Lack of succession planning greatest long-term risk to Indian MSMEs, say experts

India has an unlimited base of round 6.33 crore MSMEs, lots of that are family-run enterprises with the second and third-generation entrepreneurs carrying ahead their enterprise legacy.

Whereas the Indian authorities has instituted many initiatives to assist the Indian MSME sector within the post-crisis world, one key issue for the longevity of any MSME is succession planning and sustainability whilst an absence of it’s the best long-term threat to such companies, based on specialists. India has an unlimited base of round 6.33 crore MSMEs, lots of that are family-run enterprises with the second and third-generation entrepreneurs carrying ahead their enterprise legacy.

“India’s MSMEs, using greater than 45 % of the nation’s workforce, are working relentlessly to make an impression within the world market, with risk-taking being part of their entrepreneurial DNA. Nonetheless, the disconnect between ardour and actuality, the problem in managing black swan and gray rhino occasions, and the shortage of a structured framework to go on the enterprise legacy to the following era are putting these MSMEs liable to survival,” mentioned Hersh Shah, CEO, IRM India Affiliate at a webinar organised by the institute. IRM had, in September final yr, partnered with the federal government’s premier MSME growth physique Nationwide Institute of Micro, Small and Medium Enterprise (NI-MSME) that trains MSMEs, people, and professionals for entrepreneurship growth, capability constructing, advertising and marketing, innovation, infrastructure growth, high quality administration, and extra.

Business specialists additionally echoed Shah’s views on the problem of succession planning amongst MSMEs. In line with V Swaminathan, Head of Company Audit & Assurance, Godrej Industries Restricted, as many as 35 per cent MSMEs really feel succession planning is their greatest drawback and that MSMEs largely have an proprietor or promoter-driven construction as a result of which the choice making is targeted on them, in contrast to giant companies which have a transparent group construction. “There’s a purposeful implementation of roles and obligations. There isn’t a idea of shared possession, the exterior expertise is simply need-based, and loyalty is larger than simply purposeful functionality,” Swaminathan added.

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Furthermore, amid modifications within the general enterprise setting over the previous few years in India equivalent to demonetsation, GST implementation, Covid pandemic, financial downturn, and so on., the necessity for succession planning is extra vital than ever. Additionally, there’s a problem of discovering workers who’re as expert because the outgoing ones within the group. “Succession planning is likely one of the most important elements for MSMEs particularly within the present local weather, the place the enterprise setting has undergone a change, and there’s a lot of unpredictability. The shortage of expert manpower is a serious constraint for MSMEs, and when key workers retire from an organisation or depart for different alternatives, the shortcoming to interchange them with an adequately skilled successor can straight affect the wellbeing of the enterprise,” mentioned Sandeep Bhatnagar, Director – Advertising & Enterprise Improvement, NI-MSME. The institute is seeking to assist such MSMEs into risk-ready enterprises over the following decade by means of IRM’s programmes in enterprise threat administration.