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A Research Project Report

On

ATTRITION MANAGEMENT

Submitted in partial fulfillment for the requirement of the MBA Degree

awarded by Bangalore University

Submitted by

Ponnappa I.S

04XQCM6064

Under the guidance of

Praveen Kamat

Professor

M.P.Birla Institute of Management

M.P.Birla Institute of Management

Race course road

Bangalore-1

INDIA

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DECLARATION

I hereby declare that this dissertation entitled

�ATTRITON MANAGEMENT� is the result of project work undertaken

by me under the guidance and supervision of Mr. Praveen Kamat,

Professor, M.P.Birla Institute of Management, Bangalore. I also declare

that this dissertation has not been submitted to any other

University/Institution for the award of any Degree.

(Ponnappa I.S)

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CERTIFICATE

I hereby certify that the research work embodied in this dissertation

entitled �ATTRITION MANAGEMENT�, has been undertaken and

completed by Mr. Ponnappa I.S under the guidance and supervision of

Mr. Praveen Kamat, Professor, MPBIM, Bangalore.

(Dr. N.S. Malavalli) Principal MPBIM,

Bangalore

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CERTIFICATE

I hereby certify that the research work embodied in this dissertation

entitled �ATTRITION MANAGEMENT�, has been undertaken and

completed by Mr. Ponnappa I.S under my guidance and supervision

(Mr. Praveen Kamat) Professor, M.P.B.I.M

Bangalore

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Acknowledgement

The satisfaction that accompanies the successful completion of any

task would be incomplete without the mention of the people who made

it possible, whose constant guidance and encouragement made my

efforts a success.

My profound thanks to my project guide Mr. Praveen kamat, Professor,

M P Birla Institute of Management, Associate Bharatiya Vidya Bhavan

for helping me throughout the project. I take this opportunity to thank

him for his immense support, guidance, specifications and ideas

without which the project would not have been a success.

I would also like to thank my project guide Srivatsa Ghantae, at

Datacraft Asia Ltd, for valuable information provided by him on the

current trends in the industry.

I wish to thank our Principal Dr. N. S. Malavalli for his encouragement

and support.

Ponnappa I.S

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CONTENT PAGES

EXECUTIVE SUMMARY 1-2

INTRODUCTION 3-6

WHAT IS ATTRITION? 7-14

THE COST OF ATTRITION 15-19

TRACKING ATTRITION CAUSES 20-39

CURBING ATTRITION 40-41

SUGGESTIONS 42-60

IMPORTANCE OF EMPLOYEE ATTRITION 61-65

LOOPHOLES IN ATTRITION MANAGEMENT 66-69

EFFECTIVE ATTRITION MANAGEMENT 70-78

ANNEXURE 79-82

BIBLIOGRAPHY 83

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EXECUTIVE SUMMARY

This report seeks to utilize primary research in order to offer a greater

understanding of the complex issues raised by staff attrition.

Specific aims were to:

Identify trends in leavers' behaviour and the reasons employees change

jobs/organisations

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 organisations

When do employees leave?

3/4 of our survey respondents had left their last organisations with less than

three years service.

Why do employees leave?

A significant difference was established between what employers assumed were

key causes of turnover, and the actual reasons employees gave for leaving.

Employers largely failed to take into account the importance of providing

opportunities for development for their employees. This was three times as

important as any other factor in employees� decisions to change jobs.

The top 3 causes were:

Lack of opportunities for personal and career development

Issues with the working experience and problems with superiors

Salary & benefits

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What can employers do to minimize the incidence of and impact of employee

turnover?

Developing an employee retention strategy involves three stages:

Identify the level and cost of turnover and benchmarking it against competitors

Understand why employees leave

Implement retention strategies

Having identified the reasons employees leave, there are a number of specific

retention strategies available to employers. Our research has emphasized the

importance of adopting a holistic approach to dealing with staff attrition.

An effective retention strategy therefore will seek to ensure:

Attraction and recruitment strategies enable selection of the �right� candidate for

each role/organisations

New employee�s initial experiences of the organization are positive

Appropriate development opportunities are available to employees, and that

they are kept aware of their likely career path with the organisations

The organization�s reward strategy reflects the employee drivers

The leaving process is managed effectively

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INTRODUCTION

About Datacraft

Datacraft is the leading independent IT services and solutions company in Asia

Pacific. Specializing in customized business solutions, Datacraft helps clients plan,

build and support their IT infrastructures.

Datacraft combines an expertise in networking, security, operating environments,

storage and contact centre technologies, with advanced skills in consulting,

integration and managed services, to craft IT solutions for businesses.

A member of the Dimension Data Group, Datacraft is listed on the main board of the

Singapore Exchange, and is a component company of the Straits Times Index.

Headquartered in Singapore, Datacraft spans more than 50 major offices and has

over 1,200 employees across 13 Asia Pacific markets.

Area of operation

Our Key Differentiators

Global delivery: Datacraft, together with parent company Dimension Data,

possesses the skills, resources, technology know-how and global reach to create a

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worldwide infrastructure that delivers seamless professional solutions and services

for international companies.

