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The role of contextual factors in shaping HRM formality in SMEs

Muhammad Burhan (Huddersfield Business School, University of Huddersfield, Huddersfield, UK)
Omar Abou Hamdan (Coventry Business School, Coventry University, Coventry, UK)
Hussain Tariq (Department of Management and Marketing, KFUPM Business School, King Fahd University of Petroleum and Minerals, Dharan, Saudi Arabia) (Interdisciplinary Research Center for Finance and Digital Economy (IRC-FDE), King Fahd University of Petroleum and Minerals, Dharan, Saudi Arabia)
Zahid Hameed (Department of Business Administration, Prince Muhammad Bin Fahd University, Al Khobar, Saudi Arabia)
Rana Muhammad Naeem (Department of Management Sciences, The Islamia University of Bahawalpur, Bahawalpur, Pakistan)

Employee Relations

ISSN: 0142-5455

Article publication date: 4 October 2022

Issue publication date: 1 February 2023

447

Abstract

Purpose

This study examines the influence of contextual factors (e.g. age and ownership type) on HRM formality (including the underlying functions of recruitment, selection, training and development, performance appraisal and compensation) in SMEs.

Design/methodology/approach

Data were collected through a quantitative survey of 300 owners/managers of services, manufacturing and trade SMEs in Pakistan.

Findings

Firm age, association with a larger parent entity, existence of a strategic business plan and the presence of a human resource information system (HRIS) are positively related with higher HRM formality. Firm size, family ownership and exporting characteristics had no association with formality.

Practical implications

This study suggests a highly influential role for contextual factors in shaping HRM practices in Pakistani SMEs. Since the lack of a strategic approach towards human resource development is directly linked to the inferior performance of SMEs in Pakistan, this study provides an understanding of the contextual institutional setting that shapes the nature of HRM practices. The findings inform both SME owners/managers and policy makers.

Originality/value

Institutional influences on HRM systems have attracted attention but organisational factors are less often studied. Studies mostly relate to Western contexts and lack perspectives from SMEs. The findings of this empirical investigation highlight the importance of context specific research given the different nature of institutional settings.

Keywords

Citation

Burhan, M., Hamdan, O.A., Tariq, H., Hameed, Z. and Naeem, R.M. (2023), "The role of contextual factors in shaping HRM formality in SMEs", Employee Relations, Vol. 45 No. 2, pp. 345-365. https://doi.org/10.1108/ER-08-2020-0386

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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