A Project report submitted in partial fulfillment of
the requirement for the award of the degree of
‘Bachelors of Management Studies’
Roll no. 7720
Parle Tilak Vidyalaya Association’s
Mulund College of Commerce
2005 – 2006
University of Mumbai
I, Varun.A.Chhibber, a student of Mulund College of Commerce
T.Y.BMS (semester Vth
) herby declare that I have completed this project
on “Employee Retention” in the academic year 2005-2006. The
information submitted is true and original to the best of my knowledge
Signature of student
I MISS.ROOPALI.MANDLEKAR hereby certify that
Varun.A.Chhibber a student of Mulund College of Commerce TYBMS
(Semester 5) has completed the project titled Employee Retention in the
academic year 2005-2006. The information submitted is true and
original to the best of knowledge
Signature of the Project Signature of Principal of the
Signature of the Examiner
I take this opportunity with great pleasure to present before you
this project on “Employee Retention” which is a result of
cooperation, hard work and good wishes of many people. I would like to
thank my with deep sense my project guide & BMS Coordinator
Miss.Roopali Mandlekar for her kind appreciation, friendly
guidance, constant encouragement, involvement in my project work and
for her valued guidance throughout my study.
I owe the debt to our Principal Mr. D.G Deshpande for giving
me an opportunity to present a creative outcome in form of a project.
I express my sincere thanks to the library staff who have provided me
right information and study material at the right time. No words can
adequately express my debt of gratitude to all my BMS friends for their
continuous support while the work was in process. I must also put on
record my gratitude to my Institute Mulund College of Commerce for all
that I learnt as a student. I also wish to thank my Family Members
whose efforts and creativity helped me in giving the final structure to the
Lastly needless to say I am also thankful to all those seen and
unseen hands and minds, which have been of direct or indirect, help in
the completion of my project.
The project begins with the significance of Human Resource Management
in today’s corporate world. It signifies the increasing importance of HRM.
Then it leads over to the employee turn over problem faced by the
companies. It highlights the resource for the high turnover rate and the
cost that this act adds up to the company.
Then the project highlights the significance of employee retention to
overcome the employee turnover problem.
The project briefly covers the various areas where employee retention
strategies are implemented namely recruitment, training and
development, work culture, salary negotiation, compensation
management, rewards and recognition and exit interviews.
And at the end the report finally highlights various aspects which are to
be considered for improvement of employee retention strategies.
Objective of Study
1) To know the importance attached to employee retention in today’s
2) Strategies employed by the company to improvise on the rate of
employee turnover rates.
3) General problems faced by the companies while practicing
Scope of study
This project has been prepared with an intention to make one realize and
understand the significance of employee retention.
Employee retention has become a major goal of the organization.
Initially recruitment was only talked about, but now in today’s corporate
world, recruitment has become just a part of HRM. Major importance is
attached to employee retention.
This project not only aims to present the theoretical aspects, but the
practical aspects as well. A survey has been done to understand the
strategies followed by various organizations to ensure Employee
The information provided in this project has been collected from various
sources. These include major information’s downloaded from various
articles through the Internet. And the matter was also acquired from the
book “Human Resource and Personal Management- 3 edition” written by
The information collected has been diluted and presented in a very
simple and lucid manner. This was done with an objective that even a
layman should be able to understand the topics that I have dealt with.
Sr.No Contents Page
2. Significance of HRM in Corporate World
3. Employee Turnover
a) Measuring Employee Turnover
b) Why do People Leave Organizations???
c) When does Employee Turnover Become
4. Employee Retention
5. Recruitment, Selection & Induction
6. Remuneration Negotiation
7. Work Environment
8. Significance of Training & Development
9. Performance Appraisal
10. Compensation Management & Reward
11. Exit Interviews
13. Analysis of Survey
14. Managing IT Retention & Turnover
15. Employee Retention Problems faced by
16. Retention Stratagem
18. Bibliography & Webliography
Employee retention is not a question or debate but rather it’s the
most important thing for any concern if its serious in long term business.
What’s a business without people and how is it going to work if the
required people aren’t there. The only and most important resource for
any company is its people. Some people might have this misconception
that this resource is less important than the other resources like money,
materials and machinery. But we have all learned from all successful
companies around the world that their success was and is due the most
important M of all the other M’s and that’s the manpower.
Well if we all know that people are the most important resource
then why do we have this question that is Employee Retention required
or not. I guess this question arised all around the world because of a very
high figure of employee turnover.
So if we are able to stop this or at least know the answer to why
there is such a high employee turnout we would know what it takes to
retain the required people. I would like to put a lot of stress in the word
required. This word needs to be understood by lot of people and
especially the people in the top management believe who believe that
there is not much difference in manpower requirement and material
requirement and the irony is that in the later case, more emphasis is
given to details & specifications. The reason I think why they are very
particular about material specifications is because they can calculate the
losses if they do not get the required material.
Unfortunately and sadly they are unable to figure out the deep negative
impact if they do not get the required people.
So how do we specify the required people? I think we can start with
answering a few questions. What is the minimum desired output? Is it
long term or short term? Are we capable of meeting his expectations or
rather that his takeaway is above or below market rates? Are we ready to
spend time and energy in grooming him and including him in the family?
Yes, I believe that the employees of a company are like a family and it
would benefit a lot of companies if they too agree. And the most
important of all that, are we willing to be transparent enough for him to
understand the company and its people. Are we willing to share with him
the companies’ clear vision and mission and the long-term company
With the answers to the above questions we would be in a position
to specify the required people to the HR dept. And with the present
tremendous gap between demand and supply the HR dept. would not
find it very difficult to find the required and right person. Well that’s
assuming that the HR dept. is competent enough to match the
candidate’s long term career aspirations to the companies’ requirement.
Well that can be a very tricky and difficult thing for the HR dept. But we
all know that the HR depts. are trained and equipped with lot of tools to
know the career aspirations of a candidate.
Now that we have the right and required person there is no doubt
that we need to retain him. We need to know our Organization and the
type it belongs to.
There are three types of organizations
The Organizations that:
• Change by themselves
• Change, when told by others
• Do not change even when told by others.
The excellent organizations belong to the category of ‘change by
They have a clear vision of where they want to be in future & all their
actions are aimed towards it.
They govern their own future and not are merely victims of
Also these Organizations are low profile, have a unified theory
about transformation and are holistic in approach. They focus on
strengthening fundamentals and mobilize the entire organization with
These Organizations have their concepts right regarding people
development. These Organizations encourage People to accept ownership
and responsibility to solve problems. In these organizations people are
empowered to act and openly share knowledge and experience.
General Electric(GE) is one of the finest examples worldwide
and back home we have the much talked about Infosys &
Significance of Human Resource
Management in Corporate World
HR has always been seen as the “cost centre” of an organization.
However studies reveal that in today’s business world, HR practices does
churn revenues. It’s all about how you invest in your human capital.
Studies suggest that not only is Human resource the most valued
asset of a company, but there also proof that investing in HR does
“Employee-involvement practices such as information sharing, skills
training rewards programs, and empowerment efforts -- all of which fall
squarely into Hr’s domain -- show a significant bottom-line return”.
Companies who have followed the employee-involvement practices have
produced a 13 percent higher return on equity.
Thus it’s obvious that employees form an integral part. How do you
select and retain talented people? How can you create an environment,
which helps people thrive at work? Many such questions form an integral
part of a company’s HR policy. Increased global competitiveness has
given way to uncertainty, which is impacting the environment within an
organization. This is where the role of a HR manager is becoming even
Traditionally the HR department has played dual roles—an
operational function (such as recruitment, personnel and performance
management, employee relations and statutory compliance’s) and a
human developmental role (comprising people development, culture and
organization building). Both these functions have always been considered
Today the equation has changed. The HR department plays a key role in
the company’s overall business strategy. HR managers have a clear
understanding of the business, the organization, its vision, mission,
values and are given ample freedom to bring processes in place to get
people aligned to these values and goals.
The focus of HR today is to create an agile organization, which can
innovate rapidly and exceed client expectations constantly, rather than
just managing people.
The basic trait required in an efficient HR manager is his ability to
gauge the strengths of his employees and put them to best use. Be a
supportive manager and create an environment where employees feel
assured that they can fall back for support in difficult situations. He
should be able to delegate responsibility, while always retaining the
accountability. Lastly, personal touch plays an important factor for
creating a sense of belonging with the company. The person should be
very effective at understanding people, their skill sets and emotional
intelligence which will help in goal setting and finally achieving the
Some key points to remember
The organization has to ensure that communication is timely and open to
retain employee trust. This also means that there is continuous feedback
from employees, which helps in better productivity.
