Business Growth and Industrial Relations and HRM Practices: A

Longitudinal Study of Australian Manufacturing SMEs

Ms Janice Jones

Lecturer, School of Commerce,

The Flinders University of South Australia,

GPO Box 2100, Adelaide South Australia 5001.

Telephone: +61 8 82012707

Facsimile: +61 8 82012644

Email: Janice.Jones@flinders.edu.au

School of CommerceResearch Paper Series: 01-6ISSN: 1441-3906

Business Growth and Industrial Relations and HRM Practices: A Longitudinal Study of

Australian Manufacturing SMEs

ABSTRACT

The principal objective in this paper is to examine possible connections between small

and medium-sized enterprise growth and industrial relations and human resource

management practices for a longitudinal sample of 871 small and medium-sized

enterprises in the Australian manufacturing sector that have embarked upon different

growth development pathways. Statistical analysis reveals highly significant differences

in industrial relations variables, training, health and safety processes and patterns of

employment across the low, moderate and high growth small and medium-sized

enterprise development pathways. Furthermore, union membership, number of unions,

registered agreements, individual contracts, training, full-time managers and

employees, and numerical flexibility are significant and/or consistent concomitants

with small and medium-sized enterprise growth.

Keywords: small and medium-sized enterprises, industrial relations, human resource

management practices; business growth

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INTRODUCTION

The industrial relations and human resource management (HRM) practices of small and

medium-sized enterprises (SMEs) have received little specific attention from researchers in

Australia. As in many other areas of scholarly inquiry into business activity, empirical

research in this field has tended to focus upon larger concerns (e.g., Kramar 1999; Fisher and

Dowling 1999; Kitay and Lansbury 1997; Morehead et al. 1997). In the case of the Australian

manufacturing sector, over 99 per cent of all businesses are SMEs according to generally

accepted definitions (ABS 1996). This fact, together with the key role that manufacturing

inevitably plays in economic prosperity, strongly suggests the importance of increasing our

understanding of the management of human resources in manufacturing SMEs in Australia.

Given recent government policy regarding the identification and encouragement of high

growth SMEs, a particularly important gap in the extant literature is any reliable evidence

concerning possible linkages between business growth and industrial relations and HRM

practices employed. Moreover, for cost and other reasons, prior research in this field has most

often been cross-sectional in nature and has tended to employ comparatively small samples.

The recent availability of data from Australia’s Business Longitudinal Survey (BLS) provides

a promising new opportunity to take up the challenges so identified.

This paper builds upon a study previously undertaken by McMahon (forthcoming) as

part of an on-going research effort to derive, characterise and employ an empirically-based

development taxonomy for SMEs operating as proprietary companies in the manufacturing

sector, using panel data now available from the BLS. The principal objective in this paper is

to examine possible connections between SME growth and industrial relations and HRM

practices for a longitudinal sample of 871 SMEs in the Australian manufacturing sector that

have embarked upon different development pathways; and. The paper proceeds as follows.

After briefly outlining the key findings of McMahon’s (forthcoming) study, and of some

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prior research on the relationship between industrial relations and HRM practices and

organisational performance, the current research method is outlined. Thereafter, the findings

of the research are presented, followed by conclusions arising from this investigation.

PRIOR RESEARCH

Manufacturing SME Growth

In McMahon’s (forthcoming) research, exploratory cluster analysis was used with key

enterprise age, size and growth variables to discover if there appear to be any stable

development pathways evident in the BLS panel data. Each of four annual data collections

for the on-going longitudinal panel of 871 manufacturing SMEs was separately examined

using cluster analysis. Comparisons were then made of cluster analysis outcomes over time.

Using the clusters as markers or signposts, three relatively stable SME development

pathways were discernible in the longitudinal panel results – low, moderate and high growth.

The low growth development pathway appears to account for approximately 70 per cent of

SMEs in the panel. The moderate growth pathway seems to be followed by roughly 25 per

cent of the panel. And around 5 per cent of the panel look to lie on the high growth pathway,

which is in accord with the observed rarity of substantial growth amongst SMEs world-wide

(McMahon et al. 1993). Differences between the identified SME development pathways in

terms of enterprise age, size and growth variables are highly significant in a statistical sense,

thus underpinning confidence in the development taxonomy.

