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HRM in Small Firms: Respecting and Regulating Informality

Paul Edwards and Monder Ram, in A. Wilkinson, N. Bacon, T. Redman and S. Snell, (eds)
The Sage Handbook of Human Resource Management. London: Sage

This chapter reviews the degree to which HR practices in small firms are formal or informal, reveals tensions between these two characteristics, and draws out implications. Much literature has tended to see informality as a uniform feature of all small firms, which is presented as a sin or a virtue. In fact, the extent of informality varies with the sectoral location of a firm, its strategy, and the degree to which it is run by a single family. Informality can promote flexibility, but can also lead to arbitrariness; analysis needs to treat it as a dynamic and variable characteristic.