For small), a competent workforce is very important

For every given structure
(be it big or small), a competent workforce is very important for the its
success and performance. Therefore, it is of high interest and importance that Small
and Medium size Enterprises (SMEs) should have a competent workforce for their success. Thus, it is advantageous to every company irrespective of
its size to positively focus on human resource (HR) development & management. However, it is rather sad that the HR activities are often neglected
by many SMEs in most parts of the world. According to a survey conducted by the
Confederation of Indian
Industries (CII), around
80%
from small enterprises and about 20% from
medium
enterprises respondents indicated
having no formal
HR department (Sarit et al.
2014).

 

The amount of economic resources controlled by
small and medium size
enterprises are
increasing significantly, this increase strengthens their role in the economic mechanism. In the European Union for example, companies having 250 or fewer employees were responsible for 66% of all jobs and 58% of total business turnover
in the year 2008 (European Commission, 2010). This calls for more scientific debates,
for political and also the civil society because they play a significant role in policy making and
the overall economic health of a society. As a result of the significant role played by SMEs in the
economy, their
problems take important positions in scientific debate’s agenda such problems include the Human Resources Management
(HRM) of these structures
(Ana-Maria
Grigore, 2008).

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Gary Dessler states the following in his book “Human Resource Management” (2014 p. 590), to an extent there is actually nothing small about these Small and Medium
size
Enterprises. They
 play big and
significant roles in the global economy as a whole. For example, about
99% of U.S. firms are small businesses. Also, most western economies are
characterized by an increasing share of small and medium-sized enterprises. The issue of human resource (HR) in small and medium size enterprises is quite a recent one. HR-
researchers have ignored the SMEs, even though smaller companies could be
fruitful structures for empirical investigation because of their numbers, growth-rates and not least diversity in the qualitative aspects of management practices. Despite the roles
played by the SMEs
in
different economies,
the
role of HR in
these structures have been neglected for
a long time.

These small and
medium size enterprises in some cases have different approaches to their   Human resource management.
This difference might be due to some
of the following reasons; size, priorities, informality, and also nature of the entrepreneur (Gary, 2015).

 

Human resource management in SME’s has been neglected, and this
despite the
characteristics of different economies such as the   Danish industrial  economy for
instance with the large proportion of SMEs; the long tradition for a rather
institutionalized and well organized lab and market. This economy could provide a basis for
a more professional approach to human resource, and finally
the
supposed very good
basis for future competitiveness, due to the values
characterizing employees as
well
as managers in Danish companies namely,
democratic management style, informal organizing, flexible working arrangement etc. Personnel planning  or training and
development initiatives were not seen, due to the same reasons as mention under HRM.
One
could say that the tradition for more professional work with employees is
very limited, and that the only
way to approach the personnel- or HR-activities in
general,
is through growth (Sarit et al., 2014). In another development, growth is
at
its minimum rate or
not even present if the advantages of economic improvements are
utilized only by a small number of people, whereas the greater
parts are being
exempted from these advantages. As a result of this, there is the need for employers
to improve their employment formation capabilities. (Nadeem Bhatti et al. ,2012)

 

The importance of HR in SMEs received attention only recently, in some ways due to the increasing resources controlled by them,
which include both human, capital and natural resources.
Concerning the human capital
point of view, the increased importance of human capital is apparent at
both
the demand and the supply side of the labor market. However, an equal supply of, and demand for
highly qualified labor
is in itself not enough to guarantee progress in
the economy because for every individual firm, supply of, and demand for labor and human capital must be matched and from
which the SMEs are not an exception (Johannes Marinus, 2003).

 

According to Johannes Marinus (2003), it has been recognized that human capital is of great importance, which has led to an increasing flow of studies on the management of human resources. Moreover, the increasing awareness of the essential
role of SMEs in most economies, is accompanied by
a rich flow of scientific research on
entrepreneurship and small
business economics and performances. The differences
between these parts of research are however, not much or are to
an extent insignificant,
as is our current understanding of HRM practices
within SMEs.

