Talent and growth in the Indian SME sector

Today, human capital management does not rely on the ‘one-size-fits-all’ philosophy. This is because talent-related decisions in today’s context rely on a plethora of factors like company size, diversity of workforce, transforming employee expectations among many other critical factors.

Business and HR leaders of small and medium-sized companies have their own unique set of challenges and opportunities when it comes to managing talent, which may not be always seen in conventional large organizations. Most small and medium enterprises in their initial phases of growth often do not have clearly defined people management practices and roles, and rely on non-formalized, temporary or existing resources to carry out HCM processes such as recruitment, learning and development and performance management.Coupled with this, SMEs are often financially constrained that in turn restricts them in designing effective solutions for long-term talent management and related problems at the scale and depth that most large companies do.

To understand the HR landscape and frames of references in the small and medium enterprises segment, People Matters conducted “The Small and Medium Enterprises HR Landscape Study 2017”that analyzed the data generated by surveying135 unique companies across sectors — ranging from IT, Healthcare toBFSI, with the employee base of below fifty to more than five thousand. The Study focused on three principal themes —Talent-related business priorities of SMEs and how ready are they to handle them; Level of maturity of HR processes in SMEs and if there are any identifiable trends; and the role of HR technology across multiple processes.

One of the starkest revelations that the Study made was that most SMEs in India do have HR departments, contrary to the common expectation. And hiring and onboarding feature among the activities that most SMEs and their HR functions enlist as top priorities.73 percent of the survey participants revealed that they were “ready” to hire people for the right skills, knowledge and experience; 80 percent stated that they were prepared to onboard new hires; and 69 percent mentioned that they were ready to create and communicate workplace policies. Given the crucial role that an onboarding process plays in acclimatizing new employees to the business and the work culture, most SMEs (60 percent) revealed that they hada formally documented onboarding process. Darshna Panchal – Head HR of BrowserStack, a cloud-based cross-browser testing tool corroborated this trend and stated that, “We ensure that all new hires spend a minimum of 4 weeks even before they are onboarded. This helps us in ensuring that the person is in line with our larger organizational culture and helps us avoid costly hiring mistakes.”

On the other hand, “Managing turnover and retaining high performing talent” is a critical challenge for most SMEs. 43 percent of the companies surveyed rated the challenge as “urgent” whereas 45 percent of the companies considered themselves “unprepared” to tackle the challenge. While there may be a number of reasons that could be attributed to talent drain, it is also closely tied to other top challenges that SMEs face— “Developing leaders”, “Providing employee-centric total rewards”, “Creating a dynamic career and learning environment”, and especially “Engaging and motivating employees to go the extra mile”— a total of 43 percent of the surveyed organizations stated that they are not prepared to tackle the challenge, and 36 percent rated the challenge as urgent. 

Technology adoption in most SMEs is need-based, more so in the HR function. And it is mostly limited to specific HR functions that involve routine work.The most common function for which technology is used is HR Operations (including payroll, leave and attendance) – 40 percent of SMEs already use a fully automated technology solution, about 46 percent of them have adopted some core technologies, and 64 percent of the SMEs use technology solutions for recruitment. Other HR processes for which technology is used include communication and collaboration (63 percent), performance management (64 percent), and compensation and benefits (62 percent). The HRfunctions where SMEs are less reliant on technology include Employee Engagement (56 percent), Strategic workforce planning (61 percent), Succession Planning (70 percent) and rewards and recognition (58 percent).

While it may seem that there is much scope for improvement in HR technology adoption in SMEs, companies need to do a careful cost-benefit analysis of investing in the right kind of technology that is contributive, convenient and conducive to their business.With evolving trends, SMEs are also encouraged to look for solutions internally and many have started to develop their own technology tools to manage their people-related issues. One such organization isACME Clean Tech Solutions, a business focused on energy conservation, management and generation. SamirSharan, CEO of the firm says, “Recruitment, leave and attendance management, performance management, training and safety-related aspects were automated and deployed via cloud-based applications, all of which were developed in-house. Currently, our HR processes are about 70-80 percent automated and we keep innovating based on changing needs of our customers.”

