Application of HRD Theories in SMEs - Coursework Example

Application of HRD Theories in SMEs Name Institution Application of HRD Theories in SMEs Introduction Considering that the main challenges in the provision of the needs of customers are innovation and flexibility, learning within institutions is turning to be one of the strategic challenges experienced within organizations. Such significance of learning in business is reflected in various management theories. With rapid changes in the environment and decline in permanent employment, it is vital for the employers to acquire relative compatibility with such changes and ensure satisfaction of employers through engaging in the learning and teaching experiences (Brown, Murphy & Wade, 2006). There have been running debates by both practitioners and researchers regarding the appropriate goals of HRD. Some argue that should focus on increasing the performance requirements of the organization and productivity of individual performance with others argue that HRD needs to focus on the development of individuals in a broader manner without the use of the bottom line results for litmus test of the worth of intervention. HRD is becoming an important area of research in HRM. There have been evolution of HRD theory and currently oriented the study of atypical. The cumulativeness of HRD in the SMEs research remains modest while receiving the attention in the popular press (Nguyen, Alam & Prajogo, 2009). However, to date, research on HRD has utilized limited theoretical perspectives, which insufficiently accounts for the heterogeneity of the SMEs. The theories are considered the building block in answering various questions such as what, who, why, when, and how questions. While undertaking research on HRD, it is vital to draw the definition, its characteristics within SMEs, and the outcomes of HRD within the SMEs. The definition of HRD is traceable in the works of Harbison and Myers (1964) and Nadler (1970); however, the definition lacks consensus. In most definitions, the researchers focused on terms such as training, learning, and development, and competence development, formal and informal job-related development. However, using competent development is congruent with the definitions of the formal training considering that it refers to the internal and external training and informed activities. In most cases, HRD is conceptualized based on the structure, individual-focused instead of collective concept. Within the SMEs, there is no widespread use of technology enabled HRD intervention including e learning. Moreover, researchers reveal the evidence indicating the prevalence and preference for the informal and idiosyncratic approaches of HRD in the SMEs (Torraco, 2002). Studies that focused on HRD intervention emphasized on the HRD practices implemented within the SMEs while investigated practices including the use of external training manuals and qualification-based programmes. On the HRD climate within the SMEs, research often focus provision of opportunity for the mangers, development of the workers, and job climate allowing the involvement of the workers in training. Theoretical Perspective Several reviewed articles have utilized the theoretical perspectives. The theory are the building blocks that answer various questions including how, what, why, who, where, and when. In most cases, researchers make theoretical perspective judgement based on the purpose, argumentation, contribution, and implication of different researchers. While studying HRD in the SMEs, most research draws various concepts from the organization and strategic management theory. In addition, in explaining the use of training and methods of development, SMEs’ environment, and the extent of opportunities associated with formal and informal learning, some studies used resource-based theory and institutional theory. In most review, the studies failed to highlight explicitly the theoretical anchorage on the strategic management and organization theory; however, the resource-based perspective underpins such theoretical standpoint (Zhang, 2006). Some studies also used learning and training design theory considered part of the wider informal learning theory, workplace learning, experimental learning, and informal learning theory. To understand the training needs, analysis of the processes, evaluation of the HRD activities, and explaining the manner in which the management understand skills, most research focused on the training design theory. Several research also focus on integration of both human capital theory and resource-based view especially on studies focusing on the competency model. Furthermore, the studies also focused on the application of the human capital theory in explaining the participation and commitment of resources in training and development, proving the formal training programmes. For long, there have been debates on whether HRD needs to promote learning and improve the performance of the organization. Although performative perspective is dominant, the learning perspective on the other hand has been gaining increased attention with most studies focusing on the performance paradigm. The studies investigate the HRD activities impacts on the outcomes of organizational performance including sales growth, innovation, and quality. However, some studies used individual-level measures of the impacts including improved job-related competence, job satisfaction, motivation of employees, and institutional commitments. Moreover, the studies implicit reference to the need for the HRD activities to impact positively other aspects of organizational functioning including improved learning agility, reduction in the skills gap, and other operational improvements (Al-Shammari & University of Stirling, 2009). There are studies that have utilized the learning in offering the explanations on pervasiveness of the informal