Chapter 1: Introduction
The competitive and volatile markets have the need of effective use of their resources. Human resource is one of the major assets that the companies can use for their business success. The Strategic human resource management is the process of talent management within the organisation to align their workforce with the company goals, objectives and strategies. According to Collins (2021), organisations cannot achieve its expected goals without driving their resources to the right direction. This direction could be strategically decided by the Human resource departments through developing effective hiring, recruitment policies, searching for skilled workforce and training them to align their personal goals with company’s overall objectives. Hence, the importance of strategic human resource management lies in strengthening the internal support systems for the human resources so that the organisation can overcome the unpredictability.
Each country has their own set of definition of what the SMEs actually means. According to a standard definition provided by OECD (Organisation for Economic Co-operation and Development), Ther SMEs are the independent, non- subsidiary form that employs fewer than certain number of employees. The European Union has set the upper limit for SMEs employees to be 250; America has the limit of 500 and in some other countries, tis number is 200. The next important concept of the research is the firm’s performance. The firm’s performance could include the financial performance, employee efficiencies, production and organisational effectiveness.
The Federation of Small Businesses stated in their report that about 5.5 million small business have started in the year 2021. This accounts for 99.9% of the business population in UK. The employees number working in the SMEs are almost 16.3%. The SMEs account for half of the turnover from private sector business in UK. The turnover of the SMEs in UK as estimated in 2021 was £2.3 trillion.
Figure 1: Number of small and medium-sized enterprises in the United Kingdom in 2021, by sector
(Source: statista.com, 2021)
As seen in the above figure, the small and medium size enterprises are present in different types of business sectors. The majority of the commercial business are the part of the UK SMEs sectors. The study says that 60% of the total SMEs are housed in the construction business. The second highest grocer in the SME sector of UK is the professional, scientific and technical activities. The SMEs contributes a major share in the UK economy. The SME sectors, like all other business sector, has been immensely affected by the COVID 19 situation. The businesses registered as self- employed people are the major part of the SME sector in UK. During the pandemic the fall in the self -employed people was devastating for the industry. The number dropped by 8.6% which was in surge in last 20 years by 93.9%. Surprisingly, the micro businesses saw a growth in their business during the pandemic situations. The business turnovers are getting lowers after the pandemic. The situation is slightly under control at present as the small and medium businesses are getting back in to their usual routine.
Sector Overview
The role of human resource in the small and medium business are undeniable. The SMEs work with fewer number of employees in comparison to the large-scale businesses. Hence, the companies working in this sector have to depend immensely on their employee efficiencies. The wrong investment in the human resources could cause high loss for the company in this sector. This is the reason that after the pandemic, the employers of these sectors worked for improving their strategic human resource management plans. The concepts of the SHRM leads to the idea that the strategic human resource management can contribute in enhancing productivity of the firms. The targets of the company are achieved effectively through the SHRM and leads to the customer satisfaction. The association of the strategic human resource with the organisational performance has been shown in previous empirical studies.
The SME sector needs new opportunities in their business scopes to deliver with their full potential. This is the sectors that has an immense influence on the British economy. The strategic human resource management could be the way for mitigating the challenges of the sector and increasing its profit margins. As per Armstrong (2019), the tentative aim of strategic human resource management is to incorporate advancement in the flexibility of creativity and innovation. This way, the organisation develop their competitive advantage in the market. The human resources are one of the most important part of the SME businesses. Innovation and creativity are channelized in the organisation through the human resource support and skills. The small and medium business have limited financial resources. These enterprises most of the time copes with the situations and work for the greater outcomes in effective way (Jiang and Messersmith 2018). Therefore, the human resource management for these organisations have to be according to the need of the organisational objectives. The strategic human resource management does exactly the same for the employees in any sector. The management often fail to understand the need of the human resources in many instances like- integrating a change in the organisation, performance management or skill development of the employees within the context.
The problematic human resource management strategies can reduce the working capabilities of the workforce. This is the main problems area that this research is going to focus. The idea of strategic human resource management is not new in the SME management context. The challenges for the organisations lies in adopting the right strategy for their human resource management which will complement their business strategies., organisational objectives as well as the employee personal development. In most of the cases, the managers make their strategic decisions for change management according to the organisational needs (Boon et al. 2018). The external business environment is given priority while developing these policies for the company. This can lead to the wrong treatment of the employees and less engagement of the employees in the organisational ventures. The employees are needed to be motivated to be the part of an organisation in today’s competitive world. The adaptability of the workforce needed to be improved to fight against the odd of the markets and establish the small and medium businesses in the competition. One of the major problems that the managers of these SMEs are facing is the strategic execution of the human resource management. The companies are facing workforce issues like employee burnout, increased employee turnover rate and reduced satisfaction of the employees in the organisational context (Armstrong 2019). Along with that effective skill development of the employees are also getting challenging for the managers of the organisation. After the pandemic and with all other external barriers, the strategic human resource management could be a challenging task for the SME managers in UK. The lack of human resource support and skills might cause fall in the employee performance and therefore, the organisational performance at long run.
Problem Statement
Existing literature has the evidence that the workforce management is a crucial part of the organisational culture. This study is developed to understand, examine and analyze how the company managers of the SMEs in UK can use their strategic decisions making skills in developing effective human resource strategies. The strategic human resource management is related to the employee performance and managerial decision making. Responding to the changes within the organisation can be a challenging task for the workforce. The employees might resist the change as they are comfortable in working within work process. The change in the organisations are common and necessary (Boon, Den Hartog and Lepak 2019). It is the responsibility of the organisational managers to incorporate the change within the organisation through their human resource performance. The managers in the SMEs often finds it difficult to respond to the needs of the employees in the change process. This study develops the plot for connecting the strategic human resource management with the organisational performance. The change management is the part of organisational operations and performance. Hence, this study would prove effective for the managerial understanding of the human resource management aspects at the time of change or in general contexts.
There are a number of studies like that of Han et al. (2019), that states that strategic human resource practices are linked to the organisational performances. The human resources are the integral part of the business organisations. The SMEs are hugely dependent in the innovation and change within their organisations. Hence, their employees must have the skill to overcome the change related challenges. The managerial support system of the organisation gives strength to the performance of the employees during the change management process. This study will help in developing the idea about the role of the strategic human resource management in the company performance enhancement. In order to do so, the study will have a primary research method adopted for analyzing the case of the UK SME industry. The study will develop the case of the small and medium enterprises in UK to understand the crucial factors in their strategic human resource management. Working upon the two crucial variables- strategic human resource management and organisational performance, would provide insight about the UK SMEs future course of actions for developing better business scopes.
The aim of the study is to examine the relationship between strategic human resource management and organisational performance of SMEs in the United Kingdom.
The study objectives are stated below-
- To review the relevant literature on the concepts and theories of Strategic Human Resource Management and SME performance.
- To explain useful ways to implement practices related to Strategic HRM to enhance organisational performance,
- To investigate the relationship between human resource management practices and the business’s performance, in terms of financial result, turnover revenue and others as well.
