attrition and retention management_final

Table of Contents

Contents Page No.

1 About Attrition 2

2 Diagnosing the Causes Of Attrition 4

3 Reasons For Attrition 10

4. Curbing Attrition 12

5. Achieving Retention 17

6. Costs of Turnover – Calculation 21

7. Facts about Employee Turnover 24

8. Attrition Rates in Asia and IT Sector 28

9. Importance of Employee Retention 32

10. How to Increase Employee Retention 33

11. Managing Employee Retention 35

12. Key points in Attracting and Retaining Talent 36

13. Retention Bonus 38

14. Role of Manager in Retention 39

15. Retention Myths 41

16. Bibliography 43

N.L. DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

1. About Attrition

In the best of worlds, employees would love their jobs, like their coworkers, work hard for their employers, get paid well for their work, have ample chances for advancement, and flexible schedules so they could attend to personal or family needs when necessary. And never leave.

But then there's the real world. And in the real world, employees, do leave, either because they want more money, hate the working conditions, hate their coworkers, want a change, or because their spouse gets a dream job in another state. So, what does all that turnover cost? And which employees are likely to have the highest turnover? Who is likely to stay the longest?

Defining Attrition: "A reduction in the number of employees through retirement, resignation or death"

Defining Attrition Rate: "the rate of shrinkage in size or number"

Attrition is beginning to significantly affect offshore ROI. Just as businesses faced a scarcity of talented IT resources during the dotcom era, organizations in offshore countries such as India are experiencing similar pains. Skilled employees are hopping from job to job and taking with them the customer knowledge and technical expertise that any company needs. Their salaries are increasing, along with their perks, benefits, and bonuses.

Defining the Attrition Problem:

Global outsourcing and the astounding amount of foreign direct investment pouring into China, Russia, and India have created tremendous opportunities and competition for talented IT professionals in those countries. The downside of this increased competition is a rising rate of attrition, particularly in India.

If a company has 100 programmers and an attrition rate of 25%, then 25 of its IT staff will leave each year. Think about the time and money it took to find, interview, hire, train, and coach those 25 people. Now think about losing them and starting the hiring and training processes anew.

How do the hiring and training processes break down in terms of total costs in India? The typical time for advertising, interviewing, screening, negotiating, and hiring a new employee is about two weeks. Companies usually allot one week for programmers to become familiar with the new business, two more


“If employees are products,

their shelf-lives are

weeks for technical training, and one last week for customer training. Now imagine a 25% attrition rate and replacing 25 of these programmers each year. Based on a yearly salary of $6, 00,000 for the human resource person and Rs. 10, 00,000 for the programmer, it would cost an additional Rs. 25, 00,000 annually in acquisition and employee training costs. After considering these figures, it quickly becomes apparent why companies are investing in strategies to prevent attrition.


2. Diagnosing the Causes of Employee Turnover

Diagnosing The Causes Of Employee Turnover

Diagnosing the key drivers of turnover is crucial if you are to reduce employee turnover. An incorrect diagnosis and your intervention is highly unlikely to succeed.

Having analyzed the available data on retention and turnover, you should have a good idea on those specific groups you wish to investigate, to see if you can establish the key drivers of turnover, and put in place appropriate solutions.

There are several different approaches to information gathering. It is usually best to use a combination, providing both qualitative and quantitative data.

Depending upon the precise circumstances: conduct small number of interviews followed by two or more focus groups then a questionnaire to a wider audience and perhaps a survey if appropriate

Interviews A good way of discovering relevant information is through one to one interviews. For an interview to be effective it should be conducted by a neutral third party.

There are advantages and disadvantages with this method of information gathering. Its major drawback is that it can be very time consuming and hence expensive. The other disadvantage is the lack of anonymity.

The main advantage is the ability to provide much greater detail than you would get from a quantitative approach such as a survey or questionnaire.

The key to interviewing is in being able to ask well targeted questions. Remember you don't want to know why employees in general leave; you want to know the main reasons why employees in this specific group leave.

Interviews can be structured or unstructured. In the initial stages it is wise to adopt an unstructured format so you can ask additional questions for more detailed information. Keep probing for extra clarity until you feel you have reached the source of the problem.


Interviewers need to have well developed listening skills to take on board relevant information; otherwise conducting interviews will be largely pointless.

Key Points prepare questions dig deep for the real truth listening is vital do a test run of your interview

Focus Groups Using a focus group can be an appropriate way of discovering some of the key drivers of turnover.

It is a good way to acquire qualitative information, rather the quantitative data that a survey produces. Focus groups are inexpensive when compared to say interviews and take less time to prepare.

A focus group provides an opportunity for a small number of people to discuss issues relating to employee turnover and retention. An added benefit of focus groups is that they can be used to generate new ideas, discussing possible solutions as well as diagnosing causes.

For larger companies you will need to conduct a series of focus groups in order to get a reasonable sample. Key Points

Requires a facilitator to pose the questions Restrict size of each group to between 6 - 10 Ensure focus group is representative of targeted group Plan broad topics though leave room to explore ideas Explain the reason for the focus group Avoid letting one person dominate Ask why colleagues left Ask why colleagues stay Ask why colleagues would leave Ask what would keep them from leaving

Nominal Group Technique

One particular type of focus group process is the nominal group technique. This is especially useful in determining the key drivers of employee turnover.

Key Points


Group size 8 -10 Representative sample Focus on why others would leave, not why they would leave Create trust Integrate the data from a series of groups

Procedure 1. Explain the ground rules 2. Each member of the group is asked to write down reasons why colleagues have left 3. The facilitator goes round the group asking each person in turn for their first reason 4. The facilitator uses a flip chart to document the reasons 5. They then repeat for each person's second reason and so on 6. These lists are then clearly displayed for everyone to see 7. Group members are then asked to choose the most important reasons after careful consideration of all those listed 8. They rank these in order of importance 9. Scores calculated by awarding a set number of points for no1, no2 etc, then totally the number of points for each reason.

