Human capital (i.e., the knowledge, skills, and abilities of employees) is one of the primary factors a business can rely on to differentiate their products or services and build a competitive advantage; however, few studies directly guide managers of small and growing firms through the people management issues that they will face through the lifecycle(s) of their business. This manuscript is designed to contribute to the body of research focusing on strategic human resource management within small and growing businesses in two meaningful ways. First, the authors present the results of two studies designed to examine the selection, training, and compensation practices currently utilized by a national sample of small business managers (N = 1503) across a wide range of industries. Second, the authors present an evidence based framework to guide owner/operators of small and growing firms through the important decision points to be considered when developing their human resource strategy to ensure that it aligns with, builds upon, and supports their business strategy.
When entrepreneurs and business executives develop a business plan, they recognize that a great line of products or services helps a company achieve, and maintain, a competitive advantage in the marketplace (Porter, 1980). For instance, the founder of Coyote Logistics (based in Lake Forest, 111) based his business model around the practice of back-hauling (filling trucks with cargo from other clients for return trips) so that fewer of his trucks traveled with underutilized cargo space (Ine, 20 1 0). This unique service has caused Coyote Logistics to have a 1 3 ,846.8% growth rate since being founded in 2006. Similarly, W.L. Gore and Associates (based in Newark, NJ) base the majority of their products (ranging from dental floss to guitar strings) on their innovative fluoropolymer material. This unique product has helped position the company as a market leader in diverse industries ranging from rugged outdoor equipment to high-end transfer cables for electronic equipment. Finally, Zappos.com (based in Henderson, NV) provides another example of a company that has relied on a unique service/product line to grow from a small web-based shoe retailer to the largest on-line shoe retailer within 5 years of being founded (Durst, 2007).
The leaders at these businesses, and any other successful venture, clearly recognize the importance of identifying a unique product or service. Furthermore, successful managers also recognize the importance of efficiently managing their employees and developing their human resources. For example, CEO Jeff Silver credits Coyote Logistics success to an intensive two-month training program followed by a six-month mentorship program that is required for all new employees (Ine, 20 1 0). Additionally, W.L. Gore and Associates has consistently been ranked as one of the top 100 places to work in Fortune magazine's annual rankings by focusing on valid human resource management practices to identify and prepare associates to develop innovative uses for their fluoropolymer materials. Furthermore, throughout Zappos.com's rapid growth, the leaders consistently focused on designing training programs to help employees deliver quality customer service (Chafkin, 2009). These firms clearly linked their human resource management practices to their competitive business model. When business leaders are able to align a strong competitive strategy with a well designed and strategically focused human resource system, it has the necessary foundation that brings customers in the door (or to their website) initially and gets them to come back for repeat business (Cascio & Boudreau, 2008; Ulrich & Brockbank, 2005).
The recognition that human resource issues are important to small and growing firms is not new. For instance, Hess (1987) presented data that suggested that small business owners rank human resource related issues as the second most important management activity after general management. …