2.

1 HRM in general

Presently firms are focusing on HRM as one of the factors for their growth (Saini and Budhwar, 2008). Human Resource is important because it helps in creating, using and sharing knowledge (Khandekar and Sharma, 2005). As aptly defined by Li Aiqiang (2009), HRM is a function that deals with selection, developing and retaining talent. Reid et al., (2002) summarised the same stating that HRM is a new way of managing people in the workplace. In the second edition of their Strategic Human Resource Management, Randal and Jackson (2007) have spoken about a transition of the way people are managed in the organisation from Personnel Management to Human Resource Management to Strategic Human Resource Management. This transition was brought about due to the change in the outlook of the discipline, where people were considered an asset to the organisation and not just a mere means to achieve business goals. Hence, accordingly, the policies and practices of the Personnel Management had to coordinate with each other. Later, a more strategic outlook was built; wherein these policies had to coordinate the employees needs to the organisation needs. As people are the source of competitive advantage (Cunningham and Rowley, 2008), their welfare and continuous development is critical to every organisation, therefore continuous HR research helps owner/ managers to determine if their HRM practices are efficient and effective (Hernandez and Franklin, 2004) so as to exploit and leverage these resources to make them competitively advantageous (Khandekar and Sharma, 2005). Even Chens (2005) thesis of Taiwanese management in UK states that HR practices need to emphasize on the selection of highly skilled employees giving them more discretion, investing in them and rewarding them through performance appraisals for a long-term impact. 2.2 Recruitment and Selection

Although recruitment and selection is addressed in SMEs, they are different from large companies (Cassell et al., 2002). According to McEvoys (1984) study of 84 small businesses in the US, 40% of these firms had personnel department, which consisted of 3 to 4 people and almost 80% of them had written policies in place. But for most of the surveyed firms, Human Resource Planning was a low priority; hence their recruitment and selection tools were unimaginative, where the owner or manager of these firms takes charge of recruiting the right people. For large firms, the responsibility lies with the HR Department (Hernandez and

Franklin, 2004). Golhar (1994) in his study of the large and small US manufacturing firms identified that both types of firms opted internal recruitment, job posting and bidding as the most used recruitment tool. Some of the common selection tools among these firms were one-to-one interviews and written tests, although small firms used job tryouts more. But according to McPhersons (2008) research in Greater London, where he studied 42 first and second generation Sikh, Pakistani family and non-family small businesses, word of mouth and on specs type recruitment were the common recruitment styles. Cassell et al. (2002) also agrees from their research that although recruitment was used more than any other HR activities, word of mouth was the most appropriate way of recruiting and selecting as it ensured more commitment to the job and no financial outlay. The SMEs researched by Reid et al, (2002) filled most of their vacancies through advertising in the newspaper nationally. They also identified that non-family owned businesses used references more than the family owned businesses. According to studies done by researchers (Cassell et al. 2002), the family owned SMEs are mostly characterized by informal HRM systems where there is no formal recruitment through which family members without required skills or abilities are recruited (McPherson, 2008). Family owned businesses are hence, always criticized for nepotism (Reid et al. 2002) because most of the HR practices in small businesses are handled by the owner / manager (McPherson 2008). On the contrary, larger firms have resource, money and time and hence use a wider range of recruitment tools and selection procedures like advertising in national newspapers, magazine and other media sources, hiring agencies and executive recruiters for higher positions along with internet and college recruiting (Hernandez and Franklin, 2004) as they attract more applicants and their cost are lowered using these formal channels (Aycan, 2005). In order to get skilled human resources in their companies, Leavell (2006) states that large businesses have their own in-house Universities or are joining educational programmes with Universities, but the small businesses cannot afford to act this proactively due to their financial constraints and hence small businesses complain that they are unable to find competent employees (McEvoy 1984). According to Carroll et al. (1999) normally SMEs do not follow textbook procedures for recruitment and selection of the staff. Rather the informal methods are mainly followed such as word-of-mouth recommendations from staff or absorbing the former employees again if they are interested. These firms normally use only job description without focusing on the job analysis. SMEs also use jobcentres and the local press advertisements that is a quicker and relatively simpler way of hiring people. This does not need any specialist in HRM to be hired for hiring people reducing the cost and risk and uncertainty of hiring unwanted or wrong people.

In view of this, we hypothesise

Hypothesis 1: Small firms are less likely to adopt a formal approach in their recruitment and selection practices and this has an effect on breakdown in partnership

2.3 Training and Development

Businesses and companies that develop and trust their employees benefit with an innovative and better skilled workforce (Leavell 2006). However, McPherson (200 observes that there is a lack of training and developing or any kind of induction in SMEs. Reid et al. (2002), identified in their study of people management in SMEs that although training and development was the biggest challenge for the SMEs, a minimum amount was spend on it but Cassell et al.s, (2002) research of SMEs in UK identifies that although there is training but it is based on specific organisational needs and is more focused or targeted. As mentioned earlier, training in small firms is mostly done in an informal manner wherein employees volunteer to train the other (Hernandez and Franklin, 2004). However, large firms use different training methods which include professional training, on job training, simulation training. They also use books, lectures, videos to assist them in the Training(Hernandez and Franklin, 2004). In the study of the training facilities of small family businesses, Matlay (2002) identified that those owners/managers that had informal recruitment procedures also had informal training and other HRD issues, whereas those that had formal management styles conducted all their HR function in a formal manner for all employees irrespective of their position or tenure with the company. Storey (2004) observes that the reason for such limited investment in Training and Development is because owners/managers of small businesses invest most of their personal finance in the business as a result of which they focus more on the business growth than the growth of the employees. Hence the size and type of industry are contingencies influencing training and development (Aycan, 2005). Based on such evidence, we hypothesise:

Hypothesis 2: Small companies in the UK and India are less likely to emphasize training and development for their employees.

2.4 Performance Appraisals and Reward Systems

Aycan (2005) states that in larger organisations, performance appraisals are more formal and periodical whereas for their counterparts the same in done frequently in an informal method. Almost ths of the small firms surveyed by McEvoy (1984) had a formal performance appraisal, whereas Cassell et al., (2002) argue that the appraisal system in SMEs is ad hoc where around 50% of the respondents in their research had some form of appraisal which was informally done and was mostly done for Senior Managers. Reward systems were least used. Even though 50% of the surveyed SMEs had an incentive scheme, it was not executed appropriately as it was not considered a priority. Similarly, Golhar (1994) also observed in his research that the large and small US manufacturing firms lacked the policies that would nurture workforce characteristics like working in groups which they knew were critical for their success but did not initiate any individual or group incentives schemes to encourage it. Barrett and Mayson (2007) point out that small business retain employees by offering salaries and rewards based on firm performance and growth. But although salary increase was the second most used motivation technique by most of the surveyed small businesses by McEvoy (1984), it was only used 8% of the time. Golhar (1994) also observed that HRM managers of small companies did not consider group incentives like the large companies. Based on these evidences we hypothesise:

Hypothesis 3: Small firms from India and the UK are less likely to compensate their employees based on their performance through performance appraisals, which can cause culture clashes when forming Joint ventures