Human resource management practices in small- and mediumsized enterprises in Turkey.

Human resource management practices in small- and mediumsized enterprises in Turkey. 1. Mustafa Koyuncu 2. Ronald J. Burke 3. Fusun Tekin Acar 4. Jacob Wolphin Small and medium-sized businesses have received relatively little research attention in almost all countries though they are more numerous than large businesses, employ more employees, weathered the current world-wide economic recession generally better than large businesses, created more new jobs during this time than did large businesses, and are increasingly hiring employees that lost jobs in large businesses or became frustrated with working in large businesses. Human resource management (HRM) practices have been found to be an important factor in the success of large businesses and researchers have increasingly begun to examine the role played by HRM practices in small and medium-sized businesses. Most of this work has been carried out in North America or Europe. The present study examines the relationship of use of professional HRM practices and small- and medium-sized business performance in Turkey. Relatively little HRM research has been carried out in Turkey. One objective of this study is to begin to address this gap in understanding of factors contributing to organizational effectiveness in this country. Data were collected from 172 SMEs in Kayseri from managers/professionals who completed a questionnaire that contained both open-ended and structured questions. 1.Nevsehir University Faculty of Tourism Nevsehir-Turkey mkoyuncu@nevsehir.edu.tr 2. Schulich School of Business York University Toronto Ontario Canada rburke@schulich.yorku.ca 3. Erciyes University Kayseri-Turkey acarf@erciyes.edu.tr 4. Independent Consultant Toronto, Ontario Canada jwolpin@schulich.yorku.ca 1

Respondents indicated only moderate use of the HRM practices and rated their effectiveness as only moderate as well. Respondents indicating greater use of these HRM practices rated the effectiveness of their SME generally higher than their competitors and higher in the current year than last year. Ratings of the effectiveness of these HRM practices were generally unrelated to SME performance however. Personal demographic characteristics of the respondent, and characteristics of the SME, were inconsistently related to use of the HRM. practices. Findings indicate that use of particular HRM practices was associated with perceptions of better SME performance. Managers in SMEs can incorporate these HRM practices INTRODUCTION There has been much less research undertaken on factors contributing to the success of small- and medium-sized enterprises (SMEs) than to large organizations (Katz, Aldrich, Welbourne & Williams, 2000). This is ironic since there are significantly more SMEs than large organizations, SMEs employ more people than do large organizations, SMEs exist in every country, SMEs have weathered the current worldwide economic recession better than large organizations, and some SMEs eventually become large organizations (Cooper & Burke, 2011). More employees have moved to SMEs with the downsizing of large organizations due to business decline, and the frustration many people feel, particularly women, with their careers in large organizations (Burke, 2011). SMEs account for at least 95% of all businesses in the US and Canada (Heneman, Tansky & Camp, 2000; Williamson et al, 2002) SMEs create 66% of new jobs and produced 39% of the Gross National Product (GNP) in the US. The economic performance of a country s economy is closely linked to the SME sector (Hamilton & Dana, 2003), and SMEs rely heavily on their employees and on their human resource management (HRM) practices for their success (Brand & Bax, 2002, Way, 2002). There is emerging evidence that use of HRM practices can contribute to the effectiveness of SMEs (see Cooper & Burke, 2011; Castogiovanni, 2011; Collins, 2001; Rauch, 2001). These HRM practices can contribute to improvements in employee attraction and selection, motivation, development, and retention, with these improvements then reflected in higher levels of SME performance. LITERATURE REVIEW What is HRM? Tocher and Rutherford (2009, p.457) define HRM as a set of distinct but interrelated activities, functions and processes that are directed at attracting, developing, and maintaining ( or disposing of) a firm s human resources. HRM policies and practices, if well developed and implemented can help SMEs improve their effectiveness. All SMEs 2

