Changing HRM practices with firm growth

Despite common perceptions about the informality of human resource management (HRM) practices within small firms, few studies have considered how HRM practices change with firm size. This paper explores how HRM practices of small firms change as the size of the firm increases. Using data from micro, small and medium firms in Queensland, Australia, the paper reviews the recruitment and selection practices, training methods, performance appraisal and the maintenance of HR records and policies in these firms. The findings indicate a move towards hierarchical structures, increased documentation and more administrative processes as the number of employees increases. The increase is rapid initially and then occurs at a slower pace thereafter. Such changes have implications for the management of the employment relationship. The paper concludes that HRM practices in small firms cannot be portrayed by a standardised description and that management training and advice for small firms must recognise the diversity associated with this important sector of the Australian economy.