SMEs as learning organisations: a study on employee emancipation in Central India.

Introduction

Emergent India, spurred by its indomitable spirit of globalisation, has accepted the global challenges as opportunities and the role of medium and small entrepreneurs in accelerating the pace of growth. The focus of the government towards SMEs was never so strong as it is in present. This has led to the creation of new ventures where the entrepreneurs are willing to undertake and enjoy the benefits of the corresponding rewards. The MESMED Act 2006 was a positive initiative to promote the growth of SMEs, which has ensured competitive, sustainable and inclusive growth. Although, the SMEs have been recognized as drivers of economic growth, Indian SMEs are facing stiff competition from their global counterparts. If liberalization has permitted cross border alliances and new opportunities for expansion and growth, it has also ushered in an era of competition where size does not matter but what matters is the organizational environment. Large and small firms operate in co-existence as big players outsource their activities to the SMEs. Hence, vibrancy is the corner stone for success as there is an all-pervasive pressure from the environment in which they operate. SMEs in India are less capital intensive and small in size in terms of manpower requirement and are ideal to build on the strengths on traditional skills and knowledge by the infusion of technology and innovative management practices. Apart from the export oriented SMEs, most of them cater to the outsourced requirement of the large manufacturers. Hence it is exactness at the shop floor and the daily work management that is necessary for building competitiveness.

As the environment is continuously changing, the development of new capabilities is essential for the process of self-review and renewal. Indian SMEs by virtue of their characteristics have a tremendous potential of growth and expansion. Introducing change in such environments is relatively much easier as:

(i) Indian SMEs are rural based, manufacturing traditional products.

(ii) They are flexible due to the lack of a well-defined structure.

(iii) Size is generally small which permits convenience for training & development with respect to change.

(iv) Most SMEs operate with obsolete technologies hence there is a scope for transformation through modernization (The Chartered Accountant, 2005).

Learning is not 'an' adaptation to change alone in accordance with the environment, but also accordance to the mental models in which they operate. Hence, it is the entrepreneurial orientation that determines the performance of the firm (Lumpkins and Dess 2005). The success of SMEs largely depends upon the competitiveness. The Competitiveness of the firm can be evaluated at two levels:

(i) Firm specific characteristics like strategic orientation, level of technology, utilization of networks or information exchange and strategic decision-making (Covin and Selvin 1997).

(ii) Individual characteristics that include both attitudinal and behavioural orientation. It refers to a set of personal and psychological traits like values, attitudes and attributes associated with motivation to induce learning (Lumpkins and Dess, 1991).

To ensure competitiveness in the SMEs there is a need for the development of an organizational culture and climate that facilitate the adoption of change. In order to ensure a smooth adoption of change, it is necessary to diagnose the organization culture which relates to the historical context within which a situation occurs and the impact of this context on the behaviour of employees. Parameters like member identity with the organization, risk tolerance with respect to initiatives, group emphasis, reward criteria for motivating performance, focus on individual decision-making, the level to which conflict can be managed and tolerated, integrations and control mechanisms adopted by the firm. Finally, the openness of the firm to the external environment is a strong determinant of the climate of the firm. The climate of the organization should be such that there is a synergetic effect leading to the growth of the firm at a faster pace. Since the SMEs in India are small in size and the structures not clearly defined, evaluating the competitiveness of the firms on the basis of culture will be inadequate. On the contrary, this very characteristic can help us in identifying features in the climate, which is relatively a more important dimension of competitiveness. A study conducted by Peters and Waterman (1982) indicates that entrepreneurs can enhance the competitiveness of their firms by laying stress on the development of culture and climate conducive for growth. A study has been conducted to evaluate the existing state of the internal environment in small business firms in India. The survey conducted measures the opinion of both the employer and the employee regarding the climate in the organizations. For the purpose the model shown in figure 1 was adopted consisting of Six Parameters for Entrepreneurs and Ten Parameters for Employees.

