Sustainable HRM in sustainable SMEs : how sustainable are sustainable SMEs in managing their human resources?

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Sustainable HRM in sustainable SMEs

How sustainable are sustainable SMEs in managing their human resources?

Author: F. B. Veenstra (Feikje) | Student number: 10475680 | Date of submission: 2015, August 31th | Institution: University of Amsterdam, ABS, Executive Programme in Management Studies – Leadership track | Supervisor: Dr. Mr. M.J.O.M. De Haas

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Statement of Originality

This document is written by Student Feikje Veenstra who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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ABSTRACT

The goal of this study is to derive an in-depth understanding of sustainability and sustainable Human Resource Management (HRM) in the context of sustainable Small and Medium sized Enterprises (SMEs), set in their real world context. This study aims to provide more insight into the role of sustainable HRM in sustainable SMEs. A combination of in depth interviews and literature research is used to explore these topics.

BACKGROUND

Sustainable HRM has received growing interest in the academic literature in past decade. During this study the definition of Kramar (2014) is the starting point considering Sustainable HRM; Sustainable HRM is the pattern of planned or emerged HR strategy and HR practices intended to achieve financial, social and ecological outcomes while reproducing a HR base over the long term. Most research done into sustainable HRM is done in large enterprises or multinationals. This study is one of the first to do research into sustainable HRM in SMEs, trying to find the interrelationship between these two topics.

METHODOLOGY

An exploratory research methodology was used for this research. The study used semi-structured interviews that covered the key topics in eight different sustainable SMEs in various industries to determine whether these organizations use sustainable HRM to achieve their sustainable goals. All organizations are located in Amsterdam, the most multicultural and innovative city of the Netherlands (Iamsterdam, 2015)1_.

1_{Retrieved from: https://www.iamsterdam.com/nl/uit-in-amsterdam/ontdek-amsterdam/ geschiedenis/} samenleving

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6 RESULTS

None of the interviewed sustainable SMEs used planned, or emerged, sustainable HRM to achieve their (sustainable) goals. One half of the interviewed SMEs did not have concrete sustainable goals. The sustainable goals of the other organizations are on an operational level and comprehend mostly environmental and economical themes, which are not aligned with their HRM or HR practices. Therefore sustainable SMEs do not just lack sustainable HRM but also strategic (sustainable) planning. The HRM of sustainable SMEs doesn’t differ from the HRM of not sustainable SMEs, therefore the literature on Sustainable HRM is not applicable for sustainable SMEs and new theory needs to be developed.

KEYWORDS:

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INTRODUCTION

Sustainability and Corporate Social Responsibility (CSR) are becoming more and more important topics in the academic literature and for organizations (MVO Nederland, 20142_{). Eighty per cent of the Dutch}

organizations find they need to contribute to a more sustainable society, sixty per cent of the Dutch organizations are already – more or less – sustainable. It is most likely that these percentages will increase in the coming years. For example MVO Nederland – a Dutch knowledge and network company for organizations with sustainable ambitions - expects that the Dutch sector of clean technology will grow from 10 billion in 2015 to 30 billion in 2020. This growth comprises both SMEs as multinationals3_.

Besides the growing interest in sustainability in general, much attention in the academic literature has been given to the topic sustainable HRM in the last decade and it has been conceptualized in a variety of ways. The main focus of the academic literature on sustainable HRM represents an attempt to understand the relation between Human Resource (HR) practices and outcomes, predominantly financial outcomes, but also environmental and social outcomes (also known as the three pillars of sustainability). Little or no attention has been given to the question whether SMEs use sustainable HRM in order to achieve their sustainable goals and how sustainable HRM is implemented in SMEs. This study aims to contribute to the literature on sustainable HRM by studying the concept, practices and interaction of sustainability and sustainable HRM. Large sustainable organizations and multinationals use sustainable HRM on the one hand to achieve their sustainable goals and one the other hand to create sustainable HRM practices. Examples of sustainable HRM are recruiting and selecting people who are willing to engage in sustainable activities and provide trainings for employees to develop skills that are required in a sustainable company. But how do SMEs, companies with up to 250 employees, organize their HRM in their attempt to achieve their sustainable objectives? Is this any different than the HRM of large sustainable enterprises and multinationals?

2_{Retrieved from: http://www.mvonederland.nl/mvo-loont/indirect-verband-mvo-winst} 3_{Retrieved from: http://www.mvonederland.nl/nieuwjaarsevenement-2015/trendrapport-2015}

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The underlying key assumption of this study is that HRM varies significantly between SMEs and large organizations and multinationals. For example, Duberly and Walley (1995) found that very few traditional SMEs adopted a strategic approach towards HRM, like large enterprises. Their analysis also showed that the dominant HRM approach of SMEs is reactive and opportunistic pragmatism. HRM practices of SMEs vary in several ways from HRM practice of large organizations; In SMEs HRM practices are more widespread within the organization (Cully et al, 1999), SMEs are less likely to adopt sophisticated practices for recruitment (Carrol et al, 1999), provide less or no training to employers (Westhead & Storey, 1997), do not conduct performance appraisal in a formal structured way (Jackson et al, 1989) and do not develop HR policies on discipline and equal opportunities (Price, 1994). Festing et al (2013) also found that SMEs have different preferences when it comes to talent management; SME´s use more often a more including approach and large enterprises favour a more elitist approach.

I believe this study makes valuable contributions to the current literature. First, even though there is growing interest in the topic, HRM in sustainable organizations is still in its infancy. Second, most research into HRM has been conducted in large organizations and multinationals (Jackson & Seo, 2010); it also tended to focus on the HR practices, not on aligning the goals of the organizations with the HR policies. And third, there is generally little research published on the relationship between HRM and SMEs in the Dutch small firm context.

This article is structured as follows: first I present an overview of the literature in relation to sustainability, sustainable organizations, sustainable HRM and HRM in SMEs. Then the study method is outlined, which is followed by the results and discussion of the results. The research concludes with the discussion of the limitations of the study, implications for practice and implications for theory and further research.

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LITERATURE REVIEW

The goal of the literature review is to establish the significance of the general field of study, followed by identifying a place where new contributions could be made. This chapter will critically evaluate different methodologies used in the academic literature to identify an appropriate approach for this research.

