Why MSME is not MNC Yet (Part-1)

Usually, we focus on growing a business and then hiring the needful resources. But things work around – first we need to hire the resources to grow the business.

So the core reason why MSMEs aren’t MNCs yet is they lack behind in recruiting the resource. Mainly, HR.

While all the possible reasons behind why MSMEs are not hiring HR stand true, there are reasons why MSMEs need to reconsider their decisions. Or they need to hire someone to make the right decisions.

That’s exactly what this article brings to you:

Why MSMEs Don’t Hire HR?

It is a common belief that HR is not needed for small and medium enterprises. This is because they believe that there are no employees to hire, or they think HR is an extra cost to the company and does not add value.

However, it is essential to note that HR can help these businesses in different ways. They can provide assistance with recruitment, training, and development of employees, payroll management, compliance with regulatory requirements, building company culture for growth and most important role is act as a bridge between employees and MSME’s business owners.

MSMEs don’t have enough budget

MSMEs don’t have enough budget to invest in a lot of things, so they need to be wise with their investments. These companies are usually start-ups or ones with minimal employees.

Although MSMEs are the backbone of India’s economy, Working capital for small and medium enterprises (SMEs) is usually small in size as compared to large multinational corporations (MNCs). This is because SMEs have a tight cash flow to manage, which means that they can’t spend huge amounts on HR and marketing. So the budget for HR is either cut down or kept minimal.


The reason why MSMEs think they can do it all alone is that they are not aware of the benefits of hiring an HR professional. They believe that hiring someone from outside will cost them more money, but in reality, it will help them grow their business faster.

Small and Medium Enterprises (SMEs) often think that they can do it all themselves or hire their friends and relatives. The truth is that hiring an HR professional is always the best decision for SMEs because an HR professional will help grow the business faster than if they were to work alone or with relatives.

MSMEs believe they don’t require HR

MSMEs think they don’t require HR. But the truth is, besides the obvious administrative tasks, the HR department can do a lot more for the company.

They make sure that your business is complying with all laws and regulations. They make sure that you have access to a good talent pool by sourcing and recruiting potential employees. They help create a culture of trust and growth.

MSMEs plan to recruit an HR when their business is grown

The growing MSMEs think they will be able to recruit human resources when their business is grown. The main obstacle in this regard is to find good resources from within the company or outside which HR can only help.

MSMEs that do not have HR think that HR will be recruited when the business grows. But it is not in line with trends. We are now facing a shortage of HR and thus MSMEs should consider outsourcing HR before their business is grown.

MSMEs don’ t have Clarity for HR responsibilities

Many SMEs are not able to afford a full-time HR professional. This leads to the lack of clarity of HR responsibilities and thus, the absence of a strategic approach to human resources management.

The absence of clarity about HR responsibilities is a major challenge for small businesses. The lack of an HR strategy can lead to inefficiency and low employee engagement.

Do MSMEs Really Require HR?

HR is a fundamental part of any organization. It is the backbone that keeps an organization running smoothly and helps it grow.

However, for small- and medium-sized enterprises (MSMEs), the human resource requirements are different from those of large organizations. For MSMEs, the focus should be on hiring people who can make a difference in the company’s growth and profitability, rather than hiring people just because they are available. A good HR professional can create this impact.

HR helps MSMEs by creating a positive culture and aligning the vision of MSME business owners with each and every employee.

Business requires dedicated HR personnel to handle your employees

A business needs to have a dedicated HR team for all employees. The HR team is responsible for hiring and training employees. They also handle any complaints from the employees and ensure they are not violating company policies.

HR is someone who can convey your message to the team and get it done by them. HR departments are also responsible for recruiting new talent and making sure that they are able to keep pace with the industry standards of hiring.

Delegating the workload enhances your productivity

MSME’s business owner can delegate HR and support workload and create more free time for productive work, i.e. meeting clients, exploring new business opportunities, raising funds, and investing in the growth of the company.

You need to follow up with only one person rather than an entire team

When you have a dedicated HR person to look after your team, you have to deal with only one person than a whole team.

The benefit of having HR is, that your employees will be managed and supported by one professional person. So you can manage your clientele. And you can focus on networking and increasing the business. It will help you to create more productive communication with your employees and clients.

All your management tasks are cut off

Your people management is literally cut off by 80%. All your decision-making is exercised by your own team. You can reduce this by hiring an HR professional who knows how to manage your team to bring the best out of them.

You can utilize your potential in managing your portfolio, building relations, and collaborating with other businesses, thus creating a roadmap for taking your business from MSME to MNC.

How MSMEs Can Hi re HR Solutions In Efficient Manner

Now that we have come to the conclusion that MSMEs do require an HR, let’s discuss their problem statements as well. The core reason small businesses don’t hire HR is the budgeting issue and not being able to connect the right HR partner.

So, here are some feasible ways to try out

  • You can hire a freelance HR
  • You can hire an HR with a fixed basic salary and add on the incentives
  • You can hire an HR solution company (executive 81 HR Solutions)

Bottom Line

The culture of professional HR isn’t that old. The roots of professional HR solutions date back to somewhere around 2-3 decades ago. However, the practice of HR responsibilities is historic enough. From manually managing the employees to putting the employee relationship on automation now; HRs have always been part of a company’s success. However, companies never really realized that they need professional HR personnel. Until the IT companies which turned into huge successes were found practicing a standard business protocol. So, in a nutshell, for MSMEs to become MNCs – MSMEs should follow a protocol that MNCs are following. Like, hiring a professional HR solution for your company’s unstoppable and smooth growth.

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