Table of Contents
In today’s leading corporations and entrepreneurs, most top level managers seem to lose control over their enterprises. Despite many years, in the mainstream literature concerning the nature of HRM practice, the associated intellectual boundaries, and its application in practice continue to be hampered by various theoretical and practical applications (Adler 1991). In contemporary organizations, HRM is usually conceived as interrelated set of activities aimed at systematically enhancing the task performance of employees in a manner commensurate with the strategic aims of senior management. Over time, it has been noted that bureaucratic forms of organization arose on a large scale in Western Europe and in the U.S during the late 19th and early 20th centuries and replaced the earlier forms of work organizations (Adler 2001). In most business enterprises, there exists a constant and homogenous throughput of goods and services. Thus, in such conditions of task requirements and transformation processes, it is necessary to assert some control by employing hierarchical generated rules and procedures that monitor and enforce a required employee task performance. However, in spite of the particular form of bureaucracy adopted, HRM is the most appropriate. Adler (2001) posits that the post bureaucratic, organizational form is beneficial because it liberates employees from the increasingly dysfunctional constraints engendered by bureaucracies and enhances their ability to deal with requirements of increasingly destabilized working environments.
HRM is intended to create workforce that is adaptive rather than dependent upon routinized repertoires (Stark 2001) and which is customer driven, and empowered to arrive at decisions on how to enhance customer service, as well as, value. HRM can enhance the creation of functionally flexible high performance employees. Through employing a wide range of HRM practices that support and sustain self-determination, development, discipline, as well as, support, while instilling a sense of organizational commitment and enhancing motivation, researchers claim that an empowered workforce will initiate a competitive advantage through improved employee task performance (Ali 1998).
Purpose of the Study
The proposed study seeks to examine the trends in the human resource management practices in transnational small and medium enterprises. In this comparative analysis, several factors crucial to total quality management will be considered. However, it has been noted by previous studies that when comparing large enterprises to the SMEs, there are some differences, since the latter face certain problems that may hinder their progress through Total Quality Management (TQM), regarding personnel, technical resources, as well as, capital (Bell 2005).
Based on the study topic, the possible research questions formulated will include the following:
1. What are some of the applications of HR practices used by the transnational SMEs and how do they differ with large firms?
2. How ready are the SME’S owners or managers to manage the transnational enterprises?
3. How efficient are the SME’s human resource systems in recruiting employees, retaining, developing, and using world-wide qualified managers?
4. What are the main problems faced by the SMEs in implementing HRM systems?
5. What are the main differences in implementing the HR practices in the transnational SMEs and the larger companies?
These research questions are extremely valuable since they have various research issues to be investigated in this study. In additions, apart from demographic issues, there are other areas that are linked to the study concerning the application of HRM practices. These issues are: recruiting, hiring, training, developing, and paying employees’ compensation.
The main objective of the study is to undertake a comparative analysis in the application of the human resource management practices in the transnational small and medium enterprises (SMEs) and large transnational companies.
The small and medium sized transnational enterprises employ HRM strategies that are distinct from larger transnational firms.
Significance of the Study
Not all enterprises are equally global; thus an organization’s business strategy can be domestic, international, multinational, or transnational. Thus, to be effective, the organization’s human resource strategy should be in line with the business strategy. Therefore, it is beneficial to ensure that transnational enterprises require having a business strategy with a transnational human resource system as well as transnational and competent management. In addition, with the escalating speed of technological change, business should adapt strategies of learning how to make decisions at a faster pace. The technological practice is a valuable commodity, and the effect on the business size is evident. However, the management of human processes is less visible, which can contribute to the errors that may be costly to reconstruct (Bryman 2004). Therefore, appropriate HRM skills are required in all businesses in order to achieve the business success. The small and medium-sized enterprises are valuable in a country’s economic stability. This is related to the social and regional stability in terms of overall job creation well as job opportunities for many people, including men and women, and for entrepreneurs with limited skills and capital in particular. The SMEs can be found across domestic regions, particularly in areas that have high incidences of poverty (Prahalad & Yves 1987). Thus, the efficiency and dynamism of SMEs can result in the increased social and economic returns in all economies. Therefore, the SMEs are entitled to feature more prominently in the anticipated patterns of economic growth, as well as, restructuring. However, the most critical factor that should be considered by the managers of the SMEs in gaining new markets is linked to innovation, as well as, learning-driven improvements and differentiation in product and process, and appropriate management practices. The transnational SMEs are faced with the stiff competition, both at the regional and global levels. This trend originated from the increased liberalization of trade influenced by the global and regional trade arrangements.
