Business Management: Size-Related Issues in MSMEs

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In the entrepreneurial dynamism pervading in the country, start-ups and growing enterprises operate side by side with those that have acquired a certain semblance of stability. Among all these, entrepreneurs, owner/managers as well as professional managers are confronted with the inevitable challenge to manage people. One of the most difficult problems facing companies involves attracting, using and retaining competent manpower. Studies have revealed that differences between small and large companies are manifest in the area of people management.

Hiring

Any firm appreciates the need for competent people in the organization. Traditionally, big businesses get the more competent people because of the offer of better compensation, employment stability and opportunity for growth. The smaller enterprises with weaker recruiting ability tend to make do with the leftover of employable people.

This situation has been slowly reversing, as large businesses could not sustain high wages and tenure of employment, much less growth space, as skills and capabilities are shifting toward knowledge qualifications rather than physical skills.

Hence, small companies do as well as large ones in practically all but the top jobs which favor big companies. This requires the entrepreneur to be a multitasking manager who must know all functional areas of management at the start-up stage. An assistant who may be recruited must likewise be a multitasker whose salary must be afforded by the smaller enterprise.

On the other hand, some high potential managers may opt to work with smaller enterprises where there are better opportunities for recognition. Also, the small firm offers greater challenges and a variety of experiences than the larger ones.

The challenge to the owner/manager is the demand on his time to find the right persons for the positions generated by a growing business. Mistakes are often committed due to time pressure, and such errors in finding the right person for a position may not be afforded by operating costs. Advertising is expensive and out-of-pocket costs in conducting employee search for qualified candidates are difficult to estimate, but must be weighed against getting the wrong person.

Smaller enterprises suffer more as owner/managers tend to underestimate and underutilize the available human resources.

One of the ways to improve personnel performance is by assigning tasks that will raise the contributions of all personnel to the limits of their potential through motivation and recognition. Although there are narrower ranges of competence from which to draw, the small firm will have to perform most, if not all, the functions in the large organization. This provides opportunities for people to develop and project their capabilities for other tasks.

As the enterprise grows, opportunities for promotion to more responsible positions may be considered. Careful assessment of potentials must be exercised to avoid operationalizing Peter’s principle in promoting anyone to a level of incompetence.

Retaining

Keeping the good staff is another hurdle to overcome. As they learn the ropes and tricks of the business, their value to the enterprise has appreciated and become attractive to other companies in need of able people.

The pressures of growth in terms of new issues and problems which constantly emerge call for people who can be alert and adaptable to constant change. Slowly, the staff in the business acquires greater value as multitaskers and must be matched by commensurate compensation and recognition. The owner! manager must be prepared to share certain authorities, if not business ownership, to keep the now above-average personnel, or risk their departure to a competitor or becoming a competitor themselves.

Personnel who cannot keep up with the business growth must also be recognized. Some supervisors work very well with two or three people but find difficulty in managing 15 or 20 persons. Constant monitoring and observation become imperative to anticipate stagnant managers who probably need reassignment or reinforcement.

Larger sized enterprises do not feel the need for retention as they may have more people than necessary. A few extra persons on partial work load or some actually performing redundant tasks manage to get away until the cost pinch comes around. Retrenchment and redundancy retirement are then resorted to, usually to the satisfaction of all concerned.