Small business growth: development of indicators.

Howard, Jack L.

ABSTRACT

While small businesses continue to flourish in the private sector, there still continue to be small businesses that either do not experience the success that the owners desire or that ultimately fail. In order to better understand the conditions that indicate when a small business is growing or ready to grow, not only do indicators of growth need to be developed, additional indicators concerning the organization's plans, communication, and human resource management issues of trust and challenges need to be examined, since these issues might influence organizational growth. This article attempts to develop instruments that can be used to assess small businesses and the conditions that need to be present in the business in order to enhance the likelihood of successful growth of the business.

INTRODUCTION

A large component of the U.S. economy is the result of successful small businesses. To illustrate the role that small businesses play in the U.S. economy, statistics found in small business textbooks (e.g., Scarborough & Zimmerer, 2003) indicate that small businesses account for the following:

* 98.5 percent of all businesses;

* 75.8 percent of the nation's new jobs;

* 52 percent of the private sector workforce;

* 51 percent of private sector GDP; and

* 47 percent of business sales.

These facts provide evidence that small businesses are important to the health of the U.S. economy.

While the role that small business plays is impressive, it is also important to recognize that big business and corporate America is not employing as many people as it has in the past, as evidenced by continuing downsizing and layoffs (Howard, 2001). In addition to representing such a significant portion of the U.S. economy, when young adults move into the workforce, 67 percent obtain their first employment in small businesses (Scarborough & Zimmerer, 2003). Even though the evidence demonstrates that small business accounts for a majority of the U.S. workforce and new job creation, much of the research on small business growth focuses on profits, sales, and market share, largely ignoring growth of the workforce. Most of the research on the growth of the workforce has been either exploratory or descriptive in nature, but has not effectively addressed the issue that growth in the workforce can lead to increased profits, sales and market share (Howard, 2001).

The present study attempts to extend preliminary research conducted by Howard (2001), where the focus was to begin to determine when a small business owner might consider expanding his or her workforce. Planning, communication, trust and additional human resource management concerns that might influence organizational growth in areas such as profits, sales and market share will also be considered. Planning in small business has not only been found to exist, but has been found to influence the success of the small business, and that to successfully expand the workforce, planning must be completed (Barringer & Greening, 1998; Howard, 2001; Morrison, Breen & Ali, 2003). Communication has been identified as an area to address when expanding the workforce in small businesses, and that effective communication can assist the organization in its operations, thus having a potential influence on organizational growth (Greening, Barringer & Macy, 1996; Nichols-Nixon, 2005). Trusting employees has been found to have a positive influence on organizational profits, while human resource problems have not only been found to exist as small businesses grow, but that organizations do make efforts to address these problems (Howard, 2001; Kotey & Slade, 2005). First, this study will discuss the literature to date, focusing on growth, planning, communication, trust and human resource problems. Second, the research method will be described. Third, the measures being examined for inclusion in the various scales will be presented. Fourth, the results of the scale development will be presented. Finally, a discussion of the implications of the scales will be presented.

LITERATURE REVIEW OF SMALL BUSINESS GROWTH

When examining the literature on small business, it quickly becomes apparent that there are many different definitions of what constitutes a small business. In addition to a variety of definitions, there are also many different conditions that influence whether a business is considered small. Given these definitions and conditions, a small business is "one that is independently owned and operated and not dominant in its field of operation" (Hodgetts & Kuratko, 1995, p. 6). Additionally, as the definition pertains to the present study, the following conditions apply:

* fewer than 250 employees in the manufacturing sector;

* less than $22 million in annual sales in the wholesale sector;

* less than $7.5 million in annual sales in the retail sector; and

* less than $10 million in annual sales in the service sector (Hodgetts & Kuratko, 1995).

Given that the present study focuses on the development of instruments that are designed to measure conditions within a small business that may be related to profits, sales and market share, all functions of firm growth, the literature review will also focus on firm growth. Additionally, references will be made to human resource management issues, such as the expansion of the workforce, planning, trust, communication in organizations and human resource problems that small businesses face, given that these issues can influence the growth of small businesses.

