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One of the essential issues that stress most of the plan makers accountable for issues is the way by which to upgrade the economy through the support of small and medium scale enterprises keeping in mind the end goal to deal with their financial change. Hence, a noteworthy worry to strategy planners in distinctive countries is to identify suitable methodology to bolster and develop or create small and medium scale enterprises (SMEs). Remembering the deciding objective to handle overall troubles blocking viable change, world leaders came up with the Millennium Development Goals (MDGs) in 2000, were projected to be met by 2015 which we are still expecting positive outcome if priority is placed. In that the most important of these MDGs is "to eradicate extreme poverty and hunger".

Coming about upon this, it ended up being to a great degree basic for the countries of the world to make solid economicarrangement that would serve the interest of larger part of their population, mostly poor people. In perspective of the actuality then, diverse countries have been endeavoring to raise the desire for ordinary solaces of their inhabitants with a particular end goal to accomplish this objective, among other Millennium Development Goals (Etuk, Etuk, & Baghebo, 2014). The significance of small and medium scale enterprises inemergent economy reminiscent of Nigeria can be huge because Nigeria's economy is conquered by small and medium scale enterprises in agricultural, construction, manufacturing, commerce and industry, services, trading, etc. Small and Medium Scale Enterprises (SMEs) assume a critical part in both developed and developing economies. Bits of knowledge asestablished that SMEs give over 55% of gross domestic product (GDP) and over 65% of total employment in developed economies what's more, it equally assume a remarkable part by contributing 60% of GDP and more than 70% of collective work in developing economies (Small and Medium Scale Enterprises Development Agency of Nigeria, 2012).

According to Drucker, an entrepreneur is a person who comprehends the business opportunities and advantage by rare assets and makes use of them gainfully. Then Management, he said the reason of an organization is to allow ordinary human beings to do extraordinary things, i.e., a means to make strengths productive and weakness irrelevant.

In Nigeria, the small and medium enterprises sub-sector has been intensifying, more than ever since the mid-1980s, following the prolonged downturn in the economy which forced many large enterprises to lay off large proportion of their work-force. The sector accounts for 70 percent of industrial employment (World Bank, 1995). Mazzarol, Volery, Doss and Thein (1999) demonstrated that rising and transitional economies depend on small businesses in replacing state-owned organizations and motivate economic growth.

A suitable analysis of the developed economies of the advanced countries tinted key crucial needed to prop up the SME sector in its bid to opening the floodgates of economic prosperity. The key strategic imperatives identified, in order of priority, include provision of adequate infrastructure, sustained and sufficient institutional support, education and skills upgrading, technological adaptation and innovation and availability and access to funding and financial services.

In highly developed economies, the SME sector is acclaimed as the motor of monetary development and improvement however against worldwide best practices Nigeria is rated poorly. Widespread efforts in terms of strategicprogrammes, policy and practice will be required to elevate Nigeria to a leading position by 2020—Report of the Vision 2020 National Technical Working Group on Small and Medium Enterprises (SMEs), July, 2009.

In the later past, Nigerians adjusted their regular gifts to develop traditional businesses and crafts that have sustained most of the country’s rural and urban poor for the better part of the last half century. While the oil boom of the 1970s brought in billions of petrodollars, most of the country’s population remained untouched by the new-found prosperity, thanks to widespread political corruption and catastrophic economic mismanagement. Because of these and other factors, the World Bank estimates that 80% of oil revenues benefited just 1% of the population.

Most of Nigeria’s current woes trace back to a historic overdependence on oil to the negligence of all other sectors, including customary trades and agriculture. Many years of non-comprehensive arrangements distanced the vast majority of Nigerians, plunging the country into a miasma of extreme poverty and ravaging civil and political strife. The ambiance of economic stagnation spawned a gargantuan informal economy that continues to sustain the bulk of Nigeria’s 170 million people. As Osalor would say, it is a measure of Nigeria’s inherent entrepreneurial capacity that this informal, unorganized sector presently accounts for 65% of Gross National Product and accounts for 90% of all new jobs (Osalor, 2010).

         “There’s no clear-cut answer to what small organisations are doing,” says Miller. However, for those in the micro and small business category – organisations with up to 50 people, according to European Commission definitions – the simple answer is Human Resource issues are seen as mired in red tape, says John Kilbey, business consultant at the Forum of Private Business (FPB).