Questionnaires

Questionnaires are commonly used as part of the information gathering process. They are a reasonable way of obtaining relevant information, though response rates are often disappointing. Questionnaires need to be designed carefully to be effective. They should be: - easy to use - anonymous - fairly brief Questions can be open or closed, multiple choice answers, ranking of items or checklist format. Steps: 1. Determine the information needed 2. Choose the type of questions 3. Create the precise questions 4. Check readability 5. Design for analysis 6. Test 7. Adjust if necessary 8. Prepare data summary 9. Distribute To improve response rates you should ensure confidentiality, provide advance warning, explain the purpose of the questionnaire and explain who will see the data.


Attitude Surveys

The use of surveys to measure employee engagement or commitment is gaining in popularity.

The research suggests commitment is a reasonable predictor of turnover if considered across a large enough group. Unfortunately surveys are not always reliable and response rates are sometimes disappointing.

One difficulty with attitude surveys is knowing which areas to focus upon. It is usually sensible to conduct some form of qualitative information gathering beforehand, in order to get an idea of which issues you should be asking about.

Surveys tend to ask the importance of each issue, in addition to rating how the company is performing on that issue.

Retention Surveys Will Usually Ask About Some of The Following: 1. Resources to do the job 2. Career development 3. Relationship with manager 4. Meaningful work 5. Work-life balance 6. Learning new skills 7. Appreciation 8. Recognition 9. Relationship with colleagues 10. Company's values 11. Leadership 12. Salary 13. Benefits 14. Job security 15. Stress 16. Team working 17. Communication 18. Giving back to the community 19. Delegation 20. Everyday experience


Exit Interviews

Exit interviews are used by the majority of companies. They tend to be conducted just before an employee leaves, though some firms wait until after the departure.

Exit interviews will normally to be done in the form of a questionnaire, though one to one interviews are also used. Recent years have seen the appearance of internet based exit interview questionnaires.

Unfortunately, research shows exit interviews to be unreliable, as departing employees opt to give socially acceptable reasons rather than genuine ones.

It is rarely in the employee's best interests to give any negative reason for leaving at this stage. The need for references is often paramount, and not worth putting at risk, by giving the real reasons.

In addition, departing employees may be unwilling to devote much time to completing detailed questionnaires, resulting in incomplete answers.

The end result will often be a large number of departures apparently due to an offer they simply could not refuse, or in the wider context, career advancement.

To improve the reliability of exit interviews, it is best if they are anonymous. An unfortunate side effect of anonymity is that response rates drop.

If you are to conduct one to one interviews, it is far better to get a neutral third party to conduct them, or if that is not practical, to use HR or a trusted figure, than to let their manager or supervisor take responsibility.

Designing Exit Interviews ensure confidentiality anonymous if possible provide a small incentive focus on improving conditions for colleagues

Some firms opt to conduct exit interviews six months after departure. This way they have a better chance of determining the destination. This information is more difficult to obtain but may be more reliable as the references factor is less significant.

In all honesty, exit interview data needs to be treated with a large degree of skepticism. It is certainly unwise to make exit interviews your only source of information.

Summary


Exit interviews in general are unreliable Treat with extreme caution Involve a neutral third party for better reliability Make sure to use other sources of information in addition

Creative Thinking

Sometimes the use of creative thinking techniques can help uncover the key drivers of turnover. The following techniques are worthy of consideration if your information gathering has proved to be unhelpful: 1. Force field analysis 2. Mind mapping 3. Brainstorming 4. Cause and effect diagram

3. Reasons for AttritionN.L. DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

It is not easy to find out as to who contributes and who has the control on the attrition of employees. Various studies/survey conducted indicates that every one is contributing to the prevailing attrition. Attrition does not happen for one or two reasons. The way the industry is projected and speed at which the companies are expanding has a major part in attrition.

For a moment if we look back, did we plan for the growth of this industry and answer will be no. The readiness in all aspects will ease the problems to some extent. In our country we start the industry and then develop the infrastructure. All the major IT companies have faced these realities. If you look within, the specific reasons for attrition are varied in nature and it is interesting to know why the people change jobs so quickly. Even today, the main reason for changing jobs is for higher salary and better benefits. But in call centers the reasons are many and it is also true that for funny reasons people change jobs. At the same time the attrition cannot be attributed to employees alone.

Organizational Matters:The employees always assess the management values, work culture, work practices and credibility of the organization. The Indian companies do have difficulties in getting the businesses and retain it for a long time. There are always ups and downs in the business. When there is no focus and in the absence of business plans, non-availability of the campaigns makes people to quickly move out of the organization.

Working Environment :

Working environment is the most important cause of attrition. Employees expect very professional approach and international working environment. They expect very friendly and learning environment. It means bossism; rigid rules and stick approach will not suit the call center. Employees look for freedom, good treatment from the superiors, good encouragement and friendly approach from one and all.

Job Matters :

No doubt the jobs today bring lots of pressure and stress is high. The employees leave the job if there is too much pressure on performance or any work related pressure. It is quite common that employees are moved from one process to another. They take time to get adjusted with the new campaigns and few employees even find it difficult and they leave immediately. Monotony sets in very quickly and this is one of the main reasons for attrition. Youngsters look jobs as being temporary and they quickly change the job once they get into their own field. The other option is to move to work where there is no pressure of sales and meeting service level agreements (SLA).

Salary And Other Benefits :

Moving from one job to another for higher salary, better positions and better benefits are the most important reasons for attrition. The salaries offered from MNC companies in Bangalore, Delhi and Mumbai have gone up very high (Rs 25000 to Rs 35,000 per month) and it is highly


impossible for Indian companies to meet the expectation of the employees. The employees expect salary revision once in 4-6 months and if not they move to other organizations.

