As India moves into the 21st Century and we talk of consistent 8% + growth to elevate us to the ranks of a great power in the next 20 to 30 years, not enough attention is being paid to MSMEs which are going to be the bed-rock on which that rise will take place.

With around 63.4 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities as well as 33.4% of India’s manufacturing output, according to CII.  They have been able to provide employment to around 120 million persons and contribute around 45% of the overall exports from India.

This does not even begin to tell its importance in sustaining innovation and its contribution to employment in this country.

While a lot of attention is routinely paid to Human Resources in large companies in the organised sector, hardly any thought is given to human resources for the MSMEs.  So, it’s time we asked ourselves what is actually happening in this area? How are people managing?  What, if anything, needs to be done?  How to do it?


The main characteristic of HR in MSMEs is randomness. While it is always dangerous to generalise, when turnover can vary from Rs. 1 crore to say Rs. 100 crores, it is a fact that employment is on an ad-hoc basis. As and when a vacancy arises, an advertisement is inserted or known sources are tapped. A small test or a quick interview, often with the entrepreneur, the terms are settled across the table and before you know it the woman or man is employed.

There is no planning over time for the human resources requirement of the enterprise or efforts to map out job specifications. There is nothing to be said, for or against, such a practice except that this is how it is generally done.

The randomness has much to do with the fact that MSMEs are usually one- woman or one- man affairs, where there is perceived lack of time, due to balancing multiple roles.  So, there is randomness in recruitment, remuneration, training, promotion, retention and even removal!

Who comes to us

It is a fact that MSMEs are at the very bottom of preferred employers, as far as job-seekers are concerned.  It would be safe to say, that most people applying for jobs with MSMEs, are people who lack either the educational qualifications or skills, to make it elsewhere.

The preference range for potential employees would be something like a) the foreign education route to employment and settling abroad b) employment in multinational companies c) employment in large Indian Companies d) Employment in Government at the Centre, States and even local Government.

It is a sobering thought that the MSME, and this applies to even the better, more established ones, are literally at the bottom of the pecking order.

What is actually astonishing is not the quality and calibre of the people who drift into MSMEs for employment but what the MSMEs routinely do with such people.  Turn them into people with an amazing, versatile range of skills. MSMEs fit capabilities to functions, and often offer people who would have been crushed by a system which goes by paper qualifications, the opportunity to rise to the highest levels.

The MSMEs role as a natural training ground for the least educated and least skilled of human resources is least appreciated and mostly overlooked, even by mandarins in the Government who are charged with the task of imparting and upgrading employable skills.  COSIA has been at the forefront of seeking formal recognition and financial/tax incentives by the Government for MSMEs crucial role in fostering human resources.


It is not merely that people drifting into MSMEs are on average lesser educated or less skilled.

The effects of a bad education system are not only lack of knowledge but imparting the wrong kind of knowledge.

So, what are the characteristics of a person emerging at the bottom of the pile from our educational system.

  • No depth of subject knowledge
  • Lack of practical skills
  • Directionless
  • No motivation or even wrong motivations
  • Lack of social skills
  • Lacking confidence & enthusiasm
  • Inability to think
  • Poor communication

What changes do MSMEs bring about?

MSMEs in general adopt a ‘’sink or swim’’ method of inducting/training new people for a job. It has the merit of teaching a new entrant the basic skill/s needed to perform her or his job without too much of hand-holding.

This kind of expectation, that with a bit of rudimentary training, the trainee will grasp and be able to do his job in a short duration may actually have a positive effect in most cases. The positive response arises from the need to fulfil the confidence reposed in one.

Given what is called “native intelligence”, the majority take to this method like fish to water and are soon equipped with the new skill/s necessary to perform their job.  This then sets the pattern for them, as long as they remain with the MSME.

Expansion of the unit, new technology, process change, administrative change, system re-configuration trigger new skills acquisition.

Formal, systematic training is still the exception, not the rule in MSMEs.

What does not change?

The informal, skills training is meant to equip a person with the functional skills necessary to perform her/his own job. The more crucial this function is for the organisation; the less attention is paid to any of the other deficiencies of the employee.

The problem is when organisations grow and employees need to be lofted up, the lack of other complementary skills and qualities now begin to show up.

The lack of communication skills which hardly mattered till yesterday now begins to matter, when the employee is thrust into an external role, say in marketing or inspection. Lack of social skills begin to take a toll, when the employee has to be elevated to a supervisory or managerial role.

A person with potential, who could possibly have benefited from a more formal, well thought-out, holistic form of training now reaches a virtual dead-end in the organisation. With her/his employment options elsewhere, being nearly non-existent, this stagnation comes at a high cost to the organisation in the form of inefficiency and to the employee personally.