SUSTAINABILITY

Sustainability and sustainable development were first described in 1987 by the Brundtland Commission, chaired by Norwegian Prime Minister Brundtland, as the development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Burton, 1987). Since 1987 many alternative definitions of sustainability have been proposed and diverse interpretations of the concepts have been made. Sustainability is an imprecise term and has evolved since its introduction. Nowadays most of the used definitions are based upon the three pillars model. This model places equal importance on environmental, social and economic considerations in decision-making (Pope and Morrison-Saunders, 2004). The three pillars can also be seen as three overlapping spheres interlocking environmental, social and economic spheres whose development should be harmonious (Marcus and Fremeth, 2009).

Figure 1 – Sustainable Development: Three Overlapping Spheres

Partly, sustainability is defined by an effort to conserve natural resources and avoid waste in operations. Conservation and the more efficient use of resources naturally lessen the burden of economic activity on

Society Society Economy Society Environment Environment

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the environment and help to ensure that the activity can be sustained over time because the resources required will not be exhausted. Sustainability also appears to encompass activities that renew and recycle what is used, once again with the goal of ensuring that the ecosystem that supports life and lifestyle can and will be preserved. Other aspects of sustainability include preserving what is – as in preserving threatened plant and animal species, and in cultural sustainability, preserving the values, arts, culture, and food ‘communities threatened by globalization and modernization’. In the physical science, much of the research on sustainability has focused on the amount of stress an ecosystem can tolerate as well as principles for restoring ecological balance. (Pfeffer, 2010)

SUSTAINABLE ORGANIZATIONS

A sustainable organization contributes to the sustainable development and produces concurrently economic, social and environmental benefits, the three pillars as described above. For organizations the three pillars of sustainability can be interpreted as follows:

 Environmental: The environmental dimension of sustainability captures the impact at various levels that occur in relation to natural resources such as water, land and air.

 Social: The social dimension of sustainability captures the impact of the activities of a company on society.

 Economic: The economic dimension of sustainability captures the ways companies affect the economy in which they operate.

According to Bakker (2005) the definition of a sustainable company is equivalent to the definition of a socially responsible company or CSR, as it is consensual to accept that social corporate responsibility involves organizational obligations with aspects of economic, environmental and social performance.

Over the last decades there is a growing interest in (building) sustainable organizations or organizations that are socially responsible and organizations are facing growing pressure by stakeholders (consumers, employees, investors, et cetera) to become greener. Green Management concerns the following topics: use resources wisely and responsibly, protect the environment, minimize the amount of air, water and

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energy, recycle and reuse goods, respect the nature, eliminate toxins and reduce greenhouse gas emissions (Marcus and Fremeth, 2009). According to these authors, green management arises from the expectations people have how organizations should be managed in order to protect the environment.

The importance of organizations developing in a more sustainable way seems to be clear, though the way to create a sustainable organization or a sustainable strategy is less obvious. For the most organizations it seems a struggle to be sustainable while at the same time they need to increase shareholder value. The conventional idea is that being green comes with additional costs, which may reduce the (global) competitiveness of the organization. On the other hand many studies identified a positive relation between sustainability and business success; having a sustainable organization might even lead to a reductions in costs (Porter & Kramer, 2006; Hart and Milstein, 2003; Ambec & Lanoie, 2008). A green image of the organization results in a better atmosphere and therefore a higher productivity. This good image will make the employees proud of the organization they are working for, and they become ambassadors for the company. This will enhance the goodwill. Porter and Kramer identified six market potentials that can be distinguished based on these studies and four key attributes that are required for an organization in order to achieve sustainability. The six market potentials are: (1) reduction of costs through increase of efficiency, (2) reduction of risks, (3) planning reliability, (4) assurance of legitimacy, (5) attraction of new customer segments, and (6) the development of new products and business segments. They key attributes according to Porter and Kramer (2006) are: (1) the skills and capabilities to grow profits and reduce risks through pollution prevention, (2) the innovative capacity to reposition through pollution prevention, (3) the vision to develop a shared road map for the future, and (4) dialogue with multiple stakeholders. These four key attributes of Porter are in line with the set of drivers Hart and Milstein (2003) relates to the creation of sustainable value: (1) reducing the level of material consumption, (2) operating at a greater level of transparency and responsiveness, (3) developing new, disruptive technologies and, (4) meeting the needs of those at the bottom of the world income pyramid.

The motivation among managers of organizations to become sustainable is diverse, for some it is a necessary evil to maintain legitimacy, for others it is a moral mandate. Only few managers see sustainability as a business opportunity: offering new ways of doing business and by that lowering risks

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and costs, or even growing profits and market share through innovation (Hart & Milstein, 2003). Hart and Milstein (2003) argue that the opportunity to create sustainable value is enormous, but yet to be fully exploited. These authors also insist that creating a sustainable organization is just another way of doing business and should be addressed as such. Ambec and Lanoie (2008) agree with Hart and Milstein (2003) that it is possible for organizations to be socially responsible while at the same time increasing revenues and reducing costs.

When looking at the link between sustainability and management, research has mainly focused on the link between profitability and sustainability and the factors that cause organizations to pursue different sustainable strategies (Ambec & Lanoie, 2008). Sustainability should encompass a focus on both human and physical resources. In 2010 Pfeffer argued that there was much greater emphasis on the physical resources rather than the human resources both in the research literature and the actions and communication of organizations regarding sustainability. To illustrate his point he searched on Google Scholar on the terms ‘ecological sustainability’, ‘environmental sustainability’, ‘social sustainability’ and ‘human sustainability’ and found that most entries were found for ecological and environmental sustainability and the results for human and social sustainability were only a small fraction of the overall entries. Nowadays a search of Google Scholar shows a completely different picture: Google Scholar finds 126.000 entries for the term ‘social sustainability’ but just 41.200 on ‘ecological sustainability’ and 112.000 entries on the term ‘environmental sustainability’. But even when there is a concern with the social and human effects of organizational activities, these concerns are primarily directed at the consequences of economic development and resource exploitation rather than the consequences of management practices for the employees’ health and well-being. For example in 2005 the American multinational retailer Wal-Mart communicated to their suppliers and employees that the goal of the company was to be 100% supplied by renewable energy, creating zero waste and selling products that sustain resources and the environment. While at the same time they paid their employees almost 15% less than other retailers. And because of this lower salary, the employees of Wal-Mart made greater use of public health and welfare programs (Jacobs et al, 2007).