Personal Reasons :

The personal reasons are many and only few are visible to us. The foremost personal reasons are getting married or falling in love or change of place. The next important personal reason is going for higher education. Most of the BE, MCA and others appear for GATE examination or other examinations and once they get cleared they quickly move out.

Health is another aspect, which contributes for attrition. Employees do get affected with health problems like sleep disturbances, indigestion, headache, throat infection and gynecological dysfunction for lady employees. Employees who have allergic problems and unable to cope with the AC hall etc. will tend to get various other health problems and loose interest to work.

Poaching :

The demand for trained and competent manpower is very high. Poaching has become very common. The big companies target employees of small companies. The placement agencies have good days for doing more business.

The employees with 4-6 months experience have very good confidence and dare to walk out and get a better job in a week's time. Most of the organizations have employee referral schemes and this makes people to spread message and refer the know candidates from the previous companies and earn too.

Employee’s Advocate :

One of the main reasons why employees leave companies is because of problems with their managers. An HR professional can be termed an employee’s advocate and a bridge between top management and employees at all levels. There is a huge gap between HR professionals and employees in terms of understanding challenges and delivering requirements. HR has not really understood the problems associated with employees’ careers and jobs. The company’s overall plans and strategies also depend on HR professionals as they voice employees’ problems and requirements. The HR department should have genuine interest in the employees’ welfare…it is responsible for making sure that their expectations are met. By doing this it is easier to meet the company’s business targets.

4. Curbing AttritionN.L. DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH

How to curb attrition?

Money Is Not Everything

Although the importance of higher packages is slowly diminishing, among fresher or laterals with less than three years of work experience, money is still considered to be the highest priority. Employees want not only work recognition, but also extra perks." A number of professionals are looking at more challenging jobs. "In several cases, faced with a choice between more money and a challenging job, employees have opted for the latter as it allows them to learn new technology and increase domain expertise." People analyze the training programmes of prospective companies with those of their current organization, which means that how an organization grooms an employee is weighed to a greater extent. This is because they know that developing next-level skills will keep them ahead in the job market, and finally result in better compensation. They also look for a job with higher levels of responsibility, better learning opportunities.

Vision And Objectives

The next level of communication, a crucial part of retention, starts with acquainting employees with the company’s vision and objectives. Organizations successful in retaining employees clearly pass on their goals and achievements. Conducting regular meetings and updating employees, especially new entrants, about the company’s status and achievements is a must.” They should concentrate on leadership and brand building as people prefer to be associated with a brand. Respect for the job should be created by BPOs. The youth should feel proud to be a part of the billion-dollar industry.

Mentoring and handholding new recruits from day one to four months are important tasks; during this period, they should be familiarized with the culture of the company. It is at this time that new entrants experiment with different options. Hence they should be exposed to the best values the company has.” If they are informed about regular happenings in the company, employees will be confident about the future and not try to look for better options.

Treat Employees Like Customers

Even while companies strive to understand which organizational, job, and reward factors will contribute to holding back employees, industry experts have found several loopholes at the top management and HR management level. Companies should have a similar approach to employees and customers. If a company strives to retain an employee in the same way it tries to retain a customer, him leaving the organization could be out of question.


Since software professionals have different priorities at different points of time, organizations need to structure their offer-mix while recruiting new hires, as well as promoting potential ones. Communication is the foundation for the entire process of managing attrition. This communication begins right from recruitment. In cases of peer pressure, an employee aims to join a well-known company. This could be achieved by brand building, which attracts the right talent and helps in retention as well.

Understanding an employee’s needs at various levels is a recommended HR practice.

Firing

Sometimes, firing can look like attrition. Looking at firing and attrition together in a different light, firing can be an excellent tool to contain attrition. Attrition can simply be defined as employee leaving his current job due to reasons like, job pressure, health problems, personal reasons, inefficient boss, etc. All the above reasons are interlinked and can be the reasons for good workers to quit. If the team has under-performers who despite given sufficient support and training are unable to perform, but they continue to be part of the team damage the morale of the team. A performer will not want to be part of the team, which has non-performers because he will have to compensate for the non-performer, thereby increasing his job output/pressure. A continuous job pressure results in health problems. Having frequent health problems not only reduces his performance, but also affects him financially. At this juncture, the performer realizes that he is working with an inefficient manager who is not capable of “cleaning up” the team by firing non-performers. With the above, the performer employee feels insecure and resigns. Firing non-performers can be an efficient tool to contain attrition.

Consider Feedback

It is important to take feedback from employees through different means and work with the HR department to iron out differences. As industry experts point out, feedback can be got in two ways—during the employee’s tenure, and through exit interviews. The Wipro Listens and Responds initiative at Wipro aims to capture the concerns and grievances of its employees. “The feedback we get through this tool will be analyzed, and action will be taken on it. Our employees are very excited that their feedback is being taken seriously,” says Sahoo. Based on their revelations, the organization can address the problems of existing employees, thereby curb attrition.

Spend Time Developing And Benchmarking Incentives


Whenever the demand for a professional in a particular field heats up, the perks associated with the job start to pile up. Standard perks for an India-based "fresher" (a new entrant in the IT services industry with little work experience) typically include free transportation, educational assistance, healthcare benefits, performance-based bonuses, onsite cafeteria, stock options, and interest-free loans to absorb the cost of relocation or maybe to finance the purchase of a two-wheeler. According to Wipro's web site, its employees even have access to an agency that will handle such "domestic chores" as paying bills, thereby giving IT workers more free time.

