Employee Learning in Small Organizations: A Concise Guide for Small Organizations 9781032464626, 9781032464657, 9781003381815

Table of contents :
Cover
Half Title
Title Page
Copyright Page
Table of Contents
About the author
Acknowledgements
Introduction
References
Chapter 1: The political economy of skills
Skill creation systems
Reflective Case Study
Problem
Tasks
References
Chapter 2: Employee learning and impact on small firm performance
Definition of HRD
Workplace training and business performance
Managing change in the small business context and the key role of learning
Reflective Case Study
Problem
Task
References
Chapter 3: The process of learning in small firms
Nature of training in small firms
The process of employee learning in small firms
The learning needs analysis stage
The action stage
The evaluation phase
Barriers to employee learning in small enterprises
Overcoming the major barriers to learning
Reflective Case Study
Problems
Tasks
References
Chapter 4: The interlink of HRD and other HR activities
HR planning
HR recruitment
HR selection
Performance appraisal
Employee rewards
The employment relationship and employee involvement schemes
Business example on the interlink of HRD with other HR activities
Case study: ‘Leather-T’
Discussion
Reflective Case Study
Tasks
References
Chapter 5: Leadership and staff learning
Definition, importance and theories of leadership
Emotional intelligence and leadership
Leadership and informal teams
Reflective Case Study
Tasks
References
Chapter 6: International dimensions of employee learning in small firms
Cross-cultural challenges of small organizations and implications for learning
Reflective Case Study
Task
References
Conclusion
Index

Citation preview

Employee Learning in Small Organizations

Employee Learning in Small Organizations provides a clear, concise and comprehensive analysis of the theory and practice of employee learning in micro- and small enterprises. The book offers easy-to-digest theory alongside practical application advice on how to effectively engage with employee learning in small businesses. Rather than see small firms as scaled-down examples of large organizations, the book highlights the different constraints and challenges that smaller business face. Topics include the wider framework of the political economy of skills, the impact of human resource development on small firms, employee learning, and the relationship with other human resource activities. This is a short accessible guide suitable for anyone interested in employee learning and small business human resources. Dr Antonios Panagiotakopoulos is an associate professor of human ­resource management and course director for the BA in Business and HRM and MSc in HRM at Norwich Business School, University of East Anglia.

Employee Learning in Small Organizations A Concise Guide for Small Organizations Antonios Panagiotakopoulos

First published 2024 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2024 Antonios Panagiotakopoulos The right of Antonios Panagiotakopoulos to be identified as author of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-032-46462-6 (hbk) ISBN: 978-1-032-46465-7 (pbk) ISBN: 978-1-003-38181-5 (ebk) DOI: 10.4324/9781003381815 Typeset in Times New Roman by SPi Technologies India Pvt Ltd (Straive)

Contents

About the author vi Acknowledgements vii Introduction 1 1 The political economy of skills

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2 Employee learning and impact on small firm performance 14 3 The process of learning in small firms

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4 The interlink of HRD and other HR activities

37

5 Leadership and staff learning

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6 International dimensions of employee learning in small firms

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Conclusion 62 Index 65

About the author

Dr Antonios Panagiotakopoulos is an associate professor of human resource management (HRM) and course director for the BA in Business and HRM and MSc in HRM at Norwich Business School, University of East Anglia. Antonios holds a PhD in HRM from the University of Leeds, where he serves as a regular teaching and research fellow at the Centre for Employment Relations, Innovation and Change. Antonios has extensive academic, research and consulting experience both in Greece and the U.K., especially in the area of workforce skills development in the small business context. In particular, he has worked as an academic for the last 17 years teaching various ­modules such as Managing People, International HRM, Training and Development, Employee Relations, Organizational Behaviour and Research Methods to undergraduate and postgraduate students at the University of Leeds, the University of Chester, the New York College (Greece), the American College of Greece and the University of East Anglia. During his career, he has won several teaching and research awards, whilst his articles have been published in various international peer-reviewed academic journals including the International Journal of Training and Development, the Journal of Business Strategy, The Learning Organization, the Journal of Workplace Learning and others.

Acknowledgements

This book is dedicated to Maria. Her endless love, continuous encouragement and support have been vital for the completion of this effort. I further extend my gratitude to my beloved parents, my sister and her family and a few close friends for their enthusiastic support. My mentors Prof. Mark Stuart and Prof. Christopher Forde (both at Leeds University), as well as Dr Susan Sayce (University of East Anglia [UEA]) deserve my special thanks for their valuable guidance during my academic career. Also, I wish to thank deeply Dr Josie Kinge (an excellent colleague at UEA) for all the precious knowledge-sharing activities in our modules, as well as Alexander McGregor (my editor at Routledge) for believing in this effort from the very first moment. Last but not least, I would like to thank my grandmother Stamatia Kostopoulou, who was the first mentor of my life.

Aims of the book and significance As the title suggests, this book provides a concise analysis of the skills development process of employees in small organizations. It is a short textbook designed for busy small firm owners/managers that wish to facilitate staff learning in the workplace. Essentially, it seeks to outline the purpose and operation of human resource development (HRD) activities in the small business context by adopting a critical perspective. It aims to provide practitioners with an understanding not only of the potential for HRD to contribute to improved organizational performance and individual well-being at work but also why it very often fails to such positive outcomes. The ultimate aim of this book is to raise the awareness of small firm owners on how to develop human talent that will drive organizational success. Furthermore, both undergraduate and postgraduate students of a subject like Employee Development, which draws on several of the social sciences, are likely to be helped by a concise textbook that focuses on

viii Acknowledgements small establishments. The idea throughout the book is to facilitate students’ efforts to match their reading to their future job-related tasks in the wider area of employee learning. At the end of each chapter, there is a reflective case study that may help both practitioners and students understand how theory can be put into practice.

Organization of Study The present textbook is structured as follows: In the introductory chapter, the main goals and central focus of this publication are outlined and its significance is discussed. In Chapter 1, a critical review of the relevant literature is undertaken, investigating the political economy of skills to help readers understand the general context of workforce skills development. In Chapter 2, the wider social and financial impact of staff learning is extensively discussed. Several empirical studies are presented to outline the importance of skills development for individuals, organizations and society. Also, an analysis is conducted on how employee learning can help small firm owners manage change effectively in today’s turbulent business world. The process of informal learning in small establishments is discussed thoroughly in Chapter 3, whereas in Chapter 4, the interlinking of some other core human resource management activities (e.g. staff selection, performance appraisal, rewards) with employee learning is examined. In Chapter 5, the concept of leadership is explored and its importance for the effective acquisition of job-related skills is examined. Finally, in Chapter 6, the analysis moves on to explore the impact of cross-cultural differences across the world on employee informal learning. The concluding chapter summarizes the core arguments of the present publication in relation to employee learning and development.

Introduction

Across the world, the need for better-trained employees is even more acute at a time when most governments are attempting to improve the living standards of their citizens and provide employment opportunities for all. The quality of human capital plays a key role in productivity growth, but several countries in the global arena suffer from a lack of high-skilled workers and poor people management practices. Nowhere is this more acute than in the small business sector, particularly for those micro-firms (i.e. firms with less than 10 employees) in several sectors of economic activity, which experience fierce national and international competition (Panagiotakopoulos, 2020a). In several parts of the advanced world, the main problems facing such firms are widely acknowledged in political and academic circles and include low product quality, high production costs, low capital investment, organizational inadequacies, a lack of high-skilled personnel and weak supportive structures. Such problems in conjunction with competitive pressures from low-cost producers in developing countries and several other external factors (e.g. pandemic, environmental ­concerns, technological changes) have led to the closure of thousands of small firms across the world and high levels of labour displacement (­Mazzarol and Reboud, 2020). In order to survive, it is frequently argued by policy makers that the small business sector needs to develop a more careful approach to the planning and implementation of employee learning interventions. The very intense competition from foreign markets due to globalization has forced firms to build intelligent systems of labour and machines that are flexible and can quickly respond to the desires of the market. In this context, human capital constitutes a major component of business success and employee learning becomes a necessity. In short, investment in workforce skills development becomes important in terms of responding quickly to technological and product change, as well as in terms of more social concerns such as worker retention and employability. It has been noted in the literature that human resource development (HRD) theory often suggests solutions relating to workforce training DOI: 10.4324/9781003381815-1

2 Introduction which are practical only for large establishments having personnel specialists with the time and experience to implement suggested delivery. However, a number of aspects of human resource training and development activity have the potential to be of particular interest to small enterprises both because of their restricted resources and the need to be responsive to the fast-changing demands of the marketplace. Highly motivated, developing staff with effective transferable skills are more likely to be able to meet the demands of the fast-changing environment which is typically associated with small businesses (Kerr and McDougall, 1999; Panagiotakopoulos, 2009). Despite the importance of workforce training for all business organizations, the majority of the literature in the HRD field continues to emphasize large firms, even though their economic significance has declined in recent years. Little effort is made toward understanding how small enterprises approach training and generating models of effective practice. This gives a distorted picture of the industrial landscape, masking the fundamental importance of small firms as a source of employment and as contributors to a dynamic economy (Hendry et al., 1995). A whole range of authors have bemoaned the lack of attention within the HRD literature that is given to small enterprises and have pointed out that such ­under-representation seems inappropriate when the scale of this sector is considered (Matlay, 1997; Kerr and McDougall, 1999; Johnson, 2002; ­Panagiotakopoulos, 2020b). It should be pointed out that small firms are not ‘scaled-down’ versions of large firms and they face different motivations, constraints and uncertainties from their large counterparts (Westhead and Storey, 1996, p. 18). As a result, HRD practices in such firms are different from those in large establishments, and hence, these organizations should be analysed specifically in academic research. As Matlay (1997) wisely noted in the past, attempts to down-scale and forcibly fit large-scale training strategies to resource-starved small businesses may result in drawing misleading conclusions regarding the nature, extent and determinants of staff learning in small organizations. A rigorous examination of the existing literature reveals that there is not much empirical knowledge of HRD in small firms, and as a result, there is no accurate information about the nature, extent, drivers and obstacles of learning in such establishments (Panagiotakopoulos, 2020b). In the absence of reliable data, learning improvement efforts can only take place by trial and error. Against this background, this publication comes to fill this significant lacuna. The scant empirical evidence in the small business context has shown that workplace learning is deemed crucial for the ‘upskilling’ of small business employees in order to increase their ability to produce high-­quality goods and services. Moreover, it contributes significantly to small firm survival and growth by enabling small enterprises to meet skill shortage

Introduction  3 needs, it raises employee confidence, it promotes a good atmosphere at work, it increases workforce flexibility, trust and loyalty and it reduces staff turnover, as well as leads to product and service innovation (Hendry et al., 1995; Kitching and Blackburn, 2002; Panagiotakopoulos, 2011). One of the most important trends over the past decades is undeniably the growth of insecurity in the world of work (i.e., precariousness). Worldwide, an increasing number of workers suffer from precarious, insecure, uncertain and unpredictable working conditions that affect their overall well-being (Standing, 2014). Several terms have appeared in the literature that denote this fundamental economic and societal change, including the ‘gig economy’ (i.e. the increased tendency for businesses to hire independent contractors and short-term workers), zero-hours working (a term used to describe a type of employment contract between an employer and an employee whereby the employer is not obliged to provide any minimum number of working hours to the employee), remote working (a working style that allows professionals to work outside of a traditional office environment) and talent sharing (i.e., one employer ‘shares’ workers who would otherwise lose their jobs with another employer that desperately needs workers to meet unexpected business demand; Woodcock and Graham, 2020). In this context, continuous employee learning features as a key element in an individual’s effort to enhance their job security since skills development can make workers employable. To this end, it is important to explore how small firm owners can support this process, which radically affects staff motivation. In-work poverty has also emerged as another major social implication closely linked to precariousness at work. For a long time, in-work poverty was not associated with European states, and having a job used to be perceived as the most effective prevention mechanism against falling into poverty. In this context, the fact that people might suffer from poverty even though they were in full-time employment was left out of account in most research studies around poverty. This view changed gradually during the last decade, and the particular topic has drawn increasing attention as a potential consequence of recent studies, which have revealed that in-work poverty significantly affects individual mental well-being and happiness, as well as employee productivity. Hence, it has become a major concern for all policy makers across the globe (Spannagel, 2013; Panagiotakopoulos, 2019). The existing research studies indicate that the perception held around in-work poverty is that households are working poor because of their certain composition or the characteristics of their household members ignoring other factors such as the prevailing labour market and welfare state institutions and policies. The question of how ­country-level political, social or economic institutions influence in-work poverty patterns has recently started to be taken into account by research. Furthermore, the emphasis of research has been placed predominantly on

4 Introduction the welfare state measures to fight in-work poverty, whereas the contribution of employers is underplayed. One of the very few relevant studies in this area has been undertaken by Joseph Rowntree Foundation in 2014, pointing to the fact that certain human resource management (HRM) practices, including staff training, could help employers tackle in-work poverty. Similar results were reported in a later study conducted by Richards and Sang (2015) in Scotland and Panagiotakopoulos (2019) in Greece, where the authors found that if employers could provide their staff with access to affordable credit (e.g., an emergency loan to cover immediate expenses) and training, they could help them to overcome the burden of in-work poverty. It is therefore worth exploring how small-firm learning provisions can address in-work poverty. For example, if employer practices can be demonstrated to reduce employee stress, assist progression in work and boost income in ways other than through direct pay, it may be that they can have a positive impact on staff experiencing poverty or at risk of poverty. Furthermore, if a business case can be constructed for ‘making bad jobs better’, it will be possible to encourage small firm owners to tackle poverty among their workforce. Against this background, this publication explores the path through which small firm organizations can become ‘­anti-poverty employers’ by adopting employee-friendly HRM practices, including systematic performance appraisals, extensive workplace learning and the provision of various non-financial benefits that could improve the overall quality of working life for employees. The need for an adaptable workforce is here to stay. The new employment landscape forces all organizations to rethink traditional employee development practices and adopt new talent management practices. The way employees are selected, trained, appraised and motivated in this new business environment differs radically from the past decades. Hence, the present publication is an attempt to present new ways of managing and developing talent in this new era with a special reference to small organizations that continue to face several constraints and huge challenges in this unstable business environment. Small firms do play a vital role in the economic growth of most economies around the globe, so their study acquires a unique urgency. Talent development is affected by a range of internal and external factors including corporate culture, chosen business strategy, selection and reward systems, labour market collective organizations, national educational systems, international competition, technological advances, environmental changes and so on. All these variables should be taken into account when discussing employee learning (Ashton and Green, 1996; Panagiotakopoulos, 2020b). Against this backdrop, this book adopts a holistic approach to HRD interventions and addresses some fundamental concerns on the importance of talent development to small firm strategies.

Introduction  5 It further informs small firm owners on how to create tailor-made and cost-effective learning opportunities for their employees, thus remaining competitive in both the domestic and international markets. The present effort breaks new ground in various respects. First, it helps readers understand how HRD interventions in small firms can contribute to the economic development of several countries across the world. Second, it examines all the key factors that determine the level and intensity of training in small firms. Existing studies around the forces that trigger training have concentrated on large organizations. However, this publication operates from the premise that small firms are not microcosms of large firms, and as such require separate treatment. It is inappropriate and inadequate simply to apply large-firm logic to small organizations. Hence, this study attempts to deepen our knowledge about the reasons why some small firms train and others do not, as well as understand why some small organizations do get positive organizational outcomes from workforce skills development and others do not. Finally, the study explores how the process of talent development in the small business context could be further supported and enhanced with the contribution of other HR core practices such as selection, performance appraisal, rewards and employee relations.

Key points of the chapter The global business environment has become very unpredictable. Frequent changes at the operational and strategic levels are needed by all types of organizations in order to respond effectively to the numerous challenges posed by the external environment and achieve competitive advantage in their markets. The need is even greater for small enterprises that suffer from resource poverty and cannot cope easily with unexpected external events. Employee learning remains one of the critical factors for smallfirm success. Small organizations need to unleash their innovative capacity to survive and stay ahead of the competition. Yet, innovation cannot be achieved on the basis of low-skilled labour. Therefore, skills development acquires a unique urgency.

