The Role of Strategic Human Resource Management in Small Sized Firms - Research Paper Example

The Role of Strategic Human Resource Management in small sized Firms MGMT 672 Small firms disregard the role of strategic human resources in increasing their productivity. Strategically planning for human resources enables proper delivery of services and quality goods to the customers by the organization. Human resources form the backbone of the organization. Strong human resources in an organization are important in the success of the organization. According to this research, the failure of small firms to focus on human resources culminates to reduced competitive advantages against the large firms. The research provides guidelines on the role played by the human resources in increasing productivity and the success of small firms. Introduction Human resources are the most important capital in an organization. Imperatively, investing in proper human resources is the best way of achieving organizational goals and plans. The ability of an organization in motivating its employees to work hard and achieve targets determines the success of the organization in the highly competitive business environment. This notwithstanding, the increased level of globalization not only requires innovativeness in the production process, but also customer-oriented service delivery. In the current business environment, the ability of a business organization to engage in effective strategic management is a necessary competence. Pearce and Robinson (1994) define strategic management as the process of designing, implementing and evaluating the functional structures of a business organization that are necessary to meet the organizational goals. Since human resources forms part of the top-level management, and the fact that human resources play a key role in the achievement of organizational overall performance, it is important for businesses to put them into consideration whenever drafting their strategic plans. Small and medium firms face stiff competition from large firms in the business. As such, these firms have to strategically place their operations in such a way that they can put up with the high level of competition in the current global economy. Human resources, being part of the strategic goals of an organization play an essential role in the success of these firms. This research investigates the role played by strategic human resource management to the success of small and medium firms. Literature Review Analoui & Karami (2003) observe that in the past, small firms did not embrace any form of business planning. Strategic management, being a form of planning process was also not part of these organizations’ priorities. They relied entirely on sales and few customers in order to make their sales. Thus, they could not expand in their operations due to lack of loyal customers. Additionally, they did not benefit from the use of skilled labor in the production process and delivery of their services to the customers (Analoui & Karami, 2003). However, there is an increase in the number of small firms embracing strategic management in the current business environment. With the high level of competition and increased costs of doing business, strategic management becomes part of the managerial roles of all organizations. Cole (1997) argues that while strategic management was an activity of large corporations, small firms are increasingly embracing its role in providing them with a competitive advantage against the large firms. Many organizations are increasingly embracing the use of strategic management in their management processes, argues Beaver (2007). An organization without strategy does not know where it wants to be in future and what it purposes to achieve in future. A strategy thus gives direction to the organization. Since a strategy has checks and balances and as it is open to modifications, it ensures that an organization remains focused on achieving its goals and objectives. In strategic human resource management, managers focus on a proactive management of people in the organization. Managers have to think ahead and plan on the means and ways of meeting employee needs in order they can meet the needs of the company (Duhaime, 2001). Through planning, managers who can effectively meet the needs of the people cultivate a working atmosphere focusing on increasing organizational productivity. Since by planning, an organization retains the most competitive and skilled employees in it encourage high levels of productivity, contributing to the success of an organization (Jeffs, 2008). The concept has however undergone various changes to what it is today. This evolution, observe Beaver (2007) and McCarthy (2003), was only relevant in large business organizations. Except for the recent trends in the management of small firms, there was little or no embrace of strategic management by small organizations. This created a deficit in the delivery of competitive products and services to the people, thus losing to the large organizations. With the realization of the role played by strategic management in enhancing competition, the small firms have embraced the concept of strategic management. Employees like working in organizations that recognize their services and their importance. Employee development, argue Salaman et al, (2005) is the most important aspect of human resource management. Employee development begins from the time an organization interviews and recruits potential employee. Over the recent past, researchers and practitioners’ focus has been on the factors contributing to organizations adopting strategic human resource management and the manner in which these firms formulate their human resource strategies. Machado, et al., (2014) assert that with the increase in the level of globalization, researchers