An important part of designing incentives is aligning them with market benchmarks. As far as salaries, HR firm Hewitt Associates reports that India showed the largest overall salary increase in the Asia-Pacific region in 2006. Salaries in India grew by 11.6% overall, while China trailed with a 6.4%–8.4% hike, the Philippines showed a 7.4%–7.7% increase, and Korea saw wages jump by 6.4%–6.8%. Salary increases for middle managers in India were even more dramatic: Nasscom, India's software association found that salaries for middle managers rose by as much as 30% in the last two years. These salaries are often paired with expansive benefit packages that include standard entry-level benefits as well as special services such as help finding and buying a home or enrolling children in school.

Captive centers and IT service providers have to offer innovative compensation and benefits—or risk losing valued employees to competitors. Nonstop evaluation and benchmarking are "need to do" activities for IT managers.

Subsidize Education And Certification

In the United States, many companies reimburse employees for advanced degrees or certifications that relate to their area of expertise. Until recently, the opposite was true in India, but that trend has begun to change as businesses have discovered that a significant portion of their attrition problems stem from employees leaving to pursue a master's degree. Several offshore service providers have teamed with universities to offer their workers management-level master's courses at a subsidized rate, and watched attrition rates drop as a result.

For example, Cognizant Technology Solutions, an IT service firm with 17,000 employees, partially reimburses Indian staff that pursues master's degrees at BITS, a higher-education institution located in Pilani, India. Business process outsourcing (BPO) player 24/7 Customer, in association with the Indian Institute of Management Bangalore, launched a management-education seminar series called "Beyond Knowledge," through which 24/7 aims to educate employees about the BPO industry and discuss related careers. Multiple providers have followed the lead of Cognizant and 24/7.

In several offshore countries, advanced degrees are considered crucial to social standing. It's important for U.S. firms with little international experience to recognize this desire among employees and design programs accordingly.


Change Locations

The high prices and resource crunch in top-tier Indian cities such as Bangalore and Mumbai have led many companies to execute alternative location strategies. Many vendors are sending work to tier-two cities (Hyderabad or Chennai) or even tier-three cities (Noida or Chandigarh), where labor and real estate costs as well as attrition may be cut in half. Such benefits come at a price: The infrastructure quality lags that of more advanced cities, and the search to find qualified people may take longer.

Another option to combat the rising attrition rates in India is to locate in other countries. Sykes Enterprises, for example, disclosed that it is relocating the customer contact management work at its Bangalore, India, facility because the center delivered an inadequate return and a limited competitive advantage. The Tampa-based company thinks the work is better suited for the other Asia-Pacific offshore centers in its portfolio, such as China. Sykes expected to incur total charges of approximately $0.8–$1.5 million for its plan to relocate work.

Rotate Employees

Employees who don't feel challenged by their work often leave. In response, companies such as TCS have programs that rotate employees into different disciplines about every two years and expose them to new locations, projects, and technologies. L&T InfoTech, a software solutions provider with 4,000 employees and six development centers in India, has implemented a similar program.

Offshore employees are asking for a clear career path with increased responsibility and frequent recognition of achievement. Established U.S. and European multinational companies have long had learning programs that set expectations for performance goals such as learning a particular tool or proprietary software. Companies practicing off shoring need to provide new challenges and opportunities for skills development through training or job rotation. It may become the only reason your best employees stay with you.

Combat Poaching By Encouraging Referrals

Rather than going through a prolonged posting process and screening a deluge of résumés, some companies poach employees directly from their competitors and offer to double salaries or buy out contracts on the spot to scale up quickly. Poaching is generally a bad idea, as it drives up salaries and discourages employee loyalty.


An employee referral program can serve as an alternative and effective recruiting strategy. Satisfied employees can be a company's best sales tool and add a personal touch that a print or radio campaign lacks. A Voice & Data survey of the top 15 Indian outsourcing companies with 1,000-plus employees found that referrals constituted 23% of new hires. For some companies, the number was even higher, at 40%. The study also observed that recruits hired through employee referral programs are "stickier"; that is, they stay with companies longer than non-referrals.

5. Achieving Retention


Transparent Work Culture

In today’s fast paced business environments where employees are constantly striving to achieve business goals under time restrictions; open minded and transparent work culture plays a vital role in employee retention.Companies invest very many hours and monies in training and educating employees. These companies are severely affected when employees check out, especially in the middle of some big company project or venture. Although employees most often prefer to stay with the same company and use their time and experience for personal growth and development, they leave mainly because of work related stress and dissatisfactions.

More and more companies have now realized the importance of a healthy work culture and have a gamut of people management good practices for employees to have that ideal fresh work-life. Closed doors work culture can serve as a deterrent to communication and trust within employees which are potential causes for work-related apathy and frenzy.A transparent work environment can serve as one of the primary triggers to facilitate accountability, trust, communication, responsibility, pride and so on. It is believed that in a transparent work culture employees rigorously communicate with their peers and exchange ideas and thoughts before they are finally matured in to full-blown concepts. It induces responsibility among employees and accountability towards other peers, which gradually builds up trust and pride. More importantly, transparency in work environment discourages work-politics which often hinders company goals as employees start to advance their personal objectives at the expense of development of the company as a single entity.Employees comprise the most vital assets of the company. In a work place where employees are not able to use their full potential and not heard and valued, they are likely to leave because of stress and frustration. In a transparent environment while employees get a sense of achievement and belongingness from a healthy work environment, the company is benefited with a stronger, reliable work-force harboring bright new ideas for its growth.

Quality of Work The success of any organization depends on how it attracts, recruits, motivates, and retains its workforce. Organizations need to be more flexible so that they develop their talented workforce and gain their commitment. Thus, organizations are required to retain employees by addressing their work life issues.

The elements that are relevant to an individual’s quality of work life include the task, the physical work environment, social environment within the organization, administrative system and relationship between life on and off the job.

The basic objectives of a QWL program are improved working conditions for the employee and increase organizational effectiveness.


