Impact of HRM on SMEs: A study on different HRM functions - Srusti ...

Srusti Management Review

Impact of HRM on SMEs: A study on different HRM functions

Garima Singh, MBA, NMIMS (Navi Mumbai), Maharashtra (410210), India

Email: [email protected]

Jasraj Panjwani, MBA, NMIMS (Navi Mumbai), Maharashtra (410210), India


Chintan Doshi, MBA, NMIMS (Navi Mumbai), Maharashtra (410210), India


Tejas Magdum, MBA, NMIMS (Navi Mumbai), Maharashtra (410210), India


Acknowledgment: We would like to express our sincere gratitude to Dr. Gowri Joshi for guiding and motivating us

throughout the research work. A sincere thanks to all participants of the survey who patiently took out time and

helped us.

Abstract: Human Resource Management is considered essential to generate constant motivation among employees and to build

competency as required by the business environment which is elementary to the success of an organization. Majorly, in small

firms, the practice of appointing an HR professional is not observed. Appointing an HR is considered non-essential and not cost-

effective. With increased competition, small firms are under pressure to remain profitable as well as to maintain quality of their

goods and services. Hence, they focus on major aspects of business such as production and marketing. Such negligence towards

employees is counter-productive and there is always a need for better understanding and managing the employee’s requirements.

The research paper focuses on understanding the requirement of human resource management in small firms along with the

issues faced by HR. The paper evaluates cases of human resource management of organizations through a case study approach

( Facebook and Flaxo Exports) and primary surveys. The organizations involved as a part of primary research are Grow Diesel,

Advisor Zaroori Hai, HS, and TFS. This research paper holds importance as the working environment shifts towards startup

culture in India. Lastly, the study signifies the overall effectiveness of prudent use of HRM for better business performance.

Keywords: HRM in small firms, small firms’ behavior, personnel management, small and entrepreneurial firms, performance

management, innovative HR policies, HRM functions.

I. Introduction

The primary objective of any firm is to enhance its reach

and increase its profitability. Any small business or

entrepreneurial firm can achieve the desired growth by

serving new, innovative products to the customers.

Creativity, knowledge, talent along with relevant skills

drives inspiration to develop new products. To achieve the

strategic goals of the company, competencies and positive

behavior of employees are required. However, to foster



continuous innovations, inspiration needs to become a daily

driving force. In such scenarios, where employee

motivation contributes to innovation and eventually, to the

company’s growth, human resource management (HRM)

plays a crucial role.

The research paper aims at reviewing HRM in small and

entrepreneurial firms. The research methodology used in

this study includes cases from two small companies which

involves understanding the scenario in the industry. Also, to

achieve clarity on human resource management in small

firms, few sets of interviews were conducted with HR

professionals or the CEO to know the implementation of

HRM in their respective firms.

Small and Entrepreneurial Firms:

Small businesses generally employ less than 150 people.

Development of small businesses includes the creation of

new firms or maybe pursued within existing firms.

Entrepreneurs can be broadly classified into novice and

habitual entrepreneurs.

Human Resource Management and Small Firms:

In small businesses, it is unusual to have HR professionals,

and the task of HR is generally performed by the owner or

their family members or by any of the other managers

working at the company. Very few organizations hire full-

time HR professionals to oversee all human resource

functions of the organization. In a small business firm with

limited employees, capital and resources, the focus is

majorly set on functions such as finance, production, and

marketing which diminishes the importance of HRM.

Human Resource Management in a small firm is usually

informal, depending on trust in employees. Employees’

training, raises, and compensation is handled more

informally, reactively, and in a short duration of time. (Gary

Dessler)

Functions involved in Human Resource

Management of a small firm:

Matching staffing requirements: Small businesses have

minimal employees that help to serve the purpose of

business. An HR professional will thus evaluate the

minimum number of employees required, and will also

make sure to fill the space with the best suitable match

in case of any vacancy. It is also necessary to retain the

best talents.

Hiring full-time employees or contract bases: For small

businesses, making the best allocation of financial

resources is crucial. Initially, the company can get

smaller jobs done by contractors. As the company

expands the decision needs to be made whether to hire

full-time employees or on contract.

Training the employees: Job training is necessary to

meet the specific requirements of a company. Small

businesses initially focus on the methodology followed

in production or services. Employees need to undergo

a proper training program that may involve work from

different departments to fully understand the business.

