Human Resource Management (HRM) in a small business can be a vital task leading to success. Specifically in the service sector, service quality depends mostly on the quality of personnel since it is labor intensive and requires face-to-face interaction with customers. For a firm to be successful, effective management of the employees is crucial which depends on a significant extent on human labor

As Baum (2007) supports; in most service industries it is the human resources that creates the competitive advantage to the organization. It is imperative to point out that the economic performance of every country's economy is strongly linked to the SME sector and SMEs rely seriously on their workforce and on their HRM practices for their success. In the hospitality industry, the quality of customer services and staff responsiveness has a direct impact on the image and reputation of the hotel

What drives the true competitive of a hotel is the performance of its employees. To stay ahead, it is essential to attract, train, develop, and retain passionate, competent, and accountable employees, and find ways to keep them engaged and motivated to perform their best

It is a fact that the small and medium enterprises (SMEs) are playing vital role in the economies around the world in irrespective of the countries development stage. SMEs are now considered as the leading source of economic growth. However, as a result of the dynamic environment and globalization, SMEs are struggling for their smooth survival. Internationally there are thousands of small-medium sized hotels that are facing challenges relating to service quality aspects

The hotel industry is a service industry and hence it strongly relies on human labor; that is, its service quality is directly connected to its staff quality. It is widely known that internationally the Hotel and Catering Industry has a number of personnel related problems and poor employment practices and conditions, especially the smaller hotels. A study in small hotels of Sweden, by the consultant Mrs. Lorna Young, demonstrated the informal nature of HRM, the lack of planning and coordination, lack of R&S policies and the absence of systematic method of T&D. Larger hotels are advantageous in relation to recruitment and development .The higher level of remuneration and benefit they can offer makes them a number one choice for highly competent and skilled staff

Hotels justify the absence or neglect of HRM functions with the size of the hotel. Smaller hotels with limited financial resources claim to be restricted in developing and implementing HR systems in comparison to larger hotels. Undoubtedly, small and large hotels differ in terms of resources, money, and time. Still, all businesses-whether small or large-must hire employees to run the daily operations. Despite the size, employees are vital assets. A well- established and maintained HR department offers a solid structure which is an organizational advantage that is vital to success

Nevertheless, although small-sized hotels are faced with unfavorable conditions, they have opportunities to expand themselves using their strengths as small firms with high levels of flexibility. Smaller organizations need to change HR practices compared to larger organizations because of the different workforce requirements. Specifically, they must focus on improving customer satisfaction and the quality of service through a procedure of well organized HR management. Human Resource Management (HRM) is the function within an organization that focuses on recruitment of, management of, and providing direction for the people who work in the organization

Sadly, small hotels face many HR-related problems related to the quality of staff, staff training and development, unattractive salaries and benefits and the relatively high level of turnover of younger staff members. It is thought that the implementation of better practices can improve the attitude and behavior of employees, lower the levels of absenteeism and turnover, and increase the skill levels of employees which can lead to "enhanced quality, efficiency and improved productivity" (Mc Keena & Beech, 2008, p. 36)

The reality is that small independent hotels cannot be successful without the presence of an efficient HRM system. As has been observed, hotel owners play the most important role in establishing such systems and so they should be the starting point of  changes. Hence, what could be done in order to set up a HR system

Sadly, SMEs are not exploiting their human resource strategically and logically and management ignores organization's most valued assets, that is, the workforce. One of the major obstacles faced by small hotels, in implementing human resource practices, is the scarcity of HR practitioners to maximize their outcomes. Hence several steps should be taken to improve the sources of organizational efficiencies to achieve the SME performance

First of all, small hotel owners should realize that HRM is an investment and that it can lead to business sustainability and success, since staff members are the most precious resource that a service sector firm has. Therefore, a Standard Operating Procedure (SOP) should be shaped for each business that will include working policies and detailed procedures for staff members in every department in order to define and maintain quality standards. On this basis a comprehensible plan of internal work procedures will improve procedures, and when a trouble about service quality arises, it can effectively assist detecting the cause

Secondly, there is a need of a well organized HR planning that will involve the analysis of HR needs, the capacity of existing staff members and the preparation of job descriptions to define staff duties and qualifications. Appropriate and skilled employees should be compensated properly, since low salaries and benefits do not attract qualified staff and of course this may lead to low-quality service terms and, eventually, a decrease in customers and revenue