Firm Growth

In the late 1990s, the U.S. economy was very good, resulting in an increase in the number of small businesses. Even though the economy in the early 21st century was not as good as the years leading up to this century, small businesses continue to blossom, as evidenced by the role they play in the U.S. economy (Scarborough & Zimmerer, 2003). Flamholtz (1990) has laid out a framework describing how businesses grow. While Flamholtz (1990) identifies seven stages of organizational growth, the first 3 stages are of particular importance and interest to small business (Howard, 2001). The first stage is that of new venture, which is when a small business is just beginning. Markets and products are being defined and developed in this stage. The second stage is expansion, and can focus on increased sales, revenues, market share, and ultimately the number of employees (Flamholtz, 1990). The third stage is professionalization, and focuses on formalizing the goals, processes and functions of the organization, and is considered to be closely related to expansion (Howard, 2001). Stage four is consolidation, and focuses on issues faced by firms once they have made the transition to professionally managed organizations with working systems in place, focusing more on managing its corporate culture (Flamholtz, 1990). Diversification is the fifth phase, focusing on developing new products for the markets to which the organization is already providing goods and services (Flamholtz, 1990). The sixth stage is integration, focusing on developing an infrastructure to support multiple business units (Flamholtz, 1990). The final stage is that of decline and revitalization, and focuses on rebuilding the organization at all levels, to ensure continued survival (Flamholtz, 1990). Stages four through seven of firm growth are of concern for older and larger organizations, and are not pertinent issues for small business.

Examining stages two and three more closely, human resource management concerns begin to enter the picture in these stages. During expansion there may be a need for an increase in the number of employees. This can be a result of trying to increase sales and market share, as well as organizations having to battle turnover of employees (Flamholtz, 1990). Additional problems result because of the increased growth, resulting in situations where employees believe that they know what the status of the inventory of the product, only to find out later that the product they believed to be in the inventory is gone (Flamholtz, 1990). This situation is indicative of a number of possible problems, but communication may be the underlying factor in this situation. Finally, it might be the case during this stage that business owners are directly involved in many facets of the organization's operations, retaining considerable control over decisions. This could be out of necessity, but it might also be out of a lack of trust that employees can do the job precisely as the business owner desires.

Planning

During professionalization, management systems focusing on planning, organization, management development and control are developed (Flamholtz, 1990). The formalization places an emphasis on organizational planning, which may include the number of employees in the organization. Additionally, control measures could also include enhancing communication in the organization, as well as addressing human resource management problems.

Over the past decade, small business research has begun to incorporate human resource management concerns into the research issues. While initial research was largely descriptive, more recent research has begun to examine the issue of the conditions that exist when a small business owner should expand his or her workforce (Hodgetts & Kuratko, 1995; Howard, 2001; Tucci, Wyld & Cappel, 1997). This begins to move research on small business into the realm of understanding what activities a small business owner should undertake so that his or her business is in a position of effectively expand its workforce. Even though there has been only a small amount of research conducted to date examining when a small business owner should expand his or her workforce, one must remember that in many instances, small businesses fail to develop a formal business plan. Bhide (2000) found that only 21 percent of successful businesses had formal business plans in place, leading to the possibility that human resource planning may not occur (Howard, 2001). Furthermore, it has been acknowledged that formal policies and procedures have not existed in many growing small businesses, and that a reliance on shared business logic is not unusual (Nicholls-Nixon, 2005). This might indicate that many businesses move forward without a sound business plan, let alone a developed plan of when to increase the size of their workforce.

