Here’s why corporate governance is key for SMEs looking to grow and scale
Human capital expert Shekhar Purohit helps develop reward programmes that motivate leadership to align with business objectives, optimise the organisation's competitive advantages, manage talent, and improve economic performance.
Many small businesses in India say lack of access to working capital and credit is a major factor inhibiting growth. This makes it difficult for them to give employees attractive compensation packages. A study by KPMG found that the search for better pay was among the top two reasons reported for attrition across companies of different sizes. The other top reason was looking for better career opportunities.
MSMEs and larger companies are finding it increasingly challenging to retain talent through existing means of reward programmes, incentives, bonuses, etc. Compensating employees and top management adequately and developing a corporate governance strategy is no easy task.
Looking at this gap as an opportunity, budding entrepreneur Shekhar Purohit (43) was inspired to step in and guide businesses in board and corporate governance, executive coaching, global strategy development, global rewards, performance management systems, and organisation development.
He set up First Mumbai Consulting in 2018 with this in mind. Leveraging Purohit’s past experience in executive and management consulting, the business has started servicing large clients across the US, India, and the Middle East from its offices in Mumbai, New York, and Chicago.
In an exclusive interaction with SMBStory, Shekhar Purohit, Founder and MD, First Mumbai Consulting, explains more about the business and how SMEs can manage their workforces better,
SMBStory: How and why did you get into human capital consulting?
Shekhar Purohit: I worked in organisations across the US, Europe, Middle East, India, and Southeast Asia, in a variety of industries such as media and entertainment, manufacturing, higher education, commercial and investment banking, private equity and venture capital, etc.
But I was always involved in organisation development, including corporate governance, executive coaching, and more. Thus I got a lot of experience in working at senior levels and observing the growth pattern in every company,
SMBS: What inspired you to become an entrepreneur?
SP: I saw that compensation trends are a key insight into the viability and growth of the general economy and certain industries. Compensation trends act as the key indicator in the investment flow for industries. I observed the lack of proper compensation strategies, corporate governance, and reward structure.
With this in mind, I was keen on testing my abilities to launch a game-changing business. I wanted to introduce unique, quality-driven services and bring forth my vision of leadership and business management. My vision became a reality last year when I started First Mumbai Consulting.
SMBS: How does First Mumbai Consulting help organisations manage their human resources better?
SP: We specialise in executive rewards, corporate governance, and compensation consulting. We help clients develop reward programmes that motivate leadership to align with business objectives, optimise the organisation's competitive advantages, manage talent, and improve economic performance.
Aligning the interests of any company management with their most critical stakeholders is a paramount objective. To support clients in meeting this objective, we assist them in designing, implementing, and communicating performance-oriented reward programmes. The firm engages in three broad practice areas: Executive Total Compensation Services; Board of Director Compensation Services, and Corporate Governance Services.
SMBS: Why do SMEs need to carefully consider compensation strategies for senior employees?
SP: SMEs are a growing sector and definitely assure more profitability for the senior level leadership if managed properly. However, since the degree of impact a senior-level management can have with SMEs is far greater than larger firms, it is imperative to set up a well-governed model to maintain the growth graphs and ensure employee satisfaction.
Further, compensation has two angles: emotional/intangible compensation and financial compensation. Most SMEs struggle to compete with larger firms on high-potential senior-level employees in terms of financial compensation.
SMBS: What can SMEs do to ensure better employee/management satisfaction?
SP: SMEs and startups already offer additional emotional/intangible compensation on flexibility, and ability to build a new business or product. A senior executive may not be exposed to this in a large enterprise. Also, SMEs can offer great autonomy and span of control to experiment and develop new skills that larger firms may not be able to offer.
However, SME compensation strategies need more value proposition-driven compensation goals. They can achieve better results by practicing corporate governance, having a financial expert in place, leadership training for young talent, and more.
SMBS: How do SMEs execute these strategies?
SP: Corporate governance helps every business to scale in the most structured format and drives the company’s growth. It is important to inculcate a careful composition of experienced board of directors with a common vision beneficial for both the company and the investors.
Further, managing finances effectively is one of the major challenges in running an SME. Hence, hiring an experienced CFO is of utmost importance. It is also important to follow a structure within an organisation, which ensures senior-level employee satisfaction and smooth flow of operations.
We have also observed SMEs facing lack of clear directions and miscommunication among young founders. Going through leadership training helps entrepreneurs manage operations much better.
SMBS: In this space, what can Indian SMEs learn from international businesses?
SP: It is critical to understand that senior-level executives are a key asset to SMEs. It is important to offer good compensation not only in terms of profit sharing but also additional perks such as performance bonus or cash remunerations. This will assure that they are highly valued.
It is important for an SME to have a common vision towards its growth strategy and follow a structured practice within the organisation. Internationally, SMEs are very careful about managing their investor’s funds in order to showcase reliability and profitability. Indian SMEs ups must ensure they understand how to manage funds more efficiently.
Additionally, in today’s fast-paced business environment, it is important to adopt to updated technological tools and leverage AI to ensure faster processes.