ABSTRACTEmployee attrition and retention of talented peopleis a real challenge before any organization . Attrition is often viewed as therealization of a company’s overall health.
Frequent employee turnover is not apositive sign for the business’s well-being. It is difficult to accept when organizations saythey have zero attrition rates. Companies may have healthier turnover rates,however, there is no such thing as zero attrition. As a means of improving theturnover, many companies strive to find methods to keep workers happy.Generally Skills-development, progress/promotion incentives, and communicationare three major ways to improve attrition. The current average employee attrition of about20-30 per cent across industries only testifies the fact that it’s a criticalchallenge in India’s growth.
This paper will help to identify and analyze the various reasons of workforce attrition indifferent organizations and what are the various techniques that can be utilized to manage attrition and explore the factors influencing retention ofemployeesKeywords:Attrition, Attrition rate, RetentionINTRODUCTION:Attritionis one of the most serious concerns of the organisations today, irrespective ofthe industry in which they are operating. Attrition is all about people leavingorganisations with the slightest provocation and having no respect andcommitment to the company in which they are working.Theattrition rate plays a significant role in an organisation. High attrition rateof employees in an organisation is a serious concern because the employees arethe human capital. Some of the organisations have started searching the causedue to which the employees are leaving the organisation. Thereare some organisations specially belonging to IT, Telecom, and various othersectors which are facing high attrition rate. Due to high attrition rate, costof the organisation increases due to training, development, socialisation andother costs on the employees.
Attrition rate is high basically in anorganisation whose work is mostly dependent on knowledge workers like BPO,paramedical, aeronautics etc. Attritionis defined as reduction in the number of employees through retirement,resignation or death. The rate of shrinkage in size or number of employees isknown as attrition rate. In India, the average annual attrition rate in thebusiness process outsourcing (BPO) sector hit a high of close to 50% a fewyears ago.
Different organisations usedifferent method to calculate the rate of attrition. TheMost Commonly Used Formulae is:Total no. of resignsper month (voluntary or forced fully) X 100(Total no. of Employeesat the beginning of the month + Total no. of newjoinees – total no. of resignations) WