HRM Practices of Large and Small Canadian Manufacturing Firms

The 1990s has been labeled as the "decade of the small business" in Canada (Candalino and Knowlton 1994). While large Canadian firms are trying to be more competitive through downsizing, re-engineering, and decentralization, small firms are forging ahead (Candalino and Knowlton 1994; Morgan 1994). This is particularly true for small Canadian firms that are developing innovations with a clear competitive advantage and are leaders in "sunshine" industries such as high technology (Candalino and Knowlton 1994). Many of the firms are also picking up products and services dropped by large firms in their downsizing efforts. As a result, small Canadian firms are making major inroads in global markets (Morgan 1994). Small firms play a significant role in the Canadian economy. They contribute nearly 40 percent of Canada's Gross Domestic Product (GDP) and employ about half the labor force (Labbe 1994). Also, small businesses create nearly 60 percent of the new jobs in Canada. Hence their success is critical for the Canadian economy (Morgan 1994). Recognizing the importance of small firms in the stability of the economy, the Canadian government has set up programs like the Program for Export Market Development and Promotional Projects Programs to encourage their start-up and growth. Canadian provinces have also enacted legislation to encourage small business. For example, in Ontario, the Small Business Development Corporation Act provides tax breaks for individuals investing in small firms. However, regardless of this support, the success of small firms in the global market depends on their ability to manage human assets (Deshpande and Golhar 1995). Today's global market expects reasonably priced, high quality products delivered on time. Hence, small firms need a highly motivated, skilled, and satisfied workforce that can produce quality goods at low cost (Holt 1993). It is therefore important that small firms implement an appropriate human resource management strategy to develop such a work force. It is not surprising that, next to general management, small firms rank personnel management as their most important management activity (Hess 1987). Unfortunately, recruiting, motivating, and retaining employees are some of the biggest problems faced by small firms (Hornsby and Kuratko 1990; Mathis and Jackson 1991). However, in practice, other functional areas such as finance, production, and marketing usually get more attention than does personnel management (McEvoy 1984). For example, one study suggested that training in personnel management is not as critical as training in finance or marketing in small firms (Curran 1988). Even textbooks on small business management pay scant attention to personnel management issues (Deshpande and Golhar 1995; Hess 1987). Other research, however, suggests that inadequate and inefficient management of human resources has often resulted in low productivity, high dissatisfaction, and turnover among the employees (Mathis and Jackson 1991). Previous research has found lack of progressive HRM practices to be the leading cause of failures of small firms (McEvoy 1984). Thus there is little consensus among researchers regarding the role of HRM in the success of small firms. The empirical research in this study tries to resolve this issue by presenting a comparative study of small and large Canadian firms. Literature Review The purpose of a good HRM program is to recruit, select, motivate, and retain employees with such required characteristics as concern for the firm's success, ability to work in groups, and quantitative skills (Deshpande and Golhar 1994). Most of the published research in the U.S. and Canada investigating HRM issues in small businesses is conceptual and has concentrated on various HRM topics like selection, training and development, compensation, and industrial relations. For example, Gatewood and Field (1987) propose a model selection program for small business, while Curran (1988) suggests several training strategies for a small business. …