References Ashton, D. and F. Green (1996) Education, training and the global economy. Cheltenham: Edward Elgar. Hendry, C., Arthur, M. B. and Jones, A. M. (1995) Strategy through people: adaptation and learning in the small-medium enterprise. London: Routledge.

6 Introduction Johnson, S. (2002) ‘Lifelong learning and SMEs: issues for research and policy’, Journal of Small Business and Enterprise Development, vol. 9, no. 3, pp. 285–295. Joseph Rowntree Foundation (2014) Rewarding work for low-paid workers. York: JRF Publications. Kerr, A. and M. McDougall (1999) ‘The small business of developing people’, International Small Business Journal, vol. 17, no. 2, pp. 65–74. Kitching, J. and R. Blackburn (2002) The nature of training and motivation to train in small firms. Department for Education and Skills (DfES), Research report No 330. Nottingham: DfES publications. Matlay, H. (1997) ‘The paradox of training in the small business sector of the British economy’, Journal of Vocational Education and Training, vol. 49, no. 4, pp. 573–589. Mazzarol, T. and S. Reboud (2020) Small business management. 4th ed. Singapore: Springer Publications. Panagiotakopoulos, A (2009) ‘An empirical investigation of employee training and development in Greek manufacturing SMES’, PhD thesis, University of Leeds. Panagiotakopoulos, A. (2011) ‘Workplace learning and its organizational benefits for small enterprises: evidence from Greek industrial firms’, The Learning Organization, vol. 18, no. 5, pp. 364–374. Panagiotakopoulos, A. (2019) ‘In-work poverty: reversing a trend through business commitment’, Journal of Business Strategy, vol. 40, no. 5, pp. 3–11. Panagiotakopoulos, A. (2020a) ‘Exploring the link between management training and organizational performance in the small business context’, Journal of Workplace Learning, vol. 32, no. 4, pp. 245–257. Panagiotakopoulos, A. (2020b) Effective workforce development: a concise guide for HR and line managers. London: Routledge Publications. Richards, J. and K. Sang (2015) ‘In-work poverty: lessons for employers and HR practictioners’, Paper presented at the CIPD conference for applied research, London, 8th December 2015. Spannagel, D. (2013) ‘In-work poverty in Europe: extent, structure and causal mechanisms’, COPE project. Luxembourg: European Commission Publications. Standing, G. (2014) The precariat: the new dangerous class. London: Bloomsbury Academic. Westhead, P. and D. Storey (1996) ‘Management training and small firm performance: why is the link so weak?’, International Small Business Journal, vol. 14, no. 4, pp. 13–24. Woodcock, J. and M. Graham (2020) The gig economy: a critical introduction. Cambridge: Polity Press.

1

The political economy of skills

Skill creation systems The intensified international competition and the rapid technological progress, which, as it spreads through industry radically upgrades the skill requirements, have made the question of how nations organize and adapt their skill formation policies to the vagaries of twenty-first-century global capitalism an urgent research question. Since the 1990s, it has witnessed an almost universal policy consensus emerging across the advanced capitalist world stressing the pursuit of a high-skill, knowledge-based economy and learning society (Crouch et al., 1999). It has been frequently argued in the HRM literature that the challenges posed by several low-cost organizations across the world can be met only if firms in advanced countries are able to produce sophisticated, high-­ quality products that are hard to imitate. However, productivity gains and innovation cannot be achieved on the basis of low-skilled work. Hence, employees in the advanced world need to possess a high level of skills, which will differentiate them from the knowledge of workers in less developed countries. As several authors have previously stressed, in the global economy, capital and finance are increasingly easily transferred. It is the human resource which therefore becomes the major difference between competing economies (Muhlemeyer and Clarke, 1997; Brown, 1999). When consumer preferences and technologies are changing rapidly, adaptability is crucial for keeping labour employed and maintaining competitiveness. Therefore, employee training becomes essential to equip individuals with the skills required to make themselves more productive and adaptable. Beyond that, without a workforce that is continuously acquiring new skills, managers are not able to introduce more sophisticated and productive machines, and thus, it becomes difficult to reap most of  the returns from technological advances (Booth and Snower, 1996; ­Stavrou-Costea, 2005).

DOI: 10.4324/9781003381815-2

8  The political economy of skills It should be pointed out that although a new production system has emerged in many countries based on high quality, quick response and high value-added product strategies, which stands in contrast with the standardized low value-added production system that dominated the twentieth century, yet a significant number of firms across various economic sectors still choose to compete primarily on the basis of low-priced, standardized goods and services and a predominantly low-skill, low-wage and casualized workforce. It remains debatable whether organizations have only one viable ‘high-value’ route to competitiveness and profitability or whether the ‘low-cost’ pathway remains a viable option for many of them. As it has been argued in the past, delocalization of production to developing countries in order to reduce costs can be the preferred business strategy for many organizations operating in labour-intensive sectors in advanced capitalist economies (Keep and Mayhew, 1999). Despite the existence of alternative forms of competition, it has been stressed by several academics that organizations in the more advanced capitalist states need to invest in innovation to face the fierce competition from low-cost producers and achieve an above-average return (Green, 1998; Mayhew and Neely, 2006). For example, increased labour costs in many labour-intensive sectors of the European industry have prevented small and large firms from competing on the basis of low-quality, lowcost goods. In contrast, new technologies promise lucrative business applications, and thus, firms are being encouraged to innovate. It has been shown that the most successful organizations in such sectors (e.g. textiles, clothing) are those companies that rely on unique brands. In simple terms, the evidence suggests that the most successful small enterprises in most sectors have been those firms that rely on innovation and the creation of unique brands (i.e. creation of niche markets). In such markets, customers have a distinct set of needs, and they are willing to pay a premium price to the firm that best satisfies their needs. As a result, firms have a great potential for profit and growth (Panagiotakopoulos, 2015). Furthermore, the ‘high skills route’ features as a more desirable path for policy makers given the social and distributional outcomes since along the ‘high-skills path’ the fruits of economic success are widely distributed (i.e. most workers gain higher wages and skills in the context of a ‘learning society’), whereas along the ‘low-skills path’ enterprises may continue to prosper but economic success is confined to elite sections of the workforce (Keep et al., 2006). Again this background, many policy makers have viewed human resource development as the answer to a range of economic and social problems ranging from competitiveness, productivity and economic growth to unemployment and social exclusion. Across the developed world and in many developing countries too, the thought is paramount that the way to economic growth is via skill formation to raise labour productivity and

The political economy of skills  9 hence average living standards. The search for better institutions for fostering skill formation has preoccupied policy makers (Panagiotakopoulos, 2020). However, at the same time, there has been a broad range of criticisms about the limitations of such an approach, which rests on the simplistic notion of human capital theory and an emphasis on a very narrow set of supply-side interventions. A number of studies have recognized that the market for human resource training is located in a broader social and economic system and that change in the former must be viewed in relation to its impact on the latter (Finegold and Soskice, 1988; Keep and Mayhew, 1999). Finegold and Soskice (1988), for example, several decades ago argued that change in just one part of the socio-economic system is unlikely to be successful if the rest of the system remains the same. They showed this by reference to the ‘low-skill equilibrium’. In this situation, a number of mutually reinforcing mechanisms, emanating from a variety of sources, constrain the economy to a low skill level. Change in any one of these, which is aimed at increasing the level of skill formation will not succeed because the other forces, many of which operate outside the training market, will mitigate its effect. They therefore pointed to a broad approach to policy change rather than one focused on eradicating perceived imperfections within the training market. Several other studies attempted to explore and understand the relationship between social institutions, production strategies, skill formation and economic competitiveness, particularly in a comparative context (Ashton and Green, 1996). Starting from a rejection of human capital theory, they stressed the need for a holistic and multi-disciplinary approach to theorizing skill formation, emphasizing both the demand for and supply of skills. Attention was then focused on the institutional linkages between government agencies, the education and training system, labour market regulations, employment structures and systems of finance and industrial relations that help shape the skill trajectory of a particular country. The issue of workplace industrial relations also remained largely absent from the skills debate. Many policies did not directly deal with what happened at the workplace and could not be expected to lead automatically to a high-quality working environment. Employers, for example, appeared to select a high-quality product route but with the vast majority of employees undertaking a narrow range of tasks, with limited job autonomy and little real involvement in work (Grugulis, 2003). The trend in the skills literature is often to assume that firms only need to move ‘up-market’, and they will automatically require a higher-skilled workforce. A high-quality or high-value-added product may enable the use of such a workforce, but there is no guarantee. Lloyd and Payne (2002) have pointed out that the power relations within the firm, in conjunction

10  The political economy of skills with wider institutional constraints, play a key role in the development of forms of work organization and skill levels. Locating issues of class, conflict and power at the centre of the skills debate is crucial for any project that realistically aims to shift the economy onto some high-skills, highwage trajectory. The preceding analysis underscores the necessity of a high-skill strategy and the need to maximize the role of high-productivity labour if living standards in advanced countries are to be sustained and improved. As it has been repeatedly argued by most commentators in this field, the challenges posed by the rise of low-cost producers in other parts of the world can be met only if labour in advanced countries has a high level of skills, which will differentiate it from the capacities of workers in the newly industrializing countries. Ashton and Green (1996, p. 191) have added that the high-skill route emphasizes the role of education and training as a powerful means for ensuring the full realization of human capabilities and offers ‘a substantial expansion of freedoms that accrue to a well-educated and highly trained population’. Moreover, education has a vital role to play towards creating a more sophisticated consumer base across the world with an emphasis on product/service quality. Furthermore, Finegold (1991) has stressed that it is in the interest of individuals, employers and policymakers to strive for a high-skill equilibrium since individuals can ensure higher future wages and more rewarding jobs, employers will be enabled to maintain and increase their competitive edge through improved quality, flexibility and innovation while the government policy makers can improve international competitiveness without a decline in the living standards of the average voter. The available evidence further suggests that there is a need for a holistic approach to theorizing skill formation, emphasizing both the demand for and supply of skills. A skilled and well-educated workforce is a vital ingredient of any advanced economy, but equally important is the fact that there are enough skilled jobs for workers to do. Attention should focus on the institutional connections between government agencies, the education and training system, labour market regulations, systems of finance and industrial relations that help shape the skill trajectory of firms. This suggests that any governmental and employer policies should encompass a wider set of measures that affect all the main variables involved in the socio-economic system in order to support a ‘high-skills’ path.

Reflective Case Study ‘Bank U’ is a leading player in the U.K. retail banking sector with a market share of about 20%. The bank’s business strategy is to aggressively grow its call centre and internet businesses while shrinking the branch

The political economy of skills  11 network. It intends to market itself based on an image of quality (which it hopes will be backed up by the service provided to customers) with affordable costs. It has rejected the option of offshoring call centre operations because of concerns that this would compromise the image of quality that Bank U regards as a key part of its brand. ‘Loan Call’ is the telephone banking arm of the personal loans division of Bank U. Customers who contact the call centre wish to either apply for a personal loan (sales calls) or have a query about an existing loan (administration calls). Sales calls and administration calls come through on different telephone numbers and are dealt with by separate groups of staff. Customers are credit-scored, and loans are only made to customers who have a satisfactory credit rating. The call centre is open 7  days, from 9 a.m. to 9 p.m. There are no unsociable hours premium, and 6 workers were specially recruited to be fully flexible (getting a 20% top-up on their salary). Shifts are fully rotational. In all, 50 staff work at Loan Call centre mostly as customer service advisors (CSAs). There are also 7 team leaders and 1 call centre manager. The ratio of women/men is 70/30. All employees work full-time. The average age of staff is 25. CSAs get the national minimum wage and a 2-day induction training around their tasks. All calls are scripted and recorded. A large LED display on the wall shows the number of calls in queue, time taken per call, sales enquiries to sales ratio and service level. CSAs are grouped into teams but because of shift work and high turnover, most do not actually sit with their teams or indeed know the other team members. The team leader, who supervises 6 CSAs, is responsible for coaching, performance management, return to work interviews, scheduling of holidays and so on, as well as working on the phones during busy periods. They are mainly responsible for ensuring that CSAs meet their targets in terms of the number of calls taken and the sales enquiries converted to sales. Loan Call has reached its target of 80% of calls to be answered in 20 seconds. However, sales targets have proved hard to meet. In terms of employee involvement, team meetings are supposed to take place twice weekly, with CSAs scheduled to be off the phones, but in practice, these often do not happen because of the volume of work. A monthly newsletter is produced to inform employees about the current situation of the company.

Problem During the last 6 months, the staff turnover rate has dramatically increased. Exit interviews are carried out which show that morale is low and occupational stress very high. There is a lot of 1-day absence at Loan Call as well.

12  The political economy of skills Tasks 1 What are the key HR issues that the senior management team should immediately address at the Loan Call centre? 2 How can employee learning be used to try to improve performance at the call centre?

Key points of the chapter The political economy of skills has moved on significantly from the limiting assumptions of human capital theory, that improving the supply of skills will create its own demand and solve the problems of low-skill economies. Recent research has pointed to the need for a more holistic, ‘societal’ approach to skill formation involving the institutional linkages between government agencies, the education and training system, labour market regulation, employment structures and systems of finance and industrial relations. A number of key societal conditions are necessary for the attainment of an ideal-type high-skills society. Among the key conditions feature a value-adding rather than a cost-cutting approach to productivity and competitiveness, the continuous development and investment in human capital and high levels of trust between employers and workers, which are embedded in the institutional fabric of society. The key argument that emerges from the discussion in this chapter is that the relationship between skill supply and demand is not a mechanistic one. This means that an increase in the skill levels of the working population does not automatically affect employer demand for a skilled workforce.

References Ashton, D. and F. Green (1996) Education, training and the global economy. Cheltenham: Edward Elgar. Booth, A. L. and D. J. Snower (1996) Acquiring skills. Cambridge: Cambridge University Press. Brown, P. (1999) ‘Globalisation and the political economy of high-skills’, Journal of Education and Work, vol. 12, no. 3, pp. 233–251. Crouch, C., Finegold, D. and Sako, M. (1999) Are skills the answer? Oxford: Oxford University Press. Finegold, D. (1991) ‘Institutional incentives and skill creation: preconditions for a high-skill equilibrium’, in Ryan, P. (ed.) International comparisons of vocational education and training for intermediate skills, pp. 93–118. London: The Falmer Press.

The political economy of skills  13 Finegold, D. and D. Soskice (1988) ‘The failure of British training: analysis and prescription’, Oxford Review of Economic Policy, vol. 4, no. 3, pp. 21–53. Green, F. (1998) ‘Securing commitment to skill formation policies’, New Political Economy, vol. 3, no. 1, pp. 134–139. Grugulis, I. (2003) ‘Putting skills to work: learning and employment at the start of the century’, Human Resource Management Journal, vol. 13, no. 2, pp. 3–12. Keep, E. and K. Mayhew (1999) ‘The assessment: knowledge, skills and competitiveness’, Oxford Review of Economic Policy, vol. 15, no. 1, pp. 1–15. Keep, E., Mayhew, K. and Payne, J. (2006) ‘From skills revolution to productivity miracle – not as easy as it sounds?’, Oxford Review of Economic Policy, vol. 22, no. 4, pp. 539–559. Lloyd, C. and J. Payne (2002) ‘Developing a political economy of skill’, Journal of Education and Work, vol. 15, no. 4, pp. 364–390. Mayhew, K. and A. Neely (2006) ‘Improving productivity – opening the black box’, Oxford Review of Economic Policy, vol. 22, no. 4, pp. 445–456. Muhlemeyer, P. and M. Clarke (1997) ‘The competitive factor: training and development as a strategic management task’, Journal of Workplace Learning, vol. 9, no. 1, pp. 4–11. Panagiotakopoulos, A. (2015) ‘Creating a high-skills society during recession: issues for policy makers’, International Journal of Training and Development, vol. 19, no. 4, pp. 253–269. Panagiotakopoulos, A. (2020) Effective workforce development: a concise guide for HR and line managers. London: Routledge Publications. Stavrou-Costea, E. (2005) ‘The challenges of human resource management towards organisational effectiveness: a comparative study in Southern EU’, Journal of European Industrial Training, vol. 29, no. 2, pp. 112–134.

