Definition Of SME In China

rendering Of SME In chinaAbstractChapter 1 Introduction1.1 footingA larger-than-life number of Small and Medium sized Enterprises (SMEs) came discover in 1980s as china has been moving from a pennyrally planned system towards a market-oriented economy. State-owned openings (SOEs) guard been involved in the economical reforms. Until the end of 2004, study SOEs rapidly change into low-toned and medium non-SOEs. At the same time, many SMEs sprouted as the implementation of non-SOE promotional material policy. Nowadays, Chinese SMEs w be increasingly dedicated to chinas economic ontogeny. As recorded until 2007, thither ar 42,291 medium-sized opening moves and 2,327,969 crushed enterprises which represent 1.78 percent and 98 percent respectively of the bring number of enterprises operating in chinawargon. The output pass judgment of SMEs contributed at least(prenominal) 60 percent of gross domestic product (GDP) as come up as generating more(prenominal)(preno minal) than than than 82 percent of economic consumption opportunities in China. Since SMEs growth rapidly and pay the overcritical roles in Chinas economic, in order to improve SMEs deed, the government has provided various ways to support SMEs such(prenominal) as introduced promotion law in 2003, issued a document State Council on Encouraging, financial backing and Guiding the Development of Private and Other Non-Public Owned Economies in 2005 and publish the SMEs growth project in 2006.Despite the external support, the internal portion such as benevolent resource counseling (HRM) has been evolving dramatically in recent years. The Chinese labor market is characterized by a enormous pool of poorly qualified personnel, more than 15 per cent of the populations atomic number 18 illiterate and many university graduates lack marketable skills. The shortage of top-class master keys and managers is acute, especially in argonas such as accounting, HRM and marketing. Aggravatin g such shortages is the concentration of professionals in the major coastal cities of Beijing, Shanghai and Guangzhou (Verburg, 1996). human Resource Management in China as new as its market economy, with its handed-down personnel administrative system undergoing a period of pro run aground change. Besides, HRM in China atomic number 18 different from those in other countries because of different political, economic systems and social and pagan backgrounds. Therefore, HRM in China faces several enigmas. First, Chinese enterprises in prevalent do non have a systematic approach to HRM that is consistent with their enterprise occupation dodging. Second, despite the oversupply of labor, many employees ar experiencing recruitment and retention problems. Third, there is a lack of an effective system which weds long motivation and bear upon with reward. Forth, there is a lack of coherence and persistence in enterprise training. The growth of human seat of government is ob viously dawdle behind that of enterprise profit (Pawan, 2004).Hence, this study aims to find out what argon the problems roughly HRM in Chinese SMEs, what atomic number 18 the roles of HRM in SMEs, how is the role of HRM pertain employee mathematical transit, and extent where this employee performance ask system performance.1.1.1 Definition of SME in ChinaWith the SME Promotion Law of China effect in 2003, the new commentary of SME came out as well. The new guidelines base on the number of employees, tax tax income and total assets of enterprises. The SME definition in China is quiet complex. Such as the specific criteria about the total assets of enterprises in industrial sector, including mining, manufacturing, electric power, gas, irrigate production and supply and construction. However, in the industries like transportation, wholesale and retail patronage organisation, and hotels and consistaurants, there is no assets requirement. Guidelines for the industrial sec tor requires SMEs to employ a maximum 2,000 tribe, and to have an annual r fifty-fiftyue not top outing RMB300 million. Their total assets should not exceed RMB 400 million. Medium-sized enterprises should employ a minimum of 300 people. Their annual revenue and total assets should not exceeding RMB30 million and 40 million respectively. The rest atomic number 18 classified as small enterprises (Details see debunk 1-1). Consequently, an SME in China whitethorn be quite large relative to SMEs in other countries. Therefore, this paper chief(prenominal)ly counselinges on small enterprises (SEs), including the problems of SE, the survey of SEs, and the recommendations about human resource perspective for SEs. render 1-1 The definition of SME in China1.1.2 Challenges to Chinese SMEsDuring the twenty-first century, straines became more than slim round became anorexic. Cost press clipping come acrossd impressive short-term results. According to some studies, about 50 per cent o f the company cost is the employee salary pay. Therefore, in order to cut achievement cost, companies start to cut employee salary. Consequently, cutting the pay for the employee ca apply employee disgratification and left. In China, the serious problem which the organization faces is the shortage of skilled staff to carry out nutriment and repairs or lack of trained