Managerial Skills for Micro, Small and Medium-sized

Enterprises (MSMEs)
Sebastian NG’ORA1, Adam Beni Swebe MWAKALOBO2, Francis LWESYA3
1 The University of Dodoma, Kikuyu Avenue, 11090 Dodoma, TZ; sngo'[email protected]
2 The University of Dodoma, Kikuyu Avenue, 11090 Dodoma, TZ;
[email protected]
3 The University of Dodoma, Kikuyu Avenue, 11090 Dodoma, TZ; [email protected]
(corresponding author) Received: August 24, 2022
Revised: November 20, 2022
Accepted: November 29, 2022
Published: December 7, 2022

Abstract: Effective managerial skills can play a key role in the internal governance of micro and
small businesses in Africa, enabling them to survive, compete and thrive in a dynamic business
environment. However, due to the low absorption capacity, many micro and small entrepreneurs
and managers lack the necessary managerial skills. We collected data from MSMEs owners and
managers in Tanzania to examine the managerial skills required and their effect on business
performance based on thematic content analysis and regression analysis. The results show that
the managerial skills of MSMEs owners and managers have a significantly positive effect on
MSMEs performance, in particular, financial management, marketing, human relations, and
entrepreneurial skills were crucial skills in running small businesses successfully. However,
financial management, marketing and entrepreneurial skills were the main skills gaps for many
MSMEs owners and managers, suggesting that education, mentoring, and training in these areas
for MSMEs owners and managers need to be strengthened. This study argues that since young
people form the majority of the stakeholders running small businesses, targeted policies and
strategies to promote entrepreneurship among young people through entrepreneurial learning
and experiences can help instil an entrepreneurial mindset, one of the crucial skills in small
business management.

Keywords: small business management; managerial skills; micro, small and medium
enterprises (MSMEs); MSMEs performance; entrepreneurship.

Introduction

Micro, small and medium-sized enterprises (MSMEs) are recognized as engines of

economic growth and development worldwide (Lwesya, Mwakalobo, & Mbukwa, 2021;
Nishantha & Kawamura, 2011; Stanislous & Mornay, 2011; Taraki, 2019). MSMEs play an
important role in job creation, innovation, regional development, and social cohesion. In
2008, MSMEs were estimated to contribute over 50% to the gross domestic product (GDP)
and around 63% to formal and informal employment (UNEP, 2008). In the African context,
informal MSMEs form a large part of the MSME sector and governments are making
significant efforts to support them by formulating policies and strategies to encourage
their development and speed up their formalization process. Many people start
businesses in the MSME sector due to the flexibility in raising initial capital, access to
technology, management, utilities and even ease of responding to market dynamics
compared to large companies (Vandenberg, 2009). However, many MSMEs are still
constrained by several factors in developing and emerging countries. These factors are
related to deficiencies in investment policy and business environment (Aikaeli, 2012;
ESRF, 2016; Mkenda & Rand, 2020), supply-side constraints (Juma & Said, 2016; Mkenda
& Rand, 2020; Pasape, 2018) and financial constraints (Mkenda & Rand, 2020; Pasape,
2018). Similarly, several studies have highlighted the importance of business training,
entrepreneurship and marketing skills for SME growth and development (Kazimoto,

How to cite
Ng’ora, S., Mwakalobo, A.B.S., & Lwesya, F. (2022). Managerial Skills for Micro, Small and Medium-
sized Enterprises (MSMEs). Management Dynamics in the Knowledge Economy, 10(4), 343-359. DOI
10.2478/mdke-2022-0022
ISSN: 2392-8042 (online)
Journal Abbreviation: Manag. Dyn. Knowl. Econ.
www.managementdynamics.ro
https://content.sciendo.com/view/journals/mdke/mdke-overview.xml
344 | Sebastian NG’ORA, Adam Beni Swebe MWAKALOBO, Francis LWESYA
Managerial Skills for Micro, Small and Medium-sized Enterprises (MSMEs)

2014; Kotorri & Krasniqi, 2018; Mbago, 2013). Although the resource-based view (RBV)
and dynamic capability theories allude to the importance of resources including human
capital for small business development, few studies focus on the managerial skills
necessary for the growth and development of small businesses in developing and
emerging countries. It has been reported that most MSMEs in these countries are
constrained by the low quality of human resources (HR) in areas such as technical skills,
human relational skills, conceptual skills, product innovation abilities, especially in the
mastery of technology, management, information, and markets (Hamsani et al., 2020).