2

Employee learning and impact on small firm performance

Definition of HRD Although several studies in the past tried to investigate the term skill, there is a lack of consensus about what the term means. The term skill frequently includes a wide range of soft, generic and transferable attributes, usually indistinguishable from personal characteristics, which in the past would never have been conceived of as skills at all. In other words, the notion of skill is now both broader and more conceptually equivocal than it has ever been. However, a basic consensus around ‘skill’ has emerged. Specifically, it can be argued that ‘skill’ includes the internalized capacities resident in the individual worker that give them control over the labour process. It is also socially constructed, which means that class, gender and race may affect how employee skills are being valued within a society (Grugulis et al., 2004). Human resource development is defined broadly as a set of activities designed by an organization to provide its members with the opportunities to learn the necessary skills to meet existing job requirements and prepare them for future job responsibilities. To put it simply, employee training comprises the procedures that seek to provide learning activities to enhance the skills, knowledge and capabilities of people, teams and the organization so that there is a change in action to achieve the desired outcomes. At the heart of training is human learning. The overall aim of workforce training is to ensure that the organization has the quality of people it needs to achieve its objectives for improved performance and growth (Panagiotakopoulos, 2020b). After a job placement, many employees may not have the ability to perform well in their new job. Often, they must be trained in the duties they are expected to do. Even if they are experienced workers, they must be trained in order to learn about the organization and its culture, be introduced to workmates, enhance their existing skills and improve their performance. In addition, existing employees need to be trained in order to achieve and sustain superior performance. However, it should be

DOI: 10.4324/9781003381815-3

Employee learning and impact on small firm performance  15 pointed out that training does more than just prepare employees to perform their jobs effectively. Training for special purposes (e.g. stress management, adjusting to staff diversity) is also required in order to help employees become aware of and cope with such issues. Moreover, the long-term development of human resources reduces the company’s dependence on hiring new workers. If employees are trained and developed properly, then new job openings are likely to be filled internally. Furthermore, promotions and transfers facilitate the achievement of employee career goals and employees, in turn, feel a greater commitment to the firm and work towards the achievement of strategic business objectives (i.e. their motivation is enhanced; Noe, 2019). Last but not least, employee training has a vital social role to play. In other words, workforce skills development enables employees to develop a range of ‘transferable’ skills and, thus, improve their future employment prospects (i.e. employability). Continuous employee learning can provide workers with a sense of ‘job security’ in today’s uncertain business environment since it makes them employable. Also, as it was stressed in the introduction of this publication, it can be one of the mechanisms through which employees can be protected from in-work poverty (Panagiotakopoulos, 2019).

Workplace training and business performance The workplace is enormously significant as a site of learning, both for accessing formal learning opportunities and for many informal learning opportunities which result from the nature of work and from social interaction with work groups. Effective training policies are fundamental to economic growth and productivity. In several major global surveys, human resource development has been found to be the most important human resources (HR) activity in all countries concerned. Although the connections between skill development and competitiveness on the one hand and productivity and prosperity on the other, are unclear, continuing training is increasingly recognized as contributing to productivity and to the management of change through the adaptation and extension of skills, on one hand, and in facilitating new patterns of work, on the other (Rainbird, 2000; Panagiotakopoulos, 2009). A number of empirical studies have found that training has a positive effect on productivity, quality and staff turnover (DeSimone et al., 2002). These studies have stressed the fact that the neglect of human resource training activity can hamper organizational performance. In attention to skills development thus is found to hamper organizational performance in a number of ways, including limiting the take-up and use of new technology, lengthening delivery times, increasing scrap levels and reducing the ability of the organization to meet increases in demand

16  Employee learning and impact on small firm performance and to exploit market opportunities. For example, investments in new technology usually demand training interventions since there are various task and skill implications of introducing new equipment. Employee training enables workers to make more effective use of the capital equipment they work with. In the small business context specifically, all the available research studies have pointed to the importance of workforce skills development for small firms’ success. In particular, the existing empirical data indicate that employee learning can help staff: reduce errors in the production process, become familiar with advanced technology (i.e. it increases their adaptability to new business processes) and improve their employability. Moreover, it leads to product and service innovation, as well as helps enterprises gain a competitive advantage in their niche markets (Kerr and McDougall, 1999; Johnson, 2002; Panagiotakopoulos, 2011). However, as Patton et al. (2000) have stressed, the axiomatic proposition that training enhances business performance remains difficult to demonstrate. The range of variables in the relationship between training and organizational performance, including the external and internal context of the firms (e.g. the nature of financial markets, competitive strategy, organizational structures, labour market deregulation, management and control of the workforce, power relations between managers and workers and between different groups of workers), the nature and extent of training interventions, as well as the complexities associated with isolating the impact of training on performance, make determining extremely difficult a definite answer to the question of payback on training and the establishment of cause–effect relationships. It is still far from established that training represents the key determinant of an organization’s financial performance. It is virtually impossible to establish a direct association or causal connection between training and profitability, for example. However, it is tentatively suggested in the existing literature that, instead of positive benefits accruing to organizations which train, it is more feasible to demonstrate that organizational performance can be held back through a neglect of training activity. In particular, a lack of emphasis on workforce skills development has been found to hamper organizational performance in a number of ways, including limiting the take-up and use of new technology, lengthening delivery times, increasing error levels and reducing the ability of the organization to meet increases in demand and to exploit market opportunities (Bakhshi et al., 2017). Recent research evidence by the author also demonstrates that there is a positive relationship between owner/management training and the ­bottom-line performance of a small firm. In particular, the findings reveal that those small firm owners/managers who have completed a formal learning intervention do achieve positive organizational outcomes (e.g. increased staff loyalty) compared to poorly trained owners. The latter seem

Employee learning and impact on small firm performance  17 to suffer from high staff turnover and low levels of staff motivation. Previous studies in this area have also shown that owner/managerial incompetence is the key factor for small firm failure (Panagiotakopoulos, 2020b). The personal and wider social benefits, which result from increased training activity, should be added to the preceding list around the significance of staff learning. These benefits include increased job security, enhanced social status, improved employee morale, greater job satisfaction and a higher standard of living (Harrison, 2002; Panagiotakopoulos, 2020a). For example, low pay is an important part of the explanation for in-work poverty. Low pay is mostly concentrated in a few labour-intensive sectors of the economy and is especially prevalent in relatively small, private-sector service provider organizations operating in either very price-competitive markets (Panagiotakopoulos, 2016, 2019). Recent research by the author has revealed that low-paying firms can become ‘anti-poverty employers’ by adopting employee-friendly HR practices including workplace training and development, flexible working and the provision of various non-wage fringe benefits that could improve the overall quality of working life for low-paid employees. The evidence shows that those small firms that can provide increased opportunities for staff learning do help their employees to secure advanced job posts with a better salary. In return, the organizations get back increased productivity and less absenteeism. Overall, the existing studies indicate that all the small enterprises, which can support the working poor using various training interventions seem to enhance significantly staff motivation and reduce employee stress, which leads to improved firm performance (Panagiotakopoulos, 2020a). The preceding analysis is closely linked to the concept of ‘good work’ (Isles, 2010). For employees, ‘good work’ concerns the development of skills; choice, flexibility and control over working hours and the pace of work; trust, communication and the ability to have a say in decisions that affect them; and a balance between effort and reward. The concept of ‘good work’ is closely related to business ethics (corporate social responsibility), a term popularly equated with business philanthropy but more accurately described as all of a company’s impacts on society and the need to deal responsibly with the impacts on each group of stakeholders. A strong record of corporate social responsibility improves an organization’s image in both product and labour markets – aiding recruitment, retention and customer loyalty (Panagiotakopoulos, 2019).

Managing change in the small business context and the key role of learning This last section examines the process of change in the small business context and provides guidance to firm owners on how to manage uncertainty based on effective learning provisions. It is undeniable that continuous

18  Employee learning and impact on small firm performance change has become the norm in the contemporary business world, so small firm owners need to be ready to lead change effectively. Several variables may force small firms to introduce a number of operational or/and strategic changes in order to survive and remain competitive, such as unexpected external events (e.g. pandemic, environmental degradation), competitor behaviour, changing customer preferences, technological advances, regulations on product/service quality and so on. Normally, most owners adopt a responsive approach when it comes to managing change (i.e. they take action when certain problems arise) due to a lack of knowledge and resources to do proper forecasting. However, it is important to scan regularly both the external and internal business environment in order to adopt a proactive approach. Learning has a critical role to play in this respect since it can prepare employees for any forthcoming changes (i.e. it makes workers adaptable). Although the list of theoretical models in the existing change management literature is quite big, most models focus on the following four core stages (Carnall and Todnem, 2014): 1 Identify the need for change. In this initial stage, small firm owners need to identify any performance gaps, generate scenarios for anticipated changes in the internal and external environment of the organization and vision the future desired state. During that stage, small firm owners should review the planned strategic goals and monitor the actual organizational performance to see if the organization met its goals. At this stage, several quantitative and qualitative indicators should be monitored (e.g. productivity, sales, staff absenteeism rate, error rates, number of faulty products, customer satisfaction, etc.) to evaluate if there is any significant discrepancy from the initially planned objectives. It is important for small firm owners to place equal emphasis on qualitative performance indicators (i.e. how a goal has been achieved). Furthermore, an extensive analysis should be conducted on the external and internal environment of the organization to identify any key factors that may act as drivers for change. 2 Explore resources for change. In this stage, small firm owners/managers should attempt to identify various obstacles to change and examine ways to overcome them. For example, a common barrier to organizational change is employee resistance, which is normally caused by the fear of the unknown, the fear of financial loss, a threat to job security and the loss of existing social status, as well as loss of job autonomy. At this stage, it is also crucial for owners/managers to evaluate whether the firm has the necessary resources (physical, financial, human) or not to implement the required change, as well as assess the employee learning implications of the proposed change.

Employee learning and impact on small firm performance  19 3 Implement change. In this stage, owners/managers should choose proper learning interventions to facilitate organizational changes. It is the stage during which owners/managers should provide a strong motive for change and help employees abandon old behaviours and adopt new ones. This stage normally involves the following steps: (a) scheduled staff meetings of the owner with existing employees to inform them about the nature of change, reasons for change and impact of change on their jobs in order to reduce their fear of the unknown; (b) increased informal staff learning provision to enable employees to develop the new gamut of skills that may be required by the organizational changes; (c) employee participation and involvement in change to feel that they are actively involved and go along with it; and (d) provision of suitable rewards (either monetary or non-monetary) to encourage employees to support with much enthusiasm the proposed changes (e.g. the provision of a flexible work schedule in return for changing work patterns). At this point of analysis, it is important to point out that those firms that managed to survive during COVID-19 were the firms that had an open-communication policy with their staff (i.e. regular updates on the pandemic, continuous advice, support for mental well-being, updates on company performance, etc.) and provided extensive training to their employees in order to cope with the emerging new working practices (e.g. information technology [IT] training to support extensive teleworking). 4 Evaluate the outcome of change. In this final change, small firm owners should monitor a number of key performance indicators (e.g. productivity, rate of errors, absenteeism, customer complaints, faulty products, etc.) before and after any organizational change to determine if the change actually had a positive impact on the overall performance of the firm. The preceding brief analysis indicates that staff resistance to change is a common characteristic of most employees owing to the fear of the unknown. In this context, effective communication, training and negotiation through the provision of rewards are vital elements in the process of managing change effectively. The major challenge for small firm owners is to gain employee commitment during organizational changes instead of forcing through the proposed change by virtue of power. This requires from owners the ability to understand all the employee concerns. Although there are cases where a ‘forcing’ strategy might look like a desirable approach to implement change (e.g. when speed to organizational change is key such as, during a sudden financial crisis), still it can be risky in the long term because it can make employees feel frustrated and disappointed about owner/management attitude, thus leaving the firm as soon as alternative job opportunities become available.

20  Employee learning and impact on small firm performance

Reflective Case Study ‘Microland - A’ is a small high-tech enterprise in the U.S. that produces payroll software programs for large corporations. It is run by a very enthusiastic and experienced owner. The company employs a general director, 10 full-time software design engineers (i.e. they design the programs working individually at their offices) and 3 full-time IT consultants (i.e. they sell the programs to the end users, they train them on how to use the programs and they provide after-sales support and advice). All design engineers and consultants are well educated, whereas all consultants have a strong background and expertise in software engineering. The rewards are very generous within the firm (above the market average) with consultants getting a higher wage than software design engineers (i.e. $400 per month extra). In terms of leadership, the owner has adopted a democratic style and staff participation in decision-making is highly encouraged. In terms of staff training, there are frequent formal seminars for both consultants and designers in order to further develop their technical skills, whereas informal learning is facilitated through extensive daily employee collaboration. Performance appraisal is conducted once a year by the general director based on a list of predetermined quantitative criteria (number of sales, number of programs developed, etc.). Each year, the best software designer (according to performance evaluation) is given the opportunity to get promoted to a consultant role (thus earning a higher salary), whereas the best consultant gets a holiday package and a generous bonus.

Problem During the last year, designers’ productivity has declined significantly, and this has caused serious problems for the firm.

Task Based on case study data, discuss the impact of employee learning on company performance. Is staff learning at the heart of the business problems that the company is currently facing? Are there any other key factors that may affect organizational performance?

Key points of the chapter This chapter has explored extensively the benefits of employee learning for individuals, organizations and society in general. The increasing interest that firms have been showing over recent years in

Employee learning and impact on small firm performance  21 employees and in practices related to their management, especially training, can be explained by the general acceptance of the fact that human resources and organizational knowledge are, at present, two of the main sources of sustainable competitive advantage for the company. Although the contribution of staff learning to goal achievement is difficult to pinpoint due to the large number of variables affecting business performance, a number of research efforts have concluded that increased learning activity positively affects productivity, service quality and labour turnover. It further leads to reduced errors in production, reduced absenteeism, enhanced motivation and job satisfaction, increased staff confidence and job security. The importance of learning is not confined to financial terms. A series of empirical studies have shown that increased employee learning in the small business context has a critical social role to play since it can be a core variable in the fight against in-work ­poverty. Moreover, the role of learning is crucial when it comes to managing change since it can ensure that employees have the set of new skills required to support the proposed change, as well as the required confidence to develop new behaviours and adapt to new circumstances.

References Bakhshi, H., Downing, J., Osborne, M. and Schneider, P. (2017) The future of skills: employment in 2030. London: Pearson and Nesta. Carnall, C. and R. Todnem (2014) Managing change in organizations. 6th ed. Essex: Pearson Education. DeSimone, R. L., Werner, J. M. and Harris D. M. (2002) Human resource development. 3rd ed. San Diego.: Harcourt College Publishers. Grugulis, I., Warhurst, C. and Keep, E. (2004) ‘What’s happening to skill?’, in Warhurst, C., Grugulis, I. and Keep, E. (eds.) The skills that matter, pp. 1–18. Hampshire: Palgrave Macmillan. Harrison, R. (2002) Learning and development. 3rd ed. London: Chartered Institute of Personnel and Development (CIPD). Isles, N. (2010) The good work guide: how to make organizations fairer and more effective. London: Taylor and Francis. Johnson, S. (2002) ‘Lifelong learning and SMEs: issues for research and policy’, Journal of Small Business and Enterprise Development, vol. 9, no. 3, pp. 285–295. Kerr, A. and M. McDougall (1999) ‘The small business of developing people’, International Small Business Journal, vol. 17, no. 2., pp. 65–74. Noe, R. (2019) Employee training and development. 8th ed. New York: McGraw-Hill.