employee. Likewise, one of the signifi baset difficulties of SME is the cost of doing business in industrial areas and host towns are high physical al-Qaeda is poor and operational costs are high.1.2 Research objectivesIn general, small firms pay less(prenominal) forethought to human resource solicitude than their larger counterparts do (Barron et al., 1987 Hornsby and Kuratko, 1990). The available empirical information on HRM at sink in SMEs suggests that smaller firms trade name less use of high performance HRM practices than larger organizations do (Barron et al., 1987 Homsby and Kuratko, 1990). This is in line with the finding that small organizations are in general more likely to operate in an informal and flexible carriage than larger firms are. For voice, Koch and McGrath (1996) find that, normally, firm size is positively related with the incidence of HRM cookery and formal training, and with the level of overall HRM sophistication. Westhead and Storey (1997, 1999) find that deuce managers and employees are less likely to get formal training in a small firm. In a study by capital of Mississippi et al., (1989), smaller companies are found to have less adjudge performance appraisals, less likelihood of bonuses based on company productivity and less training than larger companies do. Aldrich and Langton (1997) find that larger companies have more formalized recruitment practices. However, firm size is not the only factor in predicting HRM practices. A large heterogeneity exists in the type and formalization of HRM practices found among smaller firms.Thus, this study aims to fin d out the problems of HRM in spite of appearance Chinese SMEs, to gain our agnizeing of HRM practices in SMEs and seek out what are the roles of HRM in SMEs. What is more, the wedge of HRM practice will be also considered, via the chain of unwrap HRM, mitigate outcomes, to mitigate firm performance, and then to better and more sustainable economic performance in the national economy. As well as what are the challenges for HRM in Chinses SMEs.1.3 Problem statementThe importance of HRM has received much anxiety in recent years. Some researchers approved that the practive of HRM might lead to better HRM outcomes that cigaret enhance firm performance (Beer, Spector, Lawerence, Mills and Walton 1984 Fombrun, Tichy and Devanna 1984 Guest 1987 1997 Schuler 1988 1997). As well as suggest by Boselie et al.,(2001) and Guest (1997), increase engagement of high performance HRM practices is generally associated with improved firm performance. Moreover, as MeEvoy (1984) already suggest ed, HRM practices may be an all- classical(prenominal) cause of small-firm success or failure. However, there has different celestial horizon of HRM. Some indicated that there is a weak link between HRM and performance (Lee and Chee 1996 MacDeffie 1995 Purchell 1995 Dunphy and Stace 1992 Wong et al. 1997). In the recent Chinese economy, what are roles of HRM may contribute to better behavioral outcomes, and thus lead to better enterprise performance? Therefore, this study addressed the pursuance research questionsRQ1 What are the roles of HRM in Chinese SMEs?RQ2 Do the roles of HRM enhance employee performance? If so, which role is the near main(prenominal)?RQ3 To what extent the employee performance affect the organizational performance?RQ4 What are the challenges to HRM in Chinese SMEs?The fundamental hypothesis is that the roles of HRM improve employee satisfaction. Further, positive employee satisfaction is positively gibe to employee performance. Consequently, positiv e employee performance is positively correlated to organizational performance.The morphologic Equation Model as bellowOrganizational performanceEmployee performanceEmployee satisfactionThe role of HRMH1 The role of HRM improve employee satisfactionH2 Positive employee satisfaction is positively correlated to employee performanceH3 Positive employee performance is positively correlated to organizational performance1.4 Research motivationHow to manage an organizations take a leakforce is a fundamental aspect of each organization, irrespective of its size. Enterprises are faced with the line of work of recruiting and retaining a suitable workforce. This is not only a challenge for large enterprises, but also for small and medium-sized enterprises. The increasing tutelage on HRM in SMEs is a comparatively recent phenomenon. HR- researchers have largely ignored the SMEs, even though smaller companies could be fruitful subjects for empirical investigation because their numbers, the gr owth-rates and not least diversity in the qualitative aspects of management practices.Traditionally, HRM is not existence seen as important as other departments like marketing, accounting, operation. There are two reasons for the lack of interest for the HRM in SMEs. Firstly, the managers and/or owners of the SMEs, often ignored personnel, or HR issues like training and provement, performance management, employee counseling and so on It waits that the mangers have the contemplate that HRM is unresponsive or not tailorised enough to their considers, and it is considered as well as costly and activity to carry for a small organization. The lack of appropriateness, expectation of the activities being too bureaucratic, time consuming and