Human Resource Management (HRM) practices play an important role in organizational production, performance, and survival. By knowing the performance of employees, it will enable the organization to attract, retain and motivate employees to support the organization's vision, mission and strategies to improve organizational performance. However, many studies on HR processes are discussed in a larger organization and are not fully covered in SMEs
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Small and medium enterprises (SMEs) have been identified as one of the fastest-growing engines in the world, with SMEs making up more than 90 percent of all businesses. SMEs play a very important role in contributing to the economy and can become even more important as the economy expands globally (Zainal, 2011). According to Rehman (2012) the role of human resource practices (HRP) at its significance in small and medium enterprises (SME) has become an emerging topic, especially in developing countries.
For large companies, HRM methods are formal. At the same time, in the SME sector, those practices vary in business size, from informal practices in small businesses to prescribed, specific, and clearly defined practices in small and medium-sized companies
HR Challenges for SMEs
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Lack of knowledge and technology and common family-based methods can be a barrier to modern business practices. However, a new type of entrepreneur can make a huge difference in the performance of a business with its structured education, flexible character, and flexible circumstances. They are well-equipped to deal with changes in business conditions (Khan, 2011).
Similarly, the perceptions of SME owners will change when they see the importance of implementing HR activities and view it as an investment rather than a cost, which improves organizational performance. It is also considered that the existing HR structure for SMEs is weak and there is room for improvement.
Major challenges.
• Lack of resources.
• Negative motivational factors.
• insufficient financial and other benefits.
• Minimum cover by law.
• Allocation of staff training and development budget.
• Employee ability to negotiate is limited.
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Opportunities for SMEs
Zin et al, (2012) suggested that By retaining skilled workers, Small Medium Enterprises (SMEs) could create a viable environment for a competitive free-market economy that could ultimately increase their profits. Understanding employees' opinions and analyzing their responsibilities is critical to the success of the organization.
Great opportunities.
• Low staff carder.
• Individual attention can be built one to one.
• Skills identification.
• Simple sequence and unity of command. (Clear reporting lines)
Conclusion
SME owners and HR managers should focus on implementing HRM practices to improve organizational performance in terms of production and market share. An effective HR system also helps to integrate other organizational activities in the short term and at the same time, the barriers and opportunities need to be clearly identified and understood by HR management to make strategic plans. This merger will open up long-term investment opportunities through organizational strategies.
Youtube Link : https://youtu.be/bhbx9DTY2Rw
Source: “Human Resource Management Small Business Case Study - YouTube,” n.d.)
References
Human Resource Management Small Business Case Study - YouTube [WWW Document], n.d. URL https://www.youtube.com/watch?v=bhbx9DTY2Rw (accessed 8.27.21).
Khan, N.U.R., 2011. HRM significance and SME sector 3.
Mohamed Zainal, S., 2011. INVESTIGATING THE ROLE OF HUMAN RESOURCE MANAGEMENT PRACTICES ON THE PERFORMANCE OF SME: A CONCEPTUAL FRAMEWORK.
Mustafa Rehman, K., 2012. Human Resource Practices in SME Sector: An Exploratory Case Study of Pakistan. Euro Econ. 31, 7–19.
Zin SM., 2012. Motivation Model for Employee Retention: Applicability to HRM Practices in Malaysian SME Sector 5.
Posts
SMEs are the back born of any economy. Hence Growth and Development of SMEs are very important. One of the main issues that SME faces is high employee turnover. By practicing proper HRM procedures high employee turnover can be controlled. However most of the times SMEs do not have sufficient HR staff to carried out proper HRM procedure. When it comes to large corporates, they normally outsource most of basic HR operations such as remunerations process. Thus they have enough time to look after employees.
ReplyDeleteAgreed Tharindu, Thanks for your feedback and your adding gained the value of article.
DeleteDevelopment of SME sector is critical for an economy. Therfore SME business owners must take nessecery actions to improve HRM process to retain and motivate employees, since it is crucial for the betterment of the SME sector as well as the Economy.
ReplyDeleteAgreed Oshadha, the effect of recruitment, compensation, performance appraisals, and training & development contribute separately and jointly to the performance of the SMEs. Managers and owners are big players in the existence of SMEs since decision making fully lies on their shoulders. SMEs must encourage and invest in HRM for a sustainable evolution. For as long as most managers believe that people management is just common sense, SMEs will continue to die within the first year as is the trend until the importance of HRM is completely conceptualized.
ReplyDeletevery informative article Oshada.
ReplyDeleteIn my point of view, The application of human resource management policies to small and medium enterprises has its limitations. This is largely due to the size of these businesses and the growing focus associated with ensuring their very existence. There is also the accumulation of jobs in SMEs, with the prevalence of informal management, the choice of oral communication rather than written, etc.
appreciate your effort. Well done
Good topic Oshada,Managing talent in SMEs is another major challenge for HR, especially for the following reasons in the various categories: Recruitment: Recruitment of 'appropriate' talent has emerged as one of the top challenges HR must face in its day-to-day operations. Fierce competition, a limited pool of qualified candidates and sometimes inability to contribute .
ReplyDeleteWell the author has explained how the HRM processes and practices have an influence on SMEs, hence SMEs plays a crucial part in economy growth. In addition explained the common challenges are faced during an implementation. Well explained.
ReplyDeleteGood subject and well presented Oshada,
ReplyDeleteMost small and medium-sized businesses aim for excellence, and they rely on their workers to go above and beyond to help them stand out from the competition, especially larger firms. With this in mind, organizations should regard human resources as much more than a compliance issue or a checkbox exercise. Supporting employees and complying with company rules should be considered a fundamental business strategy with the necessary tools and HR skills in place (HR Solutions, 2020)
It's crucial to remember that SMEs are constantly changing environments, and HR issues may appear to be small roadblocks at first. Leaders must keep in mind, however, that neglecting these issues or deferring action can be costly in the long run.
ReplyDeleteImportant topic... For SMEs, overseeing ability is a huge test confronting HR. Management time is for the most part centered around development and scale and performance evaluations can regularly be inadequately organized or simply not reported. This is regularly on the grounds that different constructions like competency framework, values, and job descriptions are not obvious. Be that as it may, when done viably, a performance management system adjusts the endeavors of each worker to the general organization objectives. This guarantees that everybody has their influence or if nothing else understands their job in its general achievement.
ReplyDeleteSMEs are similar to training schools. They laid the groundwork but failed to maintain it. Certain HRM practices must follow to avoid this factor. Yes, it is a challenge for SMEs. However, implementing certain HRM practices can help to prevent issues such as employee turnover.
ReplyDeleteWell written article on how HR practice to be in SMEs as this type of business in the market are growing and it is vital for SMEs to have good HR practices to attract and retain the best fit in the long run.
ReplyDeleteMany SMEs cannot afford the cost of dedicated HR staff. Basically their Payments and record keeping will be conducted by a bookkeeper or an accountant who incorporates those functions into other financial functions. In such a case, managers have a major responsibility to define and communicate HR policy. However, if they are expecting a growth, they should properly implement the Hr procedures.
ReplyDeleteMost SMEs don’t have HR departments. No HR function can implement people processes. SME lack HR departments for two reasons. First, SME growth focus. Small businesses want to grow and become more sustainable. So, HR isn't. Second, SMEs have limited budgets and consider an HR department unnecessary. Promoters manage HR functions themselves in many SMEs to save money, causing more HR issues. That is, the promoter's culture becomes the SME culture, and no one is responsible for it.
ReplyDelete