HIGH ATTRITION IN MSME SECTOR IMPACTING THEIR GROWTH, SAYS MSME EPC, 05-04-2023
After two- year Covid induced lockdown, the technology companies in the small, and medium sector are witnessing as high as 35 per cent attrition rate followed by 27 per cent in services sector severely impacting them to return to normal after the pandemic, according to the survey carried out by the MSME Export Promotion Council. The survey had covered 700 units all over the country representing different sectors.
Though the attrition rate across industries is marginally lower, but technology firms are struggling hard to retain employees. The rising churn rate has led to tremendous impact on micro, small and medium sector to the extent of 20 percent on manufacturing sector, 27 per cent in services sector particularly in financial sector and 26 per cent in e-commerce and 25 per cent in pharma. The technology companies are spending significant time and resources in training manpower but the employees move with the same knowledge to other units at higher remuneration.
Releasing the study here today, the MSME EPC Chairman D S Rawat said, engineering firms, rural units, agro-based, food and hospitality, and tourism sectors are facing lesser pressure.
The technology companies are faced with tough completion from the large and global companies and, therefore, losing a trained man-power put pressure on them and threat with business consequences. Under more pressure are those who undertake ‘out-source’ work or entered agreements delivery on ‘stipulated time frame’.
In today’s competitive environment, the impact of attrition on a business is felt highly detrimental to both the bottom line and morale. Attrition is not only related to the loss of employees or the loss of customers but unfortunately disrupt team dynamics as well as low morale. The loss of valued employees is demoralizing the remaining staff, said Rawat.
The survey found that more and more MSMEs are moving to digital economy to transform their businesses so that they can expand their market reach at domestic and international levels. Due to high attrition rate, this sector suffers the most and their entire planning is disrupted.
The survey found that a large number of MSMEs of late have launched digital initiatives to keep pace with technology innovation to address the new competitive dynamics. The companies are engaged to build differentiating capabilities that enable them to deliver value in unique way, work with digitally-enabled ecosystems and tackle some of the major problems.
The high attrition rate being experienced by some of the key sectors such as technology firms, e-commerce, financial and pharmaceutical is eroding the competitiveness of these units and many of the times diverting funds from ‘true business growth’ to higher and provide training to the new employees.
Some of the units have stated that they even lose their valued customers especially the foreign customers because the delivery schedules are disturbed and in turn their goodwill is impacted.