The Influence of Informal Strategic Management Modes on Performance of Small Enterprises in Kisumu County, Kenya

Estimates suggest that more than 95 % (125 million) of enterprises across the world are small enterprises, accounting for approximately 60 % of private sector employment. In Kenya, the sector created up to 85 % (7.5 Million) of the total employed in the year 2012. Despite this significance, studies indicate that 75 % of small enterprises fail during their first five years of operation. To this end, scholars and practitioners have encouraged the small enterprises to use formal strategic management modes to leverage their performance, but the small enterprises continue to depict informal strategic management modes, characterized by unstructured decision making processes. It is therefore important to understand the appropriateness of these formal strategic management modes to small enterprises and to clarify whether exposure to informal strategic management modes would lead to better performance of the small enterprises. The purpose of the study was, therefore, to investigate the influence of informal strategic management modes on the performance of small enterprises with specific reference to the beneficiaries of the Youth enterprise Fund in Kisumu County. The specific objective was to determine the different strategic management modes employed by the small enterprises in Kisumu County and to investigate the link between the chosen modes and performance of the enterprises. The study was guided by a conceptual framework, anchored on Mintzberg and Waters theories on deliberate, emergent and reactive strategic management modes. The accessible population was 242 small enterprises run by the Youth Enterprise Development Fund, out of which 150 youth enterprises and 7 key informants were sampled for the study. Data on the types and choice of strategic management modes employed by the small enterprises was collected using the questionnaire method. The instruments were tested for validity and reliability through content validity index and Cronbach Alphas internal consistency index respectively. Data on the types of strategic management modes were analyzed using frequencies and weighted means. Pearsons Correlation Coefficient was used to analyze the link between the chosen modes and performance. This study was deemed significant in its ability to reveal to policy makers, trainers and small enterprise sector players the management gaps that, if filled, would lead to better performance of small enterprises. The study found out that the small enterprises used the strategic management modes interchangeably but relied more on informal strategic management modes. The study concludes that the conventional schools of thought that focus on linear models of strategic management present viable strategies that can align small enterprises into achieving success but are not enough in the day today management of small businesses. The study recommends that practitioners and scholars of small firm strategic management take cognizance of triple nature of strategic management that combines formal and informal modes of management and devote more time in studying models that would suit small firm management.