There has to be a common theme built relating to vision, participation,
control, measurement of work processes, communication and
commitment. Experts point out that if you create an environment where
people truly participate. You don’t need control. The employees do what
needs to be done.
Measuring employee turnover
Most organizations simply track their crude turnover rates on a month
by month or year by year basis. The formula is simply:
Total number of leavers over period x 100
Average total number employed over period
The total figure includes all leavers, even people who left involuntarily
due to dismissal, redundancy or retirement. It also makes no distinction
between functional (i.e.-beneficial) turnover and that, which is
Crude turnover figures are used by all the major surveys of employee
turnover. So they are necessary for effective benchmarking purposes.
However, it is also useful to calculate a separate figure for voluntary
turnover and to consider some of the more complex employee turnover
indices, which take account of characteristics such as seniority and
Costing employee turnover
Estimating the cost of employee turnover is a useful starting point
when seeking to persuade line managers and Finance Directors that
money needs to be invested in order to improve retention rates. At
present surprisingly few (7%) HR departments calculate the costs of
It is possible to compute a ‘not less than’ figure very easily by
working out what it costs on average to replace a leaver with a new
starter in each of the major employment categories. This figure can then
be multiplied by the crude turnover rate for that staff group to calculate
the total annual cost of turnover.
The major categories of costs to take account of are:
• Administration of the resignation
• Recruitment costs
• Selection costs
• Cost of covering during the period in which there is a vacancy
• Administration of the recruitment and selection process
• Induction training for the new employee.
Many of these costs consist of management or administrative staff’s time
(opportunity costs) but direct costs can also be substantial where
advertisements, agencies or assessment centers are used in the
More complex approaches to turnover costing give a more accurate and
invariably higher estimate of total costs. A widely quoted method involves
estimating the relative productivity of new employees during their first
week’s or months in a role and that of resigns during the period that they
are working their notice
Why Do People Leave Organizations?
Employees resign for many different reasons.
• Sometimes it is the attraction of a new job or
• The prospect of a period outside the workforce which ‘pulls’ them,
on other occasions they are ‘pushed’ due to dissatisfaction in their
present jobs to seek alternative employment.
• Sometimes it is mixtures of both pull and push factors.
• For a fourth group reasons for leaving are entirely explained by
domestic circumstances outside the control of any employer, as is
the case when someone relocates with their spouse or partner.
Recent research strongly suggests that push factors are a great
deal more significant in most resignations than most managers
appreciate. It is relatively rare for people to leave jobs in which they are
happy, even when offered higher pay elsewhere. Most staff has a
preference for stability.
It is important to appreciate that the reason people give for their
resignations are frequently untrue or only partially true. The use of exit
interviews is widespread yet they are notoriously unreliable, particularly
when conducted by someone who may later be asked to write a reference
for the departing employee. They are reluctant to voice criticism of their
managers, colleagues or the organization generally, preferring to give
some less contentious reason for their departure.
Recent research highlights the importance of front line managers
and how their behaviour relates directly to the levels of commitment,
motivation and satisfaction reported by employees.
A poor relationship with a line manger can be an important reason for
individuals leaving their organization, but its significance can be masked
as a result of the difficulties associated with exit interviews mentioned
above. A lack of training and developmental opportunities is also major
reason voluntary turnover. On an average, 44% of respondents cited
‘promotion outside the organization’ as a main cause of labour turnover,
40°/o highlighted ‘change of career’ and 37% ‘lack of career of
In the high turnover industries in particular, a great deal of employee
turnover consists of people resigning or being dismissed in the first few
months employment. Research shows that during 2003, 2O% of leavers
left between 0 and 6 months’ service. Even when people stay for a year or
more is often the case that the decision to leave sooner rather than later
is effectively taken in the first weeks of employment. Poor recruitment
and selection decisions, both on the part of the employee and employer,
are usually to blame, along with poorly designed or non-existent
Expectations are often raised too high during the recruitment
process leading people to compete for and subsequently to accept jobs for
which they are in truth unsuited. Organizations do this in order to
ensure that they fill their vacancies with sufficient numbers of well-
qualified people as quickly as possible. However, over the longer term the
practice is counter-productive as it leads to costly, avoidable turnover
and the development of a poor reputation in local labour markets.
When Does Employee Turnover Become
There is no set level of employee turnover above which effects on
the employing organization becomes damaging. Everything depends on
the type of labour markets in which the company competes. Where it is
relatively easy to find and train new employees quickly and at relatively
little cost (i.e. where the labour market is loose), it is possible to sustain
high quality levels of service provision despite having a high turnover
rate. By contrast, where skills are relatively scarce, where recruitment is
costly or where it takes several weeks to fill a vacancy, turnover is likely
to be problematic from a management point of view. This is especially
true of situations in which you are losing staff to direct competitors or
where customers have developed relationships with individual employees
as is the case in many professional services organizations.
Some employee turnover positively benefits organizations. This
happens whenever a more effective employee replaces a poor performer,
and can happen when a senior retirement allows the promotion or
acquisition of welcome ‘fresh blood’. Moderate levels of staff turnover can
also help to reduce staff costs in organizations where business levels are
unpredictable month on month. In such situations when business is
slack it is straightforward to hold off filling recently created vacancies for
Retaining Top Talent in a Competitive Market Successful
Companies Develop Integrated Retention Programs to Keep
Top Talent from Leaving for the Competition
With business booming, it’s a sellers market for job seekers. For
company HR departments, retention of key employees is more important
than ever, as tempting offers from competitors seeking to correct their
own labour shortage increases the likelihood of key employees heading
out for greener pastures. So how can companies keep employees happy
and retention rates high?
Research says that top talents in organizations cannot be retained
merely by high salary and a wealth of perks. They demand more
intangible benefits — stimulating work, flexible career options, and a
corporate culture which values their work. As experienced consultants in
the area of Talent Retention, we offer these basic pillars of success for
companies in any industry:
Employ competency-based recruiting to improve selection
effectiveness and increase employee retention.
The company should identify the following benefits of recruiting
candidates based on their competencies: improved accuracy in selecting
the best candidates, better person-job fit, reduced turnover, lower hiring
costs, higher levels of productivity and contribution.
Offer an attractive benefits package.
Talented employees are highly marketable and almost always have
advanced degrees. While salary and benefits cannot substitute for
deficiencies in other areas, companies must also show their appreciation
for key employees contributions with substantial compensation
packages. Like health care benefits in the industry, an employee stock
purchase plan, and one of the largest corporate-sponsored day-care
centers in the country.
Establish a corporate culture that emphasizes knowledge
sharing and employee feedback.
Employees value a workplace in which their input is encouraged
and appreciated. An open door policy encourages employees at all levels
to ask questions, contribute ideas and resolve issues. This sharing
atmosphere gives everyone a voice in creating the type of corporate
culture in which they would like to work.
Provide opportunities to explore different positions within the
Here employees participate in different types of activities within
their field of interest, new hires can explore their strengths and interest
areas before selecting a job that best suits them. The variety of
assignments also benefits new employees by giving them an opportunity
to learn more about the company’s diversity develop a company contact
network and demonstrate their research capabilities to a variety of
Leading companies look at talent retention as an integrated process, not
as isolated events.
Companies that recognize the importance of long-term, dedicated
employees begin the retention process during recruiting and embed
retention practices in career path and employee development and
Today’s workers are no longer inclined to stay at one company for the
duration of their careers. The most talented professionals are more likely
to be courted by other businesses, and the effects of turnover can be
costly. The time and money it takes to recruit, rehire and retain can
quickly cut into a firm’s bottom line.
Hiring smart is the first step to developing a loyal, motivated workforce
and keeping turnover at a minimum. Other factors, such as competitive
compensation and creating an employee-friendly work environment also
play a role. A study commissioned by our firm among executives at the
nation’s 1000 largest companies found that, aside from salary, job
applicants inquire just as frequently about corporate culture as they do
other benefits. The implication is clear: The more enriching your work
environment, the more likely are to retain a staff of satisfied, productive
Improving employee retention
• Give prospective employees a ‘realistic job preview’ at the recruitment
stage. Take care not to raise expectations only to dash them later.
• Make line managers accountable for staff turnover in their teams.
Reward managers whose record at keeping people is good by including
the subject in appraisals,
• Maximize opportunities for individual employees to develop their skills
and move on in their careers
• Ensure wherever possible that employees have a ‘voice through
consultative bodies, regular appraisals, and attitude surveys and
• Wherever possible accommodate individual preferences on working
hours. Be as flexible as possible in the allocation of shifts.
• Provide as much job security as possible. Employees who are made to
feel that their jobs are precarious may put a great deal of effort in to
• Bend over backwards to ensure that you do not and are never seen to
discriminate against employees on any unfair grounds.