It would appear that the development pathways and the pace of SME development

(over 20 years or so) in the McMahon (forthcoming) study match reasonably well with those

in earlier research of a similar nature undertaken by Hanks et al. (1993). Both development

models seem to lead towards the same range of SME configurations that are widely

recognised in the relevant research literature (McMahon et al. 1993):

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Traditional SMEs – following the low growth development pathway, these concerns

generally have few, if any, growth aspirations. They principally exist to provide their

owner-managers with a source of employment and income. Furthermore, they are

frequently operated in a manner consistent with the life-style aspirations of their owner-

managers. The McMahon (forthcoming) study suggests that after approximately 15

years such SMEs would have fewer than 20 employees, sales less than $3 million per

annum, total assets below $2 million, little or no employment growth, and sales growth

up to 5 per cent per annum.

Capped growth SMEs – following the moderate growth development pathway, these

concerns generally have modest growth aspirations. Bounds to growth could be

externally imposed by the nature of their competitive environment; or may be intrinsic

given the nature of their operations. Frequently though, growth is deliberately capped

by owner-managers to a rate that limits dependence upon external financing – thus

minimising surrender of control and accountability obligations this support would

normally bring. The McMahon (forthcoming) study suggests that after approximately

15 years such SMEs would have fewer than 100 employees, sales around $10 million

per annum, total assets less than $10 million, employment growth up to 3 per cent per

annum, and sales growth as much as 10 per cent per annum.

Entrepreneurial SMEs – following the high growth development pathway, these

concerns generally have ambitious growth aspirations. They are most often associated

with entrepreneurial aptitude, international outlook, technical and commercial

innovation, and other business qualities that could see them eventually become large

enterprises. The McMahon (forthcoming) study suggests that after approximately 15

years such SMEs would have over 100 employees, sales around $30 million per annum,

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total assets more than $20 million, employment growth exceeding 5 per cent per

annum, and sales growth greater than 10 per cent per annum.

The fact that these common SME configurations are recognised in the research lends further

plausibility to the empirically-based development taxonomy derived.

HRM Practices and Organisational Performance

Following a review of the conceptual literature on HRM practices and firm

performance, Huselid (1995) concluded that employee behaviour within firms has important

implications for organisational performance - namely, HRM practices can affect individual

employee performance through their influence over employees’ skills and motivation and

through organisational structures that enable employees to improve how their jobs are

performed. However Kitay (1997) argues that much of the extant HRM literature is

prescriptive, rather than analytical, and tends to describe what managers should be doing –

often based on unproven assumptions about the relationship between HRM practices and

organisational performance. Moreover, propositions about the relationship between HRM

practices and organisational performance lack solid empirical foundations (Kitay 1997).

Huselid (1995) reviewed prior empirical work examining the link between HRM

practices and organisational performance, and suggested that high performance work

practices such as extensive recruitment, selection and training; formal information sharing;

attitude assessment; job design; grievance procedures and labour-management participation

programs; as well as performance appraisal and merit based promotion and incentive

compensation systems enhances firm performance.

Deery et al. (1997) also argue that there is a considerable body of research evidence

indicating that certain innovative HRM practices can increase employee effort and positively

affect organisational performance. Green and McIntosh (1998) concluded that employees are

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motivated to supply effort where individual performance related pay schemes are used and

upward communication channels exist between workers and management. Furthermore,

union presence is more likely to have a positive influence on employee effort, when

accompanied by cooperative employee relations and high-trust, progressive HRM techniques

(Green and McIntosh 1998). Innovative HRM practices include extensive training, employee

participation, less rigid work design, and decentralising managerial tasks (Ichniowki et al.

1996). A number of econometric studies (Huselid 1995; Ichniowski et al. 1997; MacDuffie

1995) tentatively show a variety of factors including employee selection, high levels of

investment in training, and extensive involvement of employees in decision-making are

associated with high levels of performance (e.g., lower employee turnover, greater

productivity and corporate financial performance).

Kitay (1997) notes that, while there is no agreement on which HRM practices should be

studied, there is an emerging consensus that single practices on there own have relatively

little effect upon performance. Instead, businesses are more likely to benefit from improved

performance when consistent ‘bundles’ of selected HRM practices are implemented.

However, identifying which bundle of practices is most likely to be effective is difficult, as is

generalising from high-performance workplace studies.

Against this background, this paper has the potential to make a useful contribution to

Australian industrial relations and HRM research in the following respects. First, the paper

focuses wholly upon industrial relations and HRM practices amongst SMEs that have tended

to be neglected by other researchers. Second, the key policy issue of concomitants with

business growth amongst SMEs is explicitly considered. Finally, the research described in the

paper employs a relatively large and representative longitudinal panel sample of SMEs from

the Australian manufacturing sector - a technique seldom employed in Australian HRM

research (Kitay 1997).