the lack of clarity concerning order effects etc., has resulted in very limited attention to the approach and the techniques associated with it among management (often without any background friendship on personnel and HR). Earlier studies pr esent even traditional personnel activities are rather seldom utilize in SMEs.Accordingly, with the growth of SMEs in China, and SMEs have increasingly contributed to Chinas economic growth, we invite to pay attention to the SMEs performance, or we can say pay attention to HRM in SMEs. As HRM issue always been ignored, especially in SMEs, the researcher attend to do this research to explore the problems regarding HRM within SMEs and the roles of HRM in SMEs as well as the challenges for HRM in Chinese SMEs.1.5 Scope of research base on regional distribution (see EXHIBIT 1-2), 68.58 percent of SMEs are fit(p) in the east of China, 20.14 percent in the middle of China, 11.28 percent in the west of China. Small enterprises in the top atomic number 23 provinces make up 48.4 percent of all small enterprises. These provinces are all located in the eastern area of China which is Jiangsu, Zhengjiang, Guandong, Shanghai, and Shandong with 11.6 percent, 11 percent, 10.4 percent, 9.9 perce nt, 8.9 percent, and 7.6 percent of all SEs, respectively.EXHIBIT 1-2Distribution of registered types of small enterprises (see EXHIBIT 1-3) is as follows domestic enterprises in mainland China make up 96.1 percent of the total HK-, Macao- and Taiwan-based enterprises, 2 percent and orthogonal enterprises, 1.9 percent. Mean plot of ground, private enterprises comprise 66.1 percent of all SEs.EXHIBIT 1-3Chapter 2 publications review2.1 kind-hearted Resource Management overview ()HRM is about the management of an organizations workforce. Managing a workforce first of all requires the presence of a workforce, which calls for activities in the handle of recruitment, selection, appraisal and compensation. Next, the workforce must(prenominal) be organized. Tasks and responsibilities must be mulish and communicated. To attend that employees possess required cognition and skills, training and development activities can be carried out. Such activities may influence the working climate within the organization, and thus employee commitment and job satisfaction. Organizations may also employ activities that today aim to improve commitment and satisfaction, either because job satisfaction is a goal in itself, or because it is trustd to have a positive usurpation on organizational performance.2.1.1 Roles of Human Resource ManagementIn the ultimo few years, roles of HR professionals were viewed in terms of transition from operational to strategicalalalalalal, qualitative to quantitative, policing to partnering, short-term to long-term, administrative to consultative, functionally oriented to business oriented, internally focussed to externally and customer-focused, reactive to proactive, activity-focused to solutions-focused. However, these transitions are too simplistic. In fact, the roles of HR professionals are in reality, multiple and not single. In order to create value and deliver results, HR professionals must begin not by rivet on the activities or work of HR but by specify the deliverables of that work. Therefore, Dave, (1997) came out the framework of four key roles of HR professional (See EXHIBIT 2-1). The two axes represent the HR professionals focus and activities. Focus ranges from long-term/strategic to short-term/operational. HR professionals must learn to be both strategic and operational, focusing on the long term and short term. Activities rang from managing process (HR tools and systems) to managing people. These two axes delineate four principal HR roles which are (1) Management of strategic human resources (2) Management of firm infrastructure (3) Management of the employee persona and (4) management of transformation and change. In other words, the roles of HR professional are strategic partner administrative expert employee champion and change agent. Table 2-1 summarizes the deliverables, simile and activities the HR professional must perform to fulfill the role.EXHIBIT 2-1 HR Roles in Building a Competitive OrganizationTable 2-1 Definition of HR rolesManagement of strategic Human ResourcesThis role focuses on positioning HR strategies and practices with business strategy which requires that the HR professional works as a strategic partner, practice uping to ensure the success of business strategies. Translating business strategic into HR practices so that the business can adapt to change, better meet customer demands and achieve financial performance through its more effective execution of strategy.Management of Firm InfrastructureManagement an organizational infrastructure is a traditional HR role. This role requires HR professionals contrive and deliver efficient HR processes for staffing, training, appraising, rewarding, promoting and managing the flow of employees. HR professionals must ensure that these organizational processes are designed and delivered efficiently.Management of Employee ContributionThis role indicates that HR professionals involve in the day-to-day problems, concerns and postulate of employees. As employee champions, HR professionals need to understand employees take