• Defend your organization against penetration by headhunters and
others seeking to poach your staff.
Recruitment, Selection & Induction
The human resources are the most important assets of an
organization. The success or failure of an organization is largely
dependent on the caliber of the people working therein. Without positive
and creative contributions from people, organizations cannot progress
and prosper. In order to achieve the goals or the activities of an
organization, therefore, they need to recruit people with requisite skills,
qualifications and experience. While doing so, they have to keep the
present as well as the future requirements of the organization in mind.
Recruitment is distinct from Employment and Selection. Once the
required number and kind of human resources are determined, the
management has to find the places where the required human resources
are/will be available and also find the means of attracting them towards
the organization before selecting suitable candidates for jobs. All this
process is generally known as recruitment. Some people use the term
“Recruitment” for employment. These two are not one and the same.
Recruitment is only one of the steps in the entire employment process.
Some others use the term recruitment for selection. These are not the
same either. Technically speaking, the function of recruitment precedes
the selection function and it includes only finding, developing the
sources of prospective employees and attracting them to apply for jobs in
an organization, whereas the selection is the process of finding out the
most suitable candidate to the job out of the candidates attracted (i.e.,
Finding and recruiting good people can be a challenge for any company
Therefore, it’s crucial to have a recruiting strategy in place.
Why are some recruitment’s successful while others are disastrous
failures? The mount of time, effort and money spent in the hiring process
very often comes to naught because hiring managers make some
inevitable mistakes. Yes, the recruitment process is more complex than
meets the eye, and it is this inability to understand the subtle factors of
the system that leads to hiring the wrong person, which often becomes a
calamitous situation for the company. Why is it necessary for the
recruitment process to be very focused? Finding out whether the person
is the “right fit” in the organization culturally is as important as Testing
his/her skill sets. Failure to identify the exact company needs is one of
the reasons that lead to wrong hiring. Adding to this is the inability to
test the exact skills of the candidate. At times organizations hire out of
desperation and consequently land up paying the price of inducting a
candidate who is not suitably qualified or skilled to take care of the
responsibilities. Blindly promoting from within and hiring because a
friend referred the candidate are the other mistakes that are often
The CV of a person is in fact the most common blind spot as it
often exaggerates the truth and can be misleading in the selection
process. Furthermore, often it is the good communication skills of the
candidate that help him/her succeed in the interview without the
necessary domain knowledge or skill.
Rushed hiring can lead to overlooking of many factors. “One has to check
where The candidate comes from—from the perspective of suitability to
work in the new culture, which could be different from the earlier
organization: and from the perspective of ability to work in teams,
customer-facing skills, ability to work under pressure, etc,” Cost
effectiveness plays an important part too.
Steps in Selection
The purpose of selection programme & technique is to choose the
most suitable candidate for a given job from among the prospective
employees. Selection procedures which employees systematic & scientific
methods that are reliable & valid can achieve this objective & can also
save cost. In order to achieve organizational objectives effectively &
efficiently, it is important to place the right man on the right job at the
right time at the right place. In order to avoid the pitfalls of wrong
selection & placement, it is necessary to adopt the principal of scientific
selection. The use of science & systematic procedure in selection is
essential for finding the right man for the right job. A wrong man on a
wrong job will mar the development & progress of the organization,
whereas the right man on right job will contribute to organizational
A sound selection system based on scientific methods can go
a long way in establishing an image of impartiality & thus can help to
attract & retain the most qualified candidates for in/towards the
Introducing the new employee who is designated as a probationer to the
job, job location, surroundings, organization, organizational
surroundings, and various employees is the final step of employment
process. This process gains more significance as the rate of turnover is
high among new employees compared to that among senior employees.
This is mainly because of the problem of adjustment & adaptability to
the new surroundings & environment. Further absence of information,
lack of knowledge about the new environment, cultural gap, behavioural
variations, different levels of technology, variations in the requirements of
the job & the organization also disturb the new employee. Further
induction is essential as the newcomer may feel insecure, shy,
nervousness & disturbing. This situation leads to instability & turnover.
Hence, induction plays pivotal role in acquainting the new employee to
the new environment, company rules & regulations.
Salary negotiations are a critical step in the hiring process and also
attach a huge significance in retention of the employees. Candidates with
in-demand skill sets may already be evaluating other opportunities by
the time you make an offer, so its important to handle this stage
effectively. Following are some tips for successful salary negotiations.
Once you’ve selected the prospective hire, make the offer as soon as
possible. A delay can cause you to lose the best applicant.
Cautiously Evaluate the Employment Offer
Enter negotiations with a strong understanding of compensation trends.
The offer should be fair to the candidate and in line with current
standards in the industry and at your firm. Businesses that can’t provide
high starting salaries should consider offering other incentives — such
as stock options, profit sharing or extra time off.
Elucidate the Details
If possible, make the offer in person. This allows you to explain all
aspects of the salary and benefits package, and provides an opportunity
for the candidate to ask questions.
When presenting an offer, be sure to highlight the reasons someone
would want to work at your company. Prospective employees are
interested in hearing about staff recognition and bonus programs,
advancement possibilities and unique aspects of the corporate culture.
Set a Time Frame
Give entry-level professionals a few days to consider the offer, and more
senior level candidates up to a week. Applicants who will need to relocate
may require additional time.
Know When to End Negotiations
When faced with a candidate who’s reluctant to accept an offer, try to
discover the source of the hesitation. Consider the potential impact of
any changes required to address these concerns or issues. For example,
providing a salary that exceeds someone’s potential contributions can
ultimately affect your firms overall compensation scale. Likewise,
persuading an applicant with serious reservations can backfire if that
individual has second thoughts after joining your organization.
It’s important to stay in touch with the candidate after the offer is
accepted. Send relevant brochures about your company and employment
forms. Also, call the individual to make sure he or she has all of the
information needed for a successful start at your firm.
The top career concern of employees today involves balancing
family and work demands — even above earning a competitive salary
according to a research study commissioned by our company.
Increasingly, employees are asking for corporate programs that reflect a
more flexible business environment. The challenge for businesses is
responding to these concerns without sacrificing productivity.
Following are some strategies followed by companies for
creating a friendly working environment.
Building a Worker-Friendly Reputation
Encourage staff to participate in developing solutions for enhancing your
company’s work environment. Solicit feedback from employees by
periodically conducting anonymous satisfaction surveys. Ask not only for
improvements they would like to see but also practical ways of
implementing these suggestions
Accentuating out those aspects of your business that most
Appeal to job candidates. Look for areas in which your company excels
and emphasize them when you interview applicants. For example, if your
firm is small, you may have more flexibility than larger companies when
it comes to offering nontraditional benefits, relaxed business attire or a
faster track to career advancement
Empowering the Employees
Most people work harder and do a better job if they feel the company
values their opinions; the management trusts them to be responsible and
empower them to make their own decisions.
Hire for the Long Term
The way a company hires, trains and rewards employees reveal a great
deal about its values. Hiring for aptitude and then training for career
advancement goes a long way toward building loyalty and increasing
retention rates. Companies with worker-friendly management practices
are at a distinct advantage when it comes to hiring qualified talent. These
programs help create a productive, satisfying workplace where employee
turnover, as well as recruitment and training costs, is kept to a
Significance of Training and Development
Does training increase employee retention?
IN MORE WAYS THAN ONE, employee turnover is an important
consideration for managers and employers alike. For starters, the
monetary cost of hiring a new worker is significantly high. It is estimated
that the cost of replacing an employee could average as much as 1 year’s
salary for that position. The estimate may be low. A pharmaceutical
company recently put the cost of a single employee turnover at 1.5 times
the person’s annual salary.
In addition to financial considerations, turnover takes its toll in other
ways as well. It lowers staff morale, safety, Productivity,
interdepartmental cooperation, and--most significantly--customer
Where training fits in, many employers believe that training boosts
morale, enhances motivation, and improves personnel retention. Marriott
hotels found, for example, that effective training of its entry-level workers
had a profound effect on keeping these employees
• Lack of training to promote career development encourages
ambitious employees to find new employers who will provide such
• Inadequate training for multicultural staff results not only in
hostility and increased turnover of minority groups but also in
fewer applications from members of these groups. The same holds
true for women when the employers fail to provide training about
The following statements support the belief that training is, indeed, likely
to improve worker retention.
• Employees are trained to do things that are applicable only to jobs
found in their own organizations. Someone, therefore, skilled in a
highly specialized technique in forensic pathology, for instance,
might have difficulty finding a similar job elsewhere (unless that
skill were in short supply, in which case the worker would be
highly sought after by other employers).
• Effective, comprehensive training provides experiences that allow
workers to realize success early on in their careers, resulting in
increased morale and, as a result, improved employee retention.
