Risk Influence of Employee Productivity on Business Failure: Evidence Found in Serbian SMEs

This research paper analyzes low productivity of company workforce as the key risk factor to business sustainability of a company, with special attention to small and medium-sized companies. The scope of research involves for-profit, and small and medium-sized companies doing business in Serbia. This paper explores whether poor human resource management, and, more particularly, low productivity of employees represent one of the key reasons for poor business performance and eventually failure of the company. The quantitative part of this research was conducted during 2022, by analyzing 468 small and medium-sized companies with less than 250 employees, who ended their business during 2021. Current theory determines human resource management in companies, the influence of different sorts on overall business performance, and employee productivity and its causal effects on business survival. This study attempts to cover identified literature gaps by analyzing the risk influences of low productivity on the failure of small and medium-sized companies, with special diversification between manufacturing and service-oriented companies. Key findings from this research were defined with the help of statistical learning methods, suggesting direct correlation of low productivity in the case of small services-oriented businesses and medium-sized manufacturing companies. Future work on this research includes extension of the analysis to other countries in the West Balkans region and the comparation of all determined causalities.