hrm in sme's

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1 HRM in SME’s Project of SME HRM in small and medium enterprises (SME’s) Submitted to: Ma’am Shirin Submitted by: Noor-ul-ain Afzal (BBA-FA08-031) Sumaira Hafiz (BBA-FA08- 034)

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Page 1: HRM in SME's

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HRM in SME’s

Project of SME

HRM in small and medium

enterprises (SME’s)

Submitted to: Ma’am Shirin

Submitted by: Noor-ul-ain Afzal (BBA-

FA08-031)

Sumaira Hafiz (BBA-FA08-

034)

Aisha Bashir (BBA-FA08-030)

Submission date: March 7, 2011

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HRM in SME’s

The University of Faisalabad

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Table fo contents

Section 1

Focus of study, company profile and background, major

issues

Section 2

Training mad development

Section 3

Literature review

Section 4

Conclusions and recommendations

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ACKNOWLWDGEMENT

First and fore mostly we would like to thank Almighty Allah who blessed us with

knowledge, understanding and ability to do this project.

We have discovered that the work of some unknown persons makes our lives easier

every day. We believe it's appropriate to acknowledge all of these unknown

persons; but it is also necessary to acknowledge those people we know have

directly shaped our lives and our work.

First of all we would like to thank our teacher Ms. Shirin for her guidance

throughout the semester.

We thank director marketing Mr. Uzair Saeed of Al-Noor textile Pvt. Ltd., under

whose kind supervision we got our required material.

DEDICATION

This project is dedicated to our parents who have enabled us to stand on our own

feet and have guided us in all matters of life.

May Allah bless them!

Ameen

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Section 1

Focus of study

This report explores the role and part of HRM in SME’s. Small and medium

enterprise didn’t have a clear concept about the importance of HRM for an

organization. Our aim was to investigate the level of HR formality in SME’s.

Small and Medium-sized Enterprises (SME) are recognized as a significant

part of both developed and developing economies. Numbers signify their

importance as SMEs usually represent more than 99 percent of all

Enterprises in almost every country. For developing economies they are

especially important as SMEs play a Critical role in poverty reduction through

employment generation. In the past, HRM scholars have focused mainly on

large firms. Recently, research attention has increased as scholars seem to

realize the importance of HRM in SMEs better. Researchers looking at smaller

companies focus on issues like the determinants of HR in SMEs individual HR

management practices and the level of HR formality. Most studies

researching HR formality conclude that in SME's in general, HRM is informal,

intuitive and ad hoc.

As in most small SMEs the owner/manager takes care of all HR related

activities it obviously becomes difficult for him/her to manage employees

when firm size increases. Consequently, the owner/manager starts thinking

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to delegate HR responsibilities to others, inevitably leading to more

formalization.

According to a classical definition, formal HRM means that procedures or

practices are;

_ Written down (like a list of skills and qualifications for jobs)

_ regularly applied within an organization (like yearly performance review)

_ Assured to take place (like employer sponsored training)

Brief Company Profile

We selected AL-NOOR PROCESSING & TEXTILE MILLS (PVT.) LIMITED.

Background:

The chief executive of al-Noor is Mr. Riaz Ahmad Sheikh and his family in

1965 in association with his elder brother Mr. Basher Ahmad and his family.

They joined hands to start their career in cloth processing industry they

invested their capital in Al-Noor fabrics PVT limited at Samundari Road

Faisalabad as a partner. To expand their business and to project their

investments Mr. Riaz Ahmad sheikh and his brother invest their capital in

Tanzeeb textile. They also plant of data oil mills at samundari road at convert

the plant into textile unit at the name of Al-Hamra textile on partnership

basis. With the great pace of their business they purchased the unit of Al-

Noor fabrics. It’s the independently owned unit by both brothers.

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By the grace of Allah they also registered another private limited company at

the name of Baber international (pvt) ltd. On June 12th 1990 with the capital

of Rs. 5,000,000 at Sargodha road Faisalabad. In 2001 they changed the

name of Baber textile to al-Noor processing & textile mills (Pvt) Ltd. Now this

unit is working under this name.

Management of company:

1. Riaz ahmad sheikh Chief Executive

Director

2. Basher ahmad Executive

Director

3. Muhammad Amir Riaz sheikh Executive Director

4. Muhammad Saeed sheikh Executive

Director

5. Muhammad Faisal sheikh Director

6. Muhammad Saad Director

7. Muhammad Hassan Riaz sheikh Director

8. Uzair Saeed Director

Employment:

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Al-Noor has engaged more than 350 skilled manpower to expedite the

processing of cloth, including 20 members of experienced and well educated

staff which is back bone of our business.