Sustainability is not just for the multinationals, SMEs can also benefit from sustainable development. Sustainable strategies can help SMEs to increase their profitability and may even create synergistic

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effects when working collaboratively (Moore and Manring, 2009). Being a sustainable organization should encompass the effects of management practices on the well-being of the employees of an organization. Pfeffer (2010) raised the question: if it does pay to be green, then why is it so hard to get organizations to adopt practices in line with their sustainability? Why are organizations more interested in saving polar bears on the North Pole than taking good care of their own people?

HRM IN SUSTAINABLE ORGANIZATIONS

HRM can be defined as all those activities associated with the management of employment relationships in the firm (Boxall and Purcell, 2003). Can (small and medium sized) organizations that want to achieve sustainability build on the existing definition of HRM? HRM is an area that constantly evolves and changes, in the last century the term HRM has evolved from ‘Personnel Management’, ‘Labour Management’ and ‘Human Relations Approach’ to ‘Strategic Human Resource Management’. Strategic Human Resource Management (SHRM) is linking the people with the strategic needs of the organization getting every employee in the organization doing things that make the firm successful (Schuler, 1992).

Jackson and Seo (2010) made three assumptions that link SHRM with organizations striving for sustainability: (1) effective HRM contributes to firm performance, (2) effective HRM is aligned with the business strategy and context and, (3) HR practices should be aligned with each other. These three assumptions form the base of one of the most recent streams of HRM: Sustainable HRM. The term sustainable HRM has been used in the academic literature for more than a decade and several definitions of the term sustainable HRM exist. They vary due to the assumptions of the authors, different theoretical frameworks, stakeholder interests and the national and industry contexts. According to Ehnert (2009) sustainable HRM is the pattern of planned or emerging human resource strategies and practices intended to enable organizational goal achievement while simultaneously reproducing the HR base over a long-lasting calendar time and controlling for self-induced side and feedback effects on the HR systems on the HR base and thus the company itself. Schuler and Jackson (2005) identified sustainable HRM as the set of activities developed by the human resource area in order to contribute to organizational effectiveness. In recent work Kramar (2014) defined sustainable HRM as the pattern of planned or emerging HR strategies and practices intended to enable the achievement of financial, social and ecological goals while simultaneously reproducing HR base over the long term. This definition of Schuler and Jackson is

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clearly in line with the three assumptions of Jackson and Seo (2010) while the definition of Kramar is more linked with the three pillars of sustainability. A common feature of the literature on sustainable HRM is that sustainable HRM practices contribute to the development of human and social capital within the organization (Kramar, 2014). Some authors also acknowledge the impact of HRM policies on externalities, such as the environment. The term sustainable HRM can therefore be referred to as HRM practices which contribute to both positive environmental outcomes as well as human/ social outcomes with the purpose of achieving economic results. Thus strategic HRM shows the set of activities developed by the HRM-department in order to create organizational effectiveness. When this organizational effectiveness incorporates economic performance, social performance and environmental performance, HRM becomes active in a sustainable way. In this study, the definition of Kramar (2014) will be the starting point considering sustainable HRM.

According to Kramar (2014) the terms sustainable work systems, HR sustainability, sustainable management of Human Resources (HR), sustainable leadership, sustainable HRM and Green HRM are subsumed under the term sustainable HRM since they all focus on the impact of HR outcomes on the sustainable survival and success of the company.

Eisenstat (1996) argued that the human resource function has a central role in sustainable organizations and can stimulate the inclusion of issues concerning sustainability in the scope of various relationships that take place inside a company and with external organizations. Boudreau and Ramstad (2005) analysed the link between HRM and the agenda of sustainability. According to these authors, there are two main challenges for modern HRM: (1) one is related to attracting, retaining and developing talents needed for the survival of an organization in times of globalization and the search for innovation; and, (2) constructing HRM which meets the objectives linked to economic, social and environmental sustainability by developing actions with a systematic and long-term approach.

LINKING HRM WITH THE THREE PILLARS OF SUSTAINABILITY:

- Economic performance – in any sustainable economic performance, innovation is key. The term innovation is used to describe how organizations increase value by developing either new

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knowledge or new processes for the use of knowledge already available (2008, Jabbour & Santos). Innovation often means more than the creation of new products and services. It can mean innovation in terms of business models, management techniques and strategies, and organizational structures (Hamel, 2006). Sustainable innovations at SMEs are introduced to improve technological processes and lower costs (Bos-Brouwers, 2009). When there is no focus on innovation, it is almost impossible for an organization to create products and services on a continuous basis necessary to ensure the prosperity of its business (Hart and Milstein, 2003). For this reason it is argued that economic performance is analysed based on the innovative potential of an organization. HRM plays an important role in stimulating innovative performance in sustainable organizations (2008, Jabbour and Santos). Schuler and Jackson (1987) argue that when the aim of HRM is innovation, practices that stimulate employees to think, create and reflect in original ways are required. According to these authors, employee behaviour that is needed for this type of organization are contained in the following innovation strategy: (1) a high degree of creativity, (2) a long term focus, (3) a high level of cooperative and interdependent behaviour, (4) a moderate concern for the quantity and quality of the outputs of a company, (5) a great degree of risk taking, and (6) a high tolerance of ambiguity and unpredictability. Innovative companies are usually known for their quality and originality of their HRM because their economic performance is strongly linked to their innovative potential. As the resources needed for this innovation are their staff and creativity, companies are being compelled to manage, motivate and reward them in order to enhance their competitive advantage. The main HR practices related to innovative organizations are: Human Resource Planning, Performance Appraisal, Reward systems and Career Management. (Jabbour and Santos, 2008)

- Social Performance – Socially appropriate HRM has to: (1) create reward systems based on concepts of equity, distributive justice, autonomy and respect, (2) ensure safety in the workplace, (3) treat employees following the principles of respect, transparency, honesty, and long-term nature of changes, and (4) respect employees’ privacy (Greenwood, 2002). It is clear that social performance is linked to diversity management inside an organization.

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- Environmental Performance – Environmental management involves a series of adjustments and planning of structure, systems and activities of a company in order to define a certain type of position related to the environment (McCloskey and Maddock, 1994)). HRM can contribute to environmental performance in several ways, for example by recruiting and selecting people committed to the environment, train and evaluate people based on environmental criteria and implement ways of rewarding individual and collective environmental performance (2008, Jabbour and Santos).

