Managerial Deficiencies in the Small and Medium Enterprises (SMEs) in Sri Lanka: An Empirical Evidence of SMEs in the Ratnapura District

Abstract

This paper discuses the basic managerial deficiencies of Small and Medium Enterprises (SMEs) in Sri Lanka with special reference to the SMEs in Ratnapura District. The study is mainly based on primary data gathered from 57 of SMEs, which were selected from 287 SMEs using stratified random sampling method. Data was gathered using a structured questionnaire and interviewing labourors, officers of various SME supportive organizations and observing SMEs. The study was supplemented with the data collected from secondary sources as well. Data was analyzed using qualitative and quantitative techniques. The study found that even basic management functions like planning, organizing, staffing, directing and controlling are not properly practiced in most of the SMEs. Most SMEs do not have clear plans for future development, production process, marketing, financial activities etc. Owners (entrepreneurs) of most of SMEs act as managers handling all the responsibilities, which are not delegated to others. Therefore, most of the SMEs do not function efficiently due to the delay of decision-making process, poor organization, poor staffing, weak controlling and directing. Financial management of most of the SMEs is found to be very weak. Most SMEs do not calculate total expenses, total revenue, profit etc, for they do not keep any account systematically. Most SMEs do not provide any welfare facilities and retirement benefits like EPF and ETF to encourage labourers. Poor production planning and production process, weak practices of marketing and poor quality of the products are the other deficiencies of SMEs. Performance of many SMEs is very poor due to the deficiencies in management. Poor knowledge in management of entrepreneurs causes the managerial deficiencies. Therefore, SMEs cannot judge problems and barriers coming from internal and external industrial environment. The paper concludes that the growth of SMEs can be accelerated by developing managerial knowledge of entrepreneurs of the SMEs.