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METHOD

The panel data employed in this research are drawn from the Business Longitudinal Survey

(BLS) conducted by the Australian Bureau of Statistics (ABS) on behalf of the federal

government over the four financial years 1994-95 to 1997-98. Costing in excess of $4

million, the BLS was designed to provide information on the growth and performance of

Australian employing businesses, and to identify selected economic and structural

characteristics of these businesses.

The ABS Business Register was used as the population frame for the survey, with

approximately 13,000 business units being selected for inclusion in the 1994-95 mailing of

questionnaires. For the 1995-96 survey, a sub-sample of the original selections for 1994-95

was chosen, and this was supplemented with a sample of new business units added to the

Business Register during 1995-96. The sample for the 1996-97 survey was again in two parts.

The first formed the longitudinal or continuing part of the sample, comprising all those

remaining live businesses from the 1995-96 survey. The second part comprised a sample of

new business units added to the Business Register during 1996-97. A similar procedure was

followed for the 1997-98 survey. Approximately 6,400 business units were surveyed in each

of 1995-96, 1996-97 and 1997-98. The BLS did not employ completely random samples. The

original population (for 1994-95) was stratified by industry and business size, with equal

probability sampling methods being employed within strata. Further stratification by

innovation status, exporting status and growth status took place for the 1995-96 survey.

Data collection in the BLS was achieved through self-administered, structured

questionnaires containing essentially closed questions. Copies of the questionnaires used in

each of the four annual collections can be obtained from the ABS. The questionnaires were

piloted prior to their first use, and were then progressively refined after each collection in the

light of experience. As well as on-going questions, each questionnaire also included once-off

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questions dealing with certain matters of policy interest to the federal government at the time

of the collections. In the current study, such once-off questions relate to training methods,

fields and providers; processes used to manage health and safety; and employer associations

and other external agencies.

Various imputation techniques, including matching with other data files available to the

ABS, were employed to deal with any missing data. Because information collected in the

BLS was sought under the authority of the Census and Statistics Act 1905, and thus provision

of appropriate responses to the mailed questionnaires could be legally enforced by the

Australian Statistician, response rates were very high by conventional research standards –

typically exceeding 90 per cent.

The specific BLS data used in this study are included in a Confidentialised Unit Record

File (CURF) released by the ABS on CD-ROM in December, 1999. This CURF contains data

on 9,731 business units employing fewer than 200 persons – broadly representing SMEs in

the Australian context. Restricted industrial classification detail, no geographical indicators,

presentation of enterprise age in ranges, and omission of certain data items obtained in the

BLS all help to maintain the confidentiality of unit records.

This research is concerned only with the manufacturing sector of the BLS CURF. There

are two reasons for this. First, over the last few decades, the performance of the Australian

manufacturing sector has been a major preoccupation of policy-makers and government

departments dealing with industry and trade. The sector has been characterised as non-

competitive by international standards, and it is considered to have failed in countering

Australia’s growing trade imbalance with the rest of the world (Pappas et al. 1990). The

second reason for considering only the manufacturing sector is that it is highly probable that

cross-industry differences in the nature of business activities, typical employment per

business, capital intensity, etc. could confound findings relating to SME development

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patterns, and to SME growth and performance more generally. Such influences are, to a

reasonable extent, controlled for by examining a single (albeit broadly defined) industry.

There are 3,411 manufacturing SMEs in the BLS CURF, representing approximately 35 per

cent of businesses in the file.

Additional focus is provided to this research by considering only manufacturing SMEs

legally organised as proprietary companies. There are two main reasons for this further

narrowing of the unit of analysis. First, as Freedman and Godwin (1994, 234) indicate, a

particular concern with proprietary companies is not uncommon amongst SME researchers

world-wide:

It would appear that, in so far as the issue is considered at all, the limited liability company is of more interest to the small business research community than are unincorporated firms; limited liability companies and entrepreneurship have become equated, or at least associated.

Second, the primary concern in this research is with SME growth and development, and it is

more likely that these will be evident in businesses legally organised as proprietary

companies (Freedman and Godwin 1994; Hakim 1989; Gray 1992; Hughes and Storey, 1994;

Yellow Pages Australia 1995). There are 2,413 manufacturing SMEs legally organised as

proprietary companies in the BLS CURF, representing approximately 71 per cent of

manufacturing SMEs in the file.

