Human Resource Management in Small Business: Critical Issues for the 1990s

HUMAN RESOURCE MANAGEMENT IN SMALL BUSINESS: CRITICAL ISSUES FOR THE 1990'S INTRODUCTION The practice of effective personnel management is one that small businesses need to develop and improve as they expand and grow. The vast majority of businesses in the United States today employ fewer than 100 people and yet current research conducted in the personnel field tends to focus on larger firms (over 100 employees) that employ full-time personnel specialists. One study of personnel functions in smaller firms found that the areas of accounting, finance, production, and marketing all take precedence over personnel management (McEvoy 1984). In many cases, the owner of a small business handles the personnel functions since they are usually limited when the firm employs only a few people. Obviously, an extremely small firm with two or three employees may not develop sophisticated personnel systems; however, there are numerous business that are categorized as "small" that employ a large number of people and need effective personnel policies for their workforce. A survey conducted by Hess (1987) showed that small business owners rank personnel management as the second most important management activity next to general management/organizational work. However, while small business owners/managers consider personnel management to be an important issue, business management textbooks do not devote enough coverage to the relevant personnel management concerns for small businesses. Even though personnel management was the second highest ranked management activity, Hess found that small business management textbooks only devoted a small percentage of space to discussion of personnel management topics as compared to other topics such as finance, marketing, or planning. Thus, as personnel practices begin to emerge in importance for smaller firms, the literature is beginning to show an increase in actual empirical data on this topic. The purpose of this article is to examine the future trends in personnel practices as perceived by the owners of small firms. In order to examine any changes in perceived concern as a small business grows, this study focuses on three sizes of small businesses: 1-50 employees, 51-100, and 101-150. THE RECENT LITERATURE The recent literature is replete with articles on various issues in personnel management that relate specifically to small business. Topics include benefits (Nation's Business, December 1988), training (Curran 1987), employee leasing (Bacas 1988), selection (D & B Reports, May-June 1987), and strategies for human resource management (Finney 1987). As illustrated by these articles, the bulk of the recent literature dealing with personnel issues specific to small businesses appears to be more conceptual in nature than empirical/data-based. However, a few researchers have examined particular aspects of the personnel field through empirical research. Amba-Rao and Pendse (1985) surveyed the compensation and maintenance practices of 78 small firms ranging in size from fewer than 25 employees to 300 employees. Their study found that most small firms lacked any systematic or rational approach in their compensation practices. Little (1986) examined the personnel functions in 275 small firms employing fewer than 100 employees and, more specifically, who in the organization performed those functions. This study found that typically the owner of a small business with up to fifty employees handles all of the personnel duties himself. Sixty-two percent of firms employing 50-100 employees had one or more full-time personnel managers. However, even in these larger firms, the owners retained certain important personnel functions for themselves. This indicates that personnel is one of the functional roles handled by most small business owners. Verser (1987) interviewed small firms in the midwest to examine the perceptions of male small business owners concerning their control over personnel practices. …