- To recommend Strategic HRM practices that may lead to improved organisational performance.
Research question:
What is the impact of strategic human resource management on the organisational performance of SMEs in UK?
Hypothesis:
H0: The strategic human resource management has no positive relation with the organisational performance in the SMEs of UK.
H1: The strategic human resource management has a positive relation with the organisational performance in the SMEs of UK.
The limitation of this report is that the study has been conducted on the specific sector of a country. The SMEs has only been taken account while developing the research context. The study could have broader implication if the other sectors were introduced in the study to analyze the impact of strategic management of human resources. The study scope has been confined in the SMEs of UK and therefore, the study results do not include the contexts for other sector or countries. The study results will collaborate only with the area of research that is similar to the research topic and have the SME context in it. These are the study limitations that could emerge after the completion of this research work.
Rationale for the Study
The project is divided in five chapter; the first chapter is Introduction where the researcher has introduced the topic, aims and objectives of the research. The second chapter is the Literature review chapter where the existing literature on the given topic has been analyzed. The third chapter is Methodology chapter that has the methods and techniques of the research work. The fourth chapter is the data analysis and discussion chapter. The data analysis has been done in this art of the project. Finally, the conclusions and recommendations has been provided in the fifth chapter of the project. An implementation plan has been attached with the recommendations for the successful execution of the recommended measures by the SMEs.
Strategic human resource management in small and medium enterprises (SMEs) has received much attention from several researchers through improving organisational performance and generating a competitive edge. Despite its broad academic and practical interest in Strategic Human Resource Management and its impact on organisational performance in the context of SMEs in the UK, some empirical contributions could be found. The empirical research in strategic human resource management focuses on a wide range of topics, as in many other areas of scholarly research in business activities.
According to Boon et al. (2018), strategic human resource management can be defined as a practical function of human resource management based on competency and skills. The approach focuses on human resource development for the competitive advantage of the organisation. With this approach, it is easy to determine how SMEs can achieve their objectives through integrated HR strategies and policy approaches with the help of relevant staff. As stated by Armstrong and Brown (2019), strategic HRM can also be seen as aspects of employment relationships such as recruiting new staff, effective coaching, performance management, employee relationships, and development. Further, it can be defined as a branch of management that focuses on how people use their skills and abilities in an organised way to efficiently play their role in achieving business objectives.
Fahim (2018) argued that SHRM is the extent to which human resource management is considered when formulating and implementing a business or corporate strategy. It is also defined as a pattern of planned human resource deployment and activity to enable SMEs organisation to reach its goal. The definition suggests that the primary goal of strategic HRM is to contribute to organisational performance (e.g., to achieve organisational goals, even if performance is determined). As apprehended in the definition above, HR deployment reflects the fundamental assumptions behind the (positive) concept of what HRM is and what it does. As such, it responds efficiently and accurately to the environment of an organisation and complements other organisational contingencies and systems (Emeagwal and Ogbonmwan, 2018).
In contrast, Sareen (2018) described strategic human resource management as an asset for investment, as well as human resource management as strategic instead of administrative, reactive, and prescriptive. In addition, strategic HRM involves developing and executing a set of proactive HR practices or policies that ensure an organisation’s human capital contributes to accomplishing the organisation’s objectives.
Armstrong and Brown (2019) stated that the initial attempt to build a connection between organisational performance and strategic human resource management depends on the belief that enhancing people management inevitably leads to more substantial performance growth without attempting to correct these links theoretically. It has now been contended that the subject is no longer theoretical that various theories, such as role behaviour theory, general system theory, human capital theory, resource dependence theory, transaction cost theory, agency theory, role behaviour theory, resource-based theory, and institutional theory of the organisation had been used to illustrate the relation between the organisational performance and HRM. This section will discuss two main theories that underlie organisational performance and the SHRM, including resource-based and human capital theories.
Human Capital Theory
The human capital theory is formulated by Rosen and Becker, who stated that individual employees have a set of abilities or skills that they can develop or improve through proper education and training. This theory states that people can enhance their efficiency through better skills training and education (McClanahan, 2017). The human capital theory has long been considered an essential resource in many organisations. The search for sustainable competitive resources is gradually geared towards organisational capabilities internally and, more specifically, to the strategic management of human resources since technology and capital become increasingly accessible to almost everyone everywhere (Pasban and Nojedeh, 2016).
As stated by Ozyilmaz (2020), human capital refers to skills, knowledge, experience, and production capability that have economic value for the organisation as these can allow people to be adaptable and productive. Therefore, people become human capital in the organisation. From the perspective of microeconomics, this theory shows that human beings have the ability, skills, and knowledge to create economic rents. Economic rent represents the benefit of formal economic income. Similar to other assets, the market has the value of human capital, but unlike other assets, the potential value of human capital can only be realised with the cooperation of individuals because substantial investment requires a cost to improve the knowledge, capacity, and skills of employees. It would only be fair for the company if it made a return to the future through overall solid productivity and organisational performance (Kolomiiets and Petrushenko, 2017).
Marginson (2019) argued that all costs associated with acquiring productive behaviours from personnel, including retention, motivation, and observation, are human capital’s investment in anticipating the future return. Individuals have abilities, knowledge, and skills about the economic value of an organisation (Nason and Wiklund, 2018). Therefore, this increase in substantial investment, through such a training program, will be justified only if it creates future returns in the company with increased productivity. Thus, since employees are willing to contribute to the organisation, SMEs will invest in specialised human resource management activities to enhance organisational performance and individual productivity. In this regard, McClanahan (2017) stated that knowledge is the most important competitive resource owned by an organisation.
Resource-Based View Theory
Then again, the resource-based view theory was proposed by Wernerfelt in 1984, is regarded as a theory of strategic management, primarily because of its practical significance to contemporary management practice. This theory is usually taken to recognise the linkage between organisational performance and strategic HRM. The three kinds of resources related to the organisations are (1) human resources (skills, knowledge, and experience of employees), (2) physical resources (equipment, technology, and plant), and (3) organisational resources (structure, planning systems, controlling and monitoring, activity, social relation between and within the enterprises and external contingencies) (Hitt, Xu and Carnes, 2016).
However, Alvarez and Barney (2017) referred to human resources as the accumulation of abilities, knowledge, and skills that a person possesses, which an organisation has developed into identifiable expertise over time. Davis (2017) conferred the effects of resource-based theory on SHRM practice and theory. The basic premise of this approach is that a company can be successful if it achieves and retains a competitive edge. In addition, the resource-based theory is based on the idea that the HRM system of the organisation can be a source of competitive benefit. Resources can be considered a source of sustainable competitive advantage if they meet the standards of inimitability, rarity, value, and non-substitutability.
As stated by Kay (2018), strategic human resource management is realised to maximise the competitive edge, sustainability, and efficiency of small and medium enterprises. Furthermore, strategic HRM refers to a prudent approach to planning, managing and designing employees, recognising individuals as strategic resources, and matching HR activities with business strategies.