In the Tanzanian context, the MSME sector is one of the most important economic drivers.
The Tanzania Development Vision 2025 (1999) highlights that the SME sector consists of
more than 3 million companies accounting for 27% of the total GDP. However, as in other
African countries, the MSME sector faces several challenges including access to finance,
technology, market information and fierce competition, as well as insufficient human and
managerial skills (Balunywa, 1992; Haselip, Desgain, & Mackenzie, 2015; Juma & Said,
2019; Nyangarika, 2017; Olomi, 2006; Rutashobya & Jaensson, 2004). Managerial skills
are one of the key areas highlighted in previous studies as important for the growth and
development of the MSME sector in Africa (Anderson, 2017; Juma & Said, 2019). However,
due to the heterogeneity of MSMEs, which have different requirements in terms of
managerial knowledge, techniques, skills, experience, and training needs, there is little
understanding of the characteristics and managerial competencies MSMEs need to drive
their growth and development. Therefore, the purpose of this case study was to
understand the managerial competencies MSMEs need to drive their growth and
development, with a focus on MSMEs owners and managers. MSMEs were classified based
on the number of employees, micro-enterprise (1-4), small enterprise (5-49) and medium
enterprise (50-99) (URT, 2002). The specific goals were to: identify the types and forms
of management skills used in different MSMEs, assess management-related variables that
affect the performance of MSME and determine the effect of owner or manager
management skills on MSME performance.

Thus, the following research questions were formulated: What types and forms of
managerial skills are used in different MSMEs?; Which management-related variables
influence the performance of MSMEs?; What effect do the management skills of owners or
managers have on the performance of MSMEs?

Literature review

Human Capital Theory

This theory brings the labor economics perspective into organizational development. The
human capital theory states that education and training increase workers’ productivity by
imparting useful knowledge and skills, and thus increase workers’ future income by
increasing their lifetime incomes (Becker, 1964; Xion, 2001). The theory emphasizes
public and private investments in the education and training of workers to make workers
productive by acquiring certain skills or experiences that increase workers’ productivity.
This theory rests on the assumption that education is highly instrumental and necessary
to improve a population’s productive capacity. Building on the work of Schultz (1975),
Dew and Xiao (2011) states that education improves the individual's ability to deal
successfully with imbalances in changing economic conditions. This ability includes the
perception of a specific imbalance, the analysis of information and the reallocation of
resources. Since the performance of SMEs depends on their degree of flexibility and
adaptability to rapidly changing market demand and supply (Criveanu et al., 2011), this
means that MSMEs will benefit from investment in education and training and this
training will be made available to workers to acquire skills, knowledge and experience
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essential to the growth and development of the business. Therefore, the theory supports
the relationship between managerial skills and SME performance.

Resource Based View (RBV) Theory

The theory was pioneered by Barney (1986, 1991). The theory argues about the
importance of resources for a firm to operate efficiently and become more competitive. It
claims that resources that are distinct will enable a firm to gain a competitive advantage.
The theory identifies three types of resources that are physical capital resources (physical,
technological, plant and equipment), human capital resources (training, experience,
insights), and organizational capital resources. This means that human capital is one of
the most important resources for the development and growth of MSMEs and that human
capital with the necessary management skills is one of the elements to achieve competitive
advantage.

Dynamic Capability Theory

The theory argues how important is it to consider the dynamics of the business
environment in the development and growth processes of enterprises. According to Teece
et al. (1997, p. 515), dynamic capability focuses on “the ability to integrate, build, and
reconfigure internal and external competencies to address rapidly-changing
environments”. While the resource-based view theory focuses on the key resources an
enterprise needs to operate efficiently and become more competitive, the dynamic
capability theory focuses on taking into account the changing business environment. This
means that an enterprise has to react or respond to the events in the business
environment, be it changing customer needs, new skills required by the market, etc. This
is also very relevant for MSMEs in low-income countries in order to be competitive and
penetrate global markets which leads to their growth and development.

