Formal Human Resource Management Practices in Small Growing Firms

Abstract

Using data from micro, small, and medium firms in Australia, the paper examines the rate of adoption of formal human resource management (HRM) practices with increasing firm size. The results demonstrate a move toward division of labor, hierarchical structures, increased documentation, and more administrative processes as the number of employees increase. The adoption of formal practices begins early in the growth process, initially at a rapid rate (as a significant percentage of firms implement these practices) and then at a slower rate (as fewer new firms adopt the formal practices). At smaller business sizes HRM practices are less formal for managers than for operatives. The paper concludes that static models cannot be used to portray HRM practices in small firms and that management training and advice for small firms must recognize the diversity of practices associated with various firm sizes.