Small is Beautiful: What Does HR Really Do — And Why It’s More Important than Ever today - Part I

According to a May ’25 SIDBI Report titled “Understanding Indian MSME Sector…”, there are an estimated 7.34 Cr MSMEs (ASUSE 23-241 is recognised as:                                                                                                              

1. One of the four primary engines of economic growth                     
2. A key pillar of “Make in India”                                      
3. A critical contributor to the goal of “Viksit Bharat 2047”.                                                                                                              

The composition of their estimated number reveals that approximately 98.64 % are micro enterprises, 1.24 % are small, and 0.12 % are medium, dotting the urban and rural landscape. More than 50% are proprietorships, 16% are partnerships, 23% private limited, and 1% are public limited.  The 6th Economic Census categorises 34.3 % Enterprises into Agricultural Activities and 65.7% into Non-Agricultural Activities, including manufacturing, trading, & other services.                

Notwithstanding their size, stage, activity, geography and ownership pattern, the enterprises in this sector are united by their critical ecosystem needs, which include:

• Entrepreneurship Promotion
• Access to affordable finance
• Market Linkages: Domestic & Global
• Mentoring / Networking from Industry Experts
• Access to higher business support services, including legal, IPR, quality assessments, and technology.
• Shortage of skilled and trained manpower, low productivity & difficulty in attracting talent                                                  

The Paradox: Skill shortages have been categorised as a “high intensity “challenge, especially by enterprises engaged in manufacturing and services. On the other hand, McKinsey Statistics estimates that 90 million workers will be looking for gainful non-farm work opportunities during the period up to 2030. 19 Central Schemes and 54 State Schemes provide support in the training and skilling ecosystem for bridging the skill gaps in this sector.    

The Missing Link: Given this paradox, why is skill shortage a lingering challenge in the sector? 

My experience of working with promoter-driven small organisations, which may not necessarily qualify to be in the MSME sector, seems to provide the answer. Human Resource as a Function is not part of the Start Up Organisation Structure as some responsibilities are assigned to the “ Executive Assistant “ or to the “ Accounts/ Administration  Executive  “ who double up as the documentation and pay roll expert, a few tasks are outsourced to recruitment & compliance consultants and local automation takes care of routine transactions as leave, attendance etc.                                                                                                                                                  

Another set of Organisations which have crossed over from the start-up stage and are looking at accelerated growth with an employee strength between 50-100,  hire a junior executive to support the Promoter in transactional HR. Organisations hit by financial instability start by shedding employees in the perceived backend functions, which include HR, Training, Administration, Accounts, Legal, and Security, etc. 

Majorly viewed by most as a cost centre, support function, manager of employee life cycle, process creator, recruiter, documenter, discipline keeper, compliance custodian, the human resource function is either completely deprioritised OR missing in action. This may well be the case in most organisations in the MSME Sector as well. Today, this picture is outdated and frankly, a disservice to what Human Resources actually is.  HR is the heartbeat of modern organisations, irrespective of size or stage. It’s the silent architect behind talent, culture, and business growth. 

HR has evolved as a business-critical function, turning business goals into clear talent plans. It reshapes the way we work. It designs systems to scale growth. Its focus is on the real ROI. HR Today is the problem-solving partner. It shows the way “ Here’s How” turns confusion to clarity, bottlenecks to breakthroughs. It gets the momentum back by unblocking teams and fixing broken workflows. HR Today is the Standard Setter. It spots toxicity and acts with alacrity, rewards integrity and impact, builds a culture based on trust and protects high performers from flying out of the organisation. HR today is all of the above and more. It’s not a function but a force.

1. Talent Acquisition - Building the Right Team

Before a business scales, it needs the right people, not just talented individuals, but people who believe in the mission, fit the culture, and drive results. HR starts with recruitment, but the job goes far beyond posting vacancies and scanning resumes.

We are matchmakers between business and capability.

What HR does:

• Manpower Planning:
• Writing Job Descriptions :
• Sourcing Channels.
• Assessment Design
• Candidate Experience:
• Offer Negotiation, Pre-Boarding & On-Boarding Preparations

 Why it matters: The wrong hire costs money. The right hire builds empires.

2. Learning & Growth for Everyone (L&D): Train-Upskill-Repeat

A learning culture can be your best retention strategy. People don’t stay where they feel stagnant.  HR knows what skills you will need next year, not only today. HR drives lifelong learning through :

• Learning Needs Analysis
• Career Frameworks:
• Building Learning Modules
• Partnering Learning Platforms
• Tracking Training ROI

Why it matters: Growth doesn’t happen by chance — it’s intentional.

3. Fair and Transparent Compensation (Compensation & Benefits)

A good salary alone doesn’t retain top performers, but unfair pay will push them out. Fair pay isn’t just a hygiene factor. It’s a trust factor. HR ensures

• Transparent salary bands and performance-based increments.
• Tailored benefits that support employee well-being

What HR does:

• Market Benchmarking
• Salary Bands:
• Incentives & Bonus Plans
• Benefits Program:
•  PF, ESIC, Gratuity, etc.
• C&B Analytics: Monitoring cost-to-company impact and benefit utilisation.

Why it matters: Pay isn't just about money, value, and respect.

4. Performance Management — Driving Results and Accountability

   Performance isn’t about policing — it’s about potential. HR helps teams:

• Set clear expectations aligned with Business Goals
• Give and receive real-time feedback.
• Recognize effort
• Handle underperformance with dignity
• Feedback Culture:
• Appraisals: Mid-Year Check-ins, Year-End Evaluations & 360-Degree Feedback

Why it matters:  Feedback fuels excellence — if delivered right.

Why Is HR Crucial Today?...... Because companies don’t run on code, products, or capital alone. They run on PEOPLE.

And HR?

• Finds them.
• Grows them.
• Protects them.
• Inspires them.
• Aligns them with the mission and metrics.

If you have personal experiences to share that support this prescription or add to it, write to me at [email protected].

By Sunny Sharma, MHROD Class of 2023 | Edited and Researched by Triveni Mehta, Senior Human Resource Consultant