[FIGURE 1 OMITTED]

Research Methodology

There are six parameters for entrepreneurs in order to test whether all of them have similar impact or there is a significant difference among them so that the important variables may be identified. Factor analysis of variance has been used for this study. On the other hand, there are ten parameters for employees. Moreover, the employees have been categorised in three parts. The significant similarities/ dissimilarities among the parameters and types of employees have to be tested so that the important ones may be identified. Two factor analysis of variance has been selected to be applied for two dimensions, parameters and types of employees. As far as the sampling is concerned, a simple random sampling has been followed in which every third element of infinite population of SMEs has been covered.

Research Plan

Research Design           Descriptive

Research Instrument       Structured Questionnaire

Sampling Design           Simple Random Sampling

Sample Size               Entrepreneurs: 105; Employees: 525.

Sample Element            Entrepreneurs, Employees

Sample Location           Central India

Measurement Instrument    Likert's Scale

The six parameters of the entrepreneurs and ten parameters of the employees have been indexed in Table 1 and Table 2 respectively. The category of the employees has been shown in Table 3, whereas the locations of the samples have been indexed in Table 4. The sampling distribution plans for the entrepreneurs and employees have been shown in Table 5 and Table 6 respectively.

Results and Analysis

The response from the entrepreneurs as well as employees has been tabulated in Table 7 and Table 9 respectively.

Analysis of Variance (Single Factor)

(for testing equality/ inequality of the opinions of entrepreneurs against factors)

[H.sub.0] : The difference of opinion for factors by the entrepreneurs is insignificant

([X.sub.i] = [X.sub.j])

[H.sub.1] : The difference of opinion for factors by the entrepreneurs is significant

([X.sub.i.sup.1] [X.sub.j])

(where i/j = 1,2,3 ...)

It can be seen from the Table 8a and Table 8b that:

Critical Value of [F.sub.(0.05,5,36)] = 2.48 (for testing the equality of response)

Here calculated value = 1.71

Calculated Value < Table Value

[H.sub.0] is accepted.

Hence, The difference of opinion for factors by the entrepreneurs is insignificant ([X.sub.i] = [X.sub.j]).

[FIGURE 2 OMITTED]

Analysis of Variance

(For Testing the Equality of Parameters/ Type of Employees)

[H.sub.0] : The difference among Factors/ type of Employees/ Workers is insignificant

([Y.sub.i] = [Y.sub.j]) and/or ([Z.sub.i] = [Z.sub.j])

[H.sub.1] : The difference among Parameters/ Type of Employees/ Workers is significant

(Y.sub.i.sup.1] [Y.sub.j]) and/or ([Z.sub.i.sup.1] [Z.sub.j])

(where i/j = 1, 2, 3 ...)

It can be seen from the ANOVA results shown in Table 10b:

(a) Critical Value of [F.sub.(0.05,9,18)] = 2.46

(For Testing the Equality of Parameters)

Here calculated value = 4001.05

Calculated Value > Table Value

[H.sub.0] is rejected.

Hence [Y.sub.i.sup.1] [Y.sub.j]

(b) Critical Value of [F.sub.(0.05,2,18)] = 3.55

(For Testing the Equality of Type of Employees)

Here calculated value = 5.87

Calculated Value > Table Value

[H.sub.0] is rejected.

Hence [Zi.sup.1] Zj

It can be analysed that there is no significant difference within the opinion of the entrepreneurs regarding parameters but there is significant difference among those in the view of employees. On the other hand, all the types of employees viz. skilled, semiskilled and unskilled have different opinions regarding parameters. All the parameters have equal weightage in the opinion of entrepreneurs (Refer Table 8b). On the basis of their opinion all the parameters need to be emphasised equally. On the other hand, the parameters have different weightage in the opinion of employees. Besides, different types of employees have different opinions regarding different parameters (Refer Table 10 b). The parameters have been given different weightage by the employees. Moreover, there is a difference of opinion within skilled, semi-skilled and unskilled employees.