Proven track record: As Asia�s pioneer in systems and network integration,

Datacraft has designed, implemented and managed network infrastructure for

many global corporations and leading service providers, as well as the equivalent of

the �Fortune 200 companies� in every country throughout Asia Pacific.

Strong specialized skills: Datacraft has over 750 industry-accredited technical

personnel region-wide and is the only region-wide Cisco Gold Certified Partner,

employing over 70 CCIE s � more than any other firms in Asia Pacific.

Best-of-breed technologies: As an independent systems integrator, Datacraft is

able to partner the world�s leading suppliers to provide the most advanced and

flexible solutions.

Area of operation:

Global Services

Local partnership, global integration

This is a suite of professional and managed services that assess, implement,

monitor, maintain, and optimize different layers of the IT environment, from the

network to applications.

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These services are supported by Datacraft�s revolutionary service delivery

architecture, Global Services Operating Architecture (GSOA), which gives

businesses the immediacy of a local partner and the leverage of a global integrator.

The key offerings are:

Consultancy � An IT and business consulting service to help organizations plan

and design their IT strategy for optimal network performance and greater

efficiencies.

Surveyor � An assessment service that provides a "snapshot" of a company's

entire IT environment, or just components, and reports on how it is functioning.

Primer � A turnkey methodology and implementation service that includes

consulting, design, site preparation, staging and piloting, logistics, installation and

project management.

Insite � A management service with offerings that range from basic monitoring to

extensive predictive analysis and reporting.

Uptime � A maintenance service that offers total support, troubleshooting, and

resolution solution for mission-critical IT systems, 24-hours a day, every day of the

year.

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Assure - An out-tasking service that provides best-in-class support services for

your network and security infrastructure.

Training � Learning solutions in data communications, project management and

vendor-certified technology skills.

Each Global Service is a standalone service and can be delivered independently.

They are also available at multiple service levels and can be configured to match

business requirements and budgets.

Datacraft's Global Services can be deployed either within your organization or

through our Global Services Centre in Asia Pacific and Dimension Data's

operations located in Australia, North America, Europe and South Africa. These

centers are interconnected through one secure system, our Global Services Portal,

which gives you local access to the knowledge base of our entire global

organization.

WHAT IS ATTRITION?

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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.

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?

Turnover rates and tendencies

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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 the week of July 8-15, 2003, that 41 percent

of organizations reported decreased turnover rates since 2001.

But the economy isn�t the only thing the correlates to turnover rates. In a report on

employee tenure, the Bureau of Labor Statistics found that in January 2002, 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.

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.

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Attrition Graph (Fig: 2.1)

Six Truths about Employee Turnover

Truth No.1: Turnover Happens

Achieving zero percent turnover is not realistic, especially in today�s job market.

Truth 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.

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Truth No. 3: Turnover Is Costly

Most managers know that turnover is expensive, but two-thirds of 1,290 managers

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, and �corporate memory.�

Truth 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 organization where these softer factors are

unknown is usually not enough to pull the employee away.

Truth No. 5: Managers Hold Most of the Keys to Keeping the Right Talent

One recent study showed that 50 percent of the typical employee�s job satisfaction

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

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instead of the managers. Many companies have begun to measure managers�

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

Truth 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.

Attrition Rate in Software Industry

With competition for talent intensifying, the need to retain key employees has

increased manifold. While the average attrition rate in the Indian software industry

is in the region of 16%-17%, that for the top tier companies is lower. Going forward,

managing a huge employee base will be the key challenge faced by these

companies. Infosys already employs nearly 40,000 professionals, while TCS

employs nearly 50,000 and to keep attrition low amid tremendous competition for

talent will be a priority.

STEPHANIE Moore, Vice-President, IT Services Research Group, Forrester

Research is one of the discerning analysts tracking strategies and trends in the

global sourcing arena.

Bringing to bear several years of experience and advice on technology and

outsourcing strategies, both at Forrester and Giga Information Group (prior to its

merger with Forrester), Stephanie speaks with authority on the slow attrition tussle

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that is taking place between multinational (MNC) and Indian frontline vendors in the

off shoring space.

At the recently concluded Nasscom 2005 conference at Mumbai, e World had a

candid talk with her on vendor turf wars, acquisition of mid-tier companies and

consolidation that may change the rules of the game.

What is your take on the status of the industry and how is the Indian vendor

versus MNC (multinational) vendor' attrition shaping up?

MNCs did cause a lot of attrition that we have seen. But I think 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 � only 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

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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 projects. That is the key

decision criteria when they select vendors.

Drop in Attrition Rate

BANGALORE: The quantum jump in the number of multinational technology

companies setting up subsidiaries in India and the heavy hiring by both MNC and

domestic IT providers, has suddenly stepped the demand for talent.

This should logically translate into higher attrition. Strangely enough the reverse

has been the case. First quarter figures disclosed by leading domestic software

services firms show that attrition in most cases has actually declined.

It looks as if despite the war for talent; techies working for large software services

brand appear to be rather loyal to their employers. Wipro, in fact, has reported

significant improvement in its attrition rate. In Q1, the figure stood at 12.2%.