In the coming years, the demographic changes are predicted to cause significant changes in the working population (Bartlett & Ghoshal 1989). This will affect the manner in which businesses prepare for the anticipated changes that may influence this transformation or the economy. However, the SMEs do not have adequate resources required to foster the development and implementation of the sustainable HR strategies and thus face particularly significant challenges experienced by transnational businesses.
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The SMEs need to have a better understanding of the impact of the HRM practices and decisions. Researches should focus on providing a clear picture of the relationship and theoretical foundations of HRM practice (Dawson 2002). For companies to sustain the global growth and competitiveness, both large companies as well as the SMEs expand their operations to emerging industrial economies in various parts of the world. For instance, businesses that operate transitionally are geographically confined and operate in a culturally complex region. Therefore, it is important to understand the effects of different cultural affiliations of employees working in these different environments. The application of HRM practices become particularly vital in the development of the appropriate HRM models that may foster increased multiculturalism.
With this background, this study will focuses on the HRM practices in the transnational SMEs. This paper seeks to address the differences or similarities in the application of the HRM practices as well as the diversity management concepts in different organizations that vary in size. Therefore, it is essential to increase attention to the extent to which the HRM models vary across different organizations according to sizes (De Vaus 2001). It is evident that the HRM practices vary across different places in the world and have given rise to different HRM forms or rather regional forms of HRM.
Businesses operate differently in different countries. This incorporates the manner in which the HR practices are conceptualized, as well as, the research traditions through which they are explored and in the way in which the HRM applications are conducted. In a conceptual term, there exist two different paradigms that may be classified as either Universalist or contextual (Denscome 2002).
HR practices are a concept that was initially coined and s applied in the U.S, as well as, the U.S global organizations across the globe (Dowling & Schuler 1990). The adoption of the HRM practices and strategic approaches in different organizations, as well as, national contexts has indicated a crucial question that is related to the successful application in SMEs. The main difference between the applications of the HR practices in the various parts of the world, for instance, in Western Europe, is the extent to which the HR practices are influenced and determined by the state corporations.
Preliminary Review of Literature
Since the Second World War, business enterprises have progressed from being domestic to becoming international, multinational as well as transnational (Kenichi 1990). Moreover, as business enterprises make a transition to the world strategies, the portfolio of skills that the managers are required to have encounters a similar shift. Most organizations started to operate as domestic firms. These firms developed novel products for their internal market. During the following period, there was no necessity that the international markets coupled with the international managerial skills. The emergence of new firms triggered competition and the firms were forced to venture into new markets. The main focus was to extend internationally by conducting business in foreign markets. In order to manage the foreign markets, there was a need of restructuring in order to create independent division. In the international phase, there emerged a structure that was hierarchical between the headquarters of the firms and the different foreign subsidiaries. This condition led to the concentration of influence and power at the headquarters of corporations. However, cross-cultural interaction between the local subsidiaries and the expatriate managers occurred within a distinctly established hierarchy where the headquarters possessed both cultural and structural dominance. This phase required effective mangers to be competent in transferring a new technology to the regional culture, by managing the regional staff and modifying business practices to be accepted by the regional consumers. Moreover, the international expatriates needed to adapt culturally in order to fit the new working environments. The small and medium-sized enterprises are becoming transnational in a major way. Their relative significance grew throughout the late 1980’s and the early 1990’s along with a rise in global foreign direct investment (Adler 1991).
