How Can SME's Manage and Retain Employees Effectively - White Paper by Husys

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This White Paper focus on the various challenges of SME's in Retaining Talent and also Winning Solutions.

This White Paper focus on the various challenges of SME's in Retaining Talent and also Winning Solutions.

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  • 1. How Can SME’s Retain Talent Effectively Whitepaper –2013 6/25/2013 Husys Consulting GR Reddy
  • 2. White Paper: How Can SME’s Retain Talent Effectively Copyright © 2013 Husys. All rights reserved. ABSTRACT The Growth of the MSME* in India has been double digits over last few years. Investment in 2011-12 alone estimated at in excess of 6 lakh crores (Approximately 100 Billion USD). MSME contributes to the overall 45% of Manufacturing output and 40% of the Export. They employ more than 59 million people in 26 million Units. This sector has more than 6000 products and contribution to Food-22%,Chemicals-12%,Basic Metals-10%,Metal Industry-8%,Elec & Machinary-6%,Rubber & Plastics 6%,Others-36%. SME’s in India – the best opportunity for any Fresh Graduate, Professionals and can offer a variety and challenging work. Many of these Units would not have a formal HR Function to differentiate themselves with so many others. The Opportunity is for the Progressive SME’s in Future to build and sustain a business to compete with large organizations (Enterprises who would like grow and become large organizations. These would be the emerging companies who use the potential of people and build great organizations in future.). Even after having such a value creation for India, Indian SMEs face certain challenges pushing them far behind their foreign counterparts. One of such critical challenges is the Human Resource (HR) Challenge, encompassing attraction and retention of the right set of people. In spite of this they struggle in attracting and retaining talent in their organizations for growth. The future mantra for the SME’s to become competitive and challenge to be next big players would be only “PEOPLE” focus. The ability of the SME units to attract the new talent, retain the talent and develop them along with the organizational growth would be at test. The ability to move from “I can do” attitude of the Business owners to “We can do” attitude would help them to reap the benefits of the current market opportunities. This whitepaper looks into the Business Owner challenges in HR faced by the SME’s in India. It also talks about the solutions that the sme’s can take to move from owner focused to People Focused to “DIFFERENTIATE” themselves in the market.
  • 3. White Paper: How Can SME’s Retain Talent Effectively Copyright © 2013 Husys. All rights reserved. INTRODUCTION The small and medium enterprise sector enjoys the repute of being the growth engine of the Indian economy. Small and medium enterprises (SMEs) contribute significantly to industrial and economic growth in all developed and developing economies. Although SMEs are witnessing a high growth trajectory because of the current opportunity and internal consumption in India, they still not evolved in terms of the people practices. Including the HR Professional Talent has never looked at this as an opportunity to build and sustain their edge. There is inherent inability to think “Using the People Power for Business” in SME’s. Hence, the initiatives to sustain the people in the organization have been very little. This reflects in retaining the talent internally. This many times works against them while the MNC’s and Large organizations adapt best of the people strategies to sustain in their business. The Growing Importance for Talent Retention Talent Retention is directly proportional to your business growth many times. The future is only in retaining the talented workforce whereby differentiating one SME to the other. While this challenge is more taken by the CEO than the HR as a function since it may not be in existence in many cases. Retention of the talent needs a strategic thinking within the SME for a long-term sustenance. In this times of new age living and life style, the only way to retain and reap benefits of the talent is more appropriate than building/hiring new teams many times. Therefore, the bottom line can be improved and wealth can be created through the Internal Talent Nurturing and retaining. SMEs struggle to communicate and retain the talent to build a long-term vision through people. The focus in building clarity in Organizational Vision, Mission, Core Values, Policies, Procedures, Statutory obligations, devising multiple levels of talent engagement in such issues would define the growth for SMEs. With the new-age talent taking over the Family owned business, the young entrepreneurs jumping into the bandwagon of creating enterprises is helping to focus more on the Talent Engagement and hence Retention. The biggest challenge that they go through is the change in the old workforce to think the new-age challenges and attitude of the people. The ability to build the clarity with the older workforce and new age workforce would help in building the long-term business sustenance.