argue that more companies started embracing strategic management in the mid and late 1990s. As business executives embraced the idea of strategic planning and management, they had to put various departments in line with these plans. Further, there was the shift by companies from focusing on increased sales to increased customer satisfaction (Gelade & Ivery, 2003). These changes fuelled the departure from pricing to quality of products and service delivery, something only possible through qualified employees (McCarthy, 2003). As such, the idea of strategic management focused on how organizations could strategically plan for their human resources in order to increase their revenues. Experts argue that the most successful business organizations in the global market are those that focus mainly on satisfying the needs of their employees (Kok, 2003). Strategic human resource management seeks to provide firms with the best ways and means of meeting the needs of the organization by satisfying the needs of the employees (Sadler & Craig, 2003). Dealing with any aspects of an organization focusing on human resources, an organization hopes to benefit by its ability to ensure its employees perform their duties perfectly. Understanding that satisfied employees not only work hard, but also work enthusiastically, strategic human resource management ensures that an organization achieves its objectives in an efficient way (Witcher & Chau, 2010). Motivation, whether intrinsic or extrinsic, plays the biggest role in influencing the performance of an organization. Highly motivated employees work dedicatedly, while poorly motivated employees consider work as a source of livelihood. There is a direct relationship between profitability and employee motivation (Çalişkan, 2010). Green, et al., (2006) assert that the lack of investment by small firms in human resources thus reduces the ability of the organization to compete with the large firms in the global economy. The effectiveness of the human resource management has a direct impact on the profitability of an organization. Duhaime (2001) points out that the only way to overcome the challenges that are facing the small business organizations is to unveil the weakness in the human resource docket that exists within these small business firms. Even with the increased investment by organizations in an effort to increase their revenues and productivity, argue Witcher & Chau (2010), the fact that some of these firms disregard the role played by strategic human resource management denies them a competitive advantage. Many firms disregard the few employees that they have, a reason why they rarely expand (Nagaraj & Kamalanabhan, 2005). Research Design and Methodology Empirical research seeks to establish the actual events happening through qualitative research. The research design of this research focuses of small enterprises in the United States. Covering a representative number of small firms from different industries with at least 5 employees, the study collects data to ascertain the role played by strategic human resource management to the success of the organization. Qualitative studies seek to eliminate any kind of doubts after conducting a research. Since data collected in a qualitative study is factual, then it eliminates any kind of doubts people could have on the research. However, by collecting data from the field and considering opinions and thoughts of the people, this research hopes to draw conclusions that organizational managers can rely on making their organizational decisions. The research will seek to provide results with minimal error, and as such, will entirely rely on employee responses, feedback and observations as the research tools employed in the research process. However, Jeffs (2008) asserts that qualitative research in most cases is a subjective method of data collection and doing research compared to other methods of research. Research tools Research tools are the materials that a researcher uses to collect data from the field. While collecting the required data for study in qualitative research, a researcher can use a variety of research tools and instruments. The choice of the research instrument heavily relies on the type of data to collect and the margin of error expected (Marshall & Rossman, 2011). As this research seeks to have minimal errors in the data collection and analysis process, it will incorporate number of data collection tools. A questionnaire containing structured questions will be the main tool used in the data collection process. In an effort to reduce the costs involved in the research process, the researcher will email the email the questionnaires to the target population, with instr4uictions on how to fill in the questionnaires. Due to the availability of the questionnaire in both hard and softy copy, the structure of the questions will assume closed ended questions in order to make data analyzing and tabulation processes easy. The questionnaires will also not require any indication of the respondent’s personal detail. However, they will have to indicate the department in which they work in. Interviews and observations will act as the parameters of testing the truth of the information provided by the respondents (Merriam & Merriam, 2009). As the organizations chosen will be accessible physically, a reconnaissance study will acquaint the researcher on the situation on the ground. After the data collection process, the researcher will then use personal judgment on ascertaining the authenticity and the genuineness of the information presented by the respondents. SPSS software will play a significant role in the analysis of the statistical data collected to provide a correlation between human resource roles and productivity in small organizations. Findings The findings of this research