A RESEARCH PROJECT

“Attrition in IT Industry”

Submitted in partial fulfillment of the requirement of the (MBA Degree) Bangalore University 2005-2007

By Shashidhar VN

Reg. No. 05XQCM6084

Under the guidance of Dr Nilanjan Sengupta

M.P. Birla Institute of Management Associate Bharathiya Vidya Bhavan

#43, Race Course Road, Bangalore-560 001

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STUDENT DECLARATION I hereby declare that this Research project entitled “Attrition

in IT Industry” has been undertaken and completed by me under the

valuable guidance of Dr Nilanjan Sengupta, M.P.B.I.M, in partial fulfillment

of Degree of MBA program is my original work and no part of the work

has been submitted for any degree, diploma, fellowship or other similar

title or prizes for any institution previously.

Date:

Place: Bangalore (Shashidhar VN)

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GUIDE’S CERTIFICATE This is to certify that this report is the result of Research

Project “Attrition in IT Industry” undergone by Mr.Shashidhar VN bearing

the register number 05XQCM6084 under the guidance and supervision of

Dr Nilanjan Sengupta. This has not formed a basis for the award of any

Degree/ Diploma of any University.

Date: Dr Nilanjan Sengupta

Place: Bangalore (Guide)

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PRINCIPAL’S CERTIFICATE

This is to certify that this report is the result of Research

project “Attrition in IT Industry” undergone by Mr. Shashidhar VN bearing

the register number 05XQCM6084 under the guidance and supervision of

Dr Nilanjan Sengupta. This has not formed a basis for the award of any

Degree/ Diploma of any University.

Date: Dr Nagesh. Malavalli

Place: Bangalore (Principal)

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ACKNOWLEDGEMENT

I would like to express my profound gratitude to Dr Nilanjan Sengupta,

Professor, M.P.Birla Institute of Management whose guidance was

significant in the successful completion of the research project.

I wish to thank our Dr. Nagesh Malavalli, Principal,

M.P.Birla Institute of Management for providing the means and

encouragement.

Date:

Place: Bangalore (Shashidhar VN)

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CONTENTS

Particulars Page

Numbers

Research extract 1

Introduction 2

Objectives of the research 5

Methodology 6

Presentation, analysis and interpretation of data

Attrition cycle & drivers 7

Turnover rates and tendencies 8

Causes for attrition 9

Growth and attrition: the problem 16

Six facts about employee turnover 18

The cost of attrition 20

Tackling attrition head-on 21

Correlation of attrition and overall quality 32

Organisational factors - job tenure? 34

Call centers - combating attrition 38

Measures taken by major it companies to curb attrition rate 41

Importance of employee attrition 48

More about employee turnover 49

Loopholes in attrition management 50

Summary and conclusion

Suggestions - effective attrition management 53

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Conclusion 55

Bibliography/ Wibliography: 56

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RESEARCH EXTRACT 1. This research project seeks to utilise secondary data research in order to offer a greater understanding of the complex issues raised by staff attrition. Staff attrition (or turnover) and absenteeism represent significant costs to most organisations. It is odd; therefore, that many organisations neither measure such costs nor have targets or plans to reduce them. Many organisations appear to accept them as part of the cost of doing business - a sign of increasing job mobility and decreasing staff loyalty perhaps, a matter to be regretted but just 'one of those things.' They add a sum in their budgets for 'temp staff' and 'recruitment' and forget about it. However, it seems to be one of the areas in which HR can make a difference - and one that can be measured in quantifiable, financial terms against targets.

2. Aim:

Identify trends in leavers' behavior and the reasons employees change jobs/organizations.

Identify the employers' perspective on employees' reasons for leaving.

Identify retention strategies that have a positive influence on retention, or at least leave current

and former staff with a positive view of the organizations. 3. Having identified the reasons employees leave, there are a number of specific retention strategies available to employers. This research project has emphasised the importance of adopting a holistic approach to dealing with staff attrition.

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INTRODUCTION Background of the study / genesis of the problem

4. Definition - Attrition: A reduction in the number of employees through retirement,

resignation or death. Employee turnover is an enormous problem for any company and

creates negative bottom-line impacts. The costs associated with employee turnover show

up in such areas as advertising for new employees and the time and money necessary to

screen the applicants, training new employees, lost productivity, decreased accuracy and

quality of work among the employees left behind who are upset about their colleague's

departure, using expensive contract and temporary employees to do the work until a

permanent employee is hired, and the expenses associated with replacing lost business.

Employee turnover costs can amount to thousands of dollars, annually. It can also prevent

companies from pursuing their growth opportunities and acquiring new business & Attrition

rate is the rate of shrinkage in size or number

5. 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 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 that entire turnover cost?

And what employees are likely to have the highest turnover? Who is likely to stay the

longest?

Statement of the problem

Alarm bells are ringing loudly in corporate corridors as attrition rates in IT organisations

average 22 percent as per a study conducted by the Indian Institute of Technology,

Bombay (IIT-B) with a sample of 1,028 IT companies in the country. Another survey done

by People—a Gartner group company specialising in the management of human capital in

IT organisations—has observed that the average tenure of an IT professional is less than

three years. Rate of attrition being a hot topic amongst the HR heads in the industry, it is

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not surprising to see that employee turnover showed an all time high in Asia .

Attrition - an International Problem

7. Employers who have difficulty retaining their valued employees often dismiss the

problem as being unavoidable or an anomaly in their industry. In a futile attempt to find

excuses, many companies cite whatever comparative numbers they can discover to justify

their losses. They point the fingers at other employers instead of addressing their own

shortcomings. Time is running out. Employee turnover is creating problems across

industries and across international boundaries.

8. Developed countries have sent a significant number of jobs to India, assuming that an

abundance of workers were dedicated, productive, hard-working, and stable. India’s

information technology industry is experiencing a high attrition rate. The loss of

experienced people and the cost of replacing them with fresh graduates---and training

them---are driving up personnel costs. Higher costs mean a reduced competitive advantage

against countries exporting jobs.

9. International Attrition rates US 42%

Australia 29%

Europe 24%

India 18%

Global Average 24%

10. China has a similar problem. Even with population in the millions, the country is

challenged with high turnover among educated and skilled workers. As the introduction of

technology outpaces availability of an appropriately trained labor force, this situation will

become worse. In South Africa, employee retention causes operations difficulties and

higher costs in industries as diverse as information technology and gold mining. Employers

in Australia face a tightening employment market and workers who want better bosses.

Northern Ireland fights a brain drain. Competition for workers even causes problems for

companies competing for business in Nepal.

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11. As Asia’s dynamic growth agenda collides with the demographic trends of an aging

population and an immediate need to attract more skilled workers, turnover is clearly on the

rise in most markets in the region. In high-growth markets, it’s now easier than ever before

for employees to move from one company to another, and so the complexity and cost of

keeping the right people in an organization increases. Hewitt surveyed more than 170

foreign-owned, locally-owned, and joint-venture companies from China, Hong Kong, India,

Japan, Korea, Malaysia, the Philippines, Singapore, and Thailand, analyzing information

from more than 230,000 employees.

Need and importance of the study 12. Talking about the problem of attrition in India, it is like a disease in the country,

where the employees are always leaving for something better. Today in the IT & related

industry we are seeing attrition rate as high as 30 percent. While ailing behemoths and

governments, see attrition as a solution, the Indian IT sector fears attrition as the No. 1

cause of dwindling numbers on the payroll, even as the company tries to add to its strength

through aggressive recruiting. Resignations within the first year are too common in the

industry; and the question of retirement does not arise yet because the average age of a IT

employee may hover around 20s. In short, therefore, the `attrition' that the IT industry talks

about is just the other name for plain-old labour turnover, traditionally defined as the rate of

change in a workforce.

13. One of the toughest challenges for the HR managers in the IT industry is to deal with

the prevalent high attrition levels. Though there is an adequate supply of qualified staff at

entry level, there are huge gaps in the middle and senior level management in the industry.

Further, the salary growth plan for each employee is not well defined. This situation has

resulted in increased levels of poaching and attrition between organisations. The industry

average attrition rate is 30–35 per cent and could range up to 60 per cent.

Objectives of the research 14. The following are the objectives of the research:

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• Attrition cycle & drivers

• Causes for attrition

• Growth and attrition: the problem

• Six facts about employee turnover

• The cost of attrition

• Tackling attrition head-on

• Correlation of attrition and overall quality

• Organisational factors - job tenure?

• Call centers - combating attrition

• Measures taken by major it companies to curb attrition rate

• Importance of employee attrition

• More about employee turnover

• Loopholes in attrition management

• Suggestions - effective attrition management

Review of literature

15. Purpose: This research project seeks to utilise secondary data research in order to

offer a greater understanding of the complex issues raised by staff attrition. Staff attrition

(or turnover) and absenteeism represent significant costs to most organisations. It is odd,

therefore, that many organisations neither measure such costs nor have targets or plans to

reduce them. Many organisations appear to accept them as part of the cost of doing

business - a sign of increasing job mobility and decreasing staff loyalty perhaps, a matter to

be regretted but just 'one of those things.' They add a sum in their budgets for 'temp staff'

and 'recruitment' and forget about it. However, it seems to be one of the areas in which HR

can make a difference - and one that can be measured in quantifiable, financial terms

against targets

16. Methodology followed by the author: During the conduct of the research on the

subject of Attrition in the Industry in India specifically the relevant basic conceptual

books/Journals and related articles published were referred and studied. Apart from this

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numerous websites were referred and researched. A comparative study of various Indian IT

Industry was done by referring to their websites and articles published by various authors

and relevant conclusions were drawn.

17. Conclusion: This study carried out with the help of the various references and

websites it gave a thorough and detailed insight into this major problem faced by the IT

industry in India and worldwide and also gave the reasons and causes with various

suggested stepf of resolving the issue to some extent. However, majority of the contents

were biased towards the corporates and very few looked at the problem from the

employees point of view which had been a shortcoming during the process of research

studies.

Methodology 18. The research on the Attrition problem in IT Industry with focus on India has been

done with the help of various secondary data from Books, Magazines, Journals and articles

published in various newspapers, etc and maximum from the various websites collected to

collect the data, study and analyse and then to bring out the various cause and effect and

the various measures to overcome the problem to some extent if not all with particular HR

angle which has a major role in the Industry towards this. Since the secondary data has

been used there has been no particular collection of data from individual companies as

samples.

