HR Support for SME's

Article Published in ET - Emerging India - 10th December 2007
Refer Gundlapally Ramalinga Reddy (Commonly known as GR)


A VERY PERSONNEL
TOUCH



If you can't afford an HR department for your small
business, help is at hand. A new breed of HR firms
will set up one and run it for you


Vikas Kumar




THESE days, 37-year-old Gundlapally Ramalinga Reddy
is a man on a mission. He has developed a HR services
model, which he hopes will unleash a revolution of
sorts in the world of small businesses. He's got a
fancy name for it—Human Resources Function Outsourcing
(HRFO), and yes, he's even patented it. If you are a
small business owner who can't afford an HR
department, Reddy's firm, Husys, will build it and run
it for you—end-to-end.
Here's how it works. Husys assigns an HR manager
who will always be on location at the client's office,
and works closely with the promoter/CEO on creating
basic HR systems, and then gradually building a
complete HR department offering services such as
organisational objectives design, role definition,
setting internal policies and employee frameworks,
performance management systems, training, and employee
counselling.
Reddy's company is joined by many other Indian HR
services firms that have taken the conventional HR
outsourcing model forward, and applied it to companies
that seem to need it the most—small businesses.
Padma Kiran Rao, 41, who founded Tvarita Consulting
in 2004, sensed this opportunity after a long career
working with large corporates like Deloitte, ilabs and
Cognizant. According to Rao, small companies face a
classic chicken-or-egg situation when it comes to HR.
Since they cannot attract senior HR talent, they have
to settle for less-experienced professionals who are
at best able to provide administrative support. "They
don't have the objectivity and stature to tell a CEO
the right thing," she says. And because of weak HR
practices, these companies in turn find it tough to
attract talent. Ergo, small HR firms, which guide them
on such people management issues, are just what the
doctor ordered.
What makes this new breed of HR services firms
successful is that they understand the needs of small
businesses—from the economics to the approach taken,
the game here is very different. First, keeping costs
down is key. So if the thumb rule is one HR resource
for every 150-180 employees in a large company, Husys
for instance, works on a 1:300 ratio. "With what we
charge for one module from a large organisation, we
manage for a year in a small business," says Reddy.
Billing rates could range from Rs 25-30,000 a month to
50-60,000 a month depending on the size and
requirements of the company.
The operational models also vary in their approach.
Some like Tvarita deploy their senior team to do most
of the strategic work, and less experienced colleagues
to assist them in operations. Arjun Shekhar, 42, who
founded Vyaktitva, a Delhi-based HR consulting firm,
works on a similar philosophy. "We come from a
perspective of not just HR but business," he says.
Agrees Pranav Kapuria, one of Shekhar's clients, who's
also the deputy MD of Delhi-based auto components
manufacturer and exporter Hitech Gears: "Very few
consultants get their hands dirty and try to
understand the cultural issues of an organisation.
Arjun is one of them." Hitech Gears, founded by
Pranav's father Deep Kapuria began as a Hero Honda
ancillary in 1986 and now has 1,200 employees.
Meanwhile, others like Husys hire freshers from
tier-II business schools and train them for 3-4 months
on the sensitivities of dealing with promoter CEOs.
"Our managers sometimes need to educate the CEO too.
So we train them to do not HR but business support
first."
Nonetheless, working with small business owners can
often be frustrating and challenging. Many are
uncomfortable with grading systems being brought and
roles being defined. So it boils down to coaching and
counselling the CEO most of the time. "You are like an
agony aunt for the CEO," says Shekhar. "That's why we
have senior people like myself doing the work, and not
just marketing our services to clients. 70% of our
team comes with more than 17 years of experience
across functions in industry."
At Tvarita, the senior team brings in a pan
industry experience in HR and Finance, and is involved
with most of the key strategic HR work. Gautam Ghosh,
35, an HR professional with career spanning
organisations such as ITC Hotels, Dell and Satyam, had
been running his independent management consulting
business and a popular blog before joining Tvarita
recently as a senior consultant. Ghosh says this role
is unlike any other he's done in the past: "I hadn't
made policy for an organisation until now," he says.
"And that's what makes it more rewarding and
challenging."
But the success or otherwise of an HR change
initiative ultimately depends on the owner/promoter's
readiness for change. And the problems start at the
top, says Rao: "Their organisations have a strong
influence of their personalities, which takes time to
overcome." For Kapuria, who entered the family
business in 2001 after an MBA from Cardiff University
in the UK and a Masters degree in lean manufacturing
from the University of Michigan in the US, installing
best HR practices came naturally. "People disregard
legacy but we understood which parts of our legacy
were positive. That has helped us in preparing for our
next phase of growth," says Kapuria
Finally it's all about delivering measurable
results, as any client will tell you. Pydah
Venkateswara Rao, 66, runs Vasavi Prosoft, a medical
transcription company, out of Hyderabad, Vizag and
Guntur in Andhra Pradesh, and is one of Husys'
clients. Launched in 2000, the company services
clients in the US healthcare industry—chiefly doctors
and clinics—and has 175 people on its rolls. "When we
touched the 70 employees mark, we realised we need
sound HR to go forward," says Rao, adding that the
exercise with Husys has paid off, "Our attrition rate
is 17% against the industry average of 25%, and
accuracy, which is a crucial parameter for our
business, is much better now."
Says Tvarita's Rao, "You can't act as consultants;
you have to operationalise your recommendations—that's
part of the deal. Small business owners are cynical
about consultants who walk away after giving advice."
She adds that a significant part of Tvarita's fees is
structured as a bonus component based on successful
implementation. "We have to connect to the business
ROI in some sense. For these companies, every moment
and every penny counts."
That makes servicing a small business, a less
attractive proposition for small HR firms. Take Husys,
where a bulk of the revenues comes from outsourcing of
HR services by large corporates. A good balance is
therefore necessary, says Reddy: "80% of our time goes
into managing operations for small clients, but only
20% of our revenues come from them. So we have to do a
mix of both large and small companies." This year
Reddy aims to do Rs 70 lakh in turnover, and 1.5 crore
the next. With two new accounts coming up in the UAE
and expansion into other cities like Pune, Mumbai and
Delhi on the cards, he plans to hire another 50 people
next year.
So while small companies are a hot learning ground,
Vyaktitva's Shekhar says it's the assignments for blue
chip companies like Pepsico, Genpact, Daksh and Hero
Honda, Bharti that rake in the big bucks. It's,
however, the fit with small businesses that makes
small HR firms a perfect partner in progress, says
Ghosh, "As small organisations ourselves, we
completely understand their pains and issues."

PEOPLE FIRST

Small businesses often can't afford a full-fledged HR
department. That makes it difficult for them to
attract talent A host of small HR firms are now
addressing this opportunity From keeping costs down to
managing cultural sensitivities, they understand small
businesses well