Employee attrition or turnover is one of the biggest challenges faced by organizations, and this has a major impact on the performance of the businesses, more-so when their key or the high- performing employee leaves them. The vacuum is created when a well-trained and well- adapted employee leaves the organization. There are lots of factors of attrition and companies are becoming more cautious and adopting new ways of retaining talent with them. Disassociation of an employee from any organization can be classified as – voluntary and involuntary. Voluntary disassociation happens when an employee willingly leaves the organization for reasons like, to name a few –

  1. better career opportunities,
  2. higher salary,
  3. dissatisfaction with the management,
  4. personal reasons including relocation due to marriage or transfer of spouse to a differentlocation,
  5. taking up higher education, or
  6. start-up own venture

Involuntary disassociation is when the employee is

  1. laid-off due to permanent closure of the vertical or department s/he is part of,
  2. when s/he is terminated on disciplinary grounds, or
  3. due to the death of the employee

Thus, employee attrition can be defined as a gradual reduction of the employees in an organization due to resignation, retirement, or death of the employee.
Any organization is run by the right set of people, its employees, hence it becomes essential for the organization to recruit, develop and retain employees with the right skill set to ensure the long term goal is achieved and that the organization is in a sustainable model. One of the major challenges faced by organizations is to attract and retain employees. Given the dynamic business environment, organizations need to have the right set of employees who would ensure the success of the organization they are associated with. On the other hand, retaining employees has become a major challenge for all organizations, including the MSME sector in India. Most of the company’s time goes into identifying the talent, training and upskilling them to a level that they are functional and to realize that they leave the company for greener pasture outside.

Many pieces of research have cited that attrition is the critical issue being faced by the SMEs today apart from career growth, compensation, and supervision. Moreover, the routine and monotonous job have also been cited as a reason for people looking for better opportunities.

The most prominent reasons for high attrition in the Small Medium Enterprises (SMEs) are because employees are informally managed and in most of the cases are owner-managed organizations or the owner has a vital role in the decision-making process of the organization, i.e., the influence of the owner is high. In such organizations, there is a lack of formal HR policies and processes, and employees tend to develop an informal relationship with each other, including the management. The relationship between the employer and the employee is trust- based. According to one study published by the Confederation of Indian Industries (CII), around 20% of the medium enterprises and 80% of small enterprises do not have a formal HR department in place. This means that most of the Human Resource activities, including hiring and retention, are loosely handled by the manager or supervisor or the management of the organization. Without a proper functioning HR department, implementing various people- related processes and policies becomes difficult for the management. This means that the organizations should have strong processes in place to retain the employee for a longer duration and to avoid a vacuum in their skill-set and ensure business continuity.

ileadHR helps you develop strong HR policies and processes suitable to your need. To know more about it, you can connect with us at info@ileadhr.com

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