22  Employee learning and impact on small firm performance Panagiotakopoulos, A. (2009) ‘An empirical investigation of employee training and development in Greek manufacturing SMES’, PhD thesis, University of Leeds. Panagiotakopoulos, A. (2011) ‘Workplace learning and its organizational benefits for small enterprises: evidence from Greek industrial firms’, The Learning ­Organization, vol. 18, no. 5, pp. 364–374. Panagiotakopoulos, A. (2016) A short guide to people management for HR and line managers. London: Routledge Publications. Panagiotakopoulos, A. (2019) ‘In-work poverty: reversing a trend through business commitment’, Journal of Business Strategy, vol. 40, no. 5, pp. 3–11. Panagiotakopoulos, A. (2020a) ‘Exploring the link between management training and organizational performance in the small business context’, Journal of Workplace Learning, vol. 32, no. 4, pp. 245–257. Panagiotakopoulos, A. (2020b) Effective workforce development: a concise guide for HR and line managers. London: Routledge Publications. Patton, D., Marlow, S. and Hannon, P. (2000) ‘The relationship between training and small firm performance; research frameworks and lost quests’, International Small Business Journal, vol. 19, no. 1, pp. 11–27. Rainbird, H. (2000) ‘Training in the workplace and workplace learning: introduction’, in Rainbird, H. (ed.) Training in the Workplace. Basingstoke: MacMillan Press.

3

The process of learning in small firms

Nature of training in small firms In the HRD literature, two major types of training have been identified in order to describe the ways organizations choose to develop employee skills, that is formal and informal training. Formal training involves all the planned learning interventions that have predetermined learning objectives, scheduled delivery, systematic evaluation of learning outcomes and accreditation of learning. By contrast, informal training involves all the learning interventions that are usually not planned and take place on an ad hoc basis. A series of research studies conducted during the last two decades have confirmed that small firms are less likely than larger organizations to provide any sort of formal training intervention for their staff (Kitching and Blackburn, 2002; Panagiotakopoulos, 2011). All these studies have revealed that much learning in small enterprises takes on an informal character, with an emphasis on subtle forms of influence and guidance from employers and others at the workplace rather than planned forms of instruction. Training is often incorporated within routine working practices and is not an additional activity. Moreover, the findings have shown that most training is undertaken at the workplace because it is cost-effective, as well as can be tailored to suit the specific needs of worker and employer (i.e. it can be delivered at times and in formats that are convenient to both sides). A common view in the literature suggests that training provision is positively correlated with firm size. However, this reflects a view that training is defined as purely formal and mainly provided by external training vendors. However, it should be pointed out that this reflects a very narrow definition of training. Widening the definition to include less-formal ways of learning reduces the gap between small and larger businesses. As Johnson (2002) argued several years ago, the extent to which there is a problem of limited learning activity in small firms depends on the definitions and

DOI: 10.4324/9781003381815-4

24  The process of learning in small firms measures that are being used. The more formal and quantitative the measure, the more negative is the picture painted. Conversely, where the definition is broadened to include more informal learning activities, learning that takes place on the job and that does not necessarily lead to formal qualifications such as, learning by doing, teamwork, visits to trade fairs, dialogue with customers and suppliers, personal development meetings and staff meetings, the gap between small firms and larger employers is reduced. In this context, the notion of informal learning seems to be central to understanding the training strategies of small firms (Eraut, 2004; Panagiotakopoulos, 2009). However, although employee training is important, it should be pointed out that without small firm owner support, the major focus of an organization is likely to be on activities other than training. Top management and employee cooperation and mutual contribution are prerequisites for the training interventions in order to benefit the organization and the individuals. In this context, employees must be well informed by the firm owner about the importance and benefits of the training activity in order to be motivated to participate actively in this process. Employees need to be ready to learn, whereas small firm owners need to know the factors affecting employee behaviour so that they can encourage and motivate their employees continuously. Such factors involve the general state of the economy, technological changes, the work environment, employee motivation to learn, knowledge and skills already possessed by employees and so on. For example, technological changes impact employee behaviour since technology creates redundancies and employee obsolescence, requiring the ongoing training of employees to acquire new, marketable skills. Furthermore, it is of the utmost importance to be stressed that the whole process of employee learning is strongly inter-related with all the major human resource management activities including staff planning, recruitment and selection, performance appraisal and rewards (as discussed in Chapter 4). For example, poor human resources forecasting (e.g. labour shortage) may result in the provision of more extensive training so that existing staff may cover all the business needs. Similarly, poor selection (i.e. owners not following a rigorous process) may lead to an increased need for further training for newcomers. Also, a lack of performance evaluation may lead to the design of learning activities that are not oriented towards filling the required employee learning gaps (i.e. learning efforts that lack intent). Moreover, the absence of a reward package that can motivate employees to acquire new skills may prove detrimental towards human resource development. In short, employee learning should be a part of a coordinated effort to improve the productive contribution of people in achieving the firm’s objectives. Changes in just one part of the human resource management (HRM) function are unlikely to bring the desired organizational outcomes.

The process of learning in small firms  25

The process of employee learning in small firms Initial training (i.e. employee orientation) is essential for any organization regardless of its size since it enables new employees to become familiar with their work tasks, get to know their colleagues and become aware of the firm’s core cultural values. This, in turn, helps the new employee feel bonded to the organization very quickly, reduces their stress caused by the fear of the unknown, boosts their confidence and gives them a sense of belonging to the company. Several research studies have shown that a rigorous employee orientation program has a radical impact on staff turnover (Stone, 2002; Panagiotakopoulos, 2013, 2014). In the small business context, employee induction can be done by the firm owner or some other experienced colleague. It may involve a range of learning activities ranging from self-learning audio-visual material to observational learning (i.e. shadowing). The preceding learning process concerns the induction of all newcomers. For the existing staff, the usual learning process in small firms may take place in 3 main stages. The learning needs analysis stage This stage is the first step in developing employee skills in any business context. Learning needs analysis is a process by which an organization’s learning needs are identified and translated into learning objectives. According to Armstrong (1999), training needs analysis is essentially concerned with defining the performance gap at work. This initial phase of any learning process establishes what kind of training is needed, by whom, when and where. Without determining the need for employee training, there is no guarantee that the right training will be provided for the right employees (i.e. training may end up being a waste of time and effort). Training needs assessment can also reveal if staff training is the appropriate solution to a performance problem, since all performance issues are not training issues. Other variables at work, including tools and equipment, factory space, work processes and poor leadership, can impact employee performance and may not have any training implications at all. Also, this stage can be used also as a diagnostic process since it can reveal shortcomings in several other core HRM activities (as noted in the previous section). In the small business context, the major tool used to identify employee learning gaps is the performance evaluation conducted by the firm owner along with an overall assessment of the external business environment (i.e. macro-environment scanning). More specifically, the owner should perform a careful and detailed performance evaluation (using relevant tools as described in Chapter 4) to identify any weaknesses in employee

26  The process of learning in small firms performance that training interventions might improve. Although a rigorous performance appraisal can be a time-consuming process, yet the size of small enterprises provides the owner with the chance to conduct a meaningful performance evaluation process without spending too much time and money. For example, a behaviour rating scale tool can be used to assess staff performance in specific job-related criteria that will give the owner the opportunity to identify any major employee learning gaps. Direct observation (by the owner) of employee performance is just one method of identifying major learning gaps. Customer feedback and peer observations could also form the basis for some valuable input, so they should not be ignored. Both customers and colleagues are significant sources of information when it comes to employee learning. Hence, the small firm owner should pay careful attention to these raters of staff performance. It should be stressed that not all organizational problems can be solved through training. There is a range of issues at work where training may have minimal or no contribution (e.g. a lack of proper equipment/machinery, poor rewards, etc.). Therefore, it is important for owners to identify the root of the organizational issue (i.e. diagnosis of a problem) before designing any learning interventions. The action stage Informal learning is the predominant skills development practice within the small business sector due to various resource constraints that such organizations face resulting in employees being much less likely than those in larger ones to have the opportunity to participate in off-the-job (formal) learning interventions. Furthermore, informal learning is especially valuable for small enterprises because they occupy increasingly specialist markets, thus having a need for highly specific skills rather than ‘generic and transferable’ skills mostly developed through formal training. For the purposes of our analysis, informal learning is used to denote any learning activity (either planned or incidental) that takes place at the workplace and does not involve any sort of external training provider or formal accreditation of learning. Before exploring the informal learning practices in small firms, it is crucial to explain how individuals learn using the popular learning cycle developed by David Kolb in 1984. The learning cycle reveals that learning is a continuous process, the direction of learning is determined by individuals’ needs and goals and it is affected by different styles of learning. The learning cycle consists of 4 main stages. The initial stage is the one in which the learner faces a particular experience (i.e. deals with a social situation). The experience is then followed by the individual’s effort to understand and clarify the situation (i.e. the learner reflects on their new

The process of learning in small firms  27 experience in the light of their current knowledge). This stage leads to the crucial cognitive one where the learner attempts to solve the problem and draw conclusions (i.e. reflection gives rise to a new idea). In the final stage, these conclusions are put into practice (i.e. the learner applies their ideas to their contexts). It is important for small firm managers to understand that employees have different learning styles. There are people who learn through active experimentation (i.e. doing) and people who are abstract thinkers (i.e. theorists) and are keen to develop theoretical models. Therefore, the learning interventions designed should take into account that sort of learning diversity. Looking at Kolb’s learning cycle, it becomes evident that informal learning comes with its limitations. For example, employees do not have much opportunity to reflect on their experiences since they learn while performing tasks (i.e. there is frequent interruption of learning, etc.). Therefore, it is crucial that the small firm owner provides sufficient time for employees to reflect on their daily experiences and develop a sound theoretical understanding that can facilitate behavioural change. The main training techniques used for Informal learning interventions involve the following: Coaching: Essentially, this concerns the guidance that employees get by their immediate supervisors (e.g. small firm owner or shop manager) in relation to their job tasks. The supervisor provides a specific ­example of what is to be achieved and then examines the employee’s performance and offers counselling on how to maintain effective performance and correct any performance problems. The process of coaching is complex and requires a range of qualities to be possessed by the supervisor. In particular, the supervisor needs to keep a steady pace of guidance, as well as make clear the relevance of the particular learning intervention to individual employee needs and organizational objectives. Furthermore, as mentioned in the previous paragraphs, it is equally important to accommodate different learning styles. Numerous research studies in the fields of education, psychology and neuroscience have concluded that every individual learns differently (Kolb, 1984; Paine, 2019). In simple terms, this means that an employee’s learning style refers to the preferred way in which they absorb, process, comprehend and retain information. Some employees may understand a job task by receiving proper verbal instructions, whereas others may need to see it in practice. Employee learning styles depend on cognitive, emotional and environmental factors, as well as one’s previous experiences. It is therefore important for a supervisor to understand the differences in their employees’ learning styles so that they can implement best practice strategies into their daily activities when doing coaching.

28  The process of learning in small firms Moreover, constructive feedback provision is of the utmost importance. Detailed, timely and accurate feedback clarifies expectations, helps employees learn from their mistakes and builds confidence. Feedback should be clear and specific, as well as include suggestions on how e­ mployees could do things differently using ‘positive’ language (e.g. instead of saying, ‘You shouldn’t do this because …’, the supervisor may say, ‘You could try doing this since …’). It is important to avoid using personal critique towards the employee. When providing feedback, the focus should be on job behaviour not on the employee’s personal attributes (i.e. personality traits). Another core element of effective coaching is careful listening to employee concerns. Showing empathy to learners is important. The supervisor is vital to understand the emotional state of employees while they participate in the learning process (e.g. identify any signs of resistance to learning), as well as adopt a positive stance in difficult situations. Other key coaching elements include the ability to encourage employees during learning, allow them gradually to undertake further responsibilities, build trust and set specific and challenging goals to be achieved. Shadowing (observational learning): This is a process whereby the employee observes a task which is done by others (e.g. manager, coworker) who serve as role models and then the employee performs the observed act. In other words, this is a learning process through which employees develop their skills by simulating other people’s behaviour. During shadowing, it is important for employees to have a clear overview of the tasks to be performed by the supervisor, as well as have the time to reflect on the supervisor’s behaviour. A follow-up meeting after each shadowing session is essential so that the supervisor can clarify the lessons to be learned. Communities of practice: This could also be a form of both planned and unplanned learning since employees get to develop their knowledge and skills through extensive interaction with their counterparts (i.e. the process of social learning). The theory of social learning indicates that learners are active in the learning process since they observe their environment and become motivated to reproduce a behaviour from their social context. In other words, social learning theory is based on the axiom that people may also learn from their interactions with others in a social context (Bandura, 1976). Communities of practice are social structures of employees who share an interest and passion in a specific work domain, and they learn how to perform their jobs more effectively as they interact with each other. Although that form of learning has its own limitations (e.g. the quality of learning may be questioned since the person who shares their knowledge around a specific subject area may not be an ‘expert’), yet it provides employees with various

The process of learning in small firms  29 benefits, including extensive learning and improved retention of information and satisfaction of their social needs (Panagiotakopoulos, 2020). Social learning at work can be enhanced through various ways including team-working tasks and projects and proper arrangement of the physical environment, as well as online employee social forums. It should be stressed that trust, familiarity and mutual understanding among employees are necessary preconditions for the successful sharing of tacit knowledge since members of ‘communities of practice’ are normally less willing to share knowledge and expertise in situations where trust is lacking. Learning by doing: This type of incidental learning is based on the wider concept of experiential learning where employees learn by experience (e.g. trial and error). This learning technique can be enhanced at work through job enrichment. In particular, as employees get the chance to perform a wide variety of tasks or participate in new projects they are exposed to a range of challenges and problems. This problem-solving process enables them to develop their subject-matter expertise and develop a vast array of skills. At the heart of experiential learning is the opportunity to engage in a range of new tasks, have sufficient job autonomy and a good network of colleagues to stimulate knowledge sharing. Therefore, job design becomes central to this type of learning. It is suggested that the small firm owner should avoid creating jobs that are highly monotonous and restrictive in terms of skills acquisition and application. As is pointed out in Chapter 4, an interesting job with various and challenging tasks can prove to be a powerful motivator for employees. The evaluation phase Employee learning evaluation is defined as the collection of information necessary to measure how well a learning intervention met its objectives (Stone, 2002). Unfortunately, the vast majority of small enterprises do not include an evaluation phase as part of their learning efforts due to misconceptions that undermine this stage of the learning process, such as the perception that learning evaluation adds cost to the learning process, as well as it is very time-consuming. However, learning evaluation is a key stage in the workforce skills development process that cannot be ignored since it can help small firm owners determine whether a learning intervention met its objectives or not (i.e. to understand if the learning activity was suitable or needs further improvement), as well as identify if employees actually benefitted from the learning activity and improved their job performance. It is important that the evaluation is conducted before, during and at the end of each learning intervention. This enables small firm owners to understand the extent of knowledge and skills possessed by employees before they start the learning activity, evaluate the effectiveness of the

30  The process of learning in small firms learning intervention by assessing employees’ understanding during the learning event and evaluate whether the learning intervention met its objectives (Panagiotakopoulos, 2020). To measure the effectiveness of employee learning, small firm owners should monitor the following: the extent to which employees’ enjoyed participating in the learning intervention, the extent to which employees expanded their knowledge after a learning intervention and were able to apply their learning to their current job tasks and the extent to which the learning intervention benefitted both the enterprise and employees (e.g. measurement of various performance indicators such as error rates, customer complaints, etc.). Direct owner observation, peer observation and customer feedback could be valuable sources of information in this process.

