Human resources a neglected function for SMEs

20 Sep, 2019 - 00:09 0 Views
Human resources a neglected function for SMEs (FILE) SMEs are a significant contributor to global employment dynamics

eBusiness Weekly

An estimated 420-510 million SMEs are conducting their businesses globally. According to Meghana Ayyagari, a leading, SME researcher working with the World Bank, SMEs who employ between five and 100 employees account for 48 percent of total permanent jobs globally.  Between 2002 and 2010, 85 percent of new jobs in the European Union were created by SMEs. These statistics show that SMEs are a significant contributor to global employment dynamics.

The Finscope Survey (2012) shows that, in Zimbabwe, an estimated 5,7 million people are employed in the MSME sector with an estimated 22 percent working full time.

Though a vast majority of MSMEs (71 percent) are individual entrepreneurs, 29 percent employ people from different sectors.

However, as encouraging as the employment statistics are, SMEs now need to embrace human resources principles to enable business growth.

Current trends show that the human resource function is neglected in favour of financial and operational tasks within their businesses.

The late Professor Curan, founder of Kingston University Business School, Small Business Research Centre points out that SMEs employees have been described as the “invisible workforce” and good human resource management was a “bleak house”.

Because of the size of their operations, SMEs hardly attract any experienced and specialised workforce. Diane Arthur, in her book “Managing Human resources in Small and Medium Companies” points out that Human Resource consultants in a corporate setting are busy on a full time basis and the effect on the small business is “nothing short of overwhelming”.

Inevitably because of lack of a strong human resource base, and solid management principles, a vast majority of SMEs do not make it to their fifth year of operations. In Canada, poor management practices caused bankruptcy to 50 percent of start-up firms.

Why do MSMEs need effective human resource policies? According to studies conducted by the South Asian Association for Regional Cooperation (SAARC), SMEs that practise good human resource principles are able to attract foreign direct investment.

Furthermore, the research shows that the latest efficient technology and expertise are injected in the business leading to rapid economic growth. Increased entrepreneurship activity from a skilled workforce also means that they are more creative and more innovative.

Diana Arthur, also argues that SMEs need continuous training as the most basic jobs will demand new and complex skills even simple clerical work.

In Zimbabwe, most MSMEs were established under unstable economic conditions making most of them survivalist in nature.

Power dynamics are largely centred on the owner and founder of the enterprise.

This “Sweatshop” kind of model for managing employees is quite popular as employees are easily substitutable and are kept at low cost as possible. Industries such as the construction sector are more “Paternalistic” in nature since employees and employers are largely dependent on each other to produce results.

Either way, these two methods are sometimes operated with very limited resources and highly informal human resource departments within the MSME space.

A study conducted by various Zimbabwean researchers for the Academia International Journal of Economic, Commerce and Management revealed that Zimbabwean SMEs are too small to meet the costs of their training budgets.

In addition the majority of SMES do not have designated human resources policies though 78 percent of the MSMEs operating in the manufacturing sector had some form of human resource documents when compared with 62 percent in the services sector.

It also emerged that MSMEs in Zimbabwe rarely make use of formal recruitment services. In Egypt 75 percent of their MSMEs made use of recruitment services.

Only 25 percent of MSMES have a formal induction and performance appraisals were virtually non-existent. Again Zimbabwean MSMEs rarely use payroll systems.

There is no doubt that SMEs need to ensure the use of best practice human resource systems in their organisations.

According to Diane Arthur; “any business regardless of size, requires the support of a well-trained and properly placed motivated employees in order to prosper.”

MSMEs should realise that they are now operating within an increasingly advanced and multicultural environment with different needs, and as such should capacitate their organisations with the requisite skills.

The same author also postulates that, the most basic jobs such as clerical work will demand new and complex skills and will require independent thinking, reasoning and the ability to diagnose and take      action.

A plethora of internet programmes and resources are available for SMEs who want to recruit their staff professionally. With limited budgets it is important to use a diversity of recruitment practices. Chinese SMEs value recruitment through their networks. The same method can also be employed by SMEs in Zimbabwe. Again MSMEs can recruit university interns who can also bring into the company much needed professional skills.

According to Albert Chandavengerwa, a leading human resources and training expert and founder of Galloway Management Consultancy, MSMEs “need to practice good and proper recruitment practices”.

Training is an absolute must and again SME owners can make use of free internet resources if experts are pricy.

Remuneration should be benchmarked to prevailing trends and the use of proper payroll systems should be encouraged.

A much hidden employee demographic that should be considered for employment by MSMEs, are People Living with Disabilities (PLWDs).

In his ground-breaking book ‘No Greatness without Goodness” Randy Lewis, Senior Vice President of Logistics for Walgreens a leading pharmaceutical company in the United states, managed to ensure that 10 percent of his workforce are PLWDs. In two of Walgreen distribution centres 40-50 percent of their employees are PLWDs.

These two distribution centres  are the most efficient within the whole company. It should be emphasised that working conditions and remuneration for PLWDs should be the same with other employees.

In conclusion, MSMEs in Zimbabwe, should consciously start embracing human resources principles and policies to ensure that they have  a competitive edge in a fast paced global economy.

 

Joseline Sithole is founder of Southern Africa Development Consultants an SME Research and Consulting Company. Contact [email protected]

 

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