MSMEs performance

There is no consensus on what constitutes MSMEs performance, various metrics and

names have been used to define MSMEs performance. For example, MSMEs performance
is synonymous with MSMEs development (Dobbs & Hamilton, 2007), “survival, success
and competitiveness” (Eniola & Entebang, 2015, p. 241). Some authors have discussed the
performance of SMEs concerning the financial and non-financial elements of the business
(Effiom & Edet, 2018). Financial elements include profits, sales, return on investment, etc.
and the non-financial aspects are “continuous business processes for a period of three
years, personal commitment and autonomy, work-life balance” (Effiom & Edet, 2018, p.
118). This study uses MSME gross margin to assess MSME performance. Several previous
studies have shown the relationship between management skills and business
performance. This includes studies of Tamkin (2005) who found that investing in people
is one way that companies can achieve positive productivity gains and other business
results. Similarly, Nishantha and Kawamura (2011) examined the role of human and social
capital on business growth and factors such as formal education, acquisition of technical
and manual skills, years of work experience in the same or a different field, previous
ownership experience in the same occupational field or another, the training received, the
family background and the technical skills of the employees were considered important.
On the other hand, Yahya et al. (2011) found that high business success is associated with
high business skills, skills to acquire market share commensurate with size and ability,
and skills to offer more specialized services. In addition, Scheers (2010) found that a lack
of marketing skills contributes to a high failure rate of SMEs in South Africa. The study
argues that an MSME's marketing determines the company's long-term success. The
346 | Sebastian NG’ORA, Adam Beni Swebe MWAKALOBO, Francis LWESYA
Managerial Skills for Micro, Small and Medium-sized Enterprises (MSMEs)

underlying view is that no one will do business with you if the potential customers are not
familiar with your product or service.

Key management skills for the development of MSMEs

Managerial skills

Skills can be perceived as the ability of a person to perform a specific task or responsibility
acquired through training or experience that manifests itself both physically and mentally.
Managerial skills consist of a combination of characteristics that enable better results to
be achieved, the means and techniques of management efficiency, and the management
style used in terms of strategies, techniques, and tools to achieve expected results
(Mănăilă et al., 2014). According to Hamsani et al. (2020) managerial skills are reflected
in a person's conceptual abilities, human relational skills, and technical skills. Ardiana et
al. (2010) posit the “indicators of skills include production skills, communication,
teamwork and organization, supervision, finance, administration and accounting”.
However, while skills are critical for improved performance, the relationship between
skills and performance is nonlinear and they cannot be understood by the linear theories.
This is because factors such as knowledge, innovation, change, excellence, quality,
corporate values, and many others are highly non-linear concepts that cannot be tackled
with linear thinking because the effects are no longer proportional to their causes or
efforts (Bratianu & Vasilache, 2009). Therefore, the issue of organizational learning
becomes important for the development of MSMEs (Bratianu et al., 2020).

Organizational learning is reflected in the key process of knowledge management

including knowledge creation, knowledge acquisition, knowledge sharing, knowledge
transfer and propagation, knowledge use, vision and business opportunities
identification, training programs for employees, business analyses, and innovation
support and they are considered critical to business performance (Bratianu et al., 2020).
Organizational learning enables companies to identify critical management skills for
business success. Stone et al. (1995, p. 19) emphasize the existence of the link between
SME performance and managerial performance, implying that the success of SMEs is
highly dependent on their managers. Some of the most important management skills are
as follows:

Financial skills

Financial knowledge and skills are one of the most important management skills that can
fuel the development of the MSME sector in low-income countries. The Organization for
economic cooperation and development (OECD, 2015; 2017) argues that the success of
micro, small and medium enterprises depends on a mixture of supply and demand-side
factors, including adequate financial knowledge and skills. The importance of financial
knowledge and skills was explained in the “G20/OECD high-level principles on MSME
financing, developed in 2015”. The critical financial areas highlighted are the choice and
use of financial services, financial and business management and planning, financial
landscape and risk and insurance. This study focuses on access to capital, keeping records
of business transactions and preparing financial Statements which are key financial
management skills in low-income countries. It is therefore hypothesized that:

Hypothesis 1 (H1): Financial skills have a positive significant effect on the performance of
MSMEs in Tanzania.
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Marketing skills

Marketing refers to anticipating and identifying customer needs and wants and providing
them when they are needed, at the right time and with the right quality and at an
affordable price (Onah, 2007). Marketing is one of the key skills entrepreneurs use to
inform, attract and retain customers. Marketing is one of the crucial skills entrepreneurs
need to run their businesses successfully. However, in many micro and small businesses,
marketing is one of the neglected skills (Agbonifoh, Oseyomon, & Asein, 2007). Several
previous studies have shown that MSME's owners’ or managers’ marketing skills may
determine the firm's long-term success. This lies in the importance of making your
products known to customers and the public, it is the only way that people will buy your
products. A study by Scheers (2010) in South Africa found that a lack of marketing skills
contributed to a high failure rate among SMEs, arguing that improving MSMEs’ marketing
skills will reverse the trend of failure. However, it is often claimed that small businesses
lack marketing techniques and skills (Kozan & Akdeniz, 2014). Some of the important
marketing skills are identifying customer needs (customer needs assessment), developing
a market niche or segment and identifying market strategies or tactics. Therefore, this
study hypothesizes that:

Hypothesis 2 (H2): Marketing skills have a positive significant effect on the performance
of MSMEs in Tanzania.

Human relations skills

Human relations skills “refer to the abilities of managers to establish and maintain good
contacts with subordinates, superiors, other managers, even with people outside the
organization” (Popescu et al., 2019, p. 1119). The success of any business organization
depends on the quality of its human resources. This has been stated in several studies (for
example, Ardiana et al., 2010; Purwidianti, 2015; Soetjipto et al., 2002). However, the
ability to engage in human relationships is one of the crucial skills in both small and large
firms that increase employee productivity and makes a significant contribution to
business performance. This succeeds when employees are motivated, paid attention to
and encouraged to participate, they become more productive there by doing high-quality
work. The focus is on good communication and interpersonal skills. Some of the indicators
of human relations skills are participatory decision-making employee motivation and the
ability to network with other business operators. It is therefore hypothesized that:

Hypothesis 3 (H3): Human relations skills have a positive significant effect on the
performance of MSMEs in Tanzania.

Research methodology

This study uses the data collected in the city of Dodoma. Data were collected from MSME
owners and managers in the city of Dodoma, the capital of Tanzania. Both questionnaires
and structured interviews were used to collect data. A sample of 60 MSME owners and
managers were approached and interviewed using questionnaires. We used thematic
analysis and regression analysis to analyze the data results. We followed a deductive
thematic analysis to analyze interview data and were guided by coding and theme
development using existing theories or concepts in the literature. According to Nandonde
(2019), thematic analysis is guided by an identified framework when searching for
patterns or themes, but this approach does not limit the exploration of new themes that
emerge from data analysis (Yin, 1981). As this study involved interviews with 60 MSME
owners and managers, the thematic content analysis was used in data analysis. According
to (Wei, 2020, p. 34) thematic content analysis (TCA) “is a descriptive presentation of
348 | Sebastian NG’ORA, Adam Beni Swebe MWAKALOBO, Francis LWESYA
Managerial Skills for Micro, Small and Medium-sized Enterprises (MSMEs)

qualitative data and qualitative data may take the form of interview transcripts collected
from research participants or other identified texts that reflect on the topic of the study”.
We used the framework proposed by Creswell (2008) in Figure 2, which shows a
hierarchy of major themes, sub-themes, and concepts in data analysis that represent the
properties of data.