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA 19. Types of attrition: There are three types as follows:

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• Market Driven – based on the demand for a particular skill or ability in temporarily

low supply (self-correcting in normal markets). The typical initial reaction by employers to

market driven attrition is to increase wages, offer better benefits, escape the market by

relocation or site migration or relax hiring standards.

• Workload or Stress Driven – on the actual capacity to perform the work required.

This is when there are not enough of the right people.

• Process Driven - variables associated with job design and/or the organization. In

some industries and organizations there is a belief that attrition has always been there

and always will be there. Addressing this scenario produces the most lasting results.

Attrition Cycle & drivers 20. Typically, in organizations experiencing systemic or chronic attrition, a cycle

develops as:

- Attrition normally brings decreased productivity. People leave causing others to work

harder. This contributes to more attrition, which contributes to increasing costs, lower

revenue. This often forces additional cost reductions and austerity measures on an

organization. This in turn makes working more difficult, causing the best performers with

the most external opportunities, to leave.

21. There are two primary drivers of voluntary attrition. These are, no one likes to feel

inadequate and, in most organizations, it is easier to leave than stay and try to alleviate the

problem. People feel inadequate when communication is either incomplete or unreliable.

Choices are either absent or insufficient. Often, the challenges in these situations are

unclear, unsatisfying or overwhelming. People will give up trying to change things when

promises are not specific, not kept or are not fulfilled in a timely manner. Additionally, when

expectations are thwarted, changed arbitrarily or unfulfilled, people will lose motivation.

Other common demotivators are when commitments are unacknowledged, vague or

incompatible.

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22. Rarely do organizations create environments where employees can meaningfully

participate in activities, which will reduce turnover. Attrition is commonly thought of as

people terminating employment. Another form of classifying types of attrition are:

• Empty Chair Attrition: Employees quit and leave

• Warm Chair Attrition: Employees quit and stay 23. Organizations should measure attrition according to its impact upon tenure. This

“tenure equity” concept, the aggregate value of employee experience relative to process

complexity, is really about the value of an employee, measured by experience and

knowledge gained in months of service.

Turnover rates and tendencies 24. A recent survey by the Society of Human Resources Management (SHRM)

indicates, not surprisingly, that employee turnover is highly correlated to the state of the

economy. With the weak economy and record-high unemployment rates, SHRM found in a

survey conducted, that 41 percent of organizations reported decreased turnover rates since

2001. The Bureau of Labor Statistics found that, the median time that wage-and-salary

workers had been on the job was 3.7 years. The results, as reported in the Occupational

Outlook Quarterly, came from a supplement to the Current Population Survey, a monthly

household survey of the civilian non institutional population aged 16 and older.

25. There were significant variations in tenure, however. Workers in the 55 to 64 age

range had a median tenure that was three and a half times that of workers 25 to 34 years

old. Other interesting results: public employees had higher tenure rates than those in the

public sector. Officials and administrators in public administration had the highest tenure:

11 years. Food service workers had the lowest tenure just 1 year.

Causes For Attrition

26. The top 3 reasons for employees leaving are:

• Lack of opportunities for personal and career development

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• Issues with the working experience and problems with superiors

• Salary & benefits

27. In the view of employees, it is the lack of opportunity for personal and career

development that is clearly the most important factor. This is three times as influential as

any other factor in employees are rated as only the third most important factor. Employees

left because of a lack of development opportunities & rated the following factors as key to

their decision to leave:

• The role did not allow me to fully use my skills and abilities

• The role provided insufficient training opportunities

• The role offered only limited opportunities for progression

• The role was not challenging enough

27. The high importance attributed to issues with the working experience is largely

because the role did not match their expectations. 63% said that this was one of their five

main reasons for leaving. This factor is likely to have played a major role in accounting for

the peak of employees who had left their organisation within six months.

Money is not everything

28. Although the importance of higher packages is slowly diminishing, among freshers

or laterals with less than three years of work experience, money is still considered to be the

highest priority. With the overall package, the demand for performance-based salaries is

going up. Employees want not only work recognition, but also extra perks. A number of IT

professionals are looking at more challenging jobs, exposure to newer technologies,

expansion of their domain capability, and movement from offshore to onsite. 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 analyse the training programmes of prospective companies with those of

their current organisation, which means that how an organisation grooms an employee is

weighed to a greater extent. This is because they know that developing next-level skills will

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keep them ahead in the job market, and finally result in better compensation. They also

look for a job with higher levels of responsibility. Hence, the reason for an employee leaving

a company could be nothing other than his growth—both vertical and horizontal. If

companies take proper steps and adopt methods to serve their employees’ needs, the

challenge of managing attrition will remain low.

Treat employees like customers

29. Even while companies strive to understand which organisational, 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 organisation could be out of

question. Since software professionals have different priorities at different points of time,

organisations 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.

Working conditions

30. Many HR experts believe that money, though a key factor, is not the only one, which

makes employees, quit. Attrition also happens when people hate their working conditions,

do not like their teammates or perhaps do not like what they are doing. There are also

cases when people leave their job for family reasons or when they wish to migrate. For

example, girls often leave their jobs when they get married and shift to another city.

31. Experts also believe that organisational culture has a great impact on who stays and

who goes. And the culture of an organisation is determined by the quality of the relationship

between bosses and their subordinates. According to a popular saying—employees never

leave the company, they leave their bosses. An inefficient boss creates poor work culture,

which is one of the frequent reasons for quitting.

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32. Employers often fail to understand the importance of providing opportunities for

development of their employees or their career growth. A conducive working atmosphere,

good culture, training and career growth with adequate salary are some provisions that

control attrition, asserts that organisational culture does not give way for attrition.

Organisations should have an open, vibrant and dynamic culture where there is a lot of

space for communication too.

33. Every employee comes to his organisation with some aspiration. An organisation is

viewed as a place where employees meet their aspirations of growth and development,

values of trust, teamwork and transparency. If a company respects them and their skills,

realise their potential and provide them with a healthy environment to learn and grow with

flexible compensation, employees take that as a strong reason to stay on.

34. Experts say that good organisational behavior is instrumental in extending the tenure

of employees in the organisation as it increases their self-esteem, confidence, morale and

motivation. A substantial growth of employee's self-esteem is as important as the concept

of learning in the industry.

Supply Vs demand

35. Attrition can be described as the function of demand and supply. The demand

comes from the growth of the industry and the policy of the company. These two things

decide whether there is a demand of fresher or experienced employees. On the other hand,

the supply comes from the educational institutions and the market. While the supply from

the educational institutions is enough to meet the demands of the industry, there is a lack of

experienced people in the industry, which in turn has created an imbalance. The imbalance

is crucial to the growth of the industry. While the industry is growing, not all companies are

capable of taking fresh people and groom them. Hence, the current status demands

experienced people and shortage of skills or retaining existing employees pose an issue for

the industry.

Increasing the pie

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36. In the current scenario, the demand of experienced and good employees is actually

outstripping the supply. In such a situation, higher salary structures pose a major challenge

in controlling attrition levels in the industry. Moreover, the salary growth plan is not well

defined as well. All this encourages poaching by companies offering higher salaries.

Though the salary is decided keeping in line with the market trends, the qualification,

experience and the attitude of the individual matters. Salary or even increments are

dependent very much on what kind of value adding the person is or will do in the

organisation and Internal imbalances should be avoided.

37. When it comes to attracting talent, throwing fat carrots at potential employees can

boomerang on the company. Fighting with salaries, prerequisites or designations as

retention tools can prove to be self defeating since rivals can also follow the same path.

Besides, HR experts from the industry believes that out paying is not a winning tactic for

companies. The organisation's reward strategy reflects its power to drive quality

employees. Apart from salary, recognition of work is a healthy retention strategy. If the

organisation values its employees, recognises and appreciates their skills and work, it

pays. It is important to keep an eye on fast track people who are intelligent and excellent

performers. Performance is a primary requirement; therefore, excellent performers should

be valued. They should be identified, nurtured and provided growth opportunity.

Organisational Factors and Reasons for Leaving

38. We have already seen that organisational factors can influence average job tenure.

Surprisingly, consistent across different industry sectors and different sized organisations.

Employees leaving industries with high turnover do so for the same reasons as leavers

from other industries, however they leave after shorter periods. This suggests that the high

turnover in these industries is due to factors endemic to the industry sector, organisation

size, location and potentially other industry specific factors rather than the actual working

environment for example the transferability of industry skills.

39. The greatest variation in reasons for leaving is shown in the public sector. Leavers

from the public sector are more likely than leavers from any other industry to leave because

of a lack of development opportunities. Conversely, they are the least likely to leave to

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improve their salary and benefits prospects. It is often argued that public sector employees

choose to work in the public sector because of their social duty rather than for personal

gain. Retention strategies within the public sector should focus on providing adequate

opportunities for development for their employees rather than relying on financial

incentives.

Reasons for Leaving - Implications for Retention Strategies

40. Many employers are unaware of the real causes of employee attrition. This

highlights the importance of employers ensuring they understand and pro-actively manage

the most influential HR practices to reduce employee attrition. Although not the major

cause of turnover, pay and reward does remain an important factor in the retention issue.

Organisations that pay employees below the market rate are likely to experience high

levels of turnover. Retention strategies which financially incentivise employees to stay

however are unlikely to secure anything more than short term commitment to the

organisation. A lack of development opportunities was the most important factor in

employees decisions to leave their previous organization. Matching development

opportunities to individual employee influence on staff retention.

Work timings

41. Another factor which can be a big deterrent is the work timings. The work timings in

are very odd. This affects the family life of the employee. Moreover, the male to female

ratio is quiet low. This means that working hour problem is quiet acute in female case

especially after they get married, as after marriage comes social and family pressure to

adjust work timings and take care of families.

Career growth.

42. Only 2 out of 10 employees on an average go on to be at the senior level. This

means that other employees look forward to change their job at other places where they

can get better opportunities to progress. Also, another problem arises with the mis-match of

expectations and qualifications of the employees. Along with that, some employees see no

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career growth in this sector, so they move on to other companies in search of changing the

sector.

Higher education

43. One more reason for employees leaving the firm is higher education. This is a

problem as most of the employees in this sector are pretty young and aspiring. They join

the firm because of lucrative salary. But with time, they try to move on to other sectors or

top management and one of the ways to do this is higher education.

