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 surveyed 135 unique companies across sectors — ranging from IT, healthcare and BFSI, with employee base ranging from below fifty to more than five thousand and analyzed the data that was generated. The study focused on three principal questions What are the talent-related business priorities of SMEs and how ready they to handle them?; What is the level of maturity of HR processes in SMEs and if there are any identifiable trends?; and What is the role of HR technology across multiple processes?

What’s Working, What’s Not

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 stated that they are “ready” to hire people for the right skills, knowledge and experience; 80 percent stated that they are prepared to onboard new hires; and 69 percent mentioned that they were ready to create and communicate workplace policies. 

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 “urgent” whereas 45 percent of the companies considered themselves “unprepared” to tackle the challenge. 

Another notable challenge that SMEs face pertains to “engaging and motivating employees” to go the extra mile. A total of 43 percent of surveyed organizations stated that they are not prepared to tackle the challenge, and 36 percent rated the challenge as urgent.  

The state of HR Technology in SMEs

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 functions for which technology is used include communication and collaboration (63 percent), performance management (64 percent), and compensation and benefits (62 percent)

HR functions 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).

Developing key talent processes

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 the existing processes a step ahead, 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 28 percent maintain a healthy bench strength (perhaps most cannot afford to), and upto 30 percent depend on employee contracts to work for a stipulated time, 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.

Click to download the SME HR Landscape Study 2017