mod 4 -hrm.pptx new module in human resource
- 1. HUMAN RESOURCE MANAGEMENT IN SMALL AND MEDIUM ENTERPRISES
- 2. DEFINITION According to Workplace Employment Relations Surveys, UK, small, medium and large firms are those whose employees number 5-49, 50-249 and 250 and above respectively. However, in India, the small scale industries (SSIs) are defined in terms of investment limits in plant and machinery. The definition is derived from the original criterion used by Industries (Development and Regulation) Act, 1951 (IDRA)
- 3. IMPORTANCE Small and Medium-sized Enterprises (SMEs) in human resource management refer to businesses that have a relatively smaller workforce and lower levels of organizational complexity compared to larger corporations. In HR terms, SMEs face unique challenges such as limited resources, recruiting constraints, and the need to maximize productivity. They often adopt more streamlined HR practices to effectively manage tasks like recruitment, training, performance evaluation, and employee engagement within their smaller operational framework. SMEs play a vital role in the country's overall production networks and they are core to the economic growth of developing countries. The contributions of formal SMEs are 50% of total employment and 33% of the national income of emerging economies. According to current empirical studies: SME‘s contribute to- over 55% of GDP and over 65% of total employment in high-income countries, over 60% of GDP and over 70% of total employment in low-income countries and over 95% of total employment and about 70% of GDP in middle-income countries.
- 4. THE DIFFERENCE IN ADOPTION OF HRM: SMES AND LARGE FIRMS: Most studies on HRM within SMEs are based on qualitative researches. This lack of information about human resources in SMEs is considered “problematic for theory, research and practice”. The studies indicate relatively far lesser use of professional HRM practices in SMEs than in larger firms. Koch and McGrath observed that generally larger firms had more incidences of HRM planning and formal training, and with higher level of overall HR sophistication in comparison with SMEs. In another study, based upon data obtained from 267 organizations, smaller companies were found to have less formalized performance appraisals, less likelihood of bonuses based on company productivity and less training than the larger companies. Larger firms were found to have more structured recruitment practices than SMEs in another study. Another difference noted by Rainnie is that small firms tend to provide more power to the managers, making the managerial prerogative largely unrestricted
- 5. INDIAN EXPERIENCE: HR CHALLENGES IN SMEs Being on a significant growth trajectory has made the sector vulnerable to a bunch of associated people challenges: Intense competition Termination of employment Prevention of Sexual Harassment in the workplace Gratuity and Provident Fund Retaining Valuable employees Lack of coherent acquisition capability including low salary, along with weak employer brand create serious constraints for the enterprises. Currently big businesses are making investments to relentlessly upgrade the skill and competencies of their critical employees, by tie ups with reputed foreign universities and engaging consultants.
- 6. Most SMEs do not have processes to systemically track employee performance, or conduct performance counseling for generating developmental inputs and capture employee insights for performance improvements. Retaining employees at the junior level is a challenge in Indian SMEs. The junior levels mostly comprise of employees with functional skills such as electricians, or field sales people. This class is highly mobile and change jobs frequently and may even quit without a prior notice.
- 7. IMPACT OF WEAK ADOPTION OF HRM IN SMEs The lack of emphasis on human resources in SMEs was one of the main reasons for business failures. The most difficult problem for small business was finding competent workers, then motivating them to perform. Human resource efficiency and performance were the most significant reasons of any SME to be unsuccessful. In India the problems of small enterprises related to HRM are – Hiring process Employee training and safety Employee handbook Payroll Time tracking Employee benefits Compliance Employee retention
- 8. FACTORS INFLUENCING THE ADOPTION OF HRM PRACTICES IN SMES: Implementation of Technology Socio-Psychological factors Cultural Factor Demographic Factors Economic Factors E-HR Political Factors Legal and Administrative Factors