The perspective of managers on integrating HR practices to increase organizational performance in SME firms: An analysis of the interaction effect

Abstract

Purpose: The aim of this paper is to clarify the human resource management (HRM) literature in small-to-medium-sized enterprises (SMEs) by empirically identifying possible combinations of HRM practices from the perspective of managers, and analyzing the relationships among them and with organizational performance in order to identify which combinations are most effective.

Design/Methodology/Approach: Using the AMO (Ability- Motivation-Opportunity) framework, we ask whether there are significant interactions between AMO-based HRM bundles and, if so, to what degree and by what means they influence organizational performance. To explore this question, we tested a theoretical model using Partial Least Squares-Structural Equation Modeling (PLS-SEM) techniques and compared the interaction and main effects. The research sample comprises SMEs operating in the Basque Region of Spain.

Findings: The study confirms the existence of hierarchies among bundles. The practices most strongly related to the SMEs’ performance lie in the bundle of motivation-enhancing practices. The results indicate that motivation-enhancing practices have a positive effect on organizational performance and when they are combined with ability-enhancing practices this effect grows.

Research limitations/implications: The cross-sectional nature of the data means that it is not possible to establish clear causal relationships among the variables studied. It would therefore be beneficial in the future to use longitudinal designs and examine cause-effect over time, as well as use samples from other geographic locations.

Practical Implications: High-performance HRM practices in the three Ability-Motivation-Opportunity (AMO) dimensions should not automatically be assumed to be complementary in an SME context, as many managers believe. Our results suggest that managers would be well advised to adopt motivational practices, combining them with training, to improve SMEs’ performance.

Originality / value: This is one of the few studies to focus on testing the interaction effects among dimensions of Ability-Motivation-Opportunity-enhancing-practices on SMEs’ organizational performance, as observed by managers. It will encourage SME managers to consider more carefully the possible combinations of AMO dimensions and to focus on those combinations most likely to have positive effects.