MAPPING HRM IMPLEMENTATION IN INDONESIA’S SMES: IN SEARCH OF NEW HRM MODEL

In Indonesia, SMEs business owners are always trying to find the best employee management practices that suit their business scale, so finding a comprehensive employee management model for SMEs is important. This research was conducted using a qualitative approach. Data collection was carried out using semi-structured interviews with 38 managers who were directly involved in HRM in SMEs. The analytical method used is content and thematic analysis. The results of this study offer new insights for SME owners regarding HRM practices that can be applied to systematically manage their human resources to increase their competitiveness. The novelties of this research are (a) This research was conducted for more comprehensive employee management functions where most of the previous studies were based on certain functions only; (b) a special SME HR model that can be used as a standard for SMEs in Indonesia.


INTRODUCTION
Micro, Small, and Medium Enterprises (MSMEs) are the most prominent pillar of the economy of numerous countries in the world. (Pedraza, 2021) states that MSMEs are important contributors to job creations and global economic developments, accounting for 90% of businesses and over 50% of jobs globally. Mahmudova (2019) adds that the performance success of small and medium enterprises has played a central role in economic prosperity, employment, and people's welfare. In some countries, including Indonesia, MSMEs made up a relatively big percentage and absorb significant workforce. (Gouardères Frédéric, 2021) remarks that a great majority of companies in the European Union (EU) were MSMEs (99%), providing two-thirds of all jobs and contributing more than half of the total added value created by businesses in the EU. Similarly in several Asian countries such as China, 97% of all companies were micro and small enterprises that provided a 4-5 times higher number of jobs than large and medium companies (Liu & Ma, 2016). In India, the fairly large MSME sector was capable of workforce absorption at a significant level (Kalyan & Babu, 2017); (Mukherjee, 2018); (Ramesha, 2021). Meanwhile, in Indonesia as of March 2021, there were a total of 64.2 million MSMEs that had contributed 61.07% GDP, absorbing 97% of the total workforce and raising 61.07% of the total investment fund (Hartarto, 2021). As such, the existence of MSMEs impacts not only the economic sector, but also other factors such as employment, people's welfare, and investment climate. This was also reported by previous researchers in various countries, stating that Micro, Small, and Medium Enterprises are pivotal in the economy of Algeria (Mahmudova, 2019), China (Liu & Ma, 2016), the Philippines (Binghay, 2012), India (Kalyan & Babu, 2017) (Mukherjee, 2018) (Ramesha, 2021), Indonesia (Juminawati et al., 2021), and Pakistan (Khan et al., 2021).
Nonetheless, in their development, MSMEs are still faced by a variety of challenges. Previous research states that MSMEs are faced with challenges with respect to resources, finances, workforce, and market share. Most of the various issues raising in MSMEs are caused by low management capability (Bismala & Handayani, 2014). Workforce or human resources, particularly in its management, is one of the challenges encountered by MSMEs from time to time. According to (Tranggono et al., 2021), human resources may inhibit innovations if managed improperly, and MSMEs management in recent time is family-based and lacks professionalism. This is as posited by (Binghay, 2012): HRM practices in MSMEs are often overlooked, whereas HRM is a persisting challenge for multitudinous MSMEs. With regard to workforce, the issues MSMEs are presented with include lack of employees of competence, company productivity, and individual employee performance (Cassell et al., 2002) .This deserves attention as HRM practices are central for MSMEs and they will influence employee relations, organizational functions, and business (Chinyamurindi et al., 2021). Employees have a role in the survivability and development of a business (Klepić et al., 2020) . The research by Albuquerque demonstrated that a number of small enterprises that did not implement HRM strategies effectively were declared bankrupt within their first five years of operation (Rice, 2018).
As pointed out by some earlier works above, finding out the best HR practice in MSMEs is critical (Ferrer et al., 2020). Currently existing research on HRM practices has predominantly been conducted in large companies as existing structured, documented formal practices have made data collection easier. Hopefully, this research can fill the gap in studies on HRM practices in the MSMEs sector based on five functions: staffing (employment planning, job description, recruitment, and selection); development (training); performance appraisal; compensation; and industrial relations. This research was focused on small and medium enterprises with 5-19 and 20-99 employees, respectively. The definitions of small and medium enterprises in this research refer to the criteria of Statistics Indonesia (BPS).
Based on prior studies, both in Indonesia and overseas, HRM practices in the MSMEs sector are still limited in aspects such as significant theoretical gap, lack of formal implementation, absence of a uniform pattern, and implementation of only a select few HRM functions (Masriah et al., 2021) ;(Psychogios et al., 2016); (Ferrer et al., 2020); (Rahmadani, 2018). This research aimed to map HRM practices in the SMEs sector and determine the ideal HRM model to be implemented in this sector based on the five functions of HRM. This research is expected to contribute to SME owners, particularly for the purpose of implementing HRM practices with a greater degree of formality.
The ever-increasingly competitive business environment demands better company management, which includes management (functions), tasks, and the performers. Management as a discipline studies the ways in which goals are achieved effectively and efficiently with the aid of others. As revealed by research findings, various issues that arise in MSMEs mostly are caused by low management capability (Bismala & Handayani, 2014).
One of the vital factors subject to company management is people, which has of late been garnering an increasing amount of attention. Companies need employees not only in adequate quantities, but also in appropriate qualities (competencies). Rapid technological developments, sound financial resources, and excellent products will not be of benefit if managed by incompetent employees. However, many state that managing employees is far from easy. Thus, employee management is considered a challenging task. Employee management is studied under Human Resources Management.
Human Resources Management is a process in which employees are engaged to achieve an organizational goal (Mondy & Martocchio, 2016). Dessler (2020) defines HRM as a process of obtaining, training, assessing, and compensating employees, taking into account employee relations, health and safety, and matters of fairness. Following the two aforementioned definitions, it can be said that effective overall HRM is required to support the goals of the organization.
Implementation of HRM in large companies is formal and holistic in general. By contrast, HRM practices in small and medium enterprises are not formal and consistent (Bismala & Handayani, 2014), although HRM is critical to the improvement of SMSEs' performance, which can be done with, among other things, adequate trainings (Masriah et al., 2021).
The HRM model used in this research was adopted and developed from the theory of HRM functions by Mondy & Martocchio (2016), which is illustrated in Figure 1. Not all of the HRM functions above are in many cases suitable to be implemented in SMEs due to the absence of HR units or HR specialists. Some managers also handle the work in employee management with a focus on recruitment and retention of employees who are considered competent. Some aspects of HRM functions will have a greater impact on MSMEs than on large companies, as in misplacement of incompetent employees, which can cause customer attrition and business failures. With business growth, the need for more structured HRM will increase, and it usually arises when there is pressure to comply with manpower laws (Mondy & Martocchio, 2016).
A number of earlier works on HRM models in SMEs have been conducted in various countries. (Zakaria et al., 2018), for instance, investigated HRM performance in SMEs in Malaysia by applying five functions of HRM, namely communication and information sharing, compensation, job design, performance appraisal, selection, and training and development. That research revealed that HRM practices in communication and information sharing and in selection were associated with organizational performance. This finding brought SME owners and management to realization on the importance of HRM practices in SME performance improvement. Meanwhile, (Capiña, 2021) conducted a study on HRM practices in MSMEs in the Philippines, saying that it is critical for MSME owners and top management to invest in good HRM as part of the managerial function of these enterprises. (Karman et al., 2022) mentioned HRM practices that wielded considerable performance effect, namely HR planning, training, and development since the presence of skilled employee is very significant.  separately investigated HRM practices in SMEs in Finland, stating that it is important to pay attention to HRM practices greater in agility, innovativeness, and productiveness that can maintain profitability and growth in the context of SMEs. The study by Andalib and Halim (2020) mapped an HRM model appropriate for MSMEs, which consists of job analysis, orientation, training and development, compensation, and performance appraisal. Meanwhile, (Caha & Urban, 2020) discovered some key activities that are needed in HRM practices in MSMEs: selection, compensation, appraisal.
Departing from earlier findings, this study was carried out to determine the ideal model for HRM practices in SMEs based on five functions of HRM-staffing (employment planning, job description, recruitment, and selection), development (training), performance appraisal, compensation, and industrial relations-with HRM activities detailed in Table 1. Employment planning was performed when the company entered a more matured phase with a greater number of employees; on the other hand, small and medium companies did not conduct employment planning in a formal manner (Karman et al., 2022) Recruitment In most cases, recruitment was conducted informally, concerned with low cost, and using internal sources and references. Errors in the recruitment and selection processes had an impact on small and medium enterprises (Klepić, 2019).

Selection
Most SMEs conducted an interview in the selection process; only a small share of SMEs administered a test and conducted a medical check-up. Department managers (users) oversaw the selection process (Klepić, 2019).

