A Study of Human Resource Management in a Small Enterprise

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The analysis of the human resources management in a small organization involves many characteristics to study. First of all, a brief summary of characteristics of human resources management in China is presented. While analyzing human resources management, one has to study job satisfactions in order to assess which factors can attract and keep employees. Next Herzberg's two-factor theory is demonstrated to discuss some aspects of employee motivation. In the following section, this study will review the literature necessities of having a HR manager in the small organization. Besides, which style of leadership is suitable for the small organization is discussed in this section through Action-centred leadership theory.

The characteristics of human resources management in China

The background of HRM in China

After Mao's death in 1976, Deng Xiaoping's policies were introduced. 'linking up with the international track' became the goal in the economic realm, and soon it was to be seen in the non-economic area which included HRM. Then HRM 'soon became a popular idea in the latter domain in place of old-style personnel management.' (Warner,2009) Meanwhile, with the fast development of Chinese economics, China has to face the challenges of globalization. (Qian,2000) The stereotypical people management model is no longer suitable for the developing China. The old people management model can be defined characteristics as 'iron rice bowl' in Chinese which means 'life-time employment'. For a period of time after 'Liberation' in 1949 in China, people enjoyed this and thought it was egalitarian model. (Kaple,2004) But now, Chinese organizations and managers have not only to face the pressures from external and international market, but also internal institutional ones. (Guthrie,1999) All of these tensions from both internal and external make managers, as well as workers have to 'cope, perform and survive.'

The new points of HRM system from western countries arrival did not make China give up its own features. Warner(2009) pointed that China is using a kind of 'hybrid system' of people-management. China opens its door to reform its economy and wants to learn some advanced theories from western. However, 'China's reformers did not merely replicate foreign models uncritically.' They 'implanted' western countries such as the US, Japan and Europe's economic management practices since the late 1970's, and did it into the Chinese 'way of doing things.' Zhu(2005) explained that the Chinese HRM path was from 'plan to market', from 'egalitarian to inegalitarian' and from ' status to contract'.

HRM of small organizations

Employee motivation

According to Mullins opinion, motivation can be described as the direction and persistence of action. A fuller definition is given by the Chartered Management Institute: Motivation is the creation of stimuli, incentives and working environments that enable people to perform to the best of their ability. The heart of motivation is to give people what they really want most form work. In return managers should expect more in the form of productivity, quality and service. There is some similarity between Herzberg's and Maslow's models. They both suggest that needs have to be satisfied for the employee to be motivated. However, Herzberg argues that only the higher levels of the Maslow Hierarchy (e.g. self-actualisation, esteem needs) act as a motivator. The remaining needs can only cause dissatisfaction if not addressed.

Motivation may be difficult for employers, they need to motivate staff 'both in the longer term and in the short run,' Mullins pointed that because of the complexity of motivation and there was no ready-made solution or single answer, employers were hard to know what motivations can motivate people work well. So some competing theories were born at the right moment. This dissertation will discuss Herzberg's Two-Factor Theory to help analysis what kinds of factors may influence or have influenced the manager motivation in the study.

Based on Herzberg's tow-factor theory which is shown as below, when managers motivate people, they need to concern about both 'Hygiene or Maintenance factors' and 'Motivators or Growth factors'. Enough attention to the former would help reduce dissatisfactions; proper attention to the latter would produce satisfactions.

Hygiene or Maintenance factors like salary, job security, working conditions,etc. can be seen as a 'hardware' of motivation. Managers cannot ignore this hardware because ignoring Hygiene or Maintenance would cause dissatisfiers, and influence woking efficiency. Take an example in real life, Medicinal alcohol is always used for disinfection before surgery, it can ensure the surgery going smoothly, but doctors cannot guarantee the succeed of the surgery just by using it. The effect of considering Hygiene or Maintenance factors is just like medicinal alcohol. They can help to reduce employees' superficial dissatisfaction about the working environment or condition and prevent problems arising, but cannot directly help to achieve employees'need for personal growth.