Interference and Bossing

44. Too much of interference and bossing stifles growth and creativity. Finding

themselves baulked at every turn, the motivation levels of employees plunges and they

look for the exit. An atmosphere of distrust too could lead to employee attrition. It would

also not be wholly correct to surmise that long hours of work are a disincentive, as in most

sectors, including IT and call centers; those who sign up know what they are in for. Job

satisfaction and employee loyalty are better in companies that allow their staff the freedom

to unleash their creativity and never fail to appreciate a job well done.

45. It is in the organisation's interest to provide a congenial atmosphere and take

initiatives that would keep the workforce morale high. Contentment and job satisfaction

certainly matter more than fat pay packets and perquisites though with the usual

exceptions. Personal reasons' and `better opportunities' are two of the most standard

answers that an employee gives at the exit interview, when he or she is leaving the firm for

another job. As a result, the exit interview becomes a routine exercise, with little or nothing

to show for it. Outsourcing the exit interview to a firm dealing in HR processes could

circumvent this problem. When the interview is conducted by a third party, the employees

are more likely to be honest, safe in the knowledge that the feedback will not go back to the

employer.

Ties That Fail to Bind

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46. Throwing more bodies at the problem isn’t going to work. All reports on outsourcing

to India state that the manna India offers is its large, educated labor pool — available at

cut-rate prices. While it’s true that India graduates 2.5 million students every year, a

majority of these graduates are unhireable. A recent report by McKinsey and Nasscom, for

instance, points out that “Currently only about 25% of technical graduates and 10%–15% of

general college graduates are suitable for employment in the offshore IT and BPO

industries respectively.”

47. How many of these recent grads are ready to handle Wall Street jobs? Those who

are hireable, do not necessarily stay. Fifty six percent of the workforce in India (across all

industries) is disengaged, hence more likely to leave for another job, as opposed to a

global standard of 24%, according to a recent study by Towers Perrin’s HR Services.

India’s percentage of disengaged employees is also the largest in the world, according to

the study, which was conducted amongst 85,000 people across 16 countries. The study

defines employee engagement as “the measure of people’s willingness and ability to give

discretionary effort at work.” “Fewer engaged workers are far less likely to deliver on their

growth agendas or achieve the kind of performance that shareholders demand,” says the

study. BPO vendors are hitting at the attrition problem from all sides. With demand for

outsourcing work far outstripping the supply of employees, service providers are looking at

innovative ways to widen their pool of talent. Many providers are setting up operations in

so-called tier-two cities, employing retired people or housewives; while others are

examining moving up the value chain to hire more specialized workers less likely to migrate

to new employers every season.

48. HR managers, too, are playing a role. They are offering career growth to employees:

training, career counseling and even involving families in career discussions. They are

establishing policies that cover certifications, worker registries, screening tests, reference

checks and non-poaching agreements. Some HR managers are wielding sticks, forcing

workers to sign legally questionable employee contracts and performance guarantees,

while some are dangling carrots — pizza parties, beer bashes, movie tickets, dating

allowances, birthday cakes and, most importantly, higher wages.

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49. Industry organizations are doing their bit too. Nasscom, India’s association for

software and services companies, has launched a campaign to gain support for its National

Skills Registry (nationalskillsregistry.com) for BPO and IT professionals. Potential

employees have to register themselves, and provide basic information such as educational

qualifications, previous employment details, photographs and fingerprints. An independent

third party verifies the information and makes it available to employers.

50. For the employee, this promises better employment opportunities because, in

theory, employers are likely to hire only registered employees. For the employer, the

registry proposes to minimize the risk of hiring high-risk staff. While the registry is primarily

a tool to enhance security, it will also help to track employees who shift jobs frequently.

51. Customers, too, agree that the attrition issue has an impact on their offshore

operations, though they regard it as primarily a provider-side issue. But, since it’s their

process that stands to suffer because of the churn happening on the vendor’s side, they

must work towards addressing this issue.

Growth and Attrition: The Problem Continues The Big Picture

52. The India Top-5 are: Tata Consultancy Services (TCS); Infosys; Wipro; Satyam; and

HCL. With the exception of Satyam, all these vendors reported revenue increases of over

40% in the most recent quarter. The chairman of Satyam, explained that although Satyam's

results were not as high as its rivals, neither is its attrition rate, and this can be expensive,

as well as having an impact on customers. In July 2006, Satyam paid its workers an

average rise of 18 percent, which has in turn helped it reduce attrition rates to a 'more

manageable' 17.3 percent.

53. Attrition rates vary between different companies, but in general they are in excess of

20 percent. According to the Indian National Association of Software and Services

Companies (NASSCOM) website, by the end of 2007 there will be an anticipated 1.6 million

people employed in the IT industry in India (in firms that operate overseas and

domestically). This is indicative of the problems that the Indian IT services companies face,

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in that demand is so high that at any time a significant proportion of the 1.6 million will go

elsewhere for employment if the pay and conditions are an improvement on what they

currently have.

54. NASSCOM had further projections for 2007 that will add further to the attrition

problems suffered by Satyam and its competitors. NASSCOM's strategic reviews for 2007

reported that IT services exports were expected to rise from $13.3 billion in 2006 to $18.1

billion this year. Taking Business Process Outsourcing (BPO), engineering services and

R&D, software products, and hardware into consideration alongside IT services (exports

and domestic), overall revenues will rise from $37.4 billion in 2006 to $47.8 billion in 2007.

The total contribution to India's GDP would be 5.4 percent - up from 4.8 percent for 2006.

Services and software exports are expected to remain the mainstay of the sector at $31.3

billion, with a 32.6 percent growth.

55. As the economy improves, we are likely to hear more about the impact of employee

attrition. Soon, retention will have to become a focus of employers and human capital

management consultants and HR Outsourcing providers. Several demographic and cultural

factors are contributing to this impending shortage. Domestic population growth in total has

been slowing. Investment in US public education has not kept pace with demand for

increasingly better educated, higher skilled workers.

56. For the first time in decades, we haven’t had a region or economic sector from which

we can borrow qualified human resources. Baby boomers are reaching retirement age. The

following generations, Gen-X and Gen-Y, much smaller in numbers, are unable to fill the

void. Offshoring is providing some relief for employers, but the supply of talent is likely to be

insufficient to meet the demand.

57. We want to address turnover because, it’s expensive, it’s non-productive and it’s

frustrating. An often-cited Harvard Business Review article estimated the cost of turnover at

around 150% of an employee’s annual salary. With turnover, customer service levels

inevitably suffer. There is a high correlation between departing employees and departing

customers - some say that customers leave at twice the rate employees leave.

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58. People usually don’t leave for money or opportunity alone. Something else isn’t

working for an employee to be tempted to leave for money or opportunity. Several

situations work together to cause attrition. Often these are a combination of low

unemployment and high wages, challenges to employees’ inherent loyalty and job design.

Six Facts about Employee Turnover

59. Fact No.1: Turnover Happens: Achieving zero percent turnover is not realistic,

especially in today’s dynamic situation.

60. Fact No. 2: Some Turnover Is Desirable: Zero percent turnover is not desirable for

a couple of reasons. First, if all employees stayed and the organization grew steadily, most

employees would be at or near the top of their pay ranges and salary expenses would be

extremely high. Secondly, new employees bring new ideas, approaches, abilities, and

attitudes and keep the organization from becoming stagnant.

61. Fact No. 3: Turnover Is Costly: Most managers know that turnover is expensive,

but two-thirds of 1,290 managers in a survey were unable to quantify the cost of turnover

when asked in a recent poll. The cost of hiring and training a new employee can vary

greatly from only a few thousand dollars for hourly employees to between $75,000 and

$100,000 for top executives. Estimates of turnover costs may range from 25 percent to

almost 200 percent of annual compensation. Costs that are more difficult to estimate

include customer service disruption, emotional costs, loss of morale, burnout/absenteeism

among remaining employees, and loss of experience & continuity.

62. Fact No. 4: More Money Is Not the ‘Silver Bullet’: Talented workers want to feel

they are being paid comparably to what other companies pay for similar work in the

industry. They also care about being paid equitably with others in similar positions making

comparable contributions. When these two conditions exist along with interesting and

meaningful work, acceptable working conditions and good management practices, the

prospect of making a little more money in an another organisation where these softer

factors are unknown is usually not enough to pull the employee away.

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63. Fact No. 5: Managers Hold Most of the Keys to Keeping the Right Talent: One

recent study showed that 50 percent of the typical employee is determined by the quality of

his/her relationship with the manager. Many companies are floundering today in their

attempts to improve employee retention because they have placed the responsibility for it in

the hands of human resources instead of the managers. Many companies have begun to

measure managers turnover rates and vary the size of their annual bonuses accordingly.

64. Fact No. 6: Reducing Turnover Starts with Commitment: The organizations that

achieve the most dramatic reductions in turnover and maintain those lower levels are

usually the ones where the top executive or owner makes it a priority. Even when the top

executive is not committed, however, one committed manager can still make a difference.

Status of IT industry and how Indian vendor versus MNC (multinational) vendor' attrition shaping up?

65. MNCs did cause a lot of attrition that we have seen. Even though developers went

from Indian vendors to MNCs, they realized that the work that MNCs did is much less

interesting than the work that Indian vendors are doing. Indian vendors want to send as

much work offshore as possible. They try and push the envelope. They send the really

interesting projects, whereas MNCs send only that work which they have to. Only what the

client wants to & what is low level and grunt work. Even though they may pay a little more

initially, the resource (employee) says: "My goodness, I am not going to spend the rest of

my life doing COBOL code" or whatever it is. The other issue is that the career path at the

MNCs is not as attractive as that at an Infosys or a Wipro. Indians run those companies

whereas in MNCs, it may not be so. Companies such as Accenture look at their Indian

centers as solution centers, so folks here aren't even on the management track. Ambitious,

talented Indian developers here sometimes think, "I should go back. I can't eventually

become CEO or practice director or what-have-you." Now, US companies are dealing with

attrition. There is terrible attrition and it has an impact on projects. Some clients may have

vendors build in a 10 per cent buffer so that when the project turns over, there is still

someone trained that can go right into the project. But the problem is, it is impossible for

vendors to provide that buffer because of the demand for their services. So we are seeing a

lot of problems with service levels, with clients being dissatisfied with the attrition levels on

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projects. That is the key decision criteria when they select vendors.

