hr in msme’s
W
ith little or no access to the kind of
employee branding opportunities that
large organizations have, MSMEs face
one of their toughest challenges in
attracting talented and qualified
employees. Retaining such employees is another story
altogether. Understandably, there are a host of internal
and external factors that contribute to poor attraction
and retention capabilities.
Industry specific factors
Typically, a majority of MSMEs serve as ancillaries or
subsidiary units to large well known national and
multinational organizations. For potential employees,
this symbiotic relationship has its merits and demerits.
While on the one hand, the partnership gives the smaller
organization good access to the larger organization's
technological and managerial resources, on the other,
it ties the MSME to a single partner or a limited set of
partners thereby constraining its ability to explore new
partnerships or businesses beyond a point. This fact is
not lost on either a fresher or a senior industry person
planning to join a small organization. It doesn't help
here if the business owner or the hiring team does not
share much information about the organization's
strategic tie-ups and growth possibilities with potential
employees. Of course, not all such businesses face this
challenge. At one MSME, where this author interviewed
some 80 employees, the many partnerships the
attract
& retain
In a world where large is not necessarily ugly and small
is not necessarily beautiful, MSMEs are working
overnight to put their houses in order at the same time as
they bring in much needed talent to grow their businesses
22 JUNE 2010
organization had with several domestic and
international players, was quite frequently cited as a
major attraction and retention lever. Several employees,
including some newly hired freshers, found in the
various opportunities to learn from the organization's
national and international network of customers, a
strong employee proposition.
Size of the organization
A major employment branding hurdle that MSMEs
have to cross when scouting for talent is its "small size"
image. Conventionally, business turnover and number
of employees are considered to be major attractions
for potential employees. While this logic makes life
easier for those MSMEs that have the numbers, it
straitjackets the others. However this seeming liability
is being turned into an advantage by some business
owners. One IT entrepreneur that this author spoke to
confessed that his small size actually allows him to
level with all employees and treat them as family.
Interestingly, this attitude is even reflected in some of
the bold steps the entrepreneur has taken to
accommodate employee motivation and productivity.
For instance, work timings at his firm have been
modulated to completely suit employee and business
convenience. "Ours is a mood driven business," says
the entrepreneur, "there are fixed working hours but
no fixed timings". Employees amble in anytime from
9 am onwards but do put in the mandatory 8 hours.
By Sumeet Varghese

Incidentally, this arrangement seems to be working
fine in terms of greater employee satisfaction and
retention as well as increased productivity.
Incidentally for Jitendra Shirke - Founding Director
of Shirke Electro - a Nashik based firm specializing in
the manufacture of quality switch gears, the large size
of the firm (about 75 employees), does not come in the
way of striking a one to one relationship. "All have
direct access to me", says Jitendra, "and this helps to
create a familial environment at the work place."
Absence of systems
It's a rather well known fact that employees moving
into an MSME from a large or medium sized
professionally run organization are typically peeved by
the lack of proper systems. At such places, decisions
continue to be taken in an arbitrary manner and are
driven by the lone person at the top. Such
unprofessional arrangements can be a major source of
frustration for talented employees. However, even
where systems are present, culture issues can override
all arrangements that are shown to exist. At one MSME,
several employees that this author spoke to, claimed
that the presence of systems to manage operations did
not serve as deterrents to the highly person driven
culture that existed at the firm. Apparently, systems
were designed and implemented keeping in mind
personal and departmental growth objectives and
targets.
According to Milind Jambotkar, Founding Director
of Slidewell Group of Companies - a Nashik based firm
engaged in the manufacturing and supply of automotive
components, bicycle accessories and assemblies, having
clear expectations and systems is the basis for the
employment contract. Slidewell does not advertise
positions but brands its high level of employee
engagement and employee development opportunities
very well to leverage word of mouth publicity. Infact,
at the interview stage itself, clear cut job descriptions
are shared along with a transparent set of expectations
from the person to be hired. Even the company's
vision, mission, core values, growth targets as well as
organizational structure are shared with potential
employees. Once in, an employee is inducted into
Slidewell's elaborate performance management system
and informed about the yearly increment processes.
More importantly KRAs are worked out at the outset
and directions to achieve the same given to the
employee. In order to help the employee perform to
the best extent possible, a system of continuous review
and periodic monitoring is closely followed.