• Access to capital
• Keeping business
records
Financial Skills • Preparation of financial
statements

• Customer needs
assessment MSMEs Performance
Marketing Skills • Targeting market niche
or segment
• Market strategies or
tactics

Human Relations • Participatory decision

Skills making
• Motivation
• Network with other
business operators

Figure 1. Conceptual framework

Source: own processing

Concept 1

Sub-theme 1

Concept 2

Major theme

Concept 1

Sub-theme 2

Concept 2

Figure 2. The structure of thematic content analysis

Source: adapted from Creswell (2008)
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Results and discussions

The demographic profile of the respondents

Based on the gender of the respondents, 43.3% were male, and 56.7% were female. Most
of the respondents were between 30 and 39 years old (36.7%) and between 20 and 29
years old (33.3%). This indicates that there is a high concentration of most owners and
managers aged between 20 and 40, suggesting that the majority of those involved in micro
and small businesses are young people. About 43.3% of the respondents had secondary
education and 16.7% had primary education and another 16.7% had no formal education.
This indicates the need for managerial skills for MSME owners or managers to improve
business performance (Table 1).

Table 1. The demographic profile of the respondents (owners and managers)

Characteristics Categories Frequency (N) Percentage (%)
Male 26 43.3
Gender
Female 34 56.7
Degree 2 3.3
College (Diploma) 6 10
Post-secondary 6 10
education
Education
Secondary 26 43.3
Primary 10 16.7
No formal training 10 16.7
attended
Age Under 20 years 2 3.3
20-29 years 20 33.3
30-39 years 22 36.7
40-50 years 14 14
Above 51 years 2 3.3
Marital status Single 12 20
Married 36 60
Divorced 8 13.3
Widow 4 6.7
1-5 30 50
Duration of business 6-10 8 30
Over 10 12 20
Source: survey, 2013

Regarding the distribution of the activities performed by the MSMEs surveyed, most of
them are engaged in retail (23.3%), sunflower oil (13.3%), food sales (10%) and grocery
stores (10%), others are engaged in clothing, charcoal shops, cosmetic shops, saloon and
spare parts (34%). The results show that all respondents in this study are mainly engaged
in off-farm activities in the area of trade and services. The results are consistent with the
OPSD (2005) report, which revealed that most MSMEs 30 were described as being
involved in off-farm economic activities such as trade and services. In relation to owners'
or managers' perceptions of the importance of managerial skills. The results show that
43.3% of respondents said management skills are very important and 56.7% of
respondents said management skills are important. This shows that all respondents
appreciate the importance of managerial skills for their business development.
350 | Sebastian NG’ORA, Adam Beni Swebe MWAKALOBO, Francis LWESYA
Managerial Skills for Micro, Small and Medium-sized Enterprises (MSMEs)

Themes and sub-themes generated from interviews on managerial skills for MSMEs
performance

Theme one: Financial management skills

It was found that financial management skills are one of the crucial skills needed by the
owners and managers of MSMEs in the study area (Table 2). Many respondents argued
that managing business finance and knowing how to allocate it efficiently is key to
business growth and development. However, few of the owners and managers had
acquired the appropriate training in financial management. This includes training on
different sources of capital for MSME development, in particular on the different financing
options. Some respondents appreciated the importance of credit and the need to explore
different financing options. For example, one respondent stated that… “Funds from low-
cost sources make up a higher proportion of my capital structure”. Similarly, some other
respondents expressed scepticism about relying on external sources of funding. One
responder commented that… “relying on credit for more than half of the capital could put
the business at risk of failure in the long run”. Management of business records is another
aspect which emerged to be an important component in financial management. Some
respondents stated that… “record keeping allows me to determine the status of my
business”. Others claimed…. “Keeping records of business transactions such as sales,
expenses, and profits and losses is my primary responsibility in business operations”.
However, some of the respondents also expressed the challenges they face in the
preparation of annual financial statements. For example, some respondents stated that “I
can't produce good financial statements without expert help”. Other respondents
indicated that small businesses do not need to keep records of business transactions.
These results suggest that financial management skills are one of the most important
managerial skills required for MSMEs development. Previous studies have shown that
financial management skills can improve MSMEs' financial resource allocation as well as
MSMEs' accessibility to external financial resources (Adomako et al., 2016; Hussain et al.,
2018; Kimani & Ntoiti, 2015). Given the financial challenges faced by many MSMEs in
Africa, this means that providing training and guidance on financial management can
empower many MSMEs to address these challenges.

