India's renown for abundant, cheap (and often exploitable) labour has been a bedrock exploited by colonial powers, local entrepreneurs, and MNCs alike.
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This persists, even today, notably in the mid-market sector, with its steadfast reliance on economic labour. Indian employers, especially in this segment, have never been known to be employee-centric, to say the least.
The employment landscape and even the world of work have changed over the decades and now even more with proposed changes to labour laws, GST and demonization. But sadly, the employer mindset hasn't changed much if Indian employers had their way, many of them would prefer operating the same way and keeping the formalisation agenda in abeyance.
Formalization heightens employer accountability to the government and employees. Governments recognize labour formalization benefits, seen in initiatives like Jan Dhan for inclusive finance, PF and ESI for social security, and JAM drives for the digital economy. This aids both government and global business goals by increasing employee income, spurring domestic spending, boosting the local economy, and addressing unemployment concerns, ultimately enhancing India's GDP.
Yet, amidst all this, a pressing truth hides beneath: India's competitiveness falls short due to inadequate labour productivity. This, along with limited mechanization, automation, and heavy reliance on cheap labour, has led to dismal productivity levels.
Formalization and labour reforms deliver social inclusion and enhance labour well-being but don't solve the problem of labour productivity.
The nation neglected to build a skilled, efficient workforce. SMBs and MSMEs prioritized low-cost labour over productivity. Indian mid-market firms suffered due to reluctance, greed, and ignorance, missing benefits of a modern, employee-focused approach. Shifting the mindset to value people over infrastructure is crucial. Government backs skilling with initiatives like the National Skill Development Mission to address productivity and competitiveness.
However, a pivotal question remains: are Indian MSMEs and SMBs poised to adeptly harness market opportunities? What do they need to do?
Companies must break the mould and invest in people by formalizing HR functions, instating processes, hiring HR expertise, and adopting HR Tech.
Elevating people's development is key to heightened competitiveness. Performance and productivity must thrive for true profitability. Despite generational diversity in middle market firms, a common aspiration arises, bridging gaps, especially in non-metro regions, through Gen Z's social media impact.
Millennials and Gen Z prompt change, emphasizing a people-centric HR approach, creating an HR Universe in firms.
India also faces a pressing issue: the gap between education and industry needs.
In this context, investing in people and HR technology has emerged as a strategic imperative to build resilient, scalable, and profitable businesses. Employers now need to change, act affirmatively and have an enabling mindset.
Adoption of Digital HR
Gone are the days of conventional HR practices. The digital revolution has reshaped the HR landscape, rendering advanced HR technology an integral operation facet. SMBs and MSMEs must recognize this evolving landscape – ignoring this transformation is no longer an option, especially in the realm of HR. No enterprise is too small to engage with HR digitization. From workforce planning and recruitment to performance management, employee engagement, and company culture, digital HR spans a broad spectrum, and companies need to not only embrace HR but go digital.
Need for HR tech as A Safeguard for Efficiency and Compliance
Amidst a limited understanding of compliance, small and medium businesses face escalating burdens with increased formalization, as per research by HiBob and CIPD. Neglecting these matters is no option. HR technology stands as a bulwark against human errors, ensuring streamlined operations and adherence to compliance regulations – saving time and legalities.
Navigating Uncertain Economic Times
As the global economy faces uncertainty, businesses are re-evaluating their spending priorities. The looming prospect of a recession and rising inflation has prompted companies to streamline their operations and invest judiciously. Here, HR technology emerges as a critical investment. It offers the potential to optimize processes, enhance productivity, and drive cost savings, all of which contribute to bolstering the bottom line.
Proactive allocation of Budget for HR
Investing in HR yields potent business outcomes, contingent on aligning people and tech investments with clear organizational objectives. This mandates formalized goals encompassing mission, vision, and annual operating plans (AOP) buttressed by a structured performance management system. A crucial tool is an HRMS, facilitating performance tracking and skill gap identification. This breeds a performance culture, fosters objectivity, and drives comprehensive organizational enhancement.
Appreciate the role of HR in growing business
Small and medium business owners must awaken to the undeniable truth: people are the pivotal asset, warranting investments in technologies and models that serve and leverage this resource. The surge of Generative AI and the impending transformation of human talent intensifies the urgency for HRTech investments to retrain or realign resources.
Moreover, HR technology unlocks value, reduces costs and boosts operational efficiencies. Owners can now construct an empowered HR ecosystem driven by human-centric tech solutions.
The outcome? Enhanced employee experience, retention, collaboration, performance and, more importantly, profitability.
This demands a seismic shift: from mere employers to enablers of excellence.
AUTHOR – JUBIN MISHRA
The author, Jubin Mishra, holds an extensive understanding of the Human Resources requirements of India's small, medium and family-owned businesses. His strategies and insights are helping middle-market companies transform through workforce modernization. As a partner at Blue Helion, Jubin acts as an advisor, mentor, and member of the CXO and Founder's core teams. Here, he leverages his extensive experience to steer companies toward their visions, improve employee performance, augment market share, unlock value, and attain competitive differentiation.
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