Note: The most successful training will be that which is given
during the orientation of new employees since this is when workers
are most receptive to learning new things.
• Training in participative management, empowerment, and self-
directed teams produces significantly increased job satisfaction.
People who become members of semi-autonomous work teams are
more resistant to turnover. (Keep in mind, however, that when
such programs are first introduced, turnover may increase for a
short time since some employees thrive only in paternalistic
organizations and therefore will be unwilling or unable to accept
Now lets look at the other side of the coin, since some people would
argue that training can actually work against employers, encouraging
• Many employers discover--unfortunately, too late--that they have
trained their people for other employers, often the competition.
Case in point:
Hospital A trains student nurses. Hospital B uses the money that it has
saved by not supporting a training school to entice Hospital A graduates
into joining B’s staff.
Bank managers are constantly complaining that they train their
employees in computer operations, only to lose them as soon as they
• Many people accept positions in organizations that provide high
quality education or highly specialized training, knowing full well
they will leave as soon as they complete that training. This is
especially true in the military. In fact, judging from the recruiting
messages of the armed services, this practice is actually
• If training is involuntary or must be paid for by the trainee, morale
may plummet. If training programs cause hardship, for example,
by being offered only after work hours or at another inconvenient
time, employees may not be able to synchronize their participation
with personal obligations. Any of these instances spur workers to
look for a new job.
• Employees become upset when they believe that their training
agenda is inappropriate or that the quality of the training sessions
leaves much to be desired. Technologists will surely become
frustrated if they are taught things contrary to what they have
learned in the laboratory, or if they are unable to apply what they
were taught in the classroom to their work back at the bench.
Hence, employee retention is once again threatened.
• A bigger question. Perhaps rather than pondering over whether
training helps to retain employees, we should ask ourselves this
question: “Does training improve service?” The answer is a
resounding YES! The right kind of training, given to the right
employees, by the light trainers, at the right time, and reinforced
by their managers back on the job can have a significantly
beneficial effect on customer service, productivity, safety,
turnaround time, and morale.
Performance appraisal may be defined as a structured formal
interaction between a subordinate & supervisor, that usually takes the
form of a periodic interview (annual or semi - annual), in which the work
performance of the subordinate is examined & discussed, with a view to
identifying weaknesses and strengths as well as opportunities for
improvement & skill development.
In many organizations – but not all – appraisals results are used,
either directly or in directly, to help determine reward outcomes. That is,
he appraisal results are used to identify the better performing employees
who should get the majority of available merit pay increase, bonuses &
From the employee view point the purpose of appraisal is four – fold :
1) Tell me what you want me to do
2) Tell me how well I have done it
3) Help me to improve my performance
4) Reward me for doing well
From the organizations point of view, one of the most important reasons
for having a system of performance appraisal is to establish & uphold the
principle of accountability
Before performance appraisal one must keep the following things in
Encourage Discussion – Research studies show that employees
are likely to feel more satisfied with their appraisal result if they
have a chance to talk freely & discuss their performance. It is also
more likely that such employees will be better able to meet future
Constructive Intention – It is very important that employees
recognize that negative appraisal feedback is provided with a
constructive intention, i.e. to help them overcome present
difficulties & to improve their future performance. Employees will
be less anxious about criticism, & more likely to find it useful,
when they believe that the appraiser’s intentions are helpful &
Set Performance Goals – it has been shown in numerous
studies that goal setting is an important element in employee
motivation. Goals can stimulate employee effort, focus attention,
increase persistence, & encourage employees to find new & better
ways to work.
Appraiser Credibility – it is important that the appraiser be
well informed & credible. Appraiser should feel comfortable with
the techniques of appraisal & should be knowledgeable about the
employee’s job & performance.
When these conditions exist, employees are more likely to view the
appraisal process as accurate & fair. They also express more acceptance
of the appraiser’s feedback & a greater willingness to change.
Motivation, Satisfaction & Retention
Performance appraisal can have profound effect on levels of
employee motivation & satisfaction.
Performance appraisal provides employees with recognition for
their work efforts it also offers opportunity to focus on work activities &
goals, to identify & correct existing problems, & to encourage better
future performance. Thus, the performance of the whole organization is
enhanced. The power of social recognition as an incentive has been long
noted. In fact, there is evidence that human beings will even prefer
negative recognition in preference of no recognition at all.
If nothing else, the existence of an appraisal program indicates to
an employee that the organization is genuinely interested in their
individual performance & development. This alone can have a positive
influence on the individual’s sense of worth, commitment & belonging.
The strength & prevalence of this natural human desire for individual
recognition should not be overlooked. Absenteeism & turnover rates in
some organizations might be greatly reduced if more attention were paid
to it. Regular performance appraisal, at least, is a good start
Compensation Management & Reward
Compensation considers why organizations pay people the way they how
various pay strategies influence the success of organizations.
Compensation management basically starts with job analysis, job
descriptions, job evaluation, salary surveys, salary ranges, and
customized performance evaluations
Compensation could be briefly classified into categories namely
Non monetary compensations
Benefits are any form of compensation that aren’t part of an
employees basic pay and aren’t tied directly to job requirements or
performance levels. Specific employee benefits today take a multitude of
forms — from the basics that you find in every benefits package (Social
Security, workers’ compensation and unemployment insurance) to highly
specialized offerings such as tuition reimbursement, child- or elder-care
assistance and in-house concierge services. Precisely which benefits the
company offers and what portion of its payroll expense goes to pay for
these services will depend on the company’s financial health, the
competition for talent within the industry and the strategic business
Every month Sandeep Mahajan and Ramesh Boridkar eagerly wait
for one thing — the pay cheque. Sandeep is the director and Ramesh the
office boy in the same company. Like them millions await their pay
cheques every month. The pay has become a symbol of someone’s worth
in the organization vis-a-vis the of the work being performed by the
person. Figuring out how much any one is really worth has been never
Recently we hired a very senior executive for an IT client. After pro
deliberations we offered Rs 40 lakh per annum. We thought we had done
a pretty good job because the pay was equivalent to that of the managing
director. Six months later the executive started raising the very issue of
his perceived worth and claimed that he should be drawing Rs 50 Iakh.
The managing director and other directors had never had any salary hike
for the past three years. The former had in fact brought the organization
from its inception to the current level. The new executive had agreed on
performance target of $2 million and failed to deliver. Yet, he argued that
his compensation was unfair and was not reflecting his worth.
The traditional Pay Cheque
Traditional pay scales in companies reflect job characteristics like
importance of the work, decision/responsibility level. The salary has
been and will continue to represent the positional level in the
organization. Even in companies, which attempted merit pay, the
quantum was so small it failed to register any impact on the
Pay hikes are similarly linked to promotions. Employees expect not
a jump but a big leap in pay but would not agree or even discuss how
much they performance would go up in the elevated position.
The HR community also spends considerable time in collecting
market and industry data.
The market ultimately decides pay levels, but it also assumes that
people occupying similar positions in organizations, or having similar
experience or skills, must be on the same salary irrespective of
The pay levels for positions go up or down, based on supply and demand
levels (We have witnessed pay rates going up over $100 per hour during
the Y2K crunch). The issue therefore is—should we allow the market to
dictate pay, or the position or hierarchy to drive the pay, or should a
good portion of the pay come from performance and contribution?
The traditional pay scale models are not viable any more. Hence, it
is time for organizations to re-engineer their salary system. The meaning
of pay has to change just like the economic and social orders have
undergone a change. IT organizations are already on the road to change
the meaning of compensation. Comparable worth is a complicated issue
and hence very many organizations are defining the meaning of worth
itself. The basis to determine pay is gradually shifting from position to
performance, status to contribution. This will have some revolutionary
consequences. Companies are working on the theory of doing more with
less. They are driven hard to conserve precious human as well as
financial capital. The route therefore is not far away from performance
and pay cheque linkage. The new mantra must be, “get paid only if there
s contribution”. That is remuneration according to the expected level of
contribution. The guaranteed pay syndrome must now end.
The new order
Having said all the above it is worthwhile to look at merit pay system
also. Merit pay is the first logical step to link performance to pay. Pay the
base salary as per the job ranks, and then do annual or semi-annual
raises based on performance (this is still conservative in my view). It still
protects the traditional hierarchy based system.
Quite often this contradicts the view that the organization’s performance
s team work, as pay raises here come only for individual performance.
Many would agree that pay raises should come only through
performance, but which performance? That of the individual or the
Individual performance as a determinant of pay increase has been
identified as the most important internal equity. Companies must then
lean towards systems wherein the better performers at least will see the
linkage of raises to their contributions.