Besides the different interpretations of sustainable HRM in sustainable organizations, it is also possible to distinguish intrinsically motivated sustainable HRM from extrinsically motivated sustainable HRM. Whereby intrinsically motivated sustainable HRM can also be used by organizations without sustainable goals. An example of this HRM is Sustainable Employability (SE). Van der Heijden et al (2015) define SE as the continuous fulfilling, acquiring or creating of work through the optimal use of competences. Sustainable Employability is taking specific circumstances of employees into account at different stages of their lives and careers. SE focuses on both younger as older employees, though it is more associated with the employability of an aging population and age-aware policies. Employees that are highly employable are more flexible, respond better to changes in their tasks and responsibilities and career shifts. Sustainable Employability can therefore be seen as a part of Sustainable HRM, but is definitely not the same as Sustainable HRM.

HRM IN SMES

Small and medium sized enterprises (SMEs) are organizations that employ 250 workers or less. In the Netherlands 99, 7% of all organizations are SMEs and in the UK this number is even higher: 99, 9%. The impact of SMEs on both regional and national economies therefore is enormous. Interestingly, the interest of the academic literature seems to be reserved for multinationals, a review of employment related journals found that only 2,9% of the published articles dealt specifically with SMEs (Harney, 2015). Harney (2015) also found that the number of articles on HRM in SMEs has decreased in the last years.

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Despite their contributions to the economy, society and employment, SMEs are often characterized by high failure rates and poor performance. Several studies showed that the presence of strategic planning is the determinant of success in SMEs (Wang et al, 2007). This study also showed that most SMEs do not use strategic planning to achieve their goals. Strategic planning is concerned with the setting of long-term organizational goals, the development and implementation of plans to achieve these goals, and the allocation or diversion of resources necessary for realizing these goals

When looking more at HRM of SMEs, the key assumption is that it differs significantly from HRM of large organizations and multinationals. Only few SMEs have adopted a formalized strategic approach towards HRM and many do not have nor need a HR manager (Kishore et al, 2012). Employing an HR professional is not a viable option for most SMEs due to the costs associated with hiring a full time HR officer. Because of that, most often the general manager or the owner of the company is responsible for the HR activities. Often there is a lack of written management procedures and practices, such as HRM, in SMEs (Kotey & Slade, 2005). Not having a formalized strategic approach towards HRM contradicts the fact that the major challenge for SMEs is retaining their talented employees because of lack of competitive salary (Kishore et al, 2012). Osman and Hashim (2003) found that many SMEs failed to achieve their goals due to the lack of HRM and organizational capabilities.

More detailed, previous research on HRM in SMEs found that SMEs have adopted less sophisticated HRM practices for recruitment (Carrol et al, 1999), training and development (Westhead and Storey, 1997), appraisal systems (Jackson et al, 1989) and the development of policies that encourages discipline and equal opportunities (Price, 1994). Furthermore, in SMEs recruitment activities and appraisal systems are less formalized. The absence of sophisticated HRM is linked with poor HRM outcomes such as jobs being less secure than jobs in larger organizations, and skill shortages or skill gaps in SMEs (Bacon & Hoque, 2005). At the same time Hayton (2003) found evidence that the few SMEs that have adopted more sophisticated HRM practices reported superior performance. Research of De Kok and Telussa (2006) supports this view; the authors found that when SMEs use HRM practices used by large organizations this leads to better organizational performance. Bacon and Hoque (2005) found in their study that SMEs who employ a high percentage of low-skilled workers are less likely to adopt HRM practices in contrast with SMEs employing a higher percentage of skilled labour.

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18 RESEARCH AREA

For small firms recruiting, motivating and retaining employees is one of their biggest challenges (Hornsby and Kuratko, 1990), in practice other functional areas such as finance, production, and marketing usually get preference over HRM due to the lack of money. While the HRM area is perhaps one of the most important areas in a SMEs, inadequate and inefficient management of HRM of SMEs has often resulted in low productivity, high dissatisfaction and high turnover among the employees (Mathis and Jackson 1991). This paradox becomes even more interesting for sustainable SMEs. It is clear that a good HRM area is essential for sustainable organizations; HRM has been widely recognized as the key resource of success and competitive advantage of sustainable organizations (Shen and Zhu, 2011). Vickers (2005) even argued that HRM is the organizational area that presents the greatest potential for the incorporation of sustainability at the organizational level. But often SMEs do not have a HR manager or even a HR policy. How do these organizations make sure they recruit, motivate and retain the employees? When looking at the HR practices of sustainable SMEs, will they invest more in a good HRM policy than not sustainable organizations? This study seeks to contribute to these debates by drawing conclusions about the HRM of sustainable SMEs and the alignment of HRM with the sustainable goals of the organizations.

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DATA AND METHOD

To answer the question ‘Do sustainable small and medium sized enterprises use Sustainable Human Resource Management to achieve their sustainable goals? And if so, how do these organizations give substance to Sustainable Human Resource Management?’ a qualitative study approach was chosen.

RESEARCH METHODOLOGY

An exploratory research methodology was used for this study. In order to collect primary data semi-structured interviews were applied. Semi-semi-structured interviews were selected for two reasons. First, they are well suited for an exploratory study because they can provide more important background information because there is more room for perceptions and opinions (Saunders et al, 2012). Second, the professional, organizational and personal background of the sample group varied so much a standardized questionnaire would not fit. Using interviews to gather data made sure that the respondents couldn’t discuss about the question with other colleagues and give a politically correct answer. And non-verbal indicators can be observed during the interview (Barribal and White, 1994).

The interviews covered key topics and key questions, the topics and questions varied from interview to interview due to the input of the interviewee (for the transcribed interviews, see appendices). The interview topics where chosen based on the literature research. These topics are: sustainability, sustainable goals of the organizations, (primary and secondary) work conditions, HRM practices (recruitment, selection, performance, appraisal, career counselling, training, outplacement, diversity and transparency) and innovation. The order of questions also varied, it depended on the flow of the conversation. All interviews were face-to-face and took place at the (head) office of the organizations.