Shafeek (2016) argued that a new dimension to better understand how HRM practices can contribute to SME success. The HRM practice is a primary factor that can affect the performance of SMEs. An organisation that implements HRM practices with dedication is more advanced than its competitors because these practices influence other variables, such as job satisfaction, competitive advantage, service quality, employee commitment, and financial performance, positively and towards overall organisational performance. However, Adla, Gallego-Roquelaure and Calamel (2019) argued that HRM practices are related to higher profits, improved innovation capability, and higher profits. Organisation size and financial availability affect the HRM practices adopted by SMEs. If sufficient financial viability determines the reasons for the implementation of HRM practices, a funding facility must be given to enhance the capacity of SMEs to implement HRM practices (Dundon and Wilkinson 2018).
As stated by Sancho et al. (2018), HRM is a coherent and strategic approach to managing the organisation’s most valuable assets: those who work there who contribute collectively and individually to achieving their goals. As said by Zehir et al. (2016), the basic notion of strategic HRM is to organise people in a way that helps organisations achieve a competitive benefit over their competitors. However, Dundon and Wilkinson (2018) argued that SHRM involves the design and implementation of an internally consistent set of practices and policies that make sure the human capital of an organisation (combined abilities, knowledge, and goals) contributes to the accomplishment of business goals.
HR practices
Zehir et al. (2016) said that there are four core HRM practices: resourcing, compensation and appraisal, progress and training, and staff relations, like union-management relations. In terms of staff resourcing, it has repeatedly emerged as a significant problem for small and medium enterprises because it is considered that SMEs have fewer workers, and therefore every single staff has a significant role to play in the growth and survival of the organisation. For many reasons, however, new staff recruitment is one of the most challenging issues faced by SMEs. In this regard, Sancho et al. (2018) stated that time and the ability of SMEs to hire employees successfully is assessed by employers as a significant aspect affecting business success.
Training and Development
Lai, Saridakis and Johnstone (2017) stated that small hotels tend to have job-specific and informal training that focuses on immediate problem solving rather than long-term human resource development. In line with this, Hamadamin and Atan (2019) stated that the SHRM in small enterprises tends to be responsive and focused on the issues emphasised at the time. In terms of career development, Wuen, Ibrahim and Ringim (2021) noted that SMEs are less likely to offer career development opportunities. In addition, Iqbal (2018) revealed that smaller organisations are less expected to have an employer-based training program and less regular performance appraisals. Hence, training and development program encourages the employees to improve their productivity and help organizations to reach business goals (Baregheh, Rowley, and Hemsworth, 2016)
Employee/labour relations
SMEs have informal employment relations and tend to be resilient to employment and legal regulations. It is consistent with Zehir et al. (2016) reported that smaller sites as part of a larger organisation had more formal employment relationships than individual SMEs. Furthermore, they also reported that SMEs usually do not have in-house human resource skills or more advanced human resource systems, for example, performance-based pay systems or family-friendly work practices. Strategic HRM helps organizations build strong relationship between employees and employers in order to reduce the workplace issues.
In brief, SMEs seem to be using informal HR systems; however, these systems may still be sophisticated. It has been determined that informality benefits SMEs, as research shows that informality works well and results in better productivity in organisations with less than twenty staff. It specifies that the importance of HR practice must be ‘most appropriate’, meaning that smaller organisations must adopt informality whether it fits into the UK context.
Gledson and Phoenix (2017) defined organisational performance as a concept that measures the position of an organisation within the market and its capability to meet the needs of its stakeholders. This can be recognised as a level of operation that matches performance objective (primary measure) and meets customer requirements (secondary measure). On the other hand, Senaratne and Wang (2018) argued that organisational performance measures how well an organisation is performing to achieve its goals and objectives, which enables an organisation to effectively measure the achievement of its goals.
According to Baregheh, Rowley, and Hemsworth (2016), organisational performance is the extent of an organisation’s success in reaching its objectives. Organisational performance can be measured based on both qualitative and quantitative variables. Quantitative performance measurement is generally used by large organisations, such as production (operating expense ratio, the number of products sold), financial outcomes (ROI, ROE, and ROA), profitability and marketing (number of consumers). In addition, qualitative performance measures are goal achievement, discipline level, individual behaviour and effectiveness in the organisation, leadership perception on organisational performance (Matthews, MacCarthy, and Braziotis 2017).
Strategic Talent Orientation
According to the research by Gledson and Phoenix (2017), strategic talent orientation will improve the performance of SMEs in the UK. The research shows that organisations can pool resources and invest in innovation to do better. The performance depends on the strengths of the organisation to obtain sufficient competencies for business continuity. But most SMEs tend to nurture talent development activity in a restricted way and struggle against external challenges in the marketplace (political and economic crisis, competition, and others). In this sense, the success of SMEs in market performance will reflect how talents have been “processed” by human resource management practices in a changing external environment.
Employee Performance and Behaviour
The business performance of an SME depends on its workforce. Sethibe and Steyn (2016) showed that employee performance and behaviour can lead to a major competitive advantage in SMEs. Employee performance has been generally used as an indicator to determine the overall performance of an organisation. It is also true for an SME. They have expectations about the nature of SMEs in terms of commitment of effort and time. However, it can also be a source of conflict for staff over work-family balance. Thus, the SME environment can be more stressful, which can lead to poor performance of employees and reduce customer satisfaction. Hence, to reach the objectives of SMEs, employees need to be adequately managed (Boakye et al., 2020).
The sustainability and success of small and medium-sized enterprises depend on their capability to perform. However, SMEs face many challenges due to the weak economy while reaching suitable performance. The theory is called resource-based view (RBV) is that the success of a company depends on its internal resources. A successful organisation has well-built internal resources in controlling almost every situation. Internal resources can be divided into resources and capabilities (Matthews, MacCarthy and Braziotis, 2017). The abilities and talent of the workers and their capabilities and knowledge are indeterminate elements. Entrepreneurial orientation, capabilities, and originality are the organisational strengths that control the performance of SMEs. An intangible asset consistent with RBV is the ability to handle this uniqueness and ability in an organisation with decent knowledge management. According to Ma, Guo and Shen (2019), the role of commitment is significant for a small and medium enterprise that ultimately leads to superior organisational performance.
Organizational Innovation
According to Usai et al. (2018), organizational innovation is organisations’ tendency to support and engage in new ideas, creative processes, and experimentation that could generate new services or products. On the other hand, innovation impacts knowledge management, directly affecting organisational performance. Innovation and organisational performance are closely involved. If SMEs can manage fundamental knowledge, they will have various resources to stay ahead of the competition. SMEs ensure innovative approaches make higher progress and benefit in various ways. Hence, innovation in SMEs is most significant for achieving performance (Liu et al., 2017). Using technology, innovation can lead to a new idea for developing services and products. Furthermore, risk tolerance is a manager’s desire to oblige a risky resource with a high probability of expensive failure. Then again, pro-activeness means looking for new opportunities that may or may not be relevant to the present business sector, adding innovative processes/products and removing deteriorating or out-dated business (Khan, Tufail and Ali, 2021).