THE COST OF ATTRITION

66. Hiring / Recruitment Costs: Costs of advertisement, agency costs, employee

referral costs, internet posting costs, etc. Administrative time for trips to job fairs & colleges,

screening applications, time, interviewing, meetings to make decisions? Newspaper,

journal, internet and other ads. Technology specialist time for placing recruitment and job

info on the district web site Brochure and flyer printing, folding, addressing, and mailing

Personnel staff time processing applications, answering phones, dealing with certifications,

and other inquiries, Cost of background checks, etc.,

67. Training Costs: Induction program costs, lodging costs during that period,

orientation material costs and cost of person who conducts orientation.

68. Low Productivity Costs: As new employee is learning new job, company policies,

etc., they are not fully productive.

69. New Hiring Costs: Cost of bringing new person aboard, time taken in

understanding the job of the employee who left and other perks given.

70. Low Sales Cost: Experience and the contacts that were lost, time for which the

position was vacant and other such things which result in either loss of customers or lower

sales.

71. What all this means is that there are huge costs associated with an employee

leaving. If we can roughly term this in monetary term, it means that for one person leaving a

company, the cost can be close to Rs. 60,000 or approximately equal to 2 months salary.

Example for a 300-seater call-center with an attrition rate of 30%, it can be as large as Rs.

60 lakh per annum.

Tackling Attrition Head-On

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72. NASSCOM ITES-BPO forum has identified HR as one of the key challenges of the

ITES-BPO industry and has formed a special task force to address short-term challenges

such as Attrition and also long-term challenges such as ensuring availability of a skilled

talent pool. To arrest this trend, companies can look into various options like good rewards,

bonding programme, flexible working hours and stronger career path. With attrition rates

ranging between 30-60 percent HR specialists feel that a scientific and analytical approach

should be implemented.

73. The tremendous turnover rate is undeniably one of the main problems faced by the

IT industry globally. HR specialists at the Nasscom summit brainstormed on various

approaches to handle this bugbear- either declare war on attrition and tackle it head on, or

adopt a more scientific analytical approach.

74. Pay cheques alone are not enough to retain employees. Management also needs to

consider other aspects like secure career, benefits, perks and communication. The attrition

battle could be won by focusing on retention, making work a fun place, having education

and ongoing learning for the workforce and treating applicants and employees in the same

way as one treats customers. Companies need to go in for a diverse workforce, which does

not only mean race, gender diversity, but also include age, experience and perspectives.

Diversity in turn results in innovation and success. The 80:20 rule also applies to

recruitment, since studies showed that 80 percent of the company's profit comes from the

efforts of 20 percent of the employees. So companies need to focus on roles, which have

the most important impact. Mercer India said the industry should look beyond the traditional

areas of recruitment and some thought should be given to employ physically challenged

people and housewives.

75. The road ahead for the IT firms is very important because if they are not able to

control the attrition rate they will loose their competitive edge in the global market. For this

certain, strategies and certain improvements are needed to be made in the processes

followed.

Retention Strategy

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76. The attrition battle could be won by focusing on retention, making work a fun place,

having education and ongoing learning for the workforce and treating applicants and

employees in the same way as one treats customers. Top retention strategy adopted by

organizations in Asia is to pay above market. They are also increasingly providing the

opportunity to teach their employees new skills and provide a favorable work-life balance in

their bid to retain key employees. This demonstrates that companies are taking steps to

address the top three reasons why employees leave an organization. Employee retention is

critical to the long-term health and success of any organization; however it is becoming

increasingly difficult for companies in Asia to attract, motivate and retain key talent. Attrition

rates are still on the rise, and as the war for talent becomes more intense each year, it is

becoming increasingly important for companies to ensure they keep the right people in

place to drive future business success.

77. The cost of attrition to a company is 70 per cent of an employee's annual salary, or

27 per cent of the company's operating expenses; and that `50-60 per cent of the attrition is

because of bad hiring alone'. Attrition levels can be drastically reduced with careful

planning and a little foresight. That's a thought on attrition worth some retention.

Workforce Needs 78. Clearly, companies must have a keen understanding of workforce needs to offer

competitive salaries, benefit programs and incentives to new recruits. Companies must

understand what their competitors are offering to ensure their compensation structure is

more attractive to new recruits, focus on retention of current employees and new

employees. As Indians job hop among employers, companies need to focus on making

their staff feel valued and contributors to the overall success of the organization. This can

be completed in a multitude of ways such as providing growth opportunities, training,

mentoring, competitive salaries and flexible schedules.

79. Companies must maintain a good reputation. To attract top recruits and maintain a

pool of future recruits to select from, it is imperative the company maintains a good

reputation. The Indian workforce talks and top recruits will not apply to companies that do

not offer solid training, mentoring, opportunity for upward growth. Competitive benefit

packages and an enjoyable work environment. Companies must offer competitive salaries

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and benefit programs. As the demand for talent continues to increase, the workforce

understands they can ask for top dollar for their skills and talent. If companies do not offer

competitive salaries and maintain high salary levels, they risk losing talent.

80. Companies usually turn to increasing the compensation for employees to retain

them. This however is no longer helpful in solving the problem as the skilled work force has

career opportunities which give preference to employee attrition rate that can be never be

totally eradicated. It can only be decreased. The business model on which a subsidiary

operation runs is significant in achieving this. Outsourcing more high end responsibilities

that offers challenging tasks to the employees goes a long way in helping. Some attrition is

healthy. Managers want under-performers to leave; often creating conditions to encourage

them to leave or simply releasing them. In an ideal situation, managers are able to predict

how much money to allocate for recruiting, hiring and training new workers.

Attrition Levels - Check

81. The attrition rate is often a harbinger of bad management. Due diligence in the

sourcing process requires customers to check a vendor’s attrition rate. If it is too high, the

customer may want to look elsewhere. Attrition is a leading indicator of other problems that

are happening in the company. Attrition rate means: are people happy, and is the company

doing the right things? Unless a company is able to attract and retrain the best talent, you

will not get the services that you need.

82. Attrition levels also tell a story about the culture of the service provider. In theory, a

customer should choose a supplier that shares its policies and concerns for its employees.

One big criterion is to look at the culture of the company, and how it meshed with the

customers. At MetLife and at Wachovia, there is a strong focus on how they [the service

providers] treat their employees. So they chose partners who had a similar focus on their

employees. Ask for a monthly report on involuntary employee turnover, experts suggest.

Any slide in this data should trigger a conversation where the customer pressures the

providers to take corrective action.

Provide Career Growth

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83. In India, IT jobs often lead to a middle-class lifestyle. In contrast to the U.S., Indian

IT jobs enjoys an element of glamour that attracts young people into large cities, providing

them with posh offices, wages that are comparatively higher than other industries and quick

promotions. HR managers strive to balance young workers’ need for career development

and retaining the industry’s hip image.

84. Service providers are quick to route high-performing agents into managerial

positions or rotate them across processes. They also offer continuous training on skills

ranging from domain knowledge to communications and interpersonal skills. Some have

even set up their own training institutes to train employees on domain-specific areas.

85. Customers can also promise good career prospects and an enriching learning

experience to retain high performers. They can, for example, introduce exchange programs

between their offshore and onshore teams; invite high-performing employees to work from

their home offices for a period of time; or even absorb star performers in their companies.

These steps may help incent high performers, whom the customer may want to retain, to

learn both domain skills and get closer to the customer company culturally. Customers can

facilitate best-practice knowledge sharing by taking star performers into their company or

introducing exchange programs to get their overseas staff closer to their company.

Instill Company Culture

86. The best practices of employee retention start with understanding that it’s neither

contracts that engage employees nor always compensation; it’s a sense of identity and

purpose. It is critical to instill company’s culture and values amongst overseas staff. This

way one builds a team with strong domain knowledge and also a sense of belonging — a

kind of emotional investment. While in the case of IT vendors, employees have a sense of

pride about working for a TCS or an Infosys, in the BPO setup; it is the customer’s

company that takes precedence. Remarkably, it is not uncommon to hear young BPO

workers claiming that they work for a Dell, an Amazon or a Nissan rather than for the

service provider.

87. Step inside many top-tier IT firms and you find that the work area devoted to a

particular customer looks and feels not like the parent IT firm but like the customer

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company. There are news clippings and recent appointments about the customer company

on the bulleting boards, posters that clearly announce that the work area belongs to a

particular customer account and newsletters on the customer company being circulated

amongst employees. If one walks around a hall where they are serving Nissan, then its

Nissan all around the wall. There are newsletters, stories, books, and communication on

cars, the automobile industry and Nissan.

88. One has to make employees feel that they are a part of business even though their

paycheck will come from the service provider.” Treating the vendor employees as an

extension of their own staff make them feel like they were working for MetLife, regardless of

the company name on their paychecks,” says a top executive about his experience at

Metlife. And what has the result of this assimilation been? “Even if the industry turnover

was 15%–20% [in ITO], Cognizant’s [one of MetLife’s suppliers] turnover was less than

that,” adds the executive. “And within Cognizant, the turnover in the MetLife account was

significantly less than that.”

89. Remember that culture will transcend only when a customer connects with a service

provider on multiple levels. It is not simply about the senior executives in both the customer

and service-provider companies sharing a few dinners together. “It’s not just me working

with the client’s head of out-sourcing or one operating leader,” says Genpact’s Bhasin. It’s

multiple layers there connecting with multiple layers here to build a culture and familiarity.”

Use Contracts to Retain Key People

90. Contracts, usually in the form of Service Level Agreements (SLA), can help provide

some continuity and reduce turnover. An SLA helps ensure that key people are not

removed from a customer account for a set period of time or without prior permission.

These agreements may include a provision stating that workers cannot be trained on your

account and then moved to other accounts. And significantly, some customers have also

built in the right to remove underproductive workers from the account. Karene House,

Senior Consultant, Morgan Chambers, an outsourcing advisory firm, says she has created

a number of contracts with staff-retention clauses. “The majority of these are for the

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protection of service and to ensure that appropriate knowledge transfer happens without

the supplier swapping people who may be less expensive,” says House.

91. The bad news in the industry is that attrition is rampant despite these agreements.

The good news is that most of the movement of people is within the industry itself. Most

employees leave one IT firm to join another — because another company may be offering

them more money or a better job profile — while few leave for other industries or for

reasons such as higher education or marriage. It’s a good idea to check with the service

provider to see whether it has any non-poaching agreements with competitors. Some IT

companies do follow informal agreements based on “gentlemen’s words” that they will not

poach from one another. Wipro BPO and TransWorks, for example, have such informal

agreements with at least 10 companies.

