A Realistic Assessment of Human Resource Projections for Small Firms: The Role and Implications of Size

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ABSTRACT

Small firms can expect to face increasing human resource related pressures due to changes in America's labor and economic environments. This study examined forecasted human resource changes by comparing and contrasting anticipated predicted workforce, organizational adjustments, and employee benefits of various size small firms. Also, it addressed whether a relationship exists between forecasts and firm size. The results indicated that firms have varying expectations for the year 2000. Organizational size appeared to influence respondents' attitudes, though the results were not uniform. Smaller-sized firms tended to support maintaining a status quo internally, with relatively few changes within their respective labor markets.

INTRODUCTION

As America approaches a new century, more attention is being given to the importance of small firms. Many expect the nation's economic growth to be in organizations of less than 200 employees. Management within small businesses faces increasing pressures due to changes in America's labor and economic environments. Some of the changes include intensified global competition; integrating work and family needs; use of advanced technology; demands for workers' education and training; and, more women, minorities, and immigrants entering the workforce (Duffy, 1988; Belous, 1989).

Continuing workforce changes call for smaller entities, like their larger counterparts, to properly plan as well as effectively manage human resources. Proficient short- and long-term human resource planning greatly depends upon their underlying forecasts. A literature review of successful and unsuccessful small businesses supports the importance of thorough environmental scanning and analysis in planning practices (for example, see Bracker & Pearson, 1986 and Bracker, Keats, & Pearson, 1988). Bracker et al. concluded that a firm's success may well depend upon planning activities that are "well-developed, properly implemented, and controlled . . ." (p. 591).

Human resource management is a critical part of entrepreneurship and the small business owner/manager must be aware of likely changes in resources needed to operate the enterprise. Indeed, practically all firms' ability to compete and survive depends upon how well they manage internal and external people-related issues. Forecasting and planning for workforce changes are important factors in effective human resource management. Several studies have echoed the need for small businesses to devote greater attention to the management of human resources. See, for example, Hornsby and Kuratko's (1990) examination of current critical issues in the 1990s; the emerging importance of employment-at-will (Holley and Wolters, 1987); and Fairfield-Sonn's (1987) linking of strategic planning and training programs.

Anecdotal evidence suggests that, like planning, forecasts differ due to organizational size. Size mainly determines the resources available to develop human resource forecasts used in organizational planning. This limitation leads to errors such as the firm's perception as to the availability of needed human resources in the 1990s. Since small businesses provide a significant share of the nation's economic growth, these perceptual errors (if such errors actually exist) could have severe economic consequences.

This paper has three objectives: (1) to examine the relationship between human resource forecasts and firm size, (2) to buttress this study's findings against forecasts reported by other sources, and (3) to analyze the realistic nature of perceptions held by those responsible for human resource management in smaller firms. The size objective relates to the premise that a firm's size determines to a large extent its perceptions of future internal and external changes related to human resource. This investigation undertook to establish if, indeed, differences existed in human resource projections-encompassing year 2000 workforce diversity, employee shortages, organizational programs and policies, and employee benefits. …