According to Martyn Shuttleworth (2009), literature review is a critical and in depth evaluation of research in which all sides of an argument must be clearly explainted, and areas of agreement and disagreement should be highlighted. In order to deal with the objectives and question proposed in the chapter 1, the author is going to find related theories in academic journals both online and paper, and other academic sources to provide the supervisor as well as readers a comprehensive overview of why the author is pursuing the research.
In the chapter, the definition, components and practice of human resource management, human resource management in Vietnam and SMEs will be presented. In addition, the author will address the problems and find solutions to improve human resource management.
2.1: Human resource management definition
There have been many lessons and also so much research both national and interational on the human resource management, which are widely applied in enterprises. And these primarily concentrate on the areas including the concept of human resource management, functions of human resource management and its applications.
An debate on what is the essence of human resource management theory is still ongoing conversation. A review and research agenda put forth by Guest (1997) has endeavoured to pull all those arguments together. He indicates that there are diverse theories about human resource management including illustrative, strategic and normative. Firstly, descriptive theory states that the important inputs of an alternative of human resource management policy and practice such as creating employee influence, enforcing human resource flows and establishing incentive reward systems will influence on four key effects, which are commitment, competence, congruence and cost effectiveness. These leading to they will produce low labor turnover, loyal and faithful employees, who will commit to build up an organization’s efficiency. This statement is also presented by Beer et al (1984) and Beaumont (1993). Secondly, strategic theory suggests that a good coordination between business strategy, human resource policy and practice will strengthen enterprises’ performance. Finally, normative theory describes a set of value that indicates human resource management practice applied to gain normative targets of high commitment to the enterprise. This will affect the performance of enterprises.
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Definition of human resource management is still in argument. Boxall and Purcell (2003) argue that this definition is affected by three issues. Firstly, human resource management is derived from a range of antecedents and depends on the stance and philosophy of the analyst. Secondly, it contributes to the analysis of the employment relationship, and is reliant upon context. Finally, the significance of human resource management is variable, which emphasize people, strategy, employment relationships etc.
In order to emphasize human resource management, Redman and Wilkinson (2006) compare it as the utilization of individuals to achieve an organization’s objectives. People management not only critical to business performance but also much more significant than priority over quality, technology, competitive strategy or R&D terms of influence on the bottom-line. They present functions of human resource management, which include employee and labour relations, staffing, human resource development, compensation and benefits, safety and health. Storey (1995) states, similarly, that human resource management is a distinctive approach to employment management which seeks to achieve competitive advantage through strategic development of a highly committed and skilled workforce, using an integrated array of cultural, structural techniques. In addition, Cherrington (1995) confirms that human resource management is responsible for how people are treated in companies. It is the commitment on taking people into the organizations, assisting them carry their work out, compensating them for their labours, and settling issues that arise.
2.2: Human resource management functions and performance
According to Mondy (2002), there are four functions in human resource management including recruitment, training and development, performance appraisal, compensation and benefits. Together they make up the human resource management system. Top management views these functions as an important tool to enhance competitiveness.
Recruitment is, firstly, the process of attracting individuals on an opportune basis, in sufficient numbers and with suitable qualifications, and motivating them to apply for jobs with an organization. This process involves analyzing and forecasting the talent that companies need to execute their business plan, it is an important strategic step, enabling the organization to recognize, develop and sustain the workforce skills it needs to successfully accomplish its strategic intent whilst balancing career and lifestyle goals of its employees. Better recruit would lead to improvement in organisation productivities outcome compare to a poor recruit process. This process is very crucial to the success of the business. Failure to recruit appropriate worker will result in slow or stunted the grow of business (Boxall and Purcell 2000, p.140). The firm may then select those applicants with qualifications most closely related to job specifications (Mondy, 2002). He confirms that finding the right way of encouraging qualified candidates to put in for employment is extremely important when a firm needs to hire employees.
Training and development is, secondly, the heart of a continuous effort designed to improve employee competency and organizational performance. Mondy (2002) argues that training provides learners with the knowledge and skills needed for their present jobs. On the other hand, development involves learning that goes beyond today’s job, which has a more long-term focus. It prepares employees to keep pace with the organization as it changes and grows. Training & Development activities have the potential to align a firm’s employees with its corporate strategies.
