A study of the formality of human resource management practices in small and medium‐size enterprises in Vietnam

Citation

Ryan, A.J. (2005), "A study of the formality of human resource management practices in small and medium‐size enterprises in Vietnam", International Journal of Entrepreneurial Behavior & Research, Vol. 11 No. 5, pp. 387-388. https://doi.org/10.1108/13552550510628345

This article presents the results of a research project, which involved a survey of some 102 small to medium‐sized enterprise (SME) owners located in Hanoi. The survey was complimented by a series of five interviews drawn from organisations within the sample. Acknowledging that small businesses have been the “engines of continued economic expansions” (p. 595) the authors then tread a well worn path, in seeking to locate the role of effective management of the employment relationship in such expansion. In order to achieve this, they restrict the definition of human resource management (HRM) practices to a list of six policy initiatives (from “Hiring to Firing”) and two more general organisational traits (the existence of a dedicated HR function and the source of new recruits (see Table 1, p. 603)). Developing a definition of HRM along these lines, the authors investigate the level of HRM usage within the sample group, then link this to their hypothesis that “the level of HR formality and firm size are positively correlated” (p. 604) and offer a consideration of the extent to which formality of HRM practices contribute to profit growth.

The main contribution of this article lies in the extension of the formality versus informality debate within a different economic and social arena. The authors note that SMEs within Vietnam face a diverse environmental context, which has a number of distinctive elements. These elements include the lack of well‐defined property rights within a society that has experienced the weakening of the central planning regime. This, the authors argue, singles out the context as markedly different from the business context, which has emerged in the transitional economies of Eastern Europe (p. 597). They suggest that the SMEs which have developed in Vietnam, as a “market economy under socialist guidance” (p. 597), face uncertainty and hence need to espouse management strategies that are more firmly based in relational rather than transactional relationships. As such, they argue, private SMEs are less likely to make use of formal HRM policies, hence basing their employment relationships more squarely on informal processes. Such a conclusion is supported within a private SME sector, which is dominated by family run business, has a lack of government regulation, and is located within a “predominately collective culture that emphasizes social relationships” (p. 598). These contextual elements are further complicated by the influx of foreign direct investment and the publicity sensitive role of the multinational organisations involved. The authors indicate that these pressures have resulted in the growth of formalised HRM policies within the SME sector designed to attract the approval of foreign organisations as much as, possibly more than, of the workforce. This suggests a situation for these privately‐owned small businesses, which has been modelled previously to indicate domination by larger players (Rainnie 1989) and suggests that within, what the authors claim is, the unique environmental context which exists in Vietnam the adoption of HRM policies by smaller firms reflects existing analysis.

The authors note that their research (despite acknowledged limitations, see p. 610) indicates that there is a clear correlation between the propensity to adopt HRM practices and size, even within the smaller business sector. Further, based on these findings, only two of the identified practices (written criteria for hiring and for performance appraisal) can be said to offer clear indications of a link between the use of HRM practices and profit growth.

Although this article has, the benefit of presenting a clear discussion of the context within which privately owned SMEs operated within Vietnam; it has the weakness of being concentrated within a single, narrowly selected location and sample of organisations. This leads to a discussion which too often has been based on existing understanding and offers little new insight into the use of HRM practices within SMEs. The limited definition of HRM applied to the organisations studied tends towards a prescriptive approach, which is wide in narrative and narrow in analysis. This said, the discussion of the context adds a further dimension to the study of the operational aspects in an international arena.