“SMEs characteristically have limited materials and financial resources – their people are their business,” says Jill Miller, research adviser at the CIPD and author of the report Achieving sustainable organisation though Human Resource in SMEs. “Effectual people management at all phases of organisational transition is fundamental to achieving sustainable organisation performance.”

        At the beginning of 21st century, with bewildering development of information and communication technologies, human element became the single element which thecompetition could not copy. Since employees have veryimportant role in SME which is aspiring to be distinct fromcompetition, human resources management has moreimportant role in planning and realization of SME’s successcompared to the past period. Strategy of human resourcesmanagement has gained importance since the employeesnow are the most important factor of development. Intel- lectual capital, knowledge and competence of employeescause success or failure of SME in dynamic environment.

Human resources management is conceivably business capacity which has turned into a key component of the method ofevery SME in their efforts to establish and keep up their focused edge available.

As of late, humanresources management gained special significance, in theoryand practice of SME management. A lot of SMEs are includedin skills of human resources management and they pay moreinterest to development of their human potentials than everbefore. In view of sudden changes and solid conditions,human resources management is perceived as strategic factorinfluencing not only the success of SME but also of nations.

Human resources management relates to practice andpolicy needed to carry out all management tasks linking topersonnel issues, principally employment/hiring, education,evaluation and rewarding of SME employees and provision ofsafe, ethically acceptable and just/fair environment for them.

Beside others, these practices and policies are the following:

·        Work analysis (determination of the nature of work ofeach employee),

·        Planning of work places and recruiting of candidatesfor the job,

·        Selection of candidates for the job,

·        Direction and education of new employees,

·        Evaluation of the efficiency/output,

·        Management of the employees’ salaries,

·        Providing incentives and benefits for employees,

·        Communication with employees,

·        Education and improvement of employees,

·        Creation of the spirit of dedication in employees.

Statement of the problem

The achievement of small and medium-sized enterprises is time and again considered an indicator of economic health, and while companies with fewer than 250 employees may be less complex than multinationals, matters of scale present a different blend of challenges. Those tasked with employing human resources systems and policies in an SME may face challenges not seen in larger Human Resource departments.

Many SMEs have no budget for keen Human Resource staff. Payroll and record-keeping may be performed by a bookkeeper or accountant who integrates those functions into other financial duties. In such a case, managers and supervisors have a greater responsibility to define and talk Human Resource policy, as well as completing evaluations and discipline procedures typical of supervisory levels. With the job elements of the Human Resource department shared and dispersed through the company, maintaining strategic HR focus may be difficult.

Civicalertness of smaller businesses may be restricted, compared with high-profile, well-respected international companies. This may put an SME at a disadvantage when recruiting, even if the SME has HR staff dedicated to hiring functions. Responses to job postings may not get response at the level a "name brand" company might, simply through lack of name recognition. Those SMEs without formal Human Resource departments may experience inconsistency with recruiting success, if hiring decisions are spread among managers with different values.

Economy of scale is again a challenge for SMEs when new recruits are trained. When a business looks to key staff to perform training, yet still requires productivity from the trainers, a new hire may receive less instruction before being thrown into production, expected to learn as he works. Creating training materials and orientation manuals may likewise strain the resources of an SME that relies on work culture to orient its staff.

SME Perception of Human Resources

It is common to find small-business owners handling Human Resource systems intuitively, without a theoretical grasp of terms and concepts.SMEs tend to see Human Resource practices in comparatively simple ways, according to a 2004 study by Cornell University. Study participants were familiar with HR practices but did not identify them as such and felt little understanding at how these practices affected their employees. These instinctive attitudes may offer resistance to the introduction of more-formal human Resource practices.


Theoretically, it is significant toexamine whether existing HRM theories and frameworks are relevant SMEs inemerging economies and decide whether how they are supported and challenged.

Practically, the findings of this study might be important for entrepreneurs, managers,and leaders in SMEs in Nigeria and for global practitioners tounderstand the practices of emerging countries as they explore every opportunity to beeffective in their operations in emerging countries.

According to Oyelaran-Oyeyinka, (2003),Small and Medium scale Enterprises (SMEs) in Africa depend mostly on own savings, not only to grow but also to innovate, firms often need real services support and formal finance assistance, failing which under-investment in long term capabilities (training and R&D) may result, (Oyelaran-Oyeyinka, 2003).