Development Training
Trainings were conducted in a structured manner. Often, trainings were too theoretical in nature. It was unclear as to how to measure the effectiveness of the trainings (Atmaja & Ratnawati, 2018). Trainings were provided to make sure that employees were able to undertake their work (Klepić, 2019).

Performance Appraisal
In small companies, there were no indicators for performance appraisal (Warda Andalib & Abdul Halim, 2020)

Compensation
Most enterprises had yet to be able to pay compensation in an amount equal to the minimum wage due to having fluctuating turnover (Warda Andalib & Abdul Halim, 2020)

METHODS
This study was conducted using a qualitative approach. Data collection was performed by interview under phone interview and online interview methods. Interviews were conducted in a semi-structured manner following the questions guide provided in Table 2. Interviews were conducted with informants consisting of managers in charge of HRM in each SME in Jakarta, Garut, Bandung, and Surabaya. A total of 38 informants were involved in this research.
The data collected pertained to HRM practices in five functions, namely staffing (employment planning, job description, recruitment, and selection), development (training), performance appraisal, compensation, and industrial relations. Data analysis was carried out after information was gathered, from which patterns and similarities between answers regarding HRM practices were identified. The analysis methods used were content analysis and thematic analysis. Thematic analysis per se is a process of identifying, analyzing, arranging, describing, and reporting a theme from a dataset (Braun & Clarke, 2006). Thematic analysis is also used to summarize key features of a big dataset as it compels researchers to take a structured approach appropriately to handle data, helping generate a clear, well-organized final report (King, 2004). According to Braun & Clarke (2013), thematic analysis is a data analysis method that helps researchers identify themes, patterns, and meanings throughout the whole dataset in relation to certain research questions. This method can be applied to analyze nearly all kinds of qualitative data, such as those from interviews, focus group discussions, and qualitative surveys, using bigger or smaller datasets.

