The Impact of Human Resource Practices and Compensation Design on Performance: An Analysis of Family-Owned SMEs

Abstract

A sample of 168 family‐owned fast growth small and medium enterprises (SMEs) was used to empirically examine the consequences of five human resource practices on sales growth performance. The results suggest that training and development, recruitment package, maintaining morale, use of performance appraisals, and competitive compensation were more important for high sales‐growth performing firms than for low sales‐growth performing firms. In addition, we examined the use of incentive compensation in the form of cash, noncash, and benefits and perks for four different levels of employees in family‐owned SMEs. The findings suggest that high sales‐growth performing firms used more cash incentive compensation at every level in the organization.