Human resource strategies in small enterprises

A survey of newly-formed micro and small enterprises in Lithuania examined issues relating to the employment, training and motivation of employees. Employers often rely on personal recommendations when recruiting staff and most of the companies were satisfied with the skills and qualifications of their employees. Some 57% of small Lithuanian enterprises applied staff motivation measures.

In 2005, the Lithuanian Development Agency for Small and Medium-sized Enterprises (Lietuvos smulkaus ir vidutinio verslo plėtros agentūra, LSVVPA) and the Market and Opinion Research Centre ‘Vilmorus’ (Visuomenės nuomonės ir rinkos tyrimų centras, Vilmorus) carried out an employers’ opinion poll. The survey covered certain issues pertaining to the employment, training and motivation of employees in recently-established micro and small enterprises in Lithuania.

Research methodology

LSVVPA and Vilmorus conducted the employers’ survey – encompassing business owners and managing directors or their representatives – in order to investigate the main problems facing relatively new enterprises in Lithuania. The respondents were interviewed in the workplace and a total of 800 establishments participated in the survey. The companies were selected from the list of Lithuanian enterprises submitted by the State Enterprise Centre of Registers (Valstybės įmonė Registrų centras) on the basis of having been registered between three and five years previously. Micro enterprises with no more than 10 employees (81.2%) and small enterprises where the number of employees did not exceed 50 persons (18.8%) were selected for the survey.

According to the type of enterprise, the respondents were distributed almost in equal proportion, with 49.6% of the respondents belonging to private limited companies and 50.4% acting as owners or representatives of other business entities.

The establishments participating in the survey operated in a range of economic sectors, namely:

• services (53.6%);

• trade (33%);

• construction (5.8%);

• manufacturing (4.9%);

• other business activities (2.7%).

Personal recommendations key in recruitment

The survey revealed that employers applied various employee recruitment methods to hire staff in small enterprises. However, in most cases, employees were hired through the recommendations of the owner or the employer’s friends or acquaintances; some 54% of the respondents gave this response. Indeed, 44% of those surveyed reported that friends, acquaintances, relatives and family members themselves were hired on recommendation. Other employee recruitment methods (respondents could choose more than one option) included the following:

• newspaper advertisements (23.8%);

• services of regional employment offices (18%);

• human resource (HR) agencies (10%).

Satisfaction with employees’ qualifications

Most of the business representatives (82.1%) stated that they were satisfied or quite satisfied with the qualifications and professional skills of their employees (Figure 1).

Employers’ satisfaction with employees’ qualifications (%)

Source: Survey of newly-established small-sized enterprises in Lithuania, LSVVPA and Vilmorus, 2005

However, enterprises with 11 or more employees reported less satisfaction with their employees more often than the average, at 28.7% compared with the overall dissatisfaction rate of 17.8%.

Provision of training

The responses in relation to whether the company offered employee training could be divided into two almost equal groups, with training held in nearly half of the enterprises, at 48.7%. Employee training was provided much more often in larger enterprises and in those with greater turnover. For example, employee training was organised in 72% of companies with a financial turnover exceeding €145,000 whereas such training was held in only 38.7% of establishments with a lower financial turnover.

Enterprises which encouraged the improvement of employees’ qualifications arranged for the payment of courses or training in several ways. In most cases (72.2%), the employer paid for the courses but, in some instances, employees had to pay the full cost (13.1%) or a part of the cost (12.9%) themselves.

Company managers would prefer their employees to attend courses related to the following subject areas (more than one option was possible):

• information technologies and their application (39.5%);

• financial analysis (33.6%);

• marketing (31.9%).

Employee motivation measures

Some 43.1% of the employers reported that employee motivation measures were not applied in their enterprises. In companies where motivation measures were used (Figure 2), financial incentives for employees were the most popular motivation tool, with employees being paid a certain percentage of the financial results. A flexible work schedule was cited as the most popular non-financial incentive for employees.

Use of employee motivation measures in companies applying such measures (%)

Note: More than one response was possible.

Source: LSVVPA and Vilmorus, 2005

Employee motivation measures are more often applied in larger companies; as many as 80.6% of enterprises with 11 employees or more use this strategy.

Rasa Zabarauskaite, Institute of Labour and Social Research