Evidence shows that there is positive association between
organization performance and compensation. There is a universal
agreement among lower level people that managers receive unfairly
excessive amounts. The question of getting more by paying less will be
answered if there is a system of thin guaranteed pay and fat variable pay
that depends on the company’s performance. The fixed wage cost thus
can be brought down.
As the compensation mode moves away from status or position price to
contribution and performance, the work culture also undergoes change.
Work cultures are no more authoritarian and encourage constant
innovation, risk taking, quick problem solving, the status as basis for
pay also must vanish soon. In conclusion we can say that there is
considerable merit in linking compensation to corporate and individual
performance. Successful introduction will depend on striking balance
between the two.
Thus aspects to be considered while formulating the compensation plan
Develop compensation strategies and policies in line with
legislation and the organization’s business strategy.
Attach meaningful monetary values to posts in the organization
ensuring that the organization’s compensation is in line with
market forces (this maybe cy means of traditional job evaluation or
other methods such as skill or competency based pay).
Develop appropriate compensation systems for the organization.
Manage overall labour costs.
Reward = Retention
Recruiting and retaining the staff who can deliver the strategic objectives
of an organization are fundamental responsibilities of any manager.
Whilst selecting individuals who match the ethos and culture is crucial,
they will not join the organization if the pay and benefits package is not
Defining Total Rewards and a Rewards Strategy
Designing a reward strategy begins with the broadest view and
understanding of the concept of “Total Rewards.” This term includes all
types of rewards indirect as well direct and intrinsic as well as extrinsic.
From an employee’s perspective, it is everything the employee takes away
from his or her relationship with an employer. The operative word here is
everything! Yet this definition is inconsistent with how reward plan
design is generally practiced; very few companies take such a holistic
TR begins with base cash the fixed and recurring wage. Building on base
cash is any short-term variable pay. Short-term variable pay is
compensation that s paid for the result of work measured in increments
of a year or less; it typically varies from one period to the next.
In addition to the elements of Total Remuneration, organizations
offer employees rewards in various forms that, while measurable, may or
may not have a dollar value. As the dynamics of the labor market shift,
these other non- cash rewards take on greater significance for several
Non cash rewards are the components of the employment compact, or
employer/employee relationship that matter most to today’s workforce,
People do not leave jobs for money they leave jobs for opportunity.
Assessing the companies’ assets all too often, the power of the
individual a company is neglected or underrated. The fact is, without a
team of individuals that are fighting with the company and for the
company the company going to be in five years time? The company may
have given them training, support, advice and guidance, but what about
the package the pay and benefits? If the company relies on their team’s
knowledge and talents success, have they assessed the impact their
reward system might have on their employees? After all, the companies
don’t want their Einstein s running off to their competitors!
It doesn’t take a genius to determine the fundamentals for
retaining key staff, just common sense. Good remuneration packages
benefits and staff perks, However, the difficulty arises in knowing how to
effectively implement and assess it. Setting salary benefits packages to
attract and retain staff is all about managing reward, and managing
reward is doing the things that needs to done to implement the reward
strategy. ‘The reward strategy is the means of using pay and, or other
forms of reward, to assist the organization to achieve its corporate goals.’
Stopping employees from leaving begins before they are recruited
and continues even after they have left. ‘It costs money to keep staff, but
then recruitment can cost up to 150 per cent of the advertised post’s
salary and failing to deal with staff retention can potentially affect
financial performance It is not a simple issue, but if the company wants
to keep their best staff then they need to take action.
Typical staff rewards cover pay, benefits, training and the working
environment. Getting the basic pay structure in place is of prior
importance. First of all, which type of job evaluation are the companies
going to use to structure their pay package? Analytical — where they
create the job first and then put the people in place? Non-analytical —
where the whole job evaluation is based on a ranking scheme? Or using
‘The salary structure should depend on the size, type and nature of
the organization, and should provide the flexibility to cope with market
and skills pressures. It should also have the scope to reward high
achievers and solid performers, and form the basis for career planning.’
In order to maintain a happy working environment, it is important for
employers to identify what’s important to the people that make up its
workforce. For example, parents, graduates, older workers, women and
specialist staff, The pay ranges can then be set in relation to age, Service,
qualifications, performance and marketability.
Research shows that paying extortionate rates to attract and retain
talent is not necessarily the answer. Compensation becomes the weak
link during uncertainty or downturns.
Salary levels have been taken to unrealistic level. Today the ratio of
1.5 : 1.0 can be seen between salary levels for similar positions between
IT and non - IT sectors. This has resulted in low withstanding capacity of
Other motivating factors, which attract and retain staff, are
interest in the job, prospects in the organization and working conditions.
Is it a ‘nice place to work? What do the employees like about it? What’s
lacking Benefits could be categorized into salary (fixed and variable),
asset building, long term security, medical needs, social / family needs,
education / learning of employee and family, long term association and
specific superior performance awards.
If the company doesn’t know, why not ask their staff. Send a survey
around the office; ask for feedback in appraisals, reviews, or in exit
interviews. Make the staff feel valued — show them that their input
counts now — rather than leaving it too late!’
The top three reason people leave jobs all involve opportunities the
opportunity to grow and develop, to learn new skills, and to be in an
environment where they are appreciated. On a list of the top eight
reasons why people leave jobs, pay rants at number eight. People seek
the opportunity to contribute, and they want to feel their contribution is
appreciated. At the same time, chief executive officers rank customer
satisfaction and employee retention as the top two measurements of
value creation. Customer service is a proven by-product o employee
satisfaction, which in turn is directly linked to rewards and recognition.
In addition, non cash rewards are the only real way to differentiate
your employment offerings. Cash is a commodity, so it cannot different
one company’s employment compact from another; it is the intangibles
that distinguish. Besides, when it comes to money, someone will always
It is by broadly defining Total Rewards to include other non-cash
rewards that employers truly distinguish themselves in the labor market
from the competition and earn employee commitment. It is a matter of
focusing the employment compact on the rewards that matter to the
workforce you are trying to create, not on the cash elements traditionally
measured by companies. Organizations spend a lot of time measuring
Total Remuneration. But what matters to employees is the total package
the Total Rewards.
It is never advisable to wait for the inevitable to come along —
losing staff could have repercussions on the business, and clients could
begin to doubt the ability of the company. Although some staff will
eventually move on, it is important to identify the needs of the individual
— what benefits are attractive and how will these produce results?
A strategic reward system - pay, benefits, continual training and
investment — can provide an excellent grounding for a successful, adept
team. ‘Spend the money, invest in your staff. If you get your strategy
correct, you’ll be rewarded with more than ten times the amount of money
In traditional internal face-to-face exit interviews, “better pay” and
“better job opportunities” are often the main reasons cited for leaving the
organization However, relying on the information gathered in this way
can be misleading since, in this type of interview situation, employees are
often reluctant to identify the true causes for their decision to resign and
tend to provide more “socially acceptable” reasons for leaving.
This issue of pay emphasizes the need to be sensitive to both
“push” and “pull” factors that may have influenced the employee’s
The traditional method of having the employee’s supervisor or a
company HR representative conduct an in-person interview on an
employee’s final day is fraught with difficulties and problems, including
being time-consuming, difficult to tabulate, not necessarily executed
consistently and both less reliable and valid than using surveys to collect
It appears, then, that many organizations are failing to recognize
the value of a systematic approach to collecting information from exiting
Gathering and collating the data in a structured manner
Aggregating the results for the organization as a whole
Analyzing the findings to identify consistent trends, patterns and
Using the results to determine and implement strategies to
increase retention and reduce turnover.
In the most straightforward terms, an exit interview is simply a means
of determining the reasons why a departing employee has decided to
leave an organization.
With the use of an exit survey system that effectively canvasses the
opinions and attitudes of departing employees, a wide range of
operational, organizational and personal variables affecting the decision
to leave are likely to be uncovered. It is this information that is essential
to highlighting the areas of perceived deficiency in the organization’s
working environment and can then be used to plan effective retention
strategies and actions.
The main reasons for leaving can be categorized into five primary
Career opportunities, including:
Perceived opportunity for advancement
Presence and/or clarity of development plan.
Enjoyment of the work, including:
How well work utilizes skills
“Fit” with job
Corporate leadership, including:
Clarity and strength of vision and mission
Overall perception of leadership
Level of respect and support received.
Availability of training, including:
Opportunity to learn new skills/develop new talents
Corporate commitment to training and development
Keeping up with latest technology.
Recognition of contributions
Communication regarding performance.