Theme two: Human relations skills

Human relations skill is another skill that has been found to be important for business
development from the perspective of MSME owners and managers. Interpersonal skills,
especially conflict management skills and motivation of others, were crucial factors from
the point of view of the interviewees. According to Popescu et al. (2019, p. 1119)
interpersonal skills is “the ability to work with people, to communicate with groups or
individuals and understand them” One respondent stated that… “when I experience
conflict with others, I strive to be cooperative yet assertive”. Another respondent
replied…. “I seek advice from friends, businesspeople and experts to cope with business
challenges”. Another prominent feature highlighted by respondents about human
relations skills is the ability of some MSME owners and managers to develop group skills.
This was reflected in effective teamwork and empowering employees by allowing them to
participate in decision-making processes. For example, one respondent noted that “I
delegate my responsibilities to other employees and encourage them to participate in
decision-making processes”. On the other hand, networking with other entrepreneurs is
another characteristic of human relationship skills, especially for micro and small
businesses. Their ability to communicate and build good relationships with other
entrepreneurs has been found to be one of the sources of business information and access
to some of the resources for their competitiveness. This means human relations skills are
vital in driving the development of MSMEs in Africa. For example, Popescu et al. (2019)
state that the sustainable development of SMEs is ensured when there is a combination of
emotional intelligence, self-awareness, and interpersonal skills.
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Theme three: Marketing skills

Marketing skills were highlighted as important by many MSME owners and managers in
this study. Marketing was used to identify customer needs and wants through market
research. One respondent stated: “I first identified the needs of the customers before
embarking on this business”. Another respondent claimed that: “I chose to operate here
because nobody operates here as long as there is a shortage of goods or services”.
However, due to firm size, limited resources, and lack of marketing skills, some MSMEs
owners and managers do not use marketing as a strategic tool for better business
performance. For example, one respondent stated that: “I believe that the quality of the
goods is self-expressing, so no need for promotion”. This result reflects what was found
by Chinedu et al. (2020), that small businesses are more likely to prefer the direct channel
of distribution to advertising, partly due to the lack of marketing departments and the stiff
competition they face from established competitors.

Theme four: Entrepreneurship skills

The study found that entrepreneurial skills are another important managerial competence
needed for MSME development among MSMEs owners and managers. This was reflected
in leadership qualities, especially business management skills. Most respondents
indicated that identifying business opportunities, organizing skills, planning skills, and
negotiating skills are critical to small business development. One respondent claimed
that…. “Firm location is an important factor in my business”. Another respondent stated
that…. “My leadership qualities, my previous experience and my planning skills have led
to my business success”. Similarly, technical skills were also important, particularly job-
specific knowledge and techniques needed to competently handle and perform specific
tasks. This includes managing supplies, equipment, production processes as well as
adapting to new technologies. Behavioral skills, on the other hand, were considered
important. This includes motivation and passion, which are reflected in creativity and
foresight and a willingness to take risks. For example, one respondent stated that… “I
always sell products that offer real value to customers”. However, despite the importance
of entrepreneurship skills, many micro and small businesses lack these skills due to
limited resources and inadequate government support. Brixiova and Kangoye (2013) find
that young African entrepreneurs cannot fully realize their entrepreneurial aspirations
because they lack the right skills. Therefore, improving the conditions for doing business
in Africa is vital, as is the provision of entrepreneurship education that addresses critical
entrepreneurial skills that are required, such as leadership skills, negotiation skills,
creative thinking, innovation and motivation and passion to instil an entrepreneurial
mindset among MSMEs owners and managers.