While formal planning may not be prevalent in small business, there is evidence that planning is related to the success of small businesses. In two different qualitative studies (Barringer & Greening, 1998; Greening et al., 1996) evidence was found that in order to successfully expand the workforce of a small business, planning for growth must be carefully done, considering a wide variety of human resource management issues, such as revision of compensation plans and providing realistic expectations to new employees. Research also has demonstrated that using business plans has a positive relationship with growth that is greater than industry norms (Morrison et al., 2003). Furthermore, a recent study found that as small businesses grow, they formalize their human resource policies and recordkeeping (Kotey & Slade, 2005). If employment policies are being formalized as a firm grows, it also might be expected that planning will become more formalized, as well as increase. Finally, small businesses employing strategies that were forward-looking were found to have a positive, direct effect on employment (Gray, 1999). All of this evidence indicates that planning in small business may be an indicator of when a small business should expand its workforce (Howard, 2001).

Studies examining the relationship between increases in revenue and increases in employees have indicated that increases in the number of employees were tied to increases in revenue (Box, Crouch & Clow, 1998; Gray, 1999). The key finding of these studies is that they begin to reveal that some businesses clearly understand that increasing the number of employees leads to increased profitability. These businesses know that sometimes the key to increasing revenues it to invest in expanding the workforce (Howard, 2001).

Communication

A second area of interest as small businesses expand their workforce is the importance of communication. Communication with employees should be focused at ensuring that employees understand the direction of the organization, leading to a sharing of the organization's vision and objectives (Dyer, 1996). When organizations expand, communication difficulties have developed, and it is important to attempt to proactively address potential communication issues before and during the time when expanding the workforce (Greening et al., 1996). The communication ensures that all employees understand the shared business logic of the organization, assisting the organization in its operations (Nicholls-Nixon, 2005). Consistent with these findings, Howard (2001) found that communication of the organization's plans through meetings demonstrated a positive, significant correlation with growth of organizational profits. These studies all indicate that increased communication not only facilitates growth of small businesses, but that communication can be used to reduce the number of problems and difficulties faced when expanding the workforce.

Trust

Trust is an issue that has not been widely studied in relation to growth in small business. However, trust has been found to have a significant, positive correlation with organizational profits (Howard, 2001). Small business owners and managers in small business need to be able to trust their employees. If they do not develop some level of trust in their employees, they may find themselves attempting to complete tasks and jobs themselves rather than delegating tasks to employees. This can lead to an underutilization of employees, as well as contributing to the burnout of small business owners and managers. While not widely studied, since trust has demonstrated a significant relationship with organizational profits, it should be more closely examined to determine if it has any relationship on the growth of small business.

Human Resource Problems

As a small business expands its workforce, it is reasonable to expect that the organization will experience some problems of a human resource management nature. This could be the reason that small businesses formalize their human resource policies and recordkeeping as they grow, since many small businesses do not have an employee dedicated to human resource management issues, as the small business owner or managers may be addressing human resource management issues on their own as needed (Kotey & Slade, 2005). Regardless of the cause, it is important to understand that these problems can develop. In an exploratory study by Howard (2001), a wide variety of human resource problems were identified by owners, managers and employees of small business. Most notably, staffing problems and appropriate salaries were noted as contributing to problems in the organization. While many other more specific problems were identified, staffing and compensation are functional areas of human resource management that might influence successful growth of small business. Effective human resource management ensures that the right number of employees with the right skills are in the right place at the right time. Given this, human resource problems might significantly influence small business growth, and should be examined more systematically.

The discussion of the literature indicates that preliminary investigations indicate that firm growth, communication, organizational trust in employees and human resource management problems appear to be consistent concerns for small businesses as they expand their workforce. In order to better determine the influences of these issues, the present study attempts to develop scales of firm growth, communication, trust and human resource management problems. These scales are being developed specifically for small business for potential use as indicators as the effects of firm growth, planning, communication, trust and human resource management problems on organizational profits, sales and market share, among other potential uses. Ultimately, it is believed that these scales might be used to indicate when a small business might expand its workforce.

METHOD

This section describes the research techniques used to develop that scales that measure firm growth, planning, communication, trust and human resource problems. The sample, procedure and analyses conducted will be described in the following subsections of this paper.

