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Group : T- AA701
1 Introduction to SME
New SME Definition
Scope of SMEs
Applicability of Definition
Effective Date
2 Human Resource Management and Its Challenges Among SMEs
8 Conclusion
9 References
Introduction to SME
A review of the definition was undertaken in 2013 and a new SME definition
was endorsed at the 14th NSDC Meeting in July 2013. The definition was simplified
as follows:
Services and other sectors: Sales turnover not exceeding RM20 million
A business can qualify as an SME if it meets either one of the two specified
Services & Other Sectors Sales turnover from Sales turnover from RM3
than 30 exceeding 75
Perennial crops (e.g. rubber, oil palm, cocoa, pepper etc.) and
Livestock
Marine fishing
Aquaculture
(ii) Construction
Infrastructure
Special trade
In addition to the qualifying criteria i.e. sales turnover and full-time employees,
SMEs refer to only pure business entities registered with the following
bodies:
preference shares); or
the parent company (two level subsidiary). For this, again the conditions in
3. Applicability of Definition
agencies at the Federal and State levels (including statutory bodies and
stakeholders are unable to compile or maintain both these data, then they
4. Effective Date
The new SME definition will come into effect as of 1 January 2014. This
means that eligibility for SME development programmes and SME statistics compiled
from 2014 onwards shall follow this new definition. All statistics compiled prior to
2014 will remain status quo and will not be affected by the new definition.
Human Resource Management and Its Challenges Among SMEs
By having good HRM practices should therefore provide every SMEs with the
include; conducting job analyses (determining the nature of each employees job),
planning labour needs and recruiting job candidates, selecting job candidates,
orienting and training new employees, managing wages and salaries (compensating
Human resources are one of the most essential growth indicators for small
and medium enterprises. Having a command of HRM knowledge will help every
SMEs avoid the personnel mistakes while managing. For example, SMEs dont want
Limited Openness to New Medium and Channels: SMEs seem to be less inclined
towards adopting modern methods of hiring such as online recruitment which is why
candidates often complain to have less information about the available job
opportunities across the board. The fact that there is no transparent mechanism for
employer and the candidate to engage leads to pitfalls for middle and senior level
recruitment.
Lack of Spirit to Innovate: Innovation is critical for the growth of SMEs and
for grabbing the attention of potential candidates. Candidates should feel the
urge to join the organization because of its capability to innovate and stand out
from the crowd. Next, its the innovation to do things differently for attracting
candidates. For e.g: Many public companies have taken some unconventional
initiatives like improving salaries and salary structures and brought them
for the last few years and there is an increasing need for the HRs to spend
time on engaging the workforce. Moreover it is not only the HRs responsibility
joint effort of senior management and the HR fraternity. They must enable
This also gives the organization an opportunity to convey their needs and
expectations better.
No Clarity on Role and Responsibilities: Role clarity is a major ingredient of
roles without asking for any clarity and crib later. Therefore, the HR must
incompetent candidates. Most of the time, it has been seen that line managers
Top talent command premium: Many companies especially the SMEs are
expectations are beyond the companies estimation. Talented people are hard
to find and barely to get. Talented people dont come cheap. They come with a
price parallel to their skills, knowledge and expertise that they may contribute
to the company. The SMEs could not afford to attract the potential talent to join
in the company due to lack of fund. Fund that they have are more crucial for
other companys operation rather than spending it to the talent. Since the
SMEs are not willing to pay more, then they cant get the right talent.
Wide Job opportunities: Currently, the market place is marked by war for
talent and talent-focused corporate would go to any length to get the right
person. The marketplace is flooded with new age companies (read IT & ITeS
companies) ready to offer more not only in terms of lucrative compensation but
also challenging job profile, cross functional exposure levels, onsite job
corporate culture not to speak of world-class brand image that would lend
prestige to people who opt to work for them. Because of this competition, it
seems hard for the SMEs to get the right talent. Knowing that job seekers are
seeker to come on board. Candidates have the luxury to choose whom to work
entrusting his career in companys hands for the next few years. Hence, it is
preferable for the candidates to enter the established companies rather than
entering the SMEs which they hardly know. Not to tell that these candidates
are being picky all the times, but with minimal information about SMEs
existence made the SMEs are not put into candidates considerations.
Talent shortage: Talent shortage is the familiar refrain for long and in the
times to come it is going to get acute than ever before. While it is the general
scenario prevalent across all industry sectors, this would be another major
concerns faced by the SMEs. The shortage of talent workers becomes more
critical when new generations (Gen Ys) are not interested to work in SMEs.
They prefer to join and work in those multinational companies (MNCs) and
foreign countries which offer them higher job opportunity and welfare
packages. Besides that, according to Tan Sri Sulaiman Mahbob, trained and
highly skilled talents in Malaysia are now working in many parts of the world,
such as in China, the Middle East, Australia, Hong Kong, Japan and even
Singapore. Therefore, the SMEs is facing serious brain drain and shortage of
transform their business line to global market also met with shortage of talents
the organization. Nowadays, the candidates have the power in choosing their
employers. If the organization refuse to stay put and hoping for the candidates
to come, the organization might losing these potential candidates since they
seem can sense the urgency of the organization for not welcoming them or
not. SMEs need to take a hard look at their current HR sourcing strategies.
