Publication Date

5-1-2005

Abstract

Small business leaders are charged with delivering high levels of company performance. There is no shortage of potentially fruitful investments available for consideration; these include developing new products or services, improving product or service quality, and enhancing marketing and sales. Another possible investment - improving the way a company manages its people - tends to receive less attention. This is somewhat surprising, however, when one considers that the human resource management practices a company uses can dramatically impact the bottom-line. One study of large publicly traded firms, for example, found that companies using "high performance" human resource practices have market values that range from between $16,000 and $40,000 per employee higher than firms that do not use such practices. A study of high tech start-ups showed that for firms going public with a high level of human resource value, the probability of survival is .79; for firms going public with low levels of human resource value, however, the probability is only .60. So, what human resource management practices foster small business success? The problem in answering this question is that prior studies often disagree about which human resource management practices are effective and which ones aren't. Furthermore, even if scholars could agree about which practices are best, there is no reason to believe that the practices used by large Fortune 500 firms or small high-tech start-ups would translate to many (if not most) small businesses. After all, small businesses (i.e., those with fewer than 200) employees, typically compete in areas other than high-tech, and are generally unlikely to go public any time soon. The Cornell University/Gevity study of human resource management practices in small businesses is the first study we know of to provide definitive answers to two critical questions facing small business leaders: (1) Do people contribute to the success of small businesses?, and (2) What human resource management strategies (and practices) can the leaders of small businesses employ to foster firm success? The results of the study are presented as follows. First, we provide a visual depiction of the study's findings. Second, we show that workforce alignment is strongly related to small business success. Third, we demonstrate how various employee selection, management, and motivation strategies affect workforce alignment. Fourth, we present four key takeaways from the study. Finally, we provide a section that allows you to compare your company's results on all study variables to those of the other 250 companies that participated in the study.

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Suggested Citation
Collins, C. J., Ericksen, J. & Allen, M. (2005). Human resource management practices, workforce alignment, and firm performance (CAHRS Working Paper #05-05). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for Advanced Human Resource Studies.
http://digitalcommons.ilr.cornell.edu/cahrswp/5

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