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Level of Formalisation of Human Resource Management in Small and Medium Enterprises in India

Author

Listed:
  • Manjari Singh

    (Manjari Singh is Assistant Professor in the Personnel and Industrial Relations Area, at Indian Institute of Management, Ahmedabad)

  • Neharika Vohra

    (Neharika Vohra is Professor in the Organisational Behaviour area, at Indian Institute of Management, Ahemdabad)

Abstract

In this article, the current state of management of human resources in Small and Medium Enterprises (SMEs) in India is explored. The owner-managers play important roles in managing human resources in SMEs. The direct involvement of the owner manager also leads to ad hoc and informal HR practices. However, formal HRM systems can help increase performance. This study specifically examines the level of formalisation of human resource management in small and medium enterprises in India. Formalisation is defined as the extent to which regular and written-up procedures exists, a stated policy is in place, and a specialist designs and executes the HR systems. Data were collected using a questionnaire from 89 small enterprises and 54 medium enterprises on the level of formalisation of twelve HR functions. It was found that the level of formalisation of HRM systems in SMEs was low and owner-managers played a central role in the HR functions of their enterprises. Compared to small enterprises, the level of formalisation was found to be higher for medium enterprises. The level of formalisation increased with increase in employee strength. An inverse relationship between the extent of involvement of the owner-manager in managing human resources and the existence of a formal policy for HRM was evidenced. Implications of decisions by owner-managers to keep HR functions informal or formal in small and medium enterprises are discussed. It is necessary for SMEs to find ways in which formal and flexible systems can co-exist.

Suggested Citation

  • Manjari Singh & Neharika Vohra, 2009. "Level of Formalisation of Human Resource Management in Small and Medium Enterprises in India," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 18(1), pages 95-116, March.
    • Handle: RePEc:sae:jouent:v:18:y:2009:i:1:p:95-116
    DOI: 10.1177/097135570801800105
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    References listed on IDEAS

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    1. Charlotte Koch & Jan de Kok, 1999. "Human-resource-based theory of the small firm, A," Scales Research Reports H199906, EIM Business and Policy Research.
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    1. Manjari Singh & Neharika Vohra, 2005. "Strategic Human Resource Management in Small Enterprises," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 14(1), pages 57-70, March.
    2. Vathsala Wickramasinghe & Anuradha Premachandra, 2021. "Organizational career growth: the mediating role of career management practices," SN Business & Economics, Springer, vol. 1(6), pages 1-29, June.
    3. Vu Hoang Nam & Hiep Ngoc Luu, 2022. "How Do Human Resource Management Practices Affect Innovation of Small- and Medium-sized Enterprises in a Transition Economy?," Journal of Interdisciplinary Economics, , vol. 34(2), pages 228-249, July.
    4. Lai, Yanqing & Saridakis, George & Blackburn, Robert & Johnstone, Stewart, 2016. "Are the HR responses of small firms different from large firms in times of recession?," Journal of Business Venturing, Elsevier, vol. 31(1), pages 113-131.
    5. Ingi Runar Edvardsson & Guðmundur Kristján Óskarsson, 2021. "Outsourcing of Human Resources: The Case of Small- and Medium-Sized Enterprises," Merits, MDPI, vol. 1(1), pages 1-11, May.

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