Consider Employee Bonds

92. Euphemistically termed service agreements, ironically, these bonds are used as

retention tools, more commonly in ITO rather than in BPO. A bond compels an employee to

stay in the company for a period of time, generally 12-24 months — usually with a bonus on

the back end. If the employee decides to leave before the stipulated period, he may forfeit

his salary for a couple of months and may even have to pay back training costs to the

company. Companies such as Wipro, Patni, Infosys, TCS and MindTree are known to use

employee bonds. Arguing in favor of bonds, employers maintain that they don’t want people

to use their companies as training grounds. Employees, on the other hand, claim that such

bonds are one sided, and don’t stipulate the company’s obligations in case the employee is

asked to leave. Steps to check the attrition level before selecting a service provider are:

• Ask for monthly reports on attrition levels

• Evaluate or move to tier-two cities

• Employ more stable workers such as housewives and retired people

• Introduce exchange programs

• Absorb star performers in your company

• Treat the provider’s staff as an extension of your own staff

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• Use contracts to ensure that key people are not removed form your account for a set

period of time or without permission

• Make sure that people are not trained on your account and then moved to other

accounts

• Ask your service provider to enter into non-poaching agreements with competing

outsourcers

• Consider asking the service provider to make employees sign bonds, if it’s legal in

the country

93. This is an area where the HR practices of customers and service providers often

diverge. Few U.S. employers ask their employees to sign these bonds. Generally, because

of the strong labor regulations in Europe, European companies have a culture that is less

stringent on employees. In some countries these types of bonds may simply be

unenforceable.

Bring Down Stress Levels

94. The IT/call-center environment is often very stressful for workers — the stress

comes from a combination of factors such as furious callers and demanding employers and

simply the work itself. The work is repetitive (most of the calls are scripted), employees

have call duration and call volume targets to meet, they work at night, deal with cultural

issues arising out of working with foreign customers and often deal with irate customers.

For those who leave a company to work outside the industry, stress is often the reason.

Absenteeism is common. In any case, stress needs to be addressed to have a productive

work environment.

95. The sourcing-evaluation process should include a look at the provider’s policy on

managing stress levels in the workplace. Many service providers organise yoga and

meditation centers, have gyms on their premises and some even assign agents as ‘fun

managers’, whose job is to make the work environment lively and less stressful. Here’s an

example of what the fun manager may do: He may declare Monday a Hawaiian day. Aloha

signs may be put up on the board by the manager, and the agents assigned to the process

may be asked to come to the office dressed in Hawaiian clothes. The ‘fun budget’ may be

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used to gift a pizza to the best-dressed person. (Admittedly, it’s possible that having to find

and wear Hawaiian clothes could cause some workers stress).

96. IT workers in India dealing with customers in U.S. time zones have a higher attrition

rate than ones servicing customers in Europe. For some companies, this issue has spurred

a follow-the-sun strategy where call centers are spaced around the globe so that call-center

shifts are restricted to daytime only. In other instances, corporations have opted to send

call center work to nearshore locations such as Mexico and Canada, rather than deal with

the graveyard shift in India.

97. But, what if in spite of all the efforts by customers and service providers, employee

churn remains high? None of the contracts that have been involved in obligate to continue

to do business with any vendor. One has to have multiple partners at any given time. If one

finds that attrition is a problem with one vendor, it starts steering the business to other

players. That is enough of an incentive for the vendors legal in that country not only to stem

attrition, but also to provide quality.

Providing Something Extra

98. It’s always about providing something extra to your employees. Good salary is

something which is a standard in the industry. So what needs to be done is to give some

perks to the employees. They need to be given perks like rewards for their good

performances. Owing to the odd working hours, the employees have very tattered personal

lives. So perks like foreign tours or company sponsored vacations are always a welcome

gift.

Honoring Performers

99. Performance based incentives is a must in the IT companies as these are generally

the employees who gets picked up by the placement hunters most often. These employees

are also among the most aspiring ones in the company so there is a need to give them

ample opportunity to rise and progress in the organization.

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Building Relationship

100. Relationship is something which lasts over time. So, if a company needs to hold on

to its employees, it needs to build a strong bonding with the employees. There is a need to

instill pride in the employees. They need to be shown that the work done by them is

important. Also, work needs to be shown in the form of challenge to the employee rather

than just a monotonous routine work. Provide employee with ESOPs, which would give

them a feeling that they are working for themselves and that they are an inseparable part of

the company.

The EEE-Model

101. Exposure, Experience and Education are three things which are vital to any

employee in any sector or industry. These needs of the employees are needed to be taken

care of for an employee to feel motivated. An employee expects the company to give him

good exposure in the kind of work he is doing. Not only this, he needs to get a good

experience working in the company from its top management and colleagues. Monthly

dinner with CEO of bonding programs with the other employees would be a good idea.

Also, some employees aspire for higher education to increase their knowledge base. Some

partnership with management institutes for short courses needs to be provided.

Alternatively, company can bear all the cost of further education for its good performing

employees.

Poaching

102. This is something which has become a very big issue in recent times. Poaching

means that one company tries to get experienced employees from other, so as to save on

the training costs and some other associated costs. Companies here need to understand

that poaching affects the industry on the whole and not only themselves. It raises the costs

to the companies on the whole, and thus, can loose their competitive advantage of cheaper

services if this continues. Some companies have already understood this and have gone

into an anti-poaching agreement. Others need to follow the same. If needs arise to hire at

lateral position from the industry, then the company should encourage the incoming

employee to complete his statutory notice period.

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HR Practices

103. HR is the most critical department in any indusry. While conducting the recruitment,

it is in the hands of HR to bring the right kind of people. HR needs to identify the employees

who would stick with the company and not get the employees solely based on the

qualifications and communication skills. Moreover, more diversity in the kind of employee

hired needs to be brought so there is a diversified culture within the company. Companies

need to look to hire from non metro cities as the employees from these cities are more

likely to stay with the company than those from metros. Also, they need to keep an eye on

good performing employees and have a career plan in mind. Not only this, they need to

discuss it with these employees on a regular basis and take feedback from them. They also

need to give their employees personal space to grow and adjust with social life. Moreover,

in case of employees leaving, a good exit-feedback system should be in place so as to

cover the reason for which the employees leave.

Office-Tiger: A Role Model IT industry to Follow

104. In a sector which boasts of an attrition rate of 30%, if a company claims of an

attrition rate of 9%, well, it certainly makes one raise his eyebrows. This company is Office-

Tiger. What the Office-Tiger tries is to instill a sense of pride in its employees. They make

the employees feel proud of doing the work they do. Every project given to them is

converted to a challenge which drives away the monotony that creeps into the job. Every

employee is given a feel that the work given to him or her is very important. Moreover,

there is a rigorous recruitment process. After that the employees undergo an induction

program where they hone their various skills. Employees work on live projects and if, during

their project work, they feel that some improvement is needed, they can go back to that

stage of training. This helps the employee continuously improve himself. Also, employees

are given encouragement to become Financial Analysts or Research Analysts.

105. It is not any one factor but the whole package, a synergy between money,

environment, acquiring the right skills through training, convenience, security, challenge

and a whole melting pot of other factors. Job satisfaction is a difficult recipe to get correct.

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However, with the right training, the team leaders, supervisors and managers can ensure

that they get this recipe correct. Training programmes developed and certified by AT&T

College of Call Centre Excellence and Coaching Mentor from Ulysses Learning equip the

team leaders and managers with the necessary skills for monitoring, staffing, scheduling,

motivation and team building, leadership and customer satisfaction. Exit interviews provide

an excellent source of information of internal problems,

employees' perceptions of the organization, underlying workplace issues, and

managers' leadership abilities.

HR's role and strategies

106. As the struggle for reducing employee attrition rates is intensifying, recruiters are

putting renewed efforts in identifying talent, which is committed and productive. However,

while everyone is competing for talent, in experts' opinion, a hiring spree can be a blunder

sometimes. Stringent recruitment process could help reduce attrition to a certain extent.

107. An internal referral mechanism is also very useful in reducing attrition rates in

companies. A thorough analysis of a candidate's background or behaviour pattern,

adaptability or liking would help the organisation with good resource pool and less attrition

rates. “When we recruit an outstation candidate, we need to keep in mind that there could

be an inclination for that candidate to move to a place closer to his or her native place.

Such facts should be kept in mind while making a decision,” says Abraham an HR

consultant.

107. Hiring stayers rather than stars is yet another strategy. According to experts, some

of the most talented people often have the tendency to move on. The reason being their

eagerness to climb by shifting from one company to another. But frequent job hoppers are

not the ultimate gainers.They gain or earn only in terms of money but those who opt to

work in one organisation for long are able to learn and gain experience which pays in the

long term.

108. An efficient HR focuses on creating a good work culture and work out different

strategies in line with organisational philosophy. According to experts, HR managers must

use the combination of growth, learning opportunity and pay attention to employees'

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personal needs and participation. The needs of the employees should be regularly gauged

through open communication, polls and feedback mechanisms to maintain consistency in

performance and high motivation levels.

Correlation of attrition and overall quality

109. The correlation of attrition and overall quality can be demonstrated by understanding

how attrition relates to several core aspects of any IT company: service quality, training,

cost, and company culture and standards.

Service quality

110. Quality of service is built on training and knowledge of the customer. Developing a

staff with deep domain expertise is clearly impossible if 40% of the employees quit every

year. This is exacerbated by the cultural barriers most buyers experience when working

with offshore IT companies. A bright young person from Kerala or Madhya Pradesh will

require some time to fully understand the mentality of a New York investment banker. It

takes time for an employee to become an expert service provider.

Training 111. Strong training programs reduce attrition by giving employees a focused, useful skill

set. Employees who receive valuable training know that future skill development is worth

sticking around for. Mature companies invest in broader training initiatives, such as

communication skills, time management skills, and management training. A company that

invests little in training is more likely to face high attrition rates. Without significant and

effective training, a service company has little chance of long term success.

Cost

112. There are many direct monetary costs to attrition: HR costs, lost productivity, and

management overhead. Precisely determining the direct costs of attrition is difficult, but a

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common estimate is 1.5 times the employee's annual salary. Since saving money is a

major motivation, cost increases harm relationships. High attrition is a form of operational

inefficiency and waste.

