Determinants of Human Resource Management Practices in Small Firms: Some Evidence from Atlantic Canada

By Wagar, Terry H. | Journal of Small Business Management, April 1998 | Go to article overview

Determinants of Human Resource Management Practices in Small Firms: Some Evidence from Atlantic Canada


Wagar, Terry H., Journal of Small Business Management


Researchers with an interest in human resource management have often limited their investigation to large firms (Storey 1992). However, observers have recently called for more work examining human resource issues within small and medium-sized businesses (Purcell 1993). While smaller employers may be interested in tracking developments in large organizations, it should not be assumed that practices used by large firms are necessarily beneficial or practical for smaller businesses.

As observed by Ng and Maki (1993), little is known about human resource practices in Canada. This deficiency in the literature is not merely a Canadian phenomenon. Researchers in the United States have also noted the shortage of survey data documenting human resource management practices and their impact on firm performance (Ichniowski. Delaney, and Lewin 1989; Becker and Gerhart 1996). Furthermore, the absence of data on human resource practices is particularly acute with regard to small business (Rowden 1995; Flanagan and Deshpande 1996).

The current study, based on responses from just under 1,000 small employers in Atlantic Canada, attempts to address some of these gaps in the literature. This article has two major objectives. First, it provides descriptive data on the use of ten practices addressing different aspects of human resource management (HRM). Second, it examine the relationship between the presence of these practices and three employer characteristics (progressive decision-making ideology, union status, and organization size) using multivariate statistics.

Background

While success and failure in small business are often predicted using financial criteria, Marlow and Patton (1993) argue that the effective management of employees is also emerging as a key variable in the survival of small firms. They maintain that small firms frequently do not employ professional experts to manage human resource issues, are considerably less likely to be unionized (and thus have more freedom in determining their human resources strategy), vary markedly with regard to the provision of training, and often do not engage in strategic employee management with the goal of gaining competitive advantage.

Holt (1993) asserts that a firm needs a well-motivated, skilled workforce if it is to compete effectively in the global marketplace, and there is growing empirical evidence linking HRM activities and organizational performance (Becker and Gethart 1996: Ichniowski et al. 1996). While large organizations are undergoing massive downsizings and employee cutbacks (Cascio 1993; Cameron 1994), recruiting and keeping good employees represents a major challenge for many small firms (Hornsby and Kuratko 1990; Mathis and Jackson 1991).

Hornsby and Kuratko (1990) note that human resource management textbooks often contradict what happens in practice, and a review of Canadian HRM textbooks reveals a preoccupation with human resource practices in large firms with very. little attention to managing the human resource function in small businesses. Moreover, previous large scale empirical studies of human resource management in small firms are limited as Deshpande and Golhar (1994) and Flanagan and Deshpande (1996) observe, most of the past research is conceptual or descriptive in nature. Still, the empirical literature addressing human resource management issues affecting small business is instructive.

Deshpande and Golhar (1994) concluded that a number of workforce characteristics (such as concern for the firm's success, ability to inspect work, worker flexibility, ability to work in groups, and self-discipline) were perceived to be more important in smaller firms. Using Canadian data, Ng and Maki (1993) found small and large firms differed in their ranking of the importance of HRM activities; for smaller firms, the three most important activities were the "reraining function" (which included administering personnel records, payroll processing, health and safety compliance, public relations, and vacation processing), the "obtaining function" (which involved pre-employment testing, recruiting, and hiring), and the "identifying function" (which included human resource planning and job evaluation). …

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