According to Leonard Nadler (1984), training and development are ornanizational learning experiences took place in the certain period of times in order to increase the job performance and improve the development capacity of organizations and individuals. The concept emphasizes the ultimate goal of human resource development is to develop the organization, also focuses on the combination of personal development goals together with development objectives of the organization. However, the term also confirmed the development activities only increase job performance and organizational development capability since only when are employees interested in appling the learned knowledge to the work then the change will be created. On the other hand, the concept also clarified the role of direct managers in improving the job performance of employees yet definition of the concept is still in debate.
Similarly, Henry J.Sredl & Willam J. Rothwell (1997) defines training and development is to refer to the organizational learning experiences which are sponsored by the business ower. They are designed and implemented along with the goal of improving the job performance and enhancing the human condition through ensuring the combination of organizational and individual goals. The concept emphasizes the support of employer for their employees in the human resource development activities. On another view, Jerry W. Gilley (2002) states that training and development is the process of promoting organizational learning, improving job performance, and creating changes through the implementation of solutions (official and non-official), initiatives and management activities aiming at performance improvement, competitiveness and innovation which has more emphasis on the official and non-official remedies in human resource development activities, and also more focus on organizational management solutions.
Thirdly, according to Mondy (2002), performance appraisal (PA) is a formal system of review and evaluation of individual or team task performance. While assessment of team performance is essential as long as teams exist in an organization, the focus of PA in a number of companies remains on the individual employee. In spite of the emphasis, an effective appraisal system evaluates achivements and initiative plans for improvement, targets, and objectives.
Finally, Mondy (2002) shows that compensation administration is one of management’s most difficult and challenging human resource areas on account of containing quite a lot of elements and has a far-reaching impact on an organization’s plans. Compensation is the total of all awards provided to employees in return for their services. Generally speaking, pay system are designed to attract, preserve, and encourage employees, to attain internal, external, and individual equity, and to keep a balance up in relationships between direct and indirect forms of compensation, and between the pay rates of supervisory and non-supervisory employees.
As far as the relationship between human resource management and organization’s performance is concerned, there has been increasing numbers of research. Most of them support the positive correlation between high performance as a result of human resource management practice and efficiency of enterprise’ performance. Poole and Jenkins (1996) examined the development of comprehensive human resource management policies by the survey of 909 firms in Britain and investigated that human resource management is one of the key factor to achieve a competitive advantage.
With the general consensus, Dunphy and Stace (1992) have the same view with Poole and Jenkins. They emphasize that people themselves and their skills are the important factor to the added value of the organisation and human management will have an influence on enriching the efficiency of an organization. As a result, human resource management must be added in enterprises’ strategic development. The empirical study on effects of management training of Wong (1997) finds out that there are considerable impacts of management training and development on reforming performance of small and medium enterprises. In addition, Bratton and Gold (1994), Bearwell et al (1994) and Storey (1995) conclude that an organisation, which strives to improve its operations and demand for success, leads to the greater emphasis on human resource management. Hence, these studies have suggested that policies and practices of human resource management contribute to business success.
Furthermore, there are several studies in which have included performance-based compensation as one of the high performance in human resource management practices. Redman and Wilkinson (2006) state that compensation is the total of all rewards provided employees in return for their services. There are two types of compensation including financial and non-financial compensation. Financial component consists of wages, salaries, bonuses, social security, health services etc. In contrary, non-financial one covers the satisfaction that an employee receives from the job itself and job environment such as teamwork, skills, autonomy, flex time and others. Huselid (1995), Delery and Doty (1996) consider compensation and benefits as the single strongest predictor of an enterprise’s performance. Based on empirical studies, these authors conclude that there is a positive correlation between performance-related pay and company performance. Therefore, performance-based compensation and merit-based promotions can be evaluated as important factors in incentive systems (Guest, 1997 and Huselid, 1995).
At present, there are quite a lot of ways to progress the practice of human resource management. One of the key factors for the success of enterprises in a competitive market is to keep up continued competence through the development of human resources, which employee performance appraisal is a crucial tool. Borman (1991) defines that performance appraisal is a system of reviews and evaluations of an individual’s or team’s performance. It covers human resource planning, recruitment and selection, training and development, career planning and development, compensation programs and evaluation of employee potentials, of which compensation is widely apply in performance appraisal. A professional appraisal system could significantly improve employee performance and enterprise profitability (Robert, 1995).