and ensure that those needs are met, overall employee contribution goes up. Therefore, HR professionals should be active and aggressive in developing human resource, linking employee contributions to the organizations success.Management of Transformation and ChangeThe final role of HR professional is to management transformation and change. Transformation entails fundamental cultural change within the firm. Change refers to the ability of an organization to improve the design and implementation of initiatives and to undertake cycle time in all organizational activities. HR professionals suffice to indentify and implement processes for change.Ulrich, in conjunction with Brockbank, reformulated the 1997 model in 2005, listing the following rolesEmployee advocate focuses on the need of todays employees through listening understanding and empathizing.Human capital develop er in the role of managing and developing human capital (individuals and teams), focuses on preparing employees to be successful in the future.Functional expert concerned with HR practices that are central to HR value, acting with insight on the cornerstone of the body of knowledge they process. Some are delivered through administrative efficacy (such as technology or process design), and others through policies, menus and interventions. Necessary to constitute between the foundation HR practices recruitment, learning and development, rewards, etc and the emerging HR practices such as communications, work process and organization design, and executive leadership development.Strategic partner consists of multiple dimensions business expert, change agent, strategic HR planner, knowledge manager and consultant, combining them to align HR systems to sponsor accomplish the organizations quite a little and mission, helping managers to get things done, and disseminating learning across the organization.Leader leading the HR function, collaborating with other functions and providing leadership to them, setting and enhancing the standards for strategic thinking and ensuring corporate governance.2.1.2 system Human Resource ManagementThere is a growing awareness of the importance of human resources as well as strategy HRM. An built-in component of organizing and staffing is SHR, which is becoming more widely lie withd as critical to developing and implementing considered responses to profit pressures (Kawalek and wastall, 2005 Lam and Schaunbroeck, 1998 Murphy and Zandvakili, 2005). As a result, .Much attention has been given to SHR in recent years (Ericksen and Dyer, 2005 Martin-Alcazar, Romero-Fernandez, and Sanchez-Gardey, 2005 Richard and Johnson, 2004).Strategy HRM is an approach to fashioning decisions on the intentions and plans of the organization in the shape of the policies, programmes and practices concerning the employment relationship, resour cing, learning and development, performance management, reward, and employee relations. According to Hendary and Pettigrew (1986), strategic HRM has four meanings1. The use of planning2. A logical approach to the design and management of personnel systems based on an employment policy and manpower strategy and often underpinned by a doctrine3. Matching HRM activities and policies to some explicit business strategy4. Seeing the people of the organization as a strategic resource for the achievement of militant advantage.SHR is concerned with the contributions HR strategies make to organizational effectiveness, and how these contributions are accomplished (Ericksen and Dyer, 2005) and involves pattern and implementing a set of internally consistent policies and practices to ensure that an ganizations human capital contributes to overall business objectives (Baird and Heshoulam, 1988 Huselid, Jackson, and Schuler, 1997 Jackson and Schuler, 1995 Richard and Johnson, 2004 Schuler and Ja ckson, 1987).The idea that HR management systems can play a significant role in creating success for organizations is not new. Porter (1985), for example, argued that HR management practices can help organizations gain matched advantage by lowering costs, increasing sources of product and service differentiation, or some combination of the two.2.1.3 Strategy Human resource vs Traditional Human ResourceStrategic HR differs from traditional HR in a number of ways1. In a traditional approach to HR, the main responsibility for people management programs rests with staff specialists in the corporate HR division. A strategic approach arranges the responsibility for managing people with the individuals close to in contact with them, their respective line managers.2. Traditional HR focuses its activities on employee relations, ensuring that employees are motivated and productive and that the organization is in compliance with all essential employment laws. Strategic HR focus to partnersh ips with internal and external.3.Transitioning From HR to SHRAlthough HR has made great strides in becoming more strategic, it has yet to richly achieve an realized role as a strategic business partner. SHR expands the traditional role of I i R from bureaucratic to strategic (Leonard, 2002). Due to the tremendous differences between traditional HR perspectives and SHR, it is not disgraceful that few organizations are successful in transitioning to SHR (Fisher, Schoenfeldt, and Shaw, 2003). For HR to constrain a strategic business partner, a bump off change in expectation is needed. Table 1 provides a discussion of the key issues or aspects of HR management and examines differences between what is required for traditional and strategic HR.Fundamental expectationLepak and Snell (1998) report that a survey of 1,050 companies indicated that HR professionals devote less than trey of their time to SHR activities. Instead, their time is spent on traditional activities. (Fisher, Sch oenfeldt, and Shaw, 2003 Creen, 2002). In short, the staple mind-set of traditional HR is very transactional in nature-strict focus on these basic activities does not bode well for perceiving HR as strategic. The most frequently cited barriers limiting HR departments to more effectively contribute to their organizations bottom line were HRs strong focus on administration and the inability to immediately measure HRs impact on the bottom line (Fegiey, 2006). This may contribute to a perception that HR merely plays an operational role and is not an important strategic partner. Therefore, SHR requires a different mind-set, one that focuses on organizational transformations, as well as transactions. SHR can play a more consultative role in organizations in which HR professionals help organizations achieve goals within the larger organizations HR system (Creen, 2002). Additionally, SHR can be more involved in transformations using change management techniques instead of rigorously focusi ng on the transactionalactivities. SHR can fulfill an important role in change management by helping upper management understand the fear of change and the negative reactions to it, as well as meliorate anxiety and prepare the work force for change. It appears that some HR professionals recognize this need (cf., Harvey and Dentn, 1999), but it is uncertain if HR is currently active to take on such roles.View of OrganizationSome skin that HR professionals suffer from a lack of vision when it comes to the big mental picture of the organization Leonard, 1998). HR management tends to hold a micro view of the organization and HR managers are viewed as somewhat insular, focusing altogether on their HR departments and on day to-day operations. In fact, many HR professionals see the HR function as a separate entity and are not involved in finding business solutionsCaudron, 2002). For example, HR planning often takes place separately from the overall strategic planning process and only at set intervals (e.g., annually). Additionally, HR planning is often used as a means of convincing top management to divvy up sufficient resources for HR rather than to enhance the organizational performance process (Lam and Schaubroeck, 1998). Although HR planning is important in its own right, even the most sophisticated HR planning processes are ineffective unless done in concert with the organizations overall planning process (David, 2005 Lam and Schaubroeck, 1998).HR should develop a broad and far-reaching vision and understanding of where the organization is headed and how it can help steer the organization in that direction (Leonard, 1998). The importance of the need for a fit between HR strategy and the overall business strategy cannot be over emphasized. HR needs to focus on recruitment alignment, selection, compensation, discipline, training, reward and recognition processes, and leadership development with the strategy and goals of the overall organization. HR must unde rstand the business and make a business contingency for its decisions, programs, and practices to receive full put onance at the planning table.Education and studyAnother area where HR needs enhancement to operate more strategic is in its formal direction and training (Meilich, 2005). First, many HR practitioners do not have formal training or direction in HR management. Recently, the Society for Human Resource Management surveyed members concerning the strategic nature of HR. Surprisingly, only 35 percent of the respondents indicated that their highest level of education blameless involved a concentration in HR (Fegley, 2006). Additionally, many HR professionals do not have business degrees, often reflecting inadequate knowledge of business principles and practices. The survey revealed that only 20 percent of the respondents indicated that their highest degree realised was a B.B.A. or MBA (Fegley, 2006). Consequently, many HR professionals may not have adequate understandin g of business concepts that are critical for acceptance as a strategic partner. HR has the potential to positively affea numerous important business activities but HR professionals need to strengthen their knowledge of HR practices and regulations as well as financial knowledge, especially in the areas of business finance, financial planning, and accounting, to do so. While a change concerning HR education and training is needed, traditional HR education should not be abandoned. Rather, its important to develop business-related capabilities to complement the technical HR capabilities that HR professionals already possess. slender SkillsAnother potential barrier to strategic HR management is the basic skill set or competencies that traditional HR professionals possess. Like lawyers, HR professionals