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HRM practice in small-medium enterprises (SMEs) Essay


The article analyzes the way of HRM practice in small-medium enterprises(SMEs) and the reason why it is important element for SMEs. Over the past years, small-medium enterprises play an increasingly significant role in European economy. It is mainly because European countries including UK have large amount of SMEs but with small scale of big enterprises. However, HRM, as an important part of a company, is utilized in tremendous different ways between large and SMEs firms. SMEs are reluctant to use HRM when considering high cost and time. This situation brings a lot of issues. Unfortunately, very few of the research for HRM in SMEs have been published till now(Domingo Ribeiro Soriano,et all,2011) .For example, according to the US academic journals from 1988 to 1998, more than 207 papers had been written about HR recruiting ,etc. However, just 7 of the articles mentioned about SMEs in Journal of Applied Psychology, Academic of Management Review and Personnel Psychology;. For these reasons,it is important to investigate the study of HRM in SMEs.

Negative and positive arguments about HRM practice in SMEs

Large amount of Debates about the efficiency of HRM in SMEs are illustrated in the earlier studies. Small business see few advantages of HRM when comparing to the large firms(Akroyd1995,adapted by Cassell.C et all,2002 ).Especially in the training ,Storey and Westhead described that the employees in the SMEs have few chances to get involved in structured training. (1997,adapted by Cassell.C et all, 2002) .After conducting several cases, Holiday also mentioned that training is not utilized well in SMEs(1995,adapted by Cassell.C et all, 2002). Cassell.C, et all(2002)did both interviews and telephone survey to a number of SMEs, and conclude that HRM practices especially selection and training process are transferring to other department in informal ways. They also found that 53% of SMEs that they investigated in recruited their employees via relatives or friend’s recommendation. It means HRM is not very formal in SMEs. In another word, HRM in SMEs are full of different issues. But according to the following study HRM indeed bring some benefit to companies.

In1995 Leicestershire, and Storey (adapted by Cassell.C et all, 2002)did a study which comparing the difference between traditional HRM and new practices among the large and small companies. The result of 15 cases implied that although the initiative of every employee in large companies has more opportunities to be enabled, it is more sustainable process in small-medium firms. In my opinion, SMEs might be developing better when they employ formal HRM practices. For example, during the study of HRM of SMEs,Williamson, Cable, &Aldrich, (2002,adapted by Patel, C. P, et all, 2010) found that that SMEs can be more competitive and legitimated with formal HRM activities since it helps firms attract more high quality employees. HRM can also create harmonious group culture, highlighting the relationship between employers and companies. (Cameron & Quinn, 1999,adapted by PATEL, C.2010).

Data analyze

In order to explore whether it is beneficial for companies when they use formal HRM practices, I conclude the research which was done by PATEL, C. P et all(2010).They did a research to discover the relationship between HRM and company productivity. In this study, high group culture means that a strong team works and effective working environment, which is usually created by strong HRM.) That it surveyed 145 firms and 6 industries including different size of firms. The correlation can be described by the following charts.Chart1 suggests: under high group culture, companies increase the use of HRM when market competition increase;

Product market competition (chart 1,adapted by PATEL,C.P,andS. CARDON,S.M )

HRM intensity (chart 2, adapted by PATEL, C. P,and S. CARDON,S.M ) Under high group culture, Chart2 indicated that HRM intensity can enhance the labor productivity To sum up, when the market is in the growing competition, HRM can boost the labor productivity. It also implied that the firms should keep the high group culture environment in order to keep the effectiveness of HRM. High group culture is from strong HRM practices. In my opinion from the data analyze, when HRM is utilized in SMEs in formal ways ,it might bring significant benefit to company. As Walsh and Whites (1981) point out same idea as well. They suggest that same regulation of HRM should be utilized among those companies but small scale in SMEs.

Author opinion

As far as my consideration, HRM is a very important part for SMEs. The reason can be explained by following aspects. Firstly, Many SMEs firms in UK have informal HRM activities rather than totally absence (Culley et all, 1998, adapted by Cassell.C, et all, 2002).However, the way SMEs conduct these kind of practice reduce its’ actual benefit. For example, if recruiting and training procedure are not completed by the HR, other department need to expense time and cost to implement those processes. Consequently, it divides the cost of HR department into other team. In fact, it increases the cost of companies in long term prospective. Therefore, SMEs may increase benefit if they employ formal HRM practices from long prospective. Secondly,According to the charts (1&2), HRM has vital influence on labor productivity when fierce competition appears.

On one hand, HRM is important element when company goes through high level of competitive market. SMEs must employ HRM if they want to survive in long term .On the other hand, strong group culture which is built by HR department can reinforce HRM to effect labor productivity (PATEL, C. P,and S. CARDON,S.M,2010).As a consequence , HRM should be develop in correct way so that the company can built adequate group culture, thereby enhance the labor productivity especially in competitive market. Thirdly, it is important to look at the economy situation in UK. UK holds a large amount of SMEs with small scale of large company. It suggests that economic contribution of SMEs play important role in the country.

From general perspective, when well-establishing and formal HRM is employed by SMEs, it will have big effect on the GDP of UK. As Cassell.C, Nadin.S, Gray.M, Clegg.C concluded in their research in 2002, HRM indeed exist in small business and small multiples. Although the structure of both firms is informal, human resource management brought obvious effective effort to the firm. From this study, we can imply that SMEs will grow stronger if they utilize more formal HRM in long term. Consequently, high level of HRM practice improves the effectiveness of companies.


My study suggest that HRM practices play very important roles in SMEs not only because it can create group culture and enhance the effectiveness of the group development, but also can protect firms from fierce competition. Moreover, HRM can increase the benefit of companies in long terms. But there is also some problem of HRM practices. Due to a lack of experience and information, majority of SMEs have no energy to take formal HRM. Whether this situation can be solved still need further study in UK. It depends on the companies themselves. Although I argued that SMEs should emphasize HRM practices in long term development, a lot of SMEs pursue short-time benefit and they may not consider HRM benefit. The research about how do the companies increase the use of formal HRM but not reduce the short-term benefit is needed to be discovering in the future. Hence, the different situations decide whether small-medium companies employ formal HRM.

Cassell.C, Nadin.S, Gray.M,Clegg.C,(2002):Exploring human resource management practices in small and medium sized enterprises, Personnel Review,Vol.31 No.6,pp:671-692

Domingo Ribeiro Soriano*and Ma. Ángeles Montoro‐Sánchez,(2011)“Introduction: Contributions of Human Resource Management to the Challenges faced by Small‐ and Medium‐Sized Enterprises in the Global Environment”, Canadian Journal of Administrative Sciences, Vol.28: P119–121

PATEL, C. P,and S. CARDON,S.M,2010, “Adopting HRM Practices And Their Effectiveness In Small Firms Facing Product Market Competition”, Human Resource Management, March–April 2010, Vol. 49, No. 2, Pp. 265– 290

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