This study examines how managerial competencies shape performance within the Portuguese hairdressing sector, a vital yet under-researched micro–small and medium-sized enterprise context. Grounded in the competing values framework, the research explores how these small structures navigate the persistent tension between internal stability and external flexibility. Our mixed-methods approach combined qualitative insights from industry leaders with a quantitative survey of 361 owner-managers and employees. Results confirm a strong link between competencies and performance, especially in social dimensions. However, profiles lean heavily toward the Human Relations Model, leaving significant gaps in the Rational Goal and Internal Process quadrants. Crucially, a perceptual dissonance emerged, as employees consistently rate managerial competence lower than owner-managers’ self-assessments suggest. By extending the competing values framework theory to fragmented service industries, this research suggests that behavioral complexity is an important factor for operational adaptability. These findings signal an urgent need for hybrid training that bridges the gap between technical craft and strategic management.