HUMAN RESOURCE ASSIGNMENT

T h e J o u r n a l o f D e v e l o p i n g A r e a s Special Issue on Kuala Lumpur Conference Held in August 2014

Volume 49 No. 5 2015

A REVIEW OF SMEs RECRUITMENT AND

SELECTION DILEMMA: FINDING A ‘FIT’.

Mathew Abraham

Maniam Kaliannan

Avvari V. Mohan

The University of Nottingham Malaysia Campus

Susan Thomas

RMIT University Vietnam

ABSTRACT

This systematic review of theoretical approaches is to determine whether the recruitment and

selection process in SMEs shows evidence of a strategic ‘fit’ and second, examining the extent

of a structured, innovative and flexible recruitment and selection process. HR managers may be

aware of Strategic Human Resource Management but their understanding of recruitment and

selection process as a HR architecture linking the firm and HR strategy may be vague. Findings

in literature shows that priority research tends to be non-HRM related functions. HRM practices

are seen as less important. The review also shows evidence that recruitment and selection is an

under researched area and no specific research papers provided insights on the concept of ‘fit’

in recruitment and selection. Although general literature presents various models of recruitment

but the compatibility between the individual, job and environment - ‘fit’, as a strategic process

in SMEs seems disconnected and unexplored. This suggests that the HRM functions in the

Malaysian SMEs are treated and perceived as secondary, routine and an insignificant function.

JEL Classifications: M05, M51, M510

Keywords: recruitment and selection, SMEs; person-job fit; person-organization fit

Corresponding Author’s Email: [email protected]

INTRODUCTION

The effort to attract, compensate, motivate and retain employees is becoming a

daunting task for Small and Medium Enterprises (SMEs). Establishing and giving

prominence to the element of fit between; person and the job; person and the

organisation would determine the firms’ progress towards creativity, innovation and

knowledge building for future competitiveness. Basically three issues indicate the

dearth of research in recruitment and selection in SMEs, first, there is a lack of study

on issues faced by SMEs when recruiting employees, second, previous research tends

to be descriptions of recruitment practices rather than any theoretical basis on the

viability of these practices and lastly, majority of research focuses entirely on large

firms therefore the findings do not represent the barriers faced by SMEs (Williamson,

et al. 2002). The evidence suggests there is a lack of sufficient understanding of HR

practices in SMEs and they lean towards activities which are ad-hoc and informal

(Mayson & Barrett, 2006).

HUMAN RESOURCE COMPETIVENESS

The HRM sub domain covers components comprising of philosophy, policies,

programmes, practices and processes (Schuler, 1992, as cited in Lengnick-Hall et al.,

2009). In this instance the ‘fit’ aspect would be the recruitment and selection process

in which the competitive advantage is to establish a link between firms’ business and

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HR strategies by investing and capitalising on core workers internal strengths. The

following questions seem relevant in this instance, 1. Does the SHRM concept

encompassing strategic recruitment and selection process be able to achieve and

contribute to the SMEs competitive advantage? 2. Do SMEs have actual success in

recruiting talents who are likely to be successful in their jobs (Breaugh & Starke,

2000)? Although there are models on recruitment and selection but its fit as a strategic

element with the SHRM concept in SMEs may be still unclear. Breaugh & Starke

(2000) argue that although there is a mix of doubt and hope in the recruitment literature,

there is still frustration over the lack of progress in understanding the recruitment

process.

A REVIEW OF RECRUITMENT AND SELECTION CONCEPTS

It is interesting to note that Breaugh (2013) laments that the various research on

recruitment is disjointed, without a clear connection between variables that interlink

the recruitment process. In the past the recruitment and selection function has been

perceived as a traditional HR function embedded in psychometric model, without

much significance, but it is now more focused, sophisticated and strategically driven

(Millmore, 2003). The recruitment and selection functions are closely inter-related and

the key elements identified across these definitions are the organisational activities and

decisions taken to identify, attract and influencing people with right competencies to

apply for a vacancy as their career choice (Mayson & Barret, 2006). The process involves finding and selecting applicants whom the recruiter predicts will be a fit and

contribute the maximum to the organisation.

