Contextual influences on HRM homogeneity and heterogeneity in SMEs : a case study of high value-added and low value-added sectors

Abstract

Abstract: This research draws attention to the problematic premises underpinning the UK government's policy goal of a competitive national economy predicated on the notion of a high skills. high value-added economic trajectory. In particular, the research highlights the limitations of the policy assumptions (inherent in the Investors in People standard) that formalised HRM practices in SMEs in high value-added sectors make them more competitive than those in low value-added sectors, which are frequently associated with informal HRM practices. The research compared the selection and recruitment, training and development, and appraisal and rewards practices of SMEs. The methodological approach adopted was constructivist, with the assumption that SME owner-managers are involved in constructing their own individual reality based on how they perceive the world around them. A case study strategy was adopted to examine the H R.M practices of a purposive sample of six SMEs in high value-added (3) and low value-added (3) sectors. Data collection combined semi-structured in-depth interviews with document searches. It was found that HRM in the sample of SMEs in both sectors combined formality and informality; characterised by institutional contextual (i.e. homogeneous) and situational contextual (i.e. heterogeneous) practices. It is suggested that a situational contextual perspective is simplistic in that although it acknowledges the interplay between HRM formality and informality, it fails to take account of the homogenising influence of the institutional contexts of SMEs. Consequently, just as normative models of HRM seek to isolate SMEs from their operating contexts, the situational contextual perspective dislocates SMEs from their institutional contexts. Therefore, the research contributes by proposing an open systems model, which reflects the complexity of HRM in SMEs by integrating the institutional and situational contextual perspectives of HRM. In view of the complexity of the HRM practices of SMEs, the research suggests a shift away from a market-led approach to skills based on the HRM practices of individual SMEs, towards direct intervention through government regulation as the most likely path to an economy in a high skill, high value-added equilibrium in the UK.