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Much below the 15.65% it reported in the same period last fiscal and marginally

lower than 12.8% in the sequential Q4 FY 05 quarter. The volatility in attrition rate

seems to be missing, said a Wipro official. At rival Infosys too, attrition rate has

dropped. The rate at 9.8% in Q1 FY 06 is lower to the 11.7% it reported in Q1 last

fiscal.

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THE COST OF ATTRITION

What are the costs of attrition?

The estimate that the recruitment and training costs of replacing the average

employee is £ 4,3001. The true cost of attrition to the organization is often

substantially higher, as this figure does not include:

Cost of lost productivity (during notice period, time to recruit and induction)

Cost of lost knowledge, expertise and business relationships (perhaps picked

up by a competitor)

Comparing employee turnover costs with costs of implementing an employee

retention strategy will prioritize the action required.

Calculate their employee attrition rate and its associated costs

Benchmark their attrition against similar organisations

Identify potential causes of their staff turnover

Highlight possible solutions to try to improve their staff retention

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Factors to Consider in the Cost of Attrition

Here are some things to consider that demonstrate clear financial costs. You

basic need is to know the cost to the district when a new employee leaves

teaching or is not rehired?

What you want to identify are your district's costs for:

New employee recruitment, especially for recruiting the kind of diverse staff

a great district wants?

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, etc.

Cost of background checks

New employee initial orientation

New employee training during the first year or two? (both that just for new

employees and all other district training)

Reduced student learning during the year or two that a new employee is

learning to teach?

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Reduced student learning when a new employee leaves with what they have

learned from trial and error, and a different new employee is hired without

that hard won experience and starts over at the beginning again.

Loss of instructional continuity when new employees leave or are not rehired

because they are not as successful as required?

Administrator time spent orienting, evaluating, coaching, developing, and

supporting new employees who are not retained?

The correlation of attrition and overall quality can be demonstrated by

understanding how attrition relates to several core aspects of any BPO company:

service quality, training, cost, and company culture and standards.

Service quality

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 your employees

quit every year. This is exacerbated by the cultural barriers most buyers

experience when working with offshore BPO 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

Strong training programs reduce attrition by giving employees a focused, useful

skill set. Employees that receive valuable training know that future skill

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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

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

saving money is a major motivation for BPO buyers, cost increases harm BPO

relationships. High attrition is a form of operational inefficiency and waste.

Company morale and standards

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

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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

Since most costs of attrition are hidden from the customer's immediate

experience, managers are tempted to see attrition as an inevitable fact of BPO life,

or a statistic for HR departments to worry about. But attrition rates deserve close

attention from BPO managers and buyers alike. While rates of up to 40% have

been reported by BPOs in India, a reasonably successful company will have a rate

no higher than 15%.

Attrition is manageable. Leading BPO 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.

BPO executives have long understood that attrition management is critical. To get

an honest measure of a BPO company, check out the bottom line in BPO quality:

attrition.

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CAUSES OF ATTRITION

When do employees leave?

Chart showing average length of job tenure (Fig: 4.1)

As the graph shows, there is a large peak of employees leaving having worked for

the organisations for only two years. In our survey, 76% of respondents had left

their last organization within 3 years. Burgess and Rees3 define this section of the

working population as �job shoppers�. They suggest that people in their early

careers treat jobs as commodities. They move from job to job shopping around for

their ideal role.

Whilst concurring that most job tenures last less than 3 years, their results identified

a second group. Having �shopped around� in their early careers, they suggest

people then find a role and organization in which they feel comfortable, and then

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settle down long term. They estimate that 24% of the working populations have

worked for one employer for at least 30 years.

Job Shock

The graph above also shows considerable numbers of respondents who left their

previous role shortly after joining. This scenario, referred to as job shock, can be

particularly costly to organisations. The organization spends considerable sums

recruiting and training the new employee, who leaves without necessarily achieving

full productivity. Job shock is common amongst our respondents as shown in the

above graph.

Do organizational factors influence job tenure?

In this section of the report we consider whether job tenure is arbitrary, or if

organizational factors impact on length of job tenure.

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Average job tenure differs across industry sectors It has been widely reported that

Chart showing how length of job tenure varies across different industry

sectors (Fig: 4.2)

Some industries have greater difficulty retaining employees than others. Our survey

results as shown in the above graph provide further evidence to support this

argument.

High Churn

According to the graph, 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

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large numbers of transient workers in jobs with often antisocial working hours and

limited scope for personal development/progression.

War for Talent

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

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.

The Larger the Organization, the Longer Employees Stay

Less well documented has been how job tenure varies across different sized

organisations.

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The following graph shows the results for our survey respondents:

Chart showing how length of service varies across different sized employers

(Fig: 4.3)

The graph clearly shows that job tenure within smaller organisations is lower than in

large organisations. Furthermore, this difference is significant. Job tenure in

organisations with more than 5,000 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.

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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

There has been much recent debate centered on how average job tenure has (or

hasn�t) changed in recent times. Many commentators claim that the increased

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.

