Linking HRM Practices to SME Performance

     It is more than evident the greatest challenge of small- medium-sized enterprises (SMEs) is human resource management (HRM) and how to effectively manage their workforce. Essential to achieving organizational growth is the ability to link HRM strategies with business strategies. HR practices tend to be fairly ad hoc. But remember the old adage – no one plans to fail; only fail to plan.  You understand my point. 

      No longer is it effective to throw caution to the wind and hope for the best. Strategy is key to managing an effective workforce.  Some researchers that conduct empirical studies do so for an understanding of how HRM practices connect, promote and ensure organizational performance. Attempts to explore the link are numerous and still growing. 

     Variables that mediate the link between HRM practices and firm performance are absenteeism (employees’ behavior), commitment or satisfaction (employees’ attitudes) and quality or productivity (employee’s performance). Researchers conduct empirical studies to discover the link between SME HR practices and the above variables: employee behavior, employee attitude or employee performance. While HR practices do not influence firm performance directly, a causal chain of effects in the application of effective HR practices is a win-win concept for your organization. The challenge is identifying measures of financial performance that sufficiently reflect survival chances in terms of SME health and long-term success.

    Key performance indicators (KPIs), i.e. (training, and development) influence the performance measures. Performance measures are the end results of KPIs.

Example: Your Company is a distributor of medical instruments to private doctor offices.  Problem:  [Clients are receiving orders after the expected return dates. Other client complaints include: incorrect volumes of instrument, incorrect instruments, etc. Currently, the company is utilizing order forms that are over 10 years old and have not been updated. Sales persons are in some instances submitting handwritten orders, and forms that (are not only out-of-date) but not properly or completely filled out before submitting to the product department.

Result: Dissatisfied clients, loss of clients, loss of revenue.

Solution: Company reorganizes the sales force and product department, implementing up-to-date order forms and invoices. Further the company implements a new training and development programs for new and current employees training all employees on NEW procedures for full and completely filling out order forms making order forms mandatory.                                                                                                                                                

The bottom line is when SME link HRM practices with firm performance, it is reflected in the attitude of the employees, customers and finances. The above represents a plan utilizing KPIs (training and development) and performance measures (improved client relationships, employee morale, and increased revenue).

Until Next Time!

All-4-HR & Business Solutions

April D. Halliburton, President

Capella University Organization and Management PhD Candidate