Ludivine Adla, Grenoble IAE Graduate School of Management and Virginie Roquelaure, iaelyon School of Management – Jean Moulin University Lyon 3
For the past decade or so, we have been conducting research on human resource management (HRM) in French small and medium-sized enterprises (SMEs). One of our initial findings is the existence of an informal and intuitive approach to HRM. Given the spatial and social proximity among the various stakeholders in an SME, the CEO plays a central role. In fact, the CEO often serves as the de facto human resources director.
He makes arbitrary decisions regarding human resources management, which are therefore not always seen as legitimate by employees. For example, compensation policy is most often discretionary: this results, in particular, in bonuses being awarded at the manager’s discretion. These subjective decisions may be challenged by employees. The same is true for promotions, which also leads to a loss of meaning and a lack of engagement among some employees.
In particular, we studied the case of an SME in the Isère department with 76 employees specializing in geometry, where human resource management (HRM) relies primarily on the owner and the CEO. As a result, hiring most often depends on the owner’s network, and the company has not established a compensation scale: bonuses and raises are awarded on an ad hoc basis according to subjective criteria. We describe this type of HRM as being self-centered around the owner.
The Complexity and Richness of Relationships
We have also observed that the informal nature of these practices can, in rarer cases, lead to the opposite effect and give rise to a shared approach to HRM between management and employees. This approach, co-created by the company’s members, is designed to be supportive and is desired by all stakeholders, which leads to stronger buy-in for the company’s mission. Although counterintuitive at first glance—given the tendency of SMEs to centralize power—this form of HRM nevertheless reflects the complexity and richness of relationships within this type of organization.
To engage and empower his employees, the CEO of another SME in the Isère department—with 95 employees—worked with all stakeholders in his company to develop a social pact in 2011. This document outlines the established rules regarding employment policy, compensation, and labor relations, while also specifying employees’ commitments. The CEO relies on his managers to communicate information, listen to employees, and—most importantly—help employees find meaning in their work. The relationship between the CEO and employees is built on an environment that fosters open communication and collaboration. Solidarity, commitment, and respect are core values at this small-to-medium-sized enterprise.
Weight of Certain Factors
Our research shows that the choice between a self-managed or shared HRM model depends on the size of the company and the profile of its leader.
First, when a company reaches the 100-employee mark, the HR function tends to become more structured, and the CEO is compelled to delegate authority to an HR manager or an administrative manager. As a result, HR management can become decentralized and more organized, as it is led by someone with genuine expertise in the field. However, this HRM can remain self-centered if the guidelines for HRM policy are dictated by the CEO. Furthermore, even if the CEO fully delegates this function to the HR manager, it does not constitute shared HRM in the strict sense, since employees will not actually be involved in shaping it.
We observed that the type of executive profile was another key determinant in choosing the form of HRM. Thus, in terms of education, a highly qualified executive will tend to formalize their HRM or seek the assistance of specialists in the field to align it with their strategy. Conversely, a self-taught executive will tend to follow their instincts and organize their HRM in a very informal manner. However, this HRM system can also be developed in consultation with employees.
Based on his past experiences, a leader who has worked for a large corporation may draw inspiration from certain structuring or organizational methods. Conversely, if he has been disappointed by certain approaches, he may decide to prioritize collaborative development and knowledge-sharing in human resource management in order to move away from what he has experienced in the past.
Values and Partnerships
We also noted the importance of a manager’s network, which may lead them to adopt HRM practices similar to those of their competitors in order to attract and retain highly qualified individuals. The networks within which the executive operates do, in fact, influence the adoption of HRM practices. These networks primarily consist of labor unions and major clients, both of which are considered coercive networks. In contrast, business executive associations, when combined with advisory networks, exert a lesser influence.
Our findings also highlight that the leader’s personal values—which certainly allow for some flexibility—are the driving force behind the implementation of a shared HRM approach. These values may focus on respect, solidarity, or dialogue.
Finally, it is important to consider the role of middle managers, who can serve as key HR liaisons when it comes to conveying the executive’s vision or sharing information. They can also alert the executive to changes in employees’ attitudes toward the company that might indicate a potential loss of engagement.
Ludivine Adla, Associate Professor of Business and Management Sciences, Grenoble IAE, Grenoble IAE Graduate School of Management and Virginie Roquelaure, University Professor, iaelyon School of Management – Jean Moulin Lyon 3 University
This article is republished from The Conversation under a Creative Commons license. Read the original article.