It will also be in favor of the company to send their

employees for external training programs to learn the

latest processes, practices, and technology.

Rewards and recognitions: The most effective way to

retain and motivate employees is by giving them

rewards for their exceptional performance. This leads



to motivation among employees to work hard

consistently.

Several issues involved in Human Resource

Management of Small Firms:

With less financial capital, it becomes difficult to

provide the best market salary, benefits, and

compensations to retain employees. To overcome this,

organizations should maintain the best working

environment and care for their employees.

Deciding on a make-or-buy strategy: It becomes

difficult to evaluate whether the organization should

hire the best talent by providing a market salary or to

hire unprofessional employees and invest in training

their employees.

To discard the unprofessional and informal structure of

the organization. Creating strategies to train

employees, resolve conflicts, and effective feedback

mechanisms.

For small businesses, the hiring process may majorly

rely on referrals. Practicing this might not provide the

company with the best fit of talent for the organization.

II. Review of literature

Deeksha Kher (2007) in ‘Assessing the extent of

SHRM in Indian Firms using content-analysis of

annual reports” studied Nifty 500 manufacturing firms

and found evidence of an increase in usage of Strategic

Human Resources Management related terms. The

study shows the increasing importance of strategic

HRM. (Kher, 2007)

Gabriel Lozano-Reina in “Human Resources Practices

and Firm Performance: Exploring the AMO Model in

Spanish SMEs” studied how human resources practices

are conducted in SMEs in Spain in 2019. They studied

1136 SMEs and found the level of education of

managers has a great impact on the development of

Human Resources practices in small firms. (Lozano-

Reina, 2019)

Branka Zolak Poljasevic’s “Human resource

management in small and medium-sized enterprises”

(2013) explains the conceptual framework of HRM in

SMEs. It explains the importance of HRM and

acknowledges the practicality of the possibility of

application of HRM in SMEs and then goes on to

suggest two separate HRM models for Small

enterprises with less than 50 employees and Medium-

sized enterprises with more than 50 employees.

(Poljasevic, 2013)

Siddharth Chandra (2020) in “HRM Practices and

Their Relationship with Customer Satisfaction: The

Case of a Food Delivery Start-Up” clearly explains the

importance of HRM practices in the service sector. The

study proves the direct relation between HR practices

and customer relations. The study shows that HRM is

essential for a business in the service sector. (Chandra,

2020)

Hemant Kamble (2006) in “Strategic human resource

management in small Organizations” examines HR

practices of small firms in the IT sector. He shows that

HR practices in such firms are reactive in nature. He

explains how such firms have a smaller number of

clients but having a significant impact on the business.

These firms have to bend according to their client’s

demands and also have significant external pressure



due to skill scarcity in labor markets. The author says

the task of HRM is to maintain a certain level of

competency to assist strategic goals. (Kamble, 2006)

Rowena Barrett (2007) in “Human resource

management in growing small firms” examined small

firms in Australia and found the growing small firms

are more likely to have formal HRM practices than

non-growing small firms. It is a very interesting finding

as it directly hints at the importance of HRM in

specifically small firms adding to the finding of

Deeksha Kher. The author mentioned a future need for

case study-based research to further back her findings.

(Barrett, 2007)

Figure 1: Number of micro, small and medium enterprises across India in the financial year 2020 by type (in millions)

Secondary data: https://www.statista.com/statistics/718232/india-number-of-msmes-by-type/

Figure 2: Number of SMEs in India from 2007-2015

Source: https://www.statista.com/statistics/718341/india-number-of-msmes/

With the increasing number of MSME (Y-O-Y), it becomes

important to understand the working of MSME and how

employee management can help in increasing

organizational efficiency by exploring the role of HRM in

the whole process.



III. Aim, Objective, and Research Gap

Aim:

To understand the nature of HRM for various functions

in small businesses/SMEs.

To understand the strategic importance of HRM,

enabling the small firms to achieve their goals.

Objective:

The study investigates the structure of strategic HRM in

small and micro firms, highlighting the innovative and

proficient methods affecting their future growth.

Research Gap:

From the above studies, it is clear that the importance of

Human Resource management has increased in recent

years. However, there are very few studies that are

conducted on human resource practices in small businesses.

