HRM practices by SMEs in Africa

By Isaac Twumasi Quantus in Accra.

Organizations have a life cycle; they are born, they grow, mature and, unless they are rejuvenated, they decline. As they move along these developmental stages, many changes take place in the internal and external environment of the organization. Organizations therefore face different problems as they grow and age. These changes may render the organization’s established processes of self maintenance ineffective and this may lead to the demise of the organization.

The ability to adapt as the business moves along the Organizational Life Cycle is critical for the survival and growth of the business. Movement along the OLC is a major determinant of the adoption of formal HRM practices by SMEs. If new challenges are not overcome, the organization may become out of sync with its environment. This may result in lower levels of efficiency and effectiveness.

Small and medium sized firms (SMEs) are vital to a nation’s economy; they produce a high proportion of national output and provide an even greater proportion of employment. Past research on small businesses in Africa suggests that few small businesses grow.

Not much is known about why SMEs in Africa adopt, or fail to adopt formal HRM practices. An investigation of the role of HRM in small firms should unearth the people management practices SMEs adopt, when and why they adopt them, as well as, what effect these have on performance. Past research on SMEs has been focused on macro level factors which affect SME performance including infrastructural constraints, lack of access to technology, and so on.

Some reasons given for the stagnation of SMEs in Africa is attributed to the poor performance of SMEs on infrastructural constraints, poor support services and incentives and the lack of organization and training of entrepreneurs. An investigation of the micro level factors is necessary to unearth the internal constraints which impede SME growth in Africa. One of these factors is HRM practices.

Personal experience and exposure to formal HRM practices is particularly important because the benefits of HRM practices are often not clear at the time of adoption. There is usually a time lag between implementation of formal HRM practices and when the results or benefits become visible. Besides, SMEs have limited resources. They are more likely to invest in HRM practices if they have experienced the benefits themselves or are convinced by significant others of the benefits of these practices. On the other hand, the costs of implementing these practices are upfront and often substantial for a small firm.

It is established that micro and small scale enterprises in Africa that survived shared some common characteristics. Their owners had some education and had been exposed to formal management systems.

The decision to adopt formal HRM practices depends on the perceived link between the organizational strategy and people management. If people are perceived to be critical to the attainment of strategic objectives, formal HRM practices are likely to be adopted.

This article was originally posted on Africa Human Resources

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