Sample

To establish the reliabilities of the scales, a systematic, random sample was drawn from a 10 county area in the Midwestern section of the United Sates. A list of 4000 small businesses was obtained from the State of Illinois Department of Commerce and Community Affairs. Selection of organizations was based on a rule of selecting every other organization, resulting in a sampling of 2000 small businesses. Responding organizations ranged in size from 2 to 600 full time equivalent (FTE) employees, with a mean of 48.6 FTEs. Organizational sales ranged from $60,000 to $175 million, with a mean of $9,373,840. When comparing these numbers to those of the definitions provided by Hodgetts and Kuratko (1995), all of the numbers met the criteria laid out in the definitions. In other words, the four organizations with more than 250 employees were not manufacturing firms, and the two organizations that had very high profits were not in the retail, wholesale or service sectors. These organizations were specialized manufacturing firms, selling components to other manufacturers.

Procedure

Surveys were sent to the owners of small businesses. If the owner could not be identified, the surveys were mailed to the president of the small business. A cover letter describing the study accompanied the surveys. The cover letter indicated that participation was voluntary and that responses would be kept confidential. Of the 2000 surveys mailed to small businesses, 154 usable surveys were returned, resulting in a 7.7 percent response rate. While the response rate is low, enough data was collected to allow for the effective analysis and development of scales to measure organizational growth, planning, communication, trust and human resource problems.

Measures

As part of a comprehensive survey, participants evaluated several statements associated with their small business concerning firm growth, planning, communication, trust and human resource problems. The complete list of items being considered for each scale is presented in Appendix 1. The participants rated these items on 5-point scales, ranging from 1 (strongly disagree) to 5 (strongly agree).

Analyses

Data were analyzed using SPSS 12.0 for Windows. First, correlation coefficients were calculated to determine if any preliminary relationships existed among the variables associated with each scale. Second, factor analyses were conducted to determine if the items loaded on the proposed scales. Factor analyses were conducted with growth and planning, growth and communication, growth and trust, and growth and human resource problems. This was done to ensure that none of the items in the growth scale loaded with items in the scales proposed to influence growth. Finally, reliability analysis was conducted for each proposed scale based on the results of the factor analyses, in an attempt to determine the reliability of the scales.

RESULTS

Table 1 presents the correlation coefficients for the scale items associated with planning in small businesses. As the data indicate, all of the items were significantly correlated with the other items proposed to be in the planning scale.

Factor analyses were conducted on the growth scale items four times, once each with the planning scales items, communication scale items, trust scale items, and human resource problems items. In the factor analysis with the planning items, two components were identified when varimax rotation was used. The first component consisted of the nine items proposed to comprise the planning scale, while the second component consisted of the 6 items proposed to comprise the growth scale. The factor loadings for each item within each scale were greater than 0.40.

Given that the items on the planning scale were identified as separate and distinct from the growth scale, a second factor analysis was conducted with only the planning scale items to ensure that these items loaded on one factor. The resulting analysis confirmed that only one component existed for planning, with all factor loadings greater than 0.60. Planning conducted had a factor loading of 0.72, formal planning had a factor loading of 0.73, monitoring the progress of plans had a factor loading of 0.80, and resources provided to ensure achievement of plans had a factor loading of 0.72. Various types of plans also were identified as components of the scale, with having operational plans resulting in a factor loading of 0.70, and having strategic plans and contingency plans having factor loadings of 0.79 and 0.69, respectively. Finally, ensuring that the parties involved in achieving the plans resulted in a factor loading of 0.67 and linking rewards to the plans had a factor loading of 0.61. When the reliability analysis was conducted on this scale, the resulting Cronbach's Alpha reliability coefficient was 0.88, indicating that the scale is reliable.

The correlation coefficients for the items associated with the communication scale items are presented in Table 2. The data indicate that each of the items was significantly correlated with the other items proposed to be in the communication scale.