Our study tries to answer how human resources activities

are undertaken in these businesses. Also, there is a need for

case study-based research for the topic (Barrett, 2007), so

we have tried to add support to the already existing

literature.

MSMEs are the backbone of the Indian economy and with

the rise in the factor of ease of doing business by the Indian

government, the MSME sector has flourished in past few

years like anything. Entrepreneurs in India are showing

their occult by contributing more than 30% to the GDP.

(Qnet)

IV. Research Methodology

The research was aimed at understanding the HR practices

in small and entrepreneurial firms.

Research design:

To understand the topic, we chose to go ahead with two

Research Methodologies, which were the Survey-based

method and Case Study based method.

Data collection:

The survey-based research included interviews with HR

Managers/ CEOs of small firms. A Questionnaire was

prepared to understand HR Practices in small firms, the

questions of which are attached in the Appendix. Interviews

were conducted over call and all the answers were recorded.

Articles and research papers from the online directories

covering the HR Practises and their impact on the success

of the companies were studied and a due analysis and

interpretation were made.

Sample size:

The survey included four companies (name of the

companies). The answers collected were further analyzed

and a due inference was made. All the companies are Indian.

These companies are from a formal economic sector. India

has a huge informal sector which accounts for more than

80% of non-agricultural employment. (International Labour

Organization)

V. Primary Survey and Findings:

The Primary research focused on getting insights from the

founders, CEOs, or HRs of the entrepreneurial firms based

in India. The companies who participated in the survey are

Grow Diesel (GD), HS (HS), Advisor Zaroori Hai (AZH),

and TFS (TFS). A set of questionnaires was prepared to

analyze the nature of HR in the respective firms. Following

are the details about the companies mentioned above,

catering to all the points discussed in the survey.

As per the privacy policy, the company's name is not

revealed for below 2 case studies (HS and TFS). The name



used in the case is a made-up name and all the data

mentioned holds true.

TFS:

TFS is a medium-sized company which was founded in

August 2004. It was started as a Sales Support setup to

customers and within 6 years of its inception, it expanded

its services and started supporting its customers in the pay-

out & compliance management of their personnel as well as

vendors. Today It is involved in Legal, accounting, book-

keeping, and auditing activities; tax consultancy; market

research and public opinion polling; business and

management consultancy. It has been constantly growing

with the tagline “Sow. Trow. Grow.” The company has

around 50 employees. The assessment is completely based

on taking into consideration various aspects like

performance, punctuality, dedication towards work,

deadlines achieved. The HR employee, Janhvi Chohan, said

after considering the current market conditions due to

pandemic she would prefer hiring less skilled employees at

lower salary and train them as it would be beneficial for the

company and the employee would gain a lot from the

training and work experience. The case strengthens Rowena

Barrett’s (2007) findings that showed a correlation between

SMEs having a strong growth rate and having structured

HRM processes.

HS:

HS is the recent venture of Saraf Foods, established in 1993.

It is an FSSC certified company that is a leader in the global

supply of freeze-dried products. HS has a reputation for

being highly reliable and providing supply of high quality.

The company believes in ethical business practices and is

committed to reducing the carbon footprint. It has been

constantly investing in sustainable solutions for the

problems it faces. From being a small venture HS, the

company has come a long way and currently has 120

employees on payroll. The company hires less skilled

employees at a lower salary and trains them according to the

Job Description. For talent acquisition, the company floats

requirements on platforms like Linkedin and hires talents

over the applications received over mail and LinkedIn. To

maintain the motivation levels of employees, HS organizes

different activities and events to engage the employees.

Periodic reports of the employees go to the superior line

managers who maintain a performance evaluation sheet

which further goes to the upper management. The company

does not provide any retention benefits to the employees.

Grow Diesel (GD):

Grow Diesel was founded in 2006 with a specialty in Clean

fuel technology development, Biofuel project

implementation, Advising Governments to secure energy

independence, and social investments with operating

locations in India and London. Growdiesel was founded

with a core belief that it is possible to transform the future,

take small steps, and create differences in millions of

people’s lives. As a startup, the organization has 50+

employees on payroll and 100+ on contractual basis. The

company believes in hiring less skilled employees at a lower

salary and investing in training them as per work needs.

Grow Diesel praises its employees for their achievements

and follows peer-to-peer feedback systems to monitor their

performance. However, the company does not offer any

retention benefits for employees to stay with the company.

