Human Resource Management in Small and Medium-sized Enterprises: Recent Developments and Emerging Issues

Abstract

Small and medium-sized enterprises (SMEs) are backbone of the national economies and represent a source of entrepreneurial skills and predominant growth model. The contribution of SMEs is also confirmed at the job level and in the creation of gross value added. In developing economies, most SMEs are facing with unfavorable external economic and social conditions and extreme forms of institutional upheaval. At the same time they have poor internal capacity that impedes their growth and competitiveness. In this sense, the biggest challenge for SMEs is how to achieve a sustainable growth. The competitiveness and the improved business performance can be built up through internal resources, namely the human resources (HR). Despite the recognition of the importance of human factor in firm growth, entrepreneurs/owner-managers do not pay attention to the development of the HR function in their organizations. SMEs are more focused on the portfolio of expertise of technology and production processes than investing in specific abilities, knowledge, skills, and motivational profile of the employees. On the other hand, the centralization of distinctive skills in one or few people creates managerial rigidity that limits learning abilities and innovation. Typically, the processes of managing human resources are not systematically planned but are rather reactive. This paper highlights human resource management (HRM) issues in SMEs, discusses the challenges related to HRM in SMEs and makes a critical analysis in Macedonian context.