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The second factor is the informality5 that is widely cited as characterising people
management in small firms (Wilkinson, 1999; Harris, 2000, 2002; Matlay, 2002; Jones,
2003a). Again, such processes are not unique to small organisations, and as Ram et al.
(2001) point out, many small firms exhibit high degrees of formality in some areas of
employment. That said, management through informal methods is seen by many
owner-managers both as appropriate to the close working relationships in small firms
and as conducive to the development of trust (Wilkinson, 1999) as well as a source of
flexibility and competitive advantage (Vinten et al., 1997). Formal employment policies,
including EO policies, may be perceived by SME owner-managers as inhibiting
flexibility and undermining informal relations. Nor may they be perceived to be (or
actually be) the most effective and cost effective way to solve pressing business
problems, as illustrated by Marchington et al.’s (2003) study of the sophisticated use
of informal recruitment methods to address skills shortages in the haulage industry.
On the other hand, lack of formality in recruitment and selection may reflect a lack of
exposure to, and awareness of, such practices arising from a lack of regular engagement
with skilled labour markets. This in turn may lead to a reliance on informal ‘word of
mouth’ approaches (Carroll et al., 1999), which are likely to be EO unfriendly.
A third factor is that many small businesses operate in tight product markets with
numerous competitive pressures (Holliday, 1995; Bacon et al., 1996; Jones, 2003a).
Sophisticated EO polices require an investment and may create opportunity costs
(Curran et al., 1997). These costs may be more readily apparent than the benefits, and
are proportionally greater in small firms (Dex and Scheibl, 1999; Harris, 2000, 2002).
Fourth, the notion of ‘family firm’ (taken literally or metaphorically) may encourage
homogeneity rather than diversity (Holliday, 1995). As Holliday observes, it can be
antithetical to equality of opportunity in relation to gender, importing, to the detriment
of women, patriarchal power relationships, paternalism (benevolent or otherwise) and
sex-role spillover from the home. Moreover, many owner-managers are men6 and we
contend that this is likely to have an impact on the propensity to pursue EO for
women.