Influence Of Human Resource Management Practices on The Performance of Small and Medium Enterprises in Kisumu Municipality, Kenya

Abstract

This study investigated the influence HRM practices on the performance of SMEs in Kisumu Municipality. HRM is the management function that implements strategies and policies relating to the management of individuals. The importance of SMEs in job creation and revenue generation is now universally accepted. They have emerged as reliable instruments for poverty alleviation and employment and income guarantee, with a positive impact far beyondthe individual client. Their growth and development, and performance in general, are therefore significant not only to the individual beneficiaries, but to the country as a whole. But the performance of SMEs in Kisumu Municipality has been poor. They have become unstable, and their profit margins and sales turnover have decreased. One way to turn this around is to ensure that SMEs adopt and practice prudent HRM practices, but the actual influence of HRM practices on the performance of SMEs have not been investigated. Most studies on SMEs in Kisumu have consistently avoided this subject and failed to address the issue of HRM vis-avis performance. There was therefore need to determine the influence of HRMpractices on the performance of SMEs in order to identify suitable HRM practices that could increase their performance, and those that make negative contributions to the performanceof SMEs in Kisumu Municipality. The specific objectives were to determine the influence of recruitment and selection; training and development; performance appraisal; employeeinvolvement and employee compensation on the performance of SMEs in Kisumu Municipality. Guided by the ecological theory, the study was conducted through a cross sectionalsurvey, on a stratified proportionate random sample of 260 SMEs selected from 777 SMEs in Kisumu Municipality. Data was collected using questionnaire and interview methods,analyzed using percentages and means, and simple and multiple regression analysis techniques,and presented in tables and figures. The study found 'out that the overall average performanceofSMEs in Kisumu Municipality is 60.71% (0" = 13.59). The study also found that recruitment and selection (F, = 143.46 > F(l, 206); to = 11.97 > t (206); Adj. R2 = .408); trainingand development (F, = 158.656> F (1,206); to = 12.596> t (206); Adj. R2 = .432); and performanceappraisal (F, = 396.834 > F (1,206); and to = 19.921 > t (206); Adj. R2 = .657) are significant determinants of the performance of SMEs in Kisumu Municipality. However, employee involvement (F, = 1.019 < F (1,206); to = 1.010 < t (206); Adj. R2 = .000); and employeecompensation (F, = 0.282 < F (1,206); to = 0531 < t (206); Adj. R2 = -.003) are not significant determinants of the performance of SMEs in Kisumu Municipality. The overall prediction model [pi = 114.2 + S.4SRS + 4.49TD + 10~9PA] explains 72.4% (Adj.R2 = .724) of the variance in the performance of SMEs. The study concludes that HRM practices have a significant influence on the performance of SMEs in Kisumu Municipality, and the better the HRM practice, the higher the performance. But more specifically, the study concludesthat recruitment and selection; training and development; and performance are the HRM practices that influence the performance of SMEs. The study recommends the development of guidelines for recruitment and selection of new staff; development of a curriculum and training manuals and a work plan to ensure that staff of SMEs attend trainings; and sensitization on the importance of regular performance appraisals. The study also recommends empowering trade unions to compel SMEs to allow employee involvement in decision making. Lastly, the study recommends promotion of reasonable employee compensation structures in all SMEs. Finally, the researcher recommends that a study be conductedon a wider scope in Kisumu County, and in all municipalities in major towns in Kenyato increase its generalizability.