HRD approaches. Most scholars tend to overlook the complexities within the learning process in SMEs and draw the attention of the mediated nature of the collective learning. Through adoption of the critical theory approach, researchers stressed on the dynamic nature of the power relations, politics, and conflicts occurring between the managers and workers within the social context of the SMEs and manner in which facilitates the new working modes. Moreover, the Saudi skill gaps relating to what the employers are seeking in to meet business objectives and the skills possessed by people is particularly an acute problem within the small businesses. Literature Gap With the increasing body of research on training and organizational-level outcomes, there is little understanding on the manner in which HRD activities relate with outcomes of the SMEs. However, there is little attention given to the HRD practices within the SMEs within Saudi Arabia. One of the potential avenues of looking at the effectiveness of HRD is to focus on developing countries as well. Therefore, the research will focus on HRD practices application within the SMEs in Saudi Arabia through highlighting the major theories utilized by the HRD practitioners. The literature evolution on HRD reflect a wide array of theories including the social learning theory, human capital theory, and resource-based theory which the section will discuss in-depth. Social Learning Theory HRD theory is changing rapidly. With the recent advancement in the practice and theory, the manner in which people conceive institutions and the world of knowledge have contributed to reinterpretation of the field (Saribaloglu, 2012). Albert Bandura created the social learning theory through incorporation of elements from other theories such as cognitive and behavioural learning theories. A selective synthesis of both theories show that the social learning theory posits that through observation of the actions of others, there could be direct impact on human behaviour. The theory is applicable to the HRD especially during the training process (Gamage, 2007). To design the training and development programmes effectively for the SMEs, it is vital that the HRD practitioners understand the behaviour of humans in learning. Training employees involves changing their behaviour and being a position of predicting such behaviour; therefore, if the HRD practitioners need to alter such behaviours, then they have to understand methods of understanding complex behaviour. According to social learning theory, learning is any permanent change in the behaviour due to experience. Moreover, the theory views learning in three distinct manners: it involves change, the change has to be permanent, and experience is a prerequisite for learning. Usually, the entrepreneurs experience vicarious learning through observing others. In such cases, if an appropriate situation arises, then the learner tends to imitate the behavioural model (Nguyen, Alam & Prajogo, 2009). Social learning theory acknowledges such view through self-control, which allows people to learn by themselves. Furthermore, social learning theory tends to emphasize on self-efficacy, which has important effect on the learning process since people entrepreneurs try learning behaviours they believe would perform successfully. Successful SMEs often ensure provision of more training then the average (Zhang, 2006). Despite emphasizing on the in the significance of improving skills within the SMEs, there is limited research into the training and development within the SMEs. Some research indicates that the major factors distinguishing the high growth and low growth SMEs are education, experience of the management, and training. Since the SMEs and their large counter-parts use different skill development methodologies, the informal learning seems to be important for the SMEs. In the SMEs, the managers and employees tend to develop their skills using the normal workplace activities. Moreover, the SMEs consider informal learning, which is less costly through inclusion in their daily operations, and tailoring them to specific needs of the workers considering its flexibility and consistency versatile in the SMEs. There have been the growing needs of the businesses to train new workers. Social learning theory holds that people learn best through viewing others. Various practices within the HRD often encourage repeat of behaviours while others discourage it including positive and negative reinforcement respectively. One of the ways of keeping up with the workplace rising demands is ensuring new workers observe the behaviours of experienced employees then model their behaviours. Significance of the Theory Social learning theory plays important role in the HRD: acquisition of attention, retaining information, reproduction of actions, and motivation of employees. Based on the social learning theory, the SMEs’ HR needs to develop new skills based on the institutional environment, personality, and behaviour. The training attributes used by SMEs could improve or decrease attention people pay during training; therefore, it is vital that the HRs ensure that the training add value, relevance, and distinctiveness. Through creation of supportive environments, which encourage career development, the employees are likely to participate fully the training programmes since they tend to recognize the impact and long-term benefits of putting efforts into learning new skills and knowledge (Chidi & Shadare, 2011). Moreover, excessive social learning also allows people to remember they have learnt easily. To assist them retain the information, the HRs need to assist the SMEs in developing the tips, tools, and techniques. Researchers found that forgetting often occur quickly after the learning process. To combat such problems, it is vital that SMEs ensure provision of opportunities to employees to