Workplace environment
According to Genc, Dayan and Genc (2019), the workplace environment is the most important factor for employee performance. The workplace environment affects the job performance of employees. The effects of the work environment can be negative or positive. Additionally, workers feel comfortable in a conducive and peaceful work environment. Their work performance will be better if they are satisfied with their work environment. Chowhan (2016) argued that when staff feels happy in their workplace, the level of organizational productivity will be improved. It can be stated that a good work environment is one where individuals can work in a healthy, safe, comfortable, and ideal way.
Employee Engagement
Kazimoto (2016) argued that a company with high employee engagement increases consumer satisfaction and reaches superior efficiency and productivity, as well as the benefits of healthier and safer workers with lower turnover and absenteeism. When workers are engaged, they plan their work, make strategic decisions, and bring more passion to their work. It enhances the growth and productivity of a company. While the staff is involved in decision-making, they achieve a personal and professional success and stake within the company. Cesário and Chambel (2017) stated that this commitment makes improved productivity because workers are actively involved in different organizational aspects and want their effort to be successful.
Internal career development scopes
Training and development program provide many benefits. It improves employee performance, minimizes staff turnover, improves organizational culture, and increases employee productivity (Al-Awlaqi, Aamer and Habtoor, 2021). The primary goal of internal career development in the organization is to develop skills and knowledge and change the behavior or attitude of workers. Koohang, Paliszkiewicz and Goluchowski (2017) argued that training and development lead to a more positive attitude to profit orientation, improve the job skills and knowledge at each organization level, encourage staff to reach business objectives, and boost the self-esteem of employees.
Rewards and Recognition
Staff recognition and reward have been shown to increase team effort, customer satisfaction, organizational values, and inspire specific behaviors among employees. This leads to more employee engagement that enhances retention and supports developing a more positive workplace. Hence, the staff is more involved in their job while their achievement is acknowledged, either verbally or through rewards (Shanker et al., 2017). According to Hassan (2016), employees who strive to achieve this goal are more productive because they become more efficient with the energy and time to achieve those goals and perceive better outcomes. While staffs invest more in what they do and are proud of it, they gain the ability to take control of their work and complete them properly. They will ensure that the work is of high quality while they are being measured against other staff or working for rewards (Bradler et al., 2016).
In addition, innovation is great hope for the growth of various small and medium enterprises in the UK, as innovation is required for entrepreneurial action. In other words, innovation requires knowledge from various suppliers, employees, and consumers. For this reason, knowledge management is vital for the performance of SMEs through increasing innovation.
Moustaghfir, El Fatihi and Benouarrek (2020) studied the performance level and HRM practice in SMEs in the UK. Georgiadis and Pitelis (2012) noted that the performance of SMEs is determined by different factors, for example, marketing, strategies, human resource management (HRM) practice, management process, technology (production and information technology) and others. As stated by Vrchota and ?eho? (2019), the adoption of these practices and how well they are implemented depends on the staff and management of the organisation. However, Prouska, Psychogios and Rexhepi (2016) argued that it is hard to achieve the anticipated outcomes without positive support from employees, while other practices seem within the organisation, such as management process, marketing strategy, and network. Wuen, Ibrahim and Ringim (2021) showed that small and medium manufacturing businesses use formal human resource management practices the same way as large corporations. It can be stated that informal HRM practices were positively associated with superior organisational performance. More formal HRM practices are observed in an SME where the number of employees is extensive, and product quality is a concern.
Mitchell, Obeidat and Bray (2013) examined the effectiveness of SHRM in accomplishing business performance in SMEs. The findings indicate that the organisational climate significantly restraints the connection between organisational performance and SHRM practice. Additionally, the results show that training, strategic alignment, selection system, job definition, and career planning are essential for the organisational performance level. Long, Ajagbe and Kowang (2014) studied the effects of SHRM on SME performance and conducted correlation analysis to assess the hypothesis and a significance level of 5%. The results obtained from these results show a robust positive association between the level of competitive performance and SHRM practice in the SME.
Knezovi?, Bušatli? and Ri?i? (2020) examined the relationship between organisational performance and human resources and collected evidence from small and medium enterprises in the UK. Their research considered human resource practices, such as job security, compensation, training and development, and information sharing. As said by Wuen, Ibrahim and Ringim (2021), compensation influences the organisation’s performance and employees as well as information sharing improves organisational performance. Sánchez, Marín and Morales (2015) argued that trust among employees is vital in small and medium-sized enterprises, so being able to collect relevant input for decision-making is essential for the success of the organisation. It is easier for SMEs to share information about their day-to-day activities for a smaller workforce, which makes staff feel a sense of belongingness and enhances organisational performance. However, Knezovi?, Bušatli?, and Ri?i? (2020) argued that training and development enhance the essential knowledge and proficiency of the organisation improves the performance of the workforce and an organisation.
Al-Tal and Emeagwali (2019) stated that the human resources assumption is that people are a main source of a company and organisational performance depends on the people. Various human resource processes and policies are effectively created and implemented, while HR will significantly impact organisational performance. Using human resource practices effectively, organisations can survive with efficient or effective traditional practices that prevent an organisation from achieving its goals. HRM practices with a focus on employees while implementing robust strategies positively impact organisational performance in both large and small organisations.
Various empirical studies have shown that the implementation of traditional HRM practices in SMEs is suitable for organisations of all sizes. The SHRM practice has been proven to positively impact organisational performance in providing training for staff, using a formal performance appraisal system, and selecting and recruiting (Khalil and Belitski, 2020).
As said by Rasool et al. (2019), HRM practice in SMEs includes selecting and recruiting staff, non-structured training, and compensation. This hypothesis is more supported by several empirical studies. Al-Tal and Emeagwali (2019) argued that this is a variable that contributes to more success in HRM in small and medium businesses.
Overall, it seems that HRM practice in SMEs has improved their organisational performance. Furthermore, similar opinions have been expressed by these authors who have assumed that the HRM practice or the relationship among employees, training, compensation, and development is directly correlated with organisational performance (Rasool et al. 2019). Prouska, Psychogios, and Rexhepi (2016) argued that formal HRM practices are positively associated with the organisational performance of SMEs in the UK.
This chapter summarised that strategic human resource management is the perfect way to use planning effectively and align with business objectives, use a rational approach to workplace and people management, and create systems based on SME employment policies and workforce strategies. This chapter has reviewed the impact of various strategic HRM practices on organisational performance based on the perspectives of different scholars. Several researchers have been interested in linking organisational performance and strategic HRM practice. However, most researchers focus primarily on large organisations, leaving a vast space to explore this field of knowledge in small and medium-sized enterprises.