Barriers to employee learning in small enterprises The existing studies around this area have revealed that there are a host of factors that affect the propensity of small firms to train (Panagiotakopoulos, 2011). In particular, small firms suffer from a number of specific obstacles that make it difficult for them to engage in learning activities, including time and cost constraints; ‘poaching’ concerns (i.e. fear of skilled labour being ‘poached’ by larger companies) due to the absence of internal labour markets and poor financial rewards; managerial ignorance on the long-term impact of training on firm performance (i.e. low managerial commitment); problematic job design and work organization that provide limited opportunities for learning (e.g. narrow range of tasks, repetitive work, low employee autonomy and involvement, etc.); absence of a systematic and well-organized performance appraisal process to identify skill gaps; low employee commitment due to the lack of promotional opportunities; a lack of in-house expertise; owner fear of losing bargaining power; competitive pressures; and available skills in the external labour marker. For example, small firm owners usually are not willing to invest time and money in workforce skills development interventions (especially formal) bearing in mind the possibility of well-trained labour being ‘poached’ by larger competitors who may be able to offer more generous financial rewards and working conditions. However, one of the major factors in any discussion about training in the small business context appears to be the small firm owners’ attitude towards employee development since firm owners determine the overall learning culture for the company. Existing evidence shows that some owners in certain sectors (e.g. high-tech) are willing to invest in staff development arguing that developing their talents will help them gain a sustainable competitive advantage in the market, whereas several others view employee learning as an operational expense rather than an investment (i.e. owners who are either not aware or yet to be convinced of the benefits of employee learning).

The process of learning in small firms  31

Overcoming the major barriers to learning As mentioned in the previous section, one of the key barriers to employee learning is owners’ ignorance about the several benefits of skills development for company performance. The previous chapter (i.e. Chapter 2) gives a good overview of the main research findings around this area and lays the ground for the provision of more frequent learning opportunities at work. For those firm owners who do acknowledge the importance of stall learning, the next sections provide useful guidance on how to overcome a series of other core barriers to learning. In short, the subsequent analysis indicates that small firm owners can take a number of steps in order to create a conducive learning environment, in particular the following: 1 They need to adopt a learning approach to the overall business strategy. This means that they should be willing to introduce small operational changes that are aligned with the general firm strategy, which they treat subsequently as experiments for performance improvement. 2 It is also helpful on several occasions to adopt a participative leadership style, where valuable employee input is provided on all business activities. In this way, owners get the chance to identify the root of any organizational deficiencies (i.e. employee knowledge gained through experience lays the ground for future learning interventions), whereas employees feel motivated and bonded to the company since they realize that they form a key part of the organization (i.e. their own learning is at the heart of future developmental activities). More information on this process is provided in Chapter 5. 3 They should conduct regular performance appraisals to identify employee learning needs. This ensures that any learning intervention does not take place for its own sake (i.e. it is not a waste of time and money) and that employees do broaden their knowledge base in areas that do matter to them and the organization itself. 4 They should provide a range of financial or/and non-financial rewards to employees for the exchange of ideas, as well as for the application of new skills. For example, the provision of an extra day off or restaurant vouchers may be given to those employees who promote learning at work significantly (e.g. an experienced worker providing extensive guidance and advice to a newcomer). 5 They should design jobs in such a way that they enhance workplace learning (e.g. encouragement of team working through proper task allocation). They should also focus on providing their staff with frequent informal learning interventions that do not require extensive time and budget (e.g. extensive coaching by experienced colleagues, as well as shadowing).

32  The process of learning in small firms 6 They should allow staff to reflect on their behaviour, as well as question ideas and actions. It is important for the owner to view employee mistakes as learning opportunities. For example, a formal meeting at the end of each month among employees and their immediate supervisor (or small firm owner) may provide enough room for reflection. Also, the arrangement of frequent informal social events outside working hours may promote this sort of social learning. 7 To avoid ‘poaching’ of skilled labour, much emphasis should be placed by the small firm owner on the provision of various non-monetary rewards, which do not require many resources and are highly valued by most employees according to several research studies. For example, the following rewards have been identified in the literature as having a radical impact on the intention of employees to stay loyal to their employer: interesting job (varied tasks and responsibilities that lead to increased job satisfaction), flexible working arrangements, supportive colleagues (chosen through a careful staff selection process), competent supervisor, tolerance of mistakes, learning opportunities, health and safety policies (increased welfare policies) and fair treatment at work (absence of discrimination; Panagiotakopoulos, 2014, 2016).

Reflective Case Study ‘PhoneplanU’ is a small mobile phone retailer in the U.K., which is owned by a very experienced IT specialist. The company sells high-quality payas-you-go mobile phones and mobile phones with fixed-term usage contracts for all networks through its 4 branches in London. It operates in a highly competitive marketplace, competing with 5 very large mobile phone retail companies and a host of smaller independent retailers. Leadership and work organization Each branch employs 5 full-time employees plus a general branch manager. Each branch sells a vast array of technologically advanced mobile phones. In terms of marketing promotion practices, the company produces a monthly brochure summarizing its best deals, which is widely distributed to consumers. As for the selling techniques, sales staff always use a computer program that prompts them to ask questions about customer requirements, which then produces a list of recommended products and deals to choose from. The firm owner has adopted an autocratic supervisory style in order to monitor closely all staff and business processes with the help of the general branch directors. Employee participation in decision-making is non-existent, and all strategic decisions are made by the company owner. Employee job autonomy is very limited (i.e. all staff

The process of learning in small firms  33 should follow a specific process around selling) so that the owner could ensure consistency in selling, whereas there is no task variety (i.e. each employee has a very restrictive set of tasks to perform in order to develop a strict specialization in their jobs). Staff selection, performance appraisal, training and rewards Store managers have responsibility for hiring sales staff, although they receive much guidance and support from the company owner. The hiring process involves the submission of a formal application form by the prospective candidate and the attendance of a formal structured interview with the respective branch manager. The selected candidates normally possess higher education qualifications in the area of ‘business and management’. Almost all employees are under 26 years of age. The company currently pays its sales staff at an hourly rate of 9£ an hour (i.e. the national minimum wage), with an extra bonus for meeting sales targets. The maximum bonus an individual is likely to receive will add 10% to monthly wages. Only the top 20% of sales staff receive any bonus at all. Top-performing sales staff and shops are praised in the company’s weekly email newsletter to all staff. The overall performance of each branch is closely monitored by the company owner using strictly a number of financial indicators (e.g. sales, profitability). Stores are also set very strict quantitative sales targets, and employee performance is measured purely against those targets through monthly performance appraisal reports (e.g. the company’s software system records the number of enquiries handled by each member of staff, the proportion of enquiries that result in sales and the value of each sale). The company owner deals with under-performing store managers and store managers deal with under-performing employees. The attitude of the company owner towards under-performing managers and employees is very much one of ‘get improved or you’ll get fired’. In terms of staff training and development, all newly hired employees receive a 3-day intensive on-the-job training around their main tasks, whereas existing staff attend once a year a formal training seminar around health and safety. Overall working environment within the firm Internal communication takes place predominantly in a formal way through scheduled personal meetings and emails. All internal communication is made available to the owner of the company as part of the quality monitoring process. As for the informal communication among employees in each shop (i.e. horizontal communication), this is generally discouraged in the company. Team working is rather limited in the company because all employees work individually at their own workstations, which are equipped with all the necessary IT facilities. In terms of organizational culture, the official company values state that friendly customer service and the provision of high quality are at the heart of business success.

34  The process of learning in small firms In practice, the firm owner makes all the key strategic business decisions and keeps store managers and employees under tight control. The working environment is competitive as poor staff performance is not tolerated and superior performance is rewarded.

Problems The firm owner plans to open 2 more new stores in the next 3 years in different regions across the U.K. However, over the last 6 months, sales in existing stores have begun to stagnate, whereas the company is not performing as well as its closest rivals. Also, staff turnover is high, with 50% of staff having left the company during that period.

Tasks Critically analyze the roles of leadership, motivation, communication and culture at PhoneplanU using relevant theory and academic literature, as well as provide specific suggestions on how problems could be resolved. Consider the role of employee learning and discuss its contribution towards business success in the specific case-study scenario.

Key points of the chapter Employee learning activities begin when a newcomer joins the organization (i.e. induction), usually in the form of employee orientation. Newcomers must learn new behaviours, facts, procedures, values and must establish relationships in order to be successful in a new position. The next steps in the learning process involve the learning needs analysis stage (i.e. to identify what training is needed and by whom), the action stage (i.e. design and implementation of learning interventions) and the evaluation stage (i.e. measuring the impact of a learning activity on firm performance). The major informal learning techniques involve coaching, shadowing, communities of practice and learning by doing. Each one has its own strengths and limitations. Coaching is the most popular informal learning technique in the small business context, which can help employees develop a range of job-related skills. Effective coaching requires from the firm owner an in-depth understanding

The process of learning in small firms  35 of the different employee learning styles, the timely provision of clear and constructive feedback, careful listening of employee concerns and understanding of their needs (i.e. empathy), mutual trust with the learners and continuous encouragement during the learning process. Several barriers to learning have been identified in the literature including ignorance on the benefits of staff learning, resource constraints, the chosen business strategy, limited management commitment, poaching concerns and many more. Small firm owners can take various steps to overcome the main obstacles to learning, including the implementation of regular, well-designed performance evaluations to identify any employee learning gaps; encouragement of employee input on the business practices (i.e. employee involvement in decision-making); and the provision of suitable rewards that can motivate staff to learn (e.g. interesting job, flexible work practices, etc.).

References Armstrong, M. (1999) A handbook of human resource management practice. 7th ed. London: Kogan Page. Bandura, A. (1976) Social learning theory. Hoboken: Prentice Hall Publications. Eraut, M. (2004) ‘Informal learning in the workplace’, Studies in Continuing Education, vol. 26, no. 2, pp. 247–273. Johnson, S. (2002) ‘Lifelong learning and SMEs: issues for research and policy’, Journal of Small Business and Enterprise Development, vol. 9, no. 3, pp. 285–295. Kitching, J. and R. Blackburn (2002) The nature of training and motivation to train in small firms. Department for Education and Skills (DfES), Research report No 330. Nottingham: DfES publications. Kolb, D. A. (1984) Experiential learning: experience as the source of learning and development. Hoboken: Prentice Hall Publications. Paine, N. (2019) Workplace learning: how to build a culture of continuous employee development. London: Kogan Page. Panagiotakopoulos, A (2009) ‘An empirical investigation of employee training and development in Greek manufacturing SMES’, PhD thesis, University of Leeds. Panagiotakopoulos, A. (2011) ‘What drives training in industrial micro-firms? ­Evidence from Greece’, Industrial and Commercial Training, vol. 43, no. 2, pp. 113–120. Panagiotakopoulos, A. (2013) ‘The impact of employee learning on staff motivation in Greek small firms: the employees’ perspective’, Development and Learning in Organizations, vol. 27, no. 2, pp. 13–15.

36  The process of learning in small firms Panagiotakopoulos, A. (2014) ‘Enhancing staff motivation in tough periods: implications for business leaders’, Strategic Direction, vol. 30, no. 6, pp. 35–36. Panagiotakopoulos, A. (2016) ‘Staff poaching’, in Wilkinson, A. and S. Johnstone (eds.) Encyclopedia of human resource management, pp. 412–413. Northampton: Edward Elgar Publications. Panagiotakopoulos, A. (2020) Effective workforce development: a concise guide for HR and line managers. London: Routledge Publications. Stone, R. J. (2002) Human Resource Management. 4th ed. Milton: John Wiley and Sons.

4

The interlink of HRD and other HR activities

HR planning HR planning is a key activity in the people management domain since it can ensure that the firm has the right number of employees, in the right jobs and at the right time (i.e. there is no labour surplus or skill shortages). The planning process should take into account both the internal (i.e. culture, strategy, budget, etc.) and external environment (i.e. state of the economy, industry competition, etc.) of an organization so that proper labour forecasting can be done. A common mistake for the small firm owner is to focus on short-term resource needs rather than on the firm’s long-term people requirements. Such a non-strategic and reactive approach can cause several problems for the organization, such as an inability to meet increased product/service demand that could eventually lead to loss of profit and harm the firm’s brand image. The main approach in the HR planning activity that can be used by small firm owners is the qualitative one. The qualitative approach uses expert opinion (usually the opinion of line managers) to predict future staffing requirements. In this approach, line managers make predictions on labour demand and supply using their experience, as well as various sources of information (e.g. governmental financial reports, sectoral research studies, national statistical data on demographics and education, etc.). Moreover, small firm owners should frequently monitor the staff turnover rate, as well as conduct exit interviews to identify any major organizational weaknesses that affect staff retention. HR planning has significant implications for employee learning since an organization that is understaffed (or employees lack the required skills) is in greater need of extensive learning interventions. Another key element of HR planning that is closely linked to employee learning is the process of job design. In particular, the way that jobs are organized within a small enterprise is of critical importance for staff learning. Job enrichment is a popular process that is characterized by adding different tasks and responsibilities to existing jobs to make them more

DOI: 10.4324/9781003381815-5

38  The interlink of HRD and other HR activities interesting and challenging. Job enlargement is another process that is characterized by adding more tasks (of the same nature) to existing jobs. The core difference between job enrichment and job enlargement lies in the quality and quantity of tasks. More specifically, job enrichment involves task variety (qualitative dimension), whereas job enlargement involves more duties (quantitative dimension). Small firm owners should strive to enrich employee jobs (instead of focusing on job enlargement and an increased workload) in order to enable staff to develop further their knowledge and skills through experiential learning. As employees engage in different tasks, they get the chance of gaining rich experience and enhancing their knowledge base through the process of learning by doing (Mullins and McLean, 2019).

HR recruitment Future job vacancies may occur either through someone leaving the organization or as a result of expansion. Recruiting a new staff member may be the most obvious tactic when a job vacancy occurs but it is not necessarily the most appropriate. Some of the options that small firm owners need to consider are the following: Re-organize the work so that the job tasks can be performed by the remaining employees, use overtime and subcontract the work. Hence, the firm owner should conduct a detailed micro-environmental analysis (e.g. business strategy, corporate culture, nature of tasks, available budget, etc.) to determine what option suits best their business context. If the decision is that the firm should recruit new employees, then an accurate job description should be produced involving the job title and context (e.g. location of work, background information of the firm), the job summary (e.g. duties, working conditions, performance standards) and the necessary, as well as desirable, attributes needed by potential applicants to perform successfully in the job. During recruitment, it is crucial for small firm owners not to discriminate against potential employees on the basis of unrelated job characteristics including gender, age, disability, ethnicity, sexual orientation, religious beliefs and so on. This is important not only for legal and ethical reasons but also for financial ones since the firm may lose valuable talent if there is discrimination against potential applicants. The available recruitment techniques can be divided into two main categories depending on whether the organization fills the vacancies internally (i.e. using existing employees) or externally (i.e. using candidates from the external labour market). Each approach has its own strengths and weaknesses. For example, internal recruitment leads to enhanced staff motivation since employees realize that they are heavily valued by the company (i.e. intense employer interest in staff development). However,

The interlink of HRD and other HR activities  39 there is a lack of new ideas in the firm (i.e. employees are affected by the existing firm culture and cannot easily think ‘outside the box’). By comparison, external recruitment provides firms with a greater pool of applicants, so more skilled employees may be attracted compared to the existing ones. Yet, external candidates need much more time to become familiar with the organizational context (i.e. employee orientation may become a time-consuming process). Normally, the great majority of small firm owners choose to fill any job vacancies from the external labour market owing to the small size of the organization (i.e. absence of internal labour markets). In terms of recruitment techniques, the most popular one in the case of internal recruitment is the word of mouth, whereas for external recruitment, most owners use existing employee referrals and online recruitment (i.e. cyber-­recruiting including social media advertisement, vacancies advertised on the corporate website, etc.). All the various techniques have benefits and drawbacks and the choice of a technique has to be made in relation to the particular job vacancy, the type of labour market in which the job falls, the business objectives and so on. It is important for the small firm owner to place much emphasis on staff recruitment because this has also a radical impact on employee learning. For example, if the ‘wrong’ candidate is being attracted in terms of knowledge, skills and attributes, then more extensive training may be needed for existing staff to cover organizational inadequacies (Panagiotakopoulos, 2016).

