Human Resource Management Practices in Small Business

By Bergmann, Thomas J.; Decker, Ronald L. et al. | Journal of Business and Entrepreneurship, October 1990 | Go to article overview

Human Resource Management Practices in Small Business

Bergmann, Thomas J., Decker, Ronald L., Lorentz, Richard D., Journal of Business and Entrepreneurship


The viability of a small business is determined by the quality of its personnel. If its employees are well-chosen, well-trained, and well-positioned, its own future is much more secure. The purpose of this study is to examine the two extremes of human resource management practice - hiring and firing - and to relate these to the dual challenges of preventing employee problems and eliminating problem employees in small businesses. Results indicate that managers who are thorough in their pre-hiring investigation are more likely to prevent the occurrence of employee problems, and that managers who are more highly trained have a higher incidence of employee termination.


Small firms, as defined by the Small Business Administration, currently employ more than 40 million people and produce goods and services valued in excess of $900 billion each year in the United States (9). In addition, most employment growth continues to come from the small business sector. Thus, given the economic importance of small firms, any serious problems they face cannot be considered insignificant. Such problems, if they are widespread, could seriously influence the economy as a whole.

While small business problems may have a variety of sources, McEvoy (6) believes that many of the problems can be traced to the selection, development and utilization of human resources. In a small firm, perhaps even more than in a large corporation, a few individuals can make or break the firm. A mistake by an alcoholic machine operator may result in an expensive lawsuit and some bad publicity for a large firm, but may result in financial ruin and loss of reputation for a small firm. Such considerations make the job of human resource management in a small firm a critical one. Hiring the right personnel is important. Solving problems is crucial, and eliminating problems that cannot be solved is a necessity. It is essential to examine small business human resource management practices to provide information which will assist individuals who are currently involved in small business or those who are interested in operating their own small business.


The selection process has a significant effect on the quality of any firm's employees, whether the firm is large or small. An essential part of the selection process includes checking references of job applicants (8). In a small firm, where multiple interviews and testing are less likely to occur, reference checking assumes even greater importance. While Gatewood and Field (2) found that companies check references 50-90% of the time, a study by Lotito and Bryant (4) revealed that up to 75% of the employers they surveyed do not check references prior to hiring new employees. Why would any employer omit this seemingly simple step to verify the credits of a potential employee? Perhaps the increased risk of lawsuits claiming "defamation of character" indicates that this step should be taken with caution.

To avoid lawsuits, legal counsel often recommends that clients confirm only that the applicant in question worked for them, the term of employment, and the rate of pay (8). Some seeking employment have recently won large awards (Davis v. Ross, 1985; O'Brien v. Papa Ginos, 1986; Lewis v. Equitable Life Assurance Society, 1986) based on the claim that a reference resulted in defamation of character (4). In other words, reference checking produces very little information and therefore, may be considered by some a useless step.

The whole process is complicated by the fact that, to avoid a negligent hiring suit, an employer must carefully inquire regarding the background of those hired. The courts expect the manager to obtain relevant job information when checking potential employees' past work histories, but may find those same managers guilty of libel for comments that hurt past employees' job opportunities. Thus, the courts have created a Catch-22 for employers. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)


1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited article

Human Resource Management Practices in Small Business


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.