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Average job tenure � male vs female

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.

Why do employees leave?

In order to allow an organization to design and implement an effective retention

strategy, it is important for both senior and line management to understand the

reasons that prompt high performers to leave and find alternative employment.

However, research reveals a disparity between the factors that employers assume

to be most influential in driving employees to leave, and those factors that have

actually caused respondents to leave a job.

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The following chart demonstrates the scale of this disparity:

Employees ______

Employers ______

Chart comparing employers� perceptions of reasons for leaving and

employees� actual reasons for leaving (Fig: 4.4)

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Employers generally believe that employees leave for a variety of reasons. The

traditional importance of pay and benefits as a decision-making factor however is

assumed to remain key. The feedback received from employees reveals a marked

difference.

The top 3 reasons for employees leaving are:

Lack of opportunities for personal and career development

Issues with the working experience and problems with superiors

Salary & benefits

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� decisions to leave. Salary and benefits

are rated as only the third most important factor.

Respondents who 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

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

to the number of respondents who left because the role did not match their

expectations. 63% of our respondents said that this was one of their 5 main reasons

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

peak of respondents who had left their organization within six months.

Organizational Factors and Reasons for Leaving

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

Surprisingly, employee�s reasons for leaving remain 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, organization size, location and potentially other industry specific

factors rather than the actual working environment for example the transferability of

industry skills.

The greatest variation in reasons for leaving is shown in the figures for 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.

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Conversely, they are the least likely to leave to 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. Our

research supports these assumptions. 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

The researches into employees� reasons for leaving have revealed a number of

contributory factors. Many employers were 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 organization.

A lack of development opportunities was the most important factor in employees�

decisions to leave their previous organization. Matching development opportunities

to individual employee�s career aspirations is likely to have the most positive

influence on staff retention.

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Attrition Trends Among Various companies

For the country�s largest software exporter TCS, attrition percentage has gone up,

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 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%. Infosys CFO Mohandas Pai said �The good people that we want to

retain in the company stay. The attrition is the lowest in that category. As the

category deepens, attrition becomes higher.�

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

38

Computers in the highest. In Q1 FY 06 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.

How call centers can combat attrition

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.

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.

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Recruitment stage

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.

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 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 ways the �hype� of a

new job can be deflated rather rapidly by the �reality� of the role once started.

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

40

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.

Call centres 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 organization should

be clearly defined and communicated to the candidates. This will go a long way in

professionalizing this industry.

Map career path

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 organization into which an individual can map his or her own personal

and career development.

Separate training programmes can be designed for experienced and

inexperienced recruits. This would give a head start to the experienced recruits

while recognizing and valuing their previous efforts. It also sets a good example

for fresher who can learn from their peers� experience. Ensuring that people enjoy

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.

A good training programme, comparable to international standards with the option

of obtaining an international certificate, can ensure that the CSRs don�t quit

because they lack the skills or abilities to perform the job.

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Monitoring the performance of CSRs and the quality of the calls is very crucial in a

call centre 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

be used as an unbiased tool for performance appraisals and motivation, as it is

based on available facts.

The remuneration factor

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 centres in

your geographical area and also within the industry is worthwhile. You do not

need to pay more than the going rate, but aim to be perceived as an employer

who values the employee.

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.

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. However, with the right training, the team leaders,

42

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.

Why Do They Leave?

Most employees leave their work for reasons other than money - and your

organization can correct these reasons. Most leaving employees seek

opportunities that allow them to use and develop their skills. Leaving employees

want more meaning in their work. They often indicate that they want to use their

qualities and skills in challenging teamwork led by capable leaders.

Managerial staffs cite "career growth" and "leadership" as the major factors that

influence attrition and retention, together with "opportunities for management"

"ability of top management" "use of skills and abilities" and "work/family balance"

Professional employees cite concerns about "supervisory coaching and

counseling," "company direction" and "interesting work"

Clerical employees voice concerns such as "type of work," "use of skills and

abilities" and "opportunity to learn"

Hourly employees notice whether they are treated with respect, their "management

ability" and "interesting work"

Orientation

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New employees who attend a positive orientation program are 70% more likely to

be with the company three years later (Corning Glass).

Exit interviews provide an excellent source of information of internal problems,

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

managers' leadership abilities.

Ineffective Managers

High employee turnover can be recognized and properly attributed to poor

managerial performance, emotional intelligence and ineffective leadership. Poorly

selected or improperly trained managers can be very expensive

.

A Workforce Magazine article, "Knowing how to keep your best and brightest,"

reported the results of interviews with 20,000 departing workers. The main reason

that employees chose to leave was poor management. HR magazine found that 95

percent of exiting employees attributed their search for a new position to an

ineffective manager.

Hire attitude; Train skills

Systemic Solutions can help you hire and inspire appropriate employees.

