Exploring human resource management practices in small and medium sized enterprises with spe

1. Proceedings of the 2nd International Conference on Current Trends in Engineering and Management ICCTEM -2014
INTERNATIONAL JOURNAL OF MECHANICAL ENGINEERING
17 – 19, July 2014, Mysore, Karnataka, India
AND TECHNOLOGY (IJMET)
ISSN 0976 – 6340 (Print)
ISSN 0976 – 6359 (Online)
Volume 5, Issue 9, September (2014), pp. 213-216
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© I A E M E
EXPLORING HUMAN RESOURCE MANAGEMENT PRACTICES IN
SMALL AND MEDIUM SIZED ENTERPRISES WITH SPECIAL
REFERENCE TO BANGALORE AND MYSORE REGION
Ravi. K. S1, Dr. Santoshkumar.A. N2
1(Research Scholar, Department of Mechanical Engineering, Sri Jayachamarajendra College of Engineering,
Mysore – 570006, Karnataka, India)
2Professor, Department of Mechanical Engineering, Sri Jayachamarajendra College of Engineering, Mysore – 570006,
Karnataka, India)
213
ABSTRACT
Human resource is required for an organization to conduct different business activities. Without the support of
human resource the organization cannot exist or operate effectively. Success of any organization depends on the effective
use of human resources. This is true in the case of small industry where the owners have a close and more personal
association with their employees. Human resource management includes different practices such as Recruitment and
Selection, Training and Development, Compensation and Rewards, Performance Appraisal and Welfare Measures. The
small and medium sector has emerged as a dynamic and vibrant sector of the Indian economy. A small and medium sized
enterprise is characterized by abundant labour supply and reduces unemployment and so on. In this paper an attempt is
made to bring out the work carried out by different authors. A pilot study is carried-out to test the internal consistency of
the questionnaire. In this study Human resource practices considered are Recruitment and Selection, Training and
Development, Compensation and Rewards, Performance Appraisal and Welfare Measures. The Cronbach's alpha values
obtained are well above the level of 0.7, thus are acceptable for the analysis purpose.
Keywords: Human Resource Management, Small & Medium Sized Enterprises, Human Resource Practices.
1. INTRODUCTION
Human resource is required for an organization to conduct different business activities. Without the support of
human resource the organization cannot exist or operate effectively. Human resource includes managers, supervisors and
other sub-ordinate or employees. An organization has to forecast its manpower needs and adjust its manpower planning
and development programs.
Human resource is most important resource in management and needs to be used efficiently. It is necessary for
success of an enterprise. Human resource is a highly productive corporate asset and the overall performance of
companies and corporations depends upon the extent to which it is effectively developed and utilized. It is the most
delicate factor of production and need not be treated merely as a commodity to be bought and used in factories. The
importance of manpower in business management is now universally accepted [1].
Success of any organization depends on the effective use of human resources. This is true in the case of SMEs
where the owners/managers have a close and more personal association with their employees. Human resource
management (HRM) includes different practices such as Recruitment and Selection, Training and Development,
Compensation and Rewards, Performance Appraisal and Welfare Measures. If good Human resource practices are

