HRM in SMEs

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Project of SME
HRM in small and medium enterprises (SMEs)
Submitted to: Maam Shirin
Submitted by: Noor-ul-ain Afzal (BBA-FA08-031)
Sumaira Hafiz (BBA-FA08-034)
Aisha Bashir (BBA-FA08-030)
Submission date: March 7, 2011

The University of Faisalabad

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Table fo contents
Section 1
Focus of study, company profile and background, major issues
Section 2
Training mad development
Section 3
Literature review
Section 4
Conclusions and recommendations
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ACKNOWLWDGEMENT

First and fore mostly we would like to thank Almighty Allah who blessed us with knowledge,
understanding and ability to do this project.
We have discovered that the work of some unknown persons makes our lives easier every day. We
believe it's appropriate to acknowledge all of these unknown persons; but it is also necessary to
acknowledge those people we know have directly shaped our lives and our work.
First of all we would like to thank our teacher Ms. Shirin for her guidance throughout the semester.
We thank director marketing Mr. Uzair Saeed of Al-Noor textile Pvt. Ltd., under whose kind
supervision we got our required material.
DEDICATION

This project is dedicated to our parents who have enabled us to stand on our own feet and have guided
us in all matters of life.
May Allah bless them!
Ameen

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Section 1
Focus of study
This report explores the role and part of HRM in SMEs. Small and medium enterprise didnt
have a clear concept about the importance of HRM for an organization. Our aim was to
investigate the level of HR formality in SMEs. Small and Medium-sized Enterprises (SME) are
recognized as a significant part of both developed and developing economies. Numbers signify
their importance as SMEs usually represent more than 99 percent of all Enterprises in almost
every country. For developing economies they are especially important as SMEs play a Critical
role in poverty reduction through employment generation. In the past, HRM scholars have
focused mainly on large firms. Recently, research attention has increased as scholars seem to
realize the importance of HRM in SMEs better. Researchers looking at smaller companies focus
on issues like the determinants of HR in SMEs individual HR management practices and the
level of HR formality. Most studies researching HR formality conclude that in SME's in general,
HRM is informal, intuitive and ad hoc.
As in most small SMEs the owner/manager takes care of all HR related activities it obviously
becomes difficult for him/her to manage employees when firm size increases. Consequently,
the owner/manager starts thinking to delegate HR responsibilities to others, inevitably leading
to more formalization.
According to a classical definition, formal HRM means that procedures or practices are;
_ Written down (like a list of skills and qualifications for jobs)
_ regularly applied within an organization (like yearly performance review)
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_ Assured to take place (like employer sponsored training)
Brief Company Profile
We selected AL-NOOR PROCESSING & TEXTILE MILLS (PVT.) LIMITED.
Background:
The chief executive of al-Noor is Mr. Riaz Ahmad Sheikh and his family in 1965 in association
with his elder brother Mr. Basher Ahmad and his family. They joined hands to start their career
in cloth processing industry they invested their capital in Al-Noor fabrics PVT limited at
Samundari Road Faisalabad as a partner. To expand their business and to project their
investments Mr. Riaz Ahmad sheikh and his brother invest their capital in Tanzeeb textile.
They also plant of data oil mills at samundari road at convert the plant into textile unit at the
name of Al-Hamra textile on partnership basis. With the great pace of their business they
purchased the unit of Al-Noor fabrics. Its the independently owned unit by both brothers.
By the grace of Allah they also registered another private limited company at the name of
Baber international (pvt) ltd. On June 12
th
1990 with the capital of Rs. 5,000,000 at Sargodha
road Faisalabad. In 2001 they changed the name of Baber textile to al-Noor processing &
textile mills (Pvt) Ltd. Now this unit is working under this name.
Management of company:
1. Riaz ahmad sheikh Chief Executive Director
2. Basher ahmad Executive Director
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3. Muhammad Amir Riaz sheikh Executive Director
4. Muhammad Saeed sheikh Executive Director
5. Muhammad Faisal sheikh Director
6. Muhammad Saad Director
7. Muhammad Hassan Riaz sheikh Director
8. Uzair Saeed Director
Employment:
Al-Noor has engaged more than 350 skilled manpower to expedite the processing of cloth,
including 20 members of experienced and well educated staff which is back bone of our
business.
Business Relationships:
As the company has local as well export business, we have sound elation with our valued
customers either from local market or from local market or from exports. We have also sound
relationship with our suppliers similarly from local as well as from foreign.
Perspective and practices of HRM of the firm:
When we talk with firms director about their hr perspective they answered they dont have
separate department for HRM company management is dealing with the HRM of company
means employees matters are dealt by company management. Starting with HR planning,
there is not any kind of clear HR strategy available in similar to their responses with respect to
business and product strategy. They verbally tell their HR strategy.
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Regarding HR Practices they didnt have any clear benchmarking about HR policies and
theories. They have some formal methods about recruitment and selection if they need to
recruit from outside. They mainly recruit employees from family and friends otherwise internal
recruitment means fill the spaces by promoting or rotating the existing employees.
Due to informality in SMEs firm has to face many challenges in business world due to
globalization and increased market competition. After 2005, company has a little
improvement in practicing the HR.
HR challenges in SMEs:


SMEs face unique challenges that stem largely from their size. While economies of scale
permit larger organizations to employ a team of specialists to address the complexities
involved in managing HR programs, this is not a viable option for many SMEs. The costs
associated with hiring highly trained HR professionals on a full-time basis are likely to be
prohibitive for many smaller organizations.
As a result, HR activities often become the responsibility of line managers. This can be
problematic for two reasons.
First, the complexity of many HR activities is likely to result in them becoming a significant
drain on managerial time and resources. As such, HR tasks may interfere with managerial
responsibilities that are directly related to revenue production. This problem is even more
critical given that scarcity of managerial talent is often cited as a key factor limiting growth in
SMEs. This scarcity of managerial talent increases the opportunity costs associated with time
spent on HR administration by SME line managers.
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Second, many HR tasks involve substantial complexity and thus the quality of HR decisions
may well be affected by the fact that line managers often lack significant training and expertise
in HR.












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Section 2
Training and Development











We select training and development approach to evaluate our selected textile firm. In textile
industry technical and creative skills are very important for the enhanced productivity and
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competitiveness of a firm. Al-Noor textile has a clear focus on training and development of
their employees. Because employees are human resources of a company and polished staff
leads a company to success. They think that our employees are our pillars of company. Skilled
worker are the basic need of textile sector. Human Resource Development is very important
for textile firms, so HRD gained momentum in termsof employing and develop manpower that
satisfies the professional requirements of this sector and that is well skilled.
The advent of HR practices in textile sector was rather slow in comparison to other industrial
sectors. But due to globalization there is increase in competition as a result development of
human resource has become essential. However organized HR practices are being adopted
mostly by the mill sector. In last decade we have seen not so good performance by textile
sector, this was because of lack of HRD department in many mills. But the scenario has
changed as HRD departments have taken up their role in textile sectors. Various training
programmers pertaining to training of workforce, textile related topics have helped in
enhancing the overall performance of the textile companies.
In order to get increased productivity from workforce it is essential to have a well framed HRD
system in the organization. If the principles of HRD are adopted it could result in decrease in
non-attendance by 20% and increase in productivity by 30%. So to cope up with the market
competition HRD is very essential element for the textile industry.
HRD department is responsible for developing the feeling of motivation in the employees; this
motivation in other words is the commitment of the employees towards the job and the
organization. When the work of HRD is done effectively it would result into co-operation
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among team members, demolition of centralized system of decision making, creates homely
environment, feeling of ownership and positive working atmosphere.
From the above discussion it is clearly seen that HRD has become an important need in textile
sector. So a clear trend towards HRD is also seen in SMEs to cope up with the new emerging
challenges in the world. From the start of 21
st
century, SMEs start practicing to some extent
because it becomes the need for them. As the prevailing trend in SMEs Al-Noor textile also
gave attention towards their HRM practices. In the last ten years they have adopted many of
the HR practices and I will discuss here the T&D practices they are practicing now a days.
1. The training drivers for the company are the following by which they analyze the needs
that when and why employees need training to develop their skills:
Business performance statistics and reports.
Financial reports and ratios.
Competitor analysis and comparison, e.g. SWOT analysis
2. Training plan: A detailed plan for carrying out employee training for a unit of work.
They have a three step training plan to implement on:
1st- establishment of performance standards (on which employees to be
evaluated): they provide a readymade structure for a training program.
Job Description ,Job Specifications, Market Benchmarking on the specified jobs
,People Culture
2nd- training objective
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To see our employees competitive with the market and coping up with the
people culture.
3rd- Standard procedures
Unit training program for technical employees
Training workshops
On the job training (JIT)
Orientation plan: (the pre-job phase training)
The company introduces the new employees with the job and workplace. Al- Noor textile use
orientation program for the new entrants to make them easier and familiar with their job.
Here is their orientation plan
Day 0 Prior to employee arrival
Clean and set up office or workstation
Notify current staff of the new staff and arrival date
Get business cards and a name plate for office or workstation
Set up equipment access ( telephone, machinery etc)