Business Relationships:

As the company has local as well export business, we have sound elation

with our valued customers either from local market or from local market or

from exports. We have also sound relationship with our suppliers similarly

from local as well as from foreign.

Perspective and practices of HRM of the firm:

When we talk with firm’s director about their hr perspective they answered

they don’t have separate department for HRM company management is

dealing with the HRM of company means employees matters are dealt by

company management. Starting with HR planning, there is not any kind of

clear HR strategy available in similar to their responses with respect to

business and product strategy. They verbally tell their HR strategy.

Regarding HR Practices they didn’t have any clear benchmarking about HR

policies and theories. They have some formal methods about recruitment

and selection if they need to recruit from outside. They mainly recruit

employees from family and friends otherwise internal recruitment means fill

the spaces by promoting or rotating the existing employees.

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Due to informality in SME’s firm has to face many challenges in business

world due to globalization and increased market competition. After 2005,

company has a little improvement in practicing the HR.

HR challenges in SMEs:

SMEs face unique challenges that stem largely from their size. While

economies of scale permit larger organizations to employ a team of

specialists to address the complexities involved in managing HR programs,

this is not a viable option for many SMEs. The costs associated with hiring

highly trained HR professionals on a full-time basis are likely to be prohibitive

for many smaller organizations.

As a result, HR activities often become the responsibility of line managers.

This can be problematic for two reasons.

First, the complexity of many HR activities is likely to result in them

becoming a significant drain on managerial time and resources. As such, HR

tasks may interfere with managerial responsibilities that are directly related

to revenue production. This problem is even more critical given that scarcity

of managerial talent is often cited as a key factor limiting growth in

SMEs. This scarcity of managerial talent increases the opportunity costs

associated with time spent on HR administration by SME line managers.

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Second, many HR tasks involve substantial complexity and thus the quality

of HR decisions may well be affected by the fact that line managers often

lack significant training and expertise in HR.

Section 2

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Training and Development

We select training and development approach to evaluate our selected

textile firm. In textile industry technical and creative skills are very important

for the enhanced productivity and competitiveness of a firm. Al-Noor textile

has a clear focus on training and development of their employees. Because

employees are human resources of a company and polished staff leads a

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company to success. They think that our employees are our pillars of

company. Skilled worker are the basic need of textile sector. Human

Resource Development is very important for textile firms, so HRD gained

momentum in terms of employing and develop manpower that satisfies the

professional requirements of this sector and that is well skilled.

The advent of HR practices in textile sector was rather slow in comparison to

other industrial sectors. But due to globalization there is increase in

competition as a result development of human resource has become

essential. However organized HR practices are being adopted mostly by the

mill sector. In last decade we have seen not so good performance by textile

sector, this was because of lack of HRD department in many mills. But the

scenario has changed as HRD departments have taken up their role in textile

sectors. Various training programmers pertaining to training of workforce,

textile related topics have helped in enhancing the overall performance of

the textile companies.

In order to get increased productivity from workforce it is essential to have a

well framed HRD system in the organization. If the principles of HRD are

adopted it could result in decrease in non-attendance by 20% and increase in

productivity by 30%. So to cope up with the market competition HRD is very

essential element for the textile industry.

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HRD department is responsible for developing the feeling of motivation in

the employees; this motivation in other words is the commitment of the

employees towards the job and the organization. When the work of HRD is

done effectively it would result into co-operation among team members,

demolition of centralized system of decision making, creates homely

environment, feeling of ownership and positive working atmosphere.

From the above discussion it is clearly seen that HRD has become an

important need in textile sector. So a clear trend towards HRD is also seen in

SME’s to cope up with the new emerging challenges in the world. From the

start of 21st century, SME’s start practicing to some extent because it

becomes the need for them. As the prevailing trend in SME’s Al-Noor textile

also gave attention towards their HRM practices. In the last ten years they

have adopted many of the HR practices and I will discuss here the T&D

practices they are practicing now a days.

1. The training drivers for the company are the following by which they

analyze the needs that when and why employees need training to

develop their skills:

Business performance statistics and reports.

Financial reports and ratios.

Competitor analysis and comparison, e.g. SWOT analysis

2. Training plan: A detailed plan for carrying out employee training for a

unit of work.

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They have a three step training plan to implement on:

1st- establishment of performance standards (on which employees

to be evaluated): they provide a readymade structure for a training

program.

Job Description ,Job Specifications, Market Benchmarking on the

specified jobs ,“People Culture”

2nd- training objective

“To see our employees competitive with the market and

coping up with the “people culture’’.”

