S Indupriya

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Introduction

The importance of human resources to

organizational success has only multiplied as

businesses have become more knowledge and

technology driven (Barney, 1991). Literature

has identified seven universal HR practices that

impact the business performance (Delery and

Doty, 1996, Akhtar, Ding and Ge, 2008). These

practices, known as best practices or strategic

HRM practices include formal training,

outcome based appraisals, employee security,

employee participation, internal career

advancement, job description and profit

sharing.

Small and medium enterprises (SMEs) have been the backbone of the Indian economy. That is both a good and a bad thing. A recent IFC study on MSME finance in India indicates there are 29.8 million enterprises in various industries, employing 69 million people. This sector accounts for 45 per cent of Indian industrial output and 40 per cent of exports. Although 94 per cent of micro, small and medium firms are unregistered, the contribution of the sector to India's GDP has been growing consistently at 11.5 per cent annually, which is higher than the overall GDP growth of 8 per cent.

The good part first. Employing close to 40% of India's workforce and contributing 45% to India's manufacturing output, SMEs play a critical role in generating millions of jobs, especially at the low-skill level. The country's 1.3 million SMEs account for 40% of India's total exports.

The Small and Medium Enterprises' (SMEs)

contribution to Indian GDP is expected to

increase to 22 per cent by 2020, from the

present 17 percent.

Unlike the larger companies that enjoy the

benefits of scale and reach, SME face several

challenges on HR front. Their ability to attract

the right talent and retain the key employee

poses a challenge. Most SME companies have

limited HR resources, often 2-3 resources only.

Unlike larger counterparts, SME have not

embraced IT to automate repetitive work like

payroll and attendance. As a result, most of

their resources are caught with payroll and

follow up. The HR resources have little time to

employee engagement or organizational

identity building activities. It is becoming

important that HR function has the right tools

and technologies to optimize the selection,

hiring, training and retaining of employees. In

absence of right tools and technologies, many

qualified SME HR professionals are caught in

only “transactional” activities and are unable to

bring strategic value to their employers.

A major fallacy in SME companies is they lack

an evolutionary approach to HR as their

company grows over years. Initially, the focus

of HR is recruiting the right candidates,

providing the organization with appropriate

policies and systems. As the company grows in

size, HR has to move from laissez-faire

decentralized approach to bring in formal

system. HR at this stage has to educate the

employees a need for formalization and

processes to capture and analyze data. As the

organization matures, the challenge for HR is to

create open spaces so that innovation and

creativity are not stifled within the company,

and employees take ownership to drive newer

innovation. However, most SME companies

pursue a common agenda approach throught

their life-cycle. Thus result in disgruntled

employees, despaired management and lost

opportunities to build lovable place to work.

We believe building appropriate HR systems in

conjunction with the life-cycle of the firm

ensure right alignment and right strategic fit. In

this paper we explain how HR integration

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makes a firm more effective and efficient and

how it could be implemented.

SME company growth over years

We use organization’s life cycle concept to describe the changes eventually happening in the organizations. Many researchers in the past have proposed different life cycle models using various variables as time dependent indices to define and discuss life cycle stages. Numerous researchers have explained organizational life process (Chandler 1962; Galbraith 1982; Churchil and Lewis 1983; Kazanijan 1988; Hoy 2006). Typical life cycle of an organization typically passes through four stages as (1) Formative stage, (2) Growth stage, (3) Maturity and (4) Decline. For our paper, we consider the first three stages only. In formation stage, the founder of SME attempts to establish the firm, ensures its survival in early stages and build customer base. The corporate objectives at this stage are establishment of the organization in terms of workable place, human resources and production facilities and acquisition of customer base. There are neither defined procedures nor control systems. There exists a rudimentary management where every process is loosely arranged. Also the number of resources is few. Thus the concentration of expertise is high and implicit. It has high probability of loss of information when any key resource absconds/ leaves the firm. The HR objectives at this stage are to define basic HR policies for employees to follow. In the growth stage, the corporate objectives involve increased production, head count and development of strong brand through focused marketing activities. The firm introduces incremental changes in the process, technology, products and services. The HR processes, while well adopted, may need to be formalized and interlinked across various HR activities. Companies may be facing loss of information, employee handling becomes difficult. HR objectives at this stage would be

