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Retention challenge at MSMEs


The micro, small and medium enterprises (MSME) sector in India, second only to China contribute significantly to the manufacturing output, employment and exports of our country. Forty four million MSMEs employ over 100 million persons making it the largest source of employment after the agricultural sector. The MSME sector also accounts for 45 per cent of manufacturing output, 95 per cent of the industrial units and 40 per cent of exports. The MSMEs are the key drivers for growth in the Indian economy and also the offer the largest number of jobs to the youth.

In Telangana and Andhra Pradesh alone, more than 2 million MSME units are looking for fresh talent, at the same time 1.5 million youth are looking for new job opportunities.

SMEs face a challenge galore in the HR arena. For starters, attracting the right talent is one of the major challenges – database of potential candidate are not mined properly. They do not have a structured HR team which can implement multiple methods of hiring. SMEs do not have any employer branding strategies that project them to potential employees.

Our research also shows that MSMEs are looking for a new recruitment solution which can provide the following – 1 Employees who have the right attitude and are keen to work in the MSME sector, 2 Candidates who have the knowledge and experience to fit the job vacancy, 3. Minimize the interview time spent by MSME entrepreneurs, 4. Interviews that can be conducted very quickly, 5. Achieve all the above 4 at a low recruitment fee.


Why is retention important?


1. SMEs do not have redundancies and people are doing multiple roles. If someone leaves the job, the gap is felt almost immediately. Hence, every time an SME loses someone they lose more than the salary.

2. In SMEs, you have to make things happen. You have to push hard to get things done. It is a people driven atmosphere. Hence absence of key people can impact profitability.

3. SMEs operate on thin margins. They cannot sustain losses for too long. Large organisations have surplus in the balance sheet. But for SMEs it becomes a survival issue, when key positions are vacant.


Why is it difficult for SMEs to retain talent


Improvement of the CV: Every professional wants to better his/her CV and hence is always on the lookout for better opportunities and movement to big employer brands. In this case, SMEs become a training ground for larger organisations and hence retention is not natural. SMEs are not able to pay attractive salaries.

Employees in SMEs do not have any cushion and if they face any financial emergency, they really feel the pinch. Hence, if another company offers them even marginally more disposable income, employees don’t mind shifting.


4-Rs of Retaining Right!


1. Recruit right – SMEs must hire candidates who are aware of working in SMEs and who are keen to work with SMEs and hence SMEs should check for keenness to work and the attitude to stay. Also, candidates should be good learners and must display their willingness to learn and grow with the organisation.

SMEs can also work with recruitment agencies, who can act like an extended HR arm of the company to manage the recruitment process so that the SMEs can concentrate on other strategic functions. This may also lead to cost savings and the SME will be able to leverage technology and expertise in the field to hire the right candidates. These agencies give SMEs access to world-class recruiting strategies and also help a great deal in employer branding to potential candidates.

2. Remunerate right – SMEs are not able to offer high salaries but at least strive to offer as close as possible to the market. According to a survey that TMI conducted, potential candidates are looking for the following in a job: a rich job role, compensation, friendly work environment, work-life balance and lastly, ‘closer to home’ work. An SME can provide 4 out of the 5 (except for compensation) and the employer branding strategies must communicate how working with an SME gives the complete job satisfaction he/she are looking for.

3. Reward right: SMEs generally have ‘standard for all’ benefits. This must change. They must look at multiple options of benefits they can give for example – variable performance pay. This may really make all the difference when a prospect is considering a job offer from an SME.

4. Relieve right: when employees decide to leave after working for a 3+ years with you and as an employer you have done your due diligence to retain them, you should let them go gracefully. Their stint with you must be celebrated and their relieving process must be hassle-free. This will ensure that you are not burning bridges.

Amongst the other wars that the world is fighting, one very crucial is the war-for-talent. The global phenomenon of talent shortage has created a situation which organisations – large and small – have been battling on a daily basis. The four critical aspects of managing talent shortage are appealing / attracting, retaining, managing and engaging an employee base which is directly impacts the bottom-line of the organisation.

MNCs and other large organisations have huge teams of specialists and spend millions of rupees on strategies to hire and retain the best. In this area, often, the SMEs lose out because they do not give enough attention to this area. They do not have the financial strength to fight this battle and hence it becomes a practice to lose their best resources to larger companies. This has to change for the largest employer group in the country – the MSME Segment.

Author: T. Muralidharan
Name of publication: Telangana Today
Date published on:
published in:
Tags: Entrepreneurship

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