Despite the fact that small hotels offer lower wages they offer a cozier and informal setting. This setting enhances a closer employee -employer relationship, and greater opportunities to make decisions that will positively impact the business. Small hotels can embrace variable pay elements to their pay structures. Pay-hike associated to performance may be incorporated aside from the regular pay scales. They can also merge non-financial rewards, such as educational benefits and recreational facilities

Wisely, pay decisions could have a linkage with the outcomes of the performance appraisal mechanism in force. Performance appraisal must be carried out by the persons who observe the performance of employees. For instance, daily monitoring may suit front office employees and workers that have immediate and daily customer contact

A small hotel does not need a substantial HRM system as a large hotel would do but there is a requirement to take care of staff selection and training to ensure that quality standards are maintained. In reality, SMEs use recruitment and selection procedures more than any other HR practice. Despite that, staffing has been identified as SMEs' weakest HRM practice. In fact, it has been stated that the most frequent staffing method by SMEs is word of mouth, as it is a low-cost option of attracting candidates

Concerning recruitment small units can valve human resources through "campus recruitment" as it is a relatively cheaper source of recruitment than recruiting through advertisement and private employment exchanges. Furthermore, graduates from educational institutions may work with enthusiasm and dedication. In the contrary, more experienced staff may be hired through walk-in interviews. However, cost-effective staffing for SMEs requires at least a clear job description. Moreover, attention must be given in the background and reference checking since time and resources of small hotels are limited

Occasionally, the hotel manager would benefit from hiring a specific HR manager, in cases in which there are problems related to high turnover, staff morale or poor service provision. Although hotel managers/owners have appreciation for the need for HRM, the lack of professional skills in HR does not allow them to apply systematic HR processes and comprehend the impact it has on the organization

In addition, absenteeism in the units seems to be rooted to poor pay and the lack of professional approach on the part of superiors in dealing with the workers. Hence, small hotels may think of instituting positive measures like counseling, reward system, improving work environment, training and so on to deal with the issue of absenteeism

As Wright notes looking from a HRM perspective, examples of formal training by large firms are generally provided to employees on a yearly basis and contain personal development opportunities. On the other hand, in a small hotel, training is often informal, costly and done on a voluntary basis by other employees within the company or by the owners. Other training options may include the use of student volunteers from local colleges/universities that can provide important training and skills to their employees

Another alternative related to "off the job training" is to engage academic faculties or trained and skilled experts in order to improve the skills of the employees. Better still; some options for training may include low-priced or free training such as advice from business groups, business communities, travel federations etc. Some of the most popular tools would be: seminars/webinars, lectures, videos, and on-the-job training

In reality, hotel owners should in general improve their knowledge about modern and non complicated management practices and should expect to fit in applicable management tools and technology in their own firms. Small hotel owners could create a network with educational institutions in their area to serve as a source for recruiting permanent and temporary staff. They could also form a network of small hotel operators to allow them to share information, compare the results of operations and build up HR systems. This would assist hotels including those with limited resources to implement HR systems through outsourced HR services. Small hotels may not function well without proper human resource management practices. Also, seeking HR expertise from HR consultants on critical issues could be helpful in order to make more efficient their functioning

It is a challenge for small hotels to adopt an always evolving HRM system. The new reality is that small- and medium-sized hotels should emphasize on creating a softer but formal version of HRM practices. Small hotel owners or managers should be more willing to involve further formality in their firms HR practices, since an 'adequate' level of formality does positively relate with firm performance

However, formalization of HRM practices requires financial support and training of owner/managers on managerial skills. Last but not least cooperation and collaboration among the government, educational institutes and firms are recommended in order to improve HRM applications. Small and medium size hotels may not function well without proper human resource management practices. There is a need to use HRM practices that are cost effective and less time consuming instead of the available sophisticated practices

The starting point of change must be the hotel owners who play the most important role in establishing such systems. The worst thing of having a HRM is not having one. With the cutthroat competition in the hospitality industry the adoption of a well thought HRM strategy by SMEs will help boost their customer service levels and, eventually, increase growth and success