3rd- Standard procedures

Unit training program for technical employees

Training workshops

On the job training (JIT)

Orientation plan: (the pre-job phase training)

The company introduces the new employees with the job and workplace. Al-

Noor textile use orientation program for the new entrants to make them

easier and familiar with their job.

Here is their orientation plan

Day 0

Prior to employee arrival

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Clean and set up office or workstation Notify current staff of the new staff and arrival date Get business cards and a name plate for office or workstation Set up equipment access ( telephone, machinery etc)

Day 1 Welcoming our new employee meeting with immediate supervisor give them the 'lay of the land'-location of restrooms, kitchen or

lunch room, dress code, hours of work introduction to team members provide a mentor or buddy who will guide the new hire arrange for security pass take the employee out to lunch

Key information to be provided job requirements and what is expected from new employees employee handbook organization chart signing of employees form location of office supplies, and general work area

Day 2 On the job training Share the right account of information that is required to the

employee to do the job connect the employee with key people whom they can go for

assistance or direction

Day 3

Official orientation program

depending on the number of new hires, set up a half day or full day orientation presentation

Allow hires to connect with each other. try ice breaker games Provide broad business information such as business strategy,

vision and mission and structure. allow employee to address any concerns they may have

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Section 3

Article reviews

Review no. 1

Encouraging Training & Development Activities in SME’s: Some Lessons from

UK Research*

BY Steve Johnson who can be contacted at [email protected]

Summary:

This article reviews some recent research that has been undertaken in the

United Kingdom (UK) into Training and development activities in Small and

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Medium Sized Enterprises (SMEs), and outlines some Lessons that could be

valuable for organizations in South Africa that are trying to encourage and

assist SMEs to engage more effectively in skill development activities.

Despite a range of statistical evidence to the contrary, UK research has

revealed that many SMEs do in Fact engages in many forms of skill

development activities.

It is important that government and other organizations recognize the

factors that inhibit training and Development in SMEs and build upon the

positive practice that does exist in many SMEs, as well as Linking skill

development initiatives more effectively with business development policies.

This article sets out some of the key lessons for policy that have emerged

from a recent review of research into skills.

Issues in SMEs (Johnson, 2002).

The policy background that forms the context for this article is the so-called

‘lifelong learning agenda’. The desire to improve the level of skills, training

and associated qualifications has long been a Component of UK economic

and labor market policy.

Given the well-documented increase in the importance of SMEs within the UK

economy, it is clearly important to consider the activities of SMEs in relation

to learning and skills development. If policy Makers are to succeed in

ensuring that the skill needs of the economy are met, they need to persuade

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and/or incentivize SMEs as well as larger employers to invest in their people,

while also convincing Individuals to invest in their own learning.

The National Skills Task Force Final Report (2000), and the subsequent

response from the Secretary of State (Department for Education and

Employment, 2000) both recognize the key role played by SMEs in the

learning and training system. These documents suggest that there are a

number of problems associated with engaging SMEs in the national skills

agenda. The problems which are identified are as follow:

1) Low levels of off-the-job training by SMEs, in comparison with larger

organizations.

2) Lack of internal capacity, and sometimes motivation, to provide learning

opportunities for their staff.

3) A "disturbingly high proportion … of owner-managers who had low or no

qualifications" (National Skills Task Force 2000: para. 4.23)

4) Very low proportions of small businesses involved in Investors in People.

The argument of this article is that the chances of success of policies to

promote lifelong learning, in the UK as well as in other countries, will be

increased if a number of key points are recognized about learning within

SMEs.This role and importance of informal learning in SMEs needs to be

recognized and appreciated. It is important to understand and appreciate the

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reasons why some SMEs do not undertake formal training. Training and

learning initiatives need to be introduced in the context of business support

and not ‘sold’ as standalone packages.

The arguments presented above suggest that care needs to be taken in

drawing general conclusions from evidence that is not totally unambiguous

and relies on definitions of training that are more relevant to large

organizations than to smaller employers. A much more sophisticated picture

needs to be built of the variations in training/learning activities between

different types of employer, if appropriate policy responses are to be

devised.

Key points:

1. UK research has revealed that many SMEs do in Fact engages in many

forms of skill development activities.

2. Documented increase in the importance of SMEs within the UK

economy.

3. Consider the activities of SMEs in relation to learning and skills

development.

4. The argument of this article is that the chances of success of policies

to promote lifelong learning.

5. Highlighted a number of factors that are relevant to the situation in

South Africa.