After transcribing the interviews the interviews were coded in order to categorize the texts with the use of NVivo. A combined approach of coding was used, both deductive and inductive which was an open minded and context sensitive approach. The codes that were used entailed little interpretation to categorize the transcribed interviews, for example codes like ‘primary employment conditions’, ‘diversity’

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and ‘absenteeism prevention’. After the first cycle of coding 90 different codes were used to organize the chunks of text and themes and subthemes emerged and some codes that covered the same topic were merged. After transcribing all eight interviews a more backstage web of motives turned up.

SAMPLE

The setting for the study was Amsterdam, the capital of the Netherlands. Amsterdam is the largest city of the Netherlands with 821.00 inhabitants4_{(March, 2015) and is the most multicultural city of the world;}

On January 1th of this year, 174 different nationalities inhabited the city (for example, New York has 150 different nationalities)5_{. Approximately 80.000 organizations are established or have an establishment}

in the city distributed over eight districts (Centrum, Noord, Oost, Zuid, West, Nieuw-West, Westpoort and Zuidoost). Amsterdam is part of one of the most important economic regions of the Netherlands and the organizational and economic climate is very much focused on sustainability; the city council took several measures to support organizational sustainability6_{. For that reason, Amsterdam can be expected}

to have more sustainable organizations than other cities in the Netherlands.

Initially thirty sustainable SMEs were approached by e-mail; in this e-mail the topic and the goal of the study was explained. All SMEs that were approached participated in the DAM price competition, an annually recurring competition for sustainable entrepreneurs in Amsterdam. The competition is a collaboration of the eight city districts of Amsterdam and various internal and external partners. A week after the first mail was sent, the approached SMEs were approached by telephone to ask if they were willing to participate in the study. Not all organizations could participate due to the size of their organization; for example independent entrepreneurs without employees or organizations that employ too little employees to have a HRM policy could not take part. Some organizations were not willing to or did not have the time to participate. After eight organizations were interviewed, a point of saturation was reached. The interviewees did not gave any new information or showed new insight and views on

4_{Retrieved from: ‘https://www.iamsterdam.com/nl/uit-in-amsterdam/ontdek-amsterdam/feiten-en-cijfers’,} March 2015.

5_{Retrieved from:} ‘https://www.iamsterdam.com/nl/uit-in-amsterdam/ontdek-amsterdam/geschiedenis/samenleving’, March 2015.

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the discussed topics. Nine employees of eight different organizations in different branches were interviewed, in one organizations two employees were interviewed. The characteristics of these organizations can be found in table 1.

Industry Function of interviewee Employees (amount)

1 Hospitality Owner/Managing Director (I1) 16

2 Press / graphic design Owner/ Managing Director (I2) 14

3 Event management Business manager (I3a) and HR officer (I3b)

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4 Pre- and after schooling Policy Advisor (I4) 21

5 Architecture Business Manager (I5) 35

6 Retail Owner/ Managing Director (I6) 100

7 Construction store Owner/ Managing Director (I7) 12

8 Pre schooling Managing director 25

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RESULTS

This research covers the sustainable goals of organization, their (sustainable) HR policy and the relationship between these two topics. In this chapter I will show the results of my research and I will try to answer the research question: ‘Do sustainable small and medium sized enterprises use Sustainable Human Resource Management to achieve their sustainable goals? And if so, how do these organizations give substance to Sustainable Human Resource Management?’

SUSTAINABLE GOALS

All eight organizations were asked what their sustainable goals are for the future. Three of the eight organizations said they do not have sustainable goals: ‘we cannot be more sustainable than we are right now. There is nothing left to improve for us’ (I1), ‘The last few years there is nothing more to do for us, there haven’t been any new developments we can use in the organization’ (I2). One organization argued that they do not have concrete goals but they are open for new developments in the industry. And the other four organizations do have sustainable goals, but none of the goals are on the strategic level of the organization. The goals comprise themes like waste separation, vegetable gardens and solar panels (I5, I6, and I7). The vision on sustainability seems also to be on a more operational and easily visible level than from a strategic or tactical point of view. Examples of sustainability in the organizations are lighting programs, the use of windmills, efficient use of natural resources and obviously the products they sell. Considering the three P’s of sustainability, these examples are all linked with the P of Planet. No organization mentioned examples that included Profit or People. The goals of the organizations are focused on visible operational items.

SUSTAINABILITY

The economic dimension of the sustainability captures the ways companies affect the economy in which they operate. ‘We must make a profit at the end of the day. Otherwise we have nothing. I am not an idealist, I am a profitable organization. There is no other option besides bankruptcy’ (1). All eight organizations mention the crisis and the way it affected the economic performance of the company. The organizations

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all agree that sustainability helped them survive the crisis, where other (not sustainable) companies in their industry did not survive it. The reason why it helped them getting through the crisis according to the interviewees is the distinctive, sustainable character of the organizations: ‘I mean there are so many competitors in our sector, as an organization you have to differentiate one way or another’ (I5). But on the other hand the crisis and therefore the limited financial resources, also limited the organizations in growing further: ‘We are under a lot of pressure, banks do not want to loan money, and being sustainable makes it triple as hard to get it realized. There is a lot of competition and then we are doing things in a different way but we still have to realize it with a limited budget, due to the crisis’ (I8). The economic dimension of sustainability is often described as the innovative capacities of the organization that increases values of the organization. Practically all eight organizations consider themselves to be innovative; only one organization (I6) doubts their innovative capacities. And all organizations find being innovative very important: ‘I feel that we’ve grown that much as an organization due to the fact that we are very innovative, we always want to be one step ahead of our customers and surprise them with new ideas’ (I7), ‘I really believe this is very important, though I also believe that you need some luck with innovations’ (I3). Besides the importance of the innovative capacities of the organization, the interviewees agree unanimous that it is very important too to have employees that show innovative work behaviour. ‘Letting them work independently but also making it possible for employees to express their ideas about the organization. I think that is really important.’ (I4). In line with the sustainable goals of the organizations, the innovative capacities and thus the economic dimension of sustainability also regards mainly their operations, products, digitalization, renewal of machines, etc.

The social dimension of sustainability captures the impact of the organization on society. The interpretation of the social dimension by the interviewed organizations is:

 Donating to charities.

 Being an ambassador of charities.

 Participating in start-ups with a sustainable character.

 Giving lectures about sustainability to external parties.