RESULTS
Regarding the HRM practices in the 38 SMEs investigated here, it was found that all small enterprises had yet to implement an HRM practice due to the absence of an HRD or persons in charge of HR. On the medium scale, however, 20% of the companies had already had persons in charge of HR in place. The companies were engaged in the Manufacturing (26%), Culinary (21%), Sales and Distribution (21%), Construction (13%), Services (13%), and Logistics (26%) sectors (see Table 3). The analysis units of this research were SMEs, while the observation units were owners or HR managers of the SMEs. This research was conducted on Java Island, in particular in the cities of Jakarta, Garut, Bandung, and Surabaya. In general, in the 38 companies studied, a number of trends were found, namely: (1) involvement of owners in HR practices on the grounds that there was no HR department, no person in charge of HR, or the role of the HR department was still limited; (2) informal relationships that cause communication and performance appraisal are still subjective; (3) implementing minimum labour regulations based on the company's capabilities, making it difficult for companies of this scale to get employees who work professionally.
Based on the interview results, the majority of the informants stated that the challenges faced by SMEs could be categorized into two: internal challenges, which were easier to manage, and external challenges, which were harder to manage. The said internal challenges were fluctuating turnovers, while the said external challenges pertained to job markets and government regulations they had to comply with. The owners of the SMEs dealt with internal challenges by managing HR costs and establishing no formal agreements with employees for the sake of greater flexibility. Such a condition was recognized as a sub-ideal situation due to relatively high employee turnover rates, difficulties finding employees of competence, and difficulties making changes within the companies as a result of limited employee abilities. Based on the findings above, as well as on the results of identification by a number of SMEs involved, this research developed a model that can be used in HRM practices in SMEs. The following are the HRM practices based on five functions of HRM found in this research.
Most of the companies had yet to implement HR planning in relation to the needs of the organizations (expansion, target increase). HR planning was conducted to meet short-term needs such as filling up vacant positions. In medium enterprises, employment planning was conducted by performing simple calculations using estimations of company needs, such as sales target increase, productivity increase, and turnover data. This employment planning helped the informants conduct budgeting for recruitment and compensation payment (payroll) and at the same time served as a reminder for them not to recruit more employees without careful considerations.
In small enterprises, there was no written job description available. Employees knew their duties from superiors' explanations as well as the explanations they received on their first day working and during technical training. This was considered the best practice in small enterprises as it offered flexibility in tasks assignment, positional change, or double positions assignment. Written job description was taken as a hindrance as it would cause employees to be calculating in performing their tasks and to refuse works unlisted in the job description. The absence of a formal job description was deemed an advantage to managers. Any negligence in work performance was considered tolerable and subjected to direct reprimand.
In medium enterprises, there was a written job description based on what position holders did on a daily basis (the tasks were not resulted from job analysis as it was supposed to be based on HRM theory) in place although it was still inconsistent. The job description was made following the example of other companies or references from the Internet. Part of the job description tended to deviate from the actual job of each employee, and updating was conducted when changes arose, as in changes in working tools or tasks specification. Furthermore, the job description available had yet to be linked to other functions of HRM, such as determination of job requirements and training.
In small and medium enterprises where the HRD or persons in charge of HR were nonexistent, there was no procedure on recruitment process. When there was a vacant position, the company owner would look for a candidate using employees' or friends' references. Job vacancy ads were not made in writing. This method was considered fairly efficient and cheap, and written job vacancy ads or more recruitment sources were considered unnecessary. In most cases, recruitment was aimed to find employee candidates at the operating level; thus, employees' or friends' references were regarded sufficient because these reference providers would surely recommend candidates with fitting working experiences. In addition, no proper documentation of employee candidates' resumes was done. As a result, no resumes documentation can be used when needs for the same positions arise in the future.
On the other hand, medium enterprises with an HRD had a recruitment procedure in place and made greater efforts in recruitment, such as posting a job vacancy ad on job search websites, on print media, or within the company environment. Since the employee candidates searched were of a greater level of diversity (not only at the operating level) and therefore more sources of employee candidates meeting the requirements would be required, reference-based recruitment was considering no longer of much help. Sufficient documentation of employee candidates' resumes had been in place, available for use to find more employees of the same positions in the future, hence sparing the companies the need to do another recruitment.
In small enterprises, selection process was executed directly by users for there was no persons in charge of HR. Interview and working skills test were the most frequently used instruments since the most common positions to be filled were technical ones. The majority of informants stated that it was not difficult to find new employees when there were employees resigning or when errors in new employee selection happened. Not much evidence was present as to examination of the personality aspect of employee candidates in small enterprises. Hiring decisions mostly were made by company owners. On the other hand, some informants admitted that incompetent employees could cause loss, which would be impactful to starting up small enterprises, as in the case of product packaging mistakes that led to damage and return by customers or in the case of production failures; therefore, matters of competence are a dilemma to company management.