practice things they have learned. According to the social learning theory, people often tend to behave in similar manner as those they admire (Umer, 2012). Through similar strategy like advertisement, SMEs could use the marketing techniques to motivate the desirable behaviours and discouraging unwanted actions. As a result, the HRs reinforces practices enabling safety, productive, and profitable working environments. Critiques of the Theory Some of the criticisms of applying social learning theory in SMEs HRD often arise from its commitment to the environment as the major influence of human behaviour. However, it is limiting to describe human behaviours solely in terms of nature or nurture and underestimates the complexity associated with human behaviour. Since SMEs occur in different setups, it is likely that the behaviour occur due to interaction between nature and nurture, which the theory fails to consider. Social learning theory often share problem of other reinforcement theories, as it does not predict what the employees would regard as positive. Human Capital Theory The origin of the theory traces back to the research undertaken by various economists while trying to establish the techniques and theoretical framework of studying the significance education in the promotion of education development. The economists pioneered the analysis of training and development as an investment in the human capital in the late 1950s and early 1960s (Terziovski, 2010). According to the human capital theory, organizations view people as valuable resources and tend to emphasize that the firms investing in human resources often produce meaningful returns. In addition, the theory views the employees as the key resource managers that businesses use in achieving the desired competitive advantage (Al-Shammari & University of Stirling, 2009). Researchers focused on establishing the existing relationship between the customers and the capabilities of the employees and noted that the workers need to have suitable knowledge and skills in serving the demands of the customers. Consequently, researchers also noted that human capital tends to affect the performance of the SMEs through innovation capital, customer capital, and process capital. Customer capital is the knowledge embedded within the various channels of marketing and customer relationship; customer capital is based on the capability of marketing, commitment of the customers, and the relationship that occurs between customers and their satisfactions. The process capital refers to the value to an SMEs derived from the methods, programmes, and processes implementing and enhancing the legal transfer of the goods and services created and improved through the management of the SMEs. Bruderl et al., (1992) were the first researchers to undertake a study on how human capital theory fits within the SMEs through arguing that even though the overall application of human capital is on the workers, there is no valid reason of inapplicability within the SMEs. Accordingly, the SMEs enjoying higher general and specific human capital could be expected to reflect higher performance level that the SMEs with lower levels of general and specific human capital which is referred to as SME human capital. Human Capital Theory and SME Performance There have not been sufficient considerations of human capital in the SMEs until the scholars noticed the significance of HRD practices through staffing, strategy, and training towards the development of the workers (Nolan & Garavan, 2015). Some research undertaken demonstrated that the innovativeness of the SMEs is linked positively to the recruitment strategy including graduates, engineers, and scientists’ employment considering the high level of knowledge and skills presented by these employees. A study undertaken by Paladino (2007) made a comparative study on the customers’ effects and resources orientation on the innovation ability and made a conclusion that investing in the human resources instead of the customers could bring more success to the SMEs (as cited in Eniola, Entebang & Sakariyau, 2015). In other words, when the total labour force within the SMEs is skilled, motivated, and experienced, then the innovation capability is likely to be high. Nonetheless, the practices of HRD should not be considered from one another since in the integration contributes to innovation performance especially when used as bundles. Usually, it is appropriate to infer that human capital often influences the innovation capital. Through emphasizing on the SMEs view, the researchers allude human capital as vital innovation root and transformation strategy. Modern management scholars often focus on the need for innovation while the previous surveys demonstrated the connection between intellectual capital and innovation success of the SMEs (Stewart & Beaver, 2004). To some extent, some organizations use models that retain flexibility and dynamism of the skilled workers. Moreover, the workers are required to carry out the internal processes of the SMEs. Besides, they also hand over the services of the customers, create brand connections, and building the list of the customers. Structural capital involves anything within the SMEs supporting the workers (Stiles, 2013). The hidden factor associated with human and structural capital is considered an assortment on the intellectual capital. Critiques of the Theory According to the neo-classical economists, labour is a commodity and integrated the work and employees into their analytical framework. The human capital theory allows the critical insights unavailable to the earlier versions of the neoclassical economics. According to the Ricardian and Marxism theories, labour is treated as a means of production with features depending on the total configuration of the economic factor (HRD Alternatives, 2016). Moreover, the theory rejects the simplistic