What is needed?

The first point to be recognised is that deficiencies needing to be made up are not only in terms of lack of technical skills.

Such deficiencies can be made up by providing on-the-job training in electrical maintenance for someone who comes from an ITI or showing how to operate Tally for accounts to someone who comes with a poor B.Com. degree.

The deficiencies we are talking about are more innate like poor standards, lack of motivation, confidence, attitude, ability to think, disinterest in learning, lack of ambition etc.

It is very important to understand that:

  • Most of our employees come from close to the bottom of the academic ladder.
  • Most of our employees come from the bottom of the economic ladder.
  • Most of our employees come from the bottom of the social ladder.

In some ways these turn out to our advantage.

  • Their expectations (at least to begin with) are low.
  • Mostly they are grateful for the opportunity being given. They reward you with loyalty and hard work.
  • Retention is less of a problem as their options elsewhere are limited.
  • In blunt terms they come to you at relatively low cost.

Where the shoe pinches?

The problems start surfacing when organisations grow, and require the people they have, to grow and contribute to the growth of the organisation. This virtuous cycle is strangled at birth because of the inherent limitations of the employees.

To be fair, this state-of-affairs is often compounded by the entrepreneur herself/himself who mostly tends to believe:

  1. That most problems in the organisation have to do with everyone else except themselves.
  2. That the limitations of employees can be fixed with some Seminars & Workshops which will somehow infuse the employees with new-found standards, motivation for efficiency and performance.

This is even more of a problem, with the rapid changes in technology and the business environment, which require everyone to be highly nimble or literally risk being wiped out.

The days of comfortable stagnancy which entrepreneurs enjoyed down to the 90’s is surely over. Even though everyone wept over the problems of the “Licence-Permit Raj”, there were no sudden surprises. Businesses, once established, could be expected to run on auto-mode for the life of the entrepreneur.

Today all bets are off.  In one sense, the sky is the limit.  For those who take the ball and run.

A new paradigm for the new age…

You require a new paradigm to survive in this New Age. When change is the only constant. When technology and products can appear/disappear overnight. When disruption is talked of in positive terms in business, MSMEs require a totally different way of thinking about their people, their human resources.

In the first place it is important to accept, that while the young women and men now coming into MSMEs may share many of the deficiencies of the previous generation, they are a cockier lot. Surprise, surprise…forget your having a lot of expectations from them…. they have a lot of expectations from you!

This is a generation which has grown up with many more things than their parents ever had, and a steady diet of advertisements, which keeps their aspirations at a high. So, dealing with them is not going to be easy.

What the entrepreneur needs to do

  • Drop Patriarchal Attitude: Accept that the patriarchal attitude which worked till yesterday will simply not work with the new entrants. You’ll have to learn to treat employees on the level.
  • Concentrate on Value Addition not cost: Since the cost of employees is already high and likely to spiral it is important to ensure high value addition per employee.
  • Formalise the Training:The Education system, while reforming, is still wholly inadequate to the task. Many of the deficiencies in employees walking into MSMEs persist. Accordingly, the Entrepreneur needs to plan and formalise the training of employees to the maximum extent possible.
  • Stress on Learning: In an environment of change, employees will cease to be useful if they do not keep learning throughout their career. They will need to remain open to ideas, think, innovate and be motivated enough to act quickly on opportunities coming the organisation’s way.
  • Gratitude is the key: We need to understand that, while remuneration and perquisites are important, a very important reason for employee loyalty is still the old-fashioned one…gratitude.

Gratitude could be for anything done for her/him, out of the way. It could also be for recognition of the employee’s contribution.

But surprisingly the most gratitude is reserved for being given opportunities to learn or perform.


The biggest takeaway is that employees will have to be TRANSFORMED to be of use.

It is no longer enough to train employees in just functional skills or even some soft skills within the framework of the time she/he is expected to perform in the workplace. In a way, entrepreneurs will have to take care of employee’s lives, to the extent that employees feel free to keep learning, be creative and innovative. Only then will they be able to contribute “true value addition” and not just ‘time’ in the organisation.

Above all it is important to be genuine.

Employees can sense when you are treating them as partners in an enterprise and not just a cog in the machine. Make sure everyone is looking at the big picture. Let everyone share in the excitement. Make sure everyone goes up with you.

They will stick with you through thick and thin when they know they are chasing a common dream!

 Author: Seshan Ranganathan

Seshan Ranganathan is the Executive Editor of TISA, Trustee of HEAD Foundation & former CEO of SSEA, TTC. He has been championing the cause of  MSMEs for more than 3 decades and is a perceptive observer and writer on a wide range of subjects.

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