 

In some cases, the HR department of SMEs is highly determined by the firm’s
culture. This culture is  influenced by the values and norms of the business
owner(s).
These Values and norms may influence not only the goal of the enterprise, but also the strategy on how to obtain that goal. The organizational culture will not only
be determined by the
owner’s values, norms and goals, but also by the way in which
these are communicated to the employees and also how
these employees are being
treated and
taken care of in these structures. Due to the lack of other stakeholders in such businesses, the decision-making processes is always influenced by the owner(s)
personality and characteristics. Often,
the employer combines
the
roles of CEO, board of directors and HR staff, and some
structures such as the work
councils and other
advisory departments if present, will have fewer rights than in large firms. Consequently, the managers’ internal room for maneuver
is larger for
smaller companies. This goes a long way to influence the management of the company’s personnel
and
workforce compared to that of larger companies. As indicated by
Kishore
 et  al.
 (2012),  small  businesses
 have  a  greater  possibility
of coincidence of power
between owners and managers.
Small business
owners usually
have direct impact on operations and activities of businesses than owners of large
businesses

 

There is actually no accepted formalized
practices for Human resource, but it can generally
be
described as formal, sophisticated, and innovative.
These practices
are seen to stimulate employee competence and commitment towards their area of work. Examples of these practices might include incentive pay
systems,
training and testing of both applicants and employees and also increasing employment security. Regarding the formality of SMEs, they can be said or seen to operate in
a more informal manner than their larger counterparts. According to several studies
conducted on entrepreneurship, the patterns of these informal
practices in small firms do often repeat themselves in HRM practices.
Kishore et al. (2012) mentioned that, this informality
can
at times be due to lack of written management procedures
and
practices,
 such
 as  human
 resource
 management.
 It
 has
 also been  shown  from
empirical research that smaller firms do  have 
less sophisticated 
or formal HRM
practices. Riemsdijk et al. (2005)
indicated that, some authors have declared that in
other
for these small businesses and companies to remain competitive, they must operate in an informal and flexible manner. Meanwhile on the other hand, some
authors argue that this informality
in SMEs instead hinders them resulting in a less formal and sophisticated Human resource practices.

Empirical research has
proven that there is an increase in the formalization sophistication of the HR policies
with increasing personnel. Some of the aspects involved in the formalization and sophistication
of
the HR polices included:
job analysis
and
job description, recruitment and selection, remuneration, training and Performance assessment.
Which means that sophistication of personnel activities is related to the
company’s size. From these studies involving sophistication of HR practices, it was
discovered that from the company owners’ point of view, the important personnel
domains for the future
included
: establishing pay-rates and secondary remuneration,
availability of good personnel, training,
effects of government regulations and
job security. All of which could be achieved depending on how
good the personnel policies were
implemented.

 

Some strategic models have been put in place to account
for the role of HRM in the
formalization of small businesses. According to De kok and Uhlander (2003), in the model of strategic change and human resource there is a differentiation between HRM context  and  HRM content.  The  content of  HRM  is  seen
 as  its
roles,  definition, organization and output and this includes the presence of the human resource department or
manager. On the other hand, HRM context is regarded as labor flows, work systems, reward systems and employee relations.
It can thus be considered that
the formalization of HRM practices can be seen as the characteristics of HRM
content. In
regards to this model, organizational context influences HRM context and which in turns partly
determines HRM content. The model also states that organizational characteristics might influence the presence
of
the human resource department or manager which
as
a result influences the formalization of HRM practices in a given scene. However,
smaller firms might have a less formal human
resource department or
manager. Therefore the aim of this paper is to
see how important Human Resource is to Small and Medium size enterprises.

 

Nevertheless, small businesses usually face some challenges as a result of their sizes. Due to the fact that large firms have the advantage of economy of scale, they have possibility to involve a team of
specialists to target complex issues involved with the management of human resource programs which is not really a viable option for most SMEs. However, there has been little
to no attention paid to the role the strategic human resource management practices of SMEs in bringing about the sustainability of the business (Kishore et
al. 2012). With a more detailed look at some HR practices like training for
example which has received a greater attention, employees in the small firms are less likely to have access to structured training compared to their counterparts in the larger firms (Cassell et al. 2006). Furthermore, Cassell et al. (2006) mentioned that there is indeed a linear relationship between firm size and amount
of
structured training
provisions. As a result of the difficulty
encountered by
most SMEs for the provision of structured
training and also
hiring of specialist concerning complex HR issues, this might go a long way to influence the performance of its
personnel and also that of the performance of the overall small
firms. This is also explained by Kishore et al. (2012) that managers in the small firms are at times required to carry out
management activities at a multidimensional
scale which at times reduce their overall
performance.