assumption of the homogenous labour and focuses on the differentiation of the workers. With such weaknesses, the theory could be substantially misleading as a framework for undertaking empirical research and guiding the policy. Resource-Based Theory The resource-based theory bases its view on the assumption that distinction in the physical, institutional, and the HRD practices between the firms could cause important homogeneity in their productive potential. With such heterogeneity, the sustainable competitive nature of the SMEs would depend on the resources that not only make it different from the competitors, but also durability and difficulty of imitation and substitution (Torraco, 2002). HRD plays vital role in the generation of sustained competitive advantage. Besides, the human resources tend to contribute to sustainable competitive advantage through facilitation of the development competencies considered firm specific and generation of tactic organizational knowledge and skills. Maintenance of the organizational competitive advantage based on the HRD often require that the management ascertain that the available HRs remain competitive, difficult to imitate, and substitute (Simon, 2012). The resource-based approach tends to emphasize on the significance for specific HRM strategy, which normally needs some form of consistent and intentional HRD activities. Usually, for the SMEs to obtain internal fit, they need to employ the best approach to the HRD practices. However, according to the theory, best practices, or high commitment normally associate with improvement in organizational performance. Besides, properly paid, motivated, working with an environment full of mutual trust need to ensure generation of high gains and lower the costs of units. However, the best practices within the SMEs are not necessarily the consequence associated with the resource-based approach. Some research suggested Aspecific HRD strategy; however, the strategy could call for distinct HRM practices within different SMEs. Moreover, the different needs on specific worker development might involve formal training for some of the SMEs while others training on the job could be more appropriate mechanism of obtaining the required skills (Nolan & Garavan, 2016). The findings of some research assert that the source of SMEs sustainable competitive advantage could be lying within the HR themselves and not within the practices used in attracting, utilizing, and retaining them. On the contrary, some of the scholars argue that the HRD practices could be viewed as the competencies of the organization including the ability of motivating the workers and handling the arising internal politics. Through focusing on interpretation, the HR could be viewed as important contributor of organizational success. Significance of the Theory in Improving SMEs The empirical research argues that the core competencies, resources, and capabilities of the SMEs are essential to maintain the required competitive advantage. Hence, it is vital to have adequate resources support and policies the creation of the capability, which is considered vital for the growth of the SMEs since they are in size, and require assistance (Koch & Kok, 1999). Through focusing on the resource based theory, it provides a framework of explaining the manner in the SMEs could identify the suitable measures of overcoming the growth obstacles, having better access to the advanced technological resources, manpower and financial resources, infrastructure, natural, and accessibility to the market. The theory emerged as an alternative to various strategic management theories that tend to explain the competitive advantage of the businesses within their market positions. While developing the theory, Edith Penrose noted that the competitiveness of the businesses usually varies considerably within the industry (as cited in Saru, 2013). The theory offers the theoretical basis on the significance of different resource types to the overall competiveness and performance of the firm. Moreover, the theory posits that a firm could achieve and sustain its desired competitive advantage if it possesses both the tangible and intangible resources considered valuable, inimitable, rare, and non-substitutable. The theory contends that the possession of the strategic resources within the business presents the excellent opportunity of developing the competitive advantage over the competitors. In addition, the acquired competitive advantage in turn assists the firm in enjoying the strong profit. Critiques of the Theory The theory is tautological from the definition of competitive advantage which is a value-creating strategy based on the resources considered valuable. Such reasoning is considered circular making the theory operationally invalid. Kraaijenbrink et al., (2010) assessed different critiques on the theory citing that it has not managerial implications, implication of infinite regress, limited applicability, and the sustained competitive advantage is unachievable. On inadequacy in managerial implication, Priem & Butler (2001) found that besides lacking managerial implication, the also lacks operational validity. According to the theory, the managers need to develop and acquire the strategic resources, which have to be valuable, rare, and non-imitable, and non-substitution. Nonetheless, the theory fails to explain the mechanism of achieving such. Moreover, the theory involves infinite regress. SMEs with the capability can put in the best practice and overtaken by other firms with the ability of developing better practices. References Al-Shammari, S. A., & University of Stirling. (2009). 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Conceptualizing the Learning Process in SMEs: Improving Innovation through External Orientation. International Small Business Journal, 24(3), 299-323. doi:10.1177/0266242606063434 Read More