A factor analysis was conducted which paired the growth scale items with the communication scale items. Utilizing varimax rotation in the factor analysis resulted in the identification of three components. The first component was made up of five of the six growth scale items. Specifically, growth over five years, growth in the number of employees over five years, growth in sales over five years, growth in profits over five years, and growth in market share over five years loaded on the growth component, each with a factor loading greater than 0.70. Managers communicating verbally with employees on a regular basis, meetings held regularly, meeting being orderly, meeting being effective and meeting being efficient each loaded on the communication component, and all factor loadings were greater than 0.50. Finally, informing employees of changes verbally and growth leveling off loaded on a third factor. This indicates that these items are not components of the proposed communication and growth scales, and were then removed from the scales.

Given that the communication items resulted in a reduction to five items on the scale, an additional factor analysis was conducted to ensure that only one component existed for the scale. The factor analysis confirmed a single factor, with the resulting factor loadings for each items greater than 0.60. Managers communicating with employees verbally resulted in a factor loading of 0.67, while meeting being held regularly had a factor loading of 0.71. Meeting being orderly, effective and efficient resulted in factor loadings of 0.79, 0.81, and 0.77, respectively. The subsequent reliability analysis indicated a Cronbach's Alpha reliability coefficient of 0.79, indicating that the scale is reliable.

The items proposed to comprise the scale on trust in small businesses resulted in significant correlations. As the data in Table 3 indicate, all of the items were significantly correlated with the other items proposed to be in the trust scale.

When the resulting five growth scale items were factor analyzed with the trust scale items, two components were identified using varimax rotation. The first factor consisted of the five growth scale items, while the second factor consisted of the three trust scale items. All factor loadings for the items associated with each scale was greater than 0.70.

A second factor analysis was conducted on only the trust items to ensure that these items loaded on just one component. One component resulted, with businesses supporting managers and employees in the decisions they make having a factor loading of 0.83. Businesses trusting their employees and businesses trusting that their employees can step in as needed resulted in factor loadings of 0.91 and 0.85, respectively. The subsequent reliability analysis resulted in a Cronbach's Alpha reliability coefficient of 0.83, indicating a scale that is reliable.

Table 4 presents the correlation coefficients for the scale items associated with human resource problems in small businesses. As the data indicate, all of the items were significantly correlated with the other items proposed to be in the human resource problems scale.

A factor analysis was conducted analyzing the growth scale items and the human resource problems scale items. Utilizing varimax rotation, two components were identified. The first component consisted of the growth scale items, while the second factor consisted of the human resource problems scale items. All factor loadings were greater than 0.70.

To ensure that the human resource problems resulted in one component, a subsequent factor analysis was conducted. A single component was identified, with problems hiring the right person resulting in a factor loading of 0.71, while problems hiring the right number of employees having a factor loading of 0.86. Providing appropriate salaries to employees and having enough people for the job each resulted in factor loadings of 0.79 and 0.82, respectively. The reliability analysis resulted in a Cronbach's Alpha reliability coefficient of 0.81, indicating that the scale is reliable.

Table 5 presents the correlation coefficients for the scale items associated with firm growth in small businesses. Only the remaining five scale items were included in the analysis, as the sixth firm growth scale item did not load on the proposed scale when the data was factor analyzed with the communication scale items. As the data indicate, all of the items were significantly correlated with the other items proposed to be in the firm growth scale.

Finally, a factor analysis was conducted on only the remaining five items proposed to comprise the growth scale. One component was identified with growth over five years having a factor loading of 0.89 and growth in the number of employees over five years resulting in a factor loading of 0.76. Growth in sales, profits and market share over five years each resulted in factor loadings of 0.93, 0.73, and 0.77, respectively. The reliability analysis indicated a reliable scale, with a resulting Cronbach's Alpha of 0.87.

