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Chat Transcript

Jayant Tewari

CEO & Financial Technologist , Out-Sourced CFO & Business Advisory Services

HR practices & structures that work for startups & SMEs


Questions Answered


guest: Hi Sumit here. Why do you think Startups and SMEs are neglecting HR practices and Recruitment

Jayant Tewari: By Definition start-ups and SME`s actually have rather marginal HR Requirements - entry level recruitment is rarely a challenge. Mid / Senior Management consists largely of the Promoter Team itself, as such there is limited applicability of conventional &/or Corporate HR Practices What many consider "neglecting" is actually the irrelevance of such Practices to the SME / Start-Up phase of business.

guest: As the topic suggests what HR practices & structures should one follow to keep their small businesses running. Thanx Pooja

Jayant Tewari: An answer to a question re-stating the topic would not be a Q&A, but a one-way seminar .... which is certainly not the objective here ... That said, there are only two levels in the Start-Up / SME space, as distinct from the 5 to 15 levels in Corporate structures. In the SME space there are Promoters & Management as one level and rank and file as the other. As such, practices need to be developed which are consistent within the respective levels rather than across levels.

guest: How can India SMEs or Startups penetrate new markets

Jayant Tewari: This is a Market & Marketing related question, which is hardly relevant here ... Unless we`re talking about HR challenges vis-a-vis entering a new International Market ... which is a very different ball game for Start-Ups and SME`s.

guest: How do sweat equities work in startups

Jayant Tewari: This is a vast area on which I actually expect substantial interaction in this chat ... There are 2 elements to Sweat Equity: 1. The Promise / Commitment 2. The Implementation of the Promise / Commitment The first is apparently easy while the second is extremely challenging on multiple fronts ...

guest: What are the key challenges of HR in SMEs and Startups. Regards Parabh

Jayant Tewari: There are a few major Challenges: 1. Compensation Structuring - which is and must be vastly different for Promoters / Management and Other Employees (which are largely entry level). 2. Policy administration eg Travel Policy - especially vis-a-vis Promoters / Management where they`re involved in its development but rarely are willing to follow their own defined processes. 3. Management / Mid Level Recruitment - where its more of the Company selling itself rather than evaluating the candidate - this often becomes the Promoter`s responsibility with very little assistance from the HR Function. 4. Compensation to Management within the cash flow constraints of the SME ...

guest: Please share your views on ESOPs for startup businesses? Do you think it\`s a good option? Well I’m thinking to implement it

Jayant Tewari: ESOPs are a great option especially for Management positions or pseudo co-promoters - unfotunately the challenge is in their implementation. Its relatively easy to Promise ESOP`s but the documentation and implementation requires serious answers from the Promoters to very hard questions.

guest: What will be your advice to small business owners when it comes to practicing and implementing the right HR policies.

Jayant Tewari: There is substantial thought required at the Policy development stage .... a Corporate HR Policy would actually have 25 areas covered, most of which are irrelevant to Small Business. Thus it can`t be used as a template. We need to address only the issues which are relevant to the scale of operations and manpower at hand. Further, we need to realise that given a 2 level (Management / Others) operation, the Policies and Practices will differ substantially across the levels. Any attempt to build policies which apply uniformly across them (which is the Corporate dictum) is a recipe for disaster.

guest: Like SMEs do you think startups like us will also get a chance to list their shares on stock exchanges

Jayant Tewari: Listing has always been a "Theoretical" possibility for start-ups .... even now, there is no statutory requirement which prevents a start-up doing a Public Issue and Listing its shares ... the Cost of conducting the issue and actually getting subscription for the shares is the challenge .... "Listing" is not a way to raise money when the economic model of the business itself has not been validated.

guest: As an industry expert what is your views on government\`s decision of demonitization and its impact on MSMEs & SMEs

Jayant Tewari: I`m all for demonetisation as I see it as a leveller of opportunity between the have`s and the have-nots ... That said, there will be a substantial impact on Angel Investments, as many Angels will now face a personal cash crunch ... Overall, I`d expect the economy to take a quarter or two to recover, but I`m very optimistic in the medium term.

guest: what are your expectations from the upcoming budget with reference to policy making for SMBs

Jayant Tewari: At the Policy level, there`s already a lot which has been done .... the problem is the implementation level ... The number of schemes which exist and the theoretical assistance available is fantastic as it stands. Unfortunately, the processes are still extremely bureaucratic and time consuming .... Personally, I`ve seen very few start-ups who have managed to find their way through the processes and actually manage to encash the assistance available at the Policy level.
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