An Analysis of the Human Resource Prac5ces in the SME Sector of Pakistan: Case Study of Bahawalpur Region

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1 An Analysis of the Human Resource Prac5ces in the SME Sector of Pakistan: Case Study of Bahawalpur Region Presenter Mustabsar Awais Ins$tute of Banking & Finance, Bahauddin Zakariya University, Multan Co-Author(s) Ahmad Timsal Ins$tute of Banking & Finance, Bahauddin Zakariya University, Multan Sundas Ahmad Qazi MS Scholar, The Islamia University, Bahawalpur

2 SME Sector in Pakistan SMEDA in its 2007 policy defines Small & Medium Enterprises as having up to 250 employees while the assets of small enterprise value at Rs. 20 million and that of medium size enterprise are worth Rs. 100 million. SMEs are spread all over Pakistan with a significant concentra5on in Punjab (65.4%). The number of SMEs in Pakistan is es5mated to be 3.2 million SME sector s contribu5on to the na5onal gross domes5c product (GDP) being 40%. All sta5s5cs are for the year (SMEDA)

3 Regional Profile: Bahawalpur District Bahawalpur, one of the largest districts of Punjab spreads over an area of 24,830 square km. It is the 13 most populated area of Pakistan. The region is experiencing urbaniza5on and a decrease in rural construct. Bahawalpur district is essen$ally agrarian. Agriculture is main source of earning for almost en$re 78% rural popula$on directly or indirectly. It is well known cokon and wheat growing area and produces 14% of cokon and 4% of wheat of the total Punjab s produc$on.

4 Regional Profile: Bahawalpur District According to Bureau of Sta$s$cs Punjab (2015), there are a total of 357 factories in Bahawalpur, out of which 345 employ less than 100 persons. 35% increase in SMEs since 2009 The major industrial ac$vi$es are co^on ginning (66%), rice and flour milling (11%), tex5le, oil and ghee manufacturing, cold storage (6%), and soap making.

5 Research Focus Established Fact: Development of the SME sector will lead to employment genera$on and increase na$onal income. Research shows that Human Resource Management (HRM) is one of the most prominent contributors for effec$ve func$oning of SMEs. However, a common misconcep$on is that HRM does not have any role to play in the ini3al stages of organiza3onal development and that only large scale firms require proper HR departments?

6 Human Resource Management Management of People in the Organiza5on The HRM team present in an organiza$on is responsible for recrui3ng people into that respec$ve organiza$on, training and helping them in performing their work, providing appropriate compensa3on for the work done and solve issues which arise within the organiza$on for the employees (Cherrington, 1995;Simon, 2007). The success of any organiza5on depends on adop5ng appropriate HRM systems into its business' opera5onal strategies as humans are the driving force in any organiza5on HRM has to be a con5nuous process when prac5ced in an organiza5on.

7 Research Objec5ves The Research Objec$ves for this study are: i. to explore the current HR prac$ces, policies and procedures in the SMEs working in the Bahawalpur ii. Region to understand the factors (if any) which impediment the trend of developing HR systems within the SMEs iii. to suggest/recommend the HR prac$ces and policies which can foster growth within the SMEs in Pakistan

8 Human Resource Management and SMEs Small firms, constrained by resources, find it difficult to operate with a separate HR department. It is difficult for them to recruit and train their resources freely. Therefore, they rely on administra3ve prac3ces to manage their employee base. The western literature suggests that in United States and Europe, personnel management and worker protec3on are the cited as the primary sources of success for a business organiza$on.

9 Human Resource Management and SMEs (in Asian Context) In Asian markets, the concepts of HRM are rela$vely new in these markets and are being implemented jointly with the tradi$onal management systems In China, HRM in SMEs are being nourished to enable the strong labor markets and it is gradually being realized in the country that poor HR prac5ces are leading towards the high turnover rates, par5cularly in the SME sector. Japanese economic success is a^ributed to SME sector and management of its human resources. Their focus has been on developing a?tudes of younger workforce and coping with the loss of trust on tradi3onal systems.

10 Proposed Conceptual Framework Firm Size Type of Business Firm Age Employee Qualifica5ons Characteris5cs of SMEs Recruitment & Selec5on Orienta5on / Socializa5on Training & Development Compensa5on & Rewards Performance Appraisal Systems HRM Prac5ces

11 Research Methodology Approach Target Popula5on Sample Size Research Instrument Data Analysis Techniques Focus on SMEs located in Bahawalpur Region All employees of 09 SMEs located in the City area of Bahawalpur (N ~ 850) Calculated as 90, selected using Stra5fied Random Sampling Ques$onnaire developed by the researchers, 24 items, likert scale (1 to 5) Percentage Analysis and One-Way ANOVA to find out the HR prac$ces being used in SMEs of Bahawalpur.

12 People 22% Years 16% Firm Size of Par5cipa5ng SMEs People 31% People 47% Age of the SMEs Years 15% Years 69% Public limited 15% Results Reliability Analysis Cronbach's Alpha Based on Standardized Items is Legal Structure of Business Private limited 39% Partnership 8% Sole proprietors hip 38%

13 Major Findings The company having age of and employee size of are more involved in Performance Appraisal prac3ces as compared to other categories of SMEs The SMEs having less than 100 employees and Sole Proprietorship are more focused on having proper Recruitment drives, while companies with employees and are public limited or private limited are working on employee Training and Development and Orienta3on ac3vi3es. The same category of firms also focus on comprehensive compensaeon policies. Majority of the SMEs have employed undergraduate and graduate staff. Almost all categories of SMEs lack trained and qualified staff

14 Conclusions Although SMEs in Bahawalpur region have adopted basic level of HR prac$ces, yet these are insufficient for developing a strong worker base and gaining any compe$$ve edge. The results show that some SMEs (based upon age, size and legal structure) are beker than their compe$tors in the region, however, when compared with interna$onal standards, there is a Huge Gap. As suggested by SMEDA Enabling environment should be built by changing the policy and regulatory framework while reducing the overall cost of doing business in Pakistan

15 Conclusions There is great need for the improvement in the HRM systems being used within the public and private SMEs with the purpose of contribu5ng posi5vely to the economic scenario. In Pakistan where these SMEs are contribu$ng significantly to the GDP, proper HRM prac$ces should be introduced to enhance the performance of the employees and to make them add more value to the success of the firm, if we wish to compete in the interna$onal arena.

16 Recommenda5ons As per SMEDA s Annual Report ( ), it conducted 205 training programs with 6637 par5cipants (43 in Punjab) to enable SMEs to contribute posi5vely towards economic growth. Increased awareness about such training programs and associated costs is necessary, as the SMEs in Bahawalpur region have the financial capacity to conduct such trainings on regular basis and enhance the skills of their workforce.