to introduce documentation of all processes, management control system, institute lines of formal communication and increase the number of resources. In the maturity stage, corporate objectives are

rationalizing the customer base,

service/product portfolio; create innovative

culture and look for international opportunities

for expansion. With formalized organization

structure, hierarchy is built in, roles and

responsibilities are clearly defined. The

challenge is to introduce changes, make

employees at all levels have a sense of

ownership and drive a sense of urgency so that

Organization does not suffer from rigidity. The

HR objectives are establishment of

comprehensive processes; standardisation and

automation of processes across organization

and emphasis on outcome – impact analysis.

Table 1: Showcase the corporate and HR

objectives at all the three stages.

Stage of

evolution

of the firm

Corporate

strategy

Expected HR

objectives

Formative/

Foundation

Establish the

organization

quickly

To setup

workable

processes

To identify

affordable

resources

To onboard and

facilitate the

production

process

Ensure go-to

market and

customer

acquisition

To define few

basic HR policies

Low strength in

number of

resources but

employees have

high expertise

Implicit to Explicit

knowledge transfer

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Growth To add more

resources

To add more

product lines

To understand

the key

customers and

account mining

Expansion of its

market share

Branding

Attempt to

formalization of

process

Adoption of

certification of

standardisation

Introduction of

documentation of

HR policies and

processes

Increase in no. of

resources

Introduction of

management

control systems

Lines of formal

communication are

laid down

Partially

formalized islands

of control

Partially

comprehensive and

consistent

processes and

procedures

Emphasis on

delivery quality

and timeliness

Maturity Rationalize

customer base

Rationalize

service/product

portfolio

Manage

productivity

and

effectiveness

Create and

sustain

innovative

culture

Encourage

production

variations

To acquire new

partner and

dealer alliances

Stride into

Organization

structure is

established

Clear descriptions

of roles and

responsibilities.

Processes are

completely

comprehensive and

standardized-

where data is used

to make informed

decisions.

Emphasis on

outcome and

impact analysis

Extensive formal

and informal

horizontal

interactions

between the

functions

international

expansion Design new HR

best practices and

acquire expertise

in them

HR direct

participation in

formulating overall

business strategy

Aligning HR process with life stages using HR integration framework

Towards aligning HR objectives with corporate

objectives at various life-stages, we suggest

organizations to adopt a four stage approach

consisting of: (1) As-Is Analysis,(2) GAP

Analysis,(3) Next 5-10 years goals and (4)

Prioritization and implementation of HR

activities.

In As-Is Analysis, the current state of the

organization’s life, system, capacity and

functionality are analyzed. The objective is to

collect data and highlight opportunities for

improvement. An As-Is of cultural elements

such as values of the organization, practices,

working style, employee morale, structural

elements as hierarchy, internal rules and

processes, lateral transfers, leadership styles of

the managers; people elements like Gender

break up, non full time employees, experience

of these employees, learning and development

programs given to them, skill gaps, recruitment,

induction, employee satisfaction surveys etc,

financial and operational elements are

assessed.

In GAP Analysis, we determine what

steps need to be taken in order to move from

the current state to the desired future state. It

highlights the gaps that exists and that need to

be filled to achieve the expected HR objectives.

It also measures the investment of time, money

and human resources required to reach the

business goal.

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Depending on what stage of life the company is

in currently, the objectives for Next 5-10 years

are established. This includes the functional

goals of all the functions in the organization

such as Finance, marketing, HR, sales, which

would be aligned with the business goals.

Once the functional objectives are freezed, the

HR activities must be prioritized based on

variables such as time, cost and percentage of

contribution to business objectives.