Supporting Employees

Organizations these days want to protect their biggest and most valuable asset and they want to do this in a way that best suits their organizational culture. Retaining employees is a difficult task. Providing support to the employees acts as a mantra for retraining them. Employers can also support their employees by creating an environment of trust and inculcating the organizational values into employees.The management can support employees directly or indirectly. Directly, they provide support in terms of personal crises, managing stress and personal development. Management can support employees, indirectly, in a number of ways as follows:

Manage employee turnover:

o Employee turnover affects the whole organization in terms of productivity. Managing the

turnover, hence, becomes an important task. A proactive approach can be adopted to reduce attrition. Strategies should be framed in advance and implemented when the times arrives. Turnover costs should also be taken into consideration while framing these strategies.

o Become employer of choice: What makes a company an employer of choice? Is the benefit it

offers or the compensation packages it gives away to its employees? Or is it measured in terms of how they value their employees or in terms of customer satisfaction? Becoming an employer of choice involves following a road map which tells where to go as a brand.

Engage the new recruits: The newly hired employees are said to be least engaged in the organization. Keeping them engaged is an important task. The fresh talent should be utilized to maximum before they start feeling bored in the organization.


Optimize employee engagement: An organization’s productivity is measured not in terms of employee satisfaction but by employee engagement. Employees are said to be engaged when they show a positive attitude toward the organization and express a commitment to remain with the organization. Employee satisfaction also comes with high engagement levels. So, organizations should aim to maximize the engagement among employees.

Coaching and mentoring: Employees whose work performance suffers due to poor interpersonal relationships or because of lack of interpersonal skills should be provided proper coaching by their superiors. Planed coaching sessions help an individual to work through issues, maximize his potential and return to peak performance.

Feedback

Feedback acts as a channel of communication between the employee and his manager. The amount of information employees receive about how well or how poorly they have performed is what we call feedback. It is a dialog between a manager and an employee which acts as a way of sharing information about the performance. It suggests where the employee performance is effective and where performance has to improve.

Managers can provide either positive feedback or negative feedback to employees. This feedback helps the employee assess his performance and identify the improvement areas.

Positive feedback communicates managerial satisfaction. Positive recognition for good performance boosts up morale of employees and results in performance improvement to a

higher productivity level. It is believed that positive feedback is the only type of feedback that generates performance above the minimum acceptable level.

Negative feedback obviously communicates manager’s dissatisfaction. However, negative feedback sometimes make employee to put more efforts to improve his performance. But such times are very rare. Moreover this improvement is short term.

Some managers do not provide any kind of feedback to their employees. Due to no feedback, employees may assume that they are performing productively or they may feel that the manager is satisfied with their performance. Studies reveal the performance tends be same or even decreases if no feedback is provided.

Thus, feedback is necessary because:

It builds trust and enhances communication between manager and employee.


It gives managers and employees a way to identify and discuss skills and strengths. Positive feedback leads to employee motivation and retention. It helps in identifying performance areas that need improvement and specific ways to

improve them. It acts as an opportunity to enhance performance by identifying resources for skill

development. It is an opportunity for managers and employees to assess and identify career and

advancement opportunities. It helps employees to understand the effectiveness of their performance and contributes to

their overall knowledge about the work

Managers have tendency to ignore good performances of their employees. Providing no feedback may demotivate employees and may lead to employee absenteeism. Input from manager’s side is necessary as it help employees to improve their performance and increase productivity

6. Costs of Turnover - Calculation


7. Facts about Employee Turnover

It is difficult to accept when organizations say they have zero attrition rates. Companies may have healthier turnover rates, however, there is no such thing as zero attrition. There are other such facts about turnover, about which most of us are not aware. Some of such facts have been highlighted below:

Turnover always happens: Companies who believe in zero attrition rates only fool themselves. This happens because employees keep on moving due to reasons like marriage or further education. Nothing can top these employees from moving on. So, rather than achieving zero attrition companies should focus on identifying whom they want to keep so that they have healthy attrition rate.

Some Turnover is Desirable: Zero attrition is not desirable mainly because of two reasons. Firstly, if all employees continue to stay in the same organization, most of them will be at the top of their pay scale which will result in excessive manpower costs. Secondly, new employees bring new ideas, approaches, abilities & attitudes which can keep the organization from becoming stagnant.

Turnover includes costs: Turnover always includes some costs. Consider the costs of replacing the key employee who falls in to the category of high performers. This includes the costs of recruitment advertisement, referral bonuses, selection testing, training costs, etc. Moreover, turnover results in loss of time and efforts, low productivity, loss of morale, loss of knowledge and so on.

High salary doesn’t work: Most managers assume that a high salary package is enough to keep employees loyal to their organization. Employees may face other problems like low job satisfaction, low engagement levels, no recognition, poor working conditions, less support from superiors and so on. Salaries are not always the solution to attrition. Managers should try to identify the roots of the problem and then find a feasible solution.

The manager can reduce attrition: Managers should take primary responsibility for retaining their employees. Much of the employee’s perception of job satisfaction stems from the relationship they share with their immediate supervisor. Managers should try to support their subordinates and give proper feedback on performance. HR managers should work in collaboration to make the key employees last in their organization.


Reducing Turnover takes Commitment: Reducing turnover takes an investment in coaching, developing, motivating, mentoring & listening to people. There should be universal acceptance of the goal of reducing turnover along with top management commitment and dedication.

Reducing Employee Turnover:

Let us explore some ideas to reduce employee turnover: Hire the best candidate.

Welcome new employees. Customize your induction program for new employees according to the requirements. Same induction program can not be applied to all the candidates. Make them feel welcomed.

Produce quality managers who can really manage employees well.

Provide employees with work schedules that are flexible enough to suit their needs.