HR selection After the recruitment process, there is the short-listing process where the small firm owner needs to identify the candidates most likely to perform successfully in the job. During that process, owners/managers need to look at the essential and desirable skills and attributes of the individual candidates and rank them. It is quite unusual for one selection method to be used alone. A combination of two or more methods should generally be used to strengthen the validity of the selection decision. The choice of the methods is dependent on various factors, including the selection criteria for the post to be filled, the abilities of the small firm owner and time and cost considerations. Various selection techniques are available, including interviews, psychometric tests, trial days and references from previous employers, with the most popular one being discussed in the next section. Interviewing is the most popular selection technique for small firm owners. It is a planned conversation for the purpose of gathering rich data about an individual. The format may vary (i.e. structured vs unstructured interviews) depending on the post with more skilled jobs favouring an unstructured approach to interview so that the owner can explore both

40  The interlink of HRD and other HR activities the ‘hard’ and ‘soft’ skills of a candidate. For more low-skilled posts, structured interviews (i.e. predetermined list of questions in a standardized format) are normally used. Although interviews suffer from several weaknesses (as is the case with every selection tool), yet they can provide small firm owners with lots of information on the individual’s skills and personality. In particular, the owner has the opportunity to observe the body language of candidates and determine if they have the necessary social skills and motives required for the job, evaluate the candidate’s ­subject-matter expertise and assess if the candidate fits with the overall team and firm culture. Arguably, the main disadvantage of interviews is the interviewer’s bias (since it is based on subjective evaluations that are affected by variables such as gender, age, educational level, previous experience, emotional intelligence, etc.) that may affect their final decision. It is important for small firm owners to design an effective interview process to ensure that the right person is being chosen for the job vacancy. It is advised prior to the interview to prepare a list of the key personal attributes and skills required for the post to be filled. Then, it is equally important to design a list of suitable open-ended, job-related questions that will enable them to gather rich information on the applicant’s ability to perform the job successfully and contribute towards the firm’s objectives. Frequent probing should be used during the interview in order to learn as much as they can about the applicant. Moreover, it is important for the owner to elaborate on the key tasks and responsibilities associated with the particular job vacancy (Panagiotakopoulos, 2016). Employee selection is also another critical HR activity, which is closely linked to workforce skills development. Therefore, mistakes cannot be tolerated during that process. For example, hiring the ‘wrong’ person (e.g. lack of person–job fit) will create additional requirements in terms of employee learning. An employee that lacks the required skills or does not match the prevalent firm culture, will need more extensive coaching to be able to perform effectively. Also, if the owner places much emphasis on the ‘hard skills’ of the candidate (e.g. IT skills, numerical skills, etc.) while ignoring other vital ‘soft skills’ (e.g. willingness to share knowledge with colleagues, interpersonal skills, etc.), then this may have a radical impact on staff learning since this limits the extent of social learning at the workplace.

Performance appraisal Performance appraisal (PA) is defined as the systematic process of reviewing employee performance. This normally requires the owner/manager and employee to take part in a performance review meeting. During the performance evaluation process, job behaviour/performance should be measured using both quantitative and qualitative indicators. In the small

The interlink of HRD and other HR activities  41 business context, this process may take place in a less formal manner. However, it is important to be implemented regularly since it provides a dynamic link to employee selection, training and rewards and lays the ground for performance improvement. The first stage in the PA process is for owners to set proper indicators (both quantitative and qualitative) of employee performance in order to be able to identify learning gaps and areas of poor performance that could be addressed through corrective action. It is important for small firm owners/managers to place equal emphasis on the qualitative criteria of performance evaluation (i.e. kind of behaviour exhibited by employees while trying to achieve the desired organizational objectives). For example, the process through which a sale of a product/service is completed does have an impact on corporate brand image, employee well-being and customer satisfaction. In other words, instead of focusing solely on measuring what has been achieved, it is equally important for owners to evaluate how it was achieved (i.e. the process). For example, some organizations manage to have increased profitability over a prolonged period by making their employees work very hard (i.e. extensive overtime work), thus causing them to suffer from ‘burnout’ after some time. Such long-term implications can be detrimental to the organization both in ethical and financial terms (e.g. poor brand image and problems in attracting talented staff, reduced sales, increased staff turnover and absenteeism, etc.). In the small business context, performance appraisal is normally done informally by the small firm owner (or line manager). However, there can be other raters of employee performance, including colleagues, customers and employees themselves. The major techniques of performance appraisal include ranking (the manager ranks each employee from best to worst according to their overall job behaviour), grading (employees’ overall performance is matched with a specific grade definition), behaviour rating scales (rating scale that evaluates employee performance using specific job-related criteria), essay description (a written statement prepared by the rater describing an employee’s strengths and weaknesses) and management by objectives (setting of measurable goals and then reviewing the progress made; Panagiotakopoulos, 2016). Arguably, behaviour rating scales are one of the tools that can offer much detailed information to the employee about their performance since it may outline learning gaps in specific areas of the job holder. Various job-related dimensions can be used including job knowledge, customer relations, safety, creativity, punctuality, team working and so on to measure staff performance. In particular, a series of job-related criteria are being developed and employees get a specific grade in each one of them. Although this may look a time-consuming tool to be used by small firm owners (since it requires some considerable effort to prepare PA forms with detailed job-related criteria for each post), yet it is a very useful tool

42  The interlink of HRD and other HR activities that can bring many positive organizational benefits in the longer term since it is closely linked to staff selection, training and rewards. A careful PA is of the utmost importance for employee learning since it provides insights into the employee’s key weaknesses (i.e. learning gaps). Without a sound PA process, the process of staff learning may lack focus. On completion of the PA process, a performance review meeting should take place so that owners can help underperforming staff get improved, as well as praise high flyers in order to maintain their performance. The following are some of the key steps that small firm owners/ managers should take in order to ensure that this meeting has a developmental character: (a) They should try to describe events and job behaviour, not judging employee attitudes (e.g. several studies have stressed that offensive criticism has a negative impact on employee morale and goal achievement); (b) they should provide positive feedback (i.e. praise staff for their strengths) in addition to areas for improvement; (c) employees should be encouraged to talk, explain job behaviour and share ideas on performance improvement. The review meeting should bring mutual benefits to employees and superiors. Any developmental intervention should be mutually agreed on so that employees can be more committed to actively participating in any learning interventions; (d) specific performance improvement objectives should be set, as well as changes in job-related behaviour (i.e. abstract comments and goals should be avoided).

Employee rewards The purpose of the next section is to look at the concept of employee compensation, which directly affects staff motivation and workforce skills development. In simple terms, motivation is an internal state that drives human behaviour. It is concerned with the reasons that make employees decide to ‘go the extra mile’ at work, as well as develop themselves (Stone, 2002). It is therefore of critical importance for small firm owners to boost employee motivation in order to improve productivity, advance product/ service quality, enhance staff knowledge and cope with any macro-environmental challenges (i.e. manage change effectively). Several theories of motivation have been developed throughout the years trying to outline the main factors and processes affecting employee behaviour (e.g. Maslow’s needs hierarchy theory, Herzberg’s two-factor theory, Vroom’s expectancy model, Locke’s goal-setting theory, Adams’s equity theory, etc.). The findings from numerous studies on employee motivation have revealed that the following core variables do have a major impact on employee behaviour at work: employee perception, values, personal needs, personality characteristics, innate and acquired abilities, job design (e.g. increased task variety, job autonomy), the culture of the organization, relationships with colleagues and managers, financial rewards

The interlink of HRD and other HR activities  43 (e.g. salary, private health insurance, private pension scheme, company car, etc.), learning opportunities and career development, health and safety at work, flexible working arrangements (e.g. part-time, term-time, job share; flex-time; teleworking), equity and fairness at work, involvement in business decision-making and the external environment (e.g. economic pressures, changes in labour regulations, etc.; Panagiotakopoulos, 2014; Mullins and McLean, 2019). Small firm owners/managers need to take into account all the above-mentioned factors affecting employee job satisfaction in order to enrich staff motivation, thus leading to low turnover and absenteeism, increased participation in learning activities, as well as improved performance. It is crucial for owners to know that human needs differ among people, as well as change across time (i.e. employee needs change as they move into different stages in their life cycle). This means that the process of employee motivation is a dynamic one and requires from the owner to have constant communication with their employees to become aware and understand their personal needs and expectations at each period. The more attuned the small firm owner/manager is to employee needs, the greater the number of matches that are likely to exist in the ‘psychological contract’ (i.e. the informal agreement between the employee and the owner that specifies what each side expects to give and receive from the employment relationship). In the small business context, the following 4 specific non-monetary rewards have appeared to be highly effective in boosting staff performance: (a) staff training, (b) challenging work, (c) job autonomy and (d) work flexibility. A relevant research study conducted by the author in 2014 on the main factors affecting staff motivation in small firms during ­periods of severe financial crisis revealed that employee involvement in ­decision-making, recognition of contribution, team working and continuous learning were among the key rewarding tools that could boost staff motivation. The findings showed that those owners who adopted an ‘inspirational motivation’ model (e.g. show empathy to employee needs and design meaningful job tasks for employees) managed to achieve far better organizational results in the long term (e.g. reduced staff turnover, improved productivity) compared to those owners who adopted a ‘fear motivation’ model (e.g. autocratic leadership with punishment being used as the main tool for performance improvement). The latter faced declining staff morale and increased staff occupational stress resulting in increased employee errors and reduced staff loyalty. As the preceding analysis indicates, employee rewards are a key variable that has a direct impact on the extent of learning in the small business context. If employees realize that they will be rewarded for improving their knowledge base, then they will be much more enthusiastic about engaging in various informal learning activities in order to

44  The interlink of HRD and other HR activities acquire and apply new skills at work (e.g. moving an employee to a post that involves more interesting and varied tasks after a successful process of skill acquisition could be an important reward for several individuals). An increasing commitment to learning is central when it comes to skills development.

The employment relationship and employee involvement schemes The steps that small firm owners take to create a harmonious working environment (i.e. healthy and productive relationships with their employees) affect the staff motivation towards skills development. In particular, how owners deal with any employee grievances, the extent of health and safety at work (i.e. employee welfare policies), staff participation in ­decision-making are just some of the core areas in the field of employee relations that can trigger (or hinder) employee learning. Regarding grievances, this term is related to the complaints that are presented to the small firm owner/manager by employees. In general terms, grievances are rarely being raised in the small business context since employees do not wish to have a conflict with the firm owner (e.g. by questioning their authority and knowledge), as well as take the risk of being considered as the troublemaker within the enterprise. Additionally, many employees consider this process meaningless since no major change is being implemented as a result of their complaint. However, despite the above arguments, small firm owners/managers should encourage the proper use of communication channels to discover sources of discontent among their staff because the dissatisfaction employees experience from various external or internal factors can lead to poor performance and unsatisfactory work outcomes (e.g. reduced effort, absenteeism, etc.; Panagiotakopoulos, 2016). Small firm owners can take a number of key steps (as outlined next) towards creating a harmonious working environment that will, in turn, affect the extent of workforce skills development. More specifically, small firm owners/managers need to (a) increase employee participation in decision-making. Employees feel bonded to the organization if they participate in various business decisions and more motivated to participate in various learning interventions. Also, major learning gaps can be identified and discussed; (b) devote much time to employee concerns to understand the obstacles they may face at work (from various factors) and contribute towards performance improvement. The arrangement of frequent social events with employees and the firm owner/manager may be a good opportunity for the sharing of concerns, and (c) be fair and consistent with all employees with any action they take in relation to grievance resolution.

The interlink of HRD and other HR activities  45 Employee involvement is also a key process that can promote employee learning significantly. The particular process allows employees to develop their knowledge and skills by giving them the opportunity to share their views, ideas and concerns with small firm owners/managers in order to diagnose and solve daily operational problems, as well as address more strategic issues (e.g. ideas on the development of new products/services). Examples of involvement mechanisms include team-working and communities of practice, which were discussed in Chapter 3. Also, the arrangement of formal monthly meetings and the encouragement of daily informal dialogues between owners and employees are also useful practices that can facilitate skills development. Business example on the interlink of HRD with other HR activities Case study: ‘Leather-T’ The company has been operating for 22 years and manufactures and sells high-quality leather goods (e.g. bags, wallets, belts) to the end users (both wholesale and retail customers) in the U.S. market. The firm is owned by a very experienced entrepreneur (with a business educational background), who has several years of work experience in the specific sector. The organization has 14 employees all of which are full-time, including 10 machine operators who are responsible for the operation and maintenance of the machines, 2 salespeople who deal with all the selling-related activities, 1 general secretary responsible for various administrative tasks (e.g. invoices, fax duties, incoming calls, customer complaints, etc.) and 1  production supervisor, who is responsible for the division of labour, daily flow of production and repairs to machinery. There are no part-time or temporary workers and most of the staff are long-serving. The company sells its products solely in the home market. As for the educational level of personnel, the production supervisor has a business-related degree, whilst the rest of the workers have completed upper-secondary education. The level of technology in the company is fairly modern with all the technological equipment imported from abroad. The firm owner undertakes all the main responsibilities for employee selection, performance appraisal, training and rewards. Recruitment is carried out mostly through existing employee referrals (networking), whereas selection is based on a formal interview with the owner. The main criteria of staff selection for most posts are previous experience in the particular industry, very good interpersonal skills and willingness to share knowledge, whereas formal education qualifications carry very little weight. Also, there is a formal performance appraisal every 6 months, whilst rewards are based on individual performance (e.g. whether machine

46  The interlink of HRD and other HR activities operators show initiative or not, as well as problem-solving abilities). Performance appraisal appears to serve as a key tool for skills development within the firm. During the appraisal process, the development needs of the workers are considered, whilst achievement is recognized and reinforced. In terms of employee involvement, at the end of each month there Is a scheduled staff meeting where all employees share their ideas on performance improvement and discuss any work-related issues. The owner welcomes any suggestions on product/service development and provides praise and financial rewards to those employees who will make insightful suggestions that will benefit the organization. For example, a retail voucher is provided to the person whose suggestion will be implemented in the company, whereas there is a generous annual bonus to the person who acted as a mentor to more junior employees. In terms of workforce skills development, the company does not have a formal training policy and plan. Employee training is implemented according to existing business needs and it is predominantly reactive with no previous planning. The firm owner takes all the decisions around the level and breadth of training provision, and he is also responsible for all the learning activities within the firm. All machine operators undertake onthe-job training on a regular basis around technical issues (e.g. working methods and quality standards) through informal coaching, as well as around various health and safety topics through manuals and formal meetings. Also, there is continuous coaching on the salespeople by the owner in order to improve their interpersonal skills and selling techniques. A large amount of learning also takes place through peer cooperation. In short, teamwork appears to be an effective learning mechanism within the firm. The machine operators work in teams, thus having plenty of opportunities to impart tacit knowledge to each other. Specifically, the more experienced workers act as team leaders for the less experienced machine operators. In this way they act as facilitators to get the most out of production workers and to encourage learning. In terms of their team leadership styles, they appear to be democratic as they listen to team members, question them to understand their points of view and be responsive to feedback. DISCUSSION

The preceding business case shows how the synergy of various HR activities can contribute significantly towards workforce skills development. As the analysis revealed, the specific organization does not have a formal plan in relation to human resource development and there are no specific financial resources allocated to employee training. Staff development is implemented in a purely informal manner. However, it is fully supported

The interlink of HRD and other HR activities  47 by several other core HR activities including staff selection, performance appraisal and rewards. In particular, the company places much emphasis on a range of ‘soft skills’ during the employee selection process that seem to benefit knowledge sharing. Moreover, there is a formal performance appraisal mechanism to facilitate skills development along with suitable rewards for knowledge creation. Employee involvement and job design also seem to be critical elements in the process of skills development.