To align HR objectives with business goals, the

company must have standardized processes

and fool proof Knowledge management

system. For which the following steps need to

be followed:

1. Map each process

a. The complete HR cycle has 6 functions

(recruitment, induction, training,

performance appraisal, reward and

recognition and exit).Each process

should be formulated with quality and

clarity in focus, so that bottlenecks and

unduly long lead times can be

prevented.

b. The flow of items for every process

under HR umbrella must be penned by

benchmarking with similar organization

in the same industry. In HR, the internal

customer needs are the items that flow

through the value stream.

c. Each process flow must be

accompanied with a checklist so that

the entire flow of activities to be done

and time frame to complete each

activity is known. This helps in

monitoring cost and time. Thus

deficiencies can be eliminated to a

large extent by showing

interdependency of various activities.

d. Establish ownership details for every

stage in each process. Every process

has a primary owner and a secondary

owner. The primary owner is the

person responsible for the outcome of

the process and the secondary owner is

the person who reviews the outcome

and its business impact.

e. We suggest each process so defined to

be checked against completeness and

purpose based on PCC-DIO framework.

The PCC- DIO framework related to

Purpose

Comprehensiveness

Consistency

Delivery

Impact

Outcome

Purpose: The process should meet the

objective of integrating each process, functions

and technology. It should focus on actions that

drive performance.

Comprehensiveness: The process should be

detailed and all encompassing. The big picture

of the roles, responsibilities, activities and

different levels of learning and associated tools,

methodologies should be captured. The

process templates designed for capturing data,

the depth and breadth of information thus

obtained should be rich enough to make

informed decisions.

Consistency: The HR systems must be

consistent in terms of data, duration and

procedures throughout the HR life cycle and

show no deviation from the desired

architecture.

Delivery: The timeliness and quality of delivery

by each process should meet the business goals

and be delivered within lead time.

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Impact: The impact analysis of every process on

the concerned stakeholders must be done after

delivery.

Outcome: On completion of each process, its

outcome should be evaluated. It helps the

senior management to understand the

drawbacks and build on strengths while

eliminating errors in the next iteration.

2. Make the processes stay inter-connected

The processes are not separate entities. The

output of one process becomes the input of the

other and few are done in parallel.

3. Capture data for decision making

Subjective information yields no meaningful

decisions. They are mostly based on intuitive

and wild gut feelings. To provide effective

decisions and improve efficiency of the

business, insights must be drawn from

objective data.

4. Enhance knowledge management system

Turning implicit data to explicit data will

provide an edge to the decision makers to

recommend suggestions. It can be documented

and formulated for any further changes in

future. The knowledge management specific to

HR applies to succession planning, decision

making for strategic growth, Knowledge

transfer from relieving employee to a new hire,

and capturing required quantifiable data at

each stage of HR process.

5. Create sense and respond system

Reduce the gap between targets and actual

measurements in terms of cost, time and

quality. Data that is unused or incorrect fouls

up operations and decision making. Hence

continuous improvement of the processes and

knowledge management system should be

made.

Conclusion

As an organization moves from formative stage to the mature stage, the HR function also should pass through the optimum growth curve by meeting the expected HR objectives. In this paper we have showcased an approach that has been implemented and yielding results. We suggest SME companies to adopt a life-cycle view to create and implement HR processes appropriate to their life-stage and corporate objectives, so that value from HR function could be optimized. Bibliography Hartog, D. N. D., & Verburg, R. M. (2004). “High performance work systems, organizational culture and firm effectiveness”, Human Resource Management Journal, 14, 55–78 Syed Akhta R , Daniel Z . D I N G, And Gloria L . Ge(2008), “Strategic HRM practices and their impact on company performance in chinese enterprises”, Human Resource Management, Spring 2008, Vol. 47, No. 1, Pp. 15–32

Rutherford, P. F. Buller , P. R. Mcmullen(2004),

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