When it comes to day to day working, Jambotkar
strongly believes in giving a free hand. Decisions in the
interest of the organization can always be taken without
any delay at Slidewell. Moreover interactions between
top level and middle level management are very
frequent. There are meetings between all levels every
15 days to discuss customer issues, resource
requirements and project progress. These are followed
by timely inputs and targeted support.
hr in msme’s
Shalaka Enterprise, a Nashik based firm specializing
in shafts for electric motors, precision machined
components and auto electrical items and parts,
practices a multi-pronged approach to bring talent
into the organization. The firm has alliances with several
ITIs in and around Nashik from which they source
their key Operator talent. These employees are first set
up as apprentices and then observed for a period of
6-7 months after which they are confirmed. For staff
level appointments, there are tie-ups with employment
agencies. Moreover, talent is also acquired through
employee referrals.
According to Shailesh Pandit, Founding Director of
Shalaka Enterprises, transparency is the firm's unique
employment proposition. "Ours is a very transparent
organization," says Shailesh, "we don't hide anything.
The employees know everything and that is why many
of them are still with us." At Shalaka, all executives
interact with the firm's customers and bankers and are
therefore, constantly in the know about the firm's
position.
Limited growth potential
For several MSMEs, there are plenty of opportunities
to motivate and retain talented employees through
well-designed career progression plans. However, in
many cases employee career progression may seem to
be a patchily drawn up affair. At one large MSME, a
good percentage of employees who were covered as
part of an employee satisfaction survey confessed that
incentives were not objectively awarded and that the
promotion system did not discriminate between
performers and non-performers. Clearly, this had led
to general skepticism towards the ambitious employee
growth plans the company had shared with the
employees.
At Teknocrats, a Nashik based MSME specializing in
designing process automation and electrical systems
and providing industrial automation training, there are
atleast 4 instances of wiremen being trained to handle
automation technology. "Two of these will be at par
with engineers after 5 years," says Nilesh, one of the
Founding Partners of the firm. "We also have cases of
people who joined as delivery chaps but ended up as
HODs", adds Nilesh. Their present Purchase Head,
interestingly, joined as an Office Boy, soon after he
completed his schooling. But 13 years later, his
dedication and loyalty and his strong desire to learn
made him eventually transition through various roles
to head an entire department. "Since we are ourselves
into automation training, we have a strong culture of
training and development to support employee growth
internally," says Amar, one of the Founding Partners of
the firm. The wiremen employed at Teknocrats report
early to work just to catch up on learning sessions
provided by internal faculty.
Inadequate compensation and benefits
With growing competition and diversification of business
not to mention the low availability of talent, MSMEs
JUNE 2010 23
hr in msme’s
often find themselves outdone in the compensation
and benefits arena, not least because of their strong
cost control centered approach to doing business.
Where every investment is seen as an immediate cost
to the company, investment in talent is also perceived
to be a waste of resources. While this explains the
limited ability of the MSME sector to attract talent,
general disregard for more professional performance
based incentive systems complicates engagement and
retention efforts further. At one MSME, employees
who were covered by an employee engagement survey
stated that neither experience nor expertise or
qualification was a critical criteria determining employee
pay at the firm. Infact, in their opinion, it was largely
based on the negotiation skills of the employee during
the employment interview.
At Teknocrats retention of employees is based on
a clear understanding of company vision and
profitability and average salary at each level. There is
a structured appraisal system in place and profit/
incentive sharing arrangements for senior employees
and specific departments. Also, organizational efforts
to achieve the vision are shared with all employees.
Moreover, decisions supporting the vision of the
company are transparently communicated across the
organization. Given this level of transparency, all
recruitment and retention efforts are based on the
values that Teknocrats follows.
Teknocrat also has a special employee reward and
recognition program to boost its retention efforts
known as the Employee Appreciation Scheme. As part
of this scheme, every exemplary follower of the
organization's values (a Value Leader) is rewarded in a
very special way. Typically during the appreciation
program, employees surround a Value Leader who
goes on to narrate to others what achievement has
lead to the appreciation. He/she also lists out the
number of times he/she has been appreciated in the
organization. Also, all employee birthdays are
celebrated in a very special way at Teknocrats. Just
before the gifts and sweets are distributed, all employees
present in the office are invited to surround the
employee whose birthday is being celebrated. This
person is then invited to share a bit about his/her
background and talk about the strengths that he/she
has. Also, all colleagues are encouraged to talk about
the strengths of the person before others. This strengths
based appreciation boosts employee engagement and
retention, according to the Directors of the company.
Of late Teknocrats has also leveraged the
organization's CSR activity as an HR tool for retention.
The firm supports an orphanage on a monthly basis.
Interestingly, employees take care of the entire initiative.
This practice has created greater emotional connect
between the organization and the employees. Also, the
values that the company follows are strictly practiced
and enforced. According to Nilesh and Amar, having a
core set of values and ethical practices also help to
distinguish their employment brand from the
competition.
