Coping with the Asian economic crisis: The rightsizing strategies of small- and medium-sized enterprises

Hong Kong has been, over the last two years, experiencing the worst economic downturn in decades. What small and medium-sized enterprises (SMEs) have done to overcome the setback, and how and to what extent, remains unknown. Given the apparent importance of retrenchment to the survival of small firms for success in economic turmoil, this paper examines the processes of the rightsizing strategies of Chinese-owned small and medium-sized firms in Hong Kong. The research results suggest that SMEs in Hong Kong follow different human resources practices at different stages. In the 'restricting stage', SMEs reduce or stop hiring new staff and restrict overtime for the existing staff to deal with decreases in sales and the oversupply of manpower. In the 'trimming stage', SMEs scale down or streamline their operations. In the 'proactive stage', SMEs employ existing staff in overtime work and start to hire new staff at lower pay but with higher technological competencies to prepare for recovery. A tentative model for rightsizing strategies of Chinese small and medium-sized firms in Hong Kong is proposed.