then use HRM practices, often informally. Many SMEs do not have a formal HR department or trained HR personnel on staff. SMEs do not use HRM policies and practices as frequently as large organizations do (Kotey & Folker, 2007; Kotey & Slade, 2005). SMEs that use HRM policies and practices tend to perform at a higher level (Chandler & McEvoy, 2000; Hayton, 2003). Carlson, Upton and Seaman (2006) reported, in a study of 168 fast-growing family owned SMEs, that faster-growing SMEs made greater use of several HRM practices such as training and development, recruitment tactics, attempts to improve employee morale, performance appraisal packages, and competitive pay and incentive systems. DeKok, Uhlaner and Thurik (2006, 2003) provide the following important examples (2006, p. 460). Recruitment the use of a recruitment and selection office, temporary employment agencies, magazines, the internet, referrals by employees, references from other sources, and open houses. Selection the use of written job descriptions, job analyses, psychological tests, and interview panels. Compensation the use of performance pay, competitive wages, and wages based on acquired skills, group incentive programs, individual incentive programs, profit sharing, annual bonuses, and other financial benefits such as insurance and savings plans. Training and development the offering of training to employees, making a formal training budget available, formal in-house training of staff, external training programs, and use of management and development training. Appraisal the use of rating scales, management-by-objectives, goal setting efforts, and having employee appraisals conducted by line mangers. Managers working in SMEs sometimes do not appreciate the value of these HRM practices nor feel they have the time to carry them out. DeKok, Uhlaner and Thurik (2006) found that family-owned SMEs male less use of professional HRM practices The Turkish context The SME sector in Turkey, not surprisingly, plays an important role in the Turkish economy in terms of its contribution to Turkey s GDP. Turkey ranked 17 th in the world in terms of GDP in 2009. There are currently over million SMEs in Turkey. In addition, the number of Turkish SMEs continues to grow yearly. The majority of Turkish SMEs are small in size, typically under 50 employees. Most Turkish SMEs are in wholesale and retail, followed by manufacturing. The Turkish government is attempting to increase the size of the SME sector by making financing available, addressing corruption in the SME sector, and streamlining government bureaucracy. The World Bank is also providing financial and technical assistance to the SME sector in Turkey. Very little research has however been undertaken in the Turkish SME sector, particularly on their management 3

of human resources. The World Bank has provided considerable financial support for SMEs in Turkey, with some Turkish banks serving as the link between the World Bank and SMEs. Turkey has created business incubators, clusters of SMEs, to support the establishment of new SMEs SMEs in Turkey are a major factor in economic development. They account for 77% of employment, 40% of investments, 26% of total value added, and 25% of bank loans (Seker & Correa, 2010). The World Bank (2009) reported the following statistics: SMEs accounted effort 79% of employment, 4% of total investment, 7% of total sales, 23% of total exports, 57% of total value added, and 25% of bank credit. Therefore developing a more productive SME sector is important for the Turkish economy and its citizens. But SMEs in Turkey face some challenges. They have been found to grow at slower rates that those in other countries; access to both financing and management skills contributing to this. SME research in Turkey Avcikurt, Altay and Ilban surveyed 155 small hotel businesses in an exploratory study of critical success factors. Four such factors emerged: efficient use of the internet, service quality, financial performance and marketing, with human resource quality underlying most of these. Tourism is an important and growing sector in Turkey. Benzing, Chu and Kara (2009) examined entrepreneurial motivations, success factors and business problems among 139 entrepreneurs in Ankara. Most started their businesses for economic reasons, job security and independence. Key success factors were reputations for honesty and social skills, good customer service. Among their problems was the confusing tax structure, unreliable employees, poor record keeping and a weak economy. Cetinel, Yolal and Emeksoy (2009) studied HRM practices in small- and medium-sized hotels collecting data from 313 SMEs. They reported most did not have formal HRM practices resulting in a lack of professionalism. SMEs generally have difficulty in recruiting and selecting staff, training, performance evaluation and job analyses. They advocate formalizing HRM policies and practices but noted that this required both financial resources and training of owners/managers in managerial skills and the importance of HRM. They argue for collaboration between government, educational institutions and SMEs to improve the use of HRM practices. Cakar and Erturk (2010), using data from 743 employees from 93 SMEs, examined relationships of cultural values, employee empowerment and firm innovation. Employee empowerment was positively related to innovation capability. Managers using participative management practices (associated with employee empowerment) fostered innovation capabilities of their SMEs. 4