After interviewing the owner of Qingdao Beiyang design architecture institute, the researcher found that the small organization had changed working places for 3 times in last 2 years, and the working environment is better and better. Now they work in a luxury office building in the centre of the city. Based on the research which data will be analyzed in findings part, all employees of the organization want better working condition, and they are happy to work here, but it is not the main reason why they can realize their goals. One of the employee whose name is Yang, said ' I think I can do my job well in both good or bad working condition, because anyway, I have to do the job, I don't wanna quit, it is difficult to find job today. But a good working condition may make me complete my job more quickly and happily.'

If managers want to motivate employees continuously and effectively, they need to improve the nature of work, pay more attention to personal growth and advancement, sense of achievement, etc. which can be thought as 'software'. Just as Mullins said 'to motivate workers to give of their best, the manager must give proper attention to the motivators or growth factors.'

When they exist, motivator factors actively create job satisfaction. If they are effective, then they can motivate an individual to achieve above-average performance and effort.

Hygiene or Maintenance factorsRepresentation of Herzberg's two-factor theory


Job security

Working conditions

Level and quality of supervision

Company policy and administration

The dissatisfiers Interpersonal relations

Motivation and job satisfaction

The satisfiers

Sense of achievement



Nature of the work

Motivators or growth factors Personal growth and advancement

Job satisfaction

One of the serious of HR problem in small business is how to make employees satisfy with their job and retain them. Mullins said that job satisfaction is necessary in order to achieve a high level of motivation and performance. However, he also indicated it is a 'complex concept and difficult to measure objectively'. Any variables of individual, social, culture, organizational and environmental factors would influence employees' job satisfactions.

In some small companies, the job satisfactions are very low and the turnover rate is high, many of them thought the reason they cannot retain employees is because employees did not satisfy their wages, benefits and working environment. These are the reasons but not all reasons. CIPD research indicated that employees resign for many different reasons. 'Sometimes it is the attraction of a new job or the prospect of a period outside the workforce which 'pulls' them. On other occasions they are 'pushed' to seek alternative employment. It can also be as a result of both 'pull' and 'push' factors. Another reason for voluntary turnover is a change in domestic circumstances outside the control of any employer.' Taylor(2002) also agreed the 'pull-type' and 'push-type' causes. He said in his book that 'pull-type resignations occur when the major cause is the positive attraction of alternative employment.' And by contrast, push factors is the perception that 'something is wrong with the existing employer.' Through 'pull' and 'push' factors, small business can know clearly why employees leaving, the company is not suitable for the employee or the employee is not suitable for the company?

Veitch (2002) conducted a case about situation of employees retention in a famous motor manufacturing company. The researcher interviewed 25 automotive engineers in depth about their most recent job moves. During the research, she found that both 'push factors' and 'pull factors' had contributed to the engineers' decision of leaving. She indicated several 'push factors' such as job insecurity, development opportunities, salary, etc. And in the research for Qingdao Beiyang institute, we focus on two 'push factors' which are personal development opportunities and salaries in employee retention analysis.

Personal development opportunities: everyone likes to climb up in his or her career and seek promotion, and recent years, more and more organizations 'reduce the number of levels in hierarchies, pushing towards harmonization and a greater degree of teamworking.' (Taylor,2002) And Taylor also pointed that many people have no interest in climbing up or joining in managerial level. These people develop their careers in their own ways especially some knowledge-based employees. The organization that the dissertation analyzes is an architecture design institute. The employees in it are included in what Taylor said the type of knowledge-based employees. He thought 'what they primarily seek is the opportunity to use their skills and expertise and to develop these further.' The same idea is also from Mary Veitch (2002), in her research, she indicated that knowledge-based people like engineers will take the opportunity to 'enhance their careers by gaining new skills and further developing others' if they are given opportunity to determine for their responsibilities by themselves.