Variables used in this research are either categorical in nature or, if metric, have

irregular distributional properties (that is, they are non-normally distributed). Transformation

of metric variables to produce normal distributions is avoided because of difficulties of

interpretation often created by such procedures. Thus, non-parametric/distribution free

techniques of statistical analysis are employed exclusively. Frequency distributions and/or

descriptive statistics for industrial relations and HRM variables across the low, moderate and

high growth SME development pathways are initially presented. Further evidence for the

statistical significance of apparent relationships between SME growth and variables are

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examined using either Kruskal-Wallis one-way analysis of variance tests, or Chi-Square tests.

Following establishing that linkages appear to exist, and are statistically significant, where

data is available, Friedman two-way analysis of variance tests are performed in order to

determine whether linkages persist over time. If such linkages persist over time, they are

sufficiently important to warrant further attention from the relevant researchers and policy-

makers.

The BLS CURF included information in the subject areas industrial relations, training,

health and safety processes and patterns of employment. Highly statistically significant

findings are summarised under these general headings.

FINDINGS

Industrial Relations

Union Membership

Table 1 presents frequency distributions for union membership in low, moderate and high

growth SMEs for each of the four years in the longitudinal panel. Inspection of Table 1

reveals that approximately 70 to 80 per cent of SMEs on the low growth pathway have no

union members. This compares with around 30 to 40 per cent of businesses on the moderate

growth pathway, and about 5 to 20 per cent of those on the high growth pathway. Hence,

union membership appears to be higher amongst concerns that are growing more rapidly. The

statistical significance of union membership across the three identified growth development

pathways are examined using a series of Kruskal-Wallis tests (Table 1). In each of the four

years, union membership is significantly greater amongst high than moderate or low growth

manufacturing SMEs (p<0.001).

‘Insert Table 1’

A series of Friedman tests conducted to determine whether statistically significant

linkages between union membership and the variable indicating SME development pathways

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persist over the four years of the panel, reveal a highly significant decline in union

membership in workplaces following the low (n=618, H=60.700, df=3, p<0.001) and

moderate (n=200, H=22.540, df=3, p<0.001) growth development pathway. While still

experiencing a significant decline in union membership, this linkage appears to be weaker for

high growth SMEs (n=39, H=7.744, df=3, p<0.05).

Number of Unions

Table 2 shows the average number of unions at high, moderate and low growth workplaces

from 1995-96 to 1997-98. An examination of Table 2 suggests that in all three years, the

average number of unions per SME appears to be greater amongst higher growth SMEs. A

series of Kruskal-Wallis tests reveal statistically significant differences between union

numbers and the variable indicating SME growth development pathways. In 1995-96, 1996-

97 and 1997-98 high growth manufacturing SMEs are represented by more unions than

moderate or low growth SMEs (p<0.001). Friedman test statistics show that there is a

statistically significant decline in unions in SMEs following the low growth pathway between

1995-96 and 1997-98 (p<0.01), whereas this is not the case for higher growth SMEs (Table

2).

‘Insert Table 2’

Employment Arrangements

Table 3 displays frequency distributions for employment arrangements in SMEs following

each of the growth development pathways from 1994-95 to 1997-98. In all four years of the

longitudinal panel, low and moderate growth SMEs are most likely to have one or more

employees on awards. High growth workplaces are also most likely to have employees on

awards in 1994-95. However, in 1995-96 high growth SMEs are as likely to have one or more

employees on individual contracts, as awards. By 1996-97, employees are more likely to be

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on individual contracts, while registered agreements are more likely in high growth

workplaces in 1997-98. Low, moderate and high growth SMEs are least likely to have one or

more employees covered by ‘other’ employment arrangements. A series of Chi-Square and

Kruskal-Wallis tests indicate that there are significant differences in employment

arrangements between slow, moderate and high growth SMEs (Table 3).

First, in all four years, there is an increase in registered agreements across SME growth

development pathways. The incidence of registered agreements is significantly greater

amongst high than moderate or low growth SMEs (p<0.001). Businesses following the high

growth development pathway are also statistically more likely than moderate or low growth

SMEs to have individual contracts in operation in 1994-95, 1995-96, 1996-97 and 1997-98

(p<0.05). High growth workplaces are most likely to have unregistered agreements in 1994-

95 (p<0.001). In contrast, high growth businesses are significantly less likely than moderate

or low growth SMEs to have awards in operation in each of the four years of the longitudinal

panel (p<0.05).