Kozan, Oksoy and Ozsoy (2006) collected data from 526 SMEs from major Turkish cities examining factors related to growth phases of SMEs. Owner/manager motivations (need for achievement, locus of control) were the strongest predictor of growth phases. Lack of know how, a mixture of items many of which tapped HRM (e.g., lack of trained employees, and lack of management talent) emerged as significant factors making it difficult for SME growth. These studies begin to add to our understanding of factors contributing to SME performance and success in Turkey and the central role of HRM policies and practices. Objectives of the research There has been relatively little HRM, management and organizational effectiveness research carried out in Turkey. This exploratory study examines the use and effectiveness of professional HRM practices in SMEs in Turkey. It considers the following questions. 1. What are the major HRM issues reported by managers in Turkish SMEs? 2. What HRM practices are used in Turkish SMEs? 3. How effective are these HRM practices seen to be? 4. Is there a relationship between use of HRM practices and perceptions of SME performance? 5. Is there a relationship between effectiveness of these HRM practices and perceptions of SME performance? 6. What role do SME characteristics play in the use of HRM practices, their effectiveness, and SME performance? METHODOLOGY Procedure Data were collected in the last half of 2010. A list of SMEs located in Kayseri was obtained from the Headship of the Administration of Small and Medium-sized Enterprises Development and Support (KOSGEB) database. A total of 243 SMEs were randomly chosen from this SME database. Participants in the study were human resource managers, vice managers, or supervisors in these companies. Each individual was sent a cover letter, a survey to be completed by them, and a return envelope to be sent to a confidential survey return address. Respondents participated voluntarily and assurances of anonymity and confidentiality were given. Completed surveys were obtained from 172 companies, a 75% response rate. Respondents and their SMEs Table 1 presents the personal demographic characteristics of individuals (N=172) that provided the SME data. The following comments are offered in summary. The majority of respondents were 40 years of age or younger (76 %), were male (74%), were college 5

Bachelor s degree graduates (67 %), had 10 years or less of company tenure (67 %), and had been in managerial jobs for 5 years of less (42 %). Table 1 Personal Demographic Characteristics of Respondents Age 30 or younger 31 40 41 50 51 and older SME Tenure 5 years or less 6 10 years 11 years or more Organizational Level Vice Manager Manager Assistant Manager N 48 83 29 12 65 48 59 36 103 33 % 27.9 48.3 16.9 7.0 37.8 27.9 34.3 20.9 59.9 19.2 Male Female Gender Level of Education Elementary High School Bachelor s degree Master s degree Management Tenure 5 years or less 6 10 years 11 15 years 16 years or more N 128 44 6 51 109 6 62 45 36 19 % 74.4 25.6 3.4 29.7 63.5 3.4 41.9 26.2 20.9 11.0 6

Table 2 shows the descriptive characteristics of the SMEs. Most were family-owned and managed (59%), did not have HR departments(57%), did not have an experienced HR professional (56%), were in the manufacturing sector (60%), had 99 or fewer employees (55%), and were more than 11 years old (67%). Table 2 Demographics of SME Sample SME Age N % SME Size N % 5 years or less 6 to 10 years 11 to 15 years 16 years or more 16 41 53 62 9.3 23.8 30.8 36.0 50 or less 51 100 101 150 151 200 33 61 33 19 19.2 35.5 19.2 11.0 200 or more 26 15.1 Has HR Department Yes No Ownership Family-business Non family-business 74 98 102 70 43.3 57.0 59.3 40.7 Has HR Professional Yes No Industry Sector Manufacturing Retail Services 75 97 96 22 54 43.6 56.4 55.8 12.8 31.4 Measures Data were collected using both open-ended and structured survey questions. Own development of knowledge and managerial skills Respondents indicated (yes/no) whether they had undertaken each of six developmental activities (e.g., attended courses or seminars, reading materials, from other SME owners and mangers). These were then combined into a total score (α=.50). Three most important/urgent HR problems, challenges and issues Respondents indicated the three most important or urgent HRM challenges or issues facing their SMEs. They were asked What are the three most important or urgent human resource problems, challenges or issues that you believe your company is currently facing. Please describe each briefly Current SME Performance 7