Pay and turnover: it mentioned in last part that Herzberg(1966) famously described pay and other extrinsic rewards as a ' Hygiene factor'. And also as the 'push factor', payment is very important in turnover level. Gustman and Steinmeier (1995) found that turnover in non-pensionable jobs was three to six times higher than in pensionable jobs. There is a link between pay and employee turnover which is no doubt. And payment is very important in guiding employees to decide which employer they will work for. People always want to take a high paid job. So many people think the more employer pay, the lower turnover rate is, and vice versa. However, in Taylor(2002)'s opinion, it is not accurate. The same idea are also from Veitch(2002) They thought increasing payment will not lead to reduction of turnover levels. There is an example which is from Veitch (2002)'s case study. It is interesting to find out, in all interviewed engineers who had left the famous motor manufacturing company, there was only one left that company primarily because of his salary level. Something here Veitch conclude that 'in combination, an effective reward strategy and an integrated employee development plan should maximize job satisfaction and minimize employee turnover.

HR managers

HRM activities need to be undertaken by HR managers. The major idea of HRM is to arrange the right person in right time, at right place. So a HR manager need take much more responsibilities for every employee. The human resource manager has to be in constant touch with the employees of the company. He or she provides advice to the staff, supervisors and trains them in various aspects. He or she has to coordinate the process of recruiting and training. Also needs to conduct employee performance reviews and should also inform the employees about the policies of the company. The need to keep employees informed in order to facilitate decision making is also one of the prime functions of the human resource manger. (Nakate)

Mullins(2010) indicated that ' smaller organizations may not justify a specialist human resource manager or a separate department. But it is still necessary to have an effective HRM function, whether it is the responsibility of the owner or of a manager or an administrative assistant. Even in the smallest organizations, or in organizations where a specialist department has not been established, there will be a need to recruit staff, to train them, to motivate and reward them, and to comply with the law relating to employment. HR work must still be carried out even of an organization is too small to justify a separate department or chooses not to establish one.'

Many small business does not have a HR manager because they think it is a kind of waste to hire a HR manager in such a small company. They may consider many aspect of the company, like existing employees, financial, operation,etc. And ask themselves : is it necessary to get a HR manager? It is said that 'many small businesses cannot afford a full-time specialist to deal with human resource problems.' But, as a business grows, 'its structure becomes more complex and personnel problems increase in number and potential cost. At a certain point in the typical small business, it becomes apparent that a full-time or part-time personnel manager is needed.' (Roberts, S, Georgia, C.Roberts andA. Georgia)

Leadership and management styles

Leadership styles: Reeves(1997.p69) explained 'leading is a concept that is hedged about with a considerable amount of mystique.' In essence, Zaleznik(1977) saw the leader as 'using power to influence the thoughts and actions of other people', 'taking of risks and striking out in new directions'. Farey (1993) quoted what Edward Land who is best known as the co-founder of the Polaroid Corporation said, leaders are 'active instead of reactive', 'shaping ideas' instead of responding to them, and that they adopt a personal and active attitude towards goals. He said the net result of leaders work hard to 'alter moods, evoke images and expectations, and in establish specific desires and objectives determines the direction a business takes' is to change the way people think about what is desirable, possible and necessary. And Farey (1993) believed it is that kind of leadership style which we can call 'transformational style'. The same opinion also from Reeves (1997,p71) Reeves thought transformational leaders tried to change employees' attitudes and 'transform' their interests in themselves into a common good.

Action-centred leadership is a general theory which focuses on what leaders actually do. This dissertation will analysis the leadership in the case through this theory.

Action-centred leadership

Hiring relatives

Just like it mentioned in introduction, many organizations especially in small organizations in China, owners of the organizations often like to hire employees by relationship or favoritism.() Certainly it may help because organizations can save money by hiring relatives and the owners would feel they can trust these relatives to let them work in key position. But owners or managers should always remember the goal of HRM, to hire right persons and put them to the right places. Someone said that 'Strong personal Relationships are not guarantees of compatible working relationships.'

Murray pointed out that 'most experts warn that combining work and family relationships almost always causes the personal relationship to suffer.' And she suggested that 'the best policy is to avoid hiring relatives.' Same opinion also comes from Lee, 'Hiring relatives to work for you can lead to some touchy situations, especially if that person turns out to not be the best employee for the position.'