‘Insert Table 3’

A series of Friedman test results (Table 4) show that between 1995-96 and 1997-98,

SMEs following the moderate and low growth pathways experience a significant decline in

employees on awards (p<0.001) and increase in registered agreements (p<0.05). There is also

a significant decrease in unregistered agreements in low growth SMEs (p<0.01). In contrast,

there are no significant variations in employment arrangements in high growth SMEs over

the longitudinal panel.

‘Insert Table 4’

Employer Associations and Other External Agencies

Employer associations and other external agencies may provide assistance to SMEs,

including advice on industrial relations. Manufacturing organisations in particular, have a

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high incidence of employer association membership (Morehead et al. 1997). As shown in

Table 5 low, moderate and high growth SMEs are most likely to use law firms for assistance,

and least likely to use government small business agencies, with over two thirds of businesses

in the three identified pathways reporting no use of their services. The results of Kruskal-

Wallis tests for SME growth development pathway differences are presented in Table 5.

Moderate growth manufacturing SMEs make significantly greater use of both law firms

and industry association/Chamber of Commerce than do high or low growth SMEs

(p<0.001); high growth SMEs are statistically more likely to use consultants (p<0.001). Firms

following the low growth pathway are significantly less likely than higher growth SMEs to

use government small business agencies (p<0.05) (Table 5).

‘Insert Table 5’

Training

Thirty-five per cent, seventy per cent and ninety-two per cent of SMEs on the low, moderate

and high growth pathways respectively have tertiary qualified managers in 1994-95. The

number of workplaces with managers undertaking training in business management on the

low, moderate and high growth pathways is thirty three per cent, sixty one per cent and

seventy two per cent respectively. Thus managers with tertiary qualifications, and

undertaking business management training appear to be more prevalent amongst concerns

that are growing more rapidly. The results of Kruskal-Wallis tests for SME growth

development pathway differences show that managers from high growth workplaces are

statistically more likely to have tertiary qualifications than managers from moderate or low

growth firms (n=871, H=158.867, df=2, p<0.001). Similarly, managers in high growth

manufacturing SMEs are also more likely to undertake training in business management

(n=871, H=98.05, df=2, p<0.001).

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Training Changes

Frequency distributions reveal that in all four years of the longitudinal panel, SMEs in each

of the three development pathways identified by McMahon (forthcoming) are most likely to

report no major change in training provision, with approximately half of all SMEs stating

training remained the same as in the previous year. However, when change occurs, SMEs are

more likely to increase than decrease training.

Chi-Square tests for SME growth development pathway differences are presented in

Table 6. In three of the four years, higher growth SMEs are more likely to increase training,

while in 1995-96, moderate and low growth SMEs are more likely too (p<0.001).

‘Insert Table 6’

Training Methods

Low, moderate and high growth SMEs are most likely to have employees participate in on-

the-job training, and least likely to use job rotation/exchanges. Low growth workplaces are

also least likely to use seminars/workshops/conferences (Table 7). Kruskal-Wallis statistics to

test for SME growth development pathway differences are also shown in Table 7. Compared

to moderate or low growth SMEs, high growth SMEs are more likely to have employees

engaged in structured training, seminars/workshops/conferences (p<0.001) and on-the-job

training (p<0.01). Moderate growth businesses are more likely than high or low growth

SMEs to use job rotation/exchanges (p<0.001).

‘Insert Table 7’

Training Fields

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A further series of Kruskal-Wallis tests reveal that businesses following the high growth

pathway are statistically more likely than those on the moderate or low growth pathway to

train employees in health and safety, management, professions, apprenticeships/traineeships,

computers and ‘other’ training (p<0.001). Frequency distributions are presented in Table 8.

‘Insert Table 8’

Training Providers

Workplaces following the low, moderate or high growth development pathways are most

likely to use employees or business owners to provide (on-the-job) training, and least likely

to use ‘other’ training providers (see Table 9 for frequency distributions).

Chi-Square tests reveal a significant increase in use of training providers across the

SME development pathways (Table 9). High growth SMEs are significantly more likely than

moderate or low growth SMEs to have employees or business owners providing structured

training (p<0.001) and on-the-job training (p<0.05). Similarly, high growth manufacturing

SMEs are also statistically more likely to use both professional and industry associations,

equipment manufacturers/suppliers, private consultants, TAFE and universities to train

employees (p<0.001).

‘Insert Table 9’

Health and Safety Processes

Frequency distributions indicate that providing health and safety information to employees is

the process most frequently used to manage health and safety in SMEs in each of the growth

development pathways. SMEs are least likely to have a health and safety training program

(Table 10).