Current SME performance was measured by three items. These items represented different facets of SME performance and were not expected to b highly positively or significantly correlated 1. Respondents compared their SMEs to major competitors (performing better, performing the same, and performing worse). 2. Respondents compared their SMEs current performance to one year ago (performing better, performing the same, performing worse). 3. Respondents indicated changes in the number of employees in their SMEs employees now compared to one year ago (more employees now, about the same employees now, fewer employees now) Professional HRM practices Respondents indicated for each of 29 professional HRM practices (see DeKok, Uhlaner & Thurik, 2006, for an explanation of how these were identified), grouped into five categories (staff recruitment, selection, compensation, training and development, employee appraisal) whether each was used in their SMEs, and if used, how effective they found its use. Use was measure by a three item scale developed by DeKok, Uhlaner and Thurik (2006): 1=not used at all, 2= used for some jobs of positions, 3-used for all jobs or positions. Effectiveness was assessed on a five point scale: 1=not effective, 3=somewhat effective, 5=very effective. Items included: a recruitment and selection office, psychological tests, competitive wages, external training, and appraisals conducted by line managers. The reliabilities for the use of each of the five professional HRM practice categories, and a total scores combining the five categories of professional HRM practice, were: recruitment,.55, 7 items; selection, 67.4 items; compensation,.72, 7 items; training and development,.84, 8 items,; appraisals,.58, 3 items, and the total score,.87, 29 items.. The reliabilities for the effectiveness of the five professional HRM categories were: recruitment,.37, 7 items; selection,.65, 4 items; compensation,.59, 7 items; training and development,.75, 8 items; use of appraisals,.67, 3 items; and the total score,.73, 29 items. Modest levels of internal consistency reliabilities were expected given the nature of the items in the various measures. FINDINGS/DISCUSSIONS Own learning and development activities Table 3 shows the use of six personal development and learning activities by respondents. Each was used by several respondents. Most commonly used sources of learning and development were: from more experienced managers (94%), from discussions with other SME mangers (86%), and from consultants (73%).Respondents made great use of learning and development activities that took place on their jobs and involved learning from other more experienced people. Respondents rated considerable use of the six developmental and learning activities, the mean being 1.2 (1=yes, 2=no). 8

Table 3 Personal Learning and Development Activities Development Initiatives N % Courses and/or seminars From more experienced managers From reading materials From government programs Discussions with other SME managers From consultant 119 162 127 100 148 125 130 69.2 94.7 73.8 58.1 86.0 72.7 75.5 Respondents engaging in a greater number of learning and development activities also rated the performance of their SMEs higher than that of their competitors (r=. 17, p<.05) and the performance of their SMEs higher now than one year ago (r=.20, p<.01). In addition, respondents engaging in a greater number of learning and development activities also reported greater use of all five professional HRM practices (ranging from.40 to.23.). But there was no relationship between the number of personal development and learning initiatives undertaken by respondents and reported effectiveness of the various areas of professional HRM practice. Respondents indicating greater participation in learning and development activities also rated the performance of their SMEs higher than their competitors (r=.17, p<.05, n=172) and the performance of their SME higher this year than last year (r=.20, p<.01, n=172). In addition, respondents indicating participating in a greater number of leaning and development activities also indicated greater use of all professional HRM practices (ranging from.40, use of Training HRM practices and participation in more learning and development activities, to.23, use of Appraisal HRM practices and participation in more learning and development activities, with a correlation of.38 (p.<001, n=172) between greater use of all five HRM practices and greater participation in learning and development activities. Most important HRM issues and challenges As expected, there was considerable variety in the HRM issues and challenges reported. Three respondents indicated that their companies had no HR problems, challenges or issues; 20 left this question blank, 32 indicated one problem, challenge or issues, 53 indicated two problems, challenges or issues, and 64 indicated three HR problems, challenges or issues. Thus the vast majority of the respondents were able to identify one or more HR problems, challenges or issues facing their SME. Although a number of different HR problems, challenges or issues were identified, some were common. Thus difficulty finding qualified and experienced staff, need to improve inadequate staff training, and compensation issues stood out, receiving 78 (45%), 35 (20%), and 31 (17%) mentions respectively. 9