Quality people are assets of the highest calibre for any organization. Many
SMEs, especially start-ups, usually lack the funds and credibility to attract the calibre
of person that they need. Without proper management and excellent staff support, an
Whilst fund raising can assist in attracting a higher calibre of staff, another
possibility is to incentivise a suitable partner for their skills contribution, even if the
especially for small medium enterprise (SMEs) in order for their business to
is always hard for SMEs due to their size and lack of emphasis on staff
management. A lot of SMEs prefer to ignore rather than to solve the talent
retention problems. Wu[6] also revealed that most SMEs believed that Human
they did not like to invest and spend more on it. According to Kinear and
High Turnover Rate: Turnover is another pressure contributing the barrier for
SMEs growth. The smaller the firm the more of a continuity problem it faces
employees turnover rate still remain at the critical level as reported by most of
the researches and surveys. The turnover rate of Generation Y is the highest
group among the workforce and it shows that the loyalty of young generation
(Gen Ys) to the organization is low. Today, job hopping becomes a norm
among Gen Ys which they are mobile and capable of grabbing better position
and benefits. The new generation is hard to express their loyalty to only one
Meanwhile, employee turnover will incur high direct and indirect costs to the
organization. For instance, the direct costs includes costs expenses and time
to recruit or interview the new employees, premium salary offered to attract the
new candidates and training cost for new employees. The indirect cost which
which the knowledge and experiences have flown out the organization. When
talents are leaving, low productivity and performance to the organization will
that, Kotze and Roodt explained that losing good employees will impact the
company morale such that employees who remain will feel de-motivated and
their job satisfaction will decrease. If this condition continues, they will be
distracted and some of them may tend to follow their colleagues to leave for
greatly impacts the business operation whereby it does not only diminished
goals. For the low operation costs industry such as SMEs will be affected
Retention of Gen Ys: Another new critical talent issue alerting the employers
is that many of them are struggling to find effective ways to retain new
generation talent known as Generation Y(Gen Ys) or Millennial who are on the
As the number of Gen Ys are getting larger, the understanding of the unique
generation in the workplace. They are the new generation of workforce and it
will be a new challenge for the employers in terms of new work behavior and
attitudes, and the tactic to retain them. For instance, the motivation factors
Boomers. They are more demanding, have higher expectation and prefer the
Personnel and Development (CIPD) 2007 report, half of the employers are
generation workforce. This is because the Gen Ys want things to be fast and
efficient with modern technology and the growing environment. Besides that,
the Gen Ys generally have higher academic qualification and skill compared to
expects greater flexibility in their career and seeks for balance between
families and work. If these values are not satisfied, they will have the intention
to leave the job. Puybaraud argues that Gen Ys are highly ambitious and aim
for high achievement. They know how to plan for their future career path and
to understand more about Gen Ys who will be leading and changing the
afford to offer to the potential candidates especially to the Gen Ys. While on
the other side, the Gen Ys perceive compensation as the most important
driving forces and motivation for them to enter and stay in the organization. It
has also become a new challege for corporate managers who must compete
with these global talented young professionals since the growing numbers of
entry of Gen Ys into the labour market are raising. These new fresher is
Besides that, if their needs are not fulfilled, they will just look elsewhere for
other jobs. Gen Ys are known to be the most demanding group ever, where
salary and benefits being one of the cause why their job satisfaction and
motivation is low. They have the intention to leave the organization easily
when they did not receive any promotion and increment. Unfortunately,
addition, the younger workers tend to have more flextime schedules and
balance their time between work, friends and family. The work life balance
opportunities around the world. Hence, this will generate a higher employee
turnover rate.
Conclusion
To summarize, SMEs are required to narrow down on hte right resource after
deal with different dynamics when contributing to SME growth plan. While the
organization plans to follow a successful trajectory, there is a need for both HR and
SMEs must understand the difference between the traditional and the
conventional approach of Talent Attraction to execute the much required change for
effective hiring. SMEs largely require focusing on recruiting individuals with the
appropriate skills using suitable evaluation procedures that verify the candidates
expertise.
References
1. Nurulhasanah Abdul Rahman, Zulnaidi Yaacob and Rafisah Mat Radzi (2016).
2. Khoo Cheok Sin The Success Stories of Malaysian SMEs in Promoting and
5. Siti Sarah bt. Omar, Lawrence Arokiasamy Maimunah Ismail The Background
Development Perspective
7. Hamid Khan, Dr. Shadiullah Khan, Dr Naveed Saif, Muhammad Saqib Khan &
11. Patrick M. Wright, Gary C. McMahan (2011). Exploring human capital: putting
15. Tahira Nazir, Syed Fida Hussain Shah and Khalid Zaman (2012). Literature