With few employees, the company does not feel any need



to hire a full-time HR employee, the CEO of the company

performs the functions of HRM.

Advisor Zaroori Hai (AZH):

Advisor Zaroori Hai is a platform to bridge the gap between

the investors and the so-called financial experts which helps

the investors by providing them top-notch advice about

different financial instruments and opportunities. The

company connects with the investors just like HR connects

with the employees and helps to achieve their goals in a

hassle-free manner. As the company is in the start-up phase

with just 10 employees, it does not believe in spending more

on HR activities but they have hired 1 HR manager to form

HR policies, and all other activities like recruiting,

motivation, assessment, and appraisals are handled by the

CEO himself. However, the CEO has managed to formalize

and implement these processes in a strategic way. For the

Talent acquisition process, the company uses campus

recruitment and offers students to work on live projects.

Students are then trained by the CEO and based on their

performance they are provided pre-placement offers. The

company currently has more than 150 interns and about 10

full-time employees. When asked about any compensation

or benefits they provide to their employees, the CEO said,

“being a startup we don’t have any such policies but we

always try to help our employees when they are in need.”

Comparison and Analysis of Survey:

Table 1.1: Comparision and analysis of primary survey

The survey provides good insights into the workings of HR

functions in SMEs:

It's quite visible from the survey that, unlike big corporates,

small firms struggle with financial resources and so they do

prefer the less skilled employees who are then trained by the

company according to their needs. Apart from that, a

smaller number of employees at firms ensures the inclusion

of front-line managers in decision making which creates a

bonding of top management with them and helps in gaining

creative bonus and therefore work efficiency increases. But

the surveyed companies don’t have any proper framework

to tackle the talent acquisition process and performance

appraisal process which are critical in the beginning stages

of a business.

Moreover, the conduction of regular workshops and

training programs for the skill development of employees,

maintaining labor laws, and support against wrongful

termination of lawsuits are important things for any SME to



ensure its growth with limited use of financial resources.

This is where an HR manager’s plum position becomes a

necessity to formalize the structure of SMEs.

Branka Zolak Poljasevic and Saša Petković in their paper

Human Resource Management In Small And Medium-

Sized Enterprises: Conceptual Framework (2013)

suggested two conceptual frameworks for HRM.

Figure 3: Conceptual Model of HRM in MSME

Secondary Source: https://www.researchgate.net/publication/325120821

The first model above is for small and micro firms that have

less than 50 employees. HRM at AZH aligns with this

model. The HRM plan is created by the owner or the CEO.

Being a modern start-up the CEO has managed to formalize

the Recruitment process. As suggested by the model,

businesses that cannot provide materialistic rewards should

use alternative motivational strategies. This was seen in the

case of AZH as well.



Figure 4: Conceptual model of HRM in medium-sized enterprises.

Secondary Source: https://www.researchgate.net/publication/325120821

The second model is for firms with 50 to 150 employees.

According to the model, the businesses at this stage starts

developing a need of HR employee and department. This

was observed in TFS and HS as well. GD and TFS had

developed a structured approach for Recruiting as well as

Performance Appraisal functions.

The key difference, according to the models, was observed

in the strategies of motivating employees. These firms had

to take extra steps to determine which employees must be

promoted according to their performance. However, unlike

the model, these firms still used the same kind of

motivational strategies as used by the small firms which

included praising their employees and organizing some



events and activities.

VI. Data Analysis and Interpretations

The section involves the study of HRM practices in two

organizations namely Facebook and Flaxo Exports. The

data being sourced from secondary resources elaborates

how the organization has adopted HR practices to manage

their employees and align their goals with that of the

organization.

Case 1: Facebook

Today, Facebook is one of the largest social media giants

present across the globe. The company, started in a college

dorm by a college dropout Mark Zuckerberg with his fellow

roommates, today is valued at around $700 Billion. The

company is generally known for its stories revolving around

how it was founded, the way it grew across the globe, and

the heights achieved today by acquiring other big brands

like Instagram, WhatsApp, Messenger, and Oculus VR.

However, many people across the globe are not aware of its

distinct and powerful talent management practices which

have helped Facebook gain such widespread success across

the globe. The case focuses on some of the unique and

innovative HR Practices that have helped Facebook

succeed. (Sullivan, ERE, 2013) (Sullivan, Ere, 2013).

