HR IN MSME S

SUMEET VARGHESE

From backwaters to white waters:

managing talent in God's own country

or an entrepreneur, place of business or

choice of business location constitutes
perhaps one of the most critical early
decisions that he or she makes for the
business. Typically this decision has major
repercussions in terms of the long-term
a bility of the business to attract human capital.
Interestingly, even as large organizations undertake
considerable research before setting up a plant or
factory, MSMEs do not have the luxury of conducting
a great deal of analysis before settling into a new
place. However, many MSME owners would concede
that locational and regional dynamics do play a very
large role particularly in connection with the availability
and retainability of talented employees. But is this
something that plays on their minds when looking for
a new business location? How critically are such inputs
viewed when deliberating on choice of business
location? How do they mitigate these risks when
scouting for an operational base?
Whereas there is no straight arithmetic to explain
how important people matters are for an MSME
deciding on a business location, anecdotal evidence
does point to a clear connection. Atleast, a handful of
MSME owners based in Kerala that this author spoke
to confirmed that there were linkages between location
and the human capital challenges they faced. While
many could not pinpoint the nature of the influence
location had on their business' ability to attract and
retain talent, some did grant that regional labor
dynamics had indeed skewed the challenges they faced.
The case of Unnikrishnan, MD at Cochin Petromins
is particularly instructive here as he took the
entrepreneurial route right after his graduation without
a stint as an employee in a regional firm. As a matter
of fact, though his firm manufactures and imports
thinners, lubricants and phenolic compounds,
Unnikrishnan has had several forays into various kinds
of businesses before settling down to manufacturing
and trading in industrial chemicals. While he has
moved into a new office over a period of time, his
industrial unit has been at the same location for over

68

April 2011

14 years. One of the main reasons for setting up the

factory was government support in the form of
industrial licenses and its proximity to a large industrial
area. As a matter of fact, manpower availability was
not an issue for choice of location initially. However,
with increasing differentiation in the workforce - blue
collar and white collar, location became an issue. The
sales team, says Unnikrishnan, wanted to sit out of a
proper office as the factory area began to be perceived
as inaccessible and polluting. However, this was not
the only challenge Unnikrishnan's business faced. With
increasing penetration of the IT sector and Banking
Services related jobs into the Kerala economy, it has
become even more difficult to retain white collar
workers. It is not just the higher salary but the nature
of the work that is now luring the staff away.
Unnikrishnan strongly believes that talent is even today
being wooed by countries in the Middle East. Besides,
rising living standards and strong familial support has
created a class of workers that prefer to take it easy.
Incidentally, even blue collar workers are being
attracted to the rapidly growing sectors in the Kerala
economy as firms in these sectors shell out upwards
of Rs. 500 a day for casual labor.
With minor variations, the MSMEs that this author
spoke to seemed to be echoing the experience of
Cochin Petromins. Typically, most agreed that the
cost of doing business has been steadily rising due to
a clutch of factors like:
Increased Competition for Talent - Internal and
External
Kerala is unique among other Indian states in that
it has one of the largest NRI populations in the Middle
East. Almost everyone in the state knows someone or
the other in the Gulf. This network has only increased
over the years making it difficult for MSMEs to attract
a skilled labor pool that has grown up with the
promise of making a fast buck in another country.
Interestingly, the little industrialization that the state
has welcomed has not stalled this talent exodus in a
major way, though salaries in the Gulf have more or
less stagnated over the last few years. Of course there

www.humancapitalonline.com

HR IN MSMES
is a wave of educated and skilled workers who prefer
to look at working in other Indian states where there
is more promise of growth.
With large foreign remittances, good returns from
agriculture (predominantly cash-crop) and steady
increases in the standard of living, service sector
companies have made a beeline not just to cash in on
the rising aspirations of all classes but also the skilled
labor pool that has now the option of working for
well known brands at competitive salaries without
venturing out of the state.

Sectoral Bias
Due to the large-scale setting up of service sector
companies, a new generation of workers in Kerala
seems to be growing up with a particular bias in favor
of service sector jobs, according to some MSME
owners. This is also because the other sectors may
not have branded themselves well from an
employment perspective. Whereas a lot of banks and
insurance companies have already occupied significant
mindshare thanks to the incessant advertising, MSMEs
in various other sectors are yet to come
to terms with this subtle or direct
branding that is continuously on.
Clearly the service sector industry
seems to drawing most of the eyeballs
for now.

letters and no clear job descriptions. It is anybody's

guess what such situations lead to.
While this may be an isolated instance of how a
long-standing acrimonious relationship between
employees and management creates a vicious cycle
of further hostility and distrust, MSMEs in Kerala
have a choice of facing the union challenge in a more
genuine and genial way as the owner can himself/
herself pay serious attention to employee issues. For
instance, Unnikrishnan's mantra is to handle employee
issues one-on-one and provide a better working
environment by tackling small issues directly without
allowing these to grow into larger issues. His policy
allows him to be personally flexible to meet employee
demands and keep his personal ego out of all employee
transactions. This approach perhaps has helped him
a lot in demanding a similar amount of flexibility
from his small employee population.
For the many start-ups as well as the more
entrenched MSMEs in Kerala, talent attraction and
retention pose perhaps one of the defining business
challenges that small business owners have to grapple

Unions
It is generally believed that Kerala has
one of the largest number of unions in
the world. Typically, for a business that
grows over a period of time, run-ins
with employee unions are pretty
common. For MSMEs that have to
wager employee deals everytime with
unions, growing a business becomes
that much more challenging. Ironically,
when employee and management
interface is union driven, real genuine
opportunities for real human resource development
activities take a backseat, thus offering practically
limited options out of the stalemate that businesses
find themselves in. When working with a particularly
large enterprise from the state, this author discovered
that frequent union issues had given rise to an
employee culture and outlook where trust,
information sharing and genuine respect and
understanding for employees were in short supply.
There is no denying the fact that decades of
Communist rule coupled with a near 100% literacy
rate has created a workforce that is highly rightconscious and quite mindful of its duties and
responsibilities especially when it comes to
employment. However, in this particular instance the
company had responded to the tremendous
opportunity of employing a highly aware workforce
by offering strongly worded (almost certainly inspired
by the litigious background of the firm) appointment

www.humancapitalonline.com

with almost on a regular basis. Whereas the state's

social, economic and political climate have combined
in unique ways to create a workforce that is highly
skilled and conscious of its rights, it has also paved
way for selective industrialization and growth
providing the narrow talent pool with increasing
opportunities for growth and development. For the
skilled employees of the state, there are competing
pressures to go over to the more affluent and
opportunity rich Gulf States or try their luck in rapidly
industrializing urban/semi-urban pockets across India.
But the entry of service sector companies particularly
in pockets like telecom, insurance and banking have
only brought these opportunities to their doorsteps.
It is in these permanent white waters that MSMEs
have to fish in order to sustain and build their
businesses.
HC
Sumeet Varghese is an independent management consultant.

April 2011

69