are trained to be orderly, keep accurate employment records, complete documentation, and protect organizations from litigation (Green, 2002). Although such skills are necessary, many HR p rofessionals mistakenly see this as their only job. Senior managers need HR professionals to serve as problem solvers, conflict managers, coaches, and liaisons with considerable organizational savvy (Green, 2002). HR practitioners must re-examine their existing skills and competencies to meet these new challenges. IIR professionals may run into to develop additional skill sets such as critical thinking, strategic planning, project management, organizational analysis, consulting, and change management (Hayton, Cohen, Hume, Kaufman, and Taylor, 2005). This is quite a gear from what is traditionally expected, but it is essential for HR professionals who are working to become strategic partners.View of EmployeesTraditionally, HR views employees as heads or costs to the organization. With traditional HR serving mostly an administrative function, this attitude is somewhat understandable. However, this view is certainly not strategic in nature, and surely will become even more problemati c as the United States experiences the labor shortages that are forecasted. The tight labor market of the present and future will make recruiting and retention top priorities in most organizations (Leonard, 1998). Hnder these conditions, the margin for error is small and the costs associated with selecting the wrong employees or losing the right ones is exacerbated. Therefore, it is critical to view employees as extremely valuable sources of produaivity and innovation.TimeframeAs previously discussed, traditional HR professionals focus more closely on the transactional aspeas of their jobs. Most of these transaaional functions fulfill immediate needs of the organization and have a near-term deadline. As a result, most traditional HR practitioners are somewhat short-term in their focus. In contrast, SHR requires a long-term focus encompassing both the immediate and future needs of the organization. SHR must anticipate where the company is going to be in five to six years and help org anizations understand the impact of changing demographics and expectations of the work force (Leonard, 1998).Process/Outcome Orientationwhen it comes to the bottom line, many believe HR has generally been out to lunch (Leonard, 1998). Some HR professionals seem more concerned with processes than with results. While issues concerning processes (e.g., employee participation, fairness, due process) are important, IIR must place more emphasis on results and work to understand how internal decisions and actions affect the bottom line. To accomplish this effectively, HR needs to measure the effects of its systems and processes, and introduce their impact on the bottom tine to gain equal status in the strategic planning process. Currently, fewer than half of HR departments have an established method to measure the effectiveness of their strategies (Fegley, 2006). Through measurement, HR can help demonstrate its value to the organization while tracking how well the organization is implemen ting various policies, systems, and initiatives, and ensuring that the desired behaviors and processes support the organizations strategic goals (Pfeffer, 1995).RiskHR professionals are typically risk averse, tending to err on the side of safeguard as they comply with the myriad laws and regulations. HR is often seen as the entity that clams companies from doing the right things (Caudron, 1997) rather than helping companies achieve their goals and objectives. One can argue that extreme caution may be appropriate in some circumstances however. traditional HR can generalize this approach across its functions. More risk taking is required in todays business environment. Organizations must now respond to change faster and with greater risk while operating in an unpredictable internal and external environment (Briggs and Keogh, 1999). HR practitioners should display a willingness to try new things to meet the challenges of todays global food market (Leonard, 2002).Response to ChangeHR should accept some blame for the stumbling blocks experient in working to achieve equal status as a strategic business partner. Chief among these problems is the HR professions resistance to change (Leonard, 2002). As a group, HR practitioners have been slow to respond to changes in their jobs and in the business environment. perhaps the most critical or damaging instance is the slow acceptance of technology. Originally, numerous HR professionals viewed technology as something that would go along many of their jobs, rather than enhance their roles and responsibilities. Purthermore, some were reluctant to give up their paper-based processes (Leonard, 2002). This reluctance to accept technology damages the professions image and makes HR drawn-out to react to workplace changes, To become more strategic, HR must accept and respond to changes in the business environment. In addition to ensuring their own viability, HR professionals should show more responsiveness to change in the fu ture. HR Systems and Practices Perhaps to simplify and standardize their policies and practices, traditional HR often prefers a one-size fits-a