This paper presents the results of a survey of human resource (HR) activity in 78 micro enterprises (firms with 10 or fewer employees). The findings indicate that micro enterprises practice a wide variety of HR activities in-house with little outsourcing. Limited organizational support is provided in terms of HR personnel and formal HR practices. HR practitioners in this study have had significant experience, but limited formal HR education. Respondents have average perceptions of their ability to perform HR functions, and prefer short seminars and webbased instruction to gain additional HR expertise.
Nowhere has the economic impact of entrepreneurial activity been realized more than in the creation of new jobs (Deshpande & Golhar, 1994; Heneman, 2000; Homsby & Kuratko, 1990; Katz, Aldrich, Welbourne, & Williams, 2000; Reynolds, Hay, & Camp, 1999). In the United States, it is estimated that small business accounts for 51% of the private gross domestic product and that the majority of America's employers are by far small businesses (U.S. Small Business Administration, 2001). Indeed, the most recent data demonstrates that over 99% of the country's employers are small businesses, and that they employ more than half of the private workforce (U.S. Small Business Administration, 2002). Small companies created 76.5% of net new jobs from 1990 to 1995 and 75.8% of net new jobs from 1996 to 1997 (case, 2001). Furthermore, micro enterprises (defined for this study as firms with 10 or fewer employees) comprise 78.8% of all employing firms and engage 16.8% of the workforce (Headd, 2000). Small business is considered a vital stimulus for growth and development, providing millions of jobs, a variety of goods and services, and a general increase in national prosperity and competitiveness (Zahra, 1999).
Growing employment in small business has led to the recognition of the importance of human resources (HR) management by both practitioners and academicians. Audretsch and Thurik (2000) note that the trend toward smaller firms, coupled with the importance of the "knowledge based" economy, has highlighted the need for effective HR practices to attract and retain quality employees. Deshpande and Golhar (1994) suggest that inadequate and inefficient HR management often results in lower productivity and higher dissatisfaction, as well as increased turnover among employees. The personnel selected ultimately determine the heights to which the company can climb or the depths to which it can plunge (Scarborough & Zimmer, 2000). Hornsby and Kuratko (1990) recommend that the practice of effective HR management needs to be developed and improved if small business expects to expand and grow. In addition, research indicates that managers of small firms have ranked HR management as the second most critical management activity, superseded in importance only by general management activities (Hornsby & Kuratko, 1990). Further, Deshpande and Golhar (1994) reported that small firms identified selection and retention of a quality workforce as their most important HR management issue.
Research concerning small business has shown that a variety of differences exist between small businesses and larger firms regarding the sophistication, perspectives, and expectations of HR management practices. For example, research generally indicates that HR practices in small businesses are less sophisticated than those of sizable firms (de Kok, Uhlaner & Thurik, 2002; Deshpande & Golhar, 1994; Gibb, 1997; Heneman, 2000; Hornsby & Kuratko, 1990; Katz et al., 2000). Hornsby and Kuratko (1990) discovered that it is not unusual for the owner of a small business to manage its HR functions personally since the owner usually has limited resources. Typically, traditional HR activities in more significant enterprises focus on matching the knowledge, skills, and ability of the person to the job requirements, while small businesses are more concerned with finding employees they believe are a match with the founder's vision and have organizational fit (Heneman, 2000). …