2. Proceedings of the 2nd International Conference on Current Trends in Engineering and Management ICCTEM -2014
17 – 19, July 2014, Mysore, Karnataka, India
followed, an organization can avoid Recruiting wrong employee, employee turnover, finding employees with poor
performance. Human resources (HR) are important of all economic activities. In order to be successful in market it is to
equip and implement change in their existing human resource management practices.
2. SMALL & MEDIUM SIZED ENTERPRISES (SMEs)
The small and medium sector has emerged as a dynamic and vibrant sector of the Indian economy. It has
contributed significantly to the realisation of the socio-economic objectives of growth in employment and exports,
support entrepreneurship and ensure industrial dispersal. It is a well-recognized fact that a small-scale sector holds the
key to economic prosperity in an economy like India, characterized by abundant labour supply, unemployment and
underemployment, capital scarcity, growing modern large industrial sector providing scope for ancillarisation and so on.
The sector has grown during the past five decades besides playing a vital role in fulfilling India’s socio-economic
objectives. The SMEs accounts for about 35 percent of the country’s industrial production, 40 percent of exports and 60
percent of employment opportunities. Various policy initiatives undertaken by the government, whether by way of
incentives or protection, have helped the sector in acquiring the status of a major contributor in the growth process.
Liberalization and economic reforms have thrown up new challenges for the SMEs. In the changing scenario, building
competitive strengths, introducing technology upgrading and quality improvement are vital issues which need to be
addressed in order to build the capability to withstand emerging pressures and ensure sustained growth. The
Government is conscious of the role and importance of Small and medium Scale Industries in strengthening our
economic performance and is therefore committed to putting in place a policy framework that would address the
problems of this sector and help it become internationally competitive[2].
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3. LITERATURE REVIEW
Ramsey, Scholarios, and Harley [3] elucidate the link between HR and productivity. According to them performance is
improved by adopting HR practices.
According to Julien [4] HRM practices exist but they are not formalized and are diverse in nature.
Chandler & McEvoy [5] opines that firms that invest in employee training, engage in formal performance appraisal and
link these to incentive compensation are likely to have lower employee turnover, higher productivity and enhanced
performance.
According to Klaas, McClendon & Gainey [6] formalized HRM practices require considerable development costs and
due to the tight supply of financial resources SMEs fear this as cost disadvantage. Thus, vision and knowledge of the
owner/manager and limited time and resources play a role in keeping SMEs informal.
Noe, Hollenbeck, Gerhart and Wright [7] argues that human resource practices shapes the behaviour, attitudes and
performance of the employees, So HR practices are considered as important tools for organizational performance.
Drummond [8] explored that training helps an individual to perform better in a given task and subsequently contributes
to the firm performance and recommends the authorities to focus on training to improve performance.
Eresi [9] said that SME units are hardly putting in place human resources management policy and wages determination
and promotional decisions are confusing and arbitrary.
De Kok & Uhlaner [10] explored that SMEs generally have less formal HRM practices, but a substantial amount of
unexplained variation still remains across small firms. It is recognized increasingly that SMEs are heterogeneous,
complex and influenced by a range of factors and encompass firms of various sizes with varying degrees of complexity in
management. So far, scholars who mostly studied the formality of the prevailing HRM and practices in SMEs could not
simplify this complexity.
Armstrong[11] explored that incentives are given, to motivate people and to be more productive to achieve high level of
firm performance.
Barrett and O’Connell[12] identified that general training has positive impact on firm performance whereas firm-specific
training does not.
Mullins [13] suggested that comprehensive performance appraisal system forms the basic yardstick for assessing an
individual’s performance, highlight potential for future career advancement and helps to improve the performance.
Deshpande S.P. and Golhar D.Y.[14] explored that career development, participative management and so on are absent
in SMEs.
According to Jyothi [15] in small firms recruitment is done through their own network of friends and relatives. Most of
the small firm’s do not spend on training and development. HR policy is absent and performance of employees is not
linked with rewards.
Ian, Jim and Will [16] described that in order to achieve higher productivity incentives should be incorporated to
organization strategies.

3. Proceedings of the 2nd International Conference on Current Trends in Engineering and Management ICCTEM -2014
17 – 19, July 2014, Mysore, Karnataka, India
Cronbach's alpha Internal consistency
0.9 Excellent
0.7 0.9 Good
0.6 0.7 Acceptable
0.5 0.6 Poor
0.5 Unacceptable
215
3.1 Summary of literature
In SMEs recruitment is done through own network of friends and relatives and is informal. HR practices exist
but are not formal and become formal as the size of the firm increases. Training helps in improving the skills and
improves the performance of the firm. Performance appraisal helps in improving the individual’s performance. In order
to achieve higher productivity, incentives should be incorporated to organization strategies. A human resource practice
shapes the behavior, attitudes and performance of the employees, So HR practices are considered as important tools for
organizational performance.
4. RESULTS DISCUSSION
A pilot study is conducted to identify problems in the questionnaire [17] and helps in reviewing the factors
considered in questionnaire. Ambiguous questions could lead to some misinterpretation by the respondents. Therefore,
by using a pilot study, the researcher can determine the adequacy of instructions for respondents completing the
questionnaire [18]. Forty copies of the questionnaire were administered to the owners/managers of small and medium
scale manufacturing enterprises in Bangalore and Mysore region of Karnataka. A reliability test was conducted to test the
validity and reliability of the variables. From 40 questionnaires distributed, 25 were collected, thus the response rate was
63 per cent.
4.1 Reliability Testing
To measure the reliability of the questionnaire used, Cronbach’s alpha is employed. Cronbach’s alpha scores of
all variables with complete response of 25 SMEs are given below in table 4.1
Table 4.1: Cronbach’s alpha scores
Dimensions Number of factors Cronbach’s Alpha
Recruitment and selection 21 0.718
Training and development 21 0.838
Performance appraisal 24 0.862
Welfare measures 11 0.766
Compensation and Rewards 14 0.868
Firms performance 4 0.931
A commonly accepted rule of thumb for describing internal consistency using Cronbach's alpha,[19][20] is as
shown in Table 4.2
Table 4.2: Acceptance criteria for describing internal consistency using Cronbach's alpha
The internal consistency reliability coefficients (Cronbach’s alpha) in this study are well above the level of 0.7,
thus are acceptable for the analysis purpose.
5. CONCLUSION
Human resource is required for an organization to conduct different business activities. Without the support of
human resource the organization cannot exist or operate effectively. Success of any organization depends on the effective
use of human resources. The small and medium sector has emerged as a dynamic and vibrant sector of the Indian
economy. HR practices exist but are not formal and become formal as the size of the firm increases. A pilot study is
conducted to identify problems in the questionnaire and helps to determine the adequacy of instructions for respondents
completing the questionnaire. The internal consistency reliability coefficients (Cronbach’s alpha) in this study are well
above the level of 0.7, thus are acceptable for the analysis purpose.

4. Proceedings of the 2nd International Conference on Current Trends in Engineering and Management ICCTEM -2014
17 – 19, July 2014, Mysore, Karnataka, India
216
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