[HR challenges in small medium enterprises]

by

Acknowledgement

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible (Abbott, 1988).

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University (Abbott, 1988).

Signed __________________ Date _________________

Abstract

Due to their limited size, many small and medium enterprises (SMEs) cannot justify full-time HR professionals in their organizations. Thus, the complex and time-consuming nature of many HR activities can result in a significant drain on existing managerial resources. Professional employer organizations (PEOs), however, offer SMEs an alternative for handling their workforce by providing compensation programs, regulatory compliance, and other HR-related services. This study examines the satisfaction levels of 763 customers of one large PEG. Results show that firm growth, past HR problems, workforce size, contractual detail, service representative-client relations, value congruence, and overall PEO usage are significantly related to managerial satisfaction with PEO services. While managing HR presents significant challenges to a fly firm, small and medium enterprises (SMEs) face unique challenges that stem largely from their size. While economies of scale permit larger organizations to employ a team of specialists to address the complexities involved in managing HR programs, this is not a viable option for many SMEs. The costs associated with hiring highly trained HR professionals on a full-time basis are likely to be prohibitive for many smaller organizations. As a result, HR activities often become the responsibility of general managers. This is problematic for two reasons. First, the complexity of many HR activities is likely to result in them becoming a significant drain on managerial time and resources. As such, HR tasks may interfere with managerial responsibilities that are directly related to revenue production. This problem is even more critical given that scarcity of managerial talent is often cited as a key factor limiting growth in SMEs. This scarcity of managerial talent increases the opportunity costs associated with time spent on HR administration by SME general managers. Second, many HR tasks involve substantial complexity and, thus, the quality of HR decisions may well be affected by the fact that general managers often lack significant training and expertise in HR.

Table of Content

CHAPTER ONE: INTRODUCTION5

Theory and Hypotheses6

Past HR Problems8

Contractual Characteristics12

CHAPTER TWO: LITERATURE REVIEW14

Relationship Tenure15

Current Usage17

CHAPTER THREE: METHODOLOGY19

The Interviews19

The survey findings19

CHAPTER FOUR: DATA ANALYSIS AND RESULTS23

Overall perceptions of the HR function25

Discussion32

Future research: exploring symbolic capital36

Some limitations of the survey data41

CHAPTER FIVE: CONCLUSION44

REFERENCES48

APPENDIX54

Chapter One: Introduction

SMEs face unique challenges with regard to the attraction and retention of employees. Attraction and retention is clearly linked to the ability to offer a competitive benefits package (Williams & Dreher, 1992). However, since benefits costs decline as firms become able to aggregate risk across a larger number of employees (Beam & McFadden, 1992), SMEs are at a disadvantage in ...