 Organize workshops for customers about the reuse of waste.

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Only one of the eight organizations mentioned their own employees when talking about the social dimension of sustainability. The social dimension is primary found outside the organization, planting trees, supporting orphanages, raising money for polar bears, and the like

The environmental dimension of sustainability captures the impact of the organization in relation to natural resources as water, land and air. All interviewed organizations are very much concerned with using resources wisely in an innovative way, minimizing the use of water, air and energy, recycling and reusing goods and eliminating toxins: ‘We’ve collected PET bottles over the last weeks and gave them to an artist who is using these bottles for a project in Brazil’ (I5) ‘Our entire car fleet runs on electricity and besides that we’ve banned all chemistries in our company’ (I2), ‘All cars of the organization are equipped with solar panels’ (I4)

Two of the organizations use external checklists to check the Green Management of their organization (I1, I7). When the organizations were asked if they could show examples that illustrate the sustainability of their organization, all mentioned examples of environmental aspects (LED-lighting, energy-efficient machines and equipment, using windmills for generating energy). When evaluating the sustainability of the interviewed organizations, environmental considerations like conservation and efficient use of natural resources are seen as most important and appeared as the prime goal of the organizations.

HRM IN SUSTAINABLE ORGANIZATIONS

Two of the eight interviewed organizations have a HR policy and employ a HR officer. The other six organizations do not have a formal HR Policy: ‘I - the owner - am responsible for the Human Resources; I perform the tasks on an ad hoc base. In a small company like this one you do not need an HR officer’ (I2), ‘We do not have a formal HR policy, we do execute HR activities, but we do not have it formally on paper’ (I1), ‘A formal HR policy does not fit with our organization, the way we work around here’ (I3). The fact that only 20% of the SMEs stated not to need or have a HR manager confirms that the HRM of small and medium sized companies differs significantly from the HRM of large organizations and multinationals. The two interviewed organizations that have a HR manager are the organizations that employ more than one hundred people.

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None of the organizations is familiar with the theme Sustainable HRM or uses Sustainable HRM in their company. When asked if the organizations see the link between their Human Resource Management and sustainability the answers were diverse. One organization (I5) admitted they are interested in redefining their HRM policies in a more sustainable way, but they find it difficult to develop and implement it. Others see the link but not for their own organization (I7) and some do not see the link at all (I3). According to the definition of Sustainable HRM by Jackson and Seo (2010) the interviewed organizations confirmed none of the assumptions: the HRM of the interviewed organizations did not contribute to firm performance, it was not aligned with the business strategy and context and the HR practices were not aligned with each other. These three assumptions are similar to the assumptions regarding Strategic HRM (Schuler, 1992). So besides the fact that the organizations do not use Sustainable HRM to achieve their sustainable goals, they also do not use Strategic HRM. How is it possible that these sustainable organizations have not aligned their HRM with the business strategy and context, and of course with each other? Looking at the key assumption of the HRM of SMEs, only few organizations have a formalized strategic approach towards HRM, the outcome of this research was to be expected. So based on this information it can be concluded that the HRM of sustainable SMEs doesn’t differ from not sustainable SMEs.

The primary employment conditions the organizations offer differ from poor ‘We are a starting company, the conditions are bad, you work here because it is fun’ (I3), to average and compliant with the Collective Labour Agreement and even above average. The larger the organization, the better the primary employment conditions are organized. Whereas the bigger organizations have better primary employment conditions, the smaller organizations offer good secondary employment benefits such as training budgets (I7), collective lunch meetings (I3) and flexible working hours (I2). According to the interviewed people these benefits are more interesting than the primary working conditions. With these benefits they try to create a team of committed employees: ‘we do our best to keep our employees aboard. For example, when an employee is working here for five years, we give her a bike and after working ten years for the organization she receives another gift’ (I6). Even though not all organizations offer poor employment conditions to their employees, not offering a competitive salary and sophisticated primary employment conditions corresponds with the views on HRM in SMEs (Bacon and Hoque, Kishore et al).

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All interviewed organizations are characterized by a low turnover: ‘Most employees work here for a long time, because it is great company to work for’ (I6), ‘Fortunately, we have a very low staff turnover, we’ve had a lot of jubilees in the recent months’ (I4). This low turnover of these organizations can be explained by the fact that all organization mentioned they want to establish a long term relationship with their employees and make them stay at the organization as long as possible: ‘The employees are really important for us, therefore we want to keep all employees on board as long as possible. Which is only possible if they are happy with their work’ (I7), ‘all of our employees are professionals whom we want to keep on board. Losing one of them is a huge loss for the company’ (I4). Since the employees are very important, it is necessary to keep them happy with their job. One half of the interviewed organizations find it the responsibility of the employees to make sure they are happy: ‘I am not going to ask constantly if they are feeling well, no, that is not my job. They are responsible themselves for creating a good atmosphere, it is not just the task of the boss to create that’ while the other organizations see it as a priority to make sure their employees are happy: ‘We occasionally give gifts to our employees and give them attention. But most important of it all is the atmosphere, collegiality is so extremely important, not being bullied and laughing with each other is important too’ (I6), ‘We really find it very important that our people are happy, taking into account when somebody is not feeling well, or when a colleague is suffering from back pain put an extra chair at his desk so that person is feeling better’ (I7). There are no special programs for people that are not happy with their job or people that suffer from mental illness. It can be concluded that the employees of the interviewed organizations are very important to the organization.

LINKING HRM WITH THE THREE PILLARS OF SUSTAINABILITY

The triple bottom line, or the three pillars of sustainability, is an interpretation of sustainability that places equal importance on environmental, social and economic considerations (Pope et al, 2004).

The Socially appropriate HRM is about creating performance and reward systems based on concepts of equity, ensure safety, respect and transparency, respect privacy and diversity. Nearly all organizations conduct performance reviews and appraisals, though there are big differences in the frequency and the formal nature of the conversations. One half of the organizations were in the process of formalizing the system and want to implement it in a more formal and structured way. The nature of the performance

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management and reward systems is quite diverse; while one organization does it on demand (I8) others do it incidentally: ‘Performance, well it is more, do I like him or not? We as the company management’ determine that (I3), and some in a more formal way: ‘We have an annual performance review and a progress review mid-year’ (I7). The interviewees do not mention equity as an important part of performance and reward systems.

