Human Resources Management In Small and Medium Enterprises Essay

IntroductionCompetitive service to a firm accrues from the judicious craft of triad basic types of imaginations, namely fleshly Capital preferences, such as Finances, lay down and EquipmentOrganizational Capital imagings Structure and systems in the organization tender-hearted raceee Capital Resources, which intromit the sk consumptives, competencies, arrive and intelligence of employees.1 tender resources be among the most authorized resources that an make-up utilises and indeedly its splendour to any(prenominal) administration stinkpot be easily down the stairsstood. Sm completely-to-Medium Enterprises (SMEs) ar no exception to this rule, although this aspect is frequently deep in thought(p) sight of. This paper examines the routine and wideness of kind Resources in SMEs, and comp atomic number 18s SMEs from devil diametrical cultural backgrounds mainland China and the UK.Role of valet de chambre Resources in SMEsThe cartoon of mankind resources di rection in SMEs admits to be powerfully encouraged. CEO/ founders in SMEs ingest kind-hearted resource perpl terminationy decisions as genuinely of the essence(p) to the harvest of their enterprises2A hire into the perception of important HR issues in flyspeck organizations showed that top six issues were occupy rates, availability of prize take to the woodsers, government regulation, train, benefits, and military control security3 The role of adult male Resources in SMEs is to contri un littlee meaningfully to makeupal objectives in a flexible and demanding environment.Lack of strategical employee focal point is widely accepted as diagnostic of beautiful enterprises. Decision- devising has been perceived to be of relatively short- condition nature comp atomic number 18d to big agreements, make small-scale enterprises practically flexible and less(prenominal) conflict-pr star. At the same time, this also elbow room that the advantages of long-run int entionning such as heavy(p) efficiency and effectiveness argon missed. On the tender resources front, this core that such governing bodys tend to capture reduced aptitude to attract, detain and cause the ruff human resources.This be devolves important in view of the situation that out of thousands of small disdaines that argon open up every year, besides a few manage to survive in the long-term. charm long-term planning and HR dodge atomic number 18 not the solo reasons for this, they be among the important reasons. Hence an examination of the HR function as a strategic part of line of credit, and its relevance to long-term planning, is in order. In addition, the role of enlisting and selection, reproduction, and motion management, atomic number 18 also relevant to any discussion on the role of human resources.Planning and serviceman Resources managementstrategic planning for the organisation of necessity to be colligate to exclusiveist goals. In turn, this means that the channel design should take into rate the long-term objectives of the organisation. A textile for strategic management incorporating HRM involves developing a electric charge statement that answers questions of what businesses the organisation is in find goals that ar general and long term and establishing objectives that argon short term and measurable. It should also encompass a complete pulverization analysis that incorporates HRM as a usable unit of analysis.4 peerless of the essential wants of gentle Resources Planning is veracious course design. homophile resources planning involves the matching of the knowledge and skills that be likely to be required in future with those that it has or will prevail. benignant Resources Planning will help the organisation to estimate critical resource requirements, plan training and development essential, and link individual goals to organizational objectives. labor design involves specifying the character istics of the contrast and the requirements such as skills for per abidanceing these bloods. Job design will thus rear the framework for a host of HR planning activities that butt end be linked to organizational objectives.5Recruitment and Selectionin one reason the plans of the organization atomic number 18 clear the beside important issue that any organisation take to address is to get the remedyeousness staff to mechanism the plans. Surveys indicate that rough 25 per cent of small businesses view the overleap of qualified workers as a threat to their expansion and very survival.6 The task assumes particular brilliance in the shimmy of small enterprises because they almost always halt a problem in attracting and retaining the opera hat talent. This is partly due to the fact that they are unable to compete with larger firms for reference staff, because it is impossible for them to match the rewards and prestige that come along with localises in larger firms. Add itionally, littler firms have a reputation for world oriented towards a hire and raise culture. teachingOnce the plans are clear, and the recruitment of the right citizenry has been completed, it becomes necessary to motivate the staff, as well as to modify them to per produce their tasks efficiently.This requires dotic training of the employees. Training is important in the case of small enterprises because they are more than than prone to changing environments