Table 2. Themes and sub-themes on management skills for MSMEs performance

Theme Sub-theme
Sub-theme One: Financial literacy of MSME owners or
managers
Theme one: Financial Concept: Financial literacy training
Sub-theme Two: Sources of capital for the development of
management skills
MSMEs
Concept: Assess various financing options
Sub-theme Three: Management of business records
Concept: The challenges of maintaining financial records
Sub-theme One: Interpersonal skills
Theme two: Human relations Concept: Conflict management and motivation of others
Sub-theme Two: Group skills
skills
Concept: Build effective teams and empower employees
Sub-theme Three: Networking
Concept: Communication with outsiders
Sub-theme One: Customer needs assessment
Theme three: Marketing skills
Concept: Market Research
Sub-theme: Two: Product or service promotion
352 | Sebastian NG’ORA, Adam Beni Swebe MWAKALOBO, Francis LWESYA
Managerial Skills for Micro, Small and Medium-sized Enterprises (MSMEs)

Concept: Marketing strategies or Tactics

Sub-them One: Leadership skills
Theme four: Concept: Business management skills
Sub-theme Two: Technical skills
Entrepreneurship skills
Concept: Operations management
Sub-theme Three: Behavioral skills
Concept: Motivation and passion
Source: own elaboration

Effects of owner or manager’s management skills on the performance of MSMEs

Based on the information obtained from the thematic content analysis, we assessed the
impact of owner or manager managerial skills on MSME performance. This aimed to
answer the three hypotheses of the study using a linear regression model. We set up the
following equation:
 = 0 + 1M + 2 F + 3HR + 4 ED + 5L + 6C + 7 A
Where:
π =estimated gross margin for 60 selected enterprises in the city of Dodoma
β = coefficients to be estimated,
M = Marketing skills
F = Financial skills
HR = Human Relation skills
Ed = Level of education
L = Entrepreneurial education of owners or managers of enterprises
C = Amount of capital invested
A = Age of owners or managers

Table 3. The effects of management skills on MSMEs Performance

Dependent variable: Performance of MSMEs
Variables Coefficients (  ) t-value p-value

(Constant) -5.858 0.000***

Marketing skills 0.265 5.032 0.001***
Financial skills 0.196 1.476 0.030**
Human relation skills 0.204 3.009 0.007**
Level of education 0.150 2.935 0.026**
Entrepreneurship skills 0.198 1.156 0.035**
Capital invested in business 0.541 5.234 0.000***
Respondent age 0.268 3.109 0.003**
Adjusted R-Squared 0.689
Sample size 60
(**) p<0.05 (***) p<0.01
Source: own elaboration

The effects of owner or managers’ management skills on the performance of MSMEs

In terms of the effects of owner or manager’s management skills on performance of

MSMEs, marketing skills had coefficients of the estimate which was significant (β1= 0.265,
p<0.001). This means that there were up to 0.265 increases in MSME performance for each
unit increase in marketing skills to MSMEs. Several previous studies have shown how
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important marketing is for small businesses because if an entrepreneur has all the
necessary management skills, without marketing knowledge and skills, an entrepreneur
may not be successful in business. Oparah et al. (2018) show that marketing is one of the
critical factors that can determine the success or failure of any new venture. This suggests
that the acquisition of marketing skills by business owners or managers is expected to
improve the performance of MSMEs. Similarly, Financial skills had a significant
relationship with MSMEs performance (β2= 0.196, p<0.030). There was up to 0.196
increases in MSME performance for each unit increase in financial knowledge and skills to
MSMEs. Some previous studies indicate that good financial literacy can minimize financial
risks as it enables entrepreneurs to identify opportunities and risks related to business
and financial decisions (Gärling et al., 2009), while low financial literacy limits access to
financing for MSMEs due to their inability to properly prepare financial reports and
inaccurate financial management (Purwaningsih & Kusuma Damar, 2015).

On the other hand, human relational skills turned out to be important, this factor showed
a significant association with MSME performance (β3= 0.204, p<0.007). There were up to
0.204 increases in MSME performance for each unit increase in networking with other
businesses and operators. This suggests that human relation skills are important for
MSMEs’ growth and development. It is evident that MSMEs, through their human relations
skills, can be able to seize business opportunities and resources that are not available to
them and negotiate with other operators. The key elements of human relationship skills
are effective communication, negotiation, multitasking, and conflict resolution. This
finding is consistent with Karami’s (2004) claim that improving the firm's core
competencies, particularly its human resources, results in the firm's highly successful
performance within the small and medium-sized electrical and electronics manufacturing
companies in the United Kingdom. Furthermore, the result is consistent with the human
capital theories of Schultz (1961) and Becker (1964) that investments in human capital
lead to an increase in human productivity which in turn leads to an increase in the
efficiency of the firm. In addition, the level of education had a significant impact on MSMEs
performance (β4= 0.541, p<0.026). This means that there were up to 0.150 increases in
MSME performance for each unit increase in the level of education to MSMEs. For example,
in a study by Dissanayake (2016) on institutional forces and life cycle stages of female-led
SMEs in developing countries, low education and lack of business training are some of the
barriers that hamper the development of SMEs in developing countries.