Transparency is an important topic, all organizations explicitly notify the importance of transparency in their organization. Transparency is being interpreted in different ways, transparency to employees about the organization, transparency to customers, openness towards each other and non-hierarchal organization: ‘I am very open. Yes, when things are going bad we share that with our team. You should deal with these things all by yourself, we deal with it together’ (I3), ‘I am very outspoken, for example: every month I give a presentation in the canteen to all employees about the ins and outs of our organization. During this presentation I always state how we are dealing with the budgets’ (I4). Three of the interviewed organizations link transparency not so much with their organization but more with their individual leadership style (I2, I4, and I7).

Four of the eight organizations find they have a diverse team of people in their organization and find it important to have a mixed workforce. Diversity in these organizations regards age, gender, racial classifications, intelligence and socioeconomic backgrounds. Sexual orientation, mental health and physical health are not identified by the organizations as diversity factors. The other four organizations struggle with organizing diversity. They acknowledge the importance of having a diverse and mixed team, but cannot manage to create one, among other things due to stereotyping within the profession (what profession?). The motivation for the organizations to have a diverse team is to improve performance (I4), hiring employees with a specific racial background because it is well known that those people are hard workers (I8), or for team balance, for example not having a division with only (fe-) male employees (I5, I6).

HRM can contribute to environmental performance in a number of ways: recruiting and selecting people committed to the environment, train and reward people based on environmental criteria and rewarding environmental performance. Recruiting talented new staff is extremely important for both small

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businesses and sustainable businesses. The interviewed organizations agree with this statement, finding good employees is hard. The methods of recruiting new people is very dissimilar among the organizations: by informal networking, internet, recruitment agencies, social media or filling the vacancy internally, all different kinds of sources are being used to recruit. The majority of the organizations do not recruit specifically on sustainability: ‘No I do not care at all if they show affinity towards sustainability. I select on other criteria, quality of work’ (I2). Only one organization said they are more interested in recruiting people that show interest in sustainability, but it is not a strong requirement.

Whereas the organizations do not recruit specifically people that show affinity towards sustainability, paradoxically they do hire people that fit the organization and fit the vision of the organization. They are expected to show fit in their work, thus some degree of affinity appears necessary. But the employee himself is responsible for fit and showing fit, not the organization: ‘Well you’re not working at the right place if you do not have that affinity. But that is your responsibility, not mine. I mean, you have more fun doing your job when you are interested in the topic’ (I3). And maybe even more paradoxical: when the employee does not show fit, it may result in dismissal even though she might have not known that she was expected to show sustainable behaviour. Not being sustainable as an employee is seen as disobeying the house rules and is therefore a reason to fire an employee.

Training and development is a HR tool all interviewed organizations use. Due to the size of the organizations most training and development plans are customized for each employee individually, depending on their function and personality. The training and development plan of employees must fit their current job and function role. None of the organization provides sustainability employability training programs ‘That does not work. If we invest in people, I want to be paid back in efficiency by the employee’ (I4). Two organizations offered some employees a training about sustainability (I1, I7), but not all employees were offered this training.

Nearly all organizations conduct performance reviews and appraisal, though there is quite a difference how often it is organized and the formal nature of the conversations. One half of the organizations are busy formalizing the system and want to implement it in a more formal and structured way. The nature of the performance management and reward systems are quite diverse, whereas one organization does

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it on demand (I8) others do it incidentally: ‘Performance, well it is more, do I like him or not? We determine that as the company management’ (I3), and some in a more formal way: ‘We have an annual performance review and a progress review mid-year’ (I7).

While Sustainable HRM is a much discussed and researched topic in the academic literature, this research provides evidence that in the Netherlands sustainable HRM is not used as such (yet) by sustainable SMEs.

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DISCUSSION

Looking at the goals of the interviewed organizations, three of the eight SMEs do not have sustainable goals, the goals mentioned by the other five organizations are primarily linked with the P of Planet and are focused on visible, operational items. SMEs that do not have goals for the future often perform worse, are less profitable and have lower employee growth than the ones that use strategic planning (Want et al, 2007). Innovation and goalsetting are very important for every organization, but even more for both sustainable organizations (Nidumolu et al, 2009) and SMEs (Edwards et al, 2005). Therefore it is remarkable that three of the eight interviewed SMEs do not have sustainable goals. How is it possible that these organizations find there is nothing left to improve and do not have goals for the future while at the same time nearly all interviewed SMEs find themselves innovative? The first step towards growth of sustainable SMEs should be setting sustainable objectives and aligning these objectives with all practices of the company.

When looking at sustainability in general, the interviewed SMEs are very much focused on the environmental and the economical dimension of sustainability. The sustainability of the organizations is apparent from their operations and the products they sell. When looking at the social dimension – people – this is found primarily outside the organization. How come that their own employees are not involved in their sustainable strategy? Growing evidence showed that organizations who want their employees to contribute to sustainability should put their employees first and create a people-first culture (Liebowitz, 2010). Is sustainability then just a commercial tool for sustainable SMEs? It seems more important to show the customers that the organization has solar panels on the roof than offering their employees good employment conditions and involve them in the sustainability of the organization.

It is striking that none of the interviewed SMEs is familiar with or uses Sustainable HR in their organization. Is it then just the lack of sustainable HRM or also strategic HRM or even the lack of having a strategy at all? It seems the interviewed SMEs lack both. None uses strategic HRM in striving for sustainability: there is no effective HRM that contributes to firm performance, HRM practices are not aligned with the strategy of the organizations and the HRM practices are not aligned with each other

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(Jackson & Seo, 2010). When looking at the management of human resources of the interviewed sustainable SMEs, the companies are more alike other SME than like larger sustainable organizations. The HRM policies of the interviewed SMEs do not differ from organizations that are not sustainable but do differ from the HRM of large sustainable companies. Being sustainable does not make their HRM any different than the HRM of other SMEs. The fact that most of the interviewed organizations do not employ an HR officer confirms this view (Kishore, 2012). And again in line with the previous, only few sustainable SMEs have adopted a formalized strategic approach towards HRM, only two organizations have formal HR policies (Duberly & Wally, 1995).

