Human Resource Management Practices in Small Firms - Research Paper Example

Human Resource Management practices in small firms Author’s name Institutional affiliation Part one The rationale of the project proposal entails identification of various Human Resource practices in small firms. How the firms ensure that the practices meet the organization objectives and goals. Besides, it will analyze how various Human Resource practices impact on employee motivation and performance. The practices that can be adopted to improve performance and employee motivation will also be investigated. Small business firms are unstable in nature since they are developing and gaining stability in the current competitive world. However, this does not dispute the importance of small companies in a country's economy. They are determinants of the industrial development in a nation. Also, they create employment for the unskilled labor thus leading to improved living standards. The success of any firm highly depends on the Human Resource Management department. Various Human Resource Management practices play a significant role in shaping a firm. Although small businesses lack extra financial resources to outsource Human Resource Management experts, they can do great with the available staff as long as the focus is on the goal of the company. Employee motivation is essential because it is a factor that catalyzes active or inactive behavior. Research questions How can employee motivation be achieved? What drives performance in small firms? How can diversity influence employee motivation? What is the relationship between change management and employee motivation? Part two: Literature Review General overview of Human Resource practices in small firms According to research done by Bartram 2005 as cited by Muhammad 2012, p.6, in Pakistan, most small firms utilize the informal style of Human Resource Management. It is characterized by Chief Executive Officers or business owners who practice direct control of the businesses. They deny employees the opportunity to explore their talents since they rarely delegate duties. Such firms limit the performance of employees due to low motivation. Most of the managers have inadequate training or knowledge on Human Resource Management thus; they are unable to manage their employees well. In another research by Kotey & and Slade 2005, p.18 in Australia, they found that most Managers and business owners have no rapport with their employees. There exists a distance between the two parties, which limits the mode and quality of communication. As a result, there is poor business performance. De Kok & Uhlaner 2001 as cited by (Muhammad, 2012 p.9) suggests that it is essential for small firms to have at least an element of formality in Human Resource Management since it is a legal requirement. It is not unusual for small enterprises to achieve competitive advantage. As long as they have a strong Human Resource Management team, which ensures all practices are implemented efficiently. However, maintaining the competitive edge is the biggest challenge. Performance management Performance management is a broad context in human resource practices which has interchangeably used with productivity, efficiency, recently competitiveness and effectiveness. Various researchers have been focusing their studies on this area from different disciplinary perspective. Boxall (2012) holds the view that for performance management system to succeed it requires employees’ regular participation in the implementation and development of the strategy (169). Therefore, it is very crucial for the successfully implemented strategy to gain co-operation and trust of the companies’ employees. The trust-cycle will assist the company to increase motivation and job satisfaction among the employees. According to Sanyal and Biswas (2014), performance management systems have various functions in an organization (p.185). The methods are used for evaluation purposes which include the promotion decision, termination and retention decisions, salary administration and recognition of employees’ productivity (Sanyal & Biswas 2014, p187). Additionally, the systems are used by companies for development functions such as assessment of employees training needs, determining attachments and transfer, providing workers productivity feedback and identifying the weaknesses and strength of all employees. According to Sanyal and Biswas (2014) human resource management roles are to ensure the employees are committed to the objectives of the organization (190). There are several approaches available to improve the performance of employees which include appraisal systems, recognition, monetary compensations, and rewards. De Waal (2013) gives a summary of the evaluation system, relationship with various job designs and the connection between performance, employees’ behavior and job satisfaction. Performance appraisal is a structured method of evaluating as well as measuring employees output in a company. Human resource managers perform the performance evaluations on a yearly basis. Rolstadas (2012) argues that lack effectiveness result from inadequate training of the employees and lack of implemented motivational strategies in the company (334). De Waal (2013) study analyzed the effects of selection and recruitment, training, development and compensation and promotional practices. Altogether, the study determined that growing human resource management practices were positively correlated to employees' job satisfaction and the success of a company. Boxall (2012) holds the view that for a company to implement a beneficial and efficient performance management system, it should ensure it is driven and owned by the management team at the front line (186). Thus, the role of commitment and capable managers at the forefront is critical in the implementation of a successful performance management system. Rolstadas (2012) emphasizes that an effective performance management system includes a clear developed job description, frequent re-training and feedback, recognition, and compensation schemes and negotiated expected outcome and returns. Boxall (2012) argues that performance management helps create, mutual trust, openness, team spirit and cooperation in the working environment (179). Besides, this Human resource management practice benefits the company by improving employees productivity through motivating every individual in the organization to achieve optimal results. Accomplishing these objectives and goals demands various ongoing activities such as prioritization and identification of expected results, identifying approaches to evaluate the progress and giving employees feedback about their performance (Rolstadas 2012, np). All this can be examined through the use of performance appraisal, a system that rates employees’ productivity according to their potentialities. Rolstadas (2012) states that performance appraisal is used to determine the weaknesses of employees and advice on which areas need improvement. The underperforming employees can be managed through training and