Role of High Performance Work Systems in SMEs

Abstract

High Performance Work Practices (HPWP) are part of the High Performance Work Systems (HPWS). The HPWS include Strategic Human Resource Management (SHRM), Flexible Working System (FWS), Diversity and Equality System (DES), Workplace Partnership (WP) and Employee Empowerment (EE). This study was designed to assess the contribution of HPWS towards growth and expansion of Small and Medium Enterprises (SMEs) as indicated through Enhanced Business Performance (EBP), High Employee Retention Ratio (HERR) and Boost in Workforce Innovation (BIWI). As the Ownership Profile and Characteristics (OPAC) vary from SME to SME, the variable was included as a moderating factor in the implementation of HPWS in an organisation. Hypotheses developed focus on checking the contribution of HPWS on SMEs growth and expansion as a whole and individual interaction of the indicators. The study collected empirical evidence from employers and employees through a questionnaire survey, a first ever study of its kind in Pakistan. Employing a sample of 1061 employers as well as employees, it develops and tests a modified HPWS model within the Pakistani SMEs. Regression as well as step-wise regression is used for data analysis. Regression and Step-wise regression analysis are done using SPSS version 15.0. The results indicate that the modified HPWS model works well in SMEs of Pakistan and findings revealed a positive relationship though weaker one due to lower level of education of the owners and major decision makers in SMEs. Moreover Employee Empowerment factor has a positive but very low contribution towards SMEs performance because of less than 10 employees in 67.4% SMEs. However surprisingly democratic behaviour is found dominant and affected positively towards enhanced business performance and boosting workforce innovation.