Varun Surana

human resource management for smes

Human Resource Management for Growing SMEs in India

Growing Strategies: Human Resource Management for SMEs in India

In today’s fast-paced environment, human resource management for SMEs is an essential aspect for the growth and sustenance in India. The talent acquisition, engagement, development, and retention of employees are some of SMEs’ most significant HR challenges as their operations scale up. Non-preference for strategic HR planning may be why a small but promising enterprise cannot follow its path if it expands.

The article takes a closer look at some of the proven techniques to utilize as an SME in India’s context, which is going through highly aggressive growth. Human Resource (HR) matters should be dealt with effectively and early because workforce management is a significant factor in sustaining business growth; the employee’s productivity and creativity are harnessed.

As an HR consultant with many years of experience in helping SMEs efficiently grow in India, I have undertaken extensive holistic strategies focusing on critical aspects of the HR management story. 

This includes the stages of recruitment, skill development, culture, compliance, HR technology for SMEs, and finally the usage of data-driven analytics. Along with correcting the internal HR processes, these tips also look forward to India’s fast-changing talent sphere.

Understanding HR Challenges Faced by Indian SMEs

HR practices in most Indian SMEs are still confined to routine admin transactions like maintenance of payroll registers and elimination of regular HR-related activities. Based on industry analysis, it is apparent that more than 75% of SMEs need more HR mechanisms or HR specialists to address the issue.

However, as SMEs grow and employ more people, ad hoc people management can negatively impact employee motivation, productivity, and retention rates. Following are some of the common HR challenges in Indian SMEs:

Large SMEs can quickly lose their reputation due to untimely HR issues, which stop the work process in full swing and may influence further economic plans.

Also Read: Indian SME Top 5 Challenges and Solutions

Strategic HR Planning to Boost SME Growth

Indian SME leaders need to plan the HR process into a long-term business planning mechanism. Using strategic HR planning focused on reconciling workforce needs and business goals helps managers contribute more to achieving the company’s goals of productivity and innovation.

Some steps for strategic HR planning include:

Another critical element of the HR strategy is combining regular recruitment, knowledge development, and motivational activities in a single approach to make the staff upgrade hassle-free and the corporate culture shared within the team grows steadily.

human resource management for growing smes in india

Effective Recruitment Strategies

Finding skilled talent that fits within budget constraints is tricky for SMEs. Here are cost-effective tactics to strengthen hiring capability: 

Build Employer Branding

Tap Digital Platforms

Innovative Hiring Approaches

Employee Development and Retention

With limited training budgets, SME leaders often overlook employee development in India, which impedes talent retention and innovation. Some ways to nurture employee capability are:

Alongside capability building, SMEs need a retention roadmap:

Compliance and Legal Aspects of HR in India

While in-house legal teams manage HR compliance in India in large companies, SMEs may lack awareness and expertise on labor law compliance in India spanning:

Non-compliance can lead to financial penalties or lawsuits; hence, it is advisable for SME leaders to consult HR legal experts or use online compliance management software right from the start of business.

Leveraging Technology in HR Management

Essential HR software covering payroll and leave management has now expanded to specialized HR tools like:

People help minimize infrastructure investments and are cost-efficient. Educational content to drive technology adoption and data literacy is also crucial.

HR Metrics and Analytics for SMEs

Here are some key HR metrics and analytics SME leaders should track manually or via analytics tools to enhance workforce productivity:

Analytics dashboards can capture trends across locations, departments and demographics on various aspects like retention risk, diversity ratio, and compensation benchmarking, allowing data-backed hiring and capability decisions.

Case Studies

Case Study 1: Using Analytics to Improve Staffing

ABC Photocopiers, a ten-year-old SME in machine refurbishing, struggled with high technician attrition from 2015-2018. Manual data collation needed to be more adequate to pinpoint underlying issues. They implemented an HR analytics platform capturing granular insights on:

Predictive analytics models identified managers needing coaching on team engagement. Targeted onboarding and skill development programs were launched, leading to a 30% attrition dip in 2019.

Case Study 2: Leveraging Remote Freelancers

A budding online retail startup needed more specialized skills like UI/UX design and digital marketing when launching its eCommerce portal in 2020. With funding constraints, they leveraged online freelancing platforms to onboard concept designers and SEO experts, leading to the following:

Virtual collaborative tools helped smooth workflow despite a distributed team. The quick scalability and on-demand access to experts accelerated their growth plans during a critical business phase.

Future Trends in HR for SMEs


While early-stage SMEs may need more HR budgets and teams, taking a long-term strategic view of managing talent rather than ad hoc people management is critical. Developing a supportive workplace culture and growth environment for employees also impacts productivity and retention positively.

As SME leaders scale up, their people strategy should keep pace with organizational growth plans. The right HR and people analytics tools provide actionable insights to make timely data-driven decisions and avoid talent-related derailments. External experts like online freelancers, legal consultants and HR advisors help overcome capability and bandwidth constraints for small HR teams.

As an experienced business consultant in India, I urge SME owners and CXOs to proactively assess gaps in acquiring and managing talent at your firms. You can schedule a consultation session with me to devise the right HR vision and execution plan tailored to your unique business growth needs. This results in a motivated, productive workforce driving innovations and growth in the post-pandemic business landscape.

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Varun Surana

Serial Entrepreneur (Education, Tech, Branding & Community Based Businesses)

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