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employee retention

  1. 1. Employee Retention Employee Retention A Project report submitted in partial fulfillment of the requirement for the award of the degree of ‘Bachelors of Management Studies’ Mumbai University Submitted by: VARUN.A.CHHIBBER Roll no. 7720 SEMESTER: V Parle Tilak Vidyalaya Association’s Mulund College of Commerce 2005 – 2006 University of Mumbai 1
  2. 2. Employee Retention Declaration 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 (Varun.A.Chhibber) 2
  3. 3. Employee Retention Certificate 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 Coordinator College/Institution Signature of the Examiner 3
  4. 4. Employee Retention Acknowledgement 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 project. 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. 4
  5. 5. Employee Retention Executive Summary 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. 5
  6. 6. Employee Retention Objective of Study 1) To know the importance attached to employee retention in today’s corporate world. 2) Strategies employed by the company to improvise on the rate of employee turnover rates. 3) General problems faced by the companies while practicing employee retention. 6
  7. 7. Employee Retention 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 Retention. 7
  8. 8. Employee Retention Methodology 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 K. Aswathappa. 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. 8
  9. 9. Employee Retention Index Sr.No Contents Page No 1. Introduction 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 Problematic??? 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 12. Questionnaire 13. Analysis of Survey 14. Managing IT Retention & Turnover 15. Employee Retention Problems faced by Call Centers 16. Retention Stratagem 17. Conclusion 18. Bibliography & Webliography 9
  10. 10. Employee Retention Introduction Employee Retention 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. 10
  11. 11. Employee Retention 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 strategies. 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. 11
  12. 12. Employee Retention 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 themselves”. 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 circumstances. 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 people aligned. 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 & Wipro 12
  13. 13. Employee Retention 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 produce returns. “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 more crucial. 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 “soft” roles. 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, 13
  14. 14. Employee Retention 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 desired results. 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. 14
  15. 15. Employee Retention Employee Turnover 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 dysfunctional. 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 experience. 15
  16. 16. Employee Retention 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 turnover. 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 recruitment process. 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 16
  17. 17. Employee Retention 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. 17
  18. 18. Employee Retention 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 developmental opportunities. Early leaving 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 induction programs. 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. 18
  19. 19. Employee Retention When Does Employee Turnover Become Problematic? 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 some weeks. 19
  20. 20. Employee Retention Employee Retention 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 20
  21. 21. Employee Retention 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. 21
  22. 22. Employee Retention Provide opportunities to explore different positions within the company 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 employees. 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 processes. 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 22
  23. 23. Employee Retention environment, the more likely are to retain a staff of satisfied, productive employees. 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 grievance systems. • 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 impress • 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. 23
  24. 24. Employee Retention 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., recruited). 24
  25. 25. Employee Retention Recruiting Smart 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 25
  26. 26. Employee Retention 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 repeated. 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. 26
  27. 27. Employee Retention Selection 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, 27
  28. 28. Employee Retention whereas the right man on right job will contribute to organizational growth. 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 organization. Induction 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. 28
  29. 29. Employee Retention Remuneration Negotiation 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. Act Quickly 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. Provide Encouragement 29
  30. 30. Employee Retention 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. Maintain Communication 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. 30
  31. 31. Employee Retention Work Environment 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  Publicizing Programs 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 31
  32. 32. Employee Retention  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 minimum. 32
  33. 33. Employee Retention 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 service. 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 educational opportunities. • 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 sexual harassment. 33
  34. 34. Employee Retention 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 more responsibility.) Now lets look at the other side of the coin, since some people would argue that training can actually work against employers, encouraging turnover. 34
  35. 35. Employee Retention • 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 become proficient. • 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 encouraged. • 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. 35
  36. 36. Employee Retention • 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. 36
  37. 37. Employee Retention Performance Appraisal 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 & promotions. Employee Viewpoint 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 Organizational Viewpoint 37
  38. 38. Employee Retention 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 mind:-  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 performance goals.  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 & constructive.  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. 38
  39. 39. Employee Retention  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 39
  40. 40. Employee Retention 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  Monetary compensations  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 plan. 40
  41. 41. Employee Retention Case Study 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 easy. 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 41
  42. 42. Employee Retention quantum was so small it failed to register any impact on the performance. 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 contributions. 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 42
