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.
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