Methodology in a study plays important role in developing the techniques, strategies and approaches. The study needs to have a methodological structure in order to fulfil its research objectives. According to Basias and Pollalis (2018), the research methodology provides scientifically sound results and contributes in research legitimacy. The researcher has made sure that all ethical considerations and other methodological justified approaches has been selected for this study.
The study has been done using the primary quantitative method. The direct experience of the employees from 30 SMEs of UK has been selected for this study. Inductive approach has been adopted in order to compliment with the quantitative strategy of the data analysis. The primary data has been collected in order to get an in depth understanding of the study needs and outcomes.
This study will develop its methods and strategies on the basis of the positivism philosophy. The positivism philosophy believes in the factual and scientific observations (Rutberg and Bouikidis, 2018). The study has collected the data from the primary resources and observed and analysed it from an objective point of view.
Justification for the choice
The reason for choosing the positivism philosophy for this study is to have a factual and scientific approach for the study. The researcher aims to understand the how SHRM influences the performance of the employees in the UK SMEs. Hence, the need for objective and scientific philosophical approach is necessary. Other hand that, the positivism philosophy relies on the quantifiable data. The quantitative data analysis is been complimented by the choice of positivism philosophy in this study.
The researcher has selected to use inductive approach to gain the study objectives and aims. The inductive approach is used when a researcher wants to reach in the theory from the general observations (Fryer et al., 2018). While the deductive approach is used to test a specific theory for a study. the justification for using the inductive approach for this study is stated below.
Justification for the choice
The inductive approach directs a researcher from bottom to top. The theories and data are collected, observed and applied in a specific context to build a theory. This study needs to analyse the impact of SHRM on a specific industry of UK SMEs. Therefore, the researcher has chosen to select the inductive approach to analyze the theories related to SHRM, observe the impact of SHRM on the SMEs and reach the results regarding the impact on specific SME sector.
The researcher designs in the social science studies are divided in to- exploratory, explanatory and descriptive design (Djafar et al., 2021). The researcher has decided to use the exploratory design for this study.
Justification for the choice
The reason for choosing thee exploratory design in this study is that the researcher wants to explore the various factors that are impacting the SMEs in UK and the impact of the SHRM on these factors to improve the overall performance of the employees in this sector. This exploratory research design has been useful to expand the study scopes and improve the research outcomes. The researcher was also able to explore the issues in strategy execution in the human resource management. The exploratory design is instrumental in recommending the effective solution to the SHRM problems in SMEs.
The research strategy that has been used in this study to answer the research question is survey. The researcher has used the survey tools to analysed the qualitative data. The case of the UK SMEs was taken into consideration while working with this study objectives.
Justification for the choice
The survey strategy has been selected to have the primary quantitative data analysis effectively. The researcher has selected the employees from SMEs of UK to survey about the impact on SHRM on their work performance. The close ended survey questionnaire has been useful to roved the detailed insight on the study. The study has become more directed by using the survey results as the quantitative approach is adopted for the survey results analysis. The employees were able to provide their working experiences and thoughts on the given topic trough this strategy.
Sampling is one of the most important part of the primary quantitative research. The researcher has used convenience sampling method for this study where the employees who have replied earlier has been selected. The convenience sampling is the non- probability sampling method where the samples are selected as per their availability and easiness to reach (Gupta and Thakkar, 2018). The researcher has studied about the top UK based SMEs through the governmental records and selected top 30 SMEs on the basis of their revenues. The researcher has then sent information of the study and email seeking permission of the SME managers to ask the participation of their employees. The employee’s lists have been collected from the SME owners and they were sent request for participating in this study. The first 100 employees who have responded from these 30 SMEs were selected randomly for the study. this was the convenient and justified approach for sampling as this takes lesser time. Other than that, the study is about the impact of SHRM on the employees. Therefore, the employees are at the receiving end for the SHRM strategies of the companies. The opinion of the employees is necessary for the study and hence, this sampling is justified for the study results.
The data collection technique chosen for this study was the primary data collection technique. The researcher has done his primary researches of theories through the existing literature and have compared it with the data collected from the primary resources like the employees of the SME sector. The participation was sent the survey forms link through email to fill in.
Justification for the choice
The primary data are effective in addressing the issues that are specific to the research objectives. The study needs to be done on the basis of the specific sector, i.e. the SMEs of UK. Hence, using the primary data ahs provided a more directed and better accuracy to the researcher. The researcher has the control over the data and therefore was able to address the specific problems that are apparent in the SME sectors in UK. Other than that, as the data has been collected recently the information are more up to date than the other secondary resources available in the study area.
The data collected from the primary resources has been analysed through approach. The researcher has used the survey strategy through questionnaire tool for reaching the data findings. The quantitative data has been analysed through the SPSS software.
Justification for the choice
The quantitative study would be more appropriate for the study than the qualitative one. This study concerns with the SME sector in UK. The specific sector has been taken into consideration in this study. therefore, the qualitative study would provide more depth and relevance to the primary data collection. The first-hand data needed to be analysed without any biases. The use of the numerical analysis method like the quantitative would make the study observations free from the research biases. Hence, the use of quantitative technique for the data analysis is appropriate and justified.
The ethical considerations in a primary research have an important implication. The vulnerable group of people were exempted from the study participation. The researcher of this study has made sure that all the participants has contributed in the survey with their full consent. In order to do so, the researcher has sent the consent form through email so that the participants know about the research topics, purpose and questions. The study was taken forward after receiving positive reply on the survey participant consent forms. The data privacy and confidentiality in data preservation has been maintained thoroughly. No personal information about the participants were used in any unethical way. The data has been used only for the academic use purposes and no commercial aspects. The researcher has collected data from the reliable sources and have cited all the secondary information in valid manner. Transparency, validity and fair research were the base of this study methods (Smith et al., 2020).
The accessibility issues in the study is related to the unavailability of some data resources because of the pandemic regulations. The researcher was compelled to have the surveys online as the COVID 19 protocols were implemented. The body language of the participants could have been a great observational aspect for the researcher which they have missed in the online survey method. The researcher was not able to access the libraries properly because of the same reasons. All the data were mostly collected from the online resources. Some of the online journals needed subscriptions of high amount. Those journals could not be accessed for the lack of subscription money.
The methodology shows that the study has been done using the primary quantitative approach to reach the research objectives. The impact of the SHRM on the performance of UK SMEs has been analysed on the basis of the first-hand experience of the employees working in the same sector. The positivism philosophy has helped the primary quantitative study to improve in scope. The research methodology for this study is appropriate and justified as it helps in achieving the stated objectives.
Figure 2: Gender
The research has included both the male and female participants in its context. As seen in the above-mentioned graph, the male and female participants for the study are almost same. While the 48% of the participants are male, 52% of the participants are female in this study. this shows that the SMEs sectors have the employees from both gender and inclusive. Therefore, the study findings have the insights of both the gender. This contributes to the data reliability and generalizability of the study.