and eminenter(prenominal) attrition rates. This makes it necessary for flock to be more flexible, and to be trained in all aspects of the business. While the need for training of staff is thus great in the case of a small enterprise, it is also accompanied by great constraints that make it more ticklish for these organisations to implement training programmes. small organisations depend twain constraints in t his honourTheir compute for training may be more limited, and they may lack the necessary resour ces to subscribe to out such trainingIt is more difficult for small enterprises to spare their state for training programmes.In spite of the in a higher place limitations, however, small enterprises need to concentrate more on training, as it is an investment that unavoidably to be done. It has been suggested that top performing companies are distinguished by their higher consumption on training and development.7Performance commissionPerformance attention involves work and job design, reward structures, the selection of people for work, the training of these employees, assessment of work slaying and policies associated with recognise and up(p) proceeding.8Performance Appraisals are an important part of Performance instruction and are useful in modify mathematical operation, helper HR planning, and identify development needs and effectiveness for promotion. abject businesses, in general, lack a statuesque writ of execution approximation system. The disadvantages of not using structured and musket ball appraisal systems are that appraisals, and the consequent rewards, are often subjective, and may promote greater dissatisfaction.Consequently, appraisal systems and Performance care trick an important role in find out the alignment of HR planning with organisational goals, and ensuring that a proper climate is available for the accomplishment of the objectives. In developing formal mathematical process appraisal systems, small businesses not only are able to ensure that performance management may become strategically aligned with organisational goals, but also ontogenesis accountability, settle under-utilisation of human resources, address concerns of productivity, and decrease employees concerns about fairness and accuracy.9In addition, the salaries and rewards that are offered as part of the employment and the management of diversity within the workforce are important considerations for any organisation. These have a greater signifi peckce in the case of small organisations.As preempt be seen from the above, the role of homo Resources management in small organisations is an important one that needs to be well understand and utilise with care.One careing extension to the role of HR management in small to medium industries is the use of Balanced distinguish humours, which are normally viewed as the unshared tool of large industries. The Balanced target Cards approach shifts the focus to long-term captureth, and includes measures of operational efficiency, customer satisfaction and employee cerebrate measures. The Balanced Score Card system thus includes a part of HR Management to assess the overall performance of the organisation.In a case take away that included deuce-ace SME organisations, Gumbus and Lussier present several(prenominal) interesting conclusions that have signifi arousece for the HR function in SME companies. The cases also practise to highlight the sizeableness of HR in SME comp anies and the link betwixt performance and HR. One of the three companies cited in the case is Futura Industries, an world(prenominal) corporation based in Clearfield, UT with 230 employees. It has over 50 years of experience in aluminium extrusion, finishing, fabrication, machining and design.The company believes that the two competitive weapons that put them ahead of arguing are their ability to hire and retain the best people and their devotion to the customer. Futuras President, Susan Johnsons belief that commit and fast(a) employees make the divergency has led the company into using the Balanced Score Card method. In the talking to of Ms. Johnson, the company had all the financial metrics, striations of customer measures, and got ISO accredited three years ago but it is our employees that differentiate us from all an some some other(prenominal) extrusion companies.10A Comparison of SMEs in the UK and mainland ChinaA playing area by Lin found that successful SMEs in chinaware place greater emphasis on soft skills and attitudes sooner than on elusive skills. He infers that SMEs in Taiwan seemed to have a better grasp of its human resources. Whenever SMEs modernize equipment, alter production processes, edict compensation policies, and engage in other reorganisation activities, they take pains to cargo hold employees responses and feelings with special care and invest hard in skills development.11According to Hu, the homo resource scenario in Taiwan is characterised by copiousness of entrepreneurs and availability of high quality professionals. Hu traces this to the importance laid on education by Chinese, and the large-scale injection of high quality human resource into the island in the effect of the retreat into, and subsequent withdrawal from, Taiwan of the KMT government. In addition, the minute population has hereditary from its ancestors the qualities of hard working, brotherhood, strong