Company morale and standards

113. In addition to the monetary cost, attrition does insidious, intangible harm to a

company's culture and standards. The overstaffing necessitated by a high attrition rate and

the fact that teams are constantly disintegrating and being reformed with novices contribute

to a sense that individuals don't matter and that standards cannot be achieved. Overstaffed

employees learn that waste and inefficiency are built into the operation while productive

employees learn that "productivity doesn't pay". All employees become less likely to

internalize the high standards for quality, security and customer service. When people are

seen to be highly interchangeable, developing human capital becomes difficult and morale

drops.

The bottom line

114. Since most costs of attrition are hidden from the customer's immediate experience,

managers are tempted to see attrition as an inevitable fact, or a statistic for HR

departments to worry about. But attrition rates deserve close attention from managers and

buyers alike. While rates of up to 40% have been reported in India, a reasonably successful

company will have a rate no higher than 15%.

115. Attrition is manageable. Leading IT companies think strategically about retaining

employees. They use professional development programs, stock option grants, promotions

and mentoring. They understand that employee satisfaction and loyalty, at all levels is an

essential foundation for a successful business. IT executives have long understood that

attrition management is critical. To get an honest measure of a IT company, check out the

bottom line in IT quality: attrition.

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Organisational factors - job tenure? 116. In this section we consider whether job tenure is arbitrary, or if organisational factors

have impact on length of job tenure. Some industries have greater difficulty retaining

employees than others.

High Churn

117. According to reports, respondents from the leisure, catering and hotel and retail

industries stayed with their organisations the shortest length of time. These industries are

commonly associated with high attrition rates, as they tend to employ large numbers of

transient workers in jobs with often antisocial working hours and limited scope for personal

development/progression.

War for Talent

118. The finance, IT and professional services have the next lowest average job tenure.

These industries employ large numbers of workers with specialist skills, knowledge and

expertise. With skills shortages prevalent, these individuals tend to be highly sought after.

With their skills so much in demand, it may be easier for these individuals to shop around

prospective employers, looking for their ideal role.

Low Churn

119. The manufacturing, engineering and transport industries conversely have the

longest average job tenure. These industries typically employ large numbers of blue-collar

workers and technical specialists with niche areas of expertise, who are traditionally less

transient than other.

h Length of service varies across different sized employers

120. Tenure within smaller organisations is lower than in large organisations.

Furthermore, this difference is significant. Job tenure in organisations with more than 5,000

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employees averages 3 years. This is fully 11 months longer than in the smallest

organisations (less than 50 employees). Possible reasons for this could be a lack of

development and promotion opportunities, or the greater impact of personality clashes

within smaller organisations. London & Scotland have lowest job tenure Geographic

location of the organization also impacts average job tenure. The job tenure of respondents

from Scotland was lowest, whilst respondents from Yorkshire, the North East and North

West stayed with their organisations the longest. Job tenure in London was amongst the

lowest. The variation in job tenure in different locations is perhaps due to the types of

industry prevalent within particular regions.

Average job tenure-Changes over time

121. There has been much recent debate centered on how average job tenure has

prominence of redundancy programmes over the last 20 years has broken the

psychological contract between employers and their employees. Employees move jobs far

more frequently because they no longer feel loyalty to their employer. Though the job

tenures of some sections of the working population (particularly males over 50) have fallen,

this has been offset by increases in job tenure of other groups. The greatest increase has

been seen amongst female workers. Improved maternity provision and greater accessibility

of education to women have been particularly influential.

Average job tenure " male vs female

122. Whilst length of service for women has increased recently, men do remain with the

same employer longer than women. Our figures suggest that the average female stays in

one job for 2 years and one month, but men stay 5 months longer.

Attrition Trends Among Various companies

123. For the albeit marginally. In Q1 attrition was 8.2% compared to the 8% in same

period last fiscal. TCS officials said of the 1,223 people who quit the company in Q1, 291

were asked to go due to low performance. Some HR managers of software firms are of the

view that seasonality in attrition seems to have evened out. Earlier some quarters, had

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more attrition due to fresher quitting to pursue higher studies. Attrition at Infosys, at top

20% of the company, in the last twelve month (LTM), was 5.3% while it was 46.3% in the

bottom 5%. HR managers of software firms say that attrition in the 1-3 year experience

category is normally the highest. In Infosys, for example, it was around 12.5% to 13% in

this category, while it was 5.8% in the case of people with experience of more than six

years. In Q1, 960 people quit Infosys , 392 of them to join other companies and 250 to

pursue higher studies. Among the big brands in the domestic software export space,

attrition at Satyam Computers in the highest. In Q1 FY 07 it was 16.68%, though lower than

17.7% in the same period last fiscal. It was 16.5% in the last quarter (Q4) of last fiscal.

Young techies need able mentors

124. Indian IT companies should try to reduce the annual attrition rate among young

engineers by providing them with good career counseling.The IT industry is maturing day

by day in India. The country has a significant number of software engineers in the global IT

workforce. Many IT companies recruit fresh graduates from reputed engineering colleges

and universities. These young engineers are enthusiastic and have a good learning curve.

Most of them are fast learners and hard workers. These engineers want challenging

assignments to get professional satisfaction. Only 25% of these engineers remain with their

first company after 5 years. Almost 75% of them leave their first company in less than 5

years time.

125. There may be several reasons to this. Can infotech companies help these engineers

by providing good mentors for them? Young engineers change companies just for overseas

assignments, designation, good technical work, or simply for salary hikes. They think that it

is the right way to progress fast. One should remember that stability also leads to growth.

Some engineers change jobs because of lack of maturity and aggressiveness. How many

are taking advice from senior people when they are changing companies? This is the time

actually when senior mentors within the organization should help them. They should give

good career advice to these young engineers. There will be one company who can pay

more than the present company all the time. So, young software professionals should not

change jobs just for salary hikes. There are so many factors, which you should take into

consideration like company reputation, culture, your growth prospects, infrastructure, and

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many more.

126. Indian infotech companies also should think in terms of the long term. Majority of the

software companies recruit people when they get a new project. These engineers should

not be ignored once the project is over. They should retain these people. These employees

should be given both technical and managerial training so that they are useful for future

assignments.

Reduce Attrition: Clerical and Hourly Employees

127. Systemic Solutions can help you communicate. Most employees want to know more

about their work. We can explain each process and help employees understand the

importance of their work. Your employees will become more knowledgeable about their

effectiveness. Here are a few ways:

• Compliments and thanks cost little and can bring great benefits

• Let employees know that their opinions are valuable Keep employees informed -don't let them hear important news through rumors Update employees on technical information

• Address staff by their first names

• Praise publicly what the employee has accomplished and say why it was important

• Criticize privately about what the employee can do better and explain how to do it better

• Create community with activities such as informal meals or events outside work

• Involve employees in organizational planning

• Titles cost little, and inform people that your employees are valuable

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Call centers - combating attrition

128. Here today, gone tomorrow! Sometimes without any notice. This is an issue that

most HR managers in the call centre space face today. Historically, high turnover amongst

call centre staff has been accepted as a universal issue for the industry. This level of

attrition may vary from country to country and city to city. However, irrespective of the level

of staff attrition, the profitability, the cost of sales, the cost of recruitment and training, etc, is

always impacted.

128. Corporations invest thousands of dollars in recruiting and training call centre

employees. Retention of employees is an important issue in this highly competitive job

market. A high churn out in this industry could be caused due to a number of reasons. The

problems begin with recruitment practices and end with retention tools adopted by the call

/contact centre. At the recruitment stage itself there could be a mismatch between the

potential employee and the job specifications. Based on factors such as voice or Web-

based activities, inbound or outbound, domain, language, etc, the skill sets of the potential

candidate would differ. By concentrating only on core competencies, often there are

situations of square pegs in round holes.

Recruitment stage

129. Recruitment procedures should include an assessment of various skill sets such as

the aptitude and the attitude to work in a particular industry. Since most call centres cater to

international clients, skills related to spoken English, exposure to Western culture,

willingness to undergo extensive training and working in night shifts become critical criteria.

As a result of not evaluating these qualities at the outset, many of the customer service

representatives (CSRs) are unsuited to their jobs and move on quickly. This means the

employer has to start the entire process of recruitment and training all over again. This is

not only time consuming but expensive as well.

130. By recruiting candidates with good people skills, right attitude, good spoken English

and willingness to learn, attrition can be handled to a great extent. Involving trainers in the

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recruitment process would be an excellent idea as they would be in a position to identify

candidates who can be trained within the pre-decided time frames. Often CSRs have a very

glamorous picture about working in a call centre. A mismatch between what is said and

what is done in a lot of, a new job can be deflated rather rapidly . Given that this industry

provides an excellent work culture and benefits, it is important to present to the potential

candidate a true picture of the work involved. It is also a good idea to conduct training

sessions at night. This gears up candidates for night shifts before they are put on the job.

The churn out that takes place soon after training, mainly due to the stress of working in the

night or due to a misconception about the job, can be avoided.

131. Call centers that constantly articulate their strategic vision and solicit employee ideas

on how to meet the vision also experience a high level of retention. The parameters for

performance appraisals and growth within the organisation should be clearly defined and

communicated to the candidates. This will go a long way in professionalizing this industry.

Map career path

132. Mapping out a career path for CSRs would provide an added incentive for them to

hang on and improve efficiency. It is often good to know that there is a career path within

an organisation into which an individual can map his or her own personal and career

development. Separate training programme can be designed for experienced and

inexperienced recruits. This would give a head start to the experienced recruits while

recognising and valuing their previous efforts. It also sets a good example for fresher who

can learn from their peers their work, or at worst do not feel particularly negative towards

the tasks they undertake on a daily basis, and respect from supervisors/managers will

make them feel valued.

133. A good training programme, comparable to international standards with the option of

obtaining an international certificate, can ensure that the CSRs, because they lack the skills

or abilities to perform the job. Monitoring the performance of CSRs and the quality of the

calls is very crucial in a call center environment. A CSR who does not like to be closely

monitored, or cannot consistently be thorough and detail-oriented, is likely to become

frustrated and begin to seek other opportunities for employment. However, monitoring can

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be used as an unbiased tool for performance appraisals and motivation, as it is based on

available facts.

