MSMEs are vital constituent of rapidly growing Indian economy. Despite the contribution that MSMEs offer to the economy, numerous MSMEs suffer due to inefficiencies present the internal systems of the organisation. One such challenge commonly faced by MSMEs is, how to effectively implement employee performance management practices. Following list indicates the key areas where organisations struggle in ensuring successful performance management:    

1. Resources crunch: Availability of limited financial, technical and human resources pose a great challenge in running the functional operations smoothly. Unavailability of basic resources leads to lack of defined roles and responsibilities.
2. Inadequate HR practices: This a major concern in MSMEs that the HR function is not empowered and doesn’t have sufficient budgetary allocation. Access to sophisticated performance management tools is not always possible.  
3. Workforce retention: Talent acquisition and retention are equally difficult for MSMEs. As the tenure of employees is highly volatile, it becomes challenging to identify and nurture talent in the organisation. 
4. Absence of formal guidelines: Due to several reasons, the HR department operates without well-defined performance management processes and policies. High reliance on subjective assessments leads to inconsistent evaluations and unclear expectations.
5. Improper documentation: Non-existence of all required performance management records and documents could result in difficulties and legal complications.    
6. Learning and development: MSMEs struggle in allocating a reasonable training and development budget, which adversely affects skill enhancement and career progression.
7. Resisting change: The work culture and reporting patterns in MSMEs are quite different than a professionally managed organisation. Employee may also not respond to performance management process favourably perceiving it formal and bureaucratic.  
8. Employee engagement: With high employee turnover rates, employees handling multiple responsibilities, and long working hours it becomes a challenge to sustain the high levels of employee engagement and motivation.   

To address these challenges and improvise the degree and accuracy of performance management, Indian MSMEs should try to implement customised performance management approaches and strategies, invest in people management best practices, encourage a culture of continuous feedback, and ensure compliance to laws and regulations. Seeking advice from HR experts and adopting the latest technology may prove to be beneficial in an organisation having limited resources.