SME performance Most respondents saw their SME performing better than their competitors and better than one year ago. Thus 63 % rated their SME performance better than their competitor (X=1.4, s.d. =.59), 65% as performing better than one year ago (X=1.5, s.d. =.70), and 45% indicated that their SME now had more employees than one year ago (X=1.7, s.d..=.73).two of the three intercorrelations between the three indicators of SME performance were positive and significantly different from zero (p<.001): greater performance than major competitors and greater performance this year than last year (r=.26, n=172), and greater performance this year compared to last year and growth in staff (r=.26, n=172). SME Characteristics and SME Performance The three indicators of SME performance wee then regressed on four SME characteristics: SME age, SME size, presence of an HR department, and presence of an HR specialist. Table 4 shows the results of these analyses. Larger SMEs and SMEs having an HR specialist were more likely to perform better than competitors. Younger SMEs and SMEs with an HR department we3re more likely to have more staff now than one y ear ago. SME characteristics failed to account for a significant amount of explained variance on SME performance now compared to one year ago. Table 4 SME Characteristics and SME Performance a R R2 P Compared to major competitors.28.08.01 SME Size (.20) HR Specialist (.20) Compared to performance last year.17.03 NS Growth in number of staff SME age (.18) HR department (.20).24.06.05 a N=172 SME Characteristics and Use of Professional HRM Practices Since respondents indicated that they made no use of particular professional HRM practices, the sample size for ratings of their effectiveness dripped accordingly. And since respondents indicated no use of different professional HRM practices, when total 10

scores ere computed, the sample sizes dropped significant. Thus because of these small sample sizes, a decision was made to only report some of the results using measures of rated effectiveness of the professional HRM practices because of the exploratory nature of the research but with an appropriate caveat and caution. The five measures of professional HRM practices, and their total usage, were separately regressed on four SME characteristics: SME age, SME size, presence of an HR department, and presence of an HR specialist. These results are shown in Table 5. A fairly similar pattern of results was present in five of the six analyses (SME characteristics failed to account for a significant amount of explained variance on Compensation practices usage). Larger SMEs, and SMEs having an HR specialist, made greater use of Recruitment HR practices, Selection HR practices, Training HR practices and total HRM practices, and SMEs having an HR specialist made greater use of Appraisal HR practices. Table 5 SME Characteristics and HRM Practices Use a R R2 P Recruitment.34.11.001 SME size (.22) HR specialist (.31) Selection SME size (.18) HR specialist (.17).28.08.01 Compensation.22.05 NS Training SME size (.27) HR specialist (.39).45.20.001 Appraisal HR specialist (.37).33.11.001 Total HRM practices SME Size (.22) HR Specialist (.37).39.15.001 a N=172 11