The remuneration factor

134. Whether we would like to admit it or not, money still remains a prime motivator. We

all need it and so examining the rates offered by other call/contact centers in geographical

area and also within the industry is worthwhile. One do not need to pay more than the

going rate, but aim to be perceived as an employer who values the employee.

135. Last but not the least, call centre employees need to be recognized as the key front

line contact with the customer. They need to know that their contribution to the

organisations is the most important as they project the image of the company. Supervisors

and managers need to be available not only to listen to ideas, but also to thank staff for

their commitment and contributions to the company.

Measures taken by major IT companies to curb attrition rate

136. The following are a few of the measures taken by IT companies to curb attrition:

• EXL Service has taken up 125 flats in Noida, where for a nominal rent, it houses

young staffers

• Wipro Spectramind has tied up with BITS Pilani and the Symbiosis Institute

of Management to provide distance learning programme for employees.

• Software company CSC gives its employees a six-month sabbatical to work

with an NGO of their choice.

• Wipro Spectramind and ICICI OneSource use their powerful parents to provide

career diversification opportunities

• Timely performance-based rewards Functional job rotation Training for skills

upgradation Regular feedback and communication Grievance and suggestion

management Reduction of stress components

137. Over and above rewards, personal development opportunities through: Performance-based incentives A transparent promotion policy through job rotation &

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Career growth opportunities. A personal development plan for each employee like:

• Soft skills training

• Communication

• Etiquette

• Acclimatization to different cultures • Training in foreign languages Annual parties, corporate sports Stress management

through yoga Recreational facility

138. In addition to vertical progression, in which employees climb up the hierarchical

pyramid as they move up in the organization, introduce a horizontal progression as well, in

which employees move laterally through different work areas like business development,

training, quality and transition, developing their skills and personalities as well.

Increasing Employee Retention or Reducing Attrition?

139. Retention Solutions

(a) Vision and objectives

(i) Observes R Natarajan, vice-president, finance and HR, Tavant Technologies India,

“Mentoring and handholding new recruits from day one to four months are important

tasks; during this period, they should be familiarised 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. Notes Satish Venkatachaliah, head of HR at SAP Labs India,

“We communicate SAP’s goals and mission to employees at all levels on a regular

basis…this has brought down the attrition level.”

(ii) Understanding an employee’s needs at various levels is a recommended HR

practice. The Meet Your People Programme carried out at Wipro aims to increase the

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effectiveness of supervisors. Under this initiative, all team leaders meet regularly to

exchange information about the challenges and successes of their respective teams.

“Through this, we are able to adopt best HR practices and tackle attrition to a great

extent,” explains Sahoo.

(iii) Exposure to newer technologies and well-managed succession plans cannot be

ruled out in managing attrition. Training in the employee’s area of specialisation can

glue him to the company. The training and development should involve domain-

specific, technology-specific and behavioural skills. Identifying the right training for the

right person is very important. “Some employees prefer development to being in a

support and maintenance job. To hold back these people, we give first preference to

training them,” adds Rakesh. Further, the use of new technologies, the support of

learning and training, and a challenging environment rank higher than competitive pay

structures as effective retention practices.

(b) Considering feedback

(i) 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.

Inputs can be secured from existing employees through various employee relationship

management tools. 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 analysed, and action will be taken on it. Our employees are very

excited that their feedback is being taken seriously,” says Sahoo. Exit interviews help

management learn the reasons why employees leave the company; based on their

revelations, the organisation can address the problems of existing employees, thereby

curb attrition.

(c) Employee’s advocate

(i) One of the main reasons why employees leave IT 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

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a huge gap between HR professionals and IT professionals 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. Says Dr Solomon Suresh, vice-president of HR at HTMT, “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.”

(d) Dr Nandkishore Rathi, placement officer, IIT-B, has a few tips.

(i) To curb a high attrition rate:

• Top management should communicate continuously with all the employees about

the vision and mission of the company.

• Support HR initiatives aimed at retaining people.

• Line managers or project managers should establish a connection between the

lower-level and top management.

• Manage the company’s growth properly.

• Develop leaders at all levels.

• Train leaders in the skills they need to manage effectively.

(ii) For HR managers

• Consider both a person’s culture-fit and job-fit.

• Understand the expectations at the entry level.

• Do not make false promises about benefits.

(iii)The most frequent methods for increasing employee retention have been to provide

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orientation and some level of mentoring support and guidance, at least for novice

educators if not all new employees. However, this bump is not as significant as is often

desired, nor as high as a more comprehensive induction program can provide. A

comprehensive induction approach can attain retention rates as high as 96% over five

years. (Texas A & M at Corpus Christi, etc.) In fact, it could be argued that one would

not even want a higher retention rate, for surely, not everyone who tries teaching should

be kept as a teacher.

(e) Funding New Employee Retention Efforts

(i) The most typical way to provide a new employee support program has been a

common sense approach, which is founded on two assumptions: Since we all were

once beginning educators, we all know what is needed to better support our recent new

hires. Every one accepts the value of increased support for new, and especially novice

employees. Each of these assumptions contain some element of truth of course. But

experience has clearly demonstrated that each contains unexamined fatal flaws.

Regarding providing a program based on our own initial year experience ignores the

dramatic changes in our profession which have occurred since that time and the fact

that mentors, our very best teachers, do not feel they have all the answers as teachers

themselves. This flaw has led to the wide spread discovery that Not every good teacher

makes a good mentor, and induction programs which have eased the stress for new

educators and helped a bit with their retention, but not helped us to improve the quality

of teaching or success of students.

(ii) Finding funding for a common sense induction and mentoring incentive has been a

challenge too. While induction programs seem so logical to educators, sadly, such

programs are often perceived as less than essential by the non educators who are

decision makers at the local school board, state or provincial policy, and legislative

levels. This has led to inadequately supported and abbreviated programs, which do not

have the capacity to provide the desired results, or to stronger programs while grant

funding endures, but which cannot be sustained when the grants are unavailable.

Clearly, the case for common sense approaches to new employee support is not as

compelling or as valued as we need.

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(iii) A more recent approach has been to focus efforts to generate funding for new

educator support programs on increasing employee retention. This can be viewed as

an attempt to demonstrate one of the major the benefits of effective induction, which is

increased numbers of effective educators working with students. Many studies in every

kind of demographic and geographic setting have shown the ability of effective

induction programs to increase retention. Some examples of the impact of induction on

educator retention include: Texas A & M University, Corpus Christi, whose program has

delivered a 96% retention rate after five years. The New Teacher Center at the

University of California, Santa Clara, which is directed by Ellen Moire and has reported

about 95% retention after 3 years.

(iv) As powerful a demonstration of success as these programs are for educators, many

non educators still question the value of induction and even increased retention. This

may be because the intended benefits of retention, improved teaching and student

learning, are less concrete, although no educator doubts they occur.

(f) Trends in old economy companies

(i) People work in manufacturing and old economy companies such as TELCO, SAIL,

L&T, BHEL and HLL, etc. for their entire life. Why it is not happening in infotech

companies? IT companies such as Infosys, Wipro, etc are among the most admired

companies in India. Even in these companies attrition rate is high, may be 1 or 2

percent less compared with the industry average. Is it happening in the western

countries? Global giants like IBM, HP, Sun and Microsoft are able to retain their

employees for two to three decades. Is this because we have very few product

development companies or because the Indian IT industry is concentrating only on the

software services sector? Indian IT companies should try to reduce the annual attrition

rate among young engineers by providing them with good career counseling.

(ii) Usually young software professionals get plenty of opportunities once they have 3-5

years of experience. This is the time they should take control and make the right move.

As they get more and more experience, opportunities may not be there in their skill set

because technology changes very fast. It is better that they should update their skills all

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the time. Young IT professionals should not worry after they get 6-8 years of

experience and by changing 5/6 companies. Most Indian software services . The

process of product development and the solutions delivery is similar in all most all

software solutions companies. All are going for quality standards like ISO 9001, SEI-

CMM, ISO 14000 EMS (Environment Management System).

(iii) Some of these recommendations, which are worth implementing, immediately are:

• An ITES/IT awareness fund is created with industry support to generate awareness

about employment in these industries, especially in Tier II and III cities through

advertisements, workshops, seminars and counseling sessions.

• Existing infrastructure in universities/colleges and existing vocation counseling centres

be leveraged, especially in Tier II and smaller towns to provide career counseling in

ITES/IT opportunities.

(iv) Some IT companies have of course done pioneering work to become an employer

of choice. TCS, for example, has put in place a comprehensive academic interface

programme (AIP), process framework and proper infrastructure. Under this

programme, professors from academia are also sent on sabbatical to TCS. Zenzar

Technologies has also done its bit. The company has partnered with Symbiosis

International Educational Centre to offer placement guarantees to successful

graduates of the institute's management course in information technology. Admissions

to this course are on the basis of a national entrance examination: AIMS Test for

Management Admission (ATMA). The batch of 90 students in this course includes

engineering students from premier institutes as well as non-engineering graduates

from relevant streams.

(v) Parametric Technology Corporation (PTC) is another company that has made

available its specialized CAD/CAM software Pro/Engineer to colleges across the world

and is providing training on its platform.

(vi) The company has entered into a partnership with ITC Infotech to promote

technological literacy among secondary school students throughout India and has

provided over 200 engineering colleges, including the IITs, BITS, and RECs, with

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Pro/Engineer software for their classrooms. There are many more such examples. For

BPOs, the signal is clear: shape up or ship out.

Importance of employee attrition

140. Why is ATTRITION important? Employee attrition costs 12 to 18 months of a

professional and 4 to 6 months' pay for each leaving clerical or hourly employee.

According to a study by Ipsos-Reid, 30% of employees plan to change jobs in the

next two years. Do the math and discover how much your company will pay for

attrition.If managers know the real causes of attrition, managers can control attrition and

retain employees. Each retained employee can save money and lead to better

opportunities.Though employee turnover can help organizations evolve and change, an

American Management Association survey showed that four out of five CEOs view

employee retention as a serious issue for organizational success.

Employee Turnover Trends

141. Minimizing turnover at the workplace has long been held as conventional wisdom

that almost goes without saying. Lately more companies are taking the approach that

managing turnover in terms of keeping it low just for the sake of having a low turnover rate

is not necessarily the most profitable practice.