family ties, competition, and similar attr ibutes that form the basis for strong family businesses.12According to McKenna & Beech, the adjacent values characterise the Asian HR scene13Politeness and courtesyEmphasis on personal relationshipNot losing faceHarmony- avoidance of open conflict predominance of group interests over individual interests airfield and respect for situation and for eldersNormative, rather than outwardly imposed controlTrust and vernacular help in business relationshipscentralisation and authoritarianismAs against the above, the HR scenario in Europe is characterised by the following features14Pluralism as against unitarismCollectivism and social orientation kind of of individualism, with the emphasis organism on national, rather than individual, interestsLegal framework firing is more difficultSocial Partnership interlocking security, protection of workers rights, and representation of workforce finished trade totalitys.Social Responsibility uphold for environment and other social obligations allowance for diversityRecognition of complexity and ambiguity.The characteristics enumerated under Asian values represent the Taiwanese scene, and the scenario in Europe is representative of the UK. From the above, it can be seen that the SMEs in Taiwan are formed with reliance on individual assistance, based on respect for authority, with consecrate and mutual relationships as the fouling factor.In the UK, and other European countries, it is the legal framework that gives the necessary assurance and support to the business rather than trust. In Taiwan authority is enforced, and followed, because it is natural to the culture. In the UK, the legal aspects are augmented by bodied negotiate with a recognized trade union to achieve this purpose. Taiwanese take great care to handle employees feelings captivately whenever sight decisions need to be taken. This is replaced by collective bargaining and more formal chat in the UK.SMEs predominate in Taiwan, whereas larger firms repr esent the more prevalent form of business in the UK.SMEs constituted 99.43 share of Taiwans total manufacturing firms in 1954, the highest level ever recorded 95.26 share in 1976, the lowest and 98.07 part in 1996. Among them, the smallest firms, employing fewer than 10 persons, accounted for 90 percent of all firms in the manufacturing heavens in the 1950s.15On the other hand, SMEs generate around one quarter of the GDP of the UK. The genesis of employment by SMEs varies from sector to sector, the highest being in the construction sector with 84% of the employment being generated by this sector. The SME sector, which was declining up to 1970, picked up momentum thereafter, and showed a procession trend till 1994. Since 1994, the number has remained constant.16As can be seen from these figures, the SME sector is less dominant in the UK than in Taiwan.why Human Resources are important in firmsThe resource-based view of organisations explains variations in firm performance by v ariations in firms human resources and capabilities17 solids can gain competitive advantage by generating specific knowledge and skills that are difficult to imitate. This can be achieved through human capital development. The importance of Human Resource Development in small firms is thus self-evident they help the firms to succeed by being competitive. In a lease of more than 100 small enterprises in two towns from Ger many a(prenominal), Rauch et al found that human resources are essentially important and an optimal utilization of skills and knowledge increases small business growth. 18In order to harness this important resource and ensure it gives the best returns, an organisation needs to select its employees with care. It is expected that as firms grow, the skills and abilities required to perform various functions and activities no longer would be available from the familiar and informal recruitment sources preferred by the owner-manager19aside from recruitment, other fun ctions such as Training and Development, Performance Appraisal, and formal procedures and backing help the organisation in improving efficiency. According to Kotey and Slade, Benefits of formal HRM practices include coming together legal requirements, maintaining records in support of decisions in the event of litigation, treating employees fairly, and increasing efficiency. 20A study by Kotey and Slade involving more than 1300 small firms in Australia showed that as firms grow they tend to stash away formal HR practices and procedures. In the words of the authors, While the analyses show that a meaning(a) percentage of SMEs implement formal HRM practices with growth, HRM dust informal in the majority of firms, peculiarly in small firms. It could be that slaying of formal HR structures and procedures necessary to support growth differentiates successful from unsuccessful SMEs.21In a small organisation, people need to be more flexible and acquire a greater variety of jobs. Thi s needs both(prenominal) motivation and skills. In turn, many employees may get better painting and greater opportunities to learn and shoulder higher responsibilities in a small firm. on the whole of these underline the importance of Human Resources Management in organisations, particularly small firms.The HRM pose is composed of policies that promote mutual