The increased attention to the application of the HR practices in the SMEs is an extraordinarily recent phenomenon. Most researchers have greatly ignored the SMEs. The application of the HRM practices in small companies could be fruitful and subjects for empirical investigations since their numbers, as well as, their growth rates in transnational business in the qualitative aspect of management practices (McClelland & Bagnall 1999). The application of the HRM practices in the SMEs has never been taken seriously on the global business. The large proportion of the SMEs in the transnational business has a long tradition for a rather institutionalized and well-organized labor market that may provide a basis for a better professional approach to the management of human resources and for the future competitiveness. There are many implications that are caused by the lack of interest that are diverse both for the SMEs as well as the HR domains. However, the study lacks a conceptual framework as well as methods that may be applicable for the majority types of firms. There is hierarchical thinking as well as stability that are rarely found in the smaller organizations as characterized in the large firms. Thus, it is necessary to engage in a study and development that may enable us to understand the applications of the HR practices in the transnational small and medium-sized companies (Tung 1988). Previous studies have noted that there is a lack of interest for issues that are two sided. This incorporates the practitioners, managers, or owners of the transnational SMEs. The application of the HR practices in the SMEs has often ignored, such issues as training and development, employee performance management, as well as, employee counseling (Tung1988).
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Based on previous studies, it seems that most managers or owners of the SMEs have viewed that the application of the HR practices is unresponsive or not adequately tailored enough to meet their needs (Saunders et al. 2003). Moreover, most small-sized businesses view the application of the HR practices to be a costly activity to be carried out by the SMEs, which are classified as small organizations. Consequently, the lack of appropriateness, the expectation of the HR practices, and the application of the activities are considered as bureaucratic, time consuming, as well as, lack clarity concerning the direct consequences. Thus, the application of the HR practices has been paid little attention over many years, in approaching the desirable techniques that are associated with it among management practices (Stark 2001).
The study focuses on the differences in the application of the HR practices in the SMEs and other large transnational companies, and whether they have taken appropriate steps towards HRM. According to previous studies, it is evident that the application of the HRM practices is seldom applied in the SMEs. Moreover, personnel planning initiatives are training programs have not been seen. One can base arguments that the tradition for more professional work with the employees in the SMEs is limited; hence, the best way to approach the HR management practices is through growth. This may also mean that organizations that are moving from the basic structures towards a functional configuration with a functional formalization as an outcome, this may also embody personnel practices.
According Pucik (1984), there exist both tangible and intangible effects of an unresponsive HR- domain to the small and medium- sized business enterprises, and lack of interests in the application of the HR practices from the owners or the organizations managers perspectives. Small businesses lack consultation and follow-up between the two sides of the business, and it seems to be working against the mainstream arguments due to the claims by many that the SMEs have been losing their competitive advantage to larger corporations in the completion of the HR skills. On the other hand, it appears that there are arguments that even beyond the application of HR practices in the transnational SMEs, stressing the need of recruiting the right employees.
As stated before, lack of business consultation between research and the small and medium-sized businesses undermines the application, accountability, as well as, the legitimization of the HR practices. For instance, HRM that is not responsive to business needs may discourage the transnational businesses from opening and operating, and further expanding. All these factors may influence the business, employees, and the community in general. Thus, to ensure that the HR applications benefit the SMEs, it is necessary to break this trend if a healthy growth is to be realized in the SMEs and the application of the HRM practices will is effective and viable for the organizations. Some arguments have gone further that the HRM applications in the SMEs should not be considered as an ambiguous and homogenous issue. Instead, one would expect several different approaches to the management of workers or human resources considering different practices that are characteristic of activities that are undertaken in the SMEs, and considering that size is only one out of the many notable contingencies.