  43. 43. Employee Retention 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 organization? 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. 43
  44. 44. Employee Retention 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 attractive. 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 44
  45. 45. Employee Retention 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 view. Total Rewards 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. Non-cash Rewards 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 reasons. 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 45
  46. 46. Employee Retention 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 pay comparisons? ‘The salary structure should depend on the size, type and nature of the organization, and should provide the flexibility to cope with market 46
  47. 47. Employee Retention 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 companies. 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!’ 47
  48. 48. Employee Retention 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 pay more. 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? 48
  49. 49. Employee Retention 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 invested.’ Exit Interviews 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 decision. 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 49
  50. 50. Employee Retention consistently and both less reliable and valid than using surveys to collect the data. It appears, then, that many organizations are failing to recognize the value of a systematic approach to collecting information from exiting employees, including:  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 themes  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 “themes”… Career opportunities, including:  Perceived opportunity for advancement  Presence and/or clarity of development plan. 50
  51. 51. Employee Retention Enjoyment of the work, including:  How well work utilizes skills  “Fit” with job  Work/life balance. Corporate leadership, including:  Clarity and strength of vision and mission  Management style  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. Compensation/rewards, including:  Base/variable pay  Benefits  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, 51
  52. 52. Employee Retention 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 being:  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. 52
  53. 53. Employee Retention  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. Questionnaire Name of the organization: Name of the employee: Designation 1. According to you, which sources are reliable for recruiting the right candidate? 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? 53
  54. 54. Employee Retention 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 the employees? a) How do you define the culture of your organization? 5. What efforts are taken to ensure that the employees have a good working environment? 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? 54
  55. 55. Employee Retention 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 managers? 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 & the organization? 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 force? 55
  56. 56. Employee Retention 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 far? 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 survey. 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 56
  57. 57. Employee Retention 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 skills etc. 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 57
  58. 58. Employee Retention 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 follows: 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 58
  59. 59. Employee Retention 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 possible. 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 59
  60. 60. Employee Retention 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 talent. 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 60
  61. 61. Employee Retention 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 61
  62. 62. Employee Retention 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 more important. 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 workforce! 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 areas: 62
  63. 63. Employee Retention  Compensation and benefits  Reward and recognition  The work environment  Lifestyle support and work arrangements (very important for the female employee)  Flexibility and autonomy  Training, Development and Advancement  Communication  Management quality 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 each area. 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 organization Above 40 63
  64. 64. Employee Retention 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  Dynamic Leadership  Team environment  Well defined roles! expectations  Sound interpersonal relationships 4. Value Driven  Fair/Impartial treatment  Timely rewards/recognition  Regular feedback 64
  65. 65. Employee Retention  Respect for the individual  Empowerment to take decisions 5. Sustenance Driven  Location of work  Compensation  Functional infrastructure  Onsite Opportunities  HR policies 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 5 Level 4 Level 3 Level 2 Level 1 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 requirement. 65
  66. 66. Employee Retention Level 3: Senior Fully Experienced Level Develops and applies advanced methods to create, design, and develop complex software. 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, projects, proposals 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 engenders. 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 turnover. 66
  67. 67. Employee Retention 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 follows:  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 Centers 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 67
  68. 68. Employee Retention 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. Turnover Costs There are many costs associated with call center staff turnover. Some are obvious, direct, measurable costs, while others are indirect 68
  69. 69. Employee Retention 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 business. 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 69
  70. 70. Employee Retention 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 70
  71. 71. Employee Retention 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. Retention Stratagem 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 71
  72. 72. Employee Retention 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. 72
  73. 73. Employee Retention 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 73
  74. 74. Employee Retention 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 communication. 74
  75. 75. Employee Retention 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 be helpful. 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 be debilitating. The retention strategies should be designed such that the retentive forces are maximized and the debilitating forces minimized. Retention 75
  76. 76. Employee 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. Conclusion 76
  77. 77. Employee Retention 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 the 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 requirements 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. 77
  78. 78. 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. 78
  79. 79. Employee Retention 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 boss. 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 weeks. 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. 79