Human Resource management is the ma

Human Resource management is the management function that implements strategies and policies relating to the management of individuals (Patterson, 1987). In the United States as well as multinational or international corporations, human resource reflects a quantitative and strategic approach to workforce management demanded by corporate management to gain a competitive advantage, and to utilize limited and highly skilled workers (McLean, Osman-Gani
& Cho, 2004). However, over time, usefulness and effectiveness of human resource practices in the performance of small and medium enterprises (SMEs) have not been clearly defined and focus of HRM practices has mainly been on multinational or international corporations. Yet the outlook of all organizations, regardless of sizes and types, are directly linked to their personnel. According to Ominde (1964), human resource is the most important asset of an organization because it is the one that manipulates all other resources (which are inert), to function according to some plan. And as Macgregor (2011) also points out, the backbone or foundation of an organization is its core staff. The performance of SMEs in Kisumu Municipality should therefore be a reflection of the performance of their staff, and how they are managed, and more specifically, how they are recruited and selected for the available positions.
SME covers a wide range of meaning and measures, varying from country to country and between the sources reporting statistics on SMEs (Wright & Paul, 2005). The term small or medium sized business has also become standard in some countries (Grameen Foundation, 2007). But despite its wide usage, there is no universally agreed definition of an SME. However, among the most common definitions in developing countries is the number of employees and size of assets or turnover in an SME: SMEs are business units whose headcount or turnover falls below certain limits (KAM, 2008; Grameen Foundation, 2007). The traditional definition in Germany has a limit of 500 employees while, in Belgium, it is 100. But the European Union has now standardized the definition to companies with fewer than 50 employees as small and those with fewer than 250 as medium. But in the United States, when small business is defined by the number of employees, then it refers to those with less than 100 employees, and medium-sized business to those with less than 500 employees (Flyvbjerg, Holm & Buhl, 2002, 2005). However, the most widely used American definition is the same of that of European Union: up to 10 employees (Harold, 2003). Kenya SMEs Bill (2009) also defines SMEs in terms of number of employees and the enterprise turnover. Generally, and as adopted in this study, an SME is an enterprise with not more than ten employees.
The SMEs sector in Kenya has undergone a lot of structural transformation in the last three decades. The government through several sessional and policy documents, acknowledges the role of this sector in poverty reduction and employment and wealth creation (GOK, 1995,
1999, 2000). The potential of SMEs in employment creation and raising incomes for many people make them an important factor in national development. There are 1.6 million registered SMEs in Kenya, constituting 96 percent of all business enterprises in the country, and employing 5.1 million people which accounts for 75 percent of the total labour force and contributes 20 percent to Kenya’s GDP. SMEs are the dynamic engines through which society-wide developmental objectives can be achieved (Kibas, 2004; Paauwe, 2009; Pandey, 2007). Considering the high unemployment in Kenya, high rates of school dropout and the increasing number of retrenches that have deepened the levels of poverty and helplessness (Kibas, 2004), SMEs have emerged as reliable alternatives to poverty alleviation and employment and income guarantee especially among women and the youth (GOK, 1999). Hence the need for them to adopt and practice prudent recruitment and selection of their human resource.
In Kisumu Municipality, a total of 168 new small enterprises were registered by the beginning of 2009 (Kisumu Municipal Office, 2010), but by the beginning of the year 2012, the number had reduced to 123. Majority of SMEs in Kisumu Municipality do not develop to full maturity. According to Acharya (2008), a constant characteristic among SMEs is their premature collapse. SMEs, just like other business organizations, need to be prepared for what may lie ahead through development of contingencies and flexible processes. Their future must be shaped by the consequences of their own planning and actions as effected by the human resource force (Acharya, 2008). According to Flyvbjerg et al. (2000) SMEs must take hold of their future through proper HRM, and in particular, through effective recruitment and selection practices.
Recruitment is the process of attracting, screening, and selecting qualified people for a job (Hoover, In Press). According to Montana and Charnov (2000), recruitment includes sourcing candidates by advertising or other methods, screening potential candidates using tests and interviews, selecting candidates based on the results of the tests or interviews, and on-boarding to ensure that the candidate are able to fulfill their new roles effectively. Recruitment form a major part of an organization's overall resourcing strategies, which identifies and secures people needed for an organization to survive and succeed in the short to medium-term (Elwood & James, 1996). Moreover, as Zheng (2006) and Croucher (2008) point out, there is a positive and significant relationship between recruitment and selection and the performance of a firm. Sang (2005) also discovered a positive association between recruitment and selection and business performance. Ichniowski and Shaw (1999), Katou and Bedhwar (2006), and Wright et al. (2005) also reported similar positive results between recruitment and selection and performance in Canada, in Finland and in New Zeeland. However, these studies and reports focused mainly on large corporate organizations, and not SMEs. But more particularly, the case of recruitment and selection and performance of SME in Kenya and in Kisumu town in particular still needs to be investigated.
Vision 2030 intends to create a globally competitive and adaptive human resource base to meet the requirement of the country (GOK, 2008). Its potential lies in the people’s creativity, work ethic, education, and entrepreneurial skills based on human resource practices of well qualified and flexible personnel for effective competition in the global economy. SMEs are one of the ways of empowering the common person in order to contribute better towards the attainment of vision 2030 and the Millennium Development Goals in Toto. But while recruitment and training practices have been promoted in large and corporate organizations, its effect on the performance of SMEs have not been intensively investigated. Yet SMEs account for over 65 million people (79%) globally and over 75 percent of the total labour force in Kenya. This scenario called for an investigation into the effect of recruitment and selection on the performances of SMEs, with a view of recommending suitable practices for improving their performance. As pointed out already, effective recruitment and selection are crucial for good performance of SMEs. But the actual effects of recruitment and training on the performance of SMEs have not been highlighted. Thus they cannot aid the development of appropriate combination of techniques for improving the performance of SMEs in Kisumu Municipality.