Figure 3: Age
The age group that has been addressed in this study is divided in three groups- 20-30 years, 31- 40 years and 41 and above. Figure 3 shows that highest number of participants (47%) belong to the 31-40 years group. 30% of the participants are from the age group of 41 and above years. The rest of the participant falls under the 20-30 years age. This implies that the UK SME sector has the employees who are at their middle age. The presence of different age group people established the balance between the age groups.
Figure 4: Year of Experience
38% of the participants are working in the sector for 1 year to 3 years span, while 36% of the participants are working for 6 months to 1-year span. The other two categories in this section- people working for less than six months and more than three months have relative low presence in the study.
Figure 5: Yearly income
The income or compensation that employees get from their job roles contributes to their social status and job satisfaction. As recorded in this survey, 33% of the participants fall under the income band of 15001 to 20000 pounds. 27% have the income of 20001- 25000 pounds, 24% have the income of 25001 and above while only 16% have the income of 10000-15000 pounds. This indicates that the SME sector pay their employees in good amount.
Factors Contributing to Strategic Human Resource Management in the SMEs
HR Practice
The existing literature shows that talent management and training and development are one of the crucial parts of HR practices. The survey question has the elements where the participants were asked for their opinion about how the new talent acquisition and talent retention are becoming challenging in the present SME sector.
Figure 6: New talent acquisition and talent retention
The above figure shows that 52% of the participants agreed to the fact that the talent acquisition for the SMEs in UK are becoming challenging. 35% strongly agreed to the same fact. While, only 5% disagreed and 5% strongly disagreed the statement. This part of the primary data fining can be related to the study of Zehir et al. (2016) who stated that HR has the role in organizing people in the company. The emerging challenges of the new talent acquisition and talent retention could be understood in the context of increasing competition and impact of globalization. The SMEs are usually the local companies who wants to survive the market through their limited financial and other resources. As the market is getting more competitive because of the new entries of global companies, the SMEs are finding it difficult to retain their workforces. It becomes necessary that these firms provide support and resources to the workforce to motivate the staying with the firms.
Figure 7: Strategic human resource management to reduce HR challenges
As shown in the figure 7, 45% agreed and 42% of the participants strongly agreed to the statement that strategic human resource management can reduce the challenges in HR practices. The strategic approach in the HR practices are linked with the organisational objectives. Human resources are one of the most valuable resources in the SMEs. Therefore, having and pre- planned and supportive approach for the human resource management would increase the possibility to longer retention. The study of Sancho et al. (2018) suggested that the ability of the SMEs to hire their workforces plays a significant role in business success.
Figure 8: Training and development
Next factor contributing in the Strategic HRM is training and developmental approaches by the company. The figure 8 shows that 48% of the participants agreed and 41% strongly agreed that training and development enhances the employee motivation to work in the UK SMEs. The study of Baregheh, Rowley, and Hemsworth (2016) stated that, UK SMEs are fight to adopt the change as they have limited skill sets for their employees. The training and development programs are the instrumental in improving the individual skills of the employees. Employees who are provided the scope for skill development through the internal training, feels that the organisation is interested in their career development. Therefore, they stay with the organisation and the new talents are also attracted through them. Hence, the primary and the existing literature- both approves the fact that training and development are necessary for reducing the employee retention and new talent acquisition challenge for the organisation.
Figure 9: Organisational objectives and SHRM
The importance of SHRM from the employer perspective has been included in the survey questions. 53% of the participant strongly agreed that management can use their SHRM strategies to communicate their objectives to the workforce. On the other hand, only 6% of the participants has strongly opposed the statement. The elements of the SHRM like planning, designing systems and coordination in the work, collectively contributes in the organisational objective gaining. The SMEs can channel their necessary information to their workforce to direct their contribution to the organisation. Therefore, the SHRM is significant in motivating the employees towards the participation of organisational success.
Figure 10: Employee/labour relation management
Question no 5 and 6 in the study was related to the employee relations that is stated to be an important part of the SHRM. According to Hamadamin and Atan (2019), one of the major reasons for the SMEs human resource management failures is that the SMEs do not have effective labour management systems. They are mostly not linked to any trades unions and therefore misses upon many issues that the employees are facing in their organisation. The participants of the study have confirmed this observation as 48% of the them agreed and 40% of them strongly agreed that the employee relation management reduce the work place issues. Focusing on the employer- employee relations means improving the workplace policies and evaluating the legal needs in the context of human resource management. All of these are the part of the SHRM that the SMEs need to concentrate on.
Figure11: SHRM and communication
Another importance of employee relations management in SHRM is to have better communication between employee and the employers. The primary data states that majority of the participants i.e. 45% of the participants strongly agreed and 41% agreed that employee relations management contributes in effective communication between the employer and the employee. The SMEs in UK have limited number of employees working with an employer. As opined by Zehir et al. (2016), the SMEs lack the performance-based pay system or family benefits in most of the cases for their employees. This makes them less attractive for the employees than the large-scale companies who have a strategic approach to all this employee relation management.
Figure 12: Innovation and employee performance
As seen in figure 12, only 3% strongly disagreed and 4% disagreed to the statement that the scopes for innovation and employee orientation improves the organisational performance. About 90% of the participants (47% agreed and 43% strongly agreed) affirmed that innovation is one of the reasons for elevated employee performance. Again, in the figure 13, 50% of total population strongly agreed that the positive orientation with the organisational innovation contributes to the improved performance of the employees. 39% of the participants agreed to the statement which proves the importance of innovation orientation in the organisational performance.
Figure 13: Organisational orientation and employee performance
As seen in figure 12 and 13, the role of innovation is undeniable in the elevated performance of the organisations working in the SMEs. The small and medium sized business have entrepreneurial orientation. Often new ideas emerged as the SMEs work on innovative approaches. The SHRM, through its planned and specific approach encourages the workforce to be creative in their workplace. At the same time, the strategic human resource management enables the firm to invest their resources in the suitable process and develop their infrastructure to support these employees in their job roles.
Figure 14: workplace environment and employee performance
While analysing another crucial factor of organisational performance, the researcher has included the questions related to the impact of workplace environment in the employee performance. 48 % of the participants has agreed to the statement that UK SMEs employee performance is influenced ny the workplace environment. The people working in this sector feel happy when they are provided a flexible and helpful workplace environment to work in. According to Chowhan (2016), the job performance of the employees is influenced by the safety and conduciveness of the work culture within an organisation.
Figure 15: Flexible practices and employee performance
The flexibility in the workplace are one of the contributors in the workplace environment. According to this study analysis, 87% of the total population agreed and strongly agreed to the fact that flexibility in the work environment motivates them to work better. In the same tone, Genc, Dayan and Genc (2019), stated that the productivity of the employees increases when they can reach their leaders, have flexibility in work and be at peace with the work environment.
The analysis of the primary and secondary data in the workplace environment shows that the human resource should be provided with the positive workplace environment to function effectively. The HR managers can have the strategic plan to improve their workplace culture through introducing flexibility and safety to their organisational set up. The connection between the work environment and organisational performance is established by this study analysis.