2.3: Human resource management in small and medium enterprises
Hill and Stewart (2000), with respect to human resource management in small and medium enterprises, state that SMEs lack resources like large enterprises, which tends to follow informal modes of operation such as short-term perspectives and the owner’s preferences and experience. However, many studies indicate that issues in SMEs are similar to those facing large enterprises such as the difficulty of linking investment in training with performance outcomes, the delivery of training courses and impacts of technology.
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Patton et al (2000) suggest that understanding the link between training interventions and achieving performance might be complicated by several variables that could impact the relationship. These factors might contain surrounding factors and particular ones to the firm, such as the owner and background of the management team, and the partnership between the training supplier and the recipient. Patton et al recommend that it could be more productive to encourage training as beneficial to the firm in the widest sense rather than attempting to reveal clear causal relationship. Huang (2001) argues that inadequacies in the definition and measurement of training have hampered attempts to show links between training and improvements in performance. Huang’s study suggests that, where firms grow up sophisticated training courses with efficient management assistance, the effectiveness of the investment in training will be high (Huang, 2001). However, it might be argued that, by their very nature, small and medium enterprises might lack the ability to build up sophisticated training programmes, with or without management assistance. There is a huge challenge in thinking up incentives for small firms to invest in formal job related training when it is often difficult to argue that it is in their short-term interests to do so.
In relative terms, the effect of the owner manager in a small firm is much more pervaise and powerful than may be the case with the CEO of a big firm. In the view of Mazzarol (2003), he suggests “small businesses are the product of their owners, whose personality and personal involvement dominate”. The owner manager’s perspectives to training will be an essential hindrance or assistance in the implementation of training programmes. Hankinson’s (2000) study of owner-managers found that these managers typically invested 93% of their working day inside the firm and made little deliberate attempt to up-skill themselves through joining courses or reading relevant literature as they regarded experience as the most relevant from of their continuing achievement. Managers with these views to training are not likely to encourage high rates of participation in training amongst their staffs. One response to this low regard many owner-managers have for the relevance of available training and development schemes might be to develop an approach based on mentoring (Hudson-Davies et al. 2000).
Sharply becoming a key issue, technology is in association with training on two sides, first the rapid development of technology coupled with the increasing pressure to keep up technical skills in order to maintain competitive, should supply an important incentive for continued investment in training and development. As McCole et al (2001) note, the generally negative attitude and low priority given to training in many SMEs is a matter for concern. Following their study of training in SMEs in Northern Ireland, McCole et al summarized that the short-term emphasis in small companies, which depresses investment in longer term masters such as training, might result in small companies experiencing a decline in their ability to keep up competitive in terms of their key human resources. The second side of technology is that new forms of electronically mediated training design and delivery should overcome several the problems of access, that have been often cited by managers in SMEs as a major obstacle. In spite of the importance of technology and the chances now emerging, research seems to suggest that SMEs have not been quick on the uptake.
From a number of managers of SMEs, a frequent complaint is that available training programmes are not well designed for the commands of the small companies, or are difficult to adapt to the specific requirements of a firm. The issues here might be more complicated than simply a question of content. Anderson and Boocock (2002) argue that the big firm model of learning, on which the majority of formal training courses are arranged, is inappropriate for small companies in which the distinctive culture and communications systems could be more suited to learning which occurs through more informal processes. Advances on training in SMEs has to contain concern not simply for content, but also for problems of timing, location and delivery and such training might require a significant level of customisation given the heterogeneous nature of the SMEs sector. Clearly there is a problem here for SMEs as highly customized products for small clients are not an appealing prospect for training providers.
According to Patton (2000), he points out that the relationship between training interventions and improved performance may be hindered by factors such as the owner and nature of management team, the relationship between the training provider and recipient. In addition, Mazzarol (2003) states that the influence of the owner manager in SMEs is more pervasive and powerful than ones in large enterprises. Moreover, Huang (2001) argues that SMEs are not capable of designing sophisticated training programs with the management support, which is a challenge for SMEs to invest into jobs related to training programs.