education. It is the responsibility of the human resource manager to address the issues affecting the performance of any staff member (Sanyal & Biswas 2014, p188). Therefore, any challenge being faced at the workplace need to be addressed to increase job satisfaction and performance of the employee. Organizations are affected when the working environment does not motivate employees. Thus, there should be adequate communication between the management team and the employees of the company. Sanyal and Biswas (2014) emphasizes that this is the reason companies carry out performance appraisal annually to determine the outcome of workers and possible causes of poor performance. Various traditional appraisal techniques can be adopted by enterprises that include a weighted checklist, one-on-one appraisal, the review scale, paired comparisons and others (Boxall 2012, 171). However, companies mostly use modern methods such as the objective management and 360-degree feedback. The 360-degree approach is a process of providing feedback to employees from the assessment by co-workers and other people such as customers. According to Boxall (2012), the managers assess the performance of the workers using the information received and rate their productivity (p.178). In performance appraisal approaches, feedback is a valuable tool. Feedback is usually a problem, solution, and behaviorally oriented technique. Rolstadas (2012) affirms that most companies use feedback tools for the development of employees while others use it for compensation adjustment and merit evaluation. Feedback is a crucial tool because it assists workers to assess their past performance. Therefore, they can improve their performance in the future by addressing the problems that might have influenced the weak outcome. Positive feedback is considered as a motivation for employees, and it improves their commitment to their jobs (Sanyal & Biswas 2014, p 190). Nevertheless, De Waal (2013) holds the view that workers see performance appraisal as a tool that gives them better understandings of their responsivities and duties toward the company. Scholars have argued that responses to the performance evaluation results are critical to the development of employees. Appraisal approaches are necessary because they help leaders to spot and manage existing problems in the work environment (Boxall 2012, p184). It positively influences the workers' sense of belonging and commitment. According to Sanyal and Biswas (2014), the system helps companies’ human resources to identify the employees who need recognition and compensation for their excellent performance (193). Employee motivation Collins et al., 2005 p.32 denotes that there are various Human Resource practices essential for the success of business. They entail employee selection, a role that entails employee hiring, selection, training and placement. It is the duty of Human Resource Managers to announce for vacant positions, highlight the job requirements, duties, responsibilities, and qualifications. In the modern society where technology has taken over most activities, the hiring and selection can be done online. However, it is applicable to companies which have adopted Human Resource Information systems. Employee management is also another practice. It is the role of Human Resource department to ensure that any work-related stressors are minimized to increase employee productivity. According to Shaharin 2012, p.18 as cited by Kshirsagar 2016, there is a great relationship between employee motivations and firm performance. It is an implication that the success of any business heavily relies on nature and effort a company gears towards the staff. It could be regarding stress management, team building, rewarding, in-service training and room for creativity and innovation. Internal trainers mainly do in-job training in small firms Cordon and Steven (2004) and Kotey & Slade (2005) to reduce costs. It is an activity that can sharpen the skills and enhance professional development among the employees. Also, it boosts their motivation and interest to perform their tasks efficiently. Cordon & Stevens, 2004 n.p) argue that large corporations attract many employees due to the significance of their name: Nevertheless, they face employee turnover due to underutilization of their skills. The workers end up seeking opportunities in small entities, which present them with an opportunity to advance in their careers. Often, small firms depend on external labor sources for staffing. As they grow to medium businesses, they are in a position to conduct internal recruitment which motivates employees to work harder and be committed to their tasks as they stand a chance for promotion (Way 2002, n.p). Employee motivation increases loyalty to employers and job. However, it is essential for managers to identify the employees' attitudes towards their jobs to understand what mode of motivation can be used. Most managers assume that employees thrive with similar motivations. Conversely, they should analyze drivers, which motivate individual employees. Besides, all people are different and prosper on differently set environments can be achieved through aspects of good leadership for example constant communication with the employees (Ajang 2007, n.p) Communication is an important tool in ensuring good work progress, especially for small firms. Above and beyond, it creates an environment for contemporary employee engagement in business operations. Employees a crucial in business advancement since most have a lot of untapped potentials, which can add onto the success of the firm. In as much economic motivation such as salary, increment is essential, the social needs are imperative as well. Creating an ample environment free from Occupational health hazards is essential. Team building helps reduce work-related stress since it is one the health issues which can affect employee motivation and performance immensely. Small business enterprises, which strive to excel have Human Resource culture that advocates and maintains workforce alignment. It is characterized by highly skilled employees who keep time and follow the set rules and regulations for the success of the company. Abraham’s Maslow theory developed in the nineteen forties is utilized more in the current century than it has ever been before. Due to the high rate of globalization and strive for competitive advantage, small firms seek to their employees attain self-actualization since it can sustain them more at the places of work (Maslow, 1989 p.23). It is a good strategy since it ensures employees give their best in their duties towards the achievement of the Manager's set goals and objectives. It gives a company a high potential a high potential of attracting investors despite its size. According to Katz (2005 p.23), employee motivation should not rely broadly on the extrinsic factors. These are the external environment of push factors, which drive one to perform such as salary. Also, salary in small firms is not as high as most people would consider. For that reason, intrinsic factors