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Conclusion:

From this article we can summaries a large and growing body of research

evidence from the UK, and has highlighted a number of factors that are

relevant to the situation in South Africa, with its large and diverse SME

population and a policy desire to improve levels of skill development in

SMEs.This review has demonstrated that it is very dangerous to generalize

about training and skill Development activities in SMEs.

Finally, it should be recognized that improved skill development can lead to

better business performance of some SMEs under some circumstances. Skill

development initiatives need to be linked to wider programmers to help

SMEs to improve their performance. This means much closer working

between skill development agencies and business development

organizations.

Review 2

FROM FORMAL TO FUNCTIONAL: SME’S, E-LEARNINGAND KNOWLEDGE TRANSFER IN THE CANDLE

PROJECTIan Stevenson

School of Education, University of LeedsWoodhouse Lane, Leeds LS2 9JT

Summary:

Small and Medium Enterprises (SMEs) are defined to be companies that have

less than 250 employees. By contrast there are just 40, 000 large enterprises

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(LE) with more than 250 employees. (Issue, 2003). In The context of the

knowledge economy, with demanding customer-bases, reduced product

cycle periods, and global markets, SMEs are under pressure to develop and

modernize their competency and skills base. Continual competitive pressures

lead SMEs and large enterprises (LE) to innovate and Change at ever

increasing rates, and both are always looking for new sources of knowledge

and skills to exploit. Within the Large Enterprise sector there has been a

trend to “outsource” training, with recent surveys showing 90% of firms

outsourcing at least some of their training and administrative tasks (Gainey

& Klaas, 2003). The training picture for SMEs is more complex, with many

(rural and peripheral) areas relying on SMEs for employment and learning

opportunities. Conclusions reached in the context of large firms about

training may be inappropriate for small organizations. (Hill & Stewart 2000).

As Iles & Yolles (2002:6) note: “there is little evidence that small business-

owners are particularly attracted to such training, either for themselves or

their staff.” This leads to a different sense of personal and organizational

goals both in comparison to large enterprises, and between employers and

employees within SMEs. A major factor in this process of gaining new

knowledge and skills for SMEs and large enterprises is Information and

Communication Technology (ICT). Although there are distinct difference

between the SMEs and LE in their attitudes and approaches to training in

new knowledge and skills, they both need to have access to the latest

technologies and to use them effectively.

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The notion that Small, Medium, and Large Enterprises can have access to the

latest research or Techniques delivered in a style and at a pace that suits

individual learners, are one attractive solution. Much has been written about

the ways that e-learning or e-training can be used as part of this process. E-

training might benefit this SME sector the most by finding business

structures that accommodate the Internet, and help the firm assimilate to

those structures as part of their activities. The “lack of Buffering” means that

for SMEs that intend to deal with the Internet, training and using the web will

take a relatively larger share of their resources. ). Enterprises need

knowledge which will be useful in helping them to achieve, often quite

specific, organizational goals. So called “just-in-time “strategies, which

resonate with business supply chain models and practices, imply that

relevant information and training arrive at a time and pace to suit a specific

need.

Key points:

1. The survey demanding customer-bases, reduced product cycle periods,

and global markets.

2. Continual competitive pressures lead SMEs and large enterprises (LE)

to innovate and Change at ever increasing rates.

3. Training picture for SMEs is more complex, with many (rural and

peripheral) areas relying on SMEs for employment and learning

opportunities.

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4. A major factor in this process of gaining new knowledge and skills for

SMEs and large enterprises is Information and Communication

Technology (ICT).

5. The e-learning or e-training can be used as part of this process.

6. Enterprises need knowledge which will be useful in helping them to

achieve, often quite specific, organizational goals.

Conclusion:

Conclusions reached in the context of large firms about training may be

inappropriate for small organizations. And also conclude by discussing the

nature of the knowledge transferred between the participants, and the model

of Knowledge Transfer used in the scenario.

Review 3

Strategies & Solutions

Training Strategy Using Internal Experts

By Kathleen D. Miller, president of Miller Consultants, Louisville, Kentucky;Virginia S. Major, organizational consultant for Miller Consultants, Manchester, Connecticut;and Leslie Hunt, organizational consultant for Miller Consultants, Houston.

Summary:

In this article describe that how much training and development is important

in supply management and the SMEs organization. Today, supply managers

must be skilled not only in supply management but in the management of

the entire value chain, as supply management

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Organizations become significant players in organizations’ quests to gain

competitive advantages. Organizations that are on the ball will craft sound

training and development (T&D) Strategies to ensure that the supply

managers who hold these increasingly critical jobs have the know-how to

excel. But it is not easy to implement training and development in today’s

time and money –starved organizations.

