HRM textbook

CHAPTER 18 MANAGING HUMAN RESOURCES IN SMALL AND ENTREPRENEURIAL FIRMS 607
THE ENTREPRENEUR Entrepreneurs are people who create businesses under
risky conditions, and starting new businesses from scratch is always risky. Researchers
believe that small firms relative informality partly stems from entrepreneurs unique
personalities. Entrepreneurs tend (among other things) to be controlling: Owners
tend to want to impose their stamp and personal management style on internal
matters, including the primary goal and orientation of the firm, its working conditions
and policies, and the style of internal and external communication and how this
is communicated to the staff. 9
IMPLICATIONS These four differences have several human resource management
related implications for small businesses.
* First, their more rudimentary human resource practices may put small business
owners at a competitive disadvantage. A small business owner not using tools like
Web-based recruiting is accumulating unnecessary costs, and probably deriving
inferior results compared to larger competitors.
* Second, there is a lack of specialized HR expertise. 10 In most (larger) small
businesses, there are at most one or two dedicated human resource management
people. This makes it more likely that they ll miss problems in specific areas, such
as equal employment law, or occupational safety. This may produce legal or other
problems.
* Third, the smaller firm often hasn t the time or specialized expertise to understand
the legal implications for instance, of innocently (but inappropriately)
asking a female job candidate if she s thinking of starting a family.
* Fourth, the small business owner may not be fully complying with
compensation regulations and laws. Examples include paying compensatory
time for overtime hours worked, and distinguishing between employees and
independent contractors.
* Fifth, paperwork duplication leads to data entry errors. Small businesses often
don t use human resource information systems, so employee data (name, address,
marital status, and so on) often appears on multiple human resource forms
(medical enrollment forms, W-4 forms, and so on). Any personal data change
requires manually changing all forms. This is time-consuming and inefficient,
and can trigger errors.
Why HRM Is Important to Small Businesses
Entrepreneurs and all small business managers need to take these implications to
heart. Small firms need all the advantages they can get, and effective human resource
management is a competitive necessity. Small firms that have effective HR practices do
better than those that do not. 11 For example, researchers studied 168 family-owned
fast growth small- and medium-size enterprises (SMEs). They concluded that successful
high-growth SMEs placed greater importance on training and development,
performance appraisals, recruitment packages, maintaining morale, and setting
competitive compensation levels than did low-performing firms: These findings
suggest that these human resource activities do in fact have a positive impact on
performance [in smaller businesses]. 12
For many small firms, effective human resource management is also mandatory
for getting and keeping big customers. Most suppliers (and therefore
their suppliers) must comply with international quality standards. Thus, to
comply with ISO-9000 requirements, large customers either directly checked
for the presence of certain HR policies, or, satisfying their service demands
indirectly necessitated changes in, for example, [the small vendor s] training
and job design. 13 The accompanying Strategic Context feature provides an
illustration.