Recruitment:

The most important and most basic thing for any company

is to recruit employees in the synergy of the company’s

requirements. Following are the different innovative

methods that FB is using to connect with the perfect match

for their company.

Acqui-Hiring: Acqui-Hiring is Facebook’s signature

hiring practice. Facebook acquires smaller firms not for

its products and services that it offers, but for the

technical talent, it possesses. Acquiring such firms

gives them an intact team almost immediately if

integrated correctly with the organization and its

culture, which will prove to be highly productive. The

only exception of the Acquisition, in this case, being

Instagram.

No requirement of Degree: Facebook does not require

the employee to have any degree, what it requires is the

ability to build great stuff nothing else. This practice

also gives the company an added advantage over other

firms of hiring the talents long before completing their

graduation.

Contest Based recruiting: The company like many

other Silicon Valley firms relies heavily on internet-

based technical contests, which helps them get talent

according to their requirements and not based on the

degrees, gender, or experience.

CEO as a chief recruiter: Mark periodically takes the

role of the chief recruiter by speaking at firms and by

visiting college campuses which helps them in

attracting potential recruits.

Ninja Hunts: The company initiates the Ninja Hunt

initiative for finding top recruits done through the

referrals of the existing employees who are aware of

the potential recruits.

Performance Assessment & Appraisal:

The performance review takes place twice a year with a

collective process of 360 Real-time feedback and reviews

from 4-5 peers. The review looks at four factors -



Judgement, Quality of execution, Managing Risk, and

Learning.

360 Real-time Feedback: Employees of Facebook have

access to the internal software of the company that

constantly collects feedback of the employees across

the year, wherein everyone has a fair idea of the

performance of the employee even before the appraisal.

This helps in minimizing any ambiguity or uncertainty.

The information gathered from the software and

reviews from three to five peers of the employee is used

to gauge the performance of any employee.

While this system can potentially create an

environment hostile and competitive, the company

culture has positively helped this system succeed.

Hence, the culture is called “Cult-Like.”

Leadership:

Leadership is considered the key factor for success. The

employees are motivated to move fast, take risks, and

maintain a strong working culture so that the company can

adapt to the 180-degree shift flourishing their businesses.

Speed is essential, so move fast and break things: At

Facebook, management proactively promotes moving

speedily in work and don’t worry about failures. The

CEO believes that “if you never break anything, then

probably you are not moving fast enough” and this

slogan has been painted on the wall. Employees of FB

believe in implementing rather than waiting for

opportunities - “Done is better than perfect”.

180-degree shift because of strong work culture: With

the increasing number of smartphone users after a

couple of years of facebook’s launch, it was understood

that smartphone is going to be a dominant player, and

keeping that thing in mind, the CEO encouraged to take

180-degree shift which helped them to flourish

business from PC to smartphone.

Rewards & Recognition:

The biggest asset for a company is to have motivated

employees. There are a number of innovative HR

policies practiced at Facebook that aligns the

company’s and the employees’ goal, which includes:

If employees’ work is exciting, and they are dedicated

to their job, then they won't take leaves because of

frivolous reasons. But to demonstrate trust in their

employees, Facebook offers paid sick leave of up to 1

month even to new joiners.

Amazing benefits for new parents: FB offers 4 months

of paid parental leave for both spouses along with

reimbursement for daycare and adoption fees.

Be bold and take risks: As most of the corporate culture

today is risk-averse and runs away from failing,

Facebook at the same time is the opposite and is not

afraid of taking risks. It believes that the riskiest thing

in business is not taking any risks, and that’s why they

encourage their employees to take bold decisions

without fearing going wrong.

Rewards based on performance: The difference

between the performance reward of a top-level

employee and an average level employee is around 300

percent, which clearly sends the message that good

performance is the primary need.

Encourage workers to drop by anytime: FB pays $600

extra to employees to rent a place nearby to the



headquarters. The goal was to subtly encourage

employees to come up at the office for casual free food,

but the main motto was to take good extra work out of

them.

Relationship with employees:

To retain your employees, it is highly important to

understand their needs and try to create a work-friendly

environment for them. Below are some methods

through which FB has become successful in retaining

its highly skilled employees.

An open floor for employees for openness,

collaboration, and innovation. Also, instead of offices

or cubicles, they have set up standing desks considering

their employee’s health benefits and ease of

connectivity with their colleagues.

