Human Resource

Management Practices in
Small Firms
 After this session, participants
should be able to:
1. Recognize the role of HRM function in startup firms
2. Identify the prominent features of HRM in small firms
3. Appreciate the issues and challenges to HRM in small firms
4. Identify the IT based tools HRM in small firms
5. New (To Be Notified) Codes of Labor in India
Greiner’s Model
of
Organizational
Change and
Development

http://www.kautilyasociety.com/tvph/output_oriented/greiner_model.htm
 What are the Micro, Small and
Medium Enterprises (MSMEs)
India defines Micro, Small and Medium Enterprises based on dual criteria
of Investment and Turnover. In June 2020, India has updated the definition as follows

Classification Criteria (in ₹)

Micro Enterprises Investment <= 1 cr and Turnover <= 5 cr
Small Enterprises Investment <= 10 cr and Turnover <= 50 cr
Medium Enterprises Investment <= 50 cr and Turnover <= 250 cr
 Importance of MSMEs
• MSMEs contribute around 6.11% of the
manufacturing GDP and 24.63% of the GDP
from service activities as well as 33.4% of
India's manufacturing output.

• MSMEs provide employment to around 120

million persons and contribute around 45% of
the overall exports from India.
 Importance of SHRM in MSMEs
Small firms, particularly those that are growing or
growth oriented, make an important contribution
to the performance of developed and developing
economies around the globe.

A number of writers argue that a strategic approach

to managing employees is vital for the success of all
firms(Barney & Wright, 1998; Dyer, 1993; Huselid,
1995; Pfeffer, 1994, 2005), including small ones.
How Small Business Human Resource
Management is Different

• Size
• Priorities
• Informality and
• Entrepreneur
 Why Small Firms Need to take HRM
Seriously
Inadequate human resource practices may put small business
owners

• At legal risk.

• Not having a dedicated HR person can slow company

decisions and overwhelm its managers.

• Without human resource information systems, paperwork is

time consuming, and duplication may create data entry
errors.

• Inefficient hiring, training, appraisal, and compensation

 Leveraging Small Size with Familiarity,
Flexibility, Fairness, and Informality
• Simple Informal Employee Selection Procedures : Reference and Work sample

• Improving Performance: HR Tools for Line Managers and Small Businesses

• Flexibility in Training: Open Programs, Online programs, Strategically relevant

programs

• Flexibility in Benefits and Rewards : More flexible and customized benefits

• Simple Retirement Benefits: The SIMPLE (savings incentive match plan for
employees) , National Pension Scheme (NPS) plan is inexpensive and simple.

• Fairness and the Family Business: Avoid partiality include setting ground rules,
treating people fairly, confronting family issues, and erasing privilege.
 Family Owned Businesses of Small Size
• First, what are the family-based antecedents of HRM in
family firms?

• Second, how do family members interact with non-

family employees in the family business?

• And third, how do families manage HRM practices that

are unique to family firms, and toward what
organizational consequences?
Combs, J. G., Jaskiewicz, P., Shanine, K. K., & Balkin, D. B. (2018).
Making sense of HR in family firms: Antecedents, moderators, and outcomes.
 Few Special Features of Family
Owned Business from HRM
• Positive Halo effect: Founders imprint processes and
behavioral norms on firms which can be useful and harmful
both. Each generation might “re-imprint” the family firm with
new habits and cultural values that break the cycle.

• Bifurcation bias: This is the situation when family-member

employees are treated differently from non-family employees.

• Socioemotional wealth (SEW): The bonding and attachment

of different family-firm founders. This shapes the business
objectives and culture both.
 Few Special Features …..
• Special Triad in Family Business: social exchange in the triad of key
family leaders that includes the non-family CEO, the older generation
family owner, and the next generation family owner. When triad
members are balanced in terms of strength and dependence, they
expect non-family CEOs to feel attached and less likely to leave.

• Nepotism: Families focused on maintaining “influence and control”

and those seeking “renewal of family bonds” will engage in more
nepotism than those seeking “family identification” as the central
SEW outcome.