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With regards to lack of knowledge concerning different practices as well as approaches to the application of the HR practices in the SMEs, it is vital to make efforts to study and understand the transnational SMEs. In order to have a better understanding of these organizations with small sizes, they should not be approached as homogeneous samples, when one sees to look at the differences and similarities.
Despite their growing importance, there are substantial studies on the impact of HRM practice on these investments. Recently, there have been significant changes in the industry’s competitive edge that have put a lot of pressure on the continuous improvement needs, which enhance the breakthrough in the quality management issues. As a result, many enterprises have embraced total quality management as the appropriate management philosophy that governs strategic planning. Most studies have attempted to disclose the importance of the firm’s performance as a way to improve competitiveness. It should be stressed that in current leading enterprises, top level managers have started to lose control. The main issue is that most firms are incapable of carrying out the sophisticated strategies. Therefore, it is necessary to understand how the SMEs are managed. The development of transnational human resource systems depends on the ability of the organizations to organize and rule transnational human resource systems.
Generally, the functions of the HRM systems are to recruit and keep competent leaders. In order to have an effective transnational HRM system, there are three distinct characteristics that must be exhibited. These include the transnational scope, representation, as well as, process. Transnational scope refers to the geographical context. It is worth mentioning that within this context vital decisions are taken. Global management involves a framework of mind and not necessarily a certain organizational culture. Therefore, in order to achieve the transnational scope, entrepreneurs must evaluate possible options and frame vital decisions to global business dynamics. In addition, the SME’s have to benchmark their firms’ performances against the global standards.
Transnational representation describes the structure of the multinational firm’s managers. Thus, in order for SMEs’ owners or managers to achieve transnational image, the organizations’ portfolio of main leaders should be multinational as its global distribution of finance, production, profits, , as well as, sales. On the other hand, the transnational process is a term that denoted the ability of firms to include opinions and representatives from diverse cultures in the decision making and planning process. Business enterprises create transnational processes by recognizing the value and appropriate use of the cultural diversity within the firm. However, this process does not necessarily involve the inclusion of individuals and ideas of many cultures but goes beyond the inclusion of cultural synergy that comprises a combination of culturally various perspectives into a transnational enterprise culture. Synergy requires that more effective and creative ways to manage employees could be created as a outcome of cross-cultural learning. Thus, to enhance a transnational process, enterprise owners must acquire skills that are necessary to work with and learn from individuals who belong to other cultures as well as their own one.
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According to Karami et al (2008), corporate governance issues are different for the small businesses enterprises, when compared to large companies. For instance, in the small and medium-sized enterprises, the doubling up of tasks by the management implies that decision making and the strategy for governance are confined to a small segment of individuals, particularly, in the case of the SMEs. Therefore, the main focus is to have a close look at the nature of the HRM capabilities and the implications of implementing the HR practices by the management or owners of the SMEs when compared to the larger firms. Most studies have used mixed approach methods in combining the qualitative and quantitative methodologies. Karami et al (2008, p 7-9) explained that the contribution of the HR practices in the SMEs is core to the business competency, which does not necessarily function as a key component of the business. Moreover, Karimi et al (2008) noted that there is a need to depict employees as valuable resources, which may lead to a strategic investment on the workers through strategic investment in the HR practices. In fact, this is both a common sense view that has achieved more and more currency in the today theory on SMEs.
The discussion provided by Karami et al (2008 p 7-9) does not have a better ground of argument in discussing the critical evaluation of the subject under discussion. However, as they contextualize their study, a more critical stance would have enhanced this section of the paper. The hypothesis presented in their study was that increasing HR capacities in a business enterprise will correlate positively with the increased productivity as well as with the increasing performance of the small and medium-sized business enterprises. On the other hand, HRM applications in the large firms are concerned with formulating business strategies than in the small and medium-sized enterprises (Karami et al. 2008). This research is based on quantitative study; however, both quantitative and qualitative approaches can be beneficial in offsetting the limitations associated with each paradigm. Some scholars posit that quantitative methodology is of a higher standard of rigor than qualitative approach. The argument that qualitative methodology is better is based on a scientific paradigm founded on the principles of rationalism and deductionist way of thinking (Grix 2004).
