A secret ingredient for SMEs performance: Human resource management in cafés and restaurants in Auckland and Waikato, New Zealand

Abstract

Though entrepreneurship theory has developed extensively over the last few decades, the drivers behind small business performance are underdeveloped in terms of human resource management (HRM) practices, particularly in café and restaurant businesses. This research has investigated the associations between entrepreneurship, HRM, and firm performance in the context of café and restaurant businesses in the Auckland and Waikato regions in New Zealand. The study used mixed methods: with priority to surveys first and conducting semi-structured interviews in later stage. The quantitative (survey) data comprised matched pairs of 107 small- and medium-sized cafés and restaurants owner/manager and a random employee. In addition, nine owner-manager qualitative interviews were conducted for enhanced understanding of HRM practices and entrepreneurship.

The research extends empirical evidence into HRM and entrepreneurship of small- and medium sized enterprises, and widens firm performance measures to non-financial outcomes and focuses on the employee by using two data sources: owner/managers and employees. How owner entrepreneurial traits and characteristics, and HRM practices influence not only the firm but the workers provide unique insights to the field. The findings show the statistical significance of positive relationship of entrepreneurial traits, skills and motivation, and employee outcomes. The finding also identified the statistical significance of small size in the effect of a direct positive relationship between the HRM practices and service climate reported by owner/managers.

The study provides recommendations for future research, and implications for practice for small business owners/managers and policy-makers by suggesting how entrepreneurship and HRM can be linked to firm performance: improved communication, role of owner/entrepreneurs in HRM, and importance of flexi-time practice in cafés and restaurants.