  • 4. White Paper: How Can SME’s Retain Talent Effectively Copyright © 2013 Husys. All rights reserved. Talent Retention Challenges @ SMEs Communicating a Clear Vision: Many organizations would not even have a future vision and hence becomes very difficult to translate the vision and communicate down the levels. The organizational focus many times is as it comes than what they wanted to be in the future. Many of them suffer from the very very short cycle syndrome, where setting a long-term goals and achieve becomes very difficult. This translates into the poor communication and no communication to the next levels many times hindering the retention of people. The basic purpose of working and seeing a future becomes very difficult for individual employees. Openness to Building Talent: Building talent in SMEs seen as giving away the organizational secrets to the talent individuals. Many times the openness is less due to the bad examples around where the talented individuals would have left the organization and built a better business than the owner himself. On the contrary how good it would be to retain that talent and use it for the organizational development. In today’s business everything can be replicated due to the information availability and tools to execute with least efforts. The only thing the other business can’t produce is the talent that you have. Lack of ability to Nurture the Talent: Not just an openness to build talent the ability of nurturing the talent is a major concern for SME owners. The resources hired for the Human Resources function many times lack the exposure and works as per the wishes of the Business Owner. The Business owner has a typical “Likeme” framework where he/she try to fit everyone in that angle. This often becomes the hinderance for development of talent within the organization. Overall view on the abilities of people and nuture to build a common strength for business lacks many times. Lack clarity of building Role & Responsibilities: Defining the scope of the work and assignment would mean a lot of work which may eat away the potential business that the owner could build in the meantime. The ability to set a right targets and expected outcomes would be the least in SME’s. Many a times the roles are confused and typically people may be operating one level below or two levels below their expected Role and responsibility. This would lead to no clarity of role and the responsibilities to build accountability for end product/delivery.
  • 5. White Paper: How Can SME’s Retain Talent Effectively Copyright © 2013 Husys. All rights reserved. Extreme focus of not letting go to Next Level: The entire organization many times reports to the CEO or the Business owner. The focus on getting into every nitty-gritty and taking every decision by the top management is a typical characteristic of SMEs. Hence the ability to development people and build scope for improvement and innovation from the team level becomes negligible. The organization with a better authority and hierarchical structure becomes almost doesn’t exist for growth of the organization. This leads to a poor 2nd Line Leadership development which hampers the growth of any organization. Lack of people engagement : Identification of the appropriate opportunities and engage the people is seen seldom in SMEs. People are more equated to delivery machines while the human sensitivity is extreme for Positive and Negative. Many times the people engagement is more from the point of view of the Business owner how he/she treats certain employees in the organisation. It is not all about the organizational framework or values. This makes it few people being highly enthusiastic being in every & anything and where by hurting the other people sentiments as being more pro management than work based value. The above all the reasons make the SMEs least attractive for any HR professional to look at joining for creating a change and “AVOID” behavior. “I only want to hire people who can take our business to the next level as their business and become part of the Organizational Growth story. We would rather avoid a great guy with negative attitude in working with SME’s. Spending time on the internal talent and complimented with the new talent who can fit into the growth is important to sustain the future business. Let’s face it, the business is run by people and the CEO’s time should be spent in building and retaining them for business growth and in turn wealth creation for stake holders including the employees.” – G R Reddy – Founder & Chief Facilitator - Husys
  • 6. White Paper: How Can SME’s Retain Talent Effectively Copyright © 2013 Husys. All rights reserved. Solutions : Winning Formulas Here are few solutions that would help the SMEs to building their capability to retain talent in organizations. Clarity of Vision & Communication: Building a clear vision is the first step in Talent Engagement. The translation of vision to the last person makes it more effective. In fact, communication, translation and knowing the effectiveness is easier at SMEs. A clear Vision, Mission, Core Values, Organizational Objectives would help in building Employee Involvement (EI). Every CEO/Business Owner should be able to make sure that the progressions of achievements are communicated from time to time. Developing 2nd Line Leadership: SMEs biggest challenge is to translate the vision & mission to the next level. As we have noticed the ability of let it go to next level would help in building the clear second line management. The development of second line Leadership gives way for employees to aspire to contribute in a better manner. The groomed 2nd Line Leadership is the best example that you can showcase to the teams the opportunity to grow. The greater the effort and success in building 2nd Line would help SMEs to grow faster. (Please review the slide presentation for more information and tips on development-small-and-medium-organisations) Building Ownership : Building ownership with employees is the only way UP for SMEs in today’s environment. There are numerous opportunities in that direction. If these methods are managed well there would be no looking back for SMEs today. Now its easy for the SMEs to build that capability of growth fund in capturing newer opportunities quickly. SMEs focus to create a value based ownership for employee would help in building wealth to its stakeholders. While it is very difficult for SME owner to think of giving away the ownership, but the new age support systems available in the form of Venture, Private Equity funding eventually moving to the value creation through the Exchanges. One such opportunity for SMEs opened up in India on 13th of March 2013 is the new SME Exchange by Bombay Stock Exchange ( This platform not only helps the value creation for enterprise but also gives opportunity to enhance visibility and ability to invest in People. Remember, by giving you stand to gain the value which you may not be able to reap otherwise for years to come.