Day 1 Welcoming our new employee
meeting with immediate supervisor
give them the 'lay of the land'-location of restrooms, kitchen or lunch room,
dress code, hours of work
introduction to team members
provide a mentor or buddy who will guide the new hire
arrange for security pass
take the employee out to lunch
Key information to be provided
job requirements and what is expected from new employees
employee handbook
organization chart
signing of employees form
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location of office supplies, and general work area

Day 2 On the job training
Share the right account of information that is required to the employee to
do the job
connect the employee with key people whom they can go for assistance or
direction

Day 3 Official orientation program
depending on the number of new hires, set up a half day or full day
orientation presentation
Allow hires to connect with each other. try ice breaker games
Provide broad business information such as business strategy, vision and
mission and structure.
allow employee to address any concerns they may have






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Section 3
Article reviews
Review no. 1
Encouraging Training & Development Activities in SMEs: Some Lessons from UK Research*
BY Steve Johnson who can be contacted at s.g.johnson@lmu.ac.uk
Summary:
This article reviews some recent research that has been undertaken in the United Kingdom
(UK) into Training and development activities in Small and Medium Sized Enterprises (SMEs),
and outlines some Lessons that could be valuable for organizations in South Africa that are
trying to encourage and assist SMEs to engage more effectively in skill development activities.
Despite a range of statistical evidence to the contrary, UK research has revealed that many
SMEs do in Fact engages in many forms of skill development activities.
It is important that government and other organizations recognize the factors that inhibit
training and Development in SMEs and build upon the positive practice that does exist in many
SMEs, as well as Linking skill development initiatives more effectively with business
development policies. This article sets out some of the key lessons for policy that have
emerged from a recent review of research into skills.
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Issues in SMEs (Johnson, 2002).
The policy background that forms the context for this article is the so-called lifelong learning
agenda. The desire to improve the level of skills, training and associated qualifications has
long been a Component of UK economic and labor market policy.
Given the well-documented increase in the importance of SMEs within the UK economy, it is
clearly important to consider the activities of SMEs in relation to learning and skills
development. If policy Makers are to succeed in ensuring that the skill needs of the economy
are met, they need to persuade and/or incentivize SMEs as well as larger employers to invest in
their people, while also convincing Individuals to invest in their own learning.
The National Skills Task Force Final Report (2000), and the subsequent response from the
Secretary of State (Department for Education and Employment, 2000) both recognize the key
role played by SMEs in the learning and training system. These documents suggest that there
are a number of problems associated with engaging SMEs in the national skills agenda. The
problems which are identified are as follow:
1) Low levels of off-the-job training by SMEs, in comparison with larger organizations.
2) Lack of internal capacity, and sometimes motivation, to provide learning opportunities for
their staff.
3) A "disturbingly high proportion of owner-managers who had low or no qualifications"
(National Skills Task Force 2000: para. 4.23)
4) Very low proportions of small businesses involved in Investors in People.
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The argument of this article is that the chances of success of policies to promote lifelong
learning, in the UK as well as in other countries, will be increased if a number of key points are
recognized about learning within SMEs.This role and importance of informal learning in SMEs
needs to be recognized and appreciated. It is important to understand and appreciate the
reasons why some SMEs do not undertake formal training. Training and learning initiatives
need to be introduced in the context of business support and not sold as standalone
packages.
The arguments presented above suggest that care needs to be taken in drawing general
conclusions from evidence that is not totally unambiguous and relies on definitions of training
that are more relevant to large organizations than to smaller employers. A much more
sophisticated picture needs to be built of the variations in training/learning activities between
different types of employer, if appropriate policy responses are to be devised.
Key points:
1. UK research has revealed that many SMEs do in Fact engages in many forms of skill
development activities.
2. Documented increase in the importance of SMEs within the UK economy.
3. Consider the activities of SMEs in relation to learning and skills development.
4. The argument of this article is that the chances of success of policies to promote
lifelong learning.
5. Highlighted a number of factors that are relevant to the situation in South Africa.
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Conclusion:
From this article we can summaries a large and growing body of research evidence from the
UK, and has highlighted a number of factors that are relevant to the situation in South Africa,
with its large and diverse SME population and a policy desire to improve levels of skill
development in SMEs.This review has demonstrated that it is very dangerous to generalize
about training and skill Development activities in SMEs.
Finally, it should be recognized that improved skill development can lead to better business
performance of some SMEs under some circumstances. Skill development initiatives need to
be linked to wider programmers to help SMEs to improve their performance. This means much
closer working between skill development agencies and business development organizations.
Review 2
FROM FORMAL TO FUNCTIONAL: SMES, E-LEARNING
AND KNOWLEDGE TRANSFER IN THE CANDLE
PROJECT
Ian Stevenson
School of Education, University of Leeds
Woodhouse Lane, Leeds LS2 9JT
Summary:
Small and Medium Enterprises (SMEs) are defined to be companies that have less than 250
employees. By contrast there are just 40, 000 large enterprises (LE) with more than 250
employees. (Issue, 2003). In The context of the knowledge economy, with demanding
customer-bases, reduced product cycle periods, and global markets, SMEs are under pressure
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to develop and modernize their competency and skills base. Continual competitive pressures