Don’t be too demanding. You re hiring human beings who have their own life and family commitments. Respect them.

Provide career counseling and development.

Discuss your future plans regarding the candidate with the candidate. Let them know that the management is interested in retaining them and cares for them.

Take proper feedback from employees regarding their grievances.

Remember your ex-employees. They can be of help in future. It is also a part of retention

Attrition Costs

One of the best methods for calculating the cost of turnover takes into account expenses involved to replace an employee leaving an organization. These expenses are:

A. Recruitment costThe cost to the business when hiring new employees includes the following six factors plus 10 percent for incidentals such as background screening:

1. Time spent on sourcing replacement2. Time spent on recruitment and selection3. Travel expenses, if any


4. Re-location costs, if any n Training/ramp-up time5. Background/reference screening

B. Training and development costTo estimate the cost of training and developing new employees, cost of new hires must be taken into consideration. This will mean direct and indirect costs, and can be largely classified under the following heads:

1. Training materials2. Technology3. Employee benefits4. Trainers’ Time

C. Administration costThey include:

1. Set up communication systems2. Add employees to the HR system3. Set up the new hire’s workspace4. Set up ID-cards, access cards, etc.

Components to be taken into consideration, while calculating attrition rate

HR professionals should not drive their own formulas to calculate attrition rate. In terms of numbers, attrition rate means:

Total Number of Resigns per month (Whether voluntary or forced) divided by (Total Number of employees at the beginning of the month plus total number of new joiners minus total number of resignations) multiplied by 100.

If calculating in monetary terms, it includes the following:

Costs Due to a Person Leaving1. Calculate the cost of the person(s) who fills in while the position is vacant. Calculate the cost of

lost productivity at a minimum of 50% of the person's compensation and benefits cost for each week the position is vacant, even if there are people performing the work. Calculate the lost productivity at 100% if the position is completely vacant for any period of time.

2. Calculate the cost of conducting an exit interview to include the time of the person conducting the interview, the time of the person leaving; the administrative costs of stopping payroll, benefit deductions, benefit enrollments.

3. Calculate the cost of the manager who has to understand what work remains, and how to cover that work until a replacement is found.


4. Calculate the cost of training your company has invested in this employee who is leaving.5. Calculate the impact on departmental productivity because the person is leaving. Who will pick

up the work, whose work will suffer, what departmental deadlines will not be met or delivered late.

6. Calculate the cost of lost knowledge, skills and contacts that the person who is leaving is taking with them out of your door. Use a formula of 50% of the person's annual salary for one year of service, increasing each year of service by 10%.

7. Subtract the cost of the person who is leaving for the amount of time the position is vacant.

Conclusion:

It is clear that there are massive costs associated with attrition or turnover and, while some of these are not visible to the management reporting or budget system, they are none the less real. The 'rule of thumb' appears to be very inaccurate indeed and, while it depends upon the category of staff, it is probably better to estimate around 80% of salary as a truer rule of thumb - and this will be on the conservative side. What does this mean? Well it means that if a company has 100 people doing a certain job paid 25,000 and that turnover or attrition is running at 10%, the cost of attrition is:

(Total staff x attrition rate %) x (annual salary x 80%) 100 staff at 10% attrition means 10 people leave and are replaced each year. A replacement cost of 80% of a salary of 25,000 means the cost of each replacement is 20,000. The cost of turnover is therefore 10 x 20,000 or 200,000 a year. The on cost to the overall salary bill is 8%.

(Saving 8% of salary costs would make the average HR manager a hero.)

8. Attrition Rates in Asia and the IT Sector

Attrition Rates in Asia


According to Hewitt’s Attrition and Retention Study Asia Pacific 2006, the no.1 reason for this growing attrition rate is compensation unfairness. 21% of the organizations who took part in the survey said that their employee left the organization because they got offers from other organizations offering better pay packages. The 2nd reason was less growth opportunities and no. 3rd reason was role stagnation the study also revealed that the top retention strategy being used by the organizations in Asia was to pay above the industry standards, providing opportunities to employees to learn new skills, and provide work life balance.

From employee point of view


Professional/Supervisor/Technical level – 39%Senior Top Management Level – 1%Others – 60%

According to the employees, attrition at the professional/supervisor/technical level was the highest (39%) and lowest at the senior/top management level (1% approximately).


Attrition Rates in Different Sectors in India

The Following graph describes the Attrition Rates in Different Sectors in India.


Attrition Rates in the I.T Sector in India


9. Importance of Employee Retention

Now that so much is being done by organizations to retain its employees, why is retention so important? Is it just to reduce the turnover costs? Well, the answer is a definite no. It’s not only the cost incurred by a company that emphasizes the need of retaining employees but also the need to retain talented employees from getting poached.The process of retention will benefit an organization in the following ways:

The Cost of Turnover: The cost of employee turnover adds hundreds of thousands of money to a company's expenses. While it is difficult to fully calculate the cost of turnover (including hiring costs, training costs and productivity loss), industry experts often quote 25% of the average employee salary as a conservative estimate.

Loss of Company Knowledge: When an employee leaves, he takes with him valuable knowledge about the company, customers, current projects and past history (sometimes to competitors). Often much time and money has been spent on the employee in expectation of a future return. When the employee leaves, the investment is not realized.

Interruption of Customer Service: Customers and clients do business with a company in part because of the people. Relationships are developed that encourage continued sponsorship of the business. When an employee leaves, the relationships that employee built for the company are severed, which could lead to potential customer loss.

Turnover leads to more turnovers: When an employee terminates, the effect is felt throughout the organization. Co-workers are often required to pick up the slack. The unspoken negativity often intensifies for the remaining staff.

Goodwill of the company: The goodwill of a company is maintained when the attrition rates are low. Higher retention rates motivate potential employees to join the organization.

