Micro, Small, and Medium Enterprises (MSMEs) often operate with a lean structure, focusing primarily on immediate operational needs and survival.

SME human capital challenges

Consequently, the significance of structured Human Resource (HR) functions is often underestimated. This has seen the businesses experience people management challenges.

High employee turnover

One of the main MSMEs’ human capital challenges is high employee turnover rates, with employees leaving within or even less than a year of joining leading to constant disruption of work output and project timelines.

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Lack of period performance reviews

MSMEs experience inconsistent employee performance due to a lack of clear performance metrics and regular feedback sessions with their staff. Failure to recognize and reward high performers and to conduct periodic performance reviews have also greatly affected MSMEs’ staff performance and motivation, leading to fluctuating customer satisfaction levels.

Labour laws and compliance issues

Many small companies have also faced fines and legal issues due to non-compliance with labour laws and safety regulations, failure to implement basic safety training and regular audits, and lack of sufficient employee records.

Low employee morale

Besides, most of these businesses are constantly experiencing low employee morale and engagement, leading to decreased productivity and innovation. They also experience a lack of the necessary skills among their workforce to enable business expansion to mention a few.

Unlike big corporates, small businesses generally don’t have a lot of room for error and managing human resources on their own can lead to costly mistakes. Fortunately, HR professionals can help small businesses stay out of trouble while developing a strong workforce to help them achieve their goals and thrive.

HR value proposition for small businesses

Integrating HR functions into MSMEs, even on a small scale, can bring significant benefits. From attracting and retaining top talent, identifying areas for improvement, boosting employee morale, aligning individual goals with company objectives, improving employee satisfaction and performance to ensuring compliance, minimizing legal risks, enhancing reputation, ensuring a safe working environment and fostering growth.

HR practices are pivotal for building a resilient and sustainable business. By implementing cost-effective HR strategies, MSMEs can maximize their human capital, ensuring long-term success in an ever-changing business landscape.

About the author

Monica Gichimu is an HR professional with years of experience supporting people functions in the Banking and Insurance Industry. Currently HR advisor at CIC Insurance Group. Previously worked as an HR Officer at Equity Bank.

She holds a Bachelor’s Degree in Human Resource Management from JKUAT, is a member of the Institute of Human Resource Management (IHRM) and is a certified Instructional System Designer.

She is committed to supporting organizations to develop capabilities that support business growth, sustainability and resilience while inspiring their career growth.