indicate that small firms have failed to implement effective human resource management in managing worker productivity. The management team in small firms has underestimated the value of employee development, motivation and appraisal (Cole, 1997). As such, these organizations have underperformed and have failed to attain optimal profits. Despite the significant role played by human resources in increasing organizational productivity, the reality is that these firms rarely embrace this concept. Only the large and medium sized organizations have embraced the concept of human resource management. Various factors contribute to the low use of strategic human resource management in small organizations. One of the major contributing factors to the low uptake of strategic human resource management by organizations is their small size. Small firms have relatively small sizes compared to large organizations. With this size, few of these firms consider strategic management important. They regard themselves as rather too small to require any form of human resource management. This perception exposes small sized firms to the risk of loss of professionalism in the management of their activities. Size determines the amount of capital that owners of a business invest in its various processes. As most of the small firms have approximately 5 employees, they regard this number as too small to require any form of employee planning and development. However, these individuals require some form of motivation and growth in order to work enthusiastically. Lack of and absence of managerial skills is yet another problem facing the small firms. As most of these firms operate as single business entities, their owners are the managers and directors. Starting a business does not require any form of training in business management; entrepreneurial skills are most important. Most entrepreneurs in fact have little or no training on managerial skills. As such, they lack professionalism in managing their enterprises. The hiring process in most cases does not follow any form of human resource management practices. Instead, they hire relatives and sometimes friends who run their businesses. Further, these firms suffer from the problem of decision making where the owner makes the most important decisions in the organization. With little consultation, they hire people they believe could best perform, the roles they desire, rather than the most competitive people and most qualified personnel to perform these duties. Such organizations have a problem with the way in which they manage their human resources, a reason why they suffer from low levels of competition. If the managers were to adopt proper ways of recruiting employees, then they could adopt proper management of their human resources in the organization. This would subsequently lead to an increase in the quality of services and products provided to their customers. The costs of implementing human resource management are an important consideration by these firms. Managers assert that due to the relatively small size of the organizations, adopting human resource management strategies is a difficult undertaking. The high cost of recruiting personnel, coupled with the additional costs in the administration processes makes the entire process cumbersome and expensive for the small firms. Managers should however understand the long-term benefits of implementing human resource strategies in the organization. With the increase in the level of globalization and international business community, all businesses focus on how they can expand their operations in an effort to win more customers thus increasing their revenues. While initial costs of establishing human resources could be high, the organization is likely to benefit from, economies of scale with time. As it expands and grows, considerably adopting new ways of doing business, these firms increasingly adopt more ways of cutting their costs, yet maximizing their revenues through quality service delivery. Recommendations There are different ways in which organizations can increase their performance in the highly competitive business environment. As employees play a major role in the success of the organization, the management should ensure that human resource planning features considerably in the management of these organizations. To realize optimum profits, the human resource management needs to invest in worker motivation and development to optimize the employee productivity. Employee training helps in improving the employee skills, which in turn facilitate employee productivity (Sadler & Craig, 2003). Skilled employees provide organizations with an optimal work output, which has a direct impact on employee productivity. A critical element for the success of any organization is customer satisfaction. With the dynamism with which customer tastes and preferences are changing with, organizations need to pay attention to these changes in an effort to increase their productivity. Currently, customer’s main concern is on the satisfaction of their personal needs, rather than the pricing of these products. While quality of goods produced plays a big role in the growth of the organization, service delivery supersedes the quality of the products on offer. Regardless of the size of the organization, it is important to invest in human resources. Customers do not regard size of organization as a factor whenever making their purchases. Various factors determine customers’ behavior when purchasing their products and services. These are the very factors influencing the loyalty of the customers. Quality of products and services provided to the members and the ability of the organization to satisfy the needs of these customers is the most important element of winning customer loyalty (Nagaraj & Kamalanabhan, 2005). While it