Assessing the role of talent management in manufacturing SMEs' performance in the Gauteng Province during COVID-19
Abstract
The significant role played by small and medium-sized enterprises (SMEs) has been confirmed in both developed and developing countries specifically in terms of economic growth and poverty alleviation. More specifically, the manufacturing SME sector is an important contributor to employment and gross domestic product (GDP). Therefore, the significant role played by the manufacturing sector is determined by the value it contributes to the economy in terms of GDP and as a catalyst for job creation, which is indicative of the sector. On the other hand, the failure rate of SMEs within the South African context is high, with an extrapolated 70% of SMEs failing within three years from establishment, emphasising the importance of organisational performance. Furthermore, ‘talent’, which should be aptly managed, has been identified as a major driver of organisational performance in the fourth industrial revolution milieu. Talent management is an emerging phenomenon and is deemed a significant concept in strategic human resource management. However, a paucity of studies focuses on the applicability thereof in different economic settings. Talent management, for the sake of clarity, can be explained as the systematic identification of keystone positions contributing to an organisationally-sustained competitive advantage, the establishment of a talent pool of candidates with requisite aptitude to fill the identified roles, the development of human resource architecture to facilitate filling identified positions with competent incumbents and ensuring employees’ continued commitment to the organisation (viz. talent development and performance appraisal). Considering the stated, the empirical study aimed to assess the role of talent management in SMEs’ organisational performance in the mentioned sector. Moreover, the adverse effect of the COVID-19 pandemic on the survival and performance of the sector is a concern that has not been investigated in its entirety.
The present study proposes to address the following gaps in the corpus of knowledge: (i) the paucity of research on talent management in various settings, i.e.
iv
manufacturing sector; (ii) empirical research underscoring understanding the effectiveness of COVID-19 mitigating measures; (iii) limited empirical evidence of the impact of COVID-19 on organisational performance; (iv) the concept of entrepreneurial ecosystems, which is an emerging theoretical framework underpinning entrepreneurial activity in SMEs, is under-theorised and the corpus of knowledge predominantly consist of conceptual studies; and (v) entrepreneurial ecosystems research focuses on technological-based industries in developed economies using case study research designs. Therefore, the main aim of the study was to assess the effect of talent management practices on organisational performance, and subsequently, propose a talent management conceptual framework for SMEs in the manufacturing industry during COVID-19. To achieve the stated main aim of the research, four research objectives were developed, including:
• To ascertain whether demographic variables, inter alia, the size of the SME, nature of service delivery, and perceived level of competition, to mention a few, statistically significantly influence talent management practises and SME performance in the manufacturing industry in the Gauteng Province.
• To ascertain whether talent management practices (i.e., recruitment and retention practices, succession planning practice, promotion practice, performance appraisal practice, talent development) significantly influence SMEs’ organisational performance in the manufacturing industry in the Gauteng Province.
• To establish whether there is a correlation between the various aspects of talent management within the context of SMEs’ organisational performance in the manufacturing industry in the Gauteng Province.
• To explore the impact of COVID-19 on the performance of SMEs in the manufacturing industry in the Gauteng Province.
The study employed a mixed-method cross-sectional research design. A total of 395 participants partook in the study with the target population including proprietors, general managers and human resource practitioners employed at manufacturing SMEs in the Gauteng Province. Data was collected using a self-constructed questionnaire with a four-point Likert scale. The Likert scale ranged from: (1) strongly disagree; (2) disagree; (3) agree; to (4) strongly agree. The total scale had an internal consistency of 0.951, as measured by Cronbach’s alpha coefficient. Recruitment and retention had a Cronbach’s
alpha coefficient of 0.891, succession planning and promotion an alpha of 0.766, performance appraisal 0.860 and talent development an alpha of 0.846. Organisational performance had a reliability score of 0.913 and COVID-19’s impact was 0.700. The validity of the measuring instrument was confirmed by means of confirmatory factor analysis (CFA) supported by structural equation modelling (SEM). Data was analysed using the Statistical Package for Social Sciences (SPSS) version 28. A combination of descriptive and inferential statistical analyses was performed. Descriptive statistical analysis was executed to provide a profile of the sample and to determine the measures of central tendency. Inferential statistical analysis was also computed to test the hypotheses, for example assessing the interrelation between talent management practices and organisational performance. Structural equation modelling (SEM) was carried out to test the hypothesised statistical models and to ascertain the goodness fit indices. Content analysis was used to interpret narrative responses related to business continuity strategies implemented during the pandemic.
Findings from the pilot study indicated that COVID-19 statistically significantly influenced organisational performance, talent development and recruitment as well as retention. The impact of COVID-19 on organisational performance can statistically significantly be mitigated by talent management practices. The narrative responses revealed that most of the SMEs did not have a business continuity plan in place and reactively reduced expenditure mostly related to human capital underscoring talent management. Results from the main study emphasising the influence of contextual factors revealed that most SMEs did not have a formal talent management strategy. Exogenous contextual factors partially statistically significantly predicted talent management facets and organisational performance, whereas endogenous contextual factors predicted talent management facets and organisational performance to a large extent. Lastly, the empirical research performed indicated that talent management and talent management practices (viz. recruitment and retention, succession planning and promotion, performance appraisal and talent development) are predictors of organisational performance in the manufacturing SME sector in accordance with the entrepreneurial ecosystem theoretical underpinning. Results confirmed the statistical significance of the proposed nexus and contributed to the development of the mentioned theory.
Managerial implications derived from the study encompass that SMEs in the manufacturing sector ought to develop and implement strategic business continuity strategies supported by effective talent management practices with a specific reference to talent development, recruitment and retention. It is also recommended that novel business continuity models be implemented post-COVID-19 to ensure business sustainability in the unforeseen event of a catastrophe. Furthermore, it is recommended that manufacturing SMEs ought to focus on endogenous contextual factors, including the perceived importance of talent management practices as a significant factor predicting organisational performance necessitating implementation and continuous assessment. Lastly, it is recommended that management pays specific attention to succession planning, promotion, recruitment and retention when developing talent management strategies as these are confirmed contributors to improved organisational performance.
Several contributions were made by the research reported on. Firstly, the study contributed to current empirical literature on talent management and talent management practices specifically within the manufacturing SME sector. Therefore, the research study contributed to an in-depth understanding and appreciation of the importance of talent management and talent management practices, considering the associated benefits to improved organisational performance. Secondly, the study contributed to the emaciated literature relating to the impact of the COVID-19 pandemic and what measures enterprises employed during the pandemic while proposing a business continuity framework post-COVID-19. The theoretical contribution is associated with the entrepreneurial ecosystem theory. The reported research empirically validated the proposed theoretical framework in the manufacturing sector within a developing economy context utilising a quantitative research design indicative of the novel theoretical contribution of the research study.
The thesis concludes and argues that talent management had a statistically significant influence on the performance of manufacturing sector SMEs in the Gauteng Province during the COVID-19 pandemic. Talent management facets that contributed to the variance in SME performance included succession planning and promotion (62.8%), recruitment and retention (58.8%), talent development (54.9%) and performance appraisal (54.5%).