When looking in more detail to Sustainable HRM, on an executive level, parts of Sustainable HRM are integrated in the organizations: a high level of cooperative and interdependent behaviour (Jabbour & Santos, 2003), high levels of transparency (Hart & Milstein, 2003), long-term relationships with employees (Eisenstat, 1996), and the importance of diversity among teams (Greenwood, 2002). But these policies are explained by a this-is-how-we-work-here-mentality and the culture of the organization, not by a good functioning HR area or formal (HR) policies. What is in it for the sustainable SMEs to organize a sustainable approach towards HRM? Or are they right by not investing in an HR officer?

According to the academic literature recruiting, selecting and retaining high-quality employees is one of the most important parts of a sustainable organization (Renwick et al, 2013). How is it possible that the interviewed organizations do not seem to make an effort for this? Sustainable SMEs should make more use of their sustainable reputation when recruiting and selecting new employees, since it is a source of competitive advantage when hiring potentially high performing employees. According to Aimen-Smith et al (2001) a positive sustainable image is the strongest predictor of a company’s overall selection attractiveness. Very paradoxical, the interviewed SMEs do not recruit or select people who are committed to sustainability, but they do expect them to show certain commitment with sustainability when they are working for the organization. The responsibility for this commitment lies with the employees themselves. It seems not fair to expect this commitment from employees when they never actually committed to this view and did not knew this commitment was expected of them.

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As already mentioned in previous paragraphs, the culture of the interviewed organizations is very important according to the interviewees. The culture of the organizations forms the base of the management of their human resources. This study showed that the culture in sustainable SMEs and a fit with the organization are more important than a formal HR policy. While when an organization that does employ a HR officer, this officer has the capability to play a significant role in the creation a sustainability culture (Liebowitz, 2010). It is therefore always recommended to employ a HR officer, even though the organization does not employ many people. Though most of the organizations that do not employ an HR officer had several barriers to hire a HR professional and create HR policies: no or little sense of urgency for achieving social goals, not having the financial resources to employ an extra employee and cynicism against formal policies and thus having a HR strategy. Further research should show if the culture in sustainable SMEs is different than the culture of not sustainable SMEs.

Sustainable Employment is not used (yet) by the interviewed SMEs. None of the organizations uses SE in their organization. Training in sustainability is used in only one of the eight SMEs, while training is widely seen as the key Green HRM intervention in order to create staff awareness, equip staff with core sustainable skills and raise the level of sustainable expertise in the firm (Roy & Therin, 2008).

Despite the growing academic interest in sustainable HRM and HRM in SMEs, sustainable SMEs do not use it at all in order to achieve their organizational objectives. When looking at the professional HRM literature in the Netherlands it is remarkable that most articles in professional HRM journals are focused on Sustainable Employability instead of sustainable HRM. When looking for the term sustainable HRM in Dutch HRM journals 428 results were found, though the gross of these search results are focused on Sustainable Employability. The professional HRM magazine P&O Actueel published an article in which the author showed that HR professionals associate Sustainable HRM mainly with the mobility and development of employees. According to HRPraktijk Sustainable HRM is a theme that will increase considerably in importance in 2015. On the list of top HR-priorities Sustainable HRM is listed second, training and development is listed first and workforce scheduling third. Though this journal already expected the topic would increase in priority in 2011. Apparently this did not increase as much as they expected. And will it really become a top priority this year?

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Eight organizations that are located in the city Amsterdam were interviewed in order to get a broad view on how sustainable SMEs organize their HRM. The city of Amsterdam encourages sustainable initiatives and many sustainable organizations are headquartered in Amsterdam, but it cannot be inferred now that the findings of this research will go for all cities with the same characteristics. It is possible that outcomes in other cities and countries differ from the outcomes of this research due to a different sustainable climate in these cities and countries. Because of that more organizations in different cities and countries need to be investigated and interviewed, to get more generable knowledge about the topic. In addition, only eight organizations were interviewed, this is a limited amount of organizations. Due to the outcomes of this study it is not likely, but there is a possibility that other organizations in the area Amsterdam differ from the interviewed organizations in the field of Sustainable HRM.

The interviewed organizations have an average of 31 employees. It is possible that the size of the organizations influences their HR perspective. It makes sense that an organizations with 10 employees organizes their HRM in a different way than organizations with 200 employees. In further research a distinction could be made in the size of SMEs and their vision on HRM.

Lastly, due to the face to face interviews, it is possible that the interviewees were not fully honest and presented their HRM activities more positive than they actually is the case. This bias could be avoided by an anonymous follow-up research among the interviewees.

IMPLICATIONS FOR THEORY/ FURTHER RESEARCH

In the past, no studies has been done on the HRM of sustainable SMEs. Even though the topic sustainable HRM has received much attention in the last decade, the current state of research is still quite minimal and very much focused on large enterprises and internationals. Much more research needs to be done on HRM in sustainable SMEs, which is clearly completely different than sustainable HRM as discussed in the scientific literature. Scientific literature about HRM in SMEs is not as minimal, but most research was

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written in the eighties and nineties and is therefore a bit outdated nowadays. Further research should focus on a more appropriate HR approach SMEs can use in the pursuit of sustainability. More guidance should come for sustainable SMEs in the HR scholarship.

IMPLICATIONS FOR PRACTICE

First of all, sustainable SMEs should start with sustainable strategic planning and setting sustainable objectives that go beyond new solar panels and energy reduction. With the setting of sustainable strategic objectives the organizations will automatically become more innovative which ensures superior economic performance (Wang et al, 2007).

While it is increasingly acknowledged that HRM is critical to sustainable success, the debate has not extended to encompass sustainable SMEs. Sustainable SMEs should pay more attention to their HRM and make it a top priority. Effective HRM will enable sustainable SMEs improving the quality of their product or service, will positively affect the performance of the organization (Pfeffer, 1998). And besides that Vickers (2005) even argued that HRM is the key resource for success and competitive advantage of sustainable organizations. For sustainable SMEs it is even more important to organize their HR adequate than any other not sustainable SME. But most of the interviewed entrepreneurs had several barriers to invest in a HRM officer, how to overcome these barriers and create a sense of urgency among these entrepreneurs? The debate in the (Dutch) literature should encompass also sustainable HRM instead of just SE, and more research needs to be published on this topic to convince the importance of HRM in sustainable SMEs.

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Sustainable HRM in sustainable SMEs : how sustainable are sustainable SMEs in managing their human resources?