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In relation to SME growth development pathway differences, high growth

manufacturing SMEs are more likely than moderate or low growth SMEs to have a written

statement of management commitment to health and safety (p<0.001). High growth

workplaces are also more likely to have a consultation program with employees, provide

health and safety training and guidelines for identifying and controlling hazards in the

workplace (p<0.001), as well as provide information and regularly inspect workplaces

(p<0.05).

‘Insert Table 10’

Patterns of Employment

The BLS included information on working owners and managers, employment status of

employees (i.e., full and part-time or casual) as well as recruitment and cessation of

employment. Statistically significant findings are reported under these headings.

Working Owners and Full-time Managers

In each of the four years of the longitudinal panel, businesses following the high growth

development pathway are most likely to employ full-time managers, and least likely to have

working owners present (Table 11). In contrast, working owners are more likely to be present

in low growth SMEs, and least likely to employ full-time managers. These variables had

significant Kruskal-Wallis results, indicating higher growth SMEs are significantly more

likely to have full-time managers (p<0.001) and less likely to have working owners (p<0.01).

‘Insert Table 11’

Results of a series of Friedman tests reveal that there is a statistically significant decline

in low and moderate growth SMEs with working owners and increase in SMEs with full-time

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managers over the four years (p<0.001). In contrast, there is no significant variation in these

variables in high growth SMEs over the four years of the longitudinal panel (Table 12).

‘Insert Table 12’

Full-time, Part-time, Casual and Total Employment

Table 13 displays the average number of full and part-time employees, as well as

casuals employed in low, moderate and high growth SMEs. Means for total employment are

also shown. An inspection of Table 13 indicates that full-time, part-time, casual and total

employment appear to be higher amongst concerns that are growing more rapidly.

‘Insert Table 13’

A series of Kruskal-Wallis tests reveal statistically significant variations between SME

development pathways in terms of these variables (Table 13). First, in all four years, there is

an increase in full-time employment across the three identified growth development

pathways, with significantly more full-time employees at high than moderate or low growth

SMEs (p<0.001). In three of the four years, there is an increase in part-time employment

across pathways-again, high growth SMEs are statistically more likely to employ part-time

employees than moderate or low growth SMEs; in 1996-97, moderate growth SMEs employ

significantly more part-time workers (p<0.001). In 1995-96, 1996-97 and 1997-98 the

average number of casual employees is significantly greater in high growth compared to

moderate or low growth SMEs (p<0.001). Finally, in each of the four years of the

longitudinal panel, high growth SMEs employ significantly more employees than moderate

or low growth SMEs. (p<0.001).

The results of a series of Friedman tests conducted to determine whether statistically

significant linkages between these employment variables and the variable indicating SME

development pathways persist over the four years of the longitudinal panel are presented in

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Table 12. Both high and moderate growth SMEs experience a statistically significant increase

in full-time and decrease in part-time employment (p<0.05). Part-time employment also

declined in low growth manufacturing SMEs, as did full-time and total employment

(p<0.001). In contrast, there is no significant variation in total employment in higher growth

SMEs between 1994-95 and 1997-98. There is also no significant variation in casual

employment in each of the firms following the three identified growth development pathways

over the longitudinal panel.

Labour Turnover: Recruitment and Cessation of Employment

Table 12 shows the average number of new managers recruited in low, moderate and high

growth SMEs in 1994-95. An examination of Table 12 reveals that more managers are hired

amongst manufacturing SMEs that are growing more rapidly. Kruskal-Wallis statistics to test

for SME growth development pathway differences (Table 13) indicate that high growth

manufacturing SMEs employ significantly more new full-time managers than do their

moderate or low growth counterparts (p<0.001).

Table 12 also presents the average number of new employees recruited, as well as

employees who ceased employment in 1995-96, 1996-97 and 1997-98 across the low,

moderate and high growth development pathways. In relation to SME growth development

pathway differences, a series of Kruskal-Wallis tests indicate that in each of the three years,

high growth manufacturing SMEs employ significantly more new employees (Table 13).

Over the same period, high growth SMEs are also more likely than moderate or low growth

SMEs to have employees who ceased employment (by way of resignation, redundancies,

dismissals etc.) (p<0.001).

Friedman test results displayed in Table 12 reveal that there is a significant decline in

both recruitment and cessation of employment in moderate growth manufacturing SMEs

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between 1995-96 and 1997-98 (p<0.05). In contrast, recruitment and cessation of

employment appears to be more stable in SMEs following the high or low growth

development pathway.