The Strategic Recruitment and Selection Models

The strategic positioning of HRM, on equal footing with organisational strategic

initiatives at top levels is seen as a catalyst towards putting HRM processes such as

recruitment and selection as integral components in sustaining competitiveness. Over

the past 20 years the significance of knowledge, skills and abilities (KSAs) towards

organization performance has become more recognized (Breaugh & Starke, 2000).

In Breaugh's (2008) model of recruitment four phases are described as the key process in attracting the right talent. First is to establish clear recruitment objectives;

second is developing strategies to fill the vacant position, third involves specific

recruitment activities which attract the right candidates and fourth is to evaluate the

outcomes of the first three phases of the recruitment exercise. Between the third and

fourth phase of the recruitment process the intervening job applicant variable

emphasises how important it is for organisations to consider the applicant’s fit with the

job and the organisation. This fit encompasses six broad factors construed as

“predictors of applicant attraction” (Chapman, et al., 2005, p. 929). These factors focus

on the characteristics of the job and organisation, the recruiter characteristics,

perceptions associated with the recruitment process, the perceived fit between person

and job, and the person and organisation, the perceived substitutes and the hiring

expectations. When examined using the resource based view the right recruitment

strategies contributes to higher labour efficiency, attracts talent with valuable skill sets,

it is difficult to be imitated, the strategy is “non-substitutable” and it integrates

horizontally with other HR practices therefore they are regarded as a source of

competitive advantage (Mayson & Barrett, 2006; Lengnick-Hall et al., 2009).

The framework of the recruitment process as proposed by Dineen & Soltis

(2010) integrates recruitment models by Breaugh (2008) and Rynes & Cable (2003).

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As the integrated model suggests there are three stages in the recruitment process. First,

organisations putting effort in generating viable candidates and the job applicant make

decisions to apply for the job. Second, maintain the status of potential applicants where

the important consideration is now the perception towards fairness and the timeliness

of the selection process. Third, the post offer closure when the applicant is now offered

a job and the decision to accept is dependent on the timing of the offer and the

competing offers by other competitors. It indicates the process variables that are

significant at each stage as it involves several aspects that would assist in identifying

potential applicants. Recruiters who are able to establish strong social networking,

communication and signalling, negotiations and influence of applicants in job choice

decision making would be able to hire talent at the right time.

THE CONCEPT OF FIT IN THE SELECTION PROCESS

The Person-Environment (P-E) Fit

The growing interest and importance of ‘fit’ in selection research is based on the

fascination among practitioners and scholars on the compatibility between the Person

and Environment (P-E) which basically is the fit with various systems in the work

place. In the P-E fit construct, the ‘P’ element is the cognitive abilities, knowledge,

skills, personality traits, characteristics, experience, education, values and goals

(Morley, 2007; Edwards, 1991). The E element can include organisational climate,

work conditions, culture, values, systems, goals, job demands, reward systems and

collective attributes (Kristof-Brown & Guay, 2010). The dimensions of research on P-

E fit developed further where Kristoff-Brown & Guay (2010) looked at different forms

of these fit e.g., person-job; person organisation; person-vocation; person-group;

supplementary; complementary and etc. With the concept of fit evolving into many

forms, it is pertinent to look at the operationalization of this fit although there have

been various debates on this (Edwards, 1991). Basically the person making whole or

adding to the environment characteristics that are missing forms the fundamental basis

in most hiring practices (Muchinsky & Monahan, 1987).