goals, influence, respect, rewards and duty between employees in the organisation.22 These policies are promoted by practices such as team working, reorient performance objectives with organisational goals, and a flat organisation structure, all of which can be achieved only through a proper Human Resources Management in the organisation.Survey inquiry findings have confirmed the theoretical position with the conclusion that unsloped HR systems is a source of competitive advantage. One study has shown that higher performance in a number of areas is correlated to right HR systems and practices. Companies that had signifi cantly higher ratings on their HR practices also reported better securities industry value, higher accounting profits, higher growth rates, better sales per employee, and lower employee turnover rate. some other study has found that newly started companies had a better survival rate if they had unplayful HR practices. The probability of survival was found to vary by as much as 42% between the firms with the best HR practices and rewards, and those with the worst. Yet another study found that performance of the organisation was strongly linked with practices such as skill and development of skilled people, better job design, better autonomy, and positive employee attitude. All these studies clear show that good HR could positively impact organisational performance practices, highlighting the importance of Human Resources in an organisation.Apart from improving performance good HR practices import in lower cost, while abject practices increase the cost to the organization. One of the change factors for this is the cost of employee turnover.Interviewing and training recruits has significant due costs for the employer. Replacing an employee involves expenses for Separation, Replacement, and Training. 23Employee turnover costs can be divided into three major elementsSeparation costs These are the costs that are directly incurred when an employee leaves the firm, and include such costs as exit interviews, administrative and paperwork costs, disbursement of separation benefits, and revenues lost due to shortage of staff.Replacement cost These represent the cost of replacing the employee who has leftover and include the costs of advertising, sourcing, interviewing and selection.Training be These are the costs that the company incurs for training and induction of a new employee. Apart from the actual expenditure on these activities, the costs of release of efficiency in the sign stages, and the time lost during the training period should also be considered .Thus employee turnover could represent a fairly high cost to the organisation. Employee turnover can be classified into avoidable and unavoidable turnover. intimately of the avoidable turnover results from lack of proper HR initiatives.24How cracking/Bad employees take the firmA good employee is mayhap the most valuable asset a small firm or SME can possess a ruffianly one could ruin the enterprise.25 Any firm, and more importantly a small firm, can ill afford to have people who do not perform.Robert Townsend, a noted Management expert was once asked the secret goat his ability to take over loss making firms, and changing them into profitable ones. The reply that he gave will be of interest to anyone asking how good or bad employees make or mar the firm. Mr. Townsend determine three factors that contributed to his successReleasing the potential of employees so that they could perform at much higher levels by the practice of appropriate management stylesIdentifying people wi thin the organisation who were blocking progress and preventing others from performing, and either changing their ways, or dismissing themIdentifying people who had the ability and crowd to take the company to greater heights, and promoting them.It can be seen that this highly successful Management practitioner reduced success to three simple rules, namely, eliminating deadwood, promoting and encouraging those with potential and creating the right climate in the company. This clearly shows that apart from creating the right environment, the most important requirement for success is the quality of people. Good people could transform a loss making company into a profitable one.26Whether a firm is small or large, its only as good as its staff.27 This can be easily understood because the employees of the organisation make the vital difference between good and poor performance in every area. Apart from the show effect that this has on the firms performance, which has been cited earlier, this also stands to reason. A company depends on coordinated working by its employees towards a common goal to achieve its objectives. In order to meet these objectives, the organisation has to do what it does well.In other words, the competence of its employees should be good if it wants to achieve results. Secondly, the soft skills of the employees are important to achieve internal teamwork as well as to nurture customers with slender performance and service. Thirdly, the employees of the company need to work efficiently if it is to have a hearty bottom line. All these objectives can be achieved only with good employees who know their job and possess the necessary hard skills, have the necessary soft skills, and are committed to the companys success. In other words, a company needs good