In my previous article, we examined how the adoption of cloud will benefit SMEs. In this seventh series of articles on SMEs in India, we look at issues beyond technology which have impacted the SME ecosystem and how it has become a major bottleneck to its survival and return to business.

Over the last few months, with the Covid-19 crises taking over our world, there have been some dramatic changes in the way we are operating. Most of us have found a way to survive, albeit the fear of what the future holds for us, is still a bit hazy.

Many SMEs we have interacted with have suffered immensely during these crises. Perhaps the only thing that has made them continue to survive is their indomitable spirit to come out of this seemingly endless pit. During our various interactions with several SME companies, we realised one of the biggest bottlenecks to restart business was neither the lack of nor the availability of funds, but, the lack of defined processes and quality of the workforce.

Over the last few months, almost all attention, to re-boot the SME ecosystem, has focussed on the financial side of the business. Almost all leading forums, foundations and industry bodies have organised hundreds of webinars on ideas and processes to get access to funds. We feel HR's function has largely been ignored, although the response from SMEs has also been lacklustre.

I feel that SME entities need massive investments in managing the domain of HR.

So although funds are, of course, the basis for the survival of any company, where even paltry government economic stimulus has had an insignificant impact on ground conditions, we really now need a movement to look beyond funding.

To aim to try to achieve the above, SMEs need to work on their internal structure, processes and practices to achieve expected growth.

Many SME owners rue the fact that their workforce (even in the financial and services sector) is not able to cope up with the culture of WFH (Work From Home). They are wondering how some MNC’s have announced WFH till March ’21 and few even till July ’21 for the majority of their employees.

In this article, we will try to define some challenges SMEs face in the domain of HR and in the next article, we will show how they can control and manage these using various Tech solutions.

Challenges SMEs face in HR

SMEs play a pivotal role in the country's economic growth. India has more than 51 million SMEs that employ around 120 million people. In 2017, SMEs were expected to create the bulk of employment and are estimated to add over 1.3 million jobs per year.

According to Samir Sathe of the Wadhwani Foundation,

-“For the three quarters from April 2020, MSMEs are likely to have contributed between $600 billion and $900 billion to India’s GDP,

- MSMEs have the potential to add $300 billion to the GDP by 2025.” 

To aim to try to achieve the above, SMEs need to work on their internal structure, processes and practices to achieve expected growth.

SME owners also need to work closely with the largely ignored HR department. On the one hand, SME’s wants to attract the best talent, but the lack of HR practices dissuades the good candidates from applying.

Surprisingly, SME owners we have talked to mention that they have the best HR policies in terms of emoluments, perks, rewards and accolades, performance management systems and so on. BUT when you interact with the teams, it all comes to being only on paper.

As a result, SMEs are struggling to fill the talent gap, identify the right talent, find a skilled workforce and retain talent crunch is becoming a big challenge.

Most SMEs do not focus on learning and development (L&D) activities. They were almost dissuaded from this activity, citing a lack of resources and time, while ignoring the fact that learning and development is a big motivator for employees.

Similarly, we have noticed a total lack of project management being followed by the majority of these companies. This also results in low morale amongst the key employees.

Small and medium scale enterprises are highly volatile in nature and thus are at a higher risk value. Most SMEs, because of the size of their operations, are heavily dependent on a few key people. Unfortunately, there is no Risk Mitigation plan in place. A good workforce is considered to be the most important asset for any organisation. Thus all SMEs, irrespective of their structure or size, must positively focus on human resource (HR) development. Additionally, since the workforce tends to be leaner and weaker in these industries, the Human Resource (HR) department needs very actively involved in handling the frequent issues which come up within the organization. 

Some interesting quotes on the importance of HR in the success of any business:

So often, the problem is in the system, not in the people, and if you put good people in bad systems, you get bad results.

- Stephen Covey 

Treat your employees right, so they won't use your internet to search for a new job.

- Mark Zuckerberg 

 
You cannot mandate productivity; you must provide the tools to let people become their best

- Steve Jobs 

Also read: 5 ways technology can simplify HR, save time and reduce stress.

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