• Mentor-Protégé Combinations: When both are family members the

prosocial mentoring will generate greater normative commitment
among protégés. Switch the protégé to a non-family member,
however, prosocial mentoring continues but the purpose is to foster
affective commitment.
 Using Professional Employer
Organizations

The vendors range from payroll companies to

those that handle all of an employer’s human
resource management requirements. PEOs
basically are your “HR office,” but your
employees still work for you.
 Using Internet and Government Tools
to Support the HR Effort
• Online learning platforms like Docebo’s (www.docebo.com/) make it easy for a
company’s employees to access off-the-shelf and customized online learning
courses and programs.

• OSHA Online Tools – the DOL’s Occupational Safety and Health Administration site
(www.OSHA.gov); supplies guidance for small business owners on practical
information including industry-specific safety and accident checklists.

• Online Employment Planning and Recruiting – Internet resources such as the

Department of Labor O*NET (http://online.onetcenter.org)

• Small Business Employment Selection Tools –some tests are so easy to use they are
particularly good for smaller firms. E.g. Wonderlic Personnel Test, which measures
general mental ability, and the Predictive Index,

• Other Sources – several direct-mail catalog companies offer a variety of HR

Materials. Firms such as HRdirect (www.hrdirect.com).
 Managing HR Systems, Procedures,
and Paperwork
Zoho is an administrative HR tool with
following features:
• Performance appraisal
• Time and attendance tracking,
• Leave management,
• Custom forms and permissions, and
• Employee self-service

Users can access the system online or via native mobile apps
for iOS and Android, so they can request time off even when
they’re not in the office.
 Bamboo HR
It is a cloud-based core HR solution
designed to meet small business
administrative needs
• A central repository of employee
information, such as job and
salary history, benefits, and
training.
• Employees can access company
documents, request time off,
view, and edit their personal data
all from a single dashboard.

For expanded use, BambooHR integrates with many popular applications for
applicant tracking, eSignatures, payroll, and performance management. The system
is also accessible on mobile devices through native apps for iOS and Android.
Few More HRM Softwares
 New Labor Codes

• Code on Wages

• Industrial Relations Code

• Occupational Safety, Health and Working

Conditions Code

• Code on Social Security

 Why New Labor Codes are Needed
There are over
200 state laws
and close to 50
central laws.

https://indianexpress.com/article/explained/
what-labour-law-changes-mean-
coronavirus-6403611/
 Code on Wages
1. New definition of wages. The new code defines wages to be
at least 50 percent of the total gross remuneration of an
employee.

2. Fewer minimum wages: The Wages Code has shrunk the list
of minimum wages, and it introduces the concept of "floor
wages" to be set by the federal government. States won't be
able to set a minimum wage below this floor.

3. Gender neutrality. The Equal Remuneration Act has

provisions for equal pay for any gender.
https://www.shrm.org/resourcesandtools/hr-topics/global-
hr/pages/india-new-labor-laws.aspx
 Industrial Relations Code
1. Hiring fixed-term workers: The new code recognizes fixed-term
workers and mandates that they will be eligible for employee
benefits, including gratuity payments on a pro rata basis.

2. Standing orders. Standing orders are certain terms and conditions

of employment issued by the government that must be followed
by employers. The new code expands them to cover all companies
that have more than 300 workers.

3. Grievance redressal committee. The new code requires that any

company with at least 20 workers must create a committee to
address any grievances.

4. Threshold for terminating workers. The new code requires only

companies with more than 300 workers to seek permission.
 Occupational Safety, Health and
Working Conditions Code
1. Night shift for women. This code allows companies to hire
women to work at night between 7 p.m. and 6 a.m., so long
as the companies fulfill certain conditions of safety and
security for these workers.

2. Changing contract labor regime. For the first time, a federal

law now defines what is a "core" activity of an organization.

3. Leave encashment. Previously, company policies required

workers to preserve their unused leaves until the end of
their employment. The new code allows employees to ask
for encashment at the end of any year.
 Code on Social Security
1. Recognizing gig and platform workers. For the first
time, the code on social security defines gig and
independent workers, such as those who work for
companies like ride-sharing service Uber. Companies
will need to contribute to a social security fund for
these workers, which the government will create.

2. Limit to Provident Fund compliance checks. Until now,

there was no limitation on how far back authorities can
look to check if a company is compliant with all rules
relating to the Employees' Provident Fund. The code
now limits authorities to looking back only five years to
check compliance.