Chief executives' strategies for job categorization, assignment and resource allocation in small scale family owned businesses

Abstract

The small scale sector occupies an important place in the country's economy (Hussain, 1997). It is true for both developing and developed countries. Their role becomes more crucial in developing economies like ours. They not only provide employment to mostly unskilled or semi-skilled labor force in any economy but also make a substantial contribution to a nation's economic development. However there is still a paucity of studies on how small businesses are run, what makes them successful and what problems they face. Also there is no documentation of how small businesses manage their human resources. It is important to know about such practices to be able to change them for accelerated growth of small scale businesses. This study has taken cues from a Chinese model developed by Chang. The model tried to explain strategies of Chinese CEOs in employee categorization, resource allocation and job assignment. Hence it was felt that it would be interesting to study how dependent are small scale businesses in India and Nepal on relatives. Was the CEO taking special care of her/his employees to be able to retain and motivate them to work harder? How jobs and resources of the business are allocated among the employees. Though Chang proposes a causal model where he claims that small businesses in China are doing well because CEOs leverage their relations with employees to get the best out of them, this study does not make a causal prediction. It does not study causal relationship between success of business and allocation of jobs and resources on the basis of relation to the employees. Rather this study simply looks at how do small businesses hire, how do they allocate jobs to employees, what are their most productive employees like, and whether relationship to the employee is given more importance than other factors while allocating resources. The study was conducted among CEOs of small scale family owned businesses in Ahmedabad, Surat and Bhubaneswar in India and Pokhara in Nepal. Total of 57 respondents from India and 27 from Nepal were interviewed. The interviews were conducted through structured questionnaire. The findings of this study conducted in India and Nepal shows that CEOs of both countries put great emphasis on competence of employees for these purposes. Loyalty to the organization and to the CEO as well as relationship with her/him also plays some role. CEOs in India and Nepal value competence of employees, loyalty to them and the organization and relationship of employees with them in the order of priority while selecting employees, allocating job and resources to them, providing career and growth opportunities. However, the hiring (selection) of employees is done through recommendations of either friends or the family or both. This indicates that the person has to have some credentials in the eyes of the CEO before getting a job. In this case, the credential comes from the recommendation. Further when CEOs were asked to name their most trusted employees quite a good number mentioned names of those employees who were also their relatives. It may be possible that these people were considered productive because of their relation with the CEO. However this requires further investigation. Also large number of CEOs submits that they offer finance related jobs to their most trusted an employee which generally means a relative or a person known to her/him. This also indicates that relatives or loyal employees get the most crucial job in the small business. Similarly, the finding that nonperforming relative gets more opportunity than non-performing non-relative to improve. Where as the same is not true for non-relatives in large number of cases. This also indicates that relation of CEOs with the employee has some importance. Some other findings such as helping in family responsibilities, providing transportation facilities in emergencies etc. are indication of India and Nepal CEOs providing help in accordance with the collective nature societies where relationship between CEO and employees go beyond the profession. Rewarding majority of trusted and productive employees with money is an indication that since basic wage is very low in these countries extra monetary reward plays an important role. Hence most trusted and loyal employee receives special favor from CEOs in this way. The findings can be interpreted that they are an indication of small scale family owned businesses who either have started to professionalize or they aspire to do so as soon as possible, It also, to a certain extent, contradicts the Chinese assertion that CEOs value relationship and loyalty of employee than competence. It is also to be noted that the Chang model is a theoretical one which does not have an empirical base. Hence, before final conducting about how CEOs value relation, loyalty, and competence further study based on causal relationship is essential.