Is HR Really Required for SMEs?

It is a general premise that HR has no or very less role to play in Small and medium enterprises (SMEs) owing to their small size, simpler operations and procedures compared to the larger ones, flatter organization structures, lesser employee activities etc. In my opinion, HR is as required or sometimes more required to an SME as it is to a bigger setup, provided at least three of the following challenges are noticed.

Talent identification is becoming difficult
Attracting the right talent is one of the major challenges of your SME owing to low image in the market and fear of job security, discouraging talented job seekers from joining. And your small business typically fills up vacancies through referrals from friends’ circle and employees without much deliberations on competency, skills, past experience and role fitment. Since identification and recruitment of right talent is one of the most important and basic functions of an HR, having an HR in place will play a critical role in the success of your small business.

Statutory requirements
Your small business is labour intensive, hence compliance with the local laws of the land is mandatory. However, managing it is becoming increasingly complex with the growth of your small business. An HR who is well versed in complying with the statutory requirements will ensure hassle free, smooth and undisrupted business operations.

Framing suitable policies and procedures
Framing effective policies and procedures in line with business dynamics is becoming the need of the hour for the success of your company, with the increase in the number of your employees. A good HR frames up to date policies, clearly communicates them to the employees and ensures smoother implementation while striking the right balance between your company’s requirements and employee benefits.

Managing people performance and talent retention
Systematic tracking of employee performance in a fair and unbiased manner, developing effective compensation strategies for talent retention and prevention of attrition are gaining importance in your organization because of mounting pressures on product/service quality and timeliness.

Employee management
You, as an owner of an SME is often a one-man army managing Operations, Marketing, Finance and Business Development. However, you believe that spending too much time on people management, employee engagement and other such activities will prove to be costly for the company in the long-run.

Need for employee training and development
Your business is suffering as employees practice old working style and are unable to keep in pace with technological changes, use sophisticated tools and techniques and regularly upgrade their skill sets.
SMEs are often unable to hire a full-time HR manager or executive, despite facing many people challenges. In my subsequent posts, I will be dealing with ways and means to cope up with absence of an HR for your SME.

Ms Uma Bhanu Kondury
Senior Consultant, Prajwal Business Services Pvt. Ltd.,

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