"The study of human resource management has been invigorated by the promise that there is a best-practice, high-involvement management that can guarantee superior organisational performance" (Wood, 1999).
This paper is structured to critically assess the differences of human resource management (HRM) in small to medium sized enterprises (SME's) with comparison to large organisations. Initially this will provide the fundamental processes involved with the implications of HRM in all organisations. The differences, or lack thereof, of HRM polices, are derived from the vast difference in the sizes of the respective organisations. Research shows that HR practices also vary extensively between small firms (Dumberlry and Walley, 1995; Julien, 1998; Bacon et al, 1998) and are often determined by the ideology and pluralistic goals of the small business owner (Kock and De Kok, 1999; Wagar, 1998). Anderson (2003) takes this one step further by claiming that HRM in SME's is not ambiguous and homogenous phenomenon. On the other hand, HRM in large organisations is more about the relationship between strategic management and employee relations in the firm, and focuses on the overall direction of the organisation in pursuit of its stated goals and objectives. Other central issues examined are recruitment, training, performance, pay, management theories, flexibility, and employee retention.
There are around 4.3 million SME's including 3.1 million sole-traders or partners with no employees, and they are the driving force behind a large number of innovations and contribute to the growth of the national economy through employment creation, investments and exports. Smalls firms, (0-49 employees) represent 99.3% of all UK businesses, and over 51% of all UK economic activity. Only 26,000 medium sized (50-250 staff) and 6,000 large firms (250 or more staff) exist in the UK and represent the other 49% of the economic activity (www.dti.gov.uk/statistics). Due to the nature of SME's, each individual employee would represent a substantive part of the workforce, thus increasing the importance of every single HR decision (Bacon et al, 1998). In larger organisations, HRM plays an equally significant role in larger organisations too, because of its impact on performance outcomes it has a strategic role to play in business management, and merits careful attention by practically all types of manager, irrespective of functional responsibilities (www.bized.ac.uk). Lado and Wilson (1994) have suggested that HRM practices in large and multinational corporations "can contribute to sustained competitive advantage through facilitating the development of competencies that are firm specific, produce complex social relationships and generate organisational knowledge." Therefore, aside from the number of employees employed by the firm, the importance of HRM is widely recognised as vastly important to large organisations, and it has also been observed that SME's consider their HRM problems to have top priority (Hornsby and Kuratko, 1990; Huang and Brown, 1999).
An interesting difference concerning small firms is their recruitment policies. They make extensive use of job-tryouts (Duberley and Walley, 1995), which are inexpensive and very well suited to evaluate the actual fit of a person with the implicit demands of the job. The personal atmosphere of small firms is reflected in the high use of informal procedures like job posting and bidding (Deshpande and Golhar, 1994). Small firms are also more likely to make the use of recruitment agencies to provide them with temporary workers for period of heightened seasonal activity, and employ a number of part-time workers due to the cheaper labour, and also providing more flexibility to the owner / manager and the employees. However, within larger organisations, recruitment and selection are critical...