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HR executives in SMEs find little time to focus on core strategic process

Human resource is still considered a support function and not a strategic business partner and sometimes CEOs assume themselves to be champions of people management

India, powered by small and medium enterprises (SMEs), is silently experiencing a revolution. SMEs employ around 40 per cent of India’s workforce, which is an estimated 80 million people. Around 1.3 million SMEs contribute 45 per cent to India’s manufacturing output and 40 per cent of India’s total export. In a way, they form the backbone of the Indian economy. At 48 million, India has the second largest number of SMEs in the world, edging close to China, which has around 50 million SMEs.

There are around 6,000 products manufactured by 31.7 per cent SMEs while the remaining 68.2 per cent are engaged in delivering various services. This sector, if extended the right support, has the potential to spread industrial growth throughout the country.

But, despite employing 40 per cent of India’s workforce, SMEs currently contribute to about 17 per cent of India’s GDP. This is due to various challenges that are faced by the SME sector as a whole. This article particularly focuses on the practical challenges that the human resources (HR) face in the SME sector.

The perception
The top most of these challenges is the perception that HR is only a support function and not a strategic business partner. Sometimes CEOs assume themselves to be champions of people management and consider it a child’s play. This ignorant outlook towards people management creates a conflicting culture and mishandling of the same impacts the business at the very core. When CEOs feel that HR is just a support department and do not take efforts to wire them in the organisation as strategic partners they are risking the business a great deal. They might be compromising some intangible issues of the organisation. When HR is involved strategically, the employees can be nudged towards the right direction and in the right manner. Strategic HRM leads to a strategic employee lifecycle, which in turn helps organisations achieve Strategic objectives.

Also, there’s a common belief that a good knowledge of products and market is enough to succeed and earn profit. It is not true, as human intervention is inevitable, be it in product design, manufacturing, marketing, sales, or customer service. It is imperative that the employers realise that people are as important as performance numbers. Only then will the management pay attention to key people related matrices like attrition, productivity, engagement, and skill proficiency.

If the top management call the shots most of the time, it will suffocate employees in key positions who may want to make a difference in their own way and want to implement their learning for the overall growth of the organisation. Lack of empowerment stunts and stagnates this growth. Centralisation of decisions not only curbs different perspectives but also affects the effectiveness and efficiency of the decision. Delay in certain crucial decisions can cause a loss as well. Thus empowering employees at every level is essential for the most efficient results.

The other important pitfall for SMEs is that the brand pull may not be strong enough to attract talent, including HR. SMEs will not be getting a bigger and quality talent pool to choose from as they do not have the brand visibility of a MNC. This affects the organisation’s efficiency and ultimately pulls down HR department’s contribution to the organisation. Absence of talented HR employees also acts as a deterrent in driving overall people strategy.

Managing talent
Despite providing challenging assignments and a fast track career path, the inability to provide best in class compensation also remains a key challenge in retaining talent. SMEs by virtue cannot pay through their nose for exceptional talent. Consequently, this has an impact on business outcomes.

Digitalisation in yet another key element in doing business effectively that SMEs are shortchanged due to budget constraints. Digitisation makes things simpler for an employee and the lack of the same can frustrate many good employees who are not able to perform to their best capacity. Process delays and clerical jobs that eat up time can be eradicated through digitisation. The precious time thus saved can be invested in strategic thinking.

When number crunching supercedes everything, it leads to a culture of hire and fire. Hardly any attention is paid to training and development. The importance of upskilling is often overlooked. Only organisations that encourage a continuous learning environment and the ones that are ever ready to adapt to the dynamic market volatility will have a sustained growth. Thus SMEs should especially focus on training and development and individual’s growth.

Unfortunately, in most SMEs HR involvement is curtailed to activities like canteen, transportation, picnics, housekeeping, security and infrastructure management. Busy as they are with these administrative tasks, HR representatives have little time to focus on core HR strategic processes like employee engagement, performance management and competency mapping, to name but a few. Administration is but a part of HR. It is not the only job they look after.

Also, many key HR processes like training are outsourced as it is cheaper. HR department acts as a coordinator in such cases. But when HR processes as essential as training are outsourced, they do not bring in the desired results. Training requires a thorough understanding of the culture and the environment in which the employee functions. An outsider will never be able to understand these accurately.

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