  • 7. White Paper: How Can SME’s Retain Talent Effectively Copyright © 2013 Husys. All rights reserved. Outsourcing HR Function : While the cost pressures are very high at the SMEs, the ability to attract the best of the HR Talent would also be a challenge. In an effort to ease such challenges, we have Husys like organizations to help in giving their expertise through a model of distributed HR Head along with on ground HR Executives who can translate the vision into real Employee Engagement or Talent Retention. With Husys unique model and the expertise of working with more than 200 organizations in 15 different Industries the expertise and best practices of other Industries can be used as an advantage. Husys would engage in understanding the Business, People and integrate with a solution to help managing the change of growth. The Function Outsourcing Company can help you in setting Vision, Mission, Values, Objectives, Roles & Responsibilities, Policies, Procedures, Performance Management, Employee engagement & retention, People Development, 2nd Line Development with constant Information for right decisions. Social Branding & Technology: Today employees would like to be with organizations known to their social system (Ex. Does the Next Neighbors know about your organization). To ease out the pressure of this Social stigma, SMEs can focus on using the internet space effectively through the social and networking media. These are very cost effective ways to reach out to the target audiences. The emergence of Web 2.0 its makes it easier to communicate and engage became easier. These also create an opportunity to build internal bonding through the employee engagement leading to retention. In India most of the times the decisions of leaving an organization or being with the organization have more of emotional connect. This can be achieved through the new age Internet revolution to keep the people together while delivering People services on cyberspace (Internet/Cloud based applications available on Software as a Service model which are pay per use to keep the cost low). Technology adaptation is the most cost effective tool for Employee retention. Example: Husys internally developed cloud application ( would help employee management easier in simplifying Employee Communication, Employee Data management, Leave Management, Setting expectations, Role clarity, Payroll and HRIS. All delivered on cloud application which is cost effective and easy to adopt.
  • 8. White Paper: How Can SME’s Retain Talent Effectively Copyright © 2013 Husys. All rights reserved. Conclusion To summarize, SMEs are required to focus on the planning, communication, nurturing of talent for better business in future. It helps to build an effective HR Function/Department with Internal and/or External Support. People practices should be the prime focus for “Differentiation” and “Business Growth”. A right mix of business focus with people practices can take SMEs to next level in competing with not just large Indian organizations but also with the MNCs who are eying to capture Indian market. Build the strength of people around and capture the market before it’s too late to realize. In this direction every business owner at SME can use the Technology, Government initiatives, NGO’s help for inclusive growth in India. About Husys: Husys - HR Function Management Company ( is striving to build HR Department for Start-up, Small and Medium businesses since 2002. Husys strive to help in managing to stream line the change that organizations go through during their growth phase. Husys addresses the key Human related issues to support organizational Growth. We integrate the Hiring, Inducting, Performance Measurement, Policies, Employee Bonding and Development. We truly live our vision : "Synergizing Human Potential for Business & Society". For more Experiences & Tips on HR @ SMEs. Please visit : Please not the following terms used above at different times as  Employee(s) : Associate, Workforce.  CEO & Business Owners terms used interchangeably  HR & People used interchangeably  Human Resource Department – CEO/Business Owner