HRM for Small Businesses

Small businesses generally do not maintain any dedicated HR person or team for structured HR practices. HR practices in most small businesses center around meeting payroll and statutory compliance requirements. As these tasks are repetitive and calculation oriented, the accounts teams are commonly to handle these tasks. So the need for a separate HR function or team is  not easily recognized in such organisations.

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Is this arrangement sufficient for continuing business success? No! A business organisation is made of people. For growing a business and its operations, additional manpower become necessary sooner or later. There could be employee turnover too. These two basic situations can give rise to the following work
  • Recruitment - Advertising for vacancies or selecting and engaging placement agencies, defining and explaining job specifications, screening CVs, organising interviews, selecting and finalising right candidate(s), finalising pay, making offers, preparing offers and appointment letters
  • Induction - helping new joinees complete necessary formalities, introduce them to other employees, conduct orientation, apprise them of the policies and procedures, arrange for their training and feedback, helping them adapt to the organisation environment in any other ways appropriate
It should be clear by now that these processes require very different competencies from those of the accounts personnel and thus cannot be carried out effectively by them. In small businesses, part of  this role is normally taken up by the owner himself. He doubles up as the HR Head and tries to carry out the activities to the best of his knowledge, ability and availability of time. But a part of the job that is detail oriented and the job that is documentation related do not get completed in most such cases. Its common to find employees in SMEs without appointment letters, salary slips, leave records etc. Naturally, transparency of HR functions in SMEs isn't practical. Employee morale in such situations is low too. Then what can happen to the overall business? At best it can continue to do the minimum for survival.

Low employee morale cannot support  healthy employee relationships. People tend to work to a compliance mindset. The same is reflected in the environment and culture of the organisation. All these together makes it very difficult for such businesses to retain or attract worthy talent. In absence of worthy talent, no improvement or expansion work effectively materializes. Growth targets are not achieved. SMEs find all the more reasons to protect cost and restrict intangible investments in HR practices. It turns out to be a vicious cycle and most small businesses fail to decode this puzzle and remain stuck in their SME identity.  

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