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Some scholars argued that if the small and medium sized business enterprises enhance their core competences, particularly in relation to the application of the HR practices, there is the likelihood that they achieve business success (Karami et al. 2008). According to the findings of the study conducted by Karimi et al (2008), they suggested that there is greater involvement of the HR practices in the development of a business strategy and implementation of the HR practices. Therefore, it will result in the improved organizational effectiveness and contribute to the wider business effectiveness (Karami et al. 2008). This study recommends that the application of the HR practices in the SMEs business strategy would be translated to a wider industry arena. However, according to Karimi et al (2008), business managers or owners should see the need and increase the rate of involvement of HR specialists in the strategic management of the SMEs. The main challenge is how business managers can use this issue in more detail and how the best approaches can be employed so that it could be achieved.
Tocher and Rutherford (2009) gave a detailed body of literature that provided a basic definition of HR, as well as, basic applications of the HR practices within the small and medium-sized businesses, which also focuses on the HRM problems and solutions, as well. This body of literature appears to provide a beneficial approach to the issue under investigation. Moreover, it gives guidelines on examining and testing the novel framework for studying HR management issues as well as problems in the transnational SMEs. The study indicated that transnational SME managers perceive the HRM management problems as problems that affect people and the community in general, instead of considering the challenges experienced by the SME managers in implementing the HR practices within their firms as part of business strategy (Tocher & Rutherford 2009). On the same note, Karami et al (2008) observed the positive applications of HR practices within such organizations. According to Tocher and Rutherford (2009), problems associated with HR are only noticed when they get severe or cumulative. Tocher and Rutherford (2008) provided a detailed description of their sample, which was actually a sufficient size to support their chosen statistical analysis as well as, the dependent and independent variables. Their studies involved hypotheses being tested within the scope of the study, which was of a large scale. The limitation with large scope of study involves the reader being left to struggle to understand and conceptualize all the elements included in the study.
Concerning cultural dimensions, there are variations identified in the previous studies. However, this could not be confirmed with the method used in the current study. This current body of literature will contribute to the body of the existing literature concerning the application of the HRM practices. While the existing literature will confirm certain discussions in the current research, the study will seek to highlight some contradicting aspects in a multicultural business context, in order to aid in understanding the study topic. Previous studies have also highlighted emerging issues regarding sustainable HR practices and diversity management. This stage of the body of literature stimulates future research.
In the study conducted by Tocher and Rutherford (2008), the methodological approach used involved a survey approach. In their approach, the researchers obtained a lot of information on the main variables. They also employed the use of binary logistic regression. The main purpose of this approach was to analyze how the owner or manager and firm characteristics influence the manner in which the HR management problems are understood. The researchers also applied descriptive statistics to assist in assessing and addressing the characteristics that were employed in the suggestions made on the hypothesis within the study. The implication of this to the current study is that it provides a considerable level of details that may be beneficial and assist in the replication of the current study. This previous study provided useful information in graphical, tabular and textual forms. These data assist in transparency, and provide detailed information on post-hoc analysis that is crucial in addressing unexpected results (Tocher & Rutherford 2008). Compared with the methodology of previous study, which involved the discussed design, it is evident that the method is relatively easy. However, in the current study, there is a need to present a strong argument for its findings; although, the main purpose and the application of the findings based on the anticipated results could be better examined. In their discussion, Tocher and Rutherford (2008) stated that owners or managers of transnational SMEs charged with the responsibility of managing transnational SMEs would be less likely to perceive HR management problems as seriously disastrous or acute, whereas, the managers or owners of the SMEs, who are highly educated in the field of the HR practices and are in charge of transnational SMEs were more likely to perceive the HR managements practices that present acute problems.