DISCUSSION AND CONCLUSIONS

The aim of this study was to examine possible connections between SME growth and

industrial relations and HRM practices. Key correlates with SME success (in growth terms)

are summarised below.

First, there is a strong suggestion that union membership and number of unions are

significant and consistent concomitants with SME growth, particularly when viewed in the

context of the wider industrial relations environment-which has seen both a decline in

unionised workplaces in Australia (ACIRRT 1999; Peetz 1999) and in manufacturing

organisations, as well as a reduction in the average number of unions per workplace in the

manufacturing sector (Morehead et al. 1997).

Second, based on the evidence presented, employment arrangements are significant

and/or consistent concomitants with SME growth. The current study suggests that the

expanded range of options available to employers and employees with respect to agreement

making (Van Gramberg et al. 2000) have been utilized by growing SMEs. Moreover, these

options, namely unregistered and registered collective agreements and individual contracts,

correlate with manufacturing SME success. However, contrary to a diminishing role, in the

present study, union membership and unions have a positive association with SME (growth)

success.

In terms of employer associations and external agencies, there is a suggestion that

government small business agencies are a less significant concomitant with SME growth than

management consultants, law firms and industry association/Chamber of Commerce. The

20

BLS CURF sought only to determine the frequency with which business information was

sought from the various sources, and was not confined to industrial relations matters.

Nevertheless, the fact that manufacturing SMEs were least likely to seek advice from

government small business agencies, with approximately two thirds of workplaces reporting

no use of these agencies, warrants further attention from researchers and policy-makers in

this field.

Research shows that investing in human resources is a potential source of competitive

advantage, and has a positive correlation with stock market performance and profitability

(Huselid et al. 1997). Evidence in the present study also suggests that training correlates with

manufacturing SME growth. The key findings from this research into SME growth and

training can be summarised as follows.

Higher growth manufacturing SMEs are more likely to have tertiary qualified managers,

as well as managers undertaking training in business management. This may, in part at

least, be due to recognition by growing SMEs of the need to develop managers capable of

managing in an internationally competitive marketplace (e.g., Karpin 1995).

Increasing training is a significant and relatively consistent concomitant with SME

growth. The fact that training has a positive effect on organisational success provides

support for the various attempts by governments to encourage industry to expend

resources on employee development.

Structured training courses, seminars/workshops, on-the-job training and job

rotation/exchanges are significant concomitants with SME growth.

In terms of training fields, training in management, professions, computers, trades and

apprenticeships, health and safety, as well as ‘other’ training are significant correlates

with SME growth.

21

Training provided by ‘other’ providers is a less significant concomitant with SME growth

than employees or business owners providing structured training, professional and

industry associations, equipment manufacturers/suppliers, private consultants, TAFE and

universities training employees, and on-the-job training provided by employees or

business owners.

Thus higher growth manufacturing SMEs provide comprehensive training and

development activities – HRM practices designed to improve current employee skills.

These findings are sufficiently important to warrant further attention from both

researchers and policy makers in the field. This is particularly pertinent given that many

Australian organisations invest little in training (Davidson 1996) and recent research shows a

decline in the average level of training investment per employee in Australian organisations

(Howes 1998).

Finally, patterns of employment that correlate with manufacturing SME growth success

are outlined below.

Working owners are a less significant and consistent concomitant with SME growth than

full-time managers.

Recruiting full-time managers is a significant correlate with SME growth. However,

an increase in full-time managers should not be surprising given that a growing firm

inevitably reaches a point where the owner can no longer make all decisions alone.

Full-time employment is a significant and consistent concomitant with SME growth.

Again, this finding is not unexpected considering SMEs generally require more

employees in order to continue to grow.

Increasing and decreasing employee numbers are both significant and consistent

concomitants with SME growth. This finding, together with the finding that casual

employment is a significant and consistent correlate with SME growth, suggests that

22

labour flexibility, and in particular numerical flexibility, is important to manufacturing

SME (growth) success.

Collectively, these findings add to an increasing body of empirical studies (Huselid

1995; Ichniowki et al. 1996; Ichniowski et al. 1997; MacDuffie 1995) suggesting that certain

industrial relations and human resource management practices are positively related to

organisational performance - in this case, with SME manufacturing growth.

