THE IMPACT OF HUMAN RESOURCE PRACTICE ON PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES

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THE IMPACT OF HUMAN RESOURCE PRACTICE ON PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES

Abstract

The study examined the impact of human resource practice on performance of small and medium scale enterprises in Nigeria. Specifically the study seek to determine the extent at which effective human resources practice can enhance the growth of small and medium scale enterprises, explore the influence of employee rewards management practices on the performance of small and medium scale enterprises and establish the influence of employee training practices on the performance of small and medium scale enterprises. The study utilized a cross-sectional survey design based on questionnaires and interviews, and a mixed methods research approach. A sample of 80 respondents was selected from employees and owners of small and medium scale enterprises  using simple random and purposive sampling techniques. Quantitative data was analysed using descriptive statistical techniques and the hypothesis was tested using Chi-Square. The findings of the study shows that human resource practice have significant impact on the performance of small and medium scale enterprises in Nigeria. The study recommends that small-scale businesses with few employees should set up human resource departments to handle human resources. Small-scale enterprise owners should ensure proper training of their employees in order to ensure that the employees have requisite skills to perform their task effective and thus enhance the overall performance of the organization.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study     

Both large firms and small and medium-sized enterprises (SMEs) are struggling for attracting and retaining talented employees in the organizations. In a highly competitive global marketplace, it is very difficult to attract and retain skilled employees in organizations without having sound HR practices. The impact of human resource management (HRM) practices on performance have become the dominant research issue in the field of HRM (Guest, 1997).

Human resources pratice plays a critical role in contributing to the overall productivity and strength of an organization. Human resources development helps to build a stronger workface through better recruiting, training and retention. The workface helps drive the efficiency of the organization as a whole and more efficient, productive and agile organization with well equipped operating managers who provide support on all human resource matters (Gelade, 2013).

Human resource practice involves a process of observation, planning, action and review to manage the cognitive capacities, capabilities and behaviors needed to enable and improve individual, team and organizational performance in work organizations, (Walgenbach, Kabst and Beck, 2009). It has multiple dimensions, covering educational attainment, workforce skills, population health and the set of employment policies that provide businesses with workers with appropriate skills and the ability to adapt quickly to new challenges. Each of these areas is a key driver in creating a favorable environment for investment. Because Human Resource Development / practice policies are all closely inter-related and must be consistent with a country’s broader development and investment policies, they cannot be framed in isolation. Low human resource development needs to be tackled through a coherent and comprehensive strategy that takes full account of the policy linkages and a country’s implementation capacity, (Jessica, 2002).

Human Resource practice concern the quality of the labor force and the regulation of the labor market. Quality in turn is a function of basic and higher education, training programs and the overall health of the population. The quality and adaptability of the labor force is a key driver in creating a favorable environment for both domestic and foreign enterprises to grow through new investment and to adapt quickly to changing circumstances. Their relative roles and the overall importance of Human Resource Development depend on individual country circumstances, particularly the economic structure, Walsh (2007).

Human resources practice also provides a variety of employee’s services ranging from research to time and leave reporting to the interpretation of the board of regent’s code state classified rules and related regulations (Gregory 2018). But many human resources organization struggle to allocate their resources, they are often hindered by a multitude of manual based process and benefits information’s that are costly, prone to errors and time consuming to manage, this factors can make it difficult for human resources organizations to focus on higher value initiative that helps to drive profitability, efficiency and contribute to the organization bottom-line, many human resources administrative units are transforming to an E-human resources task tools and processes into internal intranets via the internet, organizations are seeking E-human solutions that can help automate tasks and streamline workflow and improve efficiency of the workface  by providing self service tools, training and information. By automating processes human resources can better align itself with the organizational services and employees needs such training and development (Armstrong 2016).

Small and Medium Scale Enterprises represent the largest proportion of the economic sector in every country. Small and medium scale enterprises are important for modern economy and it is widely recognized that they contribute to employment growth (Drucker, 2016). About 99% of all European companies are small and medium sized and they provide 66% of all working places (ECSB Newsletter). Over the last decade, enterprises with less than 10 employees provided more new jobs than bigger companies (Mulhern, 1995). Despite the contribution of Small and Medium Scale Enterprises, enough attention have not given to the impact of human resource practice on the performance of small and medium scale enterprises in Nigeria, thus the need to carryout this study on the impact of human resource practice on performance of small and medium scale enterprise.