The Person - Organisation (P-O) Fit and Person – Job (P-J) Fit

How does the P-O and P-J fit complement the recruitment and selection practices? The

P-O fit is defined as the compatibility or the alignment between the characteristics of

the person and the organisation or environment (Kristoff-Brown & Guay, 2010). P-O

fit is greatly desirable not only because of the encouraging work based outcomes but

also its effect in “job seeking intentions, job and career satisfaction, psychological

strain, organisational citizenship behaviours, knowledge acquisition and sharing,

ethical conduct, organisation identification, job performance and turnover” (Morley,

2007, p. 111). Research indicates the significance and positive outcomes of P-O fit,

and the strong correlations towards work related outcomes especially job satisfaction,

organisation commitment and satisfaction (Hoffman & Woehr, 2006; Kristoff-Brown

& Guay, 2010). The distinction is the congruence of person and job in predicting

individual and organisational outcomes (Edwards, 1991). Traditionally managers

assume the important outcome of the selection process and job performance is the link

between KSAs and critical requirements of the tasks, referred to as the P-J Fit (Bowen,

et al, 1991). Drawing on the selection model that establishes a P-O fit, i.e. the

personality and culture/climate relationship the proposed framework by Bowen et al.,

(1991) may assist managers to rigorously rethink the traditional approach. Use the job

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analysis and organisation analysis to find a fit between the successful employee and

organisation in terms of both the context and content of the job. Then deduce the type

of person required by examining the employees’ personality (values, needs, interests)

and social skill. Next step, determine the rites of passage for entry, example tests.

Finally the reinforcing of P-O fit at work. It is reinforcing skills and knowledge through

employee developmental programmes.

METHODOLOGY

Definition of SMEs

There has not been any common or universal definition for SMEs. Most countries use

number of employees as their main criteria whereas others use firm’s assets and

revenue as the additional criteria. SMEs in Malaysia are defined based on two criteria

which are annual sales turnover or number of full-time employees in the respective

sectors. In Malaysia the total SMEs now stand at 653,000 which represents 98.5% of

all establishments (SME Corporation Malaysia, 2014). Majority of the SMEs are in the

services, manufacturing and construction sectors. It is reported that 40.1 per cent or

almost 1.5 million workers were employed by small business enterprises (Economic

Census: Profile of SMEs, 2011), which means on average a small enterprise employs

11 workers. A medium sized enterprise employed 859,000 workers or 23.4 per cent,

which means on average 43 workers per enterprise.

Sampling Methods

Five educational databases, Business Source Premier (EBSCO), Emerald Insight,

ABI/Inform Global (ProQuest), Scopus, and SAGE were used to identify and

determine the relevant articles. In addition more general academic database such as

Google Scholar was also used to widen the scope of literature search. There were no

specific time frames determined due to the scarcity of research. The initial search

parameters using words such as “Recruitment and Selection in Malaysian SMEs” did

not yield any specific articles. However redefining it into “Human resource

management practices; Malaysian SMEs” and “Establishing fit in Malaysian SMEs”

produced a few more articles however the search was not very encouraging. Using the

term “SMEs in Malaysia” generated hundreds of articles however many were non-HR

related research. There were some conference proceedings papers but were not

included as they were mainly preliminary studies.

ANALYSIS

Review of HRM Practices in Malaysian SMEs

HRM practices in Malaysian SMEs are limited and it is at an embryonic stage. Between

2006 and 2013 there were only thirteen studies conducted on HRM practices and eight

were empirical papers, the rest were merely theoretical papers. Eleven of these research

papers focused on HRM practices in SMEs. Among all the studies, only one focused

on the relationship between three variables comprising competency, person-job fit and

the employees’ job performance in the context of service SMEs. The findings indicate

that both competency and person-job fit is significantly related to the job performance

of employees in the service SMEs. Employees perform better and enjoy their work

when the person-job fit dimension is realised (June, Kheng, & Mahmood, 2013).