Regaining efficiency: If an employee resigns, then good amount of time is lost in hiring a new employee and then training him/her and this goes to the loss of the company directly which many a times goes unnoticed. And even after this you


cannot assure us of the same efficiency from the new employee.

10.How To Increase Employee Retention

Companies have now realized the importance of retaining their quality workforce. Retaining quality performers contributes to productivity of the organization and increases morale among employees.

Four basic factors that play an important role in increasing employee retention include salary and remuneration, providing recognition, benefits and opportunities for individual growth. But are they really positively contributing to the retention rates of a company? Basic salary, these days, hardly reduces turnover. Today, employees look beyond the money factor.

Employee retention can be increase by inculcating the following practices


1. Open Communication: A culture of open communication enforces loyalty among employees. Open communication tends to keep employees informed on key issues. Most importantly, they need to know that their opinions matter and that management is 100% interested in their input.

2. Employee Reward Program: A positive recognition for work boosts the motivational levels of employees. Recognition can be made explicit by providing awards like best employee of the month or punctuality award. Project based recognition also has great significance. The award can be in terms of gifts or money.

3. Career Development Program: Every individual is worried about his/her career. He is always keen to know his career path in the company. Organizations can offer various technical certification courses which will help employee in enhancing his knowledge.

4. Performance Based Bonus: A provision of performance linked bonus can be made wherein an employee is able to relate his performance with the company profits and hence will work hard. This bonus should strictly be productivity based.

5. Recreation facilities: Recreational facilities help in keeping employees away from stress factors. Various recreational programs should be arranged. They may include taking employees to trips annually or bi-annually, celebrating anniversaries, sports activities, et al.

6. Gifts at Some Occasions: Giving out some gifts at the time of one or two festivals to the employees making them feel good and understand that the management is concerned about them.


11. Managing Employee Retention

The task of managing employees can be understood as a three stage process:1. Identify the cost of employee turnover

2. Understand why employees leave

3. Implement retention strategies

A. Identify the cost of employee turnover:

The organizations should start with identifying the employee turnover rates within a particular time period and benchmark it with the competitor organizations. This will help in assessing the whether the retention rates are healthy in the company. Secondly, the cost of employee turnover can be calculated. According to a survey, on an average, attrition costs companies 18 months’ salary for each manager or professional who leaves, and 6 months’ pay for each hourly employee who leaves. This amounts to major organizational and financial stress, considering that one out of every three employees plans to leave his or her job in the next two years.

B. Understand why employees leave:

Why employees leave often puzzles top management. Exit interviews are an ideal way of recording and analyzing the factors that have led employees to leave the organization. They allow an organization to understand the reasons for leaving and underlying issues. However employees never provide appropriate response to the asked questions. So an impartial person should be appointed with whom the employees feel comfortable in expressing their opinions.

C. Implement retention strategy:

Once the causes of attrition are found, a strategy is to be implemented so as to reduce employee turnover. The most effective strategy is to adopt a holistic approach to dealing with attrition. An effective retention strategy will seek to ensure:

Attraction and recruitment strategies enable selection of the ‘right’ candidate for each role/organization

New employees’ initial experiences of the organization are positive


Appropriate development opportunities are available to employees, and that they are kept aware of their likely career path with the organization

The organization’s reward strategy reflects the employee drivers

The leaving process is managed effectively.

12. The Key Points in Attracting and Retaining Talent

The following table describes the key points in Attracting and Retaining Talent

Employers Key points in Attracting And Retaining Talent

Procter and Gamble India

o Early responsibilities in career o Flexible and transparent organizational culture o Global opportunities through a variety of exposure and diverse

experiences

o Performance Recognition

American Express (India)

o Strong global brand o Value-based environment

o Pioneer in many people practices

NTPC

o Learning and growth opportunities o Competitive rewards o Opportunity to grow, learn and implement

o Strong social security and employee welfare performance- oriented culture

Johnson & Johnson o Strong values of trust, caring fairness, and respect within the organization

o Freedom to operate at work o Early responsibility in career o Training and learning opportunities o Visible, transparent and accessible leaders o Competitive rewards


o Innovative HR programs and practices

Glaxo Smith Kline Consumer Healthcare

o Performance-driven Rewards o Its belief in “Growing our own timber” o Comprehensive development and learning programs o Flat organization, where performance could lead to very quick

progression o Challenging work context o Competitive rewards

o Exhaustive induction and orientation program

Tata Steel

o Organization philosophy and culture o Job stability

o Freedom to work and innovate

Colgate Palmolive India

o Company brand o Open , transparent, and caring organization o Management according to the managing with respect to

guiding principles o Training ad development programs o Structured career planning process

o Global career opportunities

Wipro

o Company’s brand as an employer o Early opportunities for growth o High degree of autonomy o Value compatibility

o Innovative people program

Indian Oil Corporation

o Company brand image o Work ethics o Learning and growth opportunities o Challenging work assignments

o Growing organization

TCS

o The group brand equity o Strong corporate governance and citizenship o Commitment to learning and development o Best in people practices o Challenging assignments


o Opportunity to work with fortune 500 clients

13. Retention Bonus

Higher attrition rates within a particular industry have forced companies to use some innovative strategies to retain employees. Retention Bonus is one of the important tools that are being used to retain employees. Retention bonus is an incentive paid to an employee to retain them through a critical business cycle. Retention bonuses are becoming more common in the corporate world because companies are going through more transitions like mergers and acquisitions. They need to give key people an attractive incentive to stay on through these transitions to ensure productivity.

Retention bonuses have proven to be a useful tool in persuading employees to stay.

