BUS603: Managing People

Currently, small- and medium-sized enterprises (SMEs) in developed economies are irreplaceable. They are considered a driving force of the economy because they largely contribute to the increase in innovation activities and to the flexible introduction of new products and also are adaptable. They also create a substantial volume of job opportunities. In Slovakia, SMEs represent a part of the business sector, which according to the Slovak business agency produces nearly 60% of added value and provides over 70% of jobs. For a stable and prosperous market economy, it is essential that there is a medium state of SMEs in the society. It is precisely for this reason that it is necessary to pay more attention to SMEs, encourage them, and also create favourable business conditions.

SME category has its own significance and role in corporate management. The role of SME entrepreneurs differs both quantitatively and qualitatively from the tasks of managers in large enterprises. In many cases, large enterprises greatly rely on SMEs in the provision of their support services and products which enables the large enterprises to concentrate on their core activities. Therefore, SMEs are highly valued for their creativity, flexibility, rapid response to changes in the environment and also in easy decision-making implementation of innovation, as well as for their focus on specific markets. On the other hand, compared to large enterprises, SMEs have limited resources, which make them less technologically equipped. They are less able to prepare and manage business plans; they are more dependent on personal relationships between management and employees and between management and customers. SMEs usually do not have significant personal contacts within the financial sector and the government and thus are less able to negotiate special tax and state benefits. However, as long as the aforementioned negatives are identified and eliminated in time, SMEs can effectively manage their business activities and significantly contribute to creating an added value and jobs in any economy.

The existence of the enterprise, its prosperity, and dynamic progress is primarily affected by the quality of human resources. Prosperous enterprises realise that the most profitable capital of the enterprise is its employees. Nowadays, the statement that people are the most valuable resource of any company proves to be more true than before. No more is it enough to ensure quality technical equipment and technology. Without the people who create added value in the company as bearers of human capital, no technical achievements can be properly utilised. Moreover, a significant part of the value of the company, in addition to its financial capital consisting of financial assets, is created by the company's intellectual capital. Intellectual capital is defined as stocks and flows of competencies, knowledge, and skills available to businesses, which contribute to the process of generating market value of the company. Intellectual capital is essentially a set of intangible sources that together with the material resources form the market value of the company. In other words, intellectual capital comprises competencies, knowledge, and skills of a company's employees. All these competencies are disseminated and transmitted further, parallelly with contacts to people outside the company (creating thus a social capital of the company) for the purpose of creating a so-called business knowledge-organisational capital. It is clear that the company should pay more attention to the human factor, and, consequently, the human factor should not be seen only as an additional expense but as a prospective income, which will pay back in the future. It is also important that business owners become aware of the fact that the success of their enterprises as a whole depends mostly on their employees. They should not overlook this fact; on the contrary, they should seek ways of the most effective use of their human factor.

The significance of human factor was analysed by Gary Becker. Becker divided human capital into a general one (usable in a variety of jobs) and to a specific capital (which can be best used in a specific company). Becker's division stimulates further discourse of motivation and the need for investment into vocational education in order to increase the company's human capital. Human capital is affected by three fundamental features shown in Figure 1.

Figure 1 shows that the skills and qualities of the individual are determined by initial factors and they can be further developed by education and the environment. Education and the environment interact and by the impact of one's environment in which the individual grows up, as well as by the impact of continuing education (both formal and informal) and by shaping one's character, the individual acquires and develops his or her competencies and skills.