Build positive, friendly, teamwork attitudes and commitment to customer services

Help new employees feel comfortable as they participate as valued team members

Provide periodic refresher courses to maintain team purpose and functionality

Apply Expert Modeling to rapidly transfer expert skills within a workforce

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Reduce Attrition: Managers and Professional Employees

Systemic Solutions can help you adjust your company vision and manager's

performance reviews to reflect employee turnover, and provide mentoring and

interpersonal training to inexperienced managers.

Develop and communicate a strong strategic vision

Provide relationship coaching and help people develop to their potential

Reward managers for their relationship skills - not only on technical know-how and

financial results

People don�t leave jobs, they leave managers! Replace managers who will not

develop relationship skills

Reduce Attrition: Clerical and Hourly Employees

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

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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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CURBING ATTRITION

Measures to cut attrition rate

Arguably the biggest bane to organisations today is attrition. This is more

pronounced between the MNC�s and software majors. So has hiring from campus

had a positive affect on attrition?

�The attrition levels for campus hires are much less than that of lateral hires,� says

Mr.Srininvasan. �Hires from campuses tend to have a lower attrition initially but

around the two year mark is a crucial time - where the integration into IBM and its

culture and values has been strong students have over the long haul a lower

attrition rate,� says Mr. Appel on similar lines.

Given Accenture�s growing demand for technology professionals and the success

from hiring from colleges, the company has decided to increase the intake from

campus significantly.

Employee attrition management more effectively

Employee attrition study enables a call center to manage employee attrition more

effectively

Solution: Analytics based study should be conducted to understand employee

behavior and to predict employee behavior. As a first step we collected internal data

47

on the past behavior of the call center's employees. We then overlaid that

information with profile information of these employees that the organization had

collected prior to recruitment as well as during the course of their employment.

Finally, we

also appended data on the employees' performances, their performance

evaluations and their raises and bonuses.

Then create segmentation models that were able to segment the employees by

their profile information and attrition history. This gave us a starting point to

understand what segments of employees had a higher inherent propensity to

attrite. We also built segmentation models around employee performance to

understand if there were certain profiles of agents that were consistently performing

better than others.

Finally, create a scoring model that would rank order employees by their propensity

to attrite from the company. Implementing the segmentation and scoring models

were able to accurately distinguish and identify employees that were at a higher risk

of attrition. The call center used our profiling models in various different but effective

ways. Firstly, they were 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 were also able to allocate employees strategically to different programs based

on their risk of attrition.

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SUGGESTIONS

MEASURES TAKEN BY MAJOR BPO COMPANIES TO CURB ATTRITION

RATE

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

Why AFS employees prefer to stay on

High employee attrition that plagues the BPO industry does not trouble AFS.

The average tenure of our employees has been six to eight years, far exceeding the

industry norm. Over three-fourths of our people have been with the company for

between five and 10 years.

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Why attrition?

Our research shows that 40 per cent of employees leave an organization to pursue

higher education, 35 per cent migrate to the west, and 15 per cent leave for

personal reasons and 10 per cent for better prospects.

AFS has devised an attrition management policy to improve employee

retention based on:

Timely performance-based rewards

Functional job rotation

Training for skills upgradation

Regular feedback and communication

Grievance and suggestion management

Reduction of stress components

Over and above rewards, we emphasize personal development opportunities

through:

Performance-based incentives

A transparent promotion policy

Polyvalence through job rotation

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Career growth opportunities

A personal development plan for each employee

Soft skills training

Communication

Etiquette

Acclimatization to different cultures

Training in foreign languages

Annual parties, corporate sports

Stress management through yoga

Recreational facility

In addition to vertical progression, in which employees climb up the hierarchical

pyramid as they move up in the organization, AFS has introduced 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.

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Increasing Employee Retention or Reducing Attrition?

Retention Solutions

The most frequent methods for increasing employee retention have been to provide

orientation and some level of mentoring support and guidance, at least for novice

educators if not all new employees. This authority�s reviews of such programs find

that they do increase retention to some extent, perhaps 15-20%. 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.

What a comprehensive induction program should provide will be discussed later in

this article. Our purpose at this point is to affirm the value of an effective. Clearly,

even when a district can not offer the top salary, it can still effectively compete for

and keep the quality educators by treating them professionally and by expecting

and supporting effective employee performance. After all, people become

educators to make a difference in student�s lives.

The more districts can demonstrate to candidates and new employees that the

district can help them achieve their original goal for becoming an educator, the

more effectively districts can recruit and retain those employees. However, such a

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statement is easier said then done. Never-the-less, there is now extensive

documentation of the power of mentoring and induction programs to increase

teacher success and, thereby, to improve the ability of a district to attract and retain

the best new employees. Simply stated, induction program success breeds teacher

success, which breeds district success in attracting and retaining successful

teachers, which increases the quality of teaching.

Funding New Employee Retention Efforts

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.

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Finding funding for common sense induction and mentoring incentives 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 are not as compelling nor as valued as we need.

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.

54

Others include the La Fource, La. School District's Beginning Teacher Program,

The Beginning Teacher Support program at Governors State University in Illinois,

and the Washoe County School District Induction Program at Reno Nevada.

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. The bigger challenge has been that it�s harder to demonstrate these benefits

have occurred as a result of effective induction.