Reflective Case Study ‘PharmU’ is a sales and marketing organization in the U.K. connected to a major global pharmaceutical manufacturing and retailing company that is based in the U.S. (i.e. parent company). It has responsibility for the brand planning and promotion of a number of pharmaceutical products manufactured by the parent company that are very well known in the U.K. It is 1 of 7 business units controlled via the parent company’s corporate centre. The corporate centre attempts to bring coherence to the direction in which all the business units are moving. This underpins not only the rationale for strategic decisions taken across all business units but also the way in which individual performance is managed. PharmU employs 40 people and is structured into 4 core functions (i.e. sales, marketing, finance and human resource management) of which the two largest are sales and marketing. In PharmU, there was no knowledge management strategy in the previous years, but this has changed recently as a result of a visit to the U.S. by the chief executive of the company and the director of finance. Following this, an explicit knowledge management strategy was developed with the aim to break down barriers between teams that inhibited the sharing of knowledge across the organization. In particular, the following major changes were introduced: • New performance goals were set. All employees were asked to reduce costs and increase profitability, as well as consider how what they do contributes to the ‘bottom line’ of the business. A strong emphasis on measurable targets was placed. • There was a decentralization of the recruitment and selection process so that each function in the company could hire suitable people that would fit specifically into their teams (e.g. the marketing function could recruit in their own likeness – blue-suited young women who are prim and proper, whereas the sales function could recruit in their own likeness – brash young men who are very competitive). • Re-organization of the physical environment so that knowledge sharing could be facilitated among employees of each function. In particular, every function had its own offices all on the same floor.

48  The interlink of HRD and other HR activities

Tasks • Do you believe that the course of action taken at PharmU will facilitate knowledge sharing among employees? • What other measures (if any) would you consider taking? Please justify your suggestions using relevant theory.

Key points of the chapter The effectiveness of HRD is strongly affected by all the other HR functions, including HR planning, recruitment, selection, performance appraisal, rewards and employee relations. All these core HR activities are heavily interlinked, and their synergy is central to any employee learning intervention. Accurate labour forecasting can ensure that the organization has the right number of employees when needed. This means that there will be no further requirements for intensive training of existing staff in order to cover any labour shortages. Careful recruitment and selection can ensure that employees have the right type of hard and soft skills in order to perform effectively in their jobs. Regular performance appraisals can lead to the effective diagnosis of employee learning needs and performance gaps. Rewards that promote and encourage knowledge sharing are necessary for employee skills development since they stimulate the process of social learning. Employee involvement is also crucial for workforce skills development since it can inform small firm owners/managers about the exact learning needs of employees and ways to improve their performance.

References Mullins, L. and J. McLean (2019) Organisational behaviour in the workplace. 12th ed. London: Pearson. Panagiotakopoulos, A. (2014) ‘Enhancing staff motivation in tough periods: implications for business leaders’, Strategic Direction, vol. 30, no. 6, pp. 35–36. Panagiotakopoulos, A. (2016) A short guide to people management for HR and line managers. London: Routledge Publications. Stone, R. J. (2002) Human resource management. 4th ed. Milton: John Wiley and Sons.

5

Leadership and staff learning

Definition, importance and theories of leadership The importance of leadership for small firm performance and staff learning cannot be over-emphasized. Normally, the owner of the small firm has the role of the leader who communicates the vision of the company to all employees, sets the overall business strategy, guides and trains staff towards achieving the business objectives and manages the change process within the enterprise. Several research efforts have pointed to the various benefits that effective leadership may bring to staff and the company itself, such as improved employee motivation and commitment and increased staff adaptability, as well as enhanced employee learning capacity that may result in an increasing rate of product/service innovation. The leader is also the person that can initiate strategic change, as well as guide their staff on how to manage uncertainty effectively. This is highly important in the turbulent macro-environment where most small firms operate (Anderson, 2010; Panagiotakopoulos, 2014; Buck, 2016). There is extensive research on the factors affecting leadership effectiveness. A rigorous historical overview reveals that several theoretical models have been put forward in order to explain why some leaders are more successful than others with each theory having its own strengths and limitations (e.g. trait-based theories, behavioural theories, contingency theories, transactional theory, transformational and charismatic theory, collaborative leadership theory). Yet, a central argument of all these theories is that there is no specific leadership approach that can ensure success in every micro/macro-environmental context. The vast array of factors that come into play within an organizational environment require an equally complex set of responses in order to lead effectively a team of employees and stay ahead of the competition (Northouse, 2015). The theory of charismatic leadership can be applied in the small business context and has the potential to achieve some positive organizational outcomes. This theory argues that an effective leader is one who is able to recognize the needs of their employees, communicate in a clear manner

DOI: 10.4324/9781003381815-6

50  Leadership and staff learning the company’s vision, as well as inspire and guide staff in order to achieve the organizational goals. This is essentially achieved through employee commitment. Charismatic leadership depends predominantly on the personality and actions of the leader and not the process or structure. Charismatic leaders have excellent interpersonal skills and a very high level of emotional intelligence. They have also developed some very clear and specific goals, which have been properly articulated to their staff. Moreover, they are those people who will take reasonable risks, which are deemed to be profitable and rewarding for the business (Zehndorfer, 2016). At the heart of charismatic leadership is the leader’s ability to adopt a positive stance towards every challenge, as well as being a moral role model for their staff (i.e. the leader’s ethical stance is exemplary), as well as inspire and motivate them to have superior performance. The particular theory has several strengths as a theoretical concept and this is the reason why it is widely applied in many organizations. Compared to the previous theories that recognize the cognitive features of the relationship between leaders and followers, the charismatic leadership model emphasizes the importance of emotional reactions by subordinates to leaders. In simple terms, it highlights what followers need in order to be motivated to contribute to a common goal (Mumford et al., 2000). Furthermore, another strong point of the particular theory is that it can lead to various long-term positive outcomes for the company that may enable the firm to gain a sustainable competitive advantage (not just superior short-term performance). For example, during the last decades, lots of firm owners in the small business sector across the world used a ‘fear motivation’ approach (based on the transactional leadership paradigm) in order to boost staff performance. The fear motivation approach is based on the notion that employees will work hard to maximize their performance for fear of losing their jobs in periods of severe economic recession and high unemployment (i.e. in labour markets where the unemployment rate is very high). However, recent empirical evidence in this area has shown that this approach brings very few short-term benefits, whereas in the long-term it leads to detrimental consequences for organizations since employees suffer from burnout and are unable to go the extra mile. Their productivity is seriously reduced, and there is high staff turnover as soon as alternative employment options become available (Panagiotakopoulos, 2014). Therefore, gaining staff commitment through an inspirational leadership approach is the suggested path for small firm owners to ensure superior employee performance. This leadership approach has also some important implications for employee learning. In particular, it can ensure that talents are fully developed and employees fulfil their potential. A charismatic leader is also a competent mentor for their employees, thus contributing towards their personal and professional development.

Leadership and staff learning  51 Although the charismatic leadership model has a lot of positive characteristics, yet it comes with a few conceptual limitations. Despite the fact that it provides a detailed explanation of the influence between the leader and their followers, it does not indicate exactly how this could be operationalized at the workplace. More specifically, this theory is mainly ­leader-centred, and it emphasizes the influence of the leader on followers. However, it is not sufficient to explain in detail how leaders could build exceptional teams (Yukl, 2006; Avolio and Yammarino, 2013). This publication makes an initial attempt to fill this knowledge gap. Hence, in the next sections, an analysis is being undertaken (using empirical evidence) on how leaders could build high-performing teams.

Emotional intelligence and leadership One of the core concepts in the area of small firm leadership is emotional intelligence (EI). This is a term used to denote the ability of an individual to understand and manage both their own emotions and those of others (Goleman, 1995). For small firm owners, having a high degree of EI is essential for personal and professional success since it determines the quality of any decision made (including any learning interventions). For example, those small firm owners that have developed their EI can easily identify employees that lack confidence at work and consequently can provide them with proper learning interventions to boost their self-confidence. Emotional intelligence consists of 4 core elements: Self-Awareness: This is the individual’s ability to understand their own emotions. This ability helps people become aware of their strengths and weaknesses. Also, it helps them understand the root of their feelings in order to manage them effectively (e.g. able to manage their stress, anger, distress). There are several practical ways that can help busy firm owners to develop their self-awareness including personal journals where feelings and thoughts can be written down. Then, the next step is to examine ‘why’ certain feelings emerged in specific social situations. Self-Regulation: This is the individual’s ability to manage effectively their own emotions and impulses. All the existing research studies have shown that people who are capable of managing their feelings do make well-informed decisions. In the small business context, firm owners are usually under continuous stress since they are heavily involved in all the core business activities. Hence, managing stress effectively is of the utmost importance in order to be able to lead effectively their teams. Research from the field of industrial psychology indicates that the ­ABCDE technique (originally developed by Albert Ellis in the 1950s) can  provide the starting point for the successful management of

52  Leadership and staff learning occupational stress. This cognitive behaviour therapy model essentially involves 5 steps as described very briefly here: 1 A (activating agent): the step where you attempt to identify the stressor. 2 B (belief system): the step where you explore in-depth your existing ­belief system and you attempt to identify rational and irrational beliefs. 3 C (consequences): the step where you try to identify the mental, physical and behavioural implications of the stressor. 4 D (dispute irrational beliefs): this is the crucial step where you try to challenge your initial beliefs by findings new frames of reference to support your new thoughts. Through extensive self-reflection, you can remove cognitive distortions (e.g. over-simplified generalizations) and reconsider any negative experience as a positive one. 5 E (effects of cognitive restructuring): in this last step you attempt to measure the effects of changing your interpretation of a situation (i.e. you evaluate the outcome of cognitive-behavioural change). Empathy: This is equally a very important element of emotional intelligence. Empathy is the ability of an individual to identify and understand the needs and viewpoints of those around them. People with empathy are good at recognizing the feelings of others, even when those feelings may not be obvious, and support them towards unleashing their potential. In short, these people manage to build ­excellent personal and professional relationships. They avoid stereotyping and judging too quickly, as well as they live their lives in a very honest way. A useful practical process that may help an individual develop their empathy is by trying to look at a situation through the perspective of the other person (i.e. different perceptual lenses). In simple terms, it is important for individuals to develop a sound awareness of why other people feel, think and behave the way they do. For example, small firm owners should consider the general background of each employee (e.g. family, education, social status, cultural values, etc.) in order to understand the underlying reasons for their behaviour. In this context, they will be able to guide them properly and support them towards achieving the business objectives. Social Skills: This set of skills involves a range of abilities (e.g. listening skills) that help individuals communicate effectively with other people. Excellent interpersonal skills do help people share their ideas and knowledge, manage conflicts and negotiate action. Individuals that have developed their social skills are excellent team players since they are able to listen carefully to others’ concerns, as well as help them

Leadership and staff learning  53 ­ evelop and excel at work. A starting point for owners to hone their d social skills is by developing their listening skills. For example, when listening to employee concerns, it is important to remove any distractions that may take place at work, make employees feel relaxed and summarize an explanation given by an employee on a particular issue. Instead of focusing on preparing their immediate response, it is important for owners to place much emphasis on listening to their employees and understanding their needs. The preceding concise analysis shows that EI is not learned through a traditional learning method (e.g. classroom-based teaching). Essentially, it must be learned in an experiential manner since it requires a rigorous exploration of the emotional sphere. The specific type of learning is based on what we actually see, hear and feel. Daniel’s Goleman (1995) work on EI has been very influential in the business arena, so small firm owners should explore extensively this core thematic area for organizational success.

Leadership and informal teams In the contemporary business arena, most work is rarely undertaken in complete isolation. Employee cooperation (i.e. team working) has become the norm, and almost every individual within an organisation will be a member of one or more groups. This has also significant implications for learning. The more people collaborate the more they learn through the process of social learning. Therefore, it is important to examine how small firm leaders can create high-performing teams and how they can encourage the development of informal teams that may contribute towards skills acquisition. Starting with a short working definition of a team, it can be argued that a team is a group of 2 or more people who interact with each other (plus there is interdependence), are psychologically aware of one another (i.e. perceive themselves to be a group) and try to achieve a common business goal. Teams can be either formal or informal. Formal teams are created by small firm owners/managers in order to complete a range of complex work-related tasks and projects, whereas informal teams arise from the personal relationships among employees, irrespective of those defined within the formal organizational structure. Informal teams may offer various advantages to both employees and firm owners. In particular, they can improve employee job security since they provide workers with a powerful collective voice (e.g. in case of unfair dismissals). Furthermore, they can facilitate significantly the process of skills development through staff collaboration (i.e. social learning). In particular, knowledge sharing among employees can be a vital process

54  Leadership and staff learning towards skills acquisition. However, informal teams have their own limitations and may affect firm performance in a negative manner. For example, informal teams may encourage their members to adopt norms that contradict the prevalent business culture (e.g. lack of punctuality), which may consequently affect the overall organizational performance. It is vital for small firm owners to understand that informal teams are likely to be developed in organizational contexts where a charismatic leadership model is applied rather than in contexts where the emphasis is placed on legitimate authority and power. Also, informal groups generally meet social and security needs before other needs. Given the previously mentioned benefits of informal teams, it should be among the key roles of small firm owners/managers to facilitate the development of informal teams (e.g. through various social events and activities) but at the same time encourage them to match their aspirations with those of the whole organization. Below are given some guidelines on how small firm owners can support the creation and growth of both formal and informal teams (Panagiotakopoulos, 2016): • Place much emphasis on the composition of the team since this will affect the rate of learning. Meredith Belbin stressed long ago that teams need to consist of individuals who have certain behavioural traits that enable them to play specific roles. These are the coordinator who has a clear view of the team objectives and organizes the team activities, the shaper who can get things going, the plant who is likely to develop some original ideas, the resource investigator who has extensive social contacts and can build networking, the implementer who can easily put theory into practice, the team worker who tries to promote harmony within the team, the completer who sets the deadlines and ensures they are achieved, the monitor evaluator who can critically evaluate all the available options for action and the specialist who provides specialist skills and knowledge around a particular ­subject area. • Set clear, challenging and interdependent tasks so that employees can interact with each other towards their completion. This will stimulate the process of social learning. • Create a proper physical setting that gives the opportunity to staff for increased social interaction (e.g. shared offices). • Arrange certain social events during the year to encourage informal team development and bonding. • Provide team rewards for outstanding performance, as well as for knowledge sharing. Recognizing team excellence through monetary (e.g. bonus) and non-monetary rewards (e.g. verbal praise), for example, can enhance team motivation significantly.

Leadership and staff learning  55 • Hold each member accountable for team performance to minimize the phenomenon of ‘social loafing’ (i.e. a team member puts less effort than the rest). • Encourage team autonomy to increase members’ satisfaction. Several studies have shown that small firm owners/managers are usually reluctant to grant decision-making authority to their staff for fear of losing their negotiating power at work. However, this limits the ability of employees to expand their knowledge and skills, as well as reduces their job satisfaction. As a result, their motivation is seriously damaged and translated into poor performance with a negative impact on the whole organization. • Provide proper resources (e.g. tools, budget) to the team in order to achieve the business objectives. • Provide continuous coaching. Any team project should also be viewed as a valuable learning experience.

Reflective Case Study ‘Hotel Z’ is a 5-star luxurious hotel chain consisting of 40 hotels throughout the U.K. The organization recently acquired a 5-star hotel in Spain in order to expand further to the European region. The hotels of the parent company are situated in very popular locations and offer high-quality services to customers with a premium on price. The organization has decided to use an ethnocentric approach and send one of its existing high-calibre (U.K.-based) managers to Spain to lead the acquisition process and transfer some core corporate values. If this new international venture is successful, the organization plans to acquire some more hotel groups in other European countries. After a rigorous screening process, the senior leaders of the parent company ended up identifying 2 potential candidates who had the required skills and expressed their willingness and desire to relocate. After a series of in-depth interviews and personality tests, the leaders created a comprehensive profile for each candidate, which follows:

Candidate A: • • • • • • • •

Marital status: single Age: 45 Very good knowledge of Spanish Excellent analytical skills Career-oriented High emotional resilience 3 years’ previous international experience 5 years’ work experience in Hotel Z

56  Leadership and staff learning Candidate B: • • • • • • • •

Marital status: Married Age: 38 Very good knowledge of Spanish Excellent analytical skills Career-oriented High emotional resilience 5 years’ previous international experience 7 years’ work experience in Hotel Z

Candidate’s B wife was also interviewed. She does not speak Spanish, but she was very enthusiastic about moving to Spain. She fluently speaks English, German and French and has worked previously as a receptionist for 7 years in a small U.K. hotel. After the final round of interviews, the selection panel chose Candidate A. The selection criteria used follow: Selection criteria: • • • • • • • • • • •

Analytical/problem-solving skills Interpersonal skills/conflict management skills Stress management skills Time-management skills Technical skills (IT) Extent of extraversion–introversion Marital status Age Previous international experience Language skills Employment history within the company

Tasks After ranking (in order of importance) the preceding selection criteria, critically evaluate the selection process and the leaders’ final decision on the chosen candidate. Use relevant theory to support your arguments.

