Human Resource Management Practices in Manufacturing SMEs in Central Java, Indonesia

SMEs are major employers in Indonesian, yet little is known about human resource management (HRM) practices that they employ. This study focused on hiring, developing, and retaining employees in manufacturing SMEs in Central Java, Indonesia in comparison to the dominant discourse on HRM in SMEs. The study involved interviews with 13 owner-managers and 42 employees representing 13 SMEs. Findings suggest that HRM in these SMEs were not the coherent set of practices typically identified in ‘best practice’ literature, but practices that were characteristically informal and emergent. Cost and appropriateness were key considerations in making decisions regarding HRM adoption. Regarding attracting employees, ‘word-of-mouth’, employee referrals and ‘walk-ins’ were the preferred methods. Informal interviews and work samples were predominant ways of assessing skill levels of prospective employees. Training was usually informal, on-the-job and unstructured. Employees attended off-the-job training only when courses were free and such courses were usually provided by government institutions or major clients. Performance appraisal was rare, but when present it was typically informal and undocumented. Regarding retaining employees, owner-managers were intent on creating a harmonious, ‘family-like’ culture and providing work schedule flexibility. Factors such as labour market conditions, culture, labour law enforcement and the technology in use also contributed to the HRM investment decision and type of HRM adopted. Although the practices employed seemed informal, reactive and short-term oriented they could be justified as being congruent with the conditions and the characteristics of SMEs and were not necessarily ‘wrong’ or ‘inferior’