In medium enterprises, there was a need for a selection process with greater levels of formality and reliability since a mistake in employee selection would be considered a waste of financial resources and time. Therefore, selection process with a greater degree of structure was in place, be it in the form of psychological test, working skills test, or interview. Some medium enterprises had had an HRD and conducted HRM independently, while some others which did not have an HRD sought assistance from a third party for psychological test. Hiring decisions were made by considering suggestions from persons in charge of HR and from users.
In small enterprises, training was conducted in technical aspects such as work completion. However, no procedure on training implementation was found. Training implementation was situational. For instance, training was implemented when new hires joined the company or when a problem arose. In small enterprises, rarely were there changes in digital-based working tools/production machines/marketing strategies since there were limitations in employee abilities and since there were no trainers in the company internal.
In medium enterprises, on the other hand, trainings were conducted routinely (typically for the technical aspects of the work) and on demand (typically for soft skills). There were no training needs analysis and return on training investment calculation in companies with no persons in charge of HR. Trainings were conducted to meet short-term needs. For instance, when there was a high number of customer complaints, an excellent services training was then held.
In small enterprises, there was no written performance appraisal. Instead, performance appraisal was carried out subjectively based on superior observation, peer complaints, or customer complaints. Other than performance, work discipline was another aspect considered important as late-coming and absenteeism could hinder the completion of the work, given that most of the employees were on the operating level.
In some medium companies, indicators of performance appraisal based on task completion, target achievement, and attendance were found. Appraisal was conducted by direct superiors, and the results were announced to the employees. The appraisal indicators used was subjective since no appraisal guide was in place. Therefore, appraisal process was deemed a difficult task for direct superiors. In addition, there was no documentation on the achievements or mistakes made by employees either. In other words, appraisal was conducted on the basis of only the appraisers' memory.
Appraisal was generally performed once a year for the sole purpose of bonus calculation. It had yet to be performed for other functions, such as to inform training implementation and salary increase. In small enterprises, the compensation paid did not meet the minimum wage since the companies were considered to be incapable and since the companies' performance was still fluctuating. In addition, the basic salary payment did not follow the applicable legislation; it was too small or even, in most cases, non-paid. In other words, in small enterprises, compensation could not serve as an employee retention strategy. There were even many cases where the salary was reduced when the employees concerned made mistakes in their work completion or had problems with attendance (absenteeism or late-coming). It was the work environment and flexibility that was considered to be a factor in employee retention in the companies. When the financial performance was in a good condition, the companies found it preferable to hold a banquet or get the employees on a vacation together as a form of appreciation to giving them a bonus. Some said that, even if there was a bonus, it was not paid to just anyone, and the decision regarding this matter was in the hands of the company executives.
Meanwhile, in medium enterprises, the minimum wage was met for positions involving working in-house for 40 hours. Things were slightly different for positions related to targets, such as production, sales, or logistics positions, in which case employees were given compensation based on their targets achievement as previously determined while still working for 40 hours. When medium enterprises reached stability in terms of business and financial performance, fulfilment of the minimum wage became a priority as they felt a sense of responsibility legally regarding this matter, although there were exceptions as mentioned above.
In small and medium enterprises with no HRD, no written bylaws were found. Rules were announced verbally, and reminder of these rules was given during daily briefing. Employee relations in these companies were based on a contract system without any written work agreement. Regulations on absences with permission and leaves were informal, in which case employees only needed to notify their direct superiors if they were to take a leave. The majority of companies had calculated overtime work with a flat rate per hour. If the companies were to terminate an employee, then they did so verbally at any time. On the other hand, an employee might also resign at any time, too, even sometimes without any notification. Most of medium enterprises with an HRD already had a company bylaw and provided a written work agreement to serve as a reference for both parties. Matters of absenteeism, leaves, overtime work, and employment termination were regulated in writing, providing employees with clarity. Some companies even provided a nation-wide social security for employment (BPJS Ketenagakerjaan) for permanent employees. Nonetheless, some deviations were still found. For instance, companies terminated an employee's contract one-sidedly without paying the employee concerned their due compensation, or employees resigned not in accordance with the rules. The informants admitted that the presence of a company bylaw and a work agreement was advantageous to the company in the following ways: employees were greatly motivated when there were clear rules and status; these bylaw and work agreement supported the management to take a firm measure when an employee made a mistake; and these bylaw and work agreement served as a basis for making decisions when there was a conflict with employees. It is fair to say that actually small enterprises too may establish a company bylaw and a work agreement, although in a simpler format.
The model for small enterprises generated by this research surely still needs some adjustment based on the company's growth, in which case a greater number of employees will demand a greater degree of formality in order to increase the management effectiveness. The initial HRM model for small and medium enterprises is presented in Figure 2.