While technology adoption and utilization is a key marker of the level of maturity of the SME in the marketplace, a review of the processes and systems in place to manage HR functions in SMEs reveals that there is scope to develop and promote key talent processes including leadership development, employee engagement and in providing employee centric total rewards. 

According to the HR Landscape SME Study, about one-third of the organizations surveyed do not have leadership development programs. And a half of those who do have a program, do not have a documented process, which means that most of their programs are time-based and adhoc. And while 41 percent of the SMEs rate their HR capability “good”, 26 percent of them believe that their HR function “needs work”. Clearly, there is much scope to take a step ahead in enhancing the existing processes, in a way that is cost-effective and creates maximum impact.

While it is clear that retaining good talent remains a challenge for SMEs, actionable strategies to counter it are still lacking. Most companies simply try to forecast attrition as accurately as possible, only 28percent maintain a healthy bench strength (perhaps most cannot afford to), and upto 30 percent depend on employee contracts to work for a stipulated time period, which is not always a great strategy. Perhaps less implemented solutions like offering greater flexibility and hiring part-time staff and consultants could help improve the situation.

With SMEs being uniquely positioned to offer models of employee engagement that are not usually seen in larger organizations, the need for them to continuously identify innovative new ways of engaging talent, under the direct purview of the business leaders is critical. Raju Sivaligam, Co-Founder & Vice President, ZeOmega, a market leader in population health management says, “Leaders are accessible to employees, including the CEO. We also conduct a “HR connect” with all our employees, the agenda of which is driven by employees and it covers development, culture and operational issues… While there has been a strong buzz around millennial talent for a while, our focus is to ensure that we have effective programs in place to ensure their development.”

Research suggests that the reason why most Indian business leaders in the SME sector refuse to innovate or put concrete HR systems in place is because they feel that they are already doing what is humanly possible So, what role can HR play in enabling and accelerating the business? 

Most companies offer well-designed induction programs and check-ins to accelerate the business processes further. Barnali Roy Chowdhury, Vice President- HR, Portea, one of the fastest growing in-home medical care service providers in India says that, “One of our unique practices is to have an HR SPOC in each location where he/she doesn’t act as an HR person but is the first point of contact for all employees regarding their various queries. Apart from this, we also have multiple helplines and quarterly surveys that help us to stay on top of multiple people challenges… We have a well laid out induction program where the heterogeneous group (which includes the talent pools of call center employees, IT engineers and healthcare professionals) comes together and interacts with each other. We have a check-in process with each individual after his/her first 30 days, 180 days and then after 9 months to ensure that we are available at every stage of the assimilation period.”

Many are also focused on HR interventions that enable effective human capital management and business growth. Darshna Panchal adds that “We have to ensure that our older employees are comfortable with the newer management and processes while focusing on their individual needs.” But all in all, the focus of the business and HR leaders has to be on the bigger picture, as Raju states “The role for HR leaders is to focus on having the right attitude towards solving people-related problems.”

As an entrepreneur or a small business owner, the challenges of managing human capital well are myriad. According to the Forbes Human Resources Council, the advantages outweigh the costs, and it lists several reasons for doing so. Most crucially, hiring a talented HR professional will demonstrate a company's commitment to growth and sustainability to current employees, future customers and funders. Certain HR activities though, can and should be outsourced. It saves cost, and makes internal systems more focused and efficient. Nicola Goodridge in her article published in The Guardian states that, “The top three reasons cited for outsourcing HR are access to skills and knowledge, gaining better quality support than the business is able to be offer in-house and the costs saved. This saving comes from the company either not requiring an HR person in-house, or enabling the person who had taken on the HR function to focus on revenue generating work. I've found the most commonly outsourced HR activities are legal services, payroll and pensions.” It is thus important to know when and how much to outsource, and this depends on how big is your company, exactly what services you need, the providers available and their costs.