As noted earlier, the BLS included one-off questions on training methods, fields and

providers; employer associations and other external agencies; and health and safety

processes. In order to determine whether statistically significant linkages between industrial

relations/HRM practices and SME growth persist over time, future data collections need to be

on-going. Furthermore, if linkages between industrial relations/HRM practices and SME

growth persist over time, such linkages are sufficiently important to warrant further attention

from researchers and policy-makers. In addition, data collection of a more comprehensive

range of HRM items including recruitment and selection practices, performance appraisal

techniques, as well as incentive schemes would enable future researchers to more thoroughly

investigate relationships between HRM practices and SME performance.

Both researchers and small business alike have acknowledged that growing businesses

need to develop their HRM practices (Gilbert and Jones 2000; Hornsby and Kuratko 1990).

Furthermore, any assistance would need to come from sources that understood both the

dynamics of small business, as well as their HRM priorities (Gilbert and Jones 2000). The

findings identified in the current study may in part, meet this need.

23

ACKNOWLEDGMENTS

The permission of the Australian Statistician to use confidentialised data from the federal

government’s Business Longitudinal Survey, and to publish findings based on analysis of that

data, is gratefully acknowledged. Responsibility for interpretation of the findings lies solely

with the author.

The author also wishes to thank Professor Richard McMahon for his assistance during the

preparation of this article.

24

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29

TABLES

Table 1 SME Growth Development Pathway Differences: Results of Kruskal-Wallis Tests for Union Membership (1994/95 - 1997/98)

Table 2 SME Growth Development Pathway Differences: Results of Kruskal-Wallis Tests for Union Numbers (1995/96 - 1997/98). Table 2 also displays

Friedman tests for SME growth and number of unions.

2

Table 3 SME Growth Development Pathway Differences: Results of Chi-Square / Kruskal-Wallis Tests for Employment Arrangement s (1994/95 - 1997/98)

d to g In 1994-95, 1995-96, 1996-97 and 1997-98 high growth SMEs are significantly less likely than moderate or low growth SMEs to have awards in operation.

h to k In all four years, high growth SMEs are more likely than moderate or low growth SMEs to have individual contracts in place.

l Unregistered agreements are significantly more likely to be in operation in high compared to moderate or low growth SMEs in 1994-95.

m to p In 1994-95, 1995-96, 1996-97 and 1997-98 high growth workplaces are also more likely than moderate or low growth firms to have one or more employees on registered agreements.

3

Table 4 Friedman Tests for SME Growth and Employment Arrangements (1995/96-1997/98)

4

Table 5 SME Growth Development Pathway Differences: Results of Kruskal-Wallis Tests for Employer Associations and other External Agencies (1995-96)

5

Table 6 SME Growth Development Pathway Differences: Results of Chi-Square Tests For Training Changes (1994/95-1997/98)

6

Table 7 SME Growth Development Pathway differences: Results of Kruskal-Wallis Tests for Training Methods (1997-98)

7

Table 8 SME Growth Development Pathway differences: Results of Kruskal-Wallis Tests for Training Fields (1997-98)

8

Table 9 SME Growth Development Pathway Differences: Results of Chi-Square Tests for Training Providers (1997-98)

Table 10 SME Growth Development Pathway differences: Results of Chi-Square tests for Health and Safety Processes (1997-98)

9

Table 11 SME Growth Development Pathway Differences: Results of Kruskal-Wallis tests for Working Owners and Full-time Managers (1994/95-1997/98)

10

11

Table 12 Friedman tests for SME growth and Employment Patterns (1994/95-1997/98)

12

Table 12 Notes

* p < 0.05, ** p < 0.01, *** p < 0.001

a & b Between 1994-95 and 1997-98 there is a statistically significant decline in working owners in low and moderate growth manufacturing SMEs.

c & d Over the same period, there is a significant increase in full-time managers in low and moderate growth SMEs.

e There is a statistically significant decline in full-time employment in SMEs following the low growth pathway from 1994-95 to 1997-98.

f & g Conversely, full-time employment increased significantly in both moderate and high growth SMEs

h – j Part-time employment decreased in SMEs following each of the three identified growth development pathways between 1994-95 and 1997-98.

k There is a significant decline in total employment in low growth SMEs over the four years of the longitudinal panel.

l From 1995-96 to 1997-98, there is a significant decrease in the number of new employees recruited in moderate growth SMEs.

m There is also a significant fall in workers who ceased employment in SMEs following the moderate growth pathway.

13

Table 13 SME Growth Development Pathway Differences: Results of Kruskal-Wallis tests for Employment Patterns (1994/95-1997/98)

14