Hrm challenges in nationalized small and medium businesses

medium enterprises) play a decisive role. More and more small business owners, corporate management have gradually recognized that human resource management on the importance of enterprise development. For the development of human resource of SMEs (small and medium enterprises) always have a lot of confusion and frustration. In this article, we are going to talk about the typical challenges for HRM in internationalized SMEs (small and medium enterprises).

This article introduces the typical challenges for HRM in internationalized SMEs (small and medium enterprises) and measurement for improvement.

In the chapter two, it discusses the current situation of SMEs (small and medium enterprises) in the world, which include the standards of SMEs (small and medium enterprises) defined by EU and The trends of SME development in the world.

In the chapter three, it discusses the typical challenges for HRM in internationalized SMEs (small and medium enterprises).

In the last chapter, it talks about the conclusion of findings and measurements for improvements.

2.0 The current situation of SMEs in the world

In recent years, the rapid development of SMEs (small and medium enterprises), particularly since reform and opening, private, wholly-owned, joint venture, more rapid development. Most companies regard quality of life, product quality check pass has increased annually, from cooperation leadership to technical staff agreed that to improve product quality, reduce costs, increase cost-effectiveness imperative to earnestly implement Shishi GB/T19000-ISO9000 standards, engage in Good Quality Management, and have formed a consensus.1

2.1 The EU define standards for SME¿½s

Small and medium enterprises (also SMEs, small and medium businesses, SMBs, and variations thereof) are companies whose headcount or turnover falls below certain limits.2

Figure 2.1: EU Defining Standards for SME¿½ 1

EU Member States traditionally have their own definition of what constitutes an SME, for example the traditional definition in Germany had a limit of 250 employees, while, for example, in Belgium it could have been 100. But now the EU has started to standardize the concept. Its current definition categorizes companies with fewer than 10 employees as “micro”, thse with fewer than 50 employees as “small”, and those

Source 2009 by Nelson Education Ltd.

1 http://www.360doc.com/content/10/0610/11/788256_32297987.shtml

2 http://en.wikipedia.org/wiki/Small_and_medium_enterprises

with fewer than 250 as “medium”.3 Please see figure 1. By contrast, in the United States, when small business is defined by the number of employees, it often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees. Both the US and the EU generally use the same threshold of fewer than 10 employees for small offices (SOHO).

2.2 The trends of SME development in the world

In most economies, smaller enterprises are much greater in number. In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people. In many sectors, SMEs (small and medium enterprises) are also responsible for driving innovation and competition. Globally SMEs account for 99% of business numbers and 40% to 50% of GDP (Gross Domestic Product).4

In India, the MSEs (Micro and Small Enterprises) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39% of the manufacturing output and around 33% of the total export of the country. Further, in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labor intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises.5

Either from the number, or from the payment of taxes, the number of employment terms and entrepreneurs, SME (small and medium enterprises) are the backbone of the country.

3 European Commission (2003-05-06). “Recommendation 2003/361/EC: SME Definition”

4 http://en.wikipedia.org/wiki/Small_and_medium_enterprises#cite_note-0

5 “Home Page for Ministry of Agro & Rural Industries”. Msme.gov.in. 2007-05-09. http://msme.gov.in/msme_aboutus.htm. Retrieved 2010-12-09.

3.0 Typical Challenges for IHRM in Internationalized SMEs

All along, the SME (small and medium enterprises) are the gritty, vibrant, and mastered a wealth of resources. However, the management of many SMEs (small and medium enterprises) is not efficient, and very limited international market share. When these high-growth companies in the state, normally, they can not maintain a consistent high level of quality. In the following chapter, the article focus on the IHRM in internationalized SMEs (small and medium enterprises).

3.1 The impact of IHRM on SMEs

Human resource is the most valuable treasures in the enterprise. An overview of the role of HR (human resource) in an organization is given in figure 2.1.

Figure3.1: Value Chain of Michael Porter 1

Nowadays, more and more companies pay attention to humane resource not only because attract talents, but also to improve the effectiveness of company management.

3.2 The deficiencies of human resource management in SMEs

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The main factors causing the crisis plan in a company, which are deficiencies of

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human resources management system. Firstly, as small to medium scale enterprises,

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the divisions of functions are sketchy, some companies did not even set up an independent human resources management, and some enterprises have set up a separate personnel department, but the employees are limited, no matter the performance or the numbers. Secondly, corporate human resources management system may be sound, but leadership on the individual will often override the system so that the system exists in name only. Thirdly, most companies only pay attention to the use and management of human resources does not emphasize human resources training, development and motivation.

In this human resource management, the employees are passive, limited expertise and their full potential, and involve employee career development.

3.3 Challenges for IHRM in Internationalized SMEs

Figure3.3 Typical Challenges for IHRM in Internationalized SMEs 1

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Typical Challenges for IHRM in Internationalized SMEs (small and medium

enterprises) has shown in the figure 2.3, which include Importance of the

founder/owner, Recruitment, selection, and retention, Human resource development;

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Expatriate management and Limited resources of the HR (human resource)

department and outsourcing.6

4.0 Conclusion of findings and measurements

Currently, SMEs (small and medium enterprises) have a dramatically increased, therefore many confused issuers appeared. IHRM (international human resource management) plays an important role not only in the implementation of corporate strategic planning, but also in the overall development objectives of the process.

As mentioned in the chapter 2.3, there are several typical Challenges for IHRM in Internationalized SMEs (small and medium enterprises), firstly, importance of the founder, which means as a leader of company, should have special skills to impact on the internationalization process of SMEs (small and medium enterprises). Two of the most essential skill is international work experience or established networks and relationships abroad which have positive perceptions of the international environment.

Secondly, Recruitment, Selection and Retention. While most SMEs (small and medium enterprises) have established human resource management functions, but the exercise of its functions widespread problems, mainly in: First, the overall quality is not high, very few professionals, lack of professional knowledge base and professional skills, the second is the lack of vocational training system. Lastly, most of HR manager was born in the local; all of them do not have enough experiences and short-term vision.

Thirdly, Human resource development, in another words, the challenge of learning. Learning processes are critically important; the understanding of human resource planning is not comprehensive for most enterprise. It is Imperative to improve capacity to perceive relevant environmental developments, which has to implant in strategy and communication training.

6 2009 by Nelson Education Ltd.

Last two factors are Expatriate management and Limited resources of the HR department. Nowadays more and more companies tend to be international; it is difficult to plan the fast changes of external environment. Especially in the mobility of the employees, due to these reasons, cultural integration, the language, different religions and gender tend to be the most important issues in the enterprises.

4.1 The measurements of findings and improvement

Human resources management is to organize protection for sustainable development. Regarding as those challenges, there are several measurements which present in the following points:

* Make sure the strategy for enterprise development, and strengthen the scientific understanding of the human resource management. Promote the human resources planning and corporate strategy integrally.

* To enhance in human resources management team and improve the overall quality of employees of SMEs (small and medium enterprises).

* Improving human resources planning support platform.

To sum up, SME (small and medium enterprises) managers must correctly identify the appearance of the crisis of human resources planning, on this base, implement the countermeasures in scientific and effective way, and solve the problems which happen in the human resource development for SMEs (small and medium enterprises).