Reducing Attrition

clearly, we need a different strategy if we are to create and adequately sustain the

new employee support programs we know we need. Just as in business and other

no educational sectors, in education, we have begun to look for a clearer

connection between our programs and the bottom line. The goal has been to collect

and present local data which clearly show a monetary value for better support of

new employees. This is why the most recent strategy for gaining induction support

has been to demonstrate the true cost of employee attrition, which is the negative

flip side of the more positive retention factor. In other words, rather than trying to

show the less tangible benefits of increased retention, we must show the

cost-effectiveness of decreased attrition.

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Combating high attrition

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 specializing in the

management of human capital in IT organisations�has observed that the average

tenure of an IT professional is less than three years.

Below the surface

Being a people-intensive industry, it is characterized by knowledge workers who

are professionals. The HR issues here are quite different from those in other

people-intensive industries. We therefore need to understand them in the context

of various forces affecting the industry both directly and indirectly. Going by the

opinions of industry analysts, as well as exit interviews conducted by different

companies, IT professionals are switching jobs for either money, career

satisfaction or the opportunity to work with newer technologies. However, when

attrition is dealt with microscopically, other reasons surface. Says Dr Nandkishore

Rathi, placement officer of IIT-B, �After doing the survey, we found that the lack of

match between personal requirements and organizational culture was quite

prevalent.� Along with the three main reasons mentioned earlier, an employee

may be concerned about the environment in the organization, his compatibility

with his supervisors, the attention paid to him, and so on.

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Money is not everything

Although the importance of higher packages is slowly diminishing, among fresher

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

to be the highest priority. Observes Rakesh Tiku, vice-president, deliveries, Infinite

Computer Solutions, �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. Adds V Bharathwaj, vice-president, global marketing, 24/7

Customer, �In several cases, faced with a choice between more money and a

challenging job, employees have opted for the latter as it allows them to learn new

technology and increase domain expertise.� People analyze the training

programmes of prospective companies with those of their current organization,

which means that how an organization grooms an employee is weighed to a

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

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

also look for a job with higher levels of responsibility.

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.

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Treat employees like customers

Even while companies strive to understand which organizational, job, and reward

factors will contribute to holding back employees, industry experts have found

several loopholes at the top management and HR management level. Says Bijay

Sahoo, vice-president, talent engagement and development, Wipro Technologies,

�Companies should have a similar approach to employees and customers. If a

company strives to retain an employee in the same way it tries to retain a

customer, him leaving the organization could be out of question.�

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

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.

The next level of communication, a crucial part of retention, starts with acquainting

employees with the company�s vision and objectives. As Rathi puts it,

organisations successful in retaining employees clearly pass on their goals and

achievements. Adds Rajeev Malik, director, HR, McAfee Software (India),

�Conducting regular meetings and updating employees, especially new entrants,

about the company�s status and achievements is a must.�

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Vision and objectives

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 familiarized with the culture of

the company. It is at this time that new entrants experiment with different options.

Hence they should be exposed to the best values the company has.� If they are

informed about regular happenings in the company, employees will be confident

about the future and not try to look for better options. 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.�

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 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.

Exposure to newer technologies and well-managed succession plans cannot be

ruled out in managing attrition. Training in the employee�s area of specialization

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

59

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.

Consider feedback

Offering medical insurance, taking care of employees� families, and a good overall

package should make sure these processes are not derailed. Going to onsite

locations matters a lot to IT workers, so organisations should allow all employees

to avail of this chance on a rotational basis.

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 analyzed, 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 organization can address the

problems of existing employees, thereby curb attrition.

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Employee�s advocate

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 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,� opines

Rathi. 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.�

Why young techies need able mentors

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

engineers by providing them with good career counseling, advises Sudhakar P

Goparaju

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

61

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.

There may be several reasons to this. Why can�t we try to stop them? This is not

happening in the old economy companies. 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. Most of

them don�t think of long-term when they are changing companies. 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 many more.

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.

62

Trends in old economy companies

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.

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 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 companies� business and operations model is similar.

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).

63

How to stop BPO attrition?

First, the good news; the business process outsourcing industry in India is

growing at a phenomenal pace. Exports were worth $ 5.2 billion in 2004-05,

growing at 44.5 per cent and industry body Nasscom has projected a 41 per cent

growth in 2005-06 to $ 7.3 billion.

The employee base has grown at a compounded annual growth rate of 52.6 per

cent, from 42,000 in 2001-2002 to 3,48,000 in 2004-2005.

Also, a Nasscom-Hewitt Associates survey says that the cost of attrition in the

industry is 1.5 times the annual salary.

For a fresh college graduate, a call centre job pays about 2.5 times as much as

other job openings. And the boom shows all signs of continuing considering that

the cost per transaction in India are estimated to be the lowest at 29 cents

compared to 52 cents in China.

Now, the bad news; Already grappling with a 30 per cent attrition rate (the highest

in the Asia-Pacific region, compared to China at 10-15 per cent), the industry is

expected to have a manpower shortage of 2,62,000 in 2008. In a country where 3

million graduate every year, the task is daunting.