1.2 Statement of the Problem     

Human resource practice has grown out of the realization that it is vital for the survival of any organization and Small and Medium Scale Enterprises in particular. This is particularly because the hastily implemented performance related pay and appraisal systems were not delivering the results that people were expecting from them (Armstrong 2000). This makes it primary to the success of any business outfit given the global competition and turbulence in the business arena. According   to   Armstrong   and   Baron   (2004),   the   benefits   of   Human   Resource practice to Small and Medium Scale Industry are therefore manifold. It is on this note that Freeman (2003) clarifies that it is   concerned   with   satisfying   the   needs   and   expectations   of   an   organization’s stakeholders – owners, management, employees, customers, suppliers and the general public. Human resources practice is faced with some problems in the course of carrying out their obligation which serves as a detriment in contributing their quota effectively to the organizations. These problems are as follows: Inadequate provision of funds to the administration poised a great obstacle to the organization in ensuring efficiency. Improper selection and employment of staff affects the productiveness and effectiveness of small and medium scale enterprises. When employees undergo the required training in order to put their acquired knowledge into practice and management do not place them on merit, it mega test the principles of efficiency in the organization. Change in government policies makes it difficult for organization to operate steadily. Social-cultural values and beliefs of the areas where organization is operating may hinder effective and efficient utilization of human resource. When the management have a wrong preconceived notion that anybody other than a specialist can mount the responsibilities and therefore, when it is not accorded the proper place it deserves, it posed a problem to the organizations development. Though SMEs have not paid due attention for human resource managing practices (Hornsby and Kuratko, 1990), managing of human resource is a decisive factor as far as SMEs’ performances are concerned” (Madurapperuma, 2009). Therefore, this study is carried out to examine the impact of human resource practice on the performance of small and medium scale enterprises.

1.3 Objectives of the study

The objective of the study was to examine the impact of human resource practice on performance of Small and Medium Scale Enterprises in Nigeria.

The specific objective:

1. To determine the extent at which effective human resources practice can enhance the growth of small and medium scale enterprises.
2. To explore the influence of employee rewards management practices on the performance of small and medium scale enterprises.
3. To establish the influence of employee training practices on the performance of small and medium scale enterprises.

1.4 Research Questions

1. To what extent does effective human resources development enhance organizational growth in Industrial Training Fund, Enugu area office?
3. What is the influence of employee rewards management practices on the performance of small and medium scale enterprises?
4. What is the influence of employee training practices on the performance of small and medium scale enterprises?

1.5 Statement of Hypothesis

H0: Human Resource Practice has no significant impact on the performance of Small and Medium Scale Enterprises.

H1: Human Resource Practice has significant impact on the performance of Small and Medium Scale Enterprises.

1.6 Scope and Limitation of the Study

The scope of the study will be limited to the impact of human resource practice on performance of Small and Medium Scale Enterprises in Nigeria.

Thus, it will focus on all efforts of the small and medium scale enterprises to increase human resources development and productivity in their establishment.

In  the  course  of  the  study  of  this  kind,  some  problems  or limitations  are  encountered,  these  are  time  and  financial constraints the researcher has very limited time for the study, due to  the  nature  of  work,  the  researcher  occupies.  Distance  from school/home  to  the  places  of  research  also  possess  a  lot  of problem  because  the  distance  is  much  and  cannot  be  covered with little time hence it reduced the frequency  of  going  to  assess  the  trained  workers  by  owners of small and medium scale enterprises  as often as should have been assessed.

1.7 Significance of the Study      

The study is significant from the point of view that no available literature or study so far has specifically focused on human resource development and organizational growth in small and medium scale enterprises. Thus, it is going to add to existing body of literature and extend the frontiers of knowledge practically.

The research findings will contribute to deepen of our understanding of effective human resource management practices in small-scale industries and their importance to researchers, policymakers and human resource management practitioners for addressing the key issues starting from assessment of the inexperienced or potential entrepreneurs ideas until their visions are realized.

The findings will also contribute to the existing knowledge and the addition will be utilized by future researchers and the different key stakeholders who are the policy makers, implementers and the leaders in the community of study, not forgetting the owners of the small-scale businesses under study.

1.8 Definition of Key Terms

Human Resources: Is the set of individuals who make up the workforce of an organization, sector or economy. They are responsible with employing suitable individual that fit a job.

Management: The organization and coordination of the activities of a business in order to achieve defined objectives.

Human resource development: Human Resource Development is a process through which employees in an organization are assisted to realize their full potential for their present and future jobs.

Small And Medium Scale Business: SMEDAN (2005) defines small and medium scale enterprises based on the following criteria: small scale enterprises are businesses with ten to forty-nine people with an annual turnover of five to forty-nine million Naira while a medium scale enterprises that have fifty to one hundred and ninety-nine employees with a year turnover of fifty to four hundred and ninety-nine million Naira.

Productivity: Productivity is the volume of goods and services produced for work within some specific unit of the hour, day, week, month, year etc.

Training: Training means to give teaching and practice in order to bring a desired stand and behavior efficiency or physical condition. Thus it is the act of teaching in the industrial or business concept. It is the act of reaching a particular level of the expectation of the employer.

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