Magazine article Journal of Services Research

HUMAN RESOURCE MANAGEMENT ISSUES AS GROWTH BARRIERS IN PROFESSIONAL SERVICE FIRM SMEs

Magazine article Journal of Services Research

HUMAN RESOURCE MANAGEMENT ISSUES AS GROWTH BARRIERS IN PROFESSIONAL SERVICE FIRM SMEs

Article excerpt

INTRODUCTION

Small and medium size enterprises have never before been so important in market economies. Entrepreneurs are now presented with greater opportunities as changes in both government microeconomic policy, and the activities of corporate businesses have helped raise awareness of the value of small firms. Governmental moves towards deregulation and privatisation have created niches for small firms to offer more specialised services within theses sectors. Corporations reengineering and streamlining their internal processes have created opportunities for managers to spin-off the less profitable areas of corporate businesses, creating new start-up ventures. Consumers have also demanded a greater choice in the consumer goods on offer, creating further specialist niche positions for new ventures. Of the UK's 3.7 million businesses in 1999 over 2.3 million were in the SME category. The service sector accounts for 23% (DTI 2000) of UK business which makes this the second largest segment of business, the first being production at 27%.

SME-DEFINITIONS

For the purpose of this study it is intended to use the definitions of an SME as used by the Bolton Committee (DTI 2000) in its 1971 report on small firms. This states, "a small firm is and independent business managed by its owner or part-owners and having a small market share", Section 249 of the Company Act of UK. 1985, states that a company is "small" if it satisfies at least two of the following criteria.

* A turnover of not more than £2.8 million.

* A balance sheet total of not more than £1.4 million.

* Not more than 50 employees.

A medium sized company must satisfy at least two of the following criteria :

* A turnover of not more than £11.2 million;

* A balance sheet total of not more than £5.6 million

* Not more than 250 employees

For statistical purposes, the Department of Tread and Industry (DTI), UK usually uses the following definitions:

* Micro firm : 0 - 9 employees

* Small firm : 0 - 49 employees (includes micro)

* Medium firm : 50 - 249 employees

* Large firm : over 250 employees.

RESEARCH OBJECTIVES

It is the intention of this study to look at the growth issues typically facing entrepreneurial start-ups and firms. The aim is to focus on issues of a Human Resource nature and to consider how these act as growth barriers. More specifically, this will be considered for PSFs as they rely solely on 'human capital' as their only source of production, and because the complex nature of professional working environments give rise to particular management challenges. To clarify the geographical nature of the study, the research and issues discussed are based, for the most part on firms located in the UK. Many of the issues discussed would, however, hold for a far wider geographical base of similar firms. By classification this study will consider a firm's size based upon its number of employees and not its revenues.

This study has the following objectives :

* To clearly define what an SME is by means of literature review.

* To establish, by way of case study and survey, to what extent SME's will encounter barriers to growth at specific stages of development.

* Define the symptoms of such potential barriers to growth through questionnaire and case study.

* Identify more specific growth issues within SME Professional Service Firm (PSFs) and establish whether these are unique to this sector.

* Develop and recommend strategies to avoid or overcome such barriers.

METHODOLOGY

The research methods utilised in this study were entirely qualitative rather than quantitative. This was due to both the focused nature of the study, and the time frame available for research. The research fell into two distinct categories. The first area of research looked at generic growth barriers faced by SMEs in general. The research set out to establish the existence of 'growth barriers' that would be likely to exist in new or small businesses during growth phases. …

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