Despite being a social media firm (100% online

product), Facebook promotes a “come to work”

culture which includes many benefits including free

tasty food, free shuttle rides, and many amenities to

keep their employees happy resulting in high

productivity.

No meeting Wednesday for an uninterrupted day for

their software developers. As meetings take a lot of

time and disturb the flow, so to keep their flow intact,

this policy is promoted.

FB has onsite workout equipment for busy employees.

Also, there is a room full of video games, movie

theatre, on-campus bicycles, skateboard course, and

many more fun activities to keep their employees in a

chilled and light mode.

No need to leave campus for your personal needs (be it

haircuts, laundry services, dry cleaning, doctor’s

appointments, or any other personal requirement.),

everything will be available to employees at the

campus only to save their time and keep their focus

intact on work.

As FB is a technology-driven firm, every employee

gets whatever technology they need to work on.

Analysis of the case study:

In this competitive world, every startup is in need to develop

their operational activities along with talent management

activities. FB is one such company that has achieved

phenomenal results in less than a handful of years with best

practices of unconventional methods in talent management.

They have adopted innovative models of HRM to improve

efficiency, which is indicated by the dominance they have

created in the social media market.



Figure 5: Conceptual model of various aspects of HRM

Secondary Source: Jan De Kok, (2003), Human Resource Management within small and medium-sized enterprises,

ResearchGate

The HR Practices in small and entrepreneurial firms depend

on a lot of factors. The major constraint faced by small firms

is financial resources. Managing their resources both human

and monetary is key to the growing firms. The stakeholders

take this decision based on the goals and strategy led out by

the firms and the organizational culture in place. This gives

birth to unique HR Practices which can be seen in the firms

like Facebook. Employing unique HR Practices results in

great employee performance, which in turn results in the

firm’s success.

Case 2: Flaxo Exports

This is a fictional case study developed by Debi S. Saini

(2008). Flaxo Exports, based in Panipat, was established in

1982 by Mr. Anil Sharma, with core business to export

handloom furnishing materials, carpets, and other items to

more than 20 countries including the USA, Australia, etc.

Flaxo was among the top five performers in handloom

exports. He created a ‘community feeling’ for all the

employees and gives personal attention to employees'

needs. Although Flaxo Exports was doing exceptionally

well, however, there didn't exist any HR department or



practices. Mr. Abhishek (son of the founder) wanted to

incorporate some changes in the present system, people’s

mindset and introduce new product lines to build the brand.

(Debi S Saini, 2008).

Recruitment:

The human resources framework at Flaxo is very

conventional. Following are the elements that Flaxo follows

for recruitment of the employees -

Shift in preference: The company used to be loyalty-

focused in the talent acquisition process but now it has

become competency-focused. However, both are

desired to some extent.

Recruitment Channel: The company uses three to four

outside agencies for their recruitment needs. The

process involves resume screening (for educated

candidates) and interviews. Flaxo does not use campus

recruitment. It rather prefers a word-of-mouth method

for recruitment.

The company finds it very easy to recruit skilled labor

as the location of the company makes this possible.

Performance Assessment and Appraisal:

Unstructured: No proper PA framework is set up for

supervisors and workers. A yearly appraisal of the

administrative staff depends on just the general impression

of the CEO about their work and for supervisors, he

counsels the managers. The considerations while assessing

are an outline of indicators, for example, the revenue

brought, the quality norm accomplished, and the number of

complaints received.

Leadership and Relation with Employees:

The company CEO has a great leadership style and

maintains a good relationship with the employees. The

following points shed a light on few of them -

Values: The CEO has strong values and respects human

rights, leading the company with principles based on

these values. The company policy includes helping

workers to meet their genuine financial needs and to

satisfy their needs of self-respect. The personal

environment created at the workplace helps in

motivating the employees and with their compliance

regarding other matters.

Building relations through events and festivals: Gifts,

sweets, and money are given on selected festivals. CEO

and senior management visit workers’ homes on social

occasions as well. Some days are collectively

celebrated, promoting open communication.

Appreciation for great work is done publicly and

denouncing is done in isolation.

Compliance with Labor Laws:

CEO thinks that labor laws in India allow workers to create

many problems for the employers even for the smallest of

issues. Compliance with labor laws is not always possible

for Flaxo. However, they have established compliance with

EPF Act, 1952, and ESI Act, 1948. Following these laws

have helped Flaxo make jobs attractive in the labor market.