Apart from finance, there are critical elements which I called “confounding factors” (which includes: knowledge, skills and experience of staff; competence and superiority of internal facilities; information and knowledge of market; intellectual and managerial leadership; external infrastructure and the enticement system at the micro and macro levels) that lacking within technology support institutions themselves. These undermine the effectiveness of their support to Small and Medium scale Enterprises (SMEs).Oni and Daniya (2012), asserted that the considering factors are significant because it would help to evaluate the operations of a vital segment of the industrial sector – Small and Medium Scale Enterprises (SMEs), which have been identified as having very high potential in promoting economic growth and development (Oni and Daniya, 2012). The assessment shall be done with particular spotlight on their financing thus adding to the presented writing on the subject matter.


 To examine the impact in which human resource practices has created in terms of performance as it relates to Small and Medium Enterprise (SMEs) in Nigerian especially Lagos State


i.      To conceptualize Human Resource issues in general in Business enterprises

ii.     To examine the input of small and medium scale Enterprises (SMEs) to the economy of Nigeria.

iii.    To high light Human Resource Issues in SMEs

iv.    To identify challenges related to Human Resource in SMEs


The research questions explored in this study are the following:

Research Questions

1. What are the Human Resource practices adopted by SMEs in Nigeria withrespect to recruitment and selection, training and development, compensation andbenefit practices, and performance management practices?

2. What Human Resource perspectives and theories are relevant to NigerianHuman Resource Management practices adopted in SMEs?

3. Which Human Resource practices of Nigerian SMEs are relevant toconvergence and divergence theories of international Human Resource Management?


Given that it is significant for hypothesis to be evaluated, also to help the researcher corroborate the greatest inadequacy for SMEs in Nigeria and fully be grateful for their respective pertinent significance, the researcher has to theorize the hypotheses as follows.

•       Is there a significant relationship between human resource practices in a firm and recruitment?

•       Is there any positive significant relationship between effective human resource management in enhancing the human resource practices?

•       Is there a significant relationship between human resource practices and organizational performance?

Scope of the study

The impact of human resource practices on the performance of small and medium scale enterprises as a study of selected SMEs in Lagos State was the influence of this study with a major focus on Organizations, firms and small business owners. Other areas focus by the study was critical examination of the impact of human resource practices influencing SMEs was suggested to smooth the progress of workers performance of SMEs on national economic development of Nigeria.


This study was constrained by many factors among which were time, funds, and the un-cooperative attitude of some respondents.

        The researcher found the study very time demanding in data collection and production. Often the researcher is rebuked for being absent from work in process of carrying out the study. Owing to the pressure of work, more intensive and extensive investigation could not be carried out.

        Some respondents were unwilling to complete the questionnaire; some others completed their own reluctantly.


Differently, several bodies, organisations and institutions have defined SMEs in different ways depending upon their purpose, objective and use. For this research, the following definitions have been adopted:

i.            Performance: is measured in organizational level outcomes and results that may include productivity, quality, customer service, and financial outcomes.

ii.          Micro/Cottage Industry: An industry with a total capital employed of not more thanN1.50 million, including working capital but excluding cost of land, and/ or, a workforceof not more than 10 workers.

iii.        Micro Enterprise: A firm, whose total cost including working capital but excluding cost of land is not more than ten million naira (N10,000,000) and/or with a labour size of not more than thirty (30) full-time workers and/or a turnover of less than two million naira (N2,000,000) only.

iv.         Small Enterprise: An enterprise whose total cost including working capital but excluding cost of land is between ten million naira (N10,000,000) and one hundred million naira (N100,000,000) and/or a workforce between eleven (11) and seventy (70) full-time staff and/orwith a turnover of not more than ten million naira (N10,000,000) in a year.

v.           Medium Enterprise: A company with total cost including working capital but excluding cost of land of more than one hundred million naira (N100,000,000) but less than three hundred million naira (N300,000,000) and/or a staff strength of between seventy-one (71) and two hundred (200) full-time workers and/or with an annual turnover of not more than twenty million naira (N20,000,000) only.

vi.         Large Enterprise: Any enterprise whose total cost including working capital but excluding cost of land is above three hundred million naira (N300,000,000) and/or a labour force of over two hundred (200) workers and/or an annual turnover of more than twenty million naira (N20,000,000) only.


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