEs in small towns like Keroka.

1.3 Objective of the study

The objective of this study is to investigate the extent to which managerial skills is a challenge to growth of hotel
based micro and small enterprises in Keroka town.

2. Theoretical Framework

2.1 Managerial Skills

In a study conducted on enterprise success factors in MSEs Gauteng, South Africa, it was concluded that a lack of
technical and managerial skills (Brink et al., 2003; Rogerson, 2008) impedes on enterprise development. Also
research conducted on MSE failures in South Africa revealed that failure was primarily caused by a lack of
management skill and training. This finding is confirmed (Rogerson, 2008) by 90% of a sample of 1000
entrepreneurs who believe that MSE failure is due to a lack of managerial skills. However, taking the importance of
training and skill into account, it is cautioned by Rogerson (2008) that skills are not the only or even primary answer
to the challenges facing MSE development.
Managerial skills not only influence owners perceptions regarding their business, but various literature sources
(Watson, 2004) acknowledge that a lack of managerial skills and training is an important cause of enterprise failure
(Naicker, 2006) complimented by lack of experience and lack of organizational culture acting as an impediment to
the establishment of MSEs. The owner manager’s characteristics (O’Gorman, 2001) can also act as a barrier to
growth in that the personality, managerial skills and style including the entrepreneur’s and/or management’s
negative attitude towards change can negatively influence an enterprise growth (Leopoulos, 2006; Naicker, 2006).

2.2 Research Gap

From the previous researches, it is seen that most of the studies conducted in the MSE sector have focused more on
factors influencing the growth and development of micro and small enterprises in Nairobi and other big towns.
Also, researches have been conducted concerning the entrepreneur’s characteristics and growth of MSEs. Whereas
this is important, an understanding is required on the factors constraining the growth of micro and small enterprises.
This is because the future sustainability of MSEs is largely the result of these factors.

3. Research Methods
3.1 Research Design

The study adopted a descriptive survey research design. The design was meant to describe the respondents view and
opinions on the variable of the study. The principal advantage of descriptive survey design is that it allows for
collection of information on large groups of respondents, with minimum costs (Levy & Lemeshow, 1999). Through
this design the study was able to establish how managerial skills strains growth of hotel based micro and small
enterprises in Keroka Town.

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3.2 Population

The target population of the study was 45 registered hotel businesses in Keroka town. These were hotels with
between 1-5 employees and a low capital investment. These were registered with the County Council of Keroka as
certified and licensed by the Ministry of health.

3.3 Sample Size and Sampling Technique

Out of a population of 45 hotels, a sample size of 30 hotels was randomly selected. The sample size was within the
lower limits of a normally distributed population as per Kothari (2002).The technique had the advantage of allowing
all elements within the population to have equal chances of inclusion into the resultant sample (Dillon and hardaker,
1993). It also eliminated bias thus enabling errors to be estimated (Kothari, 2009). By this technique each unit in the
population of 45 hotels had an equal chance of being selected. Through the technique it was possible to generalize
the findings and inferences were made based on the entire population.

3.4 Data Collection Methods

A structured questionnaire with three point likert scale response ratings was utilized in data collection. This
basically provided primary information of the respondent’s opinions on constraints of enterprise growth. A face
interface was very vital in obtaining accurate information. The enumerator was able to clarify questions which
appeared unclear to the respondents.
A pilot test was conducted on respondents from units of the population not sampled for the study to examine clarity
and effectiveness of the questionnaire. The data was analysed and was found to be reliable and valid for this
particular study. Feedback from the pilot study was incorporated into the questionnaire that was used to gather data
for this research.
3.5 Data Collection Procedure
As a researcher, I administered 30 questionnaires among the existing MSEs of hotel businesses in Keroka town.
Respective respondents were informed about the purpose of the study. They were further informed that, the
completion of the questionnaire will take a short time and therefore would not waste their time.
The following were the ethical issues explained to respondents: Firstly, informed consent was obtained from the
participants by way of information leaflet outlining the purpose of the study. Secondly, the respondents were also
informed that participation in the study is optional. Finally, participants were informed that confidentiality will be
maintained on the information provided as no personal identifiers were used in the research.

