The Role of HR in Small and Medium Scale Enterprises

KVIMIS Blog Image - B School , Coimbatore

SME (Small-Medium Enterprise) sector has been playing a significant role in strengthening country’s economic progress as they contribute around 40% of the manufacturing output and accounts for over 8% of the national GDP. Despite of their incredible growth so far, SMEs are still facing some of the inherent challenges related to people and culture which can be essentially addressed by an ideal HR leader.

According to a survey conducted by Confederation of Indian Industries, 20% of medium and 80% of small-sized businesses have no HR departments. Since most SMEs mostly work on a tight budget, they perceive that having a HR department or appointing a HR manager is a costly affair. However, it is advisable to build an HR system right from the start so that various people related practices like talent management, engagement, policies related to compensation and benefits can be laid out, thus improving employee motivation and control attrition.

The success of SME’s depends on maintaining a pool of skilled labour by providing proper training. Big organizations can rope in external experts to deliver training programs. For SME’s it may not be possible due to budgetary constraints. In such cases, the role of a HR manager is important to roll-out specific skill-based programs depending on the need of the organisation.

SMEs in their initial days usually carry a culture which is fun, energetic, fast-moving and entrepreneurial in nature. However, once the business starts growing and becomes mature, it tends to lose its original entrepreneurial spirit as teams become big. In this situation HR can play a significant role to maintain the entrepreneurial culture by keeping everyone informed, involved and engaged, thereby enhancing the team spirit.

The growth of the company means more employee intake. In this situation, the role of HR is vital to ensure that the values of the founders are aligned with that of larger employee group and ensure that a two-way and transparent communication between both the parties

The success of SMEs largely depends upon the enthusiasm, competency, resources and commitment of a single person (owner) around whom the enterprise revolves. Since the owners often involve themselves in daily management tasks, people issues are often taken for granted and managed informally. This task of people management becomes increasing complex as the organisation grows. Therefore it is a useful move to appoint a HR manager as employees are a strategically important, indispensable resource for the SME’s to achieve its goals.

HR professionals play an integral role in creating the destiny of an organization as they lay a solid foundation for the strong team, for any entrepreneurial idea to succeed.