SMALL- and medium-sized service enterprises provide jobs as well as contribute to trade, economy and social inclusion for Malaysia.
In 2021, service SMEs represented 84 per cent of SMEs, and the service sector contributed 60 per cent to the gross domestic product.
This trend is in keeping with the rise of service trade and knowledge-based economy.
Boosting the performance of service SMEs is, therefore, key to unlocking the potential of SMEs and Malaysia.
Service SMEs are different from SMEs in the goods sector.
From the perspective of service SMEs, ownership of intellectual capital, particularly human and relational capital, provides a plausible explanation concerning the link with knowledge and value creation.
In fact, human capital is a resource that is available to service SMEs.
In this regard, the knowledge and skills owned by a firm's employees make it difficult for firm-specific assets to be traded in the open market.
Human capital with specialised skills is considered a resource and is regarded as instrumental and complex to the firm, but is critical in creating wealth.
In fact, human capital determines the size, scope and direction as well as key in generating revenue and competitive advantage for the growth and survival of firms.
Human resource management plays a role in managing firms' human capital.
It covers the whole spectrum of human resource management activities, including recruiting talent, training them, assessment and compensation.
However, the focus of traditional human resource management has been on managing organisational needs for talent based on current needs as well as best practices.
In a sense, the traditional human resource management does not explicitly address the link between human capital, knowledge, and performance and tends to be inadequately aligned to boost the knowledge process in firms.
In the context of service SMEs that are asset-light and knowledge intensive, and depend on knowledge workers in producing and delivering innovative services, it is necessary to take a human resource management approach that focuses on knowledge.
Knowledge-based human resource management (HRM) involves HRM practices designed to attract, retain and motivate employees to create, share and use knowledge.
Key to this are HRM practices involving recruitment, training and development, appraisal, and compensation system, which support employees' knowledge-based behaviours.
It reflects the shift from managing people to a greater emphasis on strategic contributions of HRM.
The following are aspects of knowledge-based human resource management that service SMEs need to pay attention to.
With regard to recruitment and selection, the knowledge-based nature of recruitment and selection process covers not only the perspective of technology used, but also the focus on employees' potential in addition to their knowledge, skills and abilities.
In terms of training and development, the current and future needs of organisation are catered to through personalised training and development programmes.
With regard to performance assessment, greater weightage needs to be given to the contributions of employees in supporting knowledge-based behaviour and activities that boost firms' performance.
Appraisals can be periodically implemented rather than once at year-end.
Concerning compensation arrangement, the focus is on rewarding employees based on their contributions to creating, sharing, and applying knowledge and reward them with better pay, benefits and promotion that commensurate with the knowledge-based nature of the job.
Source: https://www.nst.com.my/opinion/columnists/2022/09/829343/knowledge-based-human-resource-management-boosts-service-smes