Conclusion

In the light of the sample study it can be concluded that (i) Entrepreneurs are cultivating a culture in SMEs directed towards employee involvement and empowerment; (ii) They are willing to introduce flexibility in the system to react to environmental changes; (iii) On the other hand employees working in the SMEs feel that they are not adequately empowered and there is a high degree of inflexibility in the internal environment. But all categories of employees do not have their views converging on common parameters; (iv) Thus, although in the views of entrepreneurs their firms leaning organisations, the employees do not feel so. The size and structure of such organisations can facilitate positive growth through a flexible organisational culture which can help the entrepreneurs convert into learning organisations. But employee involvement through empowerment is a pre-requisite.

Limitations

The study has been conducted in only the seven locations of Central India that may not be true universally. The mental status of the respondents at the time of data collection has not been considered that might have influenced the accuracy of the data. The individual biases like culture, climate, language, tastes, age, status etc. might have influenced the accuracy of the data that may lead to degenerated conclusion.

References

Covin, J. G. and Slevin, D. P. (1997), "A conceptual model of entrepreneurship as firm behaviour", Entrepreneurship Theory and Practice, Vol. 16, pp. 7-25.

Dess, G. G. and Lumpkin, G. T. (1991), "Linking corporate entrepreneurship to strategy, structure, and process: suggested research directions", Entrepreneurship Theory and Practice, Vol. 23 (3), pp. 85-10.

Dess, G. G. and Lumpkin, G.T. (2005), "The role of entrepreneurial orientation in stimulating effective corporate entrepreneurship", Academy of Management Executive, Vol. 19 (1), pp.147-56.

Peters and Waterman (1982), 'Diagnosing Organisational Culture Change', [Available at http://www.rapidbi.com/ created/organisational-culture.html].

SMEs In India: Will They Be Able To Join "Global Chains"? September 2005. The Chartered Accountant.

Sumita Dave (1) and Saket Ranjan Praveer (2)

Shri Shankaracharya Institute of Management and Technology, Jhunwani, Bhilai--490020, C.G., India

(1) E-mail: [e-mail],

(2) E-mail: [e-mail]

Table 1: Entrepreneurs

S. No.   Parameter                                           Index

1        Customer Need Identification
                                                             [X.sub.1]
2        Degree of Employee Involvement in Decision-Making
                                                             [X.sub.2]
3        Principle Values Living in the Organisation
                                                             [X.sub.3]
4        Frequency of Change of Objectives
                                                             [X.sub.4]
5        Level of Hierarchy
                                                             [X.sub.5]
6        Strength of Control of Management
                                                             [X.sub.6]

Table 2: Opinion Parameters for Employees

S. No.   Parameter                                         Index

1        Disturbance due to Organisational Trouble         [Y.sub.1]

2        Encouragement by Management to Take Initiatives   [Y.sub.2]

3        Group Orientation                                 [Y.sub.3]

4        Rewards Linked with Performance                   [Y.sub.4]

5        Impact of Decision on Employees                   [Y.sub.5]

6        Encouragement of Criticism                        [Y.sub.6]

7        Importance of Outcome                             [Y.sub.7]

8        Organisation of Work by Owner                     [Y.sub.8]

9        Employee Behaviour Monitored as Rules and         [Y.sub.9]
         Regulations

10       Change as the Outcome of External Environment     [Y.sub.10]

Table 3: Types of Employees

S. No.   Employee/ Workers Type   Index

1        Skilled                  [Z.sub.1]

2        Semi-Skilled             [Z.sub.2]

3        Unskilled                [Z.sub.3]

Table 4: Location of Samples

S. No.   Name of Location             Index
1        Pithampur, Indore (M. P.)    [L.sub.1]
2        Mandideep, Bhopal (M. P.)    [L.sub.2]
3        Bhilai/ Durg (C. G.)         [L.sub.3]
4        Jagatpur, Cuttack (Orissa)   [L.sub.4]
5        Jamshedpur (Jharkhand)       [L.sub.5]
6        Sagar (M. P.)                [L.sub.6]
7        Raipur (C. G.)               [L.sub.7]

Table 5: Sampling Distribution Plan for Entrepreneurs

            [L.sub.1]   [L.sub.2]   [L.sub.3]   [L.sub.4]

