Small business enterprises are located around the world, and these businesses also have to perform all management functions. Though HR is an indispensable function in these business enterprises, it continues to occupy a backseat among all other management functions such as finance, marketing, procurement, technology, etc. The focus is on firefighting activities to maximize revenue, save costs, ensure better financial management, etc. Since the HR expertise within an organization plays an important role in deciding its successes and failures, it is important to pay attention to how well the HR systems have been designed.

Small businesses are the fastest growing segment of an economy. The Indian economy includes a very large number of small enterprises, and the government of the day has instituted a number of protectionist measures. Even in the US economy, small businesses play an important role and accounted for half of the nation’s private Gross Domestic Product (GDP) and 75% of all new jobs in 1995 (Small Business Administration, 1996). The Small Business Administration of the US defines small businesses as having fewer than 500 employees, and in fact, a large percentage of those businesses have fewer than 100 employees. The Micro, Small and Medium Enterprises Development Act, 2006 has defined small-scale enterprises as those enterprises in which the investments in plant and machineries are more than 25 lakh and less than 5 cr. For the purpose of this paper, we are considering all organizations or business enterprises with investments ranging between 1 cr and 5 cr and the number of employees between 50- 100. Enterprises with investment below 1 cr and less than 50 employees are not included within the scope of this paper, as investment in HR by these enterprises may not be considered as an important function and laying emphasis on the same may prove expensive. As HR does not contribute directly to the enterprise’s profitability and productivity, it is regarded as less important even by many medium and large-scale organizations.

Small business organizations only grow big. Even the most successful large organizations such as Escorts, NIIT and MRF started as small ones. But it has also been observed that despite the best of the governmental support, there has been a high incidence of sickness and failure of many small enterprises. The significant presence, combined with high failure rates, of small business organizations creates a need for increased support to these enterprises to help them become more professionally managed. A lot of attention has been given to these small businesses in recent years as a lot of investment of the government has gone into them.

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