Thus it should be recognized that, in many cases, the organization has at
least some influence over the employee’s decision to voluntarily give up a
job. In fact, when all reasons for leaving are categorized in terms of
(1) The employer’s impact on the decision to stay or go and
(2) The employee’s own level of control over the decision,
More than 50% of the reasons for leaving are within the control of
both the employer and the employee. These reasons for leaving include
both the longer- term concerns and problems that can lead to a gradual
decrease in satisfaction as well as the more immediate work-oriented
“shocks” that can prompt previously-satisfied employees to rethink their
commitment to the organization and, ultimately, leave their jobs.
From this analysis, it is clear that organizations should seriously
consider what strategies and policies are in place to reduce turnover and
retain valuable employees. Since a large proportion of turnover appears
to be avoidable, it is imperative for organizations to determine how best
to intervene and thereby prevent at least some degree of turnover.
The value of exit surveys
A structured system of exit surveys can play an integral role in a
well – planned programme of employee satisfaction and work climate
research. Some principles for planning an exit survey system include
Universal — interviewing all voluntary departures provides a more
complete understanding of turnover.
Standardized — using a core set of consistent questions ensures
comparability throughout the organization and across time.
Comprehensive — including feedback on the work environment in
addition to reasons for leaving increases usefulness in determining
strategies to reduce turnover.
Independent — minimizing the discomfort in revealing the true
reasons for leaving improves the reliability of the results.
Available — encouraging centralized access to the findings
increases the likelihood of taking action.
Monitored — setting targets for reduction in turnover through
planned strategies helps to ensure that the investment made in
exit surveys is to its maximum use.
Name of the organization:
Name of the employee:
1. According to you, which sources are reliable for recruiting the right
2. What according to you attracts job seekers to your company?
a) What kind of induction program does the company
design for the new recruit?
b) Duration of the program
c) Do you think that the employees benefit from the
induction program? If yes, to what extent?
3. Is succession planning done for the employees if yes at what level?
4. Does work culture of the company help in boosting the morale of
a) How do you define the culture of your organization?
5. What efforts are taken to ensure that the employees have a good
6. How often are performance appraisals conducted?
i) 3 months ii) 6 months iii) Annually iv) other [pls specify]
7. How does the result of performance appraisal help the employees
& the organization?
8. What steps are taken by the company in order to motivate the
employees who have reached at a stagnation level?
9. How are the training needs identified?
10. How often management development programs organized for
11. On what basis are the pay packages revised?
12. Are job rotation, enrichment, enhancement techniques adopted
in your organization? If yes, how does it benefit the employees &
13. What are the two challenges faced by the HR department & how
can it be overcome?
14. What steps are taken for retaining productive & efficient work
15. According to you how can exit interviews prove to be a double
edged weapon for developing retention strategies?
16. . What retention strategies are adopted by the company so
Analysis of survey
Following is the analysis of the survey conducted by me of various
companies. Major information has been acquired by personally visiting
the companies and some information is compiled with the material
acquired through internet.
The companies whose survey analyses are presented are Ceat,
Convergys, L&T infotech, and Airtel. Below is the brief analysis of the
The companies basically underwent the same recruitment’s
processes such as ads in newspaper, approved manpower agencies,
campus interviews, walk-in interviews, employee referrals, email etc.
As very much obvious the companies interviewed are quite reputed so it’s
the brand name that attracts the job seekers towards the company. And
other reasons were scope for multifunctional experience under one roof,
working condition is the best, good housing and schooling facilities,
investment of time, money and energy in continuous training.
Job prospects offered are mostly complete orientation of the
organization in all functional facilities. Basically during recruitment itself
the skills needed are tested and even through performance appraisal
system is undertaken to gauge soft skills. And these skills are basically
working in teams, interpersonal skills, creative thinking, entrepreneurial
Induction program generally include proper orientation and top
management takes part in formal induction of employee and convey the
mission, vision and other values of the company, followed by feedback.
Attempts are being made to promote employees vertically and laterally.
The main requirements for prevalence of healthy work culture are spirit
of teamwork, informal employee feedback, open, Informal and
performance enabling innovativeness, respect for people, empowerment
with accountability and entrepreneurship are the key ingredients. But
the major problem faced is senior people feel insecure with young
entrants, especially since new employees are comfortable with
computers. and the steps taken to achieve the above stated aspects are
to empower employee to take decision and suggestions are encouraged,
ease at work, no obstruction during delivering error free service,
informality, fun, work life balance, employee communication.
The next question was about the importance attached to
compensation benefits. Well here Convergys said it is one of the most
important retention strategies. Whereas at Ceat it is not considered as a
decisional factor they believe more on non-monetary benefits.
Rewards and recognition schemes undertaken are like employee of the
month, rewards for achieving above expectation results, even best
performers reward schemes for dealer’s e.g. foreign trip, thank you note
etc. Building trust in their minds for the company could bring about
commitment from employees. i.e. is by being transparent in the various
policies and strategies, by seeing to it that that the employees personal
goals is matched to that the expectation of the organization. Developing
commitment, passion and a positive attitude, build employee capability
Attrition rate is around 15% in L&T Infotech, 18% in Airtel and
around 1% in Ceat and quite normal in other companies. And exit
interviews play a vital role in reducing attrition rates.
Some of the unique HR policies followed by these companies are as
1. Continues identification of training needs (functional as well as soft
skills) and organizing training in a regular basis.
2. Recognition of higher studies (part time) and encouraging company
sponsored management programs.
3. HR reach out, Customer contact program
4. Follow open door policy
Managing IT Retention and Turnover
The Indian software industry is poised for stupendous growth in
the coming years. Though this might sound like great news for the
Industry stalwarts and the IT Industry as a whole, it has really not being
sounding as a sweet music to the real soldiers of this revolution, the
people who are in the midst of the “Real action” on the shop floor (if I
may use that word), yes reference is to the software programmers who
make those arcane lines of code really work.
Software is a wealth and job creating industry, which has in just a
few years, grown to US $ 1 trillion, employing millions of professionals
worldwide. The Indian software industry has burgeoned, showing a
nearly 50% compounded annual growth rate over the recent years. Being
knowledge — based industry, a high intellectual capital lends competitive
advantage to a firm. Intellectual capital comprises human capital and
intellectual assets — the latter being any created bit of knowledge or
expertise. With a global explosion in market - opportunities in the IT
sector, the shortage of manpower both in numbers and skills is a prime
challenge for HR professionals. The related issues are varied indeed:
recruitment of world-class workforce and their retention, compensation
and career planning, technological obsolescence and employee turnover.
This article presents some of the findings of our recent research on the
HR challenges posed by the IT sector.
As different consultants occupy themselves painting a rosy picture
for this industry in the coming years, the industry leaders are busy
chalking out business strategies, talking about the markets,
technologies, more stable Revenue Models etc, we often forget that at the
core is the software professionals who are ultimately going to make this
The more motivated they are closer the goal. But, these guys are no
zombies who are paid for sweating on the assembly lines instead these
are the “Knowledge Workers”, more qualified, more human and more
expressive. They have a voice, and their employers cannot afford to turn
a deaf ear to them. Another interesting aspect that we need to identify is
that these people work in teams and as it is, every successful team needs
a successful leader. They need leaders at every level, leadership is no
more “Motivational”, it is a “Hygiene Factor” today. Companies need to
make far more investments today in producing effective leaders at all
levels. While the Indian IT industry has been blessed with superlative
leadership at the very top (N.R.Narayanmurthy, Azim Premji, Ashank
Desai), this leadership does not always percolates down the line. These
factors have compelled the IT companies to give priority-one attention to
its greatest resource, the “Human Resource”.
Here employee retention and motivation becomes a critical
component of this humongous challenge. The turnover rates, in the
range of 15% in the past year, have moved into the 20% range for many
organizations. Top performers are those companies that have managed to
hold their turnover below 10%, for many of them just barely. An ideal
turnover level, estimated by many at about 5%, is simply unattainable
for most organizations. Those companies that do achieve such levels in
the short term may get there by using various short term retention
tactics, such as bonus and incentive plans, that may only stem a mass
exodus for a period of time. If this is a critical time on a project, of
course, it can be well worth it.
Nonetheless, it is, like most compensation based retention tactics,
merely a short-term fix. One that lasts until the bonus is paid, the next
salary survey released or the next headhunter calls. Over the past year,
we have seen many organizations recognize that they need to move
beyond the concept of traditional compensation, to focus on a more
fundamental strategy of employee development, in order to retain top IT
They need to examine in detail the issues related to employee
retention. Companies need to think beyond compensation, to examine
the nature of IT work and the work environment. They need to explore
the importance of training, development and advancement opportunities
to managing retention and turnover. We also have to look at the impact
of work-family life balance.
Today, an employee’s life outside the workplace can have a
significant impact on their value to the organization. We need to explore
areas where organizations may in fact spend less and accomplish more,
for both the organization and the employee.
