A Study of Formalisation of Human Resource Management practices in MSMEs in Gujarat

Abstract

newlineThe focus of this study was to investigate the presence of formalisation of human resource newlinemanagement practices (HRMP) in the Micro, Small and Medium Enterprises (MSME) in the newlinestate of Gujarat, India, and consequently the effect of formalisation on organisational newlineperformance. MSMEs contribute 80% of global economic growth and are highest newlineemployment generators. To keep the cost low, they follow unique human resource newlinemanagement (HRM) practices. Despite these importance and scope of MSMEs, very few newlinestudies have focussed on studying HR Practices and extent of formalisation of HRM in these newlineunits. newlineThe assumption behind this study was that formalised HRMP helps in getting better newlineorganisational performance (Nguyen and Bryant, 2004). The aim was to study the current newlineHRMP among MSMEs in the state of Gujarat .The effect of formalised HRMP on annual newlinesales was studied separately among MSMEs. The study was conducted on 223 MSMEs newlineacross 17 districts in Gujarat. Along-with that, other relevant factor like demographic newlinevariations and contextual factors was also studied to understand their effect on formalisation newlineof HRMP. Among the three contextual variables studied; namely firm size, labour agreement newlineand large firm association, it was found that formalisation of HRM is dependent on newlineorganisation size and large firm association, but no relation was found between formalisation newlineand labour union. newlineIt is argued that precarious employment, recruitment through labour contractor and keeping newlinemore workers as contract worker to avoid legal scrutiny is the cause for this. Also, the culture newlinebased control system prevalent in small and medium firms in high context nations like India newlinecreates an environment for non formalized HRM practices. This has its own advantages and newlinedisadvantages. Since there are social control systems, the discipline process is positive and newlinemaintained within the firm, however, the role of government, legal and judiciary mechanism newlineloses its relevance. newlineFinally, results of this study will provide information about