Challenges in Human Resource

Management at MSMEs

HRM Group 8
PGP/26/377 - PREETHI RAJ
PGP/26/397 - OM SHUBHAM
PGP/26/410 - SHRESTH BIYALA
PGP/26/412 - SIMRAN KERNI
PGP/26/419 - VISHAL SHAKYA
 What are MSMEs and why are they
1
important?

Our 2 Importance of HRM in MSMEs

Agenda Existing HRM Practices (Qualitative and

3
quantitative research)

4 Challenges and Implementable solutions

5
 What are
MSMES?
MSME stands for Micro, Small, and
Medium Enterprises.

They are divided into two divisions:

Manufacturing Enterprises and
Service Enterprises.

Micro Small Medium

Investment INR 1 Cr INR 10 Cr INR 50 Cr

Turnover INR 5 Cr INR 50 Cr INR 250 Cr

~As per Revised criteria by Ministry of MSMEs

Are MSMEs important? Hint: Yes. Super
Important!!!

-Approximately 6.3 crore MSMEs in

India:
29.7%

50%
Generate 29.7% of Employ 120 million Generate 50% of
India's GDP people (45% of India's India's total exports
Industrial W orkforce)

~Annual report by Ministry of Micro, Small and Medium Enterprises 2019-20

MSMEs: The 51.25% of MSMEs are based in rural areas.
Which deploys significant rural workforce.
Engine of
India's The sector has consistently maintained a

Economic growth rate of over 10%.

Growth By its high labor absorption nature,

"MSMEs might be considered as
small investment enterprises, but
their contribution to the Indian
Economy has been noteworthy."
~Roma Priya (Founder, Burgeon
Law)
MSMEs have significantly contributed to
employment generation and rural
industrialization .
On the gateway of global growth due to
low cost of production (50% export
share).
Complementary to large industries as
ancillary units.
Distribution of MSMEs by
Nature of activity
Other Services Manufacturing
33% 31%

Trade
36%
Importance of HRM in MSMEs
Relatively less focus has been placed on HR practices in MSMEs when compared
* to the larger companies.

* There is a lack of experience and internal resources to implement HR strategies.

* External uncertainty, the typical characteristic of MSMEs, adds up to the woes.

(Hill and Stewart, 1999)

As small firms are heterogeneous and vary widely in the types of HR practices
* used, the higher costs would incur as customized programs would be necessary.
Ferligoj, et.al. (1997)
Excerpts from Qualitative
interviews:
“Earlier, a new plant supervisor was hired but he did not
communicate our expectations to the management and
theirs to us…….we only had work-related limited interaction
and there was a lot of job role ambiguity at workplace……”
 “Last year we all got the same appraisal except
for one guy, he worked the same as us. Just
that he went on extra lunch with the boss”

“We needed 10 extra people for the new contract

we received. We only received 16 applications out
of which 6 had no prior experience”

“We, as workers, are rarely involved in any decision-

making process, even when it directly concerns us……...I
only know how much I will be paid by the end of the day, I
feel that the owners should be more connected to us…..”
Quantitative insights from the
survey:
Satisfied
25%

80% Dissatisfied
55%

Neutral
20%

80% Performance Reviews Only 25% of the employees from

are Ad-Hoc in nature the pool were satisfied with their
current compensation
 Yes
24%

65%
M aybe
12% No
64%

65% of Employees from the 64% of the Employees don't have

pool think that the appraisal any idea about their career
process is biased trajectory in their respective
organization
 55% 63%

55% of employees feel that 62.5% of the Employees

the tasks they perform were think that the workers are
not mentioned explicitly not motivated enough
prior to joining the firm.
M os t C ommon
Challenges:
1.Lack of performance review process
MSMEs exhibit distinct characteristics that differentiate them
from their larger counterparts. There is a need to establish the
relevance of existing Performance Management systems for
MSMEs.

In small business, feedbacks are generally given on an ad-hoc

basis. Small business owners feel like they know everybody and
there is no point in doing structured performance reviews.
2. Recruiting the right talent
A limited pool of qualified personnel sometimes leads to
ineffective hiring of talent.
"25 percent of small businesses view the lack of qualified
workers as a threat to not only to their expansion plans but also
to their survival." (Mazzrol, 2003)

Inadequate branding and risk associated make these

enterprises less attractive vis-a-vis more established, big
organizations.

3. No Documentation System
MSMEs face a challenge in their productivity due to improper/no
documentation of human resource management-related
documents.

MSMEs think they only work for "today".

(Shrabani B. Bhattacharjee, Balaram Bhattacharjee, 2015)
'
4. Employee Engagement
Engaged employees are generally more willing to recommend
the organization to others and commit time and effort to
help the organization succeed.

The benefits paid to the employees are relatively lower

(Agarwal, 2009; Hornsby and Kuratko, 1990).

5. Training and Development

Apart from the financial crunch, there is limited scope for
career development and advancement in MSMEs. (Agarwal,
2009; Kumar et. al., 2009)

Company size is directly related to HR sophistication and

formal training (de Kok and Uhlaner, 2001).

Small MSMEs generally think that any training except the

regular job requirement is a luxury and can only be provided
when the firm is making large profits.
Recommendations
1. Recruiting and retaining the right talent
Instituting and documenting a formal and transparent hiring
process with clear guidelines

Scientifically match the personality traits of the applicant to the

requirements of the role

"Presence of personal forms of relationship while recruitment

becomes perilous for enriched employee relation". (Mahoney
and Decktop, 1986)
Recommendations
2. For Lack of Performance Review
The feasibility of incorporating an integrated HR in a small
industry is very low. Hence, some practices could be evolved
from the traditional methods to make the performance
review more transparent.

Setting SMART goals, make sure you give your employees the
opportunity to express what they want from their career
development well in advance.

Conduct regular meetings with the employees regarding

their goal management, that will help them achieve their
objectives smoothly and increase productivity
Recommendations
3. For Improper Documentation
Documentation of the employment relationship provides a
written record that may be necessary to support such
actions as employee promotion, employee pay raises, and
disciplinary action—including employment termination.

It provides helpful guidance for performance review

Recommendations
4. For Employee Engagement
Organize regular meetups with the employees and let them
know about the periodic updates about the firm so that they
feel like an integral part of the organization.

Involve the family members of the employees as well as

employers on various celebrations to build a bonding among
the community.

Discuss the future plans of the organization with employees

too, such that they feel an important part of the organization.
Recommendations
5. For Training and Development
Skill-gap assessment should be carried out to develop a
training-needs identification matrix, which will capture the
skill gaps and corresponding training requirements.

Collaboration with external agencies to help employee

acquire relevant skills and develop their personality is
encouraged as in-house expertise in such programs is
limited
Recommendations
Implementation of Training needs identification matrix
The matrix represents the areas
related to the degree of
complexity of operation vis-a-
vis the required skill set of the
workers. Based on the matrix
the training needs and the
priority that needs to be given
for the implementation for
training programs can be
identified.
Thank
you!