Configuring and Contextualising HR Systems: An Empirical Study of Manufacturing SMEs

Abstract

Human resource management (HRM) has become for SMEs a critical factor of adaptation to an increasingly complex and uncertain business environment. Founded on open systems and contingency theory, the present study seeks to identify configurations of HR systems in manufacturing SMEs, and to determine the extent to which these configurations are associated to the environmental and organisational context. Survey data analysis of 176 manufacturing SMEs revealed three configurations of HR systems, namely a strategic-high-commitment a functional-high-commitment and a traditional-low-commitment system. Differences in these systems are associated to variables that reflect the SMEs' environmental, organisational and technological context. Key words: HRM, gestalts, open systems theory, context, small business Introduction One of the important trends in the study of organisations in the last thirty years has been the increasingly explicit recognition of environmental factors, including the study of HRM in SMEs (Arthur/Hendry 1992). For Scott (2004), this is attributable to the development of open systems theory, focusing on the environment with which all types of systems interact, be it the cell or the solar system, or in which they operate and evolve. This theory has given rise to various theoretical approaches aimed at explaining the determinants of organisational structure, including contingency theory (Woodward 1958; Lawrence/Lorsch 1967), transaction cost theory (Williamson 1975, 1985), resource dependency theory (Pfeffer/Salancik 1978), network theory (White/ Boorman/Breiger 1976), population ecology (Hannan/Freeman 1977) and institutional theory (DiMaggio/Powell 1983; Meyer/Rowan 1977). Each approach has developed new arguments to explain how certain environmental factors interact with and affect organisations. Being in close proximity to their business environment, small and medium-si2ed enterprises (SMEs) in particular must continuously adapt themselves to the pressures and constraints that emanate from this environment (Freel 2000). As well, these firms must be flexible in managing internal changes pertaining to their resources (human, technological, financial) and their organisation (e.g., changes in size, stage of development, production system) (Harney/Dundon 2006). In adapting to changes in their internal and external environments, SMEs must make all sorts of adjustments, especially with regard to their HR systems. The manner in which these adjustments are made has given rise to an important body of literature characterised by a divergence between those researchers that have adopted the universalistic perspective and those advocating the contingency perspective. The universalistic perspective posits that the most-recognised HR have a positive effect whenever they are applied. Thus, simply applying or more practice is deemed to directly and positively influence organisational performance. This approach has also been labelled as practices and one best way (Delery/Doty 1996; McMahan/ Virick/Wrigth 1999; Colbert 2004). The contingency perspective suggests however that HRM are effective to the extent that they are aligned with the business strategy (Miles/Snow 1984; Schuler/Jackson 1987). As discussed by Venkatraman (1989), various forms of alignment or are possible, including whereby fit is seen as a set of relationships that are in a temporary state of balance (Miller 1981). Another assumption is equifinality, which recognizes that numerous equally effective gestalts may exist (Van de Ven/Drazin 1985). The configurational perspective, at times distinguished from the contingency perspective in HRM research (Delery/Doty 1996), is taken here to be similar to the latter perspective as it is not really distinguishable from a conceptual point of view (Schuler/Jackson 2005). Both the universalistic and contingency perspectives have been the object of criticism, the first mainly for being too simplistic, the second because it most often considers only contingency variable, that is, strategy. …