Key points of the chapter Leadership is critical for a small firm’s success since the leader is the  person who creates the future direction of the organization and inspires followers to support them towards achieving business

Leadership and staff learning  57 objectives. Leaders who adopt a participative style tend to promote staff learning and stimulate social learning among employees. EI is vital for small firm leaders since it can enable them to build high-performing teams that will work towards achieving business objectives and will be able to respond to any unpredicted environmental changes. EI consists of 4 core elements: the ability of an individual to understand their own emotions, the ability to effectively manage their emotions, the ability to understand other people’s needs and the ability to manage effectively their social relationships. The creation and support of both formal and informal teams in the workplace are crucial for the completion of several daily tasks and skills development. Therefore, small firm owners should take a number of steps to create high-performing teams, including careful selection of team members, setting of clear and challenging goals, extensive coaching, feedback provision on team performance and team rewards.

References Anderson, M. (2010) The leadership book. London: Financial Times/Prentice Hall. Avolio, B. and F. Yammarino (2013) Transformational and charismatic leadership: the road ahead. 10th anniversary edition. Bingley: Emerald Publishers. Buck, A. (2016) Leadership matters. Suffolk: John Catt Educational Publishers. Goleman, D. (1995) Emotional intelligence. New York: Bantam Books. Mumford, M. D., Zaccaro, S. J., Harding, F. D., Jacobs, T. O., and Fleishman, E. A. (2000) ‘Leadership skills for a changing world: solving complex social problems’, The Leadership Quarterly, vol. 11, no. 1, pp. 11–35. Northouse, P. (2015) Leadership: theory and practice. 7th ed. London: Sage Publications. Panagiotakopoulos, A. (2014) ‘Enhancing staff motivation in tough periods: implications for business leaders’, Strategic Direction, vol. 30, no. 6, pp. 35–36. Panagiotakopoulos, A. (2016) A short guide to people management for HR and line managers. London: Routledge Publications. Yukl, G. (2006) Leadership in organizations. Hoboken: Prentice Hall Publications. Zehndorfer, E. (2016) Charismatic leadership. Oxon: Routledge Publications.

6

International dimensions of employee learning in small firms

Cross-cultural challenges of small organizations and implications for learning In the current era, a large number of small organizations engage in international business activities in order to gain access to unique raw materials, acquire access to larger markets (thus increasing their potential for profitability) and find cheaper production methods, as well as acquire access to advanced technology and know-how. The intense domestic competition in various sectors has forced small firm owners to turn their attention to the global business arena in order to survive or/and increase profitability. However, as companies cross national borders, the business environment becomes more complex compared to the domestic macro-environment since additional factors come into play (e.g. the political, social, legal, economic environment varies significantly among countries). In this context, a sound knowledge of the impact of culture on employee work attitudes is necessary if small firm owners are to support staff learning and boost organizational performance. National culture is defined as the set of norms, behaviours, beliefs and customs shared by the population of a sovereign nation. Also refers to specific characteristics such as language, religion, ethnic and racial identity, history and traditions (Hofstede, 1980). Extensive cross-cultural management research has revealed that the national culture shapes human behaviour, so it affects the way people interact and behave at work. Therefore, all business processes that involve human activities are affected by national culture. Several cross-cultural models have attempted to capture the differences in how people behave at work. Hofstede’s (1980) cross-cultural theoretical model has been among the most popular ones used in the International HRM literature to demonstrate the cultural differences that exist among employees around the globe and how their impact on staff behaviour. The Hofstede model of national culture consists of 6 dimensions. The cultural dimensions represent independent preferences for one state of

DOI: 10.4324/9781003381815-7

International dimensions of employee learning in small firms  59 affairs over another that distinguish countries (rather than individuals) from each other. It should be pointed out that the country scores on the dimensions are relative (i.e. each human being is unique, so culture can only be used meaningfully by comparison). For simplicity of analysis, we will focus on the following 4 core dimensions: • Power distance. This dimension measures the extent to which inequalities in power (social and economic) are accepted within a nation. Countries that have a high score in that dimension are tolerant of wider social and economic inequalities. In the workplace, this means that employees do accept a hierarchy at work and expect to be told what to do (i.e. job autonomy is very limited). • Uncertainty avoidance. This dimension measures the extent to which the members of a society feel uncomfortable with uncertainty and ambiguity. In other words, this dimension tries to capture whether a society is quite tolerant of precarious situations or not. In the workplace, this means that people in countries with a high score in this dimension are usually reluctant to embrace change and prefer stability. Also, they place much emphasis on job security. • Individualism versus collectivism. This dimension measures the extent to which people in a society are integrated into groups. Individualistic societies place much emphasis on caring for self and immediate family members, whereas in collectivist societies, the emphasis is placed on group relations. In the workplace, this means that employees in individualistic societies care mostly about the achievement of personal goals, whereas employees in collectivist societies care mainly about group performance. • Masculinity versus femininity. This dimension attempts to measure the general orientation of a society towards rewards. The masculinity side of this dimension represents a preference in society for achievement, heroism, assertiveness and material rewards for success. Its opposite, femininity, stands for a preference for cooperation, modesty, caring for the weak and quality of life. In the workplace, this means that employees in masculine societies are mostly motivated by financial incentives, whereas employees in feminine societies are predominantly looking for work–life balance. Using Kolb’s experiential learning model (as discussed in Chapter 3) and Hofstede’s cultural framework, the impact of national culture on employee learning could be analysed. As mentioned in Chapter 3, people have different learning styles. This means that there are individuals who learn through action and individuals who are abstract thinkers. Furthermore, people from different cultures do have different values and experiences, so for example, their readiness for classroom-based learning may be

60  International dimensions of employee learning in small firms quite different (i.e. learners are receptive to practical or theoretical stimuli depending on their cultural backgrounds). Moreover, as a result of different behaviour patterns, socialization and work experiences, individuals from different cultures may make different assumptions about what they see and understand. Hence, they are likely to acquire different bodies of knowledge. It is therefore important for small firm owners to understand how different cultural backgrounds shape human behaviour towards skills acquisition so that they can design suitable learning interventions. For example, employees in collective societies such as China, Bangladesh, Portugal and Romania do enjoy peer interaction, so learning through communities of practice should be encouraged. By contrast, in individualist societies like the U.K. and U.S., a classroom-based approach or/and self-directed learning should be used to promote employee skills development. Moreover, employees in countries that score high in power distance expect to receive detailed orders and specific guidance from their superiors on how to complete their tasks. This means that their learning is rather restricted since their senior managers have much control over their informal learning at work compared to low-power-distance countries where employees enjoy greater equality in social status and knowledge sharing can be facilitated and stimulated.

Reflective Case Study ‘LandtechX’ is a very large and profitable information technology (IT) company with its headquarters in the U.S. The company manufactures and sells high-quality software payroll systems for small and medium-sized organizations. A year ago, the company acquired a well-known IT firm in Bulgaria in order to expand further to the European market. The company, after the acquisition, decided to send an expatriate (a very experienced IT consultant) to Bulgaria to act as the temporary general director in order to guide the local staff in the newly acquired firm and transmit some core cultural values of the parent company. After a month, the expatriate decided to introduce 3 major organizational changes in order to improve the performance of the acquired firm. In particular: • He introduced individual performance-related pay with a bonus and benefits based on several quantitative criteria (e.g. the number of contracts with clients, etc.) for all employees. • He enhanced workforce flexibility by making IT designers work from home 2 days a week. • He gave extensive job autonomy and decision-making power to the junior technical staff (i.e. IT designers).

International dimensions of employee learning in small firms  61 However, after 6 months, an employee satisfaction survey revealed that the vast majority of Bulgarian workers were unhappy with the overall working climate and that they had reduced motivation.

Task Using relevant theory, discuss the cross-cultural issues that the expatriate faced in relation to the management of the new teams of employees in Bulgaria and provide suggestions on what the expatriate can do to overcome those problems and boost staff motivation. What do you think is the role of employee learning, and how can it be stimulated in the specific company?

Key points of the chapter Nowadays, an increasing number of small organizations decide to engage in international business activities to survive and boost their profitability. However, the international business arena is full of challenges since the external (macro) environment becomes complicated. It is therefore crucial for small firm owners to acquire an indepth knowledge of cross-cultural management to understand how culture shapes employee behaviour at work and how it impacts individual learning. Hofstede’s cultural framework provides a useful tool for the analysis of cultural differences among countries. The model outlines the impact of culture on employee behaviour using several dimensions. National culture does affect the nature and extent of employee learning in small organizations. People from different cultural backgrounds learn in different ways and interpret information based on their cultural beliefs. Hence, all small firm owners that engage in international business activities should be aware of the impact of different cultural values on skills development if they are to design effective learning activities that can enhance employee knowledge.

References Hofstede, G. (1980) Culture’s consequences: international differences in work related values. Beverly Hills: Sage Publications. Kolb, D. A. (1984) Experiential learning: experience as the source of learning and development. NJHoboken: Prentice Hall Publications.

Conclusion

This publication has attempted to fill the knowledge gap in relation to the ways employees in small enterprises learn and acquire new skills, which are considered the basis of organizational success at national and international levels. The analysis pointed to the value of small firms adopting a high-skills business strategy. Several research studies in the wider fields of small business management and HRM have stressed the need for small organizations in several sectors of economic activity to abandon their cost-minimization approaches to profitability and shift their strategies towards high-value-added production in order to remain competitive in domestic and foreign markets. In several countries across the globe, policy makers attempt to support such a high-skills strategy by increasing the supply of skills in the labour market, mainly in the form of an expanded formal education system and training subsidies. However, such a narrow policy intervention neglects other significant areas required to support a ‘high-skills’ strategy, such as an array of macroeconomic policies and changes in the workplace. A central message of this publication is that the answers to such questions depend on a complex of factors influencing the skill intensity of the production process and that the significance of employer demand for more and higher skills should be recognized. Boosting qualification levels of the available workforce will not, itself, produce the kind of economic benefits that policy makers desire. The key issue is to ensure that skills once created get used to productive effect within firms. A key message from this study is that while a high-skills route to industrial development may be feasible, achieving it requires care in building appropriate institutional conditions and in ensuring that employers demand such skills. In simple terms, the importance of employer demand for a well-educated workforce cannot be over-emphasized. Small firm owner commitment towards the achievement of a high-skills society and the key role of informal learning for workforce skills development are two core factors that should be acknowledged in any discussion around HRD in the small business context. Skill policies need to embrace a much DOI: 10.4324/9781003381815-8

Conclusion  63 broader range of ‘demand-side’ interventions capable of changing the way firms compete, design jobs and manage their employees if substantive progress is to be achieved. Such interventions should involve high-trust HRM systems, which encourage new forms of work organization and job design (i.e. a significant reduction in unskilled/low-skilled jobs) and the spread of coaching networks that facilitate the informal learning activities of small firms. Furthermore, policy makers have considered formal learning a major target area for public intervention claiming that formal learning constitutes the most important way of acquiring and developing the skills and competencies required at work. Yet, they appear to lack the required flexibility and relevance to attract small firm owners’ interest. The analysis in this effort reveals that small firms do not want, require or need formal systems of training (e.g. off-the-job training). Even in those firms where a more highly skilled workforce is demanded, research evidence shows that informal learning features as their preferred method of skills development. In particular, the findings from several empirical studies indicate that small firm owners favour employee development approaches that emphasize experiential, informal and self-directed learning, thus facilitating organizational development. Learning from other people and the challenge of the work itself prove to be the most important dimensions of learning in the small business context. It should be recognized that learning within small firms is often informal and incidental and facilitated by managers/supervisors and peers (i.e. employees learn from their everyday experiences in informal ways). Unless policy makers and firm owners engage with the issue of informal learning and understand exactly how such informal practices can be harnessed in more sophisticated ways to push small enterprises towards more high skills agendas, skill development policies will be doomed to failure. The study also brings fresh thought around the impact of informal learning on small firm competitiveness by revealing that it can be a key factor for improved organizational performance. The prevailing wisdom on HRD in small firms is that not much is done: The evidence is that such firms do not spend equivalent on training compared to large companies and rarely have a staff member with a dedicated training role. Hence, it is often assumed their HRD is inferior, if not non-existent. However, the present study reveals a high degree of unplanned and informal learning activity in small firms, which simply cannot be measured by means of indicators traditionally used in the field of education and training, such as participation rates, training hours, expenditures or level of qualification. One of the key messages of this research effort is that an absence of formal training does not mean that small firms do not train per se. They do train and it should be acknowledged that informal learning is not an inferior form of learning. It is fundamental, necessary and valuable in its own

64 Conclusion right as it helps small firms to meet skill shortage needs, reduce errors during the production process, introduce sophisticated technology, respond to changes and increase job satisfaction for workers. This is not to suggest that such forms of learning automatically relate to improved firm performance but to suggest that understanding the processes by which informal learning practices are stimulated, developed and implemented in small firms, and how such practices link to wider firm strategy and HRM context, is necessary if academics and practitioners are to understand how to stimulate skills upgrading and skills demand in such firms. Another key concluding point of this effort is that the contribution of learning is not limited to economic terms. It should be recognized that employee learning does offer various social benefits as well. For example, it has a vital role to play in combating in-work poverty. The present effort revealed that employee learning can help the working poor improve their living conditions. This means that staff development is closely linked to corporate citizenship. A concluding point of this publication is that HRM synergy is critical for skills development in the small business context. As the discussion in Chapter 4 revealed, the process of informal learning is severely affected by other core HR activities including staff selection, performance appraisal and rewards. Small firm owners should place equal emphasis on all the major HR activities if they are to evolve into learning organizations. All the HR functions are heavily interlinked with each other, so a change in just one HR element will not bring the desired performance improvement outcomes. Organizations need to make improvements in all the HR areas (e.g. proper HR planning, rigorous staff selection, regular performance evaluations, generous performance-related rewards, etc.) in order to achieve superior performance.

Index

Action stage 26 Behaviour rating scale 40 Business ethics 17 Change management 17 Charismatic leadership 50 Coaching 27 Communities of practice 28 Cultural dimensions 58 Emotional intelligence 51 Empathy 52 Employee-friendly HR practices 17 Employee involvement 45 Employment relationship 44 Employee rewards 42 Fear motivation 50 Formal training 23 Gig economy 3 Hard skills 40 High-value route 8 Human Capital 1 Human resource development 1, 14 Human resource management 4, 24 Human resource planning 37 Human resource recruitment 38 Human resource selection 39 Informal teams 53 Informal training 23

Initial training 25 In-work poverty 3 Labour poaching 32 Leadership 49 Learning barriers 30 Learning by doing 29 Learning cycle 26 Learning evaluation 29 Learning needs analysis 25 Low-cost pathway 8 Motivation 42 Non-monetary rewards 43 Observational learning 28 Performance appraisal 40 Precariousness 3 Remote working 3 Self-awareness 51 Self-regulation 51 Shadowing 28 Skill 14 Skill creation systems 7 Social learning 28 Social skills 52 Soft skills 40 Talent sharing 3 Zero-hours working 3