An ethical strategic decision-making framework for South African small and medium enterprises

Abstract

Small and Medium Enterprises (SME) are as important in South Africa as they are across the globe. The South African government has identified SMEs as a key player in the economy, and has developed polices and initiatives to assist them in becoming sustainable. These enterprises face numerous challenges due to their size and unique characteristics, and the failure rate of these entities remains high. While much research has been conducted on SMEs, the field of strategic decision-making (SDM) and business ethics in SMEs is underrepresented, particularly in South Africa. Most research in these two fields has also focused on large organisations, and SMEs have been neglected. The implementation of effective SDM and the creation of ethical infrastructures are necessary to maintain and ensure the long-term performances of these entities. Hence, there is a need to develop appropriate theory and frameworks aimed at SMEs. Considering the above, the aim of this study was to determine a benchmark SDM process for SMEs, and to identify how ethics can be integrated into the SDM process. Data was collected though the Delphi Technique, the Interactive Qualitative Technique, and additional interviews with SME owners/managers as participants. The Delphi Technique allowed the study to reach participants across all nine provinces of South Africa, although most participants in this study were located in the Gauteng province. Much of the empirical data obtained was defined and refined by the participants, with the researcher assisting and facilitating in the research process. The empirical findings identified a benchmark SDM process, as well as how ethics can be defined and integrated into this process. The findings highlighted unique SDM-related activities in the South African context. These unique activities are internal reasons for SDM, financial analysis, the development of alternatives, choice of an alternative with the least cost route, gathering of non-financial information, importance of communication, the implementation step, and lastly, evaluating the effectiveness of the strategic decision. The findings also indicated that SMEs do not follow specific formal steps in SDM, which highlights the dynamic nature of SDM in SMEs. The influencing factors of SDM in SMEs contributed additional and unique knowledge to the literature in the South African context. The unique influencing factors that were identified included operational matters such as “engine” (the processes and

structures), limitations/opportunity matters such as time and capacity, and rewards such as fuzzy feel-good feelings and financial potential. In addition, the study identified ethical influencing factors and ethical principles such as integrity, doing the right thing, reliability and responsible behaviour towards stakeholders that guide strategic decisions. Personal ethical principles, such as moral codes and beliefs, were also identified. These findings highlight the mediating and moderating roles of SDM. The empirical finding also established how SMEs define ethics. The findings highlighted unique practical elements of defining business ethics, such as highlighting trustworthiness, and quality of products and services. Additional findings indicated the role of emotions in making ethical strategic decisions. Thirdly, the empirical findings also indicated how the broad influencing factors relate to each other. This was the first empirical research study to highlight the influencing factors within a system of SDM; highlighting influencing factors (primary drivers) such as risk, and primary outcomes such as rewards. Lastly, an ethical SDM framework is suggested, indicating the moderators and mediators in SDM, and highlighting how ethics are integrated into SDM. The thesis contributes to the field of SDM, business ethics and SMEs, and particularly, to ethical SDM in SMEs. It is of value to South African SME owners/managers, who can utilise the findings of this study.