HRD in small and medium-sized enterprises

By Alan Price. Adapted from Chapter 4 of Human Resource Development: Strategy and Tactics (2004)

18 January 2005 - Westhead and Storey (1997) consider that training provision varies considerably in small businesses with size being a significant factor. The British small business sector has a long-standing reputation for poor training levels but Westhead and Storey found considerable variations between the smallest (micro-enterprises) and larger SMEs. Smaller firms conducted their training internally with a focus on informal skills learning. Larger SMEs tended to obtain more external, formal training with a goal of obtaining recognised qualifications.

In a survey of 6000 randomly selected SMEs in Great Britain, Matley (2002) found significant differences in owner/manager attitudes and approaches towards training needs of family and non-family employees in their businesses. The needs of family members were seen in terms of firm-specific HRD issues such as succession planning whereas training for non-family employees was focused on individual career needs.

Owner/managers were mostly positive towards training but did not regard it as a critical element in overall business strategy. Matlay also found that small business owner/managers frequently claimed to be under pressure from government agencies and private trainers to invest in HRD. In most cases (100 per cent of micro-enterprises and 93 per cent of small businesses), decision-making for training and HRD were taken by the owner/manager. A mere 7 per cent of small businesses employed a human resource manager but, even in those organizations, the final decisions appeared to be taken by the owner/managers. The study encountered training plans and related budgets in under 6 per cent of micro-enterprises and fewer than 9 per cent of small businesses.

Looking at medium-sized enterprises, Matlay (2002) observes that owner/managers continued to be heavily involved in HRD issues in just over two-thirds (68 per cent) of the sample despite the increasing levels of complexity and formality found in such organizations. HR managers took charge of training and HRD decisions in only 26 per cent of cases. All respondents claimed that they used training plans and related budgets. All respondents saw a strong link between their firms' specific training needs and sustainable competitive advantage. However, despite their positive approach to training, most owner/managers did not appear to view training as being crucial to their overall business strategy. Instead, they took a tactical perspective, relating training to the perceived HRD needs of their workforces and seeing training of non-family members as an organizational expense. Conversely, HRD in family businesses was proactive for family members as part of medium to long-term development and succession strategies.

Matlay found considerable dissatisfaction with the range of training available from external providers. Typically, owner/managers reported that they were faced with a significant range of skills shortages because they were unable to find relevant training for both present and future business needs. Respondents claimed to have searched at local, regional and (in some cases) national levels in order to find economically priced training programmes that were relevant to their particular HRD needs. When programmes were found, owner/managers were often reluctant to proceed because of the high costs involved and the absence of support. As a consequence, they were likely to adopt 'off the shelf' training packages with a more reasonable cost and guaranteed support despite being more general than the ideal requirements. Concern for the development needs of successors led owner/managers to devote more time and effort into searching for packages that would be of relevance to family members.

Hill and Stewart (2000) use a number of case studies to clarify the nature of human resource development in SMEs and the relationship with national policy in the UK. They confirm a tendency for short-termist and spontaneous HRD in a wide variety of companies in different industries. Training is informal, reactive, and aimed at solving immediate workplace problems rather than longer-term development of employees. Hill and Stewart also found a tendency to justify the absence of training rather than the active promotion of a development strategy. However, the business philosophy of owner/managers - as shown by their attitudes and motivation - and their perception of the link between HRD and performance have a mediating influence.

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