HR consultants say one of the key gaps being faced by the industry is the low

level of expertise at frontline (lower-middle) management, in managing and

sustaining an ITES-BPO operation.

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The inexperienced middle and frontline management is one of the key causes of

attrition. Another disturbing data is that nearly 50 per cent of those who quit leave

the industry.

So what's the way out? First, the industry has to get out of its image of an Internet

sweatshop where an employee is resigned to his fate of being in office at ungodly

hours for a dead-end job.

Companies which have not been able to tackle this image could take a cue from

ICICI OneSource, which gives employees who have been with the company for

more than 18 months an option to switch to positions in other ICICI group

companies.

The system works as a big assurance for BPO employees that the skills they have

learnt such as customer friendliness and rapid response to customer problems

have wider applications and market demand.

This is important considering the fact that the cost of attrition in the industry is 1.5

times the annual salary.

BPOs have also started moving up the value chain -- a primary reason why the

industry needs to put its act together to meet the coming crisis for trained

manpower.

For example, the expectation is that by 2007, the industry demand for Java

professionals alone will touch three million.

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On its part, Nasscom is doing what it can by exploring the concept of a national

skills registry of IT employees, which will operate on a shared services model and

will be administered by a credible third party.

The industry body is also coming out with an assessment and certification

programme to create an employable talent pool with benchmarked-requisite skills

and will shortly unveil an assessment and certification for frontline management.

A Nasscom-KPMG study has made detailed recommendations for attracting,

training, certifying and deploying resources for the ITES industry.

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.

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.

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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.

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.

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

Pro/Engineer software for their classrooms.

There are many more such examples. For BPOs, the signal is clear: shape up or

ship out.

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IMPORTANCE OF EMPLOYEE ATTRITION

Why is ATTRITION important?

Employee attrition costs 12 to 18 months� salary for each leaving manager or

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

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.

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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 recession, in

an inverse proportion to the unemployment rate. Today we are experiencing

ongoing soft labor markets and unusually low quit rates.

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.

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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

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.

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.

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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 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.

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.

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Summary

Too much recruitment and training costs employers money, but so does a

workforce stacked with stale managers and unmotivated employees.

At least in this climate of soft labor markets and low quit rates turnover is now

more likely to be seen as an opportunity for bringing in fresh talent into a

workforce while at the same time extracting savings by lowering labor costs and

adjusting benefits packages.

But even without current labor market conditions, employers are taking a new look

at controlling and managing turnover in a more comprehensive way.

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LOOPHOLES IN ATTRITION MANAGEMENT

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 our ongoing

research and consulting with many firms, I have found six problems that are

crippling organizational efforts to improve workforce capabilities in the face of baby

boomer retirements. How are you 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, leaders often won�t provide the political support or the resources needed.

Developing proactive executive champions is an essential part of almost every

aging workforce initiative.

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Mistake #2: Failing to connect aging workforce solutions to management�s

strategic objectives. Managers in one large aerospace company undertook a major

knowledge 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. But the solution

doesn�t lie in one or two initiatives applied uniformly across the organization. Rolling

out a new succession planning process or implementing a flexible phased

retirement program won�t be adequate for creating your future workforce when so

much experience is leaving. 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

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knowledge. In organizations like NASA and the World Bank, where there is a strong

commitment to the organization�s ongoing mission, veteran workers are more 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� actual level of commitment when designing knowledge retention

strategies so you can be sure new programs and systems are aligned with peoples�

willingness to cooperate.

Mistake #5: Over investing in technology solutions to �capture� knowledge. 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

weren�t interested in reviewing hours of video tape to find one nugget from an old

codger, no matter now smart he or she was. The business world is already full of

unused �lessons learned� databases and dusty videotapes created with departing

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 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 a wide range of initiatives needed to support the development of future

workforce capabilities to compensate for attrition among highly-skilled employees.

But, in my consulting with organizations today, I find most are not coordinating

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these efforts and the opportunity costs are tremendous. Strengthening your

workforce for the future means coordinating and integrating activities in four areas:

(1) human resources policies and processes, such as succession planning and

phased retirement practices; (2) the use of a variety of knowledge transfer

practices, such as documentation, storytelling, and coaching; (3) leveraging IT

applications effectively to support knowledge capture, sharing, and reuse; and (4)

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.

The challenges posed by an aging workforce and increased mid-career turnover

are getting greater management attention these days. That�s a good thing because

there will be staggering knowledge losses in the years ahead due to the departure

of experienced managers and professionals from organizations 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. Anticipating

them will help you minimize their effects.

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EFFECTIVE ATTRITION MANAGEMENT

Managing Employee Attrition

The task of managing employee attrition can be split into three stages:

Identify the level and cost of turnover and benchmarking it against competitors

Understand why employees leave

Implement retention strategies

Identify the level and cost of turnover

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 whether retention is a cause for concern is how difficult and/or costly

it is to replace leavers.

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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.