The internal experts are in the best position to identify which knowledge and

skills are most essential for sourcing professionals in their organization. But if

internal experts not give the new ideas and efforts then organization hire the

outside experts who manage all the things. There are many use of external

expertise and they give the benefits to the organizations. When T&D experts

come together with SMEs, however, the group is most likely to succeed in

producing a strategy that is fresh and effective. The SMEs involved in this

project were all exemplary employees who were committed to strategic

sourcing. They were able to identify and explain the best practices, although

they required some assistance from the consultants in reaching consensus

about which practices should be incorporated into standard work processes.

But if the organizations use their internal experts they have knowledge,

skills, and abilities (KSAs) that they use to carry out their duties and make

decisions. An excellent way to develop the content for training that meets

real organizational needs is to base it on the KSAs possessed by the

organization’s finest talent. These KSAs may be of two types. The first type is

fact-based and procedural. Training professionals use fairly straightforward

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procedures called job analysis and task analysis to access this information

from SMEs. The T&D facilitators asked the SMEs to describe concrete

situations that exemplified how they carried out each step. As the SMEs

relayed their stories, the facilitators probed by asking questions, such as how

they chose between several alternatives, how they weighed options, or what

information they examined in order to make decisions.

Still another way to use internal experts is to involve them in the delivery of

the training or learning experience. With the proper materials and some

preparation, most SMEs can become effective teachers. T&D professionals

can offer valuable instruction on how to facilitate learning experiences, both

formal and informal. Some of the services they can provide include

conducting "train-the-trainer" sessions for SMEs or designing mentoring or

SOJT toolkits that the SMEs can use as guides. Changes occurring within

supply management organizations necessitate increased attention to the

training and development needs of sourcing professionals.

Key points:

1. Organizations are maximizing their resources to develop and

implement training strategy

2. By collaborating with internal experts.

3. Assemble the training and development strategy group.

4. Use different subject matter experts to determine curriculum.

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5. Use internal SMEs to deliver the training and development

experiences.

6. T&D gives the confident to work the more effective and efficient.

7. The SMEs take the clear decisions.

8. The T&D world refers to these people as subject matter experts

(SMEs). They bring profession related expertise to the table.

Conclusion: The article has described a few of the many ways to involve

internal experts in the design, development, and delivery of T&D strategies.

Regardless of the exact role they play, when sourcing experts collaborate

with T&D professionals, together they can create learning programs that

successfully support the goals of the organization while saving time and

money.

Section 4

Conclusions and Recommendations

To summarize, HR functions deal with different dynamics when contributing

to SME growth plan. While the organization plans to follow a successful

trajectory, there is a need for both HR and the Promoters to appreciate and

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agree on change management agenda through change in organization

culture. HR has the responsibility to understand business dynamics in SME

environment before implementing the standard HR practices, policies and

processes. This mutual appreciation will help HR to be an effective business

partner.

It is the hard reality, with which scholars may agree that right efforts has not

been devoted to understand the relevance of HRM formality for SMEs as

majority of the scholars wisely tried to escape from this by advocating

formality is required when SMEs grow, pressurize from larger counterparts

and so on. As literature review suggests that an appropriate level of HR

formality is required and these formal HR practices are believed to help

Owners/mangers in hiring the right candidates, developing employees,

compensating and judging their performance which in return helps

organizations achieve better results. But in reality things are different, as

hardly any study able to clearly identify 'what HR formality means for SMEs'.

Now to summarize training and development in the context. T&D has a very

positive trend in the last decade in SME’s. As increasing competition and the

globalization mean it very important for every organization to have powerful

and skilled staff, which understands the trends and changing needs of

society.

To develop the staff according to market trends HRD is playing a vital role in

making the staff competitive. So a way to enhance T&D is to work with

internal experts to design T&D strategies for the firm. Source them to T&D

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specialists so they can make learning programs which can work effectively

for the firm and it also save money.

Here are some recommendations to improve training strategies for a firm.

There are ten features which are necessary for a feature of training program

for a firm either it’s an SME because in competitive world sizes of firm have

lost its importance. The thing which is important is skilled manpower.

1. Training objectives should be strategy driven

2. Positive cost to benefit ratio

3. Training objectives should be Supported by key strategies, systems,

structures, policies, and practices

4. Training should Maximize employee ability and potential through

shared accountability

5. Training should be Work-related.

6. Learning by doing is best criteria.

7. Training should have Transferability of knowledge and skills back to

the job.

8. Linked to other people-related programs and departments

9. Continuous learning process.

10. Training should be driven through many channels.

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We have some low cost training programs as recommendations:

People Performance Potential model (PPP)

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The Process of Training and Developing Others - Typical Model