is easy to win new customers, it is a hard task to maintain old and existing ones. For any organization to command market leadership in the highly competitive business environment, customer satisfaction is important. This makes it necessary for an organization to invest in employees who serve these customers directly. Enthusiastic employees, argue Çalişkan (2010) not only contribute to the high performance of an organization but also help in retaining its customers by providing them with satisfying services. The performance of a firm largely relies in the internal processes. Poor managerial strategies lead to poor results. Since an organizational strategy defines its plan about its future, human resource strategy defines the manner in which the organization plans for its human resource needs. Thus, while planning for its future, human resources should be a major factor in determining these plans. Laying out a good human resource plan could help in solving problems inherent in the management of organizational processes. Despite the few employees working in small firms, having an elaborate human resource development plan is important for these firms. Managers and directors of these firms should ensure that they have a plan taking care of their employees from the time of recruitment to their exit. Customers feel secure whenever they receive service from the same employees repeatedly. High employee turnover in most cases is a sign of a poorly managed organization, suffering from poor human resource managers. It is thus important to ensure that the organization retains its employees in order to retain these customers. The only way of ensuring that employees remain loyal to the organization is by providing them with the best incentives and motivation in order to perform. Instead of hiring their most preferred employees to work in these organizations, recruiting them based on merit is important. This ensures that the organization attracts the most qualified employees for the desired job. Further, the employees have the desired skills, knowledge and expertise in order to perform their duties (McCarthy, 2003). Competitive recruitment process introduces professionalism in the management of the organization. Such a system ensures that the employees adapt to a well-organized system of personnel management. After recruitment, the organization should provide the employees with adequate training on the job. They need to understand the various needs and requirements of their job. Training them equips them with the knowledge and skills essential to the performance of their work, thus helping the organization achieve its goals and objectives. Training is also a motivating factor for employee performance. Providing adequate training to the employees help them perform their work more efficiently and effectively. Understanding the kind of work one has to perform enables the employees to provide high quality services to the customers, thus increasing their performance. Developing various employee programs aiming at improving their performance is yet another way in which these firms can improve their human resource management. An employee development program focuses at improving the knowledge and skills of the employees, while at the same time ensuring that personally they are satisfied with their work, and satisfied with the salaried they receive. Poor salaries create inconveniences, as the organization could suffer from high levels of employee turnover or boycotting of work. Employee development subjects them to promotion and increased responsibilities. Although the organization could have few employees, establishing a framework that increases the responsibility of these employees is important. By recognizing their work, efforts and devotion to the organization is the best way of encouraging employees to work hard and achieve the desired results. Recognition comes through promotion, salary increments, overtime payments, leaves and other fringe benefits. By recognizing the work of their employees, these organizations motivate them to work hard, thus meeting the organizational goals and objectives. Conclusion Small firms compete in the same business environment with the large organizations. They seek to satisfy the needs of the same kind of people in the market place. Competition has however increased with the increase in the level of globalization. While in the past businesses had to contend with minimal competition from the local firms, the infiltration of foreign products and service providers in different parts of the world warrants for a change of tactics by small firms operating in these areas. They have to adopt a new approach in trying to win against the stiff competition from the large and well-established firms. Human resource plays a significant role in the success of the organization. It is with this understanding that most of the small organizations need to shift their focus from pricing, quality and other promotional activities, and focus on human resources in improving their levels of performance. Large organizations, having understood the role played by human resources in increasing revenues have embraced this concept. However, small firms are yet to acknowledge the role played by human resources in increasing their performance. As such, they lag behind in terms of profitability and growth. Establishing proper human resource frameworks targeting their recruitment and development is important. Further, employee motivation and recognition of their work helps increasing their desire to work harder, thus increasing their level of performance and subsequently, success. Thus, this research recommends the adoption of strategic human resource management in the success of small firms. References Analoui, F., & Karami, A. (2003). 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