Applicant Attraction Practices and Outcomes among Small Businesses

Small firms dominate the business landscape of the U.S. Only two percent of organizations nationally have more than 100 employees (Wiatrowski 1994). Further, small businesses are the fastest growing segment of the U.S. economy, and accounted for 75 percent of all new jobs created in 1995 (Small Business Administration 1996). Despite the prevalence of small businesses, the human resource management (HRM) systems embedded within them are understudied and poorly understood. There is a decided large-organization "bias" in the description and evaluation of HRM systems that has characterized research for decades (Granovetter 1984; Rynes and Boudreau 1986). Consequently, little is known about how small businesses actually practice HRM or how effective their HRM practices are in attracting, motivating, and retaining employees. Small businesses face different concerns than those of larger organizations. The concept of "liability of smallness" suggests that small organizations, relative to larger ones, face problems of access to financial and material resources that make it difficult to compete and survive (Hannan and Freeman 1984). Further, because of the small size of the organizations, there are a high number of single incumbent jobs, and employees typically perform multiple roles with unclear boundaries regarding the respective job role responsibilities (May 1997). At a time when small businesses need strong human resource management practices to manage their growth, the HR function is typically an underdeveloped functional area in the organization. Though a small business may need to acquire additional employees to fuel its growth, employee attraction strategies may be used on a sporadic, ad-hoc basis. Such usage may be necessary because of a major knowledge gap regarding the attraction practices actually used by other small businesses and the effectiveness of those practices. This important void needs to be filled if small businesses are to learn how to attract more effectively a qualified workforce, which is a key component of overall effective management of the firm's human resources. The present study addresses this void by investigating the nature and effectiveness of employee attraction practices of small businesses. Such practices encompass the myriad of staffing and compensation activities used by small businesses to attract its work force. To lay the ground work for the study, the results of the three studies that have investigated attraction practices in small businesses are first presented, followed by discussion of the rationale for the present study and how it extends the previous research. Literature Review and Research Rationale McEvoy (1984) studied the HRM practices of 84 small businesses (between 25 and 250 employees) near a major metropolitan area. A 36-item questionnaire was administered via personal interview to the person responsible for HRM in the firm. The questions sought information about usage of HRM practices in HR policy and strategy, staffing, performance evaluation, motivation, compensation and benefits, job satisfaction, and turnover. Findings of direct relevance to the present study were that advertisements and walk-ins were the most widely used (67 percent) recruitment methods, and that interviews and application blanks were the most widely used (90 percent) selection techniques. In addition, while most firms (90 percent) conducted performance appraisal, relatively few attempted to relate pay raises to appraisal results. Only 29 percent of the firms used salary survey results to determine starting pay for new employees, though most offered vacations, paid holidays, rest breaks, and life and health insurance. To evaluate the effectiveness of these practices, a few questions were asked to assess respondents' "feelings and attitudes toward various personnel practices of their firms" (McEvoy 1984, p. 7). Respondents generally indicated a "very positive outlook with regard to these practices" (p. …