[X.sub.i]   15          15          15          15

            [L.sub.5]   [L.sub.6]   [L.sub.7]   Total

[X.sub.i]   15          15          15          105

Table 6: Sampling Distribution Plan for Employees

            [L.sub.1]   [L.sub.2]   [L.sub.3]   [L.sub.4]

[Z.sub.1]   25          25          25          25

[Z.sub.2]   25          25          25          25

[Z.sub.3]   25          25          25          25

Total       75          75          75          75

            [L.sub.5]   [L.sub.6]   [L.sub.7]   Total

[Z.sub.1]   25          25          25          175

[Z.sub.2]   25          25          25          175

[Z.sub.3]   25          25          25          175

Total       75          75          75          525

Table7: Likert's Points of Entrepreneurs' Response

            [L.sub.1]   [L.sub.2]   [L.sub.3]   [L.sub.4]   [L.sub.5]

[X.sub.1]   45          41          42          47          49

[X.sub.2]   40          44          40          40          45

[X.sub.3]   41          48          45          40          45

[X.sub.4]   44          49          47          42          45

[X.sub.5]   49          47          43          40          47

[X.sub.6]   42          43          47          45          45

            [L.sub.6]   [L.sub.7]   Mean    SD

[X.sub.1]   42          45          44.43   2.72

[X.sub.2]   41          43          41.86   1.96

[X.sub.3]   43          43          43.57   2.5

[X.sub.4]   47          47          45.86   2.17

[X.sub.5]   48          40          44.86   3.52

[X.sub.6]   41          45          44      1.93

Table 8a: Summary

Groups   Count   Sum   Average   Variance

X1       7       311   44.43      8.62

X2       7       293   41.86      4.48

X3       7       305   43.57      7.29

X4       7       321   45.86      5.48

X5       7       314   44.86     14.48

X6       7       308   44         4.33

Table 8b: ANOVA

Source of Variation   SS        df   MS      F      P-value   F crit

Between Groups         63.62     5   12.72   1.71   0.16      2.48

Within Groups         268       36    7.44

Total                 331.619   41

Table 9: Likert's Points of Employees/ Workers

       Y1    Y2    Y3    Y4    Y5    Y6

Z1     340   360   367   341   320   300

Z2     347   370   373   347   324   310

Z3     340   375   370   344   329   307

Mean   342   368   370   344   324   306

       Y7    Y8    Y9    Y10   Mean   SD

Z1     400   380   297   280   339    37.1

Z2     389   383   307   290   344    33

Z3     391   387   305   291   344    34.1

Mean   393   383   303   287

Table 10a: ANOVA (Two-Factor without Replication)

SUMMARY   Count   Sum    Average   Variance

Z1        10      3385   338.5     1528.5

Z2        10      3440   344       1213.56

Z3        10      3439   343.9     1292.77

Y1        3       1027   342.33    16.33

Y2        3       1105   368.33    58.33

Y3        3       1110   370       9

Y4        3       1032   344       9

Y5        3       973    324.33    20.33

Y6        3       917    305.67    26.33

Y7        3       1180   393.33    34.33

Y8        3       1150   383.33    12.33

Y9        3       909    303       28

Y10       3       861    287       37

Table 10b: ANOVA

Source of Variation   SS       df   MS        F        P-value    F crit

Rows                  198.07   2    99.03     5.87     0.01093    3.55

Columns               36009    9    4001.05   236.96   8.00E-17   2.46

Error                 303.93   18   16.89

Figure 1: Research Model

Entrepreneur

* Customer Need Identification

* Degree of Employee Involvement
in Decision-making

* Principle Values Living in the
Organisation

* Frequency of Change of
Objectives

* Level of Hierachy

* Strength of Control of
Management

Skilled/ Semi-Skilled/ Unskilled
Employee

Employee/Worker

* Disturbance due to Organization
Trouble

* Encouragement by Management to Take Initiatives

* Group Orientation Rewards Linked with
Performance

* Impact of Decision on Employees

* Encouragement of Criticism Importance of
Outcome

* Organisation of Work by Owner

* Employee Behaviour Monitored as Rules and
Regulations

* Change as the Outcome of External Environment