Critically Assess Whether Human Resource Management Is Any Different In Sme's Than Large Organisations

Critically assess whether Human Resource Management is any different in SME's than large organisations?

"The study of human resource management has been invigorated by the promise that there is a best-practice, high-involvement management that can guarantee superior organisational performance" (Wood, 1999).

This paper is structured to critically assess the differences of human resource management (HRM) in small to medium sized enterprises (SME's) with comparison to large organisations. Initially this will provide the fundamental processes involved with the implications of HRM in all organisations. The differences, or lack thereof, of HRM polices, are derived from the vast difference in the sizes of the respective organisations. Research shows that HR practices also vary extensively between small firms (Dumberlry and Walley, 1995; Julien, 1998; Bacon et al, 1998) and are often determined by the ideology and pluralistic goals of the small business owner (Kock and De Kok, 1999; Wagar, 1998). Anderson (2003) takes this one step further by claiming that HRM in SME's is not ambiguous and homogenous phenomenon. On the other hand, HRM in large organisations is more about the relationship between strategic management and employee relations in the firm, and focuses on the overall direction of the organisation in pursuit of its stated goals and objectives. Other central issues examined are recruitment, training, performance, pay, management theories, flexibility, and employee retention.

There are around 4.3 million SME's including 3.1 million sole-traders or partners with no employees, and they are the driving force behind a large number of innovations and contribute to the growth of the national economy through employment creation, investments and exports. Smalls firms, (0-49 employees) represent 99.3% of all UK businesses, and over 51% of all UK economic activity. Only 26,000 medium sized (50-250 staff) and 6,000 large firms (250 or more staff) exist in the UK and represent the other 49% of the economic activity (www.dti.gov.uk/statistics). Due to the nature of SME's, each individual employee would represent a substantive part of the workforce, thus increasing the importance of every single HR decision (Bacon et al, 1998). In larger organisations, HRM plays an equally significant role in larger organisations too, because of its impact on performance outcomes it has a strategic role to play in business management, and merits careful attention by practically all types of manager, irrespective of functional responsibilities (www.bized.ac.uk). Lado and Wilson (1994) have suggested that HRM practices in large and multinational corporations "can contribute to sustained competitive advantage through facilitating the development of competencies that are firm specific, produce complex social relationships Ð'...and generate organisational knowledge." Therefore, aside from the number of employees employed by the firm, the importance of HRM is widely recognised as vastly important to large organisations, and it has also been observed that SME's consider their HRM problems to have top priority (Hornsby and Kuratko, 1990; Huang and Brown, 1999).

An interesting difference concerning small firms is their recruitment policies. They make extensive use of job-tryouts (Duberley and Walley, 1995), which are inexpensive and very well suited to evaluate the actual fit of a person with the implicit demands of the job. The personal atmosphere of small firms is reflected in the high use of informal procedures like job posting and bidding (Deshpande and Golhar, 1994). Small firms are also more likely to make the use of recruitment agencies to provide them with temporary workers for period of heightened seasonal activity, and employ a number of part-time workers due to the cheaper labour, and also providing more flexibility to the owner / manager and the employees. However, within larger organisations, recruitment and selection are critical elements of effective human resource management. Within the HRM paradigm, these are not simply mechanisms for filling in vacancies, but are viewed as key Ð''push' and Ð''pull' levers for organisational change. The behavioural competencies of the large workforce can be determined and gradually modified by the management to fashion issues such as team working and company culture. Attention has switched from rigid lists of individual skills and abilities that are much more valuable for SME's, to broader-based competences. In general, there is greater regard for personal flexibility and adoptability Ð'- a reorientation from present to future stability (www.hrmguide.co.uk). In stark comparison to large organisations, SME's often rely on extended social networks in attracting and retaining employees, as many owe their survival to low labour costs (Hilbert et al, 1994) "The importance of the recruitment and selection process which is essential of organisational competitiveness and a failure to approach this function effectively will have consequences for future job performance," as was aptly recognised by Nankervis, Compton & McCarthy, (1999). "A good recruitment system is crucial to the organisation, because the recruitment of suitable employees will improve retention and morale among the existing workforce by accentuating to those both inside and outside the organisation the importance it attaches to people" (Hall et al 1991). Large organisations usually have an intense recruitment system composing of various styles of interviews such as the behavioural based criterion, the biographical interview and the situational interview, along with assessment centres and psychometric tests (www.shl.com).

A frequently mentioned element in HRM literature is the relative lack of training in SME's (Kitching, 2000). This "economies of training", as explained by Arthur and Hendry (1990) and Storey (1999), show that due to the fact that they offer less opportunity for career development, SME's have a much higher probability of labour turnover. As a result, better trained employees will chose opportunities elsewhere, leaving the small firm behind with its less trained employees and depleted training budget. Company specific, on-the-job training has been proposed as a solution to this; however this would have little value to other firms. Over and above recruitment and work-time arrangements, the necessity to be completitive has forced larger firms to set up intensive training schemes leading to qualifications which can increase the quality of the products or services provided, while keeping jobs going (Tyson, 1997). Training is necessary to ensure an adequate supply of staff who are technically and