lead SMEs and large enterprises (LE) to innovate and Change at ever increasing rates, and both
are always looking for new sources of knowledge and skills to exploit. Within the Large
Enterprise sector there has been a trend to outsource training, with recent surveys showing
90% of firms outsourcing at least some of their training and administrative tasks (Gainey &
Klaas, 2003). The training picture for SMEs is more complex, with many (rural and peripheral)
areas relying on SMEs for employment and learning opportunities. Conclusions reached in the
context of large firms about training may be inappropriate for small organizations. (Hill &
Stewart 2000). As Iles & Yolles (2002:6) note: there is little evidence that small business-
owners are particularly attracted to such training, either for themselves or their staff. This
leads to a different sense of personal and organizational goals both in comparison to large
enterprises, and between employers and employees within SMEs. A major factor in this
process of gaining new knowledge and skills for SMEs and large enterprises is Information and
Communication Technology (ICT). Although there are distinct difference between the SMEs
and LE in their attitudes and approaches to training in new knowledge and skills, they both
need to have access to the latest technologies and to use them effectively.
The notion that Small, Medium, and Large Enterprises can have access to the latest research or
Techniques delivered in a style and at a pace that suits individual learners, are one attractive
solution. Much has been written about the ways that e-learning or e-training can be used as
part of this process. E-training might benefit this SME sector the most by finding business
structures that accommodate the Internet, and help the firm assimilate to those structures as
part of their activities. The lack of Buffering means that for SMEs that intend to deal with the
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Internet, training and using the web will take a relatively larger share of their resources. ).
Enterprises need knowledge which will be useful in helping them to achieve, often quite
specific, organizational goals. So called just-in-time strategies, which resonate with business
supply chain models and practices, imply that relevant information and training arrive at a time
and pace to suit a specific need.
Key points:
1. The survey demanding customer-bases, reduced product cycle periods, and global
markets.
2. Continual competitive pressures lead SMEs and large enterprises (LE) to innovate and
Change at ever increasing rates.
3. Training picture for SMEs is more complex, with many (rural and peripheral) areas
relying on SMEs for employment and learning opportunities.
4. A major factor in this process of gaining new knowledge and skills for SMEs and large
enterprises is Information and Communication Technology (ICT).
5. The e-learning or e-training can be used as part of this process.
6. Enterprises need knowledge which will be useful in helping them to achieve, often quite
specific, organizational goals.
Conclusion:
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Conclusions reached in the context of large firms about training may be inappropriate for small
organizations. And also conclude by discussing the nature of the knowledge transferred
between the participants, and the model of Knowledge Transfer used in the scenario.
Review 3
Strategies & Solutions
Training Strategy Using Internal Experts
By Kathleen D. Miller, president of Miller Consultants, Louisville, Kentucky;
Virginia S. Major, organizational consultant for Miller Consultants, Manchester, Connecticut;
and Leslie Hunt, organizational consultant for Miller Consultants, Houston.
Summary:
In this article describe that how much training and development is important in supply
management and the SMEs organization. Today, supply managers must be skilled not only in
supply management but in the management of the entire value chain, as supply management
Organizations become significant players in organizations quests to gain competitive
advantages. Organizations that are on the ball will craft sound training and development
(T&D) Strategies to ensure that the supply managers who hold these increasingly critical jobs
have the know-how to excel. But it is not easy to implement training and development in
todays time and money starved organizations.
The internal experts are in the best position to identify which knowledge and skills are most
essential for sourcing professionals in their organization. But if internal experts not give the
new ideas and efforts then organization hire the outside experts who manage all the things.
There are many use of external expertise and they give the benefits to the organizations. When
T&D experts come together with SMEs, however, the group is most likely to succeed in
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producing a strategy that is fresh and effective. The SMEs involved in this project were all
exemplary employees who were committed to strategic sourcing. They were able to identify
and explain the best practices, although they required some assistance from the consultants in
reaching consensus about which practices should be incorporated into standard work
processes.
But if the organizations use their internal experts they have knowledge, skills, and abilities
(KSAs) that they use to carry out their duties and make decisions. An excellent way to develop
the content for training that meets real organizational needs is to base it on the KSAs
possessed by the organizations finest talent. These KSAs may be of two types. The first type is
fact-based and procedural. Training professionals use fairly straightforward procedures called
job analysis and task analysis to access this information from SMEs. The T&D facilitators asked
the SMEs to describe concrete situations that exemplified how they carried out each step. As
the SMEs relayed their stories, the facilitators probed by asking questions, such as how they
chose between several alternatives, how they weighed options, or what information they
examined in order to make decisions.
Still another way to use internal experts is to involve them in the delivery of the training or
learning experience. With the proper materials and some preparation, most SMEs can become
effective teachers. T&D professionals can offer valuable instruction on how to facilitate
learning experiences, both formal and informal. Some of the services they can provide include
conducting "train-the-trainer" sessions for SMEs or designing mentoring or SOJT toolkits that
the SMEs can use as guides. Changes occurring within supply management organizations
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necessitate increased attention to the training and development needs of sourcing
professionals.
Key points:

1. Organizations are maximizing their resources to develop and implement training
strategy
2. By collaborating with internal experts.
3. Assemble the training and development strategy group.
4. Use different subject matter experts to determine curriculum.
5. Use internal SMEs to deliver the training and development experiences.
6. T&D gives the confident to work the more effective and efficient.
7. The SMEs take the clear decisions.
8. The T&D world refers to these people as subject matter experts (SMEs). They bring
profession related expertise to the table.
Conclusion: The article has described a few of the many ways to involve internal experts in the
design, development, and delivery of T&D strategies. Regardless of the exact role they play,
when sourcing experts collaborate with T&D professionals, together they can create learning
programs that successfully support the goals of the organization while saving time and money.



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Section 4
Conclusions and Recommendations
To summarize, HR functions deal with different dynamics when contributing to SME growth
plan. While the organization plans to follow a successful trajectory, there is a need for both HR
and the Promoters to appreciate and agree on change management agenda through change in
organization culture. HR has the responsibility to understand business dynamics in SME
environment before implementing the standard HR practices, policies and processes. This
mutual appreciation will help HR to be an effective business partner.
It is the hard reality, with which scholars may agree that right efforts has not been devoted to
understand the relevance of HRM formality for SMEs as majority of the scholars wisely tried to
escape from this by advocating formality is required when SMEs grow, pressurize from larger
counterparts and so on. As literature review suggests that an appropriate level of HR formality
is required and these formal HR practices are believed to help Owners/mangers in hiring the
right candidates, developing employees, compensating and judging their performance which
in return helps organizations achieve better results. But in reality things are different, as hardly
any study able to clearly identify 'what HR formality means for SMEs'.
Now to summarize training and development in the context. T&D has a very positive trend in
the last decade in SMEs. As increasing competition and the globalization mean it very
important for every organization to have powerful and skilled staff, which understands the
trends and changing needs of society.
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To develop the staff according to market trends HRD is playing a vital role in making the staff
competitive. So a way to enhance T&D is to work with internal experts to design T&D
strategies for the firm. Source them to T&D specialists so they can make learning programs
which can work effectively for the firm and it also save money.
Here are some recommendations to improve training strategies for a firm.
There are ten features which are necessary for a feature of training program for a firm either
its an SME because in competitive world sizes of firm have lost its importance. The thing
which is important is skilled manpower.
1. Training objectives should be strategy driven
2. Positive cost to benefit ratio
3. Training objectives should be Supported by key strategies, systems, structures,
policies, and practices
4. Training should Maximize employee ability and potential through shared accountability
5. Training should be Work-related.
6. Learning by doing is best criteria.
7. Training should have Transferability of knowledge and skills back to the job.
8. Linked to other people-related programs and departments
9. Continuous learning process.
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10. Training should be driven through many channels.

We have some low cost training programs as recommendations:

People Performance Potential model (PPP)





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The Process of Training and Developing Others - Typical Model