such as job competence and progress in one's dream or career of pursuance. According to Herzberg's two-factor theory, there are two factors that determine employee motivation. They include dissatisfaction and satisfaction; therefore, employers of small firms need to dig out the different factors so that they can increase those which cause contentment at the expense of those which cause discontent. Change management practice According to Edwards & Pinnington 2000, p163, change management as a Human Resource practice is an essential impact in firms resulting from restructuring, relocation or even merging of businesses. The volatile nature of small firms makes the susceptible to the change predisposing factors. They are still not well known in the society, and as the position themselves for competitive edge, it needs time coupled with various adjustments of business structure and orientation in general. Since a firm comprises of different individuals, who react differently so unusual situations such as change, it should be managed tactfully. It is the role of Human Resource department to ensure that employees are guided effectively to adjust to any of the forms and reduce any occurrence of job changes related stress. It is because of the limited financial resources in these firms that mitigation measures should be undertaken to reduce any further costs like a need for professional counselors to offer therapeutic services to the employees. Change is a practice which can immensely affect employee motivation either positively or negatively. For example, a small firm which values contemporary employee engagement does not the same impact as a company which secludes employees from most activities and decision-making processes. The latter is likely to have had inputs from employees and elucidated reasons for the action. The employees in the particular company are likely to perceive it as a way to enhance their careers and increase performance According to Edwards & Pinnington 2000, p. 160, some employees are likely to pose resistance to change especially if it is likely to have an element of negative influence in their lives. For example, a change whereby a company is relocated to a new geographical area is likely to face opposition from employees who found the previous station convenient and easily accessible. The effect can only be prevented thorough well-channeled communication with employees before the changes. According to research done in Australian Tourism small enterprises by Breen et al., 2006 p. 26-27 innovations are one of the changes typical in these sizes of businesses. It is because they are growing land thus using the internal resources to enhance productivity. It is also a way for attracting potential clients. Besides, it improves customer satisfaction with services, which is one of the ways to increase demand. The customers are likely to share about the services with their friends and family members. With innovation comes recognition due rewarding given to the managers for great work. As a result, it gives them a feeling of achievement hence strives more in encouraging their employees to be more creative. Cultivating a spirit of innovation among employees enhances their morale since they are developing their skills and getting more empowered (Gudmundson & Hartenian, 2000 p.27). The research also found that managers in small firms increase innovativeness through communication with clients and getting feedback for their services. It helps them understand the niches that require a bridge. In any business, clients are essential stakeholders and much focus should be put on ensuring that they get satisfied with the products or services offered. Networking with other large size firms also enhances innovation since they can benchmark and get insight on new ideas and practices which can increase productivity and firm performance. Managing diversity Diversity is one of the aspects which, influence business development and innovations. The workforce is comprised of many different people with different cultures and professional background. Human Resource Management department needs to embrace diversity right from the selection. According to (Shen et al., 2009, p.239, most successful firms have embraced diversity through hiring members of the minority and marginalized groups such as women and the physically disabled. It is a factor which attracts more clients and increases firms’ total output. Implementation of affirmative action to ensure that there are policies which ensure the promotion and fair utilization of minorities earns a company a good reputation. Research by Butterfield & Powell 1994 as cited by Shen, 261, indicates that there has been a minimal number of women participating in training and development programs. Therefore, small firms can tap in practice and increase their .competitive edge. Conclusion In summary, from the literature review, it is evident that there are small firms which struggle while there are those which are maneuvering their way to increase their competitive advantage. Human Resource Management is an essential department in any entity regardless of the size. Although most small entities face financial challenges and try to adopt informal Human Resource Management, it is essential that they practice formality with the available resources. The review found that almost all Human Resource practices are interdependent. Cultivating diversity in the workplace provides a vast pool of resources in terms and skills such as problem-solving skills and extensive expertise. It enhances innovation, a key factor in cultivating competitiveness through the attraction of customers and satisfaction. Promoting innovation among employees increases their morale and hence business performance. Firm performance is the main reason for companies’ existence. Therefore, efforts must be made to invest in the welfare of employees through constant communication, managing any emerging changes, rewarding, in-service training, stress management, an ample working environment, team building and diverse on-the-job training. Broad networking with other companies also increases the innovative power of a company. Bibliography Ajang, P.E., 2007. Assessing the role of work Motivation on Employee Performance. Boxall, P., 2012. High‐performance work systems: what, why, how and for whom?. Asia Pacific Journal of Human Resources, 50(2), pp.169-186. Breen, J., Bergin-Seers, S., Roberts, L., Frew, E. and Carlsen, J., 2006. Innovation and change management for small and medium tourism enterprises in the tourist park sector. Cooperative Research Centre for Sustainable Tourism, Gold Coast. Cardon, M.S. and Stevens, C.E., 2004. Managing human resources in small organizations: What do we know?. Human resource management review, 14(3), pp.295-323. Collins, C., Ericksen, J. and Allen, M., 2005. Human Resource Management Practices, Workforce Alignment, and Firm Performance. De Waal, A., 2013. Strategic Performance Management: A managerial and behavioral approach. Palgrave Macmillan. 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