High performance work practices in small firms: a resource-poverty and strategic decision-making perspective

Small Business Economics, Mar 2012

High performance work practices (HPWPs) are human resource management practices aimed at stimulating employee and organisational performance. The application of HPWPs is not widespread in small organisations. We examine whether the implementation of coherent bundles of HPWPs (aimed at employee ability, employee motivation or at the opportunity to perform) depends on the scarcity of resources, as reflected in the size of the company, and on strategic decision-making in small firms related to the owner’s expertise and attitudes. In our research, a total of 211 employees from 45 small organisations were asked to rate the presence of HPWPs in their organisation. These averaged perceptions were linked to information provided by the owner–managers on the size of their firm and their own expertise and attitudes. The findings support that smaller but coherent bundles of HPWPs can be found in small organisations and that the implementation of these bundles depends on available resources, strategic decision-making and the combination of the two. These findings highlight the need to integrate the notions of resource poverty and strategic decision-making to understand the uptake of bundles of HPWPs within small firms.

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High performance work practices in small firms: a resource-poverty and strategic decision-making perspective

Brigitte Kroon 0 1 Karina Van De Voorde 0 1 Jules Timmers 0 1 0 K. Van De Voorde Behavioural Science Institute, Radboud University , PO Box 9104, 6500 HE Nijmegen, The Netherlands 1 B. Kroon (&) K. Van De Voorde J. Timmers Department of Human Resource Studies, Tilburg University , PO Box 90153, 5000 LE Tilburg, The Netherlands High performance work practices (HPWPs) are human resource management practices aimed at stimulating employee and organisational performance. The application of HPWPs is not widespread in small organisations. We examine whether the implementation of coherent bundles of HPWPs (aimed at employee ability, employee motivation or at the opportunity to perform) depends on the scarcity of resources, as reflected in the size of the company, and on strategic decision-making in small firms related to the owner's expertise and attitudes. In our research, a total of 211 employees from 45 small organisations were asked to rate the presence of HPWPs in their organisation. These averaged perceptions were linked to information provided by the owner-managers on the size of their firm and their own expertise and attitudes. The findings support that smaller but coherent bundles of HPWPs can be found in small organisations and that the implementation of these bundles depends on available resources, strategic decision-making and the combination of the two. These findings highlight the need to integrate the notions of resource poverty and strategic decision-making to understand the uptake of bundles of HPWPs within small firms. 1 Introduction Research into human resource management (HRM) and performance in small firms has embraced the investigation of the presence of high performance work practices (HPWPs). HPWPs are modern employee management practices, such as formal employee training, high pay levels, group-based performance pay and self-directed teams (Appelbaum et al. 2000). It is claimed that increased implementation of HPWPs results in better performing organisations in terms of financial and employee outcomes (Combs et al. 2006). However, the uptake of the package of HPWPs has been found to be quite low in small firms (Kauhanen 2009; Way 2002). One of the unresolved issues is whether this low uptake is the result of smaller firms simply doing a bit of everything but in a less sophisticated manner than larger firms (Dandridge 1979; Mayson and Barrett 2006), or that smaller firms deliberately adopt smaller sets of related practices instead of the whole package of HPWPs. This avenue has not been explored much to date. In order to understand this issue in greater depth, we turn to the theoretical foundation of HPWPs. Appelbaum et al. (2000) argued that a combination of three bundles of HR practices is theoretically involved in building a HPWP system (HPWPS). These bundles are: employee ability-enhancing practices (such as training and skill development) (A), employee motivation-enhancing practices (including high pay, career development and topdown information sharing) (M) and practices that give employees the opportunity to go the extra mile (such as employee involvement and teamwork) (O). Together, these are referred to as the AMO model of HPWPs. Although no distinction is made between these elements in most research, Boxall and Macky (2009) have recently theorised that each component of the AMO bundle is aimed at different goals, which in turn suggests that it may be possible to find organisations where only Ability or Motivation or Opportunity practices dominate (Toh et al. 2008). This concept of focussed bundles of HPWP could advance the debate on HRM and performance in small firms. In the remainder of this paper we focus on two theoretical perspectives on the uptake of bundles of HPWS in small firms. First, we examine the straightforward assumption that the average uptake of ability and motivation practices is less in smaller organisations than in larger firms. The logic for this assumption lies in the notion of resource poverty (Welsh and White 1981). Compared to larger firms, small firms are more constrained by limited resources. In terms of financial resources, the low uptake of HPWPs in small firms has been related to the high costs involved in implementing all of the practices (Sels et al. 2006). In addition, the simple structure of smaller organisations allows for quick and relatively informal communication styles, which may conflict with the greater formality and relatively more time-consuming nature of the HPWP approach (Jack et al. 2006). The second and more profound theoretical perspective holds that small firm owners, for various strategic considerations, adopt smaller but coherent bundles of HPWPs. Here we turn to the notion of strategic choice and the effect of the human capital of the owner on strategic decision-making in small firms (Child 1997). Given that most small firms do not employ a specialist HR professional, decision-making concerning HRM normally rests in the han (...truncated)


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Brigitte Kroon, Karina Van De Voorde, Jules Timmers. High performance work practices in small firms: a resource-poverty and strategic decision-making perspective, Small Business Economics, 2012, pp. 71-91, Volume 41, Issue 1, DOI: 10.1007/s11187-012-9425-0