HRM and Small-Firm Employee Motivation: Before and After the Great Recession

A long-running debate in the small-firms’ literature questions the value of formal human resource management (HRM) practices, which have been linked to high performance in larger firms. The authors contribute to this literature by exploiting linked employer–employee surveys for 2004 and 2011. Using employees’ intrinsic job satisfaction and organizational commitment as motivational outcomes, the authors find the returns to small-firm investments in HRM are U-shaped. Small firms benefit from intrinsically motivating work situations in the absence of HRM practices and find this advantage disturbed when formal HRM practices are initially introduced. Firms can restore positive motivation when they invest intensively in HRM practices in a way that characterizes high performance work systems (HWPS). Although the HPWS effect on employee motivation is modified somewhat by the Great Recession, it remains robust and continues to have positive promise for small firms.