Optimizing Human Capital in Micro, Small, and Medium Enterprise (MSME) Economy: A Strategic Human Resource Perspective.

Kellen Njeru
Human Resource Manager

A business holds many assets, but some are easier to quantify compared to others. For example, You can easily pull up a balance sheet to determine the value of economic assets, but the balance sheet will not tell you how much your employees are worth. It is also difficult to put a number to intangible values like leadership, yet they significantly impact business performance. Hence, it is crucial for any organization to be aware of such values so that they can better optimize them.

Human capital can be explained as an intangible asset stemming from a person’s talent and experience. Human capital isn’t an official asset you can quantify on a balance sheet. But it’s still considered an economic value for a company. That’s because human capital empowers a company to service its clients, create its products, and innovate for new offers. ( Better Up, 2021). Hiring more people is an obvious way of increasing human capital, but that does not necessarily guarantee increased profitability and productivity. Human capital is not static, and there are some things an MSME can do to optimize its  existing workforce, which are;

ITaking care of the employee’s personal growth

This begins at the point of hiring, where you not only hire for skills and experience but also ensure that there is a match between organizational and personal values. This provides a common ground within which both the employee and the employer can focus on growth for both of them, leading to a win-win situation for both parties. As a business, it is always important to think of everyone as a talent and focus on employees’ ability to progress, considering their long-term options instead of focusing only on top performers. Keep the employees motivated by regularly offering them new challenges and supporting them through the process. At the point of achieving the desired result, the employee will have grown in skills and expertise in the role, thus leading to personal growth.

An MSME can optimize its human capital by having a clear succession plan in place too. The senior leaders train, mentor, and coach the next in line, which leads to the transfer of skills and growth in skills for the junior employees. When the next-in-line employee is promoted, it leads to growth in their career, leading to effective optimization of employees and saving the business recruitment cost on replacement of the senior employee.

Another way to ensure personal growth in MSMEs which in many cases have a very lean organization structure is by increasing the scope of an employee role because there maybe limited growth opportunities vertically e.g., a business may have a great salesperson. But there is only one head of the sales department (sales manager) opportunity in the organization; in such a case, the business can consider increasing the scope of the salesperson; thus, they become a key accounts salesperson. That way, he will still have grown within  lean MSMEs and be well optimized.

II. Training and Development

Many MSMEs have outsourced the human resource function to mainly do HR execution roles such as processing of payroll, recruitment, and disciplinary management, yet human capital management is much more than these execution roles. In many cases, employees are promoted to leadership positions due to how well they perform in a particular role without much consideration of their people management skills, which is a key to optimizing human capital. Training on leadership and courses such as Human Resources for Non-human Resource Managers are quite helpful to line managers, supervisors, and team leaders in motivating employees, understanding their challenges, increasing employee retention, and hiring the right people with the right skills, thus helping in the optimization of employees in the department.

IIICreating an entrepreneurial and innovative culture in the business

Culture eats strategy for breakfast is a famous quote by Peter Drucker; in the current times, culture should be part of your business strategy to help the business succeed. Entrepreneurial culture entails an employee having a strong sense of ownership of their work and a can-do attitude that goes over and beyond while doing their job, leading them to being able to adapt real quickly to new opportunities and being a driving force of innovation. MSMEs should promote innovation by taking advantage of employees’ unique talents and finding ways to use them in their jobs. For example, If an accountant is good at making videos, they can make videos about the company that can be used for marketing and brand amplification. This will make the employees more fulfilled and engaged even as the business fully optimizes them.

IV. Invest in the right technology.

Implementing the right human resource technology will help build automated processes that will promote efficiency. Through technology, MSMEs can keep HR information in an integrated database that can be able to track not just costs but also characteristics of successful, long-term employees, identify a misallocation of scarce resources, or reveal human capital trends that signal problems. Through technology, smaller firms can have workforce analytics readily available when needed, making planning easier and leading to more data-informed decisions. In implementing human resource technology, the first step is to identify the problem that can be solved with a technological solution. That will help a business narrow the options to find the right technology to meet its needs to optimize its human capital.

VLeadership learning to connect with each employee.

MSMEs typically have smaller workforce numbers, which the leadership can take advantage of to have a personalized approach to the day-to-day management of employees, taking into account employees’ personalities and preferences while communicating with them. Managers can also learn how employees are wired to cater to their needs. For example, some employees may require frequent check-in and a more personal relationship than others. Leadership development and employee engagement, said Skidmore, are “ongoing processes designed to be strategic, sustainable and measurable,” and there is no one-size-fits-all solution for managers. Initiatives and programs can be evaluated to provide personalized and effective results for workers, Skidmore added. (Business Daily,2023).

In conclusion, there is a need for MSMEs to optimize human capital as people are the only source of long-term competitive advantage. Companies that fail to invest and optimize their employees jeopardize their success and even survival in the long run. Optimizing human capital does not necessarily mean increasing the headcount. Sometimes, it means making the best of the team already in place