2.4: Human resource management of SMEs in VietNam
Vietnamese government with the assistance from international organisations in many countries in the world has paid more and more attention to the development of SMEs since the renovation “doi moi”. In order to support Viet Nam along with its efforts, some donors came and joined hands to support Vietnamese SMEs as key actors in the country’s socio-economic development. A number of researchers have been implemented with the mandate to provide assistance to the development of SMEs. Almost these researches have aimed at financial issues, business&working environment of SMEs and business services. This area has been mentioned by some reports in different aspects although there has not been any research specialising in human resources management issues in Vietnamese SMEs.
Nguyen Duc Vinh (1999) indicates that the faster the growth experienced by the small firm the more likely it will experience human resource masters. The management of SMEs tends to be small and multi-functional. Often, entrepreneurs run companies dingle-handed or take a disproportionate production of the key decisions, in addition to functioning as the general interface to the outside world. Creating a larger, “professional” management is desirable, but until a certain size is reached it is difficult to create much division of labour and to develop specialised interfaces. These leading to management functions in a brutal cycle of overwork, which results in inability to consider and exploit externally-derived improvement opportunities, that in turn leads to overwork. The lack of specialised is completely absent. Notably, a number of small firms have no engineers and therefore no “intelligent interface” to technological changes and opportunities. Other key skill and resources might be absent. Usually, for instance, new technology-based companies have few marketing or business development capabilities.
SMEs, which are trying to orient to export markets, require good entrepreneurial and management skills. However, business management skills are not up to the mark. Only a few owners are equipped with business knowledge of a market economy. Most of the proprietors run business based on their own experience. In general, entrepreneurs in the SMEs sector are often “home-grown”, obtianing their skills and leadership qualities in their own workplace and business environment. Beyond a certain point, this “learning by doing” approach becomes less useful in assisting small firms in graduating into modern small enterprises, equipped with advance models of technology and marketing skills. Furthermore, SME management rely on being experienced and being able to communicate both inside the enterprise and with outside partners. Thus, according to Tuong Lai (1999), training and support programmes might be needed to build up the quality and skills of both employees and management.
In Vietnam, the facts have showed that employers are reluctant to invest in training potentially highly mobile workers. To a certain extent, the demand for technical and vocational training is being dampened by employees’ tendency to leave for a better job once they have been trained. Employers do not believe in contracts that require their workers to stay firm a certain period of time after training, either because the workers are not registered or because they think the contracts will not be enforced. A survey by MPDF in 89 manufacturing companies in both public and private sectors (MPDF, 2000) found that:
On average, each month, firms invested three days of internal staff time in training and bought-in an average of 16 days of training services.
Seventy eight percent of external training was provided by the public sector. The respondents also state that training content needed to be more up-to-date, of global quality, and localized for the Vietnamese context. Training should be carefully matched to customers’ demands with both basic and advanced training options. The training itself needed to be practical, not theoretical. The method of instruction needed to be designed to ensure skill transfer from the classroom back to the workplace.
Fifty nine percent of the companies indicated that they were not able to get the training expertise they needed in Viet Nam.
Additionally, although labour is abundant, most job seekers are unskilled staffs. While only a small number of SMEs could provide training for their staffs, government assistance in training is insignificant. Viet Nam Chamber of Commerce and Industry (VCCI), though, plays an active role on organising seminars and some training courses, a number of private companies do not apply such programs, nor they aware of VCCI’s training services that is particularly the situation in the poorer provinces (Stoyan Tenev et al., 2003). According to a survey by MPDF, private firms, especially SMEs are the least preferred place of employment. Students and their parents think of a private employer as failing to provide suitable jobs and to ensure job security for employees (MPDF, 1999). This perception makes SMEs more difficult to attract qualified labour.
In a seminar on development of SMEs under the umbrella of Asia Pacific Economic Cooperation (APEC) in 2005, Dodd (2005) points to another weakness arising from the fact that smaller Vietnamese businesses tend to have the bulk of their labour force make up of family members, friends or relatives. In this opinion, “good brothers do not necessarily make good associates. It is often difficult for a company leader to have a good judgement of his employees, especially when it comes to one of his skin. And even when the right judgement is made, other employees may still see the director’s decision as an unfair one”. Brown and Davison (1999) shared this opinion with Dodd that human resource management within family-owned and managed small firms can also be made difficult when family members hold key positions within the business or find themselves in dispute with other or the human resource manager.
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