142. Instead of managing turnover and giving equal value to all employees the notion is

that retention efforts should be focused on certain types of employees rather than across

the board. For example, at Applebee's their system doesn't reward managers for keeping

turnover low, it rewards them for keeping turnover low for top-performing employees. In

their case the company divides its employees into three groups: the top 20 percent, the

middle 60 percent, and the bottom 20 percent. (The 20/60/20 approach.) With the retention

efforts of their managers focused on the top 80 percent of employees the company doesn't

even set retention goals for the bottom 20 percent. Many of those in the bottom percentage

will leave and be replaced by a new group of hires, some of whom may turn out to become

top-performers. Turnover usually rises during economic expansions and falls during

55

recession, in an inverse proportion to the unemployment rate. Today we are experiencing

ongoing soft labor markets and unusually low quit rates.

143. In this environment the trend is that many companies are more concerned with the

turnover rate being too low rather than too high. With a heightened concern about wrongful

termination lawsuits managers can sometimes be reluctant to release poor performers, and

this in turn may lead to a loss in competitiveness.

144. Some advantages of higher turnover rates are in introducing new talent, and cost

savings through resetting salaries and other measures. In some cases employers must

replace old skill sets with new ones as technology or the customer base changes, or for a

different demographic mix or a better distribution of age groups. To facilitate this some

companies are now moving towards semiannual or even quarterly reviews to speed up the

process of terminating low performers or employees who can't step up to meet new

requirements of the company. The trend seems to be that workforce management

executives are more likely to think that unless they are creating "churn" in their turnover

they are facing a situation of ongoing inflated labor costs and stagnation.

More about Employee Turnover

145. One of the main financial benefits of turnover is that it provides an opportunity to

reset salaries. As employees at the high end of the pay structure leave, cost savings are

typically seen when a company brings in a replacement at a lower rate, or promotes from

within and lowers the rate for that employee's replacement.

146. Turnover can also produce substantial savings in employee benefit programs,

especially when younger workers replace older workers. Most of the higher costs of benefit

programs come from health care premiums, which are age-related. Jamie Hale, senior

consultant at Watson Wyatt predicts that total benefit costs for older workers are generally

around 20 percent higher than for younger workers.

Some other savings that can be seen by turnover are annual bonuses that are not paid,

open-position savings, and the value of any performance improvements that might result.

Of course there are costs, as well as savings, involved in any turnover equation. In the past

"turnover cost calculators" have provided input for financial costs, but no inputs for financial

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gain. In making turnover calculations now companies are more often aware that a standard

cost/benefit analysis cannot be provided for when the focus is only on the cost side of the

equation and does not include the benefit side.

147. When both costs and benefits are considered a more realistic cost/benefit analysis

can be reached, and as a result turnover is now often viewed in a different light. By

documenting all of the savings produced by turnover as well as the costs, companies now

can manage turnover levels so that financial gains outweigh the losses.

Loopholes in attrition management

148. When baby boomers reach retirement age, the departure of many highly-skilled

veteran employees is going to hurt business performance in several ways. It will not only

decrease the potential for innovation and growth in some units, but accelerated attrition will

also decrease operational efficiency and increase costs. A few organizations are trying to

get the jump on this problem. Companies like the Tennessee Valley Authority, Northrop-

Grumman, and Dominion Resources have begun implementing new workforce

development strategies to improve the retention of critical knowledge and reduce the costs

of turnover. But in the ongoing research and consulting with many firms, it is found that six

problems that are crippling organizational efforts to improve workforce capabilities in the

face of baby boomer retirements. How are we going to avoid these challenges?

Mistake #1: Assuming leaders will invest in solutions once aging workforce threats are

pinpointed. Some companies are becoming good at diagnosing where they are most

vulnerable to losing employees with critical knowledge. But, when it comes to

implementing specific solutions, such as accelerated mentoring programs, investing in

knowledge capture systems, or hiring successors early enough to train them.

Developing proactive executive champions is an essential part of almost every aging

workforce initiative.

Mistake #2: Failing to connect aging workforce solutions to management & strategic

objectives. Managers in one large aerospace company undertook a major knowledge

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retention initiative when the firm began losing too many engineers with special

knowledge needed to maintain one type of aircraft they had built. But company

executives pulled the plug on the project a year later because it wasn't producing

results that were linked clearly enough to business outcomes. Retaining and

developing workforce capabilities must always be tied somehow to objectives that

leaders really care about. Building a clear business case for knowledge retention is the

only way to overcome the inevitable conflicts that arise when other business needs

start competing for the same resources.

Mistake #3: Pursuing the silver bullet solution. The threat of losing 20 to 50 percent of

your employees in the next five years is a sobering problem. Companies need a

portfolio of options that can be customized to meet the requirements of individual units

and departments. Responding to the knowledge retention needs of R&D scientists, for

example, is different than meeting the requirements for effective senior management

succession.

Mistake #4: Not taking into account employee attitudes towards sharing valuable

knowledge. Face it, employees often have a wide range of feelings about sharing

knowledge. In organizations like NASA and the World Bank, where there is a strong

commitment to the organization they are likely to willingly share what they have

learned. But in plenty of firms today, employees, who feel burned out and cynical

because of past layoffs and budget cuts, are likely to be unmotivated to participate in

knowledge sharing programs. Find out your employees sharing strategies so you can

be sure new programs and systems are aligned with peoples willingness to cooperate.

Mistake #5: Over investing in technology solutions. Sandia Labs spent millions of

dollars videotaping hundreds of employees who were about to retire. Unfortunately, it

turned out younger workers at the nuclear weapons lab, no matter now smart he or she

was. The business world is already full of such employees. When it comes to

knowledge retention, leading with a technology solution is a recipe for failure.

Technology definitely has a role to play in supporting knowledge retention efforts, but it

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must be applied only when it is aligned with existing knowledge sharing and learning

behaviors.

Mistake #6: Failing to integrate aging workforce or knowledge retention solutions.

There are wide ranges of initiatives needed to support the development of future

workforce capabilities to compensate for attrition among highly-skilled employees. But,

in organisations today, they are not coordinating these efforts and the opportunity costs

are tremendous. Strengthening workforce for the future means coordinating and

integrating activities in four areas:

• Human resources policies and processes, such as succession planning and phased

retirement practices;

• the use of a variety of knowledge transfer practices, such as documentation,

storytelling, and coaching;

• leveraging IT applications effectively to support knowledge capture, sharing, and

reuse; and,

• proactively designing practices to recover knowledge once it has left the

organization, either through careful outsourcing or formal programs to bring retirees

back as consultants or contractors.

142. The challenges posed by an aging workforce and increased mid-career turnover are

getting greater management attention these days. There will be staggering knowledge

losses in the years ahead due to the departure of experienced managers and professionals

from organisations throughout the industrialized world. But leaders who have begun

addressing this problem are running into new challenges. The potential mistakes described

here can undermine future workforce development and threaten business performance.

SUMMARY AND CONCLUSION Suggestions - Effective attrition management

Employee attrition management – A Model

149. Employee attrition study enables to manage employee attrition more effectively. Analytics based study should be conducted to understand employee behavior and to

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predict employee behavior. As a first step we collect internal data on the past behavior of

the employees. Then overlay that information with profile information of these employees

that the organisation had collected prior to recruitment as well as during the course of their

employment. Finally, append that data on the employees' performances, their performance

evaluations and their raises and bonuses.

150. Then create segmentation models that are able to segment the employees by their

profile information and attrition history. This gives a starting point to understand what

segments of employees have a higher inherent propensity to attrite. Also build

segmentation models around employee performance to understand if there are certain

profiles of agents that were consistently performing better than others.

151. Finally, create a scoring model that would rank employees by their propensity to

attrite from the company. Implementing the segmentation and scoring models are able to

accurately distinguish and identify employees that were at a higher risk of attrition. The IT

firms can use this profiling models in various different but effective ways. Firstly, they would

be able to alter their recruitment policy to proactively attract profiles that were less likely to

attrite. Also, based on an employee's attrition score they could decide what kind of

mentoring was necessary for the employee. Finally, they would also able be able to

allocate employees strategically to different programs based on their risk of attrition.

152. Managing Employee Attrition: The task of managing employee attrition can be

split into three stages:

Stage 1:Identify the level and cost of turnover and benchmarking it against competitors

• When does employee turnover become a cause for concern?

• Labour turnover varies across industry sectors, and different organization sizes.

Furthermore, the cost and impact of attrition varies dependent on the geographic

location and the labour market in which the organization is competing. Identifying

your employee turnover rates and benchmarking this figure against similar

organisations is one way to assess significance, however the key determinant of

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whether retention is a cause for concern is how difficult and/or costly it is to replace

leavers.

Stage 2:Understand why employees leave: Exit interviews are an ideal way of recording

and analyzing the factors that have led staff to leave the organization. They allow an

organization to collate quantitative and qualitative data regarding reasons for leaving

and underlying issues. Survey highlighted a further benefit of conducting exit interviews.

Stage 3:Implement retention strategies: The employees who received an exit interview

as part of their leaving process left with a more positive opinion of the organization than

those who did not. Overall, the perception of the former employer was improved by

15.3% where exit interviews were used. Ensuring leavers retain a positive opinion of the

organization is important to protect your employer brand and is a key part of retaining

your remaining employees.

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Conclusion

153. To conclude, IT firms need to understand that now, the case is not about giving

more salaries and preventing the employees from leaving. Employees need much more

than what is obvious. A long-term relationship needs to be established with its employees.

Moreover, employees in this sector need a lot of personal space and a well thought-out

career growth plan. Also, HR practices are needed to be fine-tuned so as to get the right

kind of employees. Some of the strategies suggested in this paper can be very easily

implemented without any cost to the company. Some other strategies are not so easily

implementable, but are very important for the growth of this sector, and are necessary for

benefiting the country on the whole.

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Bibliography:

Aswathappa. K, (2002), Human resources and Personel Management. Tata McGraw-Hill

Publishing Company Limited

Fred Luthans. (2002), Organisational Behavior. McGraw-Hill International

Wibliography:

www.bpoindia.org/research/attrition

www.attrition.co.uk

www.expresscomputeronline.com

www.thehindubusinessline.com

en.wikipedia.org/wiki/Attrition

www.careersindia.com/website/attritionstudy

www.alsbridge.com/hr_outsourcing_employee_attrition_full.shtml

www.economictimes.indiatimes.com

www.rediff.com

www.itpeopleindia.com/20040621/management2.shtml

www.globalservicesmedia.com

www.icmr.icfai.org/casestudies