Professional HRM practices-use and effectiveness Table 6 presents the mean scores for use and effectiveness of the five areas of professional HRM practice, and a total score for both use and effectiveness across all five areas of professional HRM practice. Respondents indicated relatively moderate use of all areas of professional HRM practice (X = 2.0, used for some jobs or positions) and rated them as generally highly effective (Mean= 2.6). Total use of these HRM practices and total rated effectiveness of them were all positive and highly correlated, but again given the smaller sample sizes these findings must be treated as preliminary. Table 6 Scores on Sub-scales of Professional HRM Practices Measures Use of Professional HRM Practices Training and Recruitment Selection Compensation Development Appraisal Total 2.1 2.1 1.9 2.0 2.4 2.1 Effectiveness of Professional HRM Practices Training and Recruitment Selection Compensation Development Appraisal Total 2.5 2.6 2.6 2.5 2.6 2.6 Respondents indicating greater use of any one of the five aspects of professional HRM practice also indicated making greater use of the four other areas of professional HRM practice; the mean inter-correlation being (n=172, r=.50, p<.001). Few of the correlations between effectiveness ratings of the various areas of professional HRM practice reached statistical significance, again because of the much reduced sample size. Respondents ratings of use of each area of professional HRM practice, and the total use measures were significantly correlated with ratings of the effectiveness of these professional HRM practices but as indicated above the sample sizes were much smaller; these latter findings must be treated with caution. Table 7 shows the correlations (n=172) between respondents ratings of their SME performance against their major competitors, against their last years performance, and whether their SME had more employees now than last year, and both extent of use of and effectiveness of the professional HRM practices. Respondents indicating greater use of Compensation HRM practices, and rated their use of Compensation practices more effective, rated their SMEs as higher performing than their competitors. In addition, respondents indicating greater use of Selection HRM practices, and a greater use of all professional HRM practices indicated higher levels of performance now than last year. 12

Table 7 Use of Professional HRM Practices and Rated SME Performance Use of Professional HRM Practices a Recruitment Selection Compensation Training and development Appraisal Total use of HRM practices Compared to Competitors.33***.20**.17*.36***.16*.34*** Compared to Last Year.22**.12.09.26**.13.22** Employee Growth.01 -.02.14.26**.14.14 a N=172 * p<.05 ** p<.01 *** p<.001 Correlations were computed between the three indicators of SME performance and each of the 29 HRM effectiveness items. Few correlations reached statistical significance at the.05 level (3 with SME [performance compared to major competitors, 1 with SME performance now compared to last year, and none with growth in staff since last year). This approach increased the sample sizes on all 29 items. Thus ratings of how effective each HRM practice was had no relationship with the SME performance measures. HRM Practices and SME Performance Hierarchical regression analyses were undertaken in which the three indicators of SME performance were separately regressed on two blocks of predictors entered in a specified order. The first block of predictors were the four SME characte3ristics (SME age, SME size, presence of an HR department, presence of an HR specialist). The second block of predictors was the usage of the five professional HRM practices (Selection, Recruitment, Training, Compensation, and Appraisal). When a block of predictors accounted for a significant amount or increment in explained variance (p<.05, measures within these blocks having independent and significant relationships with a dependent variable (p<.05) were identified. This approach to analysis controls the effects of the SME characteristics before examining the relationships of the usage of the professional HRM practices with each indicator of SME performance. These results are shown in Table 8, 13

Table 8 Use of HRM Practices and SME Performance a Compared to major competitors R R2 Change R2 P SME Characteristics.28.08.08.01 SME size (.20) HR specialist (.120) HRM practices Training (.23) Selection (.21).42.18.10.01 Compared to last year SME Characteristics HRM Practices Training.17.32.03.11.03.08 NS.05 Growth in staff SME characteristics SME size (.16).24.06.06.05 HRM Practices Training (-.40) Compensation (-.22) Selection (.22) Recruitment (.19).41.17.11.001 a N=172 The following comments are offered in summary. First, SMEs making greater use of both Training and Selection also were seen as performing at a higher level than their competitors (Bs=.23 and.21, respectively). Second, SMEs making greater use of professional Training practices also indicated higher levels of performance currently than last year (B=.33). Third, SMEs making greater usage of both Training and Compensation and less use both Selection and Recruitment indicated more staff this year than last year (Bs=.40,.22, -.20 and -.19, respectively). Correlates of SME characteristics Given the exploratory nature of this research an examination of various correlates of SME characteristics was undertaken Correlations were computed between SME characteristics and all other study measures. The following statistically significant relationships were observed: larger SMEs were more likely to have an HR department (r=.38, p<.001) and were likely older (r=.15, p<.05); there was no relationship between type of business ownership and management (family vs. non-family) and whether the 14

