HRM Practice Clusters in Relation to Size and Performance: An Empirical Investigation in Canadian Manufacturing SMEs

Abstract The objective of this study is to investigate whether the most successful small businesses (SMEs) can be distinguished from the less successful ones by their resorting more extensively to certain clusters of human resource management (HRM) practices. The result of sampling 176 Canadian manufacturing SMEs contributes substantially to answer this question. It turns out from the analyses that different clusters of practices are associated with the performance of an SME, whether it is a greater ability to retain employees or to encourage growth and innovation. More precisely, the practices of dissemination of information and of incentive compensation (bonuses, profit sharing and stock ownership) are associated with employee retention; the practice of involvement in decision-making is associated with innovation and the practices of job descriptions, recruitment, and performance appraisal, are associated with growth. Another interesting finding is that one can reduce the number of HRM practices applied in SMEs to a lesser number of clusters, which could facilitate further modeling in research attempting to establish causal relationships between HRM practices and the performance of manufacturing SMEs.

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