CHANDRAMAULI YODHA and SANDEEP CHATTERJEE share how micro, small and medium enterprises can overcome the challenge of scalability to prosper.
The Indian economy has been growing over the past few years and business sentiment is also positive. Various micro, small and medium enterprises (MSMEs) are doing quite well in almost all sectors. MSMEs play an important role in the economic and social development of India with their effective, efficient, flexible and innovative entrepreneurial spirit. However, most of them face the fundamental challenge of scalability.
This scalability is more in context of human resources (HR). For any business to prosper, HR is a vital aspect and this is where the challenges arise. Key parameters that largely define success include inculcating ownership, developing trust, providing a dignified environment and empowering people. However, these are also the points, individually or in combination, that are difficult to find in most companies. The problem becomes more acute in MSMEs where systems are either not developed or immature as these function in a typical family environment. Of course, there are lots of advantages in terms of flexibility in such setups, but once entities reach a threshold level, the same acts as a hindrance. ´What needs to be done to ensure scalability´ is a common question one comes across. In a recent case of a manufacturing setup in the MSME sector, the company was unable to scale up and meet targets, which was compounded by not getting the right people, high attrition, and a negative brand image despite the management wanting to do all that was required to grow the company.
This is a typical scenario encountered by companies. By virtue of our experience in the domain, as a part of business consulting, we were entrusted to look at the HR aspects and recommend a solution. We started our diagnosis and found some crucial things, as discussed hereon.
Delegation and control The promoters or owners were convinced that they had decentralised power and adequate autonomy was given to department heads. The actual scenario was quite different. The promoters were still involved in all decision-making, big and small. Even for petty things, starting from recruitment to any aspect of employee engagement, the control rested with them. The promoters involuntarily held all the controls, which curtailed the freedom of the professionals employed. For every small and big thing, the HR had to take approvals from the management, which was breeding bureaucracy. The vision was formulated but there was no direction to execute it. It was a typical scenario where the promoters were indirectly breeding inefficiency by underutilising the potential of the manpower deployed and curtailing their freedom. Fortunately, and common for us, when we pointed this out to the promoters, they accepted our views and followed our recommendations, which were as follows:
The promoters were asked to deploy SBU heads and give them top-line and bottom-line accountability, without interfering in day-to-day operations. All decisions, from strategic to tactical, were to be taken by the SBU heads who would run the show. Monthly MISs were sent to the promoters for review and physical meetings were held every month, which eventually moved to once in a quarter.
Any expansion plans, strategic-level hiring or significant decision that needed to be taken were discussed with the promoters, the feasibility shared and justified with a turnaround time. Once the same was justified, the SBU head would take the call and execute. This eventually led to a significant reduction of the promoters´ direct involvement with policies of the company and ensured that professionalism as a culture was bred. This led to an increase in productivity and accountability of the top layers, which further percolated down.
HR policy review
The HR policy, though well-articulated, lacked the human touch so important in this era. With digitisation and flow of information being so easy, comparison between a company and its peers is unavoidable. We suggested various changes in the policy to make employees brand ambassadors of the company. This was important to kill the negative perception about the company created among the prospective candidate community. The HR role earlier was involved more in non-core activities like recruitment, payroll and statutory compliances. We suggested getting these activities outsourced and making employee engagement and benefits a key task to retain and motivate employees. A fixed TAT (turnaround time) was suggested for recruitment and feedback mechanism. An appraisal system based on bosses and peer evaluation was formulated, as a result of which the onus of successful activity rested with the team and rewards and recognition were aligned to the same. To address the problems of right fit during the recruitment stage, we introduced psychometric evaluation as an additional tool complimenting the interview process.
We trained the department heads and sensitised them on the type of questions to be probed during the interview phase.
As a result, all the units, which were earlier operating in silos, began operating together and a sense of ownership started prevailing. The KRAs/KPIs were revisited and prepared in line with the objectives of the organisation.
Thrust on new ideas
A lot of preconceived notions and thought processes of the manufacturing setups that would drive the industry 25 years ago were still prevailing in the organisation, and these were hindering growth. Although they were technically competent, the mindset of the department heads was preventing them from thinking out of the box. We had to challenge their conventional wisdom at times by coaching, mentoring or using competency assessment tolls. Through various assessments, we identified training needs and worked on continuous coaching methods.
Overall, we observed that once the promoters let loose their obsessive control on the talent and processes and exercised judicious restraint while giving the professionals a free hand and simultaneously demanding onus and accountability, it helped to percolate professionalism from top to bottom. Further, by providing a dignified ambience and laying out proper systems, thereby encouraging teamwork and discouraging nepotism; a dramatic shift in the productivity of employees was noticed and the numbers of brand ambassadors also increased. This was gauged by performance improvement on a year-on-year basis and a survey that showed a significant jump in employee loyalty levels.
Another common problem with most MSMEs, which was also found in this case, is that the HR function is totally neglected. Other departments were given more importance. This is a typical trap - if the HR department is not manned by the right person or led by non-competent professionals either at the functional or strategic level, it is a sure shot recipe for disaster; after all, it is the only animate and crucial element for any company to succeed. While we helped identify and plug the gaps with the company in question, it is always advisable to give due importance to this function at the onset itself, by getting the right person and considering HR a capital investment, not a cost.
About the authors:
Chandramauli Yodha, founder, Wits N Skills, has 15 years of experience in business development, sales and marketing, customer relations and library management. Sandeep Chatterjee serves as a consultant in the HR consulting service with the company.
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