But, for other laws, Flaxo has run into trouble occasionally.



Analysis of the case study:

Figure 6: Harvard model of HRM

There were several key issues extracted from the case of

Flaxo Exports which is faced by most of the SMEs, the most

common issue is the lack of Formalization and unstructured

methodology. As observed in the Harvard model of HRM,

Stakeholders/Founders are personally involved in every

decision making as there exists a fear of risk to lose personal

touch with the business growth, but as a part of HRM Policy

Choices, the solution is to hire people-oriented managers to

bring a change in attitude and mindset of employees who

can get perfections in operations. The situational factors

such as labour market and location make it possible for the

company to hire skilled employees. Labor laws are not

followed in most SMEs and it was evident in the case that

lack of compliance with labor laws was actually beneficial

to both the parties- company and workers. The company

follows various HR Policies to ensure employee motivation

such as appreciating employees for exceptional work and

offering gifts on specific occasions. There was a dire need

to restructure the HR department with the HR manager and

provide retirement benefits, Performance appraisals,

gratuity, bonus packages so that the firm can achieve the

projected growth of the business. With the implementation

of appropriate HRM policies, the firm can achieve long-

term objectives in alignment with the company’s objective.


VII. Conclusion and Suggestions

The startup culture has been growing across the globe, and

specifically in India. Every business has to make important

decisions, in their launch stage, based on what they can

afford and what is needed to be done to achieve their

business objectives. While most of the time expenses on

HRM are tried to be avoided, some HRM functions are

critical for businesses and may determine the long-term

sustainability of the business in a competitive environment.

With this paper, we have attempted to find out the nature of

HRM functions in small and medium-sized firms.

The research paper is divided into six chapters. The first and

second chapters cover the introduction and review of the

literature of the study. We thoroughly reviewed the existing

literature and specifically looked for HRM models and

theoretical frameworks for HRM in small and medium

firms.

Section V covers the primary research where we surveyed

4 firms and analyzed how they approach various functions

of HRM. The survey has provided insights into the actual

HRM practices at the ground level. Although data is non-

conclusive due to the smaller sample size, it still manages

to provide some key trends regarding the HRM functions in

small and medium businesses. Firstly, the data suggests

HRM functions are recognized as essential in start-up firms.

Secondly, the recruitment process is done through modern

channels like LinkedIn and Campus Hiring. Third, most of

the firms recognized the need of hiring HR employees for

policy framework processes. Fourth, some firms managed

to structurize their performance appraisal and used

innovative modern practices like peer-feedbacks to evaluate

the performance of their employees.

Chapter 6 covers the secondary research which includes an

analysis of two case studies- Facebook and Flaxo-Exports.

These case studies showed how innovative and strategic

HRM practices help firms succeed. How these firms dealt

with HRM functions has been clearly portrayed in these

case studies.

Future Scope of further studies: All the firms involved in

our study were from a formal start-up sector. A study on

HRM practices in businesses in informal sector of India can

be pursued in the future. Also, a study that can measure the

cost and effect of implementing strategic HRM will be a

great addition to the existing literature.


References

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Gate

Kher Deekhsha, (2007), Assessing the extent of SHRM in Indian Firms using content-analysis of annual reports,

DSpace

Siddharth Chandra, (2020), HRM Practices And Their Relationship With Customer Satisfaction: The Case Of A Food

Delivery Start-Up, DSpace

Rowena Barrett, Susan E. Mayson, (2007), Human resource management in growing small firms, Human Resources in

small firms.

Hemant Kamble, (2006), Strategic human resource management in small Organisations, DSpace

Gabriel Lozano-Reina, (2019), Human Resources Practices and Firm Performance: Exploring the AMO Model in

Spanish SMEs

Branka Zolak Poljasevic, 2013, Human Resource Management In Small And Medium-Sized Enterprises: Conceptual

Framework, Researchgate

Book:

Gary Dessler, B. V. (2020). 11e. Human Resource Management. Pearson

Articles:

Sullivan, D. J. (2013). Ere. From https://www.ere.net/a-case-study-of-facebooks-simply-amazing-talent-management-

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practices-part-1-of-2/

https://qnet-india.in/why-entrepreneurship-is-integral-to-economic-

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