Let us examine the tactics being used to “treat” the IT retention problem
in organizations today and raise some strategic options for organizations
to consider in developing a true staffing strategy. This shift from tactics
to strategy is a critical step in recognizing how to approach the
management of the most costly resource in IT departments.
A Tactical View of Retention and Turnover
Retention and motivation of personnel are major HR concerns
today. People—a Gartner group company specializing in management of
human capital in IT organizations—has observed that the average tenure
for an IT professional is less than three years. Further, the use of new
technologies, the support of learning and training, and a challenging
environment ranked higher than competitive pay structures as effective
retention practices. Our own recent survey of 1028 software
professionals from 14 Indian software companies, showed that while the
professional gave importance to personal and cultural job-fit, HR
managers believed that the key to retention was salary and career
satisfaction. Money was a prime motivator for ‘starters’ but for those into
their third or fourth jobs, their value-addition to the organization was
Monetarily, offering ‘the best salaries in industry’ is the minimum
every company is doing, apart from performance-based bonuses, long-
service a and stock options. Many organizations frequently conduct
employee satisfaction and organization climate surveys, and are setting
up Manpower Allocation Cells (MAC) to assign the right project to the
right person’. In fact, some are even helping employees with their
personal and domestic responsibilities to satisfy & motivate their
For most IT organizations, employees and employee retention and
turnover are managed tactically. A wide variety of tactics are employed,
each of which is thought to have a positive effect on employee retention.
For the most part these tactics are employed in an evolutionary and ad
hoc way in response to issues that arise inside the IT organization.
These tactics or initiatives are reactive in nature, its intention is
merely to solve an existing issue and not to anticipate the larger issues
and address them. Some emerge as part of a planned process to deal
with staffing issues; others are developed in response to a problem or
issue faced by one or more employees. Whether they emerge from a
systematic review process or as a by product of some other issue, they
are seldom formulated into an overall strategy; their costs are not well
understood and their specific impact on retention even less so.
The tactical approaches can be organized into eight major
Compensation and benefits
Reward and recognition
The work environment
Lifestyle support and work arrangements (very important for the
Flexibility and autonomy
Training, Development and Advancement
For each of these areas, a general overview of the impact on retention
and turnover is provided;
They make a bottom line assessment of the critical value of each area
(i.e. how important is each component for addressing the employee issue)
and then explore the individual tactics, highlighting some key details in
Another challenge that faces the Indian IT companies is that
people in India are culturally diverse, multilingual, and they significantly
differ in their upbringing. Yet, in organizations, they come together to
achieve a common goal. People differ in their needs, aspirations, likes
and dislikes, expectations and preferences, all of which make them
unique. The IT companies have as many different people as their
fingerprints. Human resources are considered to be the most complex
and challenging among all available resources in an enterprise, more so
in an IT enterprise.
Thus, let us try to understand the demographics of a typical IT
A majority of software professional belongs to the age group of 21-30,
constituting almost 74%. By its very nature the software industry is
young. The employees here have certain unique needs and aspirations.
The factors that motivate or at sometimes demotivate can be clustered
under following headings, these are;
1. Company Driven
Company’s Brand Image
Latest technologies to work on
Company’s bright future
Company’s ambitious growth plan
The Learning experience
2. Process Driven
Participate management culture
Fast careers growth
Enhancement of competencies
Transparent and effective communication
3. Relationship/Behavior Driven
Well defined roles! expectations
Sound interpersonal relationships
4. Value Driven
Respect for the individual
Empowerment to take decisions
5. Sustenance Driven
Location of work
These factors do not work in isolation; instead they have a cumulative
impact on the employees’ performance at the work place. Depending
upon the level of employee in terms of his designation, experience, age
the weight he gives to these factors varies. The employees can be further
classified in different levels as follows:
Level 1: Associate, Entry Level.
Primarily works on project tasks, design tasks, design specifications,
develops routine and utility Programs.
Level 2: Intermediate Level.
Uses experience and technical competence for planning, organizing and
conducting different phases of software projects, based on performance
Level 3: Senior Fully Experienced Level
Develops and applies advanced methods to create, design, and develop
Level 4: Consultant
Conducts, plans and directs major projects, or phases of projects; co-
ordinates teams staff, recommends technical correction.
Level 5: Manager, Software Engineering! Development.
Reviews, evaluates and approves software development specifications,
Developing a Strategic Orientation
People Management cannot be treated as a one off initiative but it should
be. It is imperative that IT companies review a large number of tactics
and take their analysis up to a somewhat higher level and formulate a
strategic position around their people management strategies. People
issues should be resolved with the same importance as the IT strategy
considers architectural issues related to hardware and software and their
fit to their business needs. It is must that the software companies should
have an IT staffing strategy that provides overall guidance in managing
the people in any organization.
In short companies face two strategic directions they might pursue in
light of the IT labor shortage and the inevitable turnover that it
Organizations need to manage the level of turnover toward some desired
target. They need to manage for turnover by restructuring work and
employment relationships to taking into account persistent high levels of
Setting a target level of turnover
Managing towards a low target level of turnover can be accomplished
through a variety of approaches by combining different tactics. Three
influence points that can be used as the core of such a strategy are as
A Compensation based strategy
A Career based strategy
A work environment strategy
Of course these factors can also be combined in various ways to develop
a unique strategic mix that best fits with your organization.
Employee Retention Problems Faced By Call
One of the most difficult challenges faced by call center
management too how to retain qualified workers. In the call center
operation, where over 70% of costs are related to staffing, turnover is a
particularly troubling problem costing organizations millions of dollars
per year. This article explores the cost or turnover to a call center, the
reasons why turnover happens, and what front- line supervisors can do
to improve Turnover Rate:
Turnover is at an all-time high. In all types of jobs, workers aged
20-24 stay with an organization only 1.3 years on average (compared to
1.5 years just 15 years ago), and workers aged 25-34 stay 2.7 years
The cost of even low levels of turnover is substantial and should be
tracked carefully in planning a retention strategy. There are two
important numbers to understand in this turnover calculation. One is
the statistical rate of turnover and the other is the actual cost of turnover
to the call center and the organization as a whole. Both numbers should
be calculated and tracked on a regular basis for trending purposes and
business case justification for programs to assist with retention.
This turnover rate should then be reviewed to analyze internal
(employees leaving for other positions within the company) versus
external (employees leaving the organization) turnover.
Both are costly to the call center organization, but obviously some
benefits to the organization if qualified people are leaving to fill other
roles within the company.
There are many costs associated with call center staff turnover.
Some are obvious, direct, measurable costs, while others are indirect
costs organization. The measurable costs of turnover generally fall into
the following categories:
Recruiting Costs: The cost of print or other advertising, job fairs,
and other promotions to attract qualified staff.
Hiring Costs: The cost of the human resource department to
process applications and screen employees, as well as call center
staff time interview candidates,
Training Costs: The cost of training facilities, trainer time, and
student training materials, both for initial and ongoing training.
Supervision Costs: The cost of additional supervisory time to
assist new staff in their early learning stages.
Unproductive Paid Time: The cost of wages during the initial
training period when staff are not yet available to process calls.
Overtime Costs: The cost of paying overtime to existing staff to
cover call workload during understaffed periods.
Reasons for Turnover
There are many reasons why turnover in the call center industry.
Some of these reasons are under the control of the call center and are
“fixable” while some must be chalked up as simply cost of doing
One of call center management’s responsibilities is to consistently assess
the reasons why people leave the center (and conversely, why they stay)
so that problems in the center’s control can be addressed. The main
reasons for call center turnover fall into these four categories:
1. Compensation: Inadequate compensation is a reason often sited
in agents exit interviews. This will be a common factor for call
centers located in highly saturated call center labor markets such
as Phoenix or Dallas where competition for qualified call center
staff is high. Call centers should do periodic compensation bench
marking studies to ensure their wages are commensurate with the
wages or nearby centers for the same type of work, particularly in
highly competitive areas.
2. Job Fit: Many times the reason an individual leaves the center is
simply due to a poor job fit. This type of turnover can be reduced
significantly by defining and advertising the job accurately and
doing proper screening and assessment on the front end to make
sure the job is a good choice for the candidate and vice versa. More
effort during the selection phase will pay for itself many times over
in improving retention, Part of this screening process will assess
whether or not the candidate is likely to be happy within the
unique working condition found in most call centers: solo work,
confined space, repetitive tasks, constant monitoring, and
inflexible work schedules.
3. Limited Job/Career Opportunities: Many individuals leave
center due to limited possibilities for career growth or
opportunities for advancement. Some organizations have multi-
level job ladders with numerous levels of agent positions and
multiple career paths to many areas.