Jitendra Shirke also strongly endorses the need to
24 JUNE 2010
differentiate one's employment brand on the basis of
value based business practices. Shirke Electro does not
advertise at all to attract talent but depends on word
of mouth publicity. According to Jitendra, simple but
effective practices like fair treatment of employees and
payment of salaries on time are highly attractive features
in a market which lacks these basic hygiene factors.
Interestingly, as part of their retention strategy, Shirke
Electro takes a holistic view of the earnings of its
employees. Needy and deserving employees are given
additional piecemeal jobs that they can take home
which they can complete with the support of their
family members and relatives. This ensures an extra
opportunity to raise family income.
Job specific factors
In many MSMEs that largely operate as ancillaries or
subsidiaries to domestic and multinational giants, work
is more or less fixed and routine. Since operationally
the business owner derives his/her profits from
specializing in some process that is integral to the great
product supply chain that these giants set up with their
partner suppliers and vendors, unless the business owner
diversifies or experiments with newer businesses, work
remains largely monotonous for the staff and workers.
With the work grind being more or less fixed and little
scope for any job rotation, employees in such units are
likely to feel greatly disengaged after a certain period
of time. Interestingly, the founder entrepreneur can
break this deadlock by exploiting various job enrichment
or job rotation strategies. However, such measures are
dependent on the maturity, leadership and delegation
abilities of the entrepreneur.
Business partnership
While it may be early days for many MSMEs to think
of employee stock options or profit sharing ratios or
some other form of employee co-ownership, a welcome
change can be seen in the case of a few that are willing
to treat their employees as business partners. One IT
entrepreneur that this author spoke to said that he
shares his profit and loss details with every employee
at his firm. However, he not only shares information
on what he makes and expects to make in the coming
year, but also asks each employee to work out clearly
what they strongly wish for in the years to come in
terms of salary and other benefits. When this is clarified,
the employees are asked to set down what they can do
and will do in order to achieve these aspirations keeping
in mind the kind of growth trajectory the organization
itself aspires for. These exchanges between the
employer and the employee have lead to a great deal
of mutuality and a greater sense of ownership for the
business among the employees. Also, it has helped the
business to attract and retain more employees each
year.
Sense of achievement
Where motivation is not directly tied to the employee's
pay package, several options to attract and retain

employees exist, particularly by appealing to the
employee's drive to realize his/her full potential. With
flatter structures, and a highly encouraging
environment to boot, employees working in the MSME
sector have the option of taking up ambitious targets
directly whetting their appetite for self-actualization.
At one large-sized MSME, several senior employees
who went through an Assessment and Development
Centre confessed they were likely to stay longer
because of the general culture of risk-taking that the
owner had created and sustained. This risk-taking
allowed the employees to take up targets they would
have not dreamt of achieving in even large
corporations. One particular employee shared his
experience of bagging a major contract in a South East
Asian country by regularly following up with a bunch
of clients in the foreign country and finally meeting up
with them face-to-face before closing the deal.
Incidentally, the employee in question had no prior
experience of securing international deals by spending
organizational resources on international travel. But
the general climate of balanced risk-taking fueled his
desire to contribute to the organization's growth by
raising his own performance bar several notches.
General hygiene factors
For the many MSMEs that operate out of small and
dusty sheds or grimy production shops, where
investment in glitzy and sparkling clean offices is a
distant dream, attraction and retention of talent largely
hr in msme’s
boils down to whatever it takes the business owner to
create and sustain a clean, neat and safe working
environment. The following table, based on a 2007
survey of 54 MSMEs spread across Nashik, Sangli,
Kolhapur and Pune, conducted by a team of business
owners headed by Ruta Pandit, Director, Shalaka
Enterprises, best illustrates the basic hygiene factors
that most MSMEs fail to offer (indicated in red) to
employees:
Clearly, each area identified in the table above
affords phenomenal opportunities to an MSME to offer
a unique employment proposition and differentiate itself
from the competition. Shalaka Enterprises has in fact,
steadily focused on some of the above listed factors to
distinguish its employment brand. It not only offers
competitive salaries to the prevailing market rates but
also extends regular workforce benefits like statutory
wages, PF and ESIC to its contract workforce.
Just as for any large sized organization, the attraction
and retention of talent requires a constant examination
of various internal and external factors that can sweeten
or embitter the employment proposition, for an MSME
too, attraction and retention of talent requires a
continuous focus on and evolution of simple but
effective strategies and tactics that can help set it apart
employment-wise from the millions of similar sized
firms that are competing for scarce talent nationally
and globally. HC
Sumeet Varghese is an independent management consultant.
JUNE 2010 25