Human Resource Management

Until recently, HRM had not been one of the priorities for SMEs. There is limited research about the HRM practices and policies in SMEs. It is primarily informal in SMEs compared to more formal employment practices for MNCs. According to a Confederation of Indian Industries survey, 20% of medium and 80% of small businesses indicated no HR departments, probably due to budget constraints. SMEs may be confronted with time, financial constraints and lack awareness of HR practices' importance to business performance. Wu et al.1 examined SMEs in the UK from the HR perspective and realised that the requirement of highly skilled workers is relatively greater in SMEs than in other firms. This is because human capital directly affects the globalisation of business. HRM is paramount for the growth of SMEs. One of the most challenging decisions SMEs faces is recruiting employees. Hiring the right employees is essential for SMEs, as they are likely to be more productive and propel the organisation forward. Recruiting the right employees is fundamental to the success of any business, more so for SMEs because hiring employees that cannot meet the companys demands will eventually cost the company. SMEs have fewer employees, making building an independent internal labour market more challenging. SMEs are also less likely to use recognised recruitment channels than larger firms, explaining the lower presence of recruitment specialists in smaller firms. Generally, SMEs are less likely to employ formal recruitment procedures. SMEs are also less likely to adopt modern recruiting methods, which is why potential candidates will have less information about the available job opportunities across the board. On the other hand, larger firms are more likely to prefer internal applicants when filling vacancies than smaller firms. Omolo et al.2 reviewed the relationship between SME selection and performance in Kisumu Municipality Kenya and found a correlation. From the study, it was established that recruitment and selection are significant determinants of the performance of the SMEs in Kisumu Municipality. A competent employee is the most critical asset for any organisation. It is in the best interests of any organisation, irrespective of the size, to critically focus on internal human resource development and management.

(a) Based on the passage, analyse the differences in HRM practices between an MNC and SME. (b) Discuss any THREE (3) HRM practices typical of SMEs that are different from MNCs. Provide specific examples in your answers.

(c) Although SMEs generally pay less attention to HRM practices, it is still essential. Examine any THREE (3) reasons why HRM is important in SMEs.

(d) The passage states that SMEs may not focus on HRM. Explain the TWO (2) reasons for this.