3.6 Data Analysis

The data obtained was summarized according to the objective of the study. The data was then subjected to Microsoft
Excel Package for descriptive analysis. Method was adopted because the volume was not large enough to warrant
use of sophisticated data analysis tools for example SPSS. The results of data analysis were then presented in form
of frequency tables, and percentages.

4. Research Findings and Discussions

The data obtained through the questionnaire schedules was first checked for completeness. The 30 questionnaire
schedules were summarized and entered into Microsoft Excel Package to generate results. Visual aids in form of
frequency tables and percentages have been used to present the results.

4.1 Effect of Managerial Skills on the Growth Of Hotel SMEs

Table 4.1a The Effect of Good Managerial Skills on the Growth of Hotel enterprises
Effect Agree Undecided Disagree
(%) (%) %

Quick Growth of Business 70 27 3

Spur/stimulates Business Growth 100 0 0

Results in Table 4.1a above all the respondents (100%) agreed that good managerial skills stimulates business
growth while (70%) of the respondents agreed that managerial skills facilitates quick enterprise growth. Although,
27% of the respondents were undecided on quick how growth is facilitated by managerial skills whereas 3% of the
respondents disagreed with the idea that quick growth of the business is as a result of managerial skills. Thus from

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this findings it is noted that managerial skills, when it comes to enterprise growth, are not such significant to quick
growth This means that, an enterprise can grow with or without managerial skills. Research conducted on MSE
failures in South Africa revealed that failure on SMEs Growth was primarily caused by a lack of management skills
(Rogerson, 2008. Watson, (2004) also acknowledges that lack of managerial skills may lead to enterprise failure.
The foregoing scholars agree with the findings of this study that managerial skills lead to MSE growth.

Table 4.1b Managerial Skills on Customers and their Growth influence of Hotel enterprises
Effect Agree Undecided Disagree
(%) (%) %

Relevant to MSE Growth 97 0 3

Improves Customer Service 97 3 0

Improves Customer relationship 93 7 0

Also, from table 4.1b above, the findings show that above 90% of the respondents agreed that good managerial skills
lead to enterprise growth through improving customers’ relationship and relevant managerial skills in fields like
finance and human resource, thus attracting many of the customers. A majority 97% posited that enterprise growth is
through improving customer service and by making use of relevant skills which lead to enterprise growth
respectively.7% of the respondents were undecided concerning the issue that customer relationship may lead to
enterprise growth while 3% were undecided with improved customer relationship and enterprise growth. This
indicates that for growth of an enterprise to be spurred there should be improved customer relationship as well as by
improving the service rendered to the customer. This will so far lead to general growth of an enterprise.

5. Summary, Conclusions and Recommendations

5.1 Summary
From the data collected and analyzed managerial skills is key to enterprise growth amongst the hotel based MSES in
Keroka town. This is true because more than 90% of the findings show that with managerial skills, customer
relationship can be improved which leads to stimulating business growth at 100%. Therefore, managerial skills
however much other people don’t consider them they substantially contribute to MSE growth.
5.2 Conclusion
It was confirmed that Managerial skills were key to the hotel based MSEs in Keroka. Lack of which could lead to
business failure. This shows that managerial skills have a strong, positive and significant influence on the growth of
MSEs. The respondents clearly recognized the importance of managerial skills as critical to MSE growth. This is
supported by the conclusion by Marriott and Marriott (1999) that managers with good managerial skills improved
their firms for better growth.
5.3 Recommendation
From the above conclusion, since managerial skills have a significant influence on MSEs, it is therefore recommend
that, there is need to organize for Hotel MSEs not only in Keroka town but country wide to impart the required
management skills so as to enhance growth in the sector. This will not only attract clients for the good management
but also increase the turnover hence leading to growth of an enterprise.

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