Implementing new policies

Implementing new policies or management practices is seldom effortless. The success of transition depends on the personality and leadership style of the manager that is especially emphasized in a smaller company, along with the organizational culture. (Mazzarol 2003, 29.) A part of SME managers find it difficult to let go of the responsibilities and to delegate, as they are accustomed to be in charge of the everyday work. This type of behavior inevitably leads to disruption of leadership, as the manager’s resources alone no longer suffice for the organizations needs. This managerial constraint on the rate of growth is known as the Penrose effect. The risk of this type of micro management is that the managers may not have enough time to concentrate on some of the most important parts of their responsibilities e.g. planning the future and developing their business. The manager’s ability and willingness to delegate responsibilities to employees and possibly to a management team and the commitment to changing practices and structures are imperative requirements for a successful implementation of new HRM policies. (Mazzarol 2003,47.) However, these requirements alone do not guarantee a successful development process.

What is often problematic about the development and implementation of HRM-practices is that the managerial consulting and training related to HRM-development is often designed for large corporations that operate with completely different resources in a totally different business environment. Managers, as well as consultants, are often keen on applying those doctrines directly without familiarizing themselves with the current state of the company’s HRM especially in relation to their ability to compete. (Kotey & Slade 2005, 16.) The disadvantage of this type of shortcut is the potential threat of consuming resources into something that might prove to be useless or even complicate the company’s operations. Thus, Strömmer states that HRM practices should always be suitable for the company’s current needs and to be able to improve the company’s flexibility in the swift market fluctuation (Strömmer 1999, 43).

However, scholars point out that HR-development is ideal in many ways in SMEs as well. Bacon et al. (1996) state that implementation of new HR-policies have potential to be executed with less effort in smaller companies due to the lower hierarchy and more direct communication culture.

Smaller scale and less complexity of the company also turns out into results faster and clearer than in a large corporation. Planning of successful implementation is also made easier by the relatively larger effect of an individual employee to the organization. Thus, implementation programs of new policies entail the potential to be more meaningful for an SME than a large corporation. HR-development programs in SMEs happen often in smaller scale and with less complexity, but the goals are equally set for creating professional practices while maintaining the unique elements of an SME. According to Wilkinson (1999), the SMEs implementation efforts are often less official, more organic and depict a more authentic approach to HR-development than the bureaucratic programs. Thus the lacking of professional and large-scale development and implementation programs can also be seen as a positive factor for competitive advantage instead of the traditional view of seeing informality as a weakness (Bacon et al. 1996, 98; Wilkinson 1999, 213).

Although new policies are usually planned and executed based on the potential benefit of solving a challenging problem or fulfilling an important need, they also entail substantial risk.

Implementing all HR-development programs should be executed with caution, as changes in the organization and especially in the working conditions may generate both positive and negative effects in employee’s productivity, commitment and turnover rate. During the implementation managers should consider the integration of HR-policies into other areas of their business to facilitate, create synergy and added value for the entire company. Mazzaroll (2003) argues that if there is no clear benefit potential from the planned changes, they company should refrain from executing them. Reformation of HRM practices should never originate exclusively from a desire to adopt so called best practices. Kotey & Slade (2005) state that impractical adapting of professional HRM practices may in fact turn against its purpose by reducing the flexibility and resources of the company by obstructing their ability to react to changes in their business environment. Before new HRM practices have been successfully implemented the company has very likely gone trough several challenging stages of learning. To be able to find the best possible practice, the managers are likely to try out different alternatives and strategies, which leads into the best possible practices trough trial and error. (Kotey & Slade 2005, 36; Mazaroll 2003, 45-46.)

The decisions regarding implementations of new HRM practices should always be evaluated against context. Implementation of professional HRM practices is not necessarily reasonable or profitable in all SMEs. However, appropriate implementation of professional HRM practices may

result in e.g. statistics to support decision-making, equal and fair treatment of employees and incremented efficiency. The result of finding the right balance between professional HRM practices and informal organizational culture is largely bound by the size and strategy of the company. Thus, the greatest challenge for SMEs is in fact to manage the implementation of professional HRM practices to match their goals while maintaining the organizational freedom typical for an SME.

(Kotey & Slade 2005, 36-37; Bacon 1996, 90.)

Further researching of theories regarding the implementation of new HRM practices is not relevant for this study, because this study mainly focuses to describe and compare the HRM processes in Finnish SMEs and to interpret their differences. Issues regarding implementation were addressed to create understanding to the logic behind the SME managers decision-making.