SME had an HR department or an HR specialist (r=-.09 and.04, respectively); SMEs having an HR department were also more likely to have an HR specialist (r-.53, p<.001); older SME s were more likely to be family-owned (r=.20, p<.001); larger SMEs made greater use of Recruitment (r=.20, p<.01), Selection(r=.21, p<.01),training, (r=.256,p<.001),and total HRM practices use *(r=.21, p<.01); and family-owned and managed businesses made less use of Selection (r--.17, p<.05), Training, (r-.23, p<.01), and total HRM practices use (r=.17, p<.05). CONCLUSION/IMPLICATION The SMEs in the study The SMEs in this study were not very advanced in their HRM practices (see Tables 2 and 6) when compared with results found in other studies (Kotey & Folker, 2007; Kotey & Slade, 2005). Most used professional HRM practices at a lower level than reported by DeKok, Uhlaner and Thurik (2006) in their study of Dutch family-owned SMEs. In general, these Turkish SMEs had a relatively low level of HRM sophistication and application. More than half had no HR department, more than half had no HR specialist expertise, they made use of these HRM practices typically on only some jobs, and they rated the effectives of their use of the professional HRM practices as less than somewhat effective. The respondents The SME contacts that completed the survey were also highly educated and undertook a wide variety of initiatives to support their learning and skill development while performing their jobs. (See Tables 1 and 3). On-the-job learning and learning from observations of and discussions with more experienced managers and professionals were the most commonly used initiatives. These were followed by courses and seminars and the reading of potentially relevant and helpful materials. and books. These undertakings seemed to fir the high level of education of the informants and their relative newness in their jobs. Dyer and Ross (2008) in a study of Canadian SME owners found that frequency of advice seeking was positively related to SME owner s perceptions of their business performance. Major HRM problems, challenges and issues Informants indicated what seemed to be both obstacles and opportunities in their listing of major HRM issues facing their SMEs. The obstacles would include poor levels of employee skill and performance, inadequate levels of employee training and compensation issues. Others (Cardon & Stevens, 2004; Hornsby & Kuratko, 2003) have reported similar major HRM issues in their studies. Interestingly, Tocker and Rutherford (2009) found that SME owners and managers of high performing SMEs were less likely to be aware of HRM problems but SME owners and managers who had more experience, more education, and worked or managed larger SMEs observed more major HRM problems. 15

Use and effectiveness of professional HRM practices and SME performance This exploratory study provided some evidence for a relationship between use of professional HRM practices and perceptions of SME performance, particularly in regard to major competitors and to a smaller degree with performance gains during the past year. This finding must be replicated in other studies to determine the generalizability of our results (see Tables 7 and 8). Practical implications There are several practical implications that follow from these results. First, the findings provide information showing the important role played by HRM practices in organizational performance. Second, this kind of information could serve as useful content in business courses offered by universities as well as business seminars for practicing SME owners and mangers. Third, developing case studies of highly successful Turkish SMEs using DeKok, Uhlaner and Thurik s HRM content categories would provide further confirmation of the role of HRM in SME success (see Conley, 2007; Seijts, 2011, for examples). Fourth, government programs supporting the creation and performance of SMEs would find the inclusion of HRM content of value. Limitations of the research It is important to note some limitations of this exploratory research to put the findings into an appropriate context. First, the sample of SMEs was relative small (n=172) and likely unrepresentative of all Turkish SMEs. The sample was from one large city and may not be reflective of the experiences of SMEs in other Turkish cities and towns. Second, all data were obtained using self-report surveys from one source within each SME raising the possibility of response set tendencies, common method factors, and bias. Third a few of the measures had levels of internal consistency reliability below the generally accepted standard of.70. Future research directions As research on the role of professional HRM practices in SMEs is just developing, particularly in Turkey, several promising research directions are evident? First, future studies should employ larger more representative samples of SMEs. Second, there is a need for research that attempts to replicate previous published work. Thus using DeKok, Uhlaner and Thurik s measures in future studies would be worthwhile. Third, objective measures of SME performance would complement the use of respondentprovided perceptions. 16

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