Figure 16: Employee engagement in organisational decisions
According to the most of the participants of the study, employee actively participate in the organisational activities if they are engaged with the decision processes of the company. Among the participants 54% agrees that employees who are engaged in the organisational decisions making have actively performed in the organisational contexts.
Figure 17: Employee engagement and employee production
On the other hand, 55% of the participants strongly agreed and 35% of them simple agreed to the fact that the employee engagement is instrumental in employee production. According to the study of Kazimoto (2016), high employee engagement increases the efficiency, and productivity. At the same time, the highly engaged employees are less prone to turnover and absenteeism in the SMEs. Therefore, the HR managers can have the plan for employee production enhancement that will deal with the employee engagement. The strategic HRM could improve the scope for the employee engagement further in the company. This will ultimately lead to the overall success of the company at large.
Figure 18: Internal career scopes and employee performance
The internal career development scopes denote to the organisational opportunities to have better individual career prospects. The internal career opportunities are the promotional plans that the company develop for their employees personal and professional growth/ according to the survey, 52% of the participants strongly agreed to the fact that the internal training and development plans actually contributes in the employee satisfaction and performance. Only 4% of the participants have strongly disagreed to the fact, while only 1% disagreed to it.
Figure 19: Promotion scopes and employee performance
The specific case of the UK SMEs is not different from the general observation about the impact of promotional scopes on the employee performance. Some of the studies like …… stated that the internal promotions have lesser impact on the employee’s performance, but in the present study this concept is defied. The promotions are the tools for the employees to show their potential and build in their capabilities. This is the reason that the appraisals and promotion encourages the employees who wants to achieve higher levels in their career.
Figure 20: Rewards and recognition reinforce improved employee performance
The influence of reward and recognition on the employee performance are discussed in the secondary resources. According to this particular study analysis, majority of the participants confirm that the Rewards and recognition reinforce improved employee performance. The UK SMEs are going through the issues of employee burnout because of the lack of resources and staffing issues. The issues could be resolved if the companies think of modifying their employee management policies under the SHRM programs. According to this study results, the effective reward and recognition will contribute in employee motivation and therefore, increased productivity in the UK SMEs.
Figure 21: Recognition and employee performance
The rewards and recognitions are shown to increase team effort, customer satisfaction, organizational values, and inspire specific behaviors among employees. The study results also show that 53 % of the participants strongly agreed and 37% of them simply agreed t the fact that employee perform more positively after they are recognized for their work. The employees are motivated to improve their performance within the organisation when they feel that their hard works are appreciated by their superiors. The promotional plans that are the part of SHRM can also contribute in letting the employees know that the organisation is appreciating their dedication and hard work.
Figure 22: SHRM has direct impact on organisational performance in UK SMEs
The direct impact of the SHRM on the organisational performance has been agreed by the survey participants as well as the literature reviewed for this study. the survey results show, 64% of the participants strongly agreed and 29% of the participants agreed to the fact that SHRM has a direct impact on the employee performance enhancement in the UK SMEs. Only 2% strongly disagreed to this fact which is negligeable in this context. The factors influencing organisational and employee performance are the innovation scopes, employee engagement, rewards and recognition, internal career developmental scopes and workplace environment. All these aspects could be improved by the application of SHRM strategies. The SHRM strategies are designed to overcome the human resource management challenges that directly impacts their performance in the organisation. The survey results confirm the positive impact of the SHRM strategies on the organisational performance in the case of the UK SMEs. Hence, it can be deduced that the SHRM is important part of the organisational performance management in the UK SMEs.
The correlation is the analysis technique that is used to show the correlations between different variables in a study. Different pairs of variables are taken and shown how they are related to each other. The correlation value ranges between -1 to +1. Therefore, when the Pearson Correlation value is 0 to +1, the association is positive between the variables. In two paired variables, if the Pearson Correlation value ranges between -1 to 0, that denotes a negative association in two variables. In the positive correlation parameter, the Pearson Correlation value that is higher than 7, is assumed to have high association. The results of correlation between different variables has been discussed below.
|
Correlations |
||||
|
HRP |
TnD |
EmR |
||
|
HRP |
Pearson Correlation |
1 |
.782** |
.645** |
|
Sig. (2-tailed) |
.000 |
.000 |
||
|
N |
100 |
100 |
100 |
|
|
TnD |
Pearson Correlation |
.782** |
1 |
.796** |
|
Sig. (2-tailed) |
.000 |
.000 |
||
|
N |
100 |
100 |
100 |
|
|
EmR |
Pearson Correlation |
.645** |
.796** |
1 |
|
Sig. (2-tailed) |
.000 |
.000 |
||
|
N |
100 |
100 |
100 |
Table 1: Correlation between SHRM factors
The strongest value of correlations in this table 1, is between the training and development and the employee relations, i.e. 0.796. In the SHRM strategies, the employees are an integral part of their policy building. The training and developmental activities can be an effective ground for the employee management communication and relationship building. Through these training programs, the employers can understand the individual needs and professional lags of the employees and provide resources to full fill them. this way developing a health employee relation.
|
Correlations |
||||||
|
Org_Inn |
Wrk_Env |
Emp_Eng |
Int_Car |
Rew_Rec |
||
|
Org_Inn |
Pearson Correlation |
1 |
.623** |
.700** |
.699** |
.683** |
|
Sig. (2-tailed) |
.000 |
.000 |
.000 |
.000 |
||
|
N |
100 |
100 |
100 |
100 |
100 |
|
|
Wrk_Env |
Pearson Correlation |
.623** |
1 |
.832** |
.855** |
.748** |
|
Sig. (2-tailed) |
.000 |
.000 |
.000 |
.000 |
||
|
N |
100 |
100 |
100 |
100 |
100 |
|
|
Emp_Eng |
Pearson Correlation |
.700** |
.832** |
1 |
.871** |
.737** |
|
Sig. (2-tailed) |
.000 |
.000 |
.000 |
.000 |
||
|
N |
100 |
100 |
100 |
100 |
100 |
|
|
Int_Car |
Pearson Correlation |
.699** |
.855** |
.871** |
1 |
.830** |
|
Sig. (2-tailed) |
.000 |
.000 |
.000 |
.000 |
||
|
N |
100 |
100 |
100 |
100 |
100 |
|
|
Rew_Rec |
Pearson Correlation |
.683** |
.748** |
.737** |
.830** |
1 |
|
Sig. (2-tailed) |
.000 |
.000 |
.000 |
.000 |
||
|
N |
100 |
100 |
100 |
100 |
100 |
Table 2: Correlations between organisational performance factors
The above table shows that all the factors of the organisational performance are positively and strongly related to each other. The strongest correlation value is between employee engagement and internal career development scopes. This indicates that the employee that are provided by the career developmental scopes in the organisation, has better engagement with the organisational activities. The alignment of the organisational gaols and the individual gaols are the main objective of having the performance management strategy in the company. The at the same time, the strong correlation between the workplace environment and internal career development shows that the leaders in the human resource can help the employees to gain their workplace environment through motivating the employee to achieve higher posts within the company. In the UK SMEs, are employees could be encouraged for the same for better outcomes.