Unfortunately, others are severely limited in growth potential and
see turnover as a result. In a survey conducted by
callcentercareers.com, 27% of people had left one call center job
and were looking for another cited lack of promotional
opportunities as their primary reason to leave. Re-defining levels
and looking for career advancement opportunities within the call
center should be evaluated often.
4. Supervisory Problems: Assuming compensation is in a
reasonable range and there is at east a reasonable affinity for call
center work, the main reason agents leave the call center is due to
ineffective supervision. For the most part, the adage ‘people don’t
leave companies; they leave leaders” is certainly true in the call
center environment. In the majority of cases, a supervisor can be
either the greatest contributor to staff retention or the primary
cause of turnover.
The new age economy, with its attendant paradigm shifts in
relation to the human capital, in terms of its acquisition, utilization,
development and retention has placed a heavy demand on today’s HR
professional. Today HR is selected to comprehend, conceptualize,
innovate, implement and sustain relevant strategies and contribute
effectively towards giving the corporation its winning edge. With a
dynamically changing and volatile demand-supply equation, especially
against erratic attrition trends and cutthroat competition no longer
restricted to local or regional boundaries, a need for strategizing and
putting in place a robust mechanism for attracting and retaining top
talent becomes vital for the company’s very survival and growth.
The new age workforce comprises mostly of knowledge workers,
who are techno – savvy aware of market realities, are materially focused
and have higher propensity to switch jobs. They prefer to experiment and
explore new opportunities, are high risk takers with higher aspirations
and expectations and generally have a totally different mind-set about
job and careers.
In the current scenario, does supply really outstrip demand?
Supply of what and demand of what? What kind of people get the pink
slip and whom do the companies ring fence? In any organization the
employees may be broadly classified into four broad categories in terms
of their performance and potential.
There are people who are woefully inadequate in both dimensions,
who we may call ‘strugglers’ and there are the ‘under-performers’, whose
performance falls below their potential. This constitutes about one fifth of
the total human capital at our disposal and these people obviously
qualify to be the first candidates for the pink slip.
The other two segments comprise of the solid pro’s’ and the stars’
who are at the higher end of the performance continuum. The former
may be relatively lower in their potential as compared with the latter, but
contribute immensely to the company’s overall performance. We could
call this as the ‘talent’ segment. This is the segment we do not want to
lose. We’ve got to protect this group from the pull of all non-retentive
forces and that needs effective retention strategies that have to be kicked
into high gear.
Retention strategies have to be viewed holistically against the total
systemic framework of talent management that encompasses the ‘talent
the ‘corporation’ and the ‘environment’. Attrition and retention should be
seen as reciprocal phenomena, which have an inverse relationship with
each other, recruitment and needs for downsizing must also be
considered in conjunction.
As understanding of the inherent considerations of an individual who
wishes to join a company and continue to stay, and potential
compulsions, which push him away, would help.
The company’s brand image crowns the list of the priorities for the
job seeker, other important considerations being; the pay package and
other pecuniary benefits, the class and quality of people that work in the
company, the challenges of the job and attractiveness of the position &
designation, the opportunities for career growth and professional
development and the kind of technology, he would be exposed to.
Dissatisfaction in any of these aspects causes severe cracks to appear in
the bonding. Anxieties and apprehensions arising from restructuring,
movements, marginalization, power politics, change of boss, change of
tasks and responsibilities, mergers and acquisitions etc. could be
instrumental in taking decisions to leave. Other factors could be to
explore better prospects elsewhere, to start one’s own venture, to take up
higher studies or certain private compulsions.
From the company’s perspective, its brand equity, philosophy,
vision, mission, culture, values and ecology have a direct bearing on
talent attraction and retention. Other company - related attributes that
impact employee retention include high demand on performance, need
for new competencies, broader, deeper and diverse job expectations, need
for re-skilling and re-deployment, career offerings and growth prospects,
goal & role clarity, policies & processes and organizational
Putting in place an effective sensing mechanism to gauge comfort,
contentment and commitment levels becomes a pre-requisite to
designing and implementing any worthwhile retention strategy.
Many such instruments have evolved over the years and include
employee satisfaction surveys, organization climate audits, open forums,
one-to-one sessions, exit interviews, ex-employee interviews, grape vines,
informal social interactions, case studies and a multitude of trend
analyses based on hard attrition data. Whatever may be the instrument,
whether used singly or in combination, the success depends on
collection and collation of unbiased responses, cataloguing of direct and
proximate clues, their effective analysis and drawing sound inferences.
In order to appreciate the push and pull effect on the individual in
the context of attrition and retention a qualitative force field listing may
While on the one hand, a compelling brand image, astute
leadership within the organization, an enduring culture and an
environment that is trusting, caring and nurturing, credibility,
transparency, empowerment, responsiveness and creative policies on
compensation, recognition etc would exert a positive influence on the
subject talent, on the other hand, compliance, control, rigid power
structure, knee-jerk changes, unexciting and drab jobs, unjust
discrimination, unrealistic deadlines, lure of lucre and poaching would
The retention strategies should be designed such that the retentive
forces are maximized and the debilitating forces minimized. Retention
strategies should not be orchestrated in isolation but must form part of
the overall strategies for strengthening the pull on the talent, which in
fact include sourcing, staffing and development strategies like improving
the pay structures & level on part with those of similar organizations,
providing the opportunities for self development & promotional avenues,
maintaining sound industrial & human relations, adopting effective
techniques of recruitment, selection, induction & placement, providing
congenial working conditions, creating the facilities & environment to
satisfy he employee’s needs for pride, security, recognition, challenging
work, autonomy, achievement, appreciation, status, power to control etc.
in addition. A robust sourcing strategy is crucial to the exercise since the
type of people one selects should not only fit into the job in terms of skill
set but should match the company culture in terms of attitude,
personality and commitment. An effective selection process ensures the
entry of the right kind of people into the organization, with the desired
loyalty and sense of belonging that goes a long way in restricting attrition
in the long run.
Critical human resource acts that need to be introduced and
altered for effective management of employees turn over ratio.
1) Employees change job for a variety of reasons
According to a research paper by an IIT - Mumbai professor, there is a
significant gap between HR managers’ perception of why employees
change jobs and the real reasons as cited by the employees themselves.
The paper’s research findings show that people leave for different reasons
depending on the stage in their career. For example employees new to
workforce tend to leave for more money, to work with new technology
and to move from small to large companies. More senior level employees
leave when the work is not challenging and when they are unhappy with
the company vision.
One solution presented is for companies to be careful in their hiring &
selection process to find employees with the ‘right’ cultural fit with the
company. Employers should also avoid presenting too rosy a picture of
the company without including a realistic look at the job and the work
2) Perks that work
Job satisfaction may be at an all time low but not for many companies
that have found a way to successfully incorporate perks into their
workplace culture. While some experts stress that perks are less
important than interesting & challenging work organizations finding that
benefits do make a difference in employee retention.
3) Employee’s first days are critical for retention success
Studies have shown that an employee’s experiences during his or her
first few weeks on a new job are critical in the employee’s later decision
whether to stay or leave. Lasting impressions about the company’s
standards, the workload, growth opportunity, the work ethic of
colleagues and communication from upper management are all formed
during this early time period
The following are some tips to ensure that new employees get off to a
good start with your company or organization:
a) Anticipate the first day. The new employee will have lots of
questions buzzing around in his mind as his first day approaches.
Anticipate those questions and put the answers in a letter or handout for
each employee. Questions might include things like
-What is the dress code?
-Where should you park?
-Where do workers eat lunch?
b) Provide a warm welcome. The new employee should be welcomed
on her first day by a friendly face. This can be someone assigned to greet
the new employee or a friendly person whom the new employee met
during interview process. Remind staff to say hello and if you want to go
all out - place fresh flowers on the new employee’s desk.
c) Assign a friend. To help the new employee feel welcome during the
first week or more assign a friend who can meet the employee for breaks
and lunch and answer any questions that one might hesitate to ask the
d) Provide a schedule. List tasks and/or meetings that the new
employee will be working on and attending during his or her first few
e) Teach the job. Be prepared with training to help the new employee
successfully learn the specifics of the job. Make sure files and equipment
are available if necessary & consider providing a colleague tutor who can
assist with learning.
f) Touch base. During the first week, be sure to check in daily with
the new employee to find out how things are going. This should continue
at least weekly for the first month or two.
g) Provide hope for the future. Explain the organizational structure
to the new employee & let him see how his job fits in with the company’s
mission. If advancement opportunities are available, explain how the
process works and the steps for growth & training.
Employee retention is important even in an employer’s market where
workers are plentiful. Each employee represents a significant investment
that is lost if the employee leaves prematurely. You can take steps to
minimize this risk by making sure each employee gets a great orientation
to the company.