A retention bonus plan is not a panacea. According to a survey, non-management employees generally receive about 10 percent of their annual salaries in bonuses, while management and top-level supervisors earn an additional 50 percent of their annual salaries. While bonuses based on salary percentages are the generally used, some companies choose to pay a flat figure. In some companies, bonuses range from 25 percent to 50 percent of annual salary, depending on position, tenure and other factors. Employees are chosen for retention bonuses based on their contributions to management and the generation of revenue. Retention bonuses are generally vary from position to position and are paid in one lump sum at the time of termination. However, some companies pay in installments as on when the business cycle completes. A retention period can run somewhere between six months to three years. It can also run for a particular project. A project has its own life span. As long as the project gets completed, the employees who have worked hard on it are entitled to receive the retention bonus. For example, the implementation of a system may take 18 months, so a retention bonus will be offered after 20 months.

Although retention bonuses are becoming more common everywhere, some industries are more likely than others to offer them. Retail/wholesale companies are the most appropriate to implement stay-pay bonuses, followed by financial service providers and manufacturing firms. Companies of all sizes use retention bonus plans to keep knowledge employees retained in the company. To retain its key senior employees post merger with EDS Corporation.


14. Role of Manager in Retention

When asked about why employees leave, low salary comes out to be a common excuse. However, research has shown that people join companies, but leave because of what their managers’ do or don’t do. It is seen that managers who respect and value employees’ competency, pay attention to their aspirations, assure challenging work, value the quality of work life and provided chances for learning have loyal and engaged employees. Therefore, managers and team leaders play an active and vital role in employee retention.

Managers and team leaders can reduce the attrition levels considerably by creating a motivating team culture and improving the relationships with team members. This can be done in a following way:

Creating a Motivating Environment: Team leaders who create motivating environments are likely to keep their team members together for a longer period of time. Motivation does not necessarily have to come through fun events such as parties, celebrations, team outings etc. They can also come through serious events e.g. arranging a talk by the VP of Quality on career opportunities in the field of quality. Employees who look forward to these events and are likely to remain more engaged.

Standing up for the Team: Team leaders are closest to their team members. While they need to ensure smooth functioning of their teams by implementing management decisions, they also need to educate their managers about the realities on the ground. When agents see the team leader standing up for them, they will have one more reason to stay in the team.

Providing coaching: Everyone wants to be successful in his or her current job. However, not everyone knows how. Therefore, one of the key responsibilities will be providing coaching that is intended to improve the performance of employees. Managers often tend to escape this role by just coaching their employees. However, coaching is followed by monitoring performance and providing feedback on the same.


Delegation: Many team leaders and managers feel that they are the only people who can do a particular task or job. Therefore, they do not delegate their jobs as much as they should. Delegation is a great way to develop competencies.

Extra Responsibility: Giving extra responsibility to employees is another way to get them engaged with the company. However, just giving the extra responsibility does not help. The manager must spend good time teaching the employees of how to manage responsibilities given to them so that they don’t feel over burdened.

Focus on future career: Employees are always concerned about their future career. A manager should focus on showing employees his career ladder. If an employee sees that his current job offers a path towards their future career aspirations, then they are likely to stay longer in the company. Therefore, managers should play the role of career counselors as well.


15. Retention Myths

The process of retention is not as easy at it seems. There are so many tactics and strategies used in retention of employees by the organizations. The basic purpose of these strategies should be to increase employee satisfaction, boost employee morale hence achieve retention. But some times these strategies are not used properly or even worse, wrong strategies are used. Because of which these strategies fail to achieve the desired results. There are many myths related to the retention process. These myths exist because the strategies being used are either wrong or are being used from a long time. These myths prevent the employer from successfully implementing the retention strategies. Let us learn about some of these myths.

1. Employees leave an organization for more pay: Money may be the motivating factor for some but for many people it is not the most important factor. Money matters more to the low-income-employees for whom it’s a survival issue. Money can make an employee stay in an organization but not for long. The factors more important than money are job satisfaction, job responsibilities, and individual’s skill development. The employers should understand this and work out some other ways to make employees feel satisfied. When employees leave, management tries to retain them by offering more money. But instead they should try to figure out the main reason behind it. Issues that are mainly the cause of dissatisfaction are organization’s policies and procedures, working conditions, relationship with the supervisor and salary, etc. For such employees, achievement, growth, respect, recognition, is the main concern.

2. Incentives can increase productivity: Incentives can surely increase productivity but not for long term. Cash incentives, volume work targets and speed awards are old management beliefs. They can generate work speedily and in volumes but can’t boost employee commitment. Rather speed can hamper the quality of work produced. What really glues employees to their work and organization is quality work, meaningful responsibilities, recognition, respect, growth opportunities and friendly supervisors.


3. Employees run away from responsibilities: It is a myth that employees run from responsibilities. In-fact employees feel more responsible if they are given extra responsibilities apart from their regular job. Employees look for variety, greater control on the processes and authority to take decisions in their present job. They want opportunities to learn and grow. Management can assign extra responsibilities to their employees and appreciate them on the completion of these tasks. This will induce a sense of pride in the employee and will improve the relationship between the management and the employee.

4. Loyalty is a thing of the past: Employees can be loyal but what they need is an employer for whom they can be loyal. There is no reason for the employee to hop jobs if he’s satisfied with the employer.

Taking measures to increase employee satisfaction will be expensive for the organizations: The things actually required to improve employee satisfaction like respect, career growth and development, appreciation, etc. can’t be bought. They are free of cost. An employer or management that reacts well to the employee’s ideas and suggestions is enough for the employees to be retained.


16. BIBLIOGRAPHY

Books:Attrition Management – Concept and Cases by Sushama MaratheWhy Do People leave Jobs? By TV Rao

Websites:www.google.comwww.timesascent.inwww.naukrihub.comhttp://www.igate.com/http://www.hewittassociates.comhttp://www.citehr.com/


http://www.igate.com/

http://www.naukrihub.com/

http://www.timesascent.in/

http://www.google.com/

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