Perception of Organization of those who didn�t have an Exit Interview

(Fig: 9.1)

As can be seen above, 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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Maximizing the success of staff interviews

The success of any staff interview depends on employees� willingness to give full

and honest feedback. Some survey respondents expressed concern about their

individual experiences.

Common complaints included:

I was uncomfortable giving honest feedback

The interview was carried out by a line manager/colleague � I did not feel

comfortable discussing our working relationship

The interview was carried out by a senior director which was quite intimidating

The interview was carried out by the HR department - I was concerned that my

feedback could affect my future references.

The process did not allow me to express my true opinions

The interview was structured and the questions were phrased in a way which

restricted me from revealing my true feelings.

No action was taken following my feedback

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Feedback forms were simply filed away and disregarded

HR had little power to implement employees� suggestions

The best way to gain staff buy-in is to ensure that:

The process is implemented by someone who is seen as impartial

The employee is given the opportunity to speak freely about their opinions

Employee feedback is acted upon

The organizations should offer a flexible delivery mechanism via either:

Face-to-face interview

Telephone interview

Online or paper-based questionnaire

Staff satisfaction surveys can be another excellent way of collecting staff opinion.

Tracking employee motivation and opinions over time helps the organization

address motivation issues before they become retention issues.

Implementing a retention strategy

As the causes of staff turnover are varied, likewise, there are a number of potential

solutions. The most effective solution is to adopt a holistic approach to dealing with

attrition.

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An effective retention strategy will seek to ensure:

Attraction and recruitment strategies enable selection of the �right� candidate for

each role/organization

New employees� initial experiences of the organization are positive

Appropriate development opportunities are available to employees, and that

they are kept aware of their likely career path with the organization

The organization�s reward strategy reflects the employee drivers

The leaving process is managed effectively

Specific Retention Strategies

The survey research undertook by experts revealed the reasons why employees

leave organisations. These differed from the reasons why employers thought

employees left. To ensure you implement the �right� retention strategy, companies

can undertake an independent audit of your new joiners�, current employees� and

leavers� views. This will give companies a real picture of how you should prioritize

your retention interventions.

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The working lifecycle (Fig: 9.2)

Over 77% of employers report retention difficulties

Revolutionizing staff retention

To develop a tool to identify how we can maximize employee retention

calculate organization's staff turnover rates

Bench mark your staff turnover against that of similar organizations

calculate the financial cost of your organization's staff turnover

Demonstrate the cost saving available through improved retention

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Identifies strategies to improve staff retention

The Business Challenge

In the call center world one of the largest challenges facing most call centers is the

high rate of agent attrition. Agent attrition is costly business as any business

manager in a call center will tell you. Not only does it raise the cost of recruitment

and training, it also disrupts the programs and reduces the overall quality of

the programs being run.

Most call centers are facing a situation that is not very unfamiliar in the rapidly

growing but competitive world of Indian call centers. The employee attrition rate

was as high as 80% with close to 50% of the recruits leaving within the first six

months of joining the company. Consequently, the companies are facing severe

quality management pressures on some of the programs that had highly involved

training programs.

The call center needed mechanisms to reduce the attrition and to reduce the

adverse impact of attrition.

Solution

Conducted an analytics based study to understand employee behavior and to

predict employee behavior. As a first step we collected internal data on the past

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behavior of the call center's employees. Then overlaid that information with profile

information of these employees that the organization had collected prior to

recruitment as well as during the course of their employment. Finally, also

appended data on the employees' performances, their performance evaluations

and their raises and bonuses.

Create segmentation models that were able to segment the employees by their

profile information and attrition history. This gave a starting point to understand

what segments of employees had a higher inherent propensity to attrite. We also

built segmentation models around employee performance to understand if there

were certain profiles of agents that were consistently performing better than others.

Finally, create a scoring model that would rank order employees by their propensity

to attrite from the company.

Implementation

The segmentation and scoring models were able to accurately distinguish and

identify employees that were at a higher risk of attrition. The call center used our

profiling models in various different but effective ways. Firstly, they were 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 were also able to

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allocate employees strategically to different programs based on their risk of

attrition.

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Annexure

Attrition Graph (Fig: 2.1)

Chart showing average length of job tenure (Fig: 4.1)

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Chart showing how length of service varies across different sized employers

(Fig: 4.2)

Chart showing how length of job tenure varies across different industry

sectors (Fig: 4.3)

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Chart comparing employers� perceptions of reasons for leaving and

employees� actual reasons for leaving (Fig: 4.4)

Employees ______

Employers ______

Perception of Organization of those who didn�t have an Exit Interview

(Fig: 9.1)

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The working lifecycle (Fig: 9.2)

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Bibliography Websites

www.7thwavesolutions.com

www.businessworldindia.com

www.citehr.com

www.datacraft-asia.com

www.economictimes.indiatimes.com

www.erp.ittoolbox.com

www.expressitpeople.com

www.humanlinks.com

www.peoplefirstsolutions.com

www.teachermentors.com

Other Information sources

Company Manual

Datacraft Intranet

HR Documents

JOURNALS:

Business Line (Catalyst)

Journal of HRM Review (ICFAI publications)