DISCUSSIONS
Company bylaws are critical to govern basic things in the execution of the company's operations. Upon the start of an employee's job, a (simple) job description will be helpful for them in adapting to their job faster. In addition, this job description will be of assistance to the management in determining the job requirements to be applied in the recruitment and selection processes. Thus, even if the employee candidates are derived from a reference list, they must still meet the job requirements according to the job needs. Training and mentoring are also central to ensuring that employees work accordingly and comply with the existing rules. Performance appraisal can then be applied according to a number of job-based key indicators. Performance appraisal will open up a room for both employees and the management to conduct evaluation and improvement. It can be conducted individually or collectively in a relaxed discussion in a meeting, as long as employees grow accustomed to appraisal and aware of the management's expectations of them. As for the compensation function, the company may start to pay salary that consists of components of basic salary, meal allowance, transport allowance, incentives (for positions with measured targets), and overtime pay, all of which may be adjusted in their amounts to the company's capacity; therefore, when it is deemed necessary for the company to reduce the salary, it is clear as to which component of the salary is cut. Furthermore, when the company has demonstrated growth and good performance, the company may allocate a budget to meet the minimum wage.

CONCLUSIONS
An HRM model expected to be effective has been discovered in this research under a number of assumptions, one of which is that small and medium enterprises (SMEs) are ordinary business entities that take an organization form as do larger enterprises. The issues of environment, competition, regulations, consumer demand, and limitation of competent human resources in the job market are not different in the case of larger enterprises. The typical characteristic in terms of human resources is that there is an extremely limited number of human resources involved, while the challenges faced include failure to understand that employees are assets, incapability to calculate the financial loss due to incompetent employees, unplanned recruitments, and the view that formality in HRM is a hindrance for the company to develop (as the focus is on external challenges). Therefore, an HRM model implementable in SMEs for effective HRM is therefore needed. This model is based on the following five functions: staffing (employment planning, job description, recruitment, and selection), development (training), performance appraisal, compensation, and industrial relations.