DISCUSSION

The results associated with the present study begin to reveal some of the underlying concepts that comprise indicators of issues facing small business. The study establishes scales that are intended to be used to study small businesses as they grow, extending the research of Howard (2001). These scales can be used to further the examination of what the major issues are as a small business grows, as well as potentially identifying when a small business should expand its workforce.

The firm growth scale was found to be reliable, and focuses on growth over a five year period, an increased number of employees, increased sales, increased profits, increased market share, and continued growth. Each of these items was included as growth in small business, just like any business, can be measured in multiple ways. In order to gain a full understanding of the total firm growth in a business, taking into account market share, profits, sales and the number of employees provides a more complete picture of the current state of the small business, and is consistent with various models and theories associated with firm growth (Flamholtz, 1990). The scale developed not only incorporates each of these dimensions, but also demonstrated a reliability of 0.87, which is a strong reliability.

Historically, only a small portion of small businesses have a formal business plan (Bhide, 2000). However, this does not mean that small businesses lack plans, just that the plans have not been formalized. Evidence does indicate that small businesses rely on shared business logic, ensuring that the small businesses can effectively move forward without a formal, written business plan (Nicholls-Nixon, 2005). Planning has been found to have an influence on the successful growth of small businesses, focusing on looking toward the future (Barringer & Greening, 1998; Greening et al., 1996; Gray, 1999). The planning scale developed in the present study incorporates both formal and informal planning, recognizing that not all plans in small businesses will be formalized in a written format. Additionally, a variety of plans can exist in organizations, such as strategic, operational and contingency plans, which have also been incorporated into the scale in an attempt to understand the extent of planning in small businesses. Monitoring progress, resources to support a plan, employee understanding of the plan and rewards associated with plan achievement have also been included as items in the planning scale. By incorporating these items, not only is the extent of planning in a small business examined, but the also the actions and resources that can be used to ensure a plan's success are considered, since these actions and resources can influence the success of the plan. The inclusion of each of these items provides a more complete view of not only the plans, but the organization's intent to support the plans. The resulting reliability was strong, with an alpha coefficient of 0.88.

Effective communication in a small business is of critical importance, given that many small businesses do not have formalized plans (Nicholls-Nixon, 2005). Most communication in small businesses is verbal, and the communication scale incorporates items that focus on verbal communication, as well as the effectiveness, efficiency and orderliness of meetings where information is communicated to employees. These items were specifically incorporated into the scale since communication of organizational plans in meetings has been found to have a positive, significant correlation with growth of organizational profits (Howard, 2001). The communication scale resulted in a strong reliability of 0.79.

Small business owners cannot always address all of the issues that their small business faces themselves. Relying on employees to execute their tasks and assignments is something that small business owners may have to do at some point. This means that small business owners need to trust their employees to do their assigned tasks, make solid decisions that support organizational success, and that an employee can step in where needed. Trust has not been studied often in small business research, but has been found to have a significant, positive relationship with organizational profits (Howard, 2001). The trust scale incorporates supporting employees to do their job, trusting employees to make decision, and trusting employees to step in and assist managers when needed, achieving a strong reliability of 0.83.

Human resource problems are encountered by all types and sizes of businesses, including small businesses. The predominant human resource problems identified by Howard (2001), focused on hiring employees, obtaining the right number of employees, having enough employees to complete the jobs necessary to the organization, and having effective compensation for employees. Each of these items was incorporated into the human resource problems scale, resulting in a reliability coefficient of 0.81, which is a strong reliability coefficient.

The present study focused on the development of scales that can be used to examine small businesses to determine if the small business is growing, as well as the status of planning, communication, trust and human resource problems. In each instance, scales resulted that produced strong reliabilities. These scales can begin to provide small business researchers the opportunity to examine the status of small businesses from an objective perspective, examining trends across small businesses to determine how planning, communication, trust and human resource problems might influence firm growth in small businesses. This can assist in further understanding which factors lead to success and which factors create challenges for small business.