Entrepreneurial skills are another skill that has been identified as important for MSME
growth and development. This factor was positively related to MSMEs performance (β5=
0.198, p<0.035). This lies in an entrepreneur’s ability to spot opportunities, take risks,
implement innovative ideas, and locate businesses where they are likely to sell their
products. Several previous studies have shown that entrepreneurial skills are important
for business success (Gümüsay & Bohné, 2018; Shehnaz & Ramayah, 2015). According to
Ibidunni et al. (2017, p. 45) “entrepreneurial skills facilitate entrepreneurs' ability to
identify industry opportunities, leverage cross-industry collaborative platforms, and
define an appropriate path for future business success”. Other factors positively related to
MSME performance are the capital invested in companies (β6 = 0.541, p < 0.000) and the
age of the respondents (β7 = 0.268, p < 0.003).

Conclusion

The aim of the study was to understand the managerial competencies MSMEs need to
drive their growth and development, with a focus on MSMEs owners and managers. In
particular, it aimed to identify the types and forms of management skills used in different
MSMEs, assess management-related variables that affect the performance of MSMEs and
354 | Sebastian NG’ORA, Adam Beni Swebe MWAKALOBO, Francis LWESYA
Managerial Skills for Micro, Small and Medium-sized Enterprises (MSMEs)

determine the effect of owner or manager management skills on MSME performance. The
results show that critical skills that entrepreneurs and managers need to have to drive the
growth and development of MSMEs are financial management skills, marketing skills,
human relations skills, and entrepreneurship skills. These skills are crucial in the context
of African countries where MSMEs face more or less similar challenges. The results
corroborate with Popescu et al. (2019) finding showing that human relation is one of the
crucial skills managers use to create an atmosphere of approval and security in which
subordinates feel free to speak their minds without fear, leading to efficiency and
productivity in organizations. Similarly, their study has also highlighted the importance of
entrepreneurship education and suggested its inclusion in the curriculum of educational
institutions.

However, in the context of this study, it was found that many MSME owners and managers
have a skills gap in financial management skills, marketing skills and entrepreneurship
skills, indicating the need for regular education and training to teach these skills. Some of
the most missing skills include preparing financial documents and evaluating different
financing options. On the other hand, marketing is one of the neglected skills of small
businesses, resulting in some of the MSMEs not selling their products as many customers
are unaware of them. Similarly, entrepreneurship skills are a crucial skill needed by many
MSME owners and managers as most of the youth running small businesses, skills such as
business management skills, technical skills and behavioral skills are important to develop
an entrepreneurial mindset. The entrepreneurial mindset is crucial, especially in terms of
identifying business opportunities, innovation, and creativity, and risk-taking. In the
Tanzanian context, the government, and institutions responsible for small business
development, such as the Small Industries Development Organization (SIDO) need to
formulate targeted policies and strategies to promote entrepreneurship among young
people through entrepreneurial learning and experiences that can foster an
entrepreneurial mindset, a crucial skill to run small businesses. The findings of this study
may help the regional or national government policies meant to support MSMEs
development in Africa and elsewhere to understand the critical skills required for MSME
development and incorporate them into their Business Development Services (BDS).
Additionally, while it is helpful for small business owners to understand what managerial
skills are critical to running their business successfully, it could also be helpful for financial
institutions to understand important managerial skills that could be useful in evaluating
the application for funding and the potential success of MSMEs. Lastly, the results
contribute to the literature on critical managerial skills for small business management.

This study was limited by the sample size of respondents, which consisted of 60 MSME
owners and managers. Future studies could consider extending the study to include
regional and cross-country comparative analyses in developing and emerging economies.

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