employees who have the right levels of knowledge, skills and attitudes.ConclusionHuman Resources Management in weeny-to-medium industries has been gaining a lot of attention lately. There is in creased sensation among many of the SME entrepreneurs themselves about the importance of good HR practices and policies. It has been shown that organisations having formal Human Resources practices grow faster, and are more profitable, than those that do not do so.A comparison between SMEs in two countries, namely Taiwan and the UK, shows that the SME sector is more predominant in Taiwan, which is characterized by a culture that lays greater emphasis on group working, respect for authority, and mutual trust. This is contrasted by the UK situation where the SME sector is les pervasive, and the HR climate is characterised by formal and legal supports, collectivism, and social responsibility.Although the two situations are quite different from each other, the importance of formal HR systems in the SME fraction is being recognised in both cases, and seem to affect performance positively, irrespective of the background.Works CitedA Causal Analysis. Entrepreneurship possibility and Prac tice, 29(6) 2005 681+.Bennett, Roger. dinky work Survival Strategies for Delivering outgrowth and Staying gainful Second Edition. London, Financial quantify Management, 1998.Burns, Paul. Entrepreneurship and half-size problem. new(a) York, Palgrave, 2001.Griffith, Roger W and Hom, dick W. Retaining Valued Employees. London, Sage Publications, 2001.Gumbus, Andra, and Robert N. Lussier. Entrepreneurs Use a Balanced plug-in to Translate scheme into Performance Measures. diary of Small melodic line Management 44(3) 2006 407+.Heneman, Robert L., Judith W. Tansky, and S. Michael Camp. Human Resource Management Practices in Small and Medium-Sized Enterprises Unanswered Questions and prox look Perspectives. Entrepreneurship Theory and Practice, 25 (1) 2000 11.Holbeche, Linda. aligning Human Resources and argument Strategy. Oxford, Butterworth-Heinemann, 2001.HRD in Small Organizations, Edited by graham opera hat & Jim Stewart. New York, Routledge, 2004.Hu, Ming-Wen. Many Small Antelopes fasten a Dragon. Futures 35(4) 2003 379+.Kotey, Bernice, and Peter Slade. Formal Human Resource Management Practices in Small Growing Firms. journal of Small Business Management, 43 (1) 2005 16+.Lin, Carol Yeh-Yun. succeeder Factors of Small- and Medium-Sized Enterprises in Taiwan An Analysis of Cases. ledger of Small Business Management, 36(4) (1998) 43.McKenna, Eugene and Beech, Nic. Human Resource Management, A Concise Analysis. Essex, Pearson Education Limited, 2002Megginson, David, Banfield, Paul, and Joy-Mathews, Jennifer. Human Resource Development. Kogan Page India Pvt. Ltd., New Delhi, 2001.Rauch, A., Frese, M., & Utsch, A. make of Human Capital and long Human Resources Development and Utilization on employment Growth of Small-Scale BusinessesSatava, David. The A to Z of Keeping staff some Firm Employees Leave without a Good Reason-Heres How Not to fail Them One. Journal of account 195 (4) 2003 67+.1 L. Holbeche, Aligning Human Resources and Busines s Strategy, Oxford, Butterworth-Heinemann, 2001, pp.10-11.2 R.L. Heneman, T.W. Judith and S. M. Camp. Human Resource Management Practices in Small and Medium-Sized Enterprises Unanswered Questions and Future Research Perspectives. Entrepreneurship Theory and Practice 25(1) (2000) p. 113 HRD in Small Organizations, Edited by Graham Beaver & Jim Stewart, New York, Routledge, 2004, p. 81.4 Ibid, p815 Ibid6 ibid, p827 ibid, p 858 ibid, p 899 ibid, p 8910 A. Gumbus and R. N. Lussier. Entrepreneurs Use a Balanced Scorecard to Translate Strategy into Performance Measures, Journal of Small Business Management, 44(3) 2006 p.407.11C.Y. Lin. Success Factors of Small- and Medium-Sized Enterprises in Taiwan An Analysis of Cases. Journal of Small Business Management, 36(4) (1998) p. 43.12 M. Hu. Many Small Antelopes commit a Dragon, Futures, 35(4) 2003 p. 379.13 E.McKenna and N. Beech. Human Resource Management, A Concise Analysis. Essex, Pearson Education Limited, 2002, pp.4-5.14 ibid15 M. Hu. P. 379.16 P.Burns. Entrepreneurship and Small Business. New York, Palgrave, 2001, p12.17 A. Rauch, M. Frese & A. Utsch. Effects of Human Capital and Long-Term Human Resources Development and Utilization on Employment Growth of Small-Scale Businesses A Causal Analysis. Entrepreneurship Theory and Practice, 29(6) 2005 p681.18 ibid19 B.Kotey and P. Slade. Formal Human Resource Management Practices in Small Growing Firms. Journal of Small Business Management, 43(1) (2005) p.16.20 ibid21 ibid22 E. McKenna and N. Beech, p34-3523 D. Satava. The A to Z of Keeping Staff Few Firm Employees Leave without a Good Reason-Heres How Not to Give Them One, Journal of Accountancy, 195(4 ) 2003 p. 67.24 R. W. Griffith and P. W. Hom. Retaining Valued Employees, London, Sage Publications, 2001, p1025 R. Bennett. Small Business Survival Strategies for Delivering Growth and Staying Profitable Second Edition, London, Financial Times Management, 1998.26 D. Megginson, P. Banfield and J. Joy-Mathews. Human Res ource Development. Kogan Page India Pvt. Ltd., New Delhi, 2001, p. 82.27 Satava, David. The A to Z of Keeping Staff Few Firm Employees Leave without a Good Reason-Heres How Not to Give Them One. Journal of Accountancy 195.4 (2003) 67+.