Finally, continued refinement and examination of the scales might provide researchers the opportunity to determine when a small business should expand its workforce. While the items in the firm growth scale indicate significant, positive correlations with each other, further examination among these items might begin to unravel the mystery of when it is the appropriate time to expand the workforce in the small business. Is it after sales increase, or is it necessary to expand the number of employees in order to increase sales? Perhaps it is a little of both, and may be conditioned by the type of business one is in. Regardless, the items can be further examined, knowing that there is a relationship among them, to determine if causation can be determined in addition to the correlation.

CONCLUSION

The present study extends prior research by establishing scales that can be used to examine small businesses (Howard, 2001). Future research should utilize these scales and focus on determining how planning, communication, trust and human resource problems might influence firm growth. Future research should also begin to attempt to determine when a small business should increase the size of its workforce, attempting to determine if a causal relationship exists between the various items within the firm growth scale. By focusing research on these two areas, valuable information will be gained, further assisting the growth of a major engine in the U.S economy.

APPENDIX 1

Scale Items for Firm Growth, Planning, Communication, Trust and Human Resource Problems

The following is the response scale that was presented to participants. Following the response scale are the scales, with each item listed.

 Strongly Strongly
 Disagree Disagree Neutral Agree Agree

 1 2 3 4 5

Firm Growth

GR1--The business has experienced considerable growth over the past 5 years.

GR2--The business has experienced considerable growth in the number of employees over the past 5 years.

GR3--The business has experienced considerable growth in sales over the past 5 years.

GR4--The business has experienced considerable growth in profits over the past 5 years.

GR5--The business has experienced considerable growth in market share over the past 5 years.

GR6--The business's growth has leveled off. (reverse coded for analysis)

Planning

PL1--Planning is conducted in the business.

PL2--Planning in the business is formal (written).

PL3--Progress toward the plan's objectives are monitored by the business.

PL4--Appropriate resources are provided to allow for the plans to be accomplished.

PL5--Operational planning, meaning that planning on how the day-to-day activities are to be conducted, is done in the

business.

PL6--Strategic planning, meaning that overall plans for the organization for the next 3-5 years, is done in the business.

PL7--Contingency planning, meaning that plans are laid out addressing situations as they arise, is conducted in the business.

PL8--The business ensures that all appropriate parties understand the business's plans.

PL9--The business links rewards to the achievement of the business's plans.

Communication

CM1--Employees are informed of changes in the organization verbally.

CM2--Managers communicate verbally with employees on a regular basis.

CM3--Meetings with managers and/or employees are held in the business on a regular basis.

CM4--Meetings with managers and/or employees are orderly.

CM5--Meetings with managers and/or employees are effective.

CM6--Meetings with managers and/or employees are efficient.

Trust

TR1--The business supports managers and/or employees in the decisions they make.

TR2--The business trusts employees to make decisions.

TR3--The business trusts that employees can step in and assist managers when needed.

Human Resource Problems

PR1--Some problems in the business are associated with hiring the right person.

PR2--Some problems in the business are associated with having the right number of employees.

PR3--Some problems in the business are associated with appropriate salaries for employees.

PR4--Some problems in the business are associated with having enough people for the job.

REFERENCES

Barringer, B.R. & D.W. Greening (1998). Small business growth through geographic expansion: A comparative case study. Journal of Business Venturing, 13(6), 467-492.

Bhide, A.V. (2000). The origin and evolution of new businesses. Oxford: Oxford University Press.

Box, T.M, H.L. Crouch & K.E. Clow (1998). Entrepreneurial performance in foreign settings: Analysis of personal, educational, and experiential predictors. Proceedings of the Academy of Entrepreneurship, 4, 14-24.

Dyer, S.C. (1996). Public relations strategies for small business growth. Public Relations Quarterly, 41(3), 43-46.

Flamholtz, E.C. (1990). Growing pains. San Francisco: Jossey Bass.