|
Correlations |
|||
|
SHRM_fac |
Emp_Perf |
||
|
SHRM_fac |
Pearson Correlation |
1 |
.806** |
|
Sig. (2-tailed) |
.000 |
||
|
N |
100 |
100 |
|
|
Emp_Perf |
Pearson Correlation |
.806** |
1 |
|
Sig. (2-tailed) |
.000 |
||
|
N |
100 |
100 |
Table 3: Correlations between SHRM and organisation performance factors
The positive strong correlation value between SHRM and organisation performance factors shows that the strategic human resource management is positively and strongly linked with the organisational performance. These two factors are related to each other.
|
Model Summary |
||||
|
Model |
R |
R Square |
Std. Error of the Estimate |
|
|
1 |
.793a |
.629 |
.621 |
.507 |
Table 4: Model Summary
In the above-mentioned table, the value of R Square is 0.629 and the Adjusted R Square is 0.621. The gap between the Adjusted R Square and R Square is negligible in this study. This means that the regression model is good fit for the existing data.
|
ANOVA |
||||||
|
Model |
Sum of Squares |
df |
Mean Square |
F |
Sig. |
|
|
1 |
Regression |
42.105 |
2 |
21.052 |
82.059 |
.000b |
|
Residual |
24.885 |
97 |
.257 |
|||
|
Total |
66.990 |
99 |
|
Null Hypothesis |
P value |
Status (95% confidence level) |
|
The strategic human resource management has no positive relation with the organisational performance in the SMEs of UK |
0.000 |
Rejected |
he P value of the is 0.000, that is, less than 0.05. this signifies that the null hypothesis is rejected. This indicates that the positive relation between the SHRM and organisational performance in the SMEs of UK is established through this study.
This study has used the primary quantitative approach for reaching the conclusion regarding the impact of SHRM on the performance of the UK based SMEs. The primary issue that has been detected in the human resource management of the UK SMEs are the lack of in- house human resource management schemes. The employees are less motivated to work with the organisation in the SME sectors as there is no strategic performance-based payment system. The informal systems in the HR management is causing lack of pattern and regular positive outcome sin the industry.
Next challenge that the sector is facing at present time is the new recruitment and employee retention. The SMEs are failing to recruit new people or having their existing workforce retained for along time. There is no application of any strategic human resource measures. Most of the SMEs suffers from the lack of financial resources and therefore, they avoid making any additional costs for their employee retention or recruiting the new ones. The study shows that the employees of the SMEs are in the opinion that an effective training and developmental program can help in encouraging them participating more skilfully in the organisational activities. On the other hand, the reward and recognition system can improve the work of the employees. The employee performance is instrumental in the organisational performance. Many existing studies has confirmed that the employees are an important asset for the organisations. Hence, when the employee’s productivity increases, the performance of the organisation automatically improves.
The strategic approaches needed to be built to address the challenges that the SMEs are facing in recent time. The HR management of the SMEs can contribute in sustainable business outcomes.
The SMEs have to work in the process that is fast and action driven. The strategic human resource management could be the part of the action driven planning of the organisations. The SMEs need to be implemented strategic HRM measures right from the hiring of the employees, to their management and retention. The as most of the SMEs do not have the employer brand that the global organisations have, they lack the opportunity of hiring quality talents from the market. The strategic approach to the human resource management can add to the value of the organisational as well as to the employees. The part of the SHRM that can be applied to the UK SMEs are- strategic workforce planning, HR Audits, employee value proposition, training, strategic and goal-oriented recruitment, 360- degree feedback system, retention management and reward and benefits. The primary costs for implementing these measures can be higher, but the long- term competitive advantages to the firms.
The study shows that the SMEs suffer from the lack of employees’ retention because of their weak employee performance management plans. In most of the SMEs, there is no performance-based compensation and benefit plans. It is recommended to the growing SME sector of UK that they should apply the strategic human resource management measures to build and effective performance-based compensation system. The employees could be given the family benefits and effective reward system so that the employees would be encouraged to perform in better way. The performance-based compensation plans must be aligned with the organisational culture as well as the legislative bases. The management needs to identify the trigger of the best performers in the organisation and improve their contribution through the reward and recognition system.
The training and development are one of the most important part of the SHRM. The SMEs are not investing much in the training and developmental projects of the organisation. The formal on-job training in the SMEs are useful for satisfaction and motivation of the employees. The training would provide the necessary support to the knowledge and skill development of the employees within the organisation. The on-job training is instrumental in developing the leadership skills among the employees. Therefore, the SMEs can achieve positive outcomes with the help of the training and development programs within the SMEs. The performance of the employees after the training would be reviewed in order to understand the effectiveness of the training.
The employer brand building is necessary in the competitive markets of the SMEs. The entrepreneurial aspects in the SMEs are based on the innovation and creative ideas. Hence, the SME employers need to make sure that they have positive brand image for attracting the new talents. The innovation requires the new talents in their organisation so that hey can get the necessary support for operations. The small and medium enterprises might have to fight harder to get the grip over the most talented workforce in the market as the international brands of organisations are already there. Building a sportive employer’s brand image in only possible through the strategic human resource management. Fair and transparent workplace environment will motivate the new talents to become the part of the SMEs for long term.
|
HRM Activities |
Estimated Costs |
Timing (in weeks) |
Responsibilities of Management |
Review Arrangements |
|
Building SHRM Measures through implementing strategic workforce planning, HR Audits, employee value proposition, training, strategic and goal-oriented recruitment, 360- degree feedback system, retention management and reward and benefits |
5% of the annual budget should be dedicated for the SHRM implementation |
40 weeks |
To ensure the HR management practices and policies are instrumental in managing the competition and adverse external environment. |
Annual review of the changed HRM plans through feedbacks of the employees and managers |
|
Developing effective performance- based Compensation System |
The company will invest 8% of the HRM budget for the benefits and performance-based compensation of the employees |
48 weeks |
The HR managers will have the responsibility to review the performance of the employees and develop benefit plans for the employees and their families. The achievers in the organisation will be rewarded and the compensation will be accordingly designed for these employees. |
Feedbacks and review forms collected from the employees. The change in performance measures after the implementation of the measures. |
|
Training and Development programs |
5 % of overall expenditure on salary |
4 weeks |
The internal trainers will be appointed by the HR manager in order to train the employees with their needed skills. |
Review of the employee performance improvement through their monthly performance assessment and new skills acquired. |
|
Building strong employer brand |
Spending 10% of the annual budget in branding |
24 weeks |
The management would spend in developing the organisational brand as a good employer. The social media, and traditional media could be used to carte the positive branding image of the organisation. |
The employee retention and new employee acquisition rate will be reviewed. |
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