Academic journal article Journal of Business and Entrepreneurship

Small Businesses' Perceptions of HRM Practices: Comparing Entrepreneurs to General Managers

Academic journal article Journal of Business and Entrepreneurship

Small Businesses' Perceptions of HRM Practices: Comparing Entrepreneurs to General Managers

Article excerpt

ABSTRACT

Entrepreneurs are considered to be necessary to an economy because they create new products and new organizations and therefore increase the number of jobs available in the job market. Once the organization has been created, the role of the entrepreneur expands to include small business ownership and management. Given the high failure rate of small businesses, that expanded role may be beyond the capability of many entrepreneurs. If entrepreneurs are creating jobs, they need skills in human resource management (HRM). The perception of HRM by entrepreneurs is compared to that of general managers of similar-sized small subsidiaries. Entrepreneurs and general managers were found to have significantly different perceptions of the value of HRM practices.

BACKGROUND

Gartner (1988) has suggested that research should concentrate not on what an entrepreneur is, but on what an entrepreneur does. One important entrepreneurial activity is the economic contribution made when new organizations are created, leading to the creation of jobs. Unfortunately, while new firms are being created, others are failing. The failure rate has been said to exceed fifty percent during the first five years of business life (Hofer & Sandberg, 1987). To help reduce these failures, entrepreneurial research should include the study of the management behavior of both successful and unsuccessful entrepreneurs. This research may then isolate the activities that contribute to a successful start-up, and those activities that may lead to failure.

According to research, the largest single contributor to small business failure has been poor management (Peterson, Kozmetsky & Ridgway 1983; Gaedeke & Tootelian, 1985). Many questions arise when considering the management abilities of entrepreneurs. Why are some entrepreneurs not good managers? Do successful entrepreneurs have a better perspective of the skills needed to keep an organization independent and profitable than those who fail? What management skills might be lacking by those who fail? Answers to these and other questions are needed to contribute to a reduction in an excessively high failure rate.

Entrepreneurs have been poked and prodded and studied, but we still know very little about this unique contributor to the economy. Perhaps we need to look to other practicing managers to determine what skills are important or essential to the management of small organizations. Empirical support exists for comparing and distinguishing founders and nonfounders (Begley & Boyd, 1987; Daily & Dalton, 1992) and owners with other managers (Birley & Norburn, 1987). Schein (1968), among others, has said that the professional manager was more objective when making decisions.

One professional manager who may be comparable to the entrepreneur could be the manager of a small subsidiary of a larger firm. Many large firms are diverse, with small units scattered geographically over a wide area. Each small unit is in some cases run much like an independent small business. These smaller, self-contained businesses are flexible and responsive to their environments and to their customers, much like entrepreneurs. The general managers of these small units may provide us with a frame of reference and a source of management information that could help us understand how entrepreneurs could be more successful at managing their new firms.

There are many starting places in a study of managerial skills, but if entrepreneurs create new organizations with new jobs, then one appropriate place to begin would be in the area of human resource management. To achieve success, growth and viability, a firm needs employees who could be productive and committed to helping the organization succeed. The ability to find and keep good employees, to interact with employees, and to create a climate for their performance could have a positive impact on the survival of the new firm (Kilmann, 1990), Some successful entrepreneurs have given much of the credit for their success to their employees (Hofer & Sandberg, 1987). …

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