Purpose: The purpose of this paper is to discuss the impact of falling rolls on human resource management in local preschools in Hong Kong. It aims to argue that the developing role of leadership in creating a culture and procedures for collective participation in staff appraisal is important for human resource management in preschool settings. Design/methodologies/approach: With the aid of a case study, the paper illustrates and analyzes the policies and practices presently adopted by many preschool heads in the process of personnel management that may potentially affect the quality of education service. Findings: This paper focuses on discussing the common practices used by many preschool heads in the field to handle staffing reduction. In particular, voluntary redundancy is perceived as an effective strategy to solve the problems of budget deficit. From the quality perspective, the strategy is based on individual decision but not on the teaching performance of staff members. This may have a negative impact on the quality of teaching and service. Originality/value: Relatively little research on human resource management in preschools has been conducted in Hong Kong. The illustration of this case study follows other studies in the literature in revealing the important links between human resource management and school development. It is proposed that the management of professional knowledge embedded in teaching practices should be connected to the policy of staff appraisal in order to achieve better quality of service. Thus, the introduction of staff appraisal and collective participation in such processes is, by its nature, a political process. This paradigm shift creates a new agenda for leadership roles and requires a cultural change in preschool settings. (Contains 1 note.)