Exploring the potential of high performance work systems in SMEs

Abstract

Purpose -Aims to explore aspects of employee relations in firms included within The Sunday Times list of the UK's "Best Small Companies to Work For", focusing in particular on the use of high performance work systems (HPWS), and the way they impact upon performance in these businesses. Design/methodology/approach -The research is based upon a postal survey supplemented by detailed face-to-face interviews with CEOs in 60 per cent of the ranked firms. Findings -The SMEs studied are found to be highly successful in terms of sales and employment growth. Our analysis suggests that the common explanation for enhanced business performance in terms of HPWS (coherent bundles of human resource management practices that function synergistically and thus have more effect than might be expected from the sum of the parts) is a valid but partial. The bundles employed in these businesses are synergetic, but the enhanced outcomes produced need to be understood in terms of the system as a whole, not just the more concrete practices that are normally considered. Research implications/limitations -While there is a need to explore further some of the findings through larger scale qualitative research, we contend that the deeper understanding of HPWS emerging from this approach is important to the formation of effective policy in relation to the small business sector. Originality/value -It is suggested that the cultures, values and norms established within the businesses are necessarily part of the system and that they play a fundamental role in shaping, empowering and reproducing the practices used.

High performance work practices in small firms: a resource-poverty and strategic decision-making perspective

“…The decision to delegate and empower employees will be made more quickly by entrepreneurs who have a better understanding of the added value of best practices. Supportive findings for this reasoning were reported by Drummond and Stone (2007) who found that in a population of best small firm employers, owner-managers stated that they had a strong belief in the advantages of involving employees in teamwork, in developing the firm strategy, in daily managerial routines and in designing their own work. These arguments lead to our third pair of hypotheses:…”

“…Therefore, whether HPWPs are adopted depends on the beliefs of the entrepreneur with respect to the benefits of HRMrelated interventions as a solution for business issues (Cassell et al 2002). This is illustrated by the finding that small firm owners consistently report that HR practices need to 'fit' their firm's conditions and needs (Drummond and Stone 2007;Harney and Dundon 2006). To further investigate this aspect, this paper builds on the decision-making models proposed by Cassell et al (2002) and de Kok and Uhlaner (2001) which hold that the decision by a small firm's management to translate a company issue into an HR intervention depends on both the owner-manager's ability to make sense of the issue at stake and his/her strategic choice to apply the available resources (time and money).…”

“…Career opportunities in larger organisations are also more likely to become formalised as roles become more differentiated (Davila 2005). Practices related to opportunity creation are less size dependent because these involve lower costs and can take place in organisations even when jobs are not clearly differentiated (Drummond and Stone 2007). Based on this argument, our first hypothesis is that:…”

“…Owner-managers are often reluctant to delegate HR responsibilities (Marlow 2002). Hence, the attitudes and knowledge of the entrepreneur will intervene in the translation of a particular need or problem into an HR intervention (Drummond and Stone 2007;Harney and Dundon 2006). According to upper echelon theory, the characteristics of key decision-makers interfere with rational decision-making (Hambrick and Mason 1984).…”

“…Strategic choice refers to the process whereby the entrepreneur decides upon a specific course of action that is to be taken by the firm in response to the (competitive) environment, the available resources and the design of the structure, rules and routines of the organisation (Child 1997;Edwards et al 2006). Indeed, when asked, small firm entrepreneurs commonly indicate that they critically evaluate the introduction and use of HR practices against the situation and needs of their firm (Drummond and Stone 2007). Together, these arguments illustrate that the decision of whether or not to implement HPWPs is as much a strategic choice as it is a result of resource constraints.…”