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Only one research was done on recruitment but it focused on the

effectiveness, practicality and managerial implications of e-recruitment practices. The

findings indicate that SME recruitment policies are determined by CEO (owner) and

if implemented it is to speed up traditional processes and improve communication

among multicultural workforce (Poorangi, Wong, Khin, & Rahmani, 2011). Many of

the studies focused on general HRM practices in SMEs, in areas that have effect on

job satisfaction, organisation performance, labour productivity, quality assurance and

e-HRM. However in terms of specific HRM practices research, in this instance

recruitment and selection, there were none identified on Malaysian SMEs.

DISCUSSION

The Scarcity of HRM Practices in SMEs

Between 1990 – 1997 only 17 empirical articles were written and in an analysis of 37

articles on management needs of SME’s, there is no clear distinction between small

and large enterprises therefore these articles fail to clarify the various HR challenges

and how they are overcome (Heneman, et al, 2000). SMEs are managed by the owners

who lack the competence in managing or implementing HR practices such as

recruitment, selection, training, appraisals and incentive or compensations schemes

(Hornsby & Kuratko, 2003). In most of the Malaysian SMEs the recruitment and

selection process may be managed by one person. This leads to several hiring blunders

such as not following proper selection process, scarce information of candidates,

disregarding information, falling for candidates’ overpromises and trusting completely

the hiring staff’s assessment (Boatman & Eker, 2012). The lack of formal processes in

SMEs has its advantages, first the organic nature of the enterprise, with a flat hierarchy

allows for faster decisions and response to demands of the customers and market,

second there is clear instructions and communication (Dundon & Wilkinson, 2009).

When Hornsby & Kuratko re-examined their original 1990 studies, they were quite

surprised that HRM practices in SMEs had stagnated and faded over the period of 10

years, in fact it was “puzzling and a cause for concern” (2003, p. 88).

Recommendations

Effective hiring decisions mean that a strategic, systematic and detailed examination

of knowledge, skills and experiences required for job success, having an accurate mix

of pre-employment tests, effective behavioural interviewing and realistic job previews

(Boatman & Eker, 2012). Even though SMEs exhibit or face these shortcomings it is

also essential to review SMEs perception of an ideal candidate in the recruitment and

selection process. The factors considered as key elements for recruitment decisions in

SMEs include flexibility, competence, reliability, stability, proximity to work

(location), attitude towards work, personality and honesty (Davidson, 2011, p. 2-3).

These factors in employers recruitment decision is derived from two components, the

recruitment stages and the employer considerations. Even though literature shows

evidence of discrete research in recruitment and selection but it is deemed as a

complementary function. The outcome of an integrated and strategic recruitment and

selection process moderated by the person –job/organisation fit is primarily based on

employer and environmental consideration (Dineen & Soltis, 2010; Davidson, 2011),

comparing strategic recruitment and selection outcomes against the initial recruitment

objectives (Breaugh, 2008; Breaugh & Starke, 2000; Dineen & Soltis, 2010; Davidson,

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2011) and actions prescribed to reinforce the person-job/organisation fit (Bowen et al.,

1991; Edwards, 1991).

CONCLUSIONS

It is apparent that SMEs major dilemma is the informal, unstructured, unsophisticated

and weak HRM practices without any strategic element (Dundon & Wilkinson, 2009).

Growing firms generally lack three important factors, first, poor strategic planning

and focus, second the competition with large firms for human resource and lastly,

growing firms are not the first choice of applicants (Mayson & Barrett, 2006). Overall

the paper establishes inadequacies of credible HR practices in Malaysian SMEs. SMEs

that are family owned fail to realise the importance of hiring professional managers,

instead family kinship is emphasised, thus creating elements of nepotism and possibly

rent seeking.

Key positions in the organisation are therefore held by family or very close

associates. Managers in a family owned business face great challenges in hiring and

firing when staff members are your family and any firing could damage family

relationships (Caliskan, 2013). Quality recruitment and selection is not stressed rather

a more informal method is used in recruitment. Professional HRM practices are rarely

practiced or adopted in these businesses therefore HR experts should be employed in

SMEs to ensure that the element of “fit’ is not ignored.

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