Greening, D.W., B.R. Barringer & G. Macy (1996). A qualitative study of managerial challenges facing small business geographic expansion. Journal of Business Venturing, 11(4), 233-256.

Gray, J.H. (1999). A predictive model of small business success. Academy of Entrepreneurship Journal, 5(2), 25-36.

Hodgetts, R.M., & D.F. Kuratko (1995). Effective small business management (Fifth Edition). Fort Worth: Dryden Press.

Howard, J.L. (2001). Human resource management issues as a small business grows. New England Journal of Entrepreneurship, 4(1), 51-63.

Kotey, B., & P. Slade (2005). Formal human resource management practices in small growing firms. Journal of Small Business Management, 43(1), 16-40.

Nicholls-Nixon, C.L. (2005). Rapid growth and high performance: The entrepreneur's "impossible dream?" Academy of Management Executive, 19(1), 77-89.

Morrison, A., J. Breen & S. Ali (2003). Small business growth: Intention, ability, and opportunity. Journal of Small Business Management, 41(4), 417-425.

Scarborough, N.M., & T.W. Zimmerer (2003). Effective small business management: An entrepreneurial approach (Seventh Edition.). Upper Saddle River, NJ: Prentice Hall.

Tucci, J.E., D. Wyld & S.D. Cappel (1997). Employment and compensation: Factors of consideration for the entrepreneur. Proceedings of the Academy of Entrepreneurship, 3, 56-58.

AUTHOR NOTES

Jack L. Howard is a Professor of Human Resource Management at Illinois State University, where he teaches courses on labor relations, human resource management and human resource management for small business. His research interests include employee rights and human resource management for small business. The author would like to thank Joshua Morgan for survey administration and Lucas Helmer for data entry. The author would also like to thank John Lust for his helpful comments on earlier drafts of this manuscript.

Jack L. Howard, Illinois State University

Table 1: Correlation Matrix of the Planning Scale Items

Variable PL1 PL2 PL3 PL4

PL1
PL2 .53 **
PL3 .64 ** .63 **
PL4 .38 ** .48 ** .53 **
PL5 .43 ** .40 ** .43 ** .43 **
PL6 .46 ** .51 ** .62 ** .50 **
PL7 .39 ** .30 ** .42 ** .46 **
PL8 .37 ** .37 ** .42 ** .43 **
PL9 .36 ** .36 ** .31 ** .41 **

Variable PL5 PL6 PL7 PL8

PL1
PL2
PL3
PL4
PL5
PL6 .48 **
PL7 .51 ** .57 **
PL8 .40 ** .43 ** .41 **
PL9 .41 ** .35 ** .35 ** .49 **

Note: Diagonals are omitted. ** p < .01

Table 2: Correlation Matrix of the Communication Scale Items

Variable CM1 CM2 CM3 CM4 CM5

CM1
CM2 .47 **
CM3 .19 * .40 **
CM4 .20 ** .40 ** .52 **
CM5 .26 ** .39 ** .44 ** .54 **
CM6 .28 ** .42 ** .34 ** .47 ** .62 **

Note: Diagonals are omitted. * p < .05. ** p < .01

Table 3: Correlation Matrix of the Trust Scale Items

Variable TR1 TR2

TR1
TR2 .65 **
TR3 .52 ** .68 **

Note: Diagonals are omitted. ** p < .01

Table 4: Correlation Matrix of the Human Resource Problems Scale Items

Variable PR1 PR2 PR3

PR1
PR2 .52 **
PR3 .44 ** .54 **
PR4 .38 ** .65 ** .55 **

Note: Diagonals are omitted. ** p < .01

Table 5: Correlation Matrix of the Firm Growth Scale Items

Variable GR1 GR2 GR3 GR4

GR1
GR2 .57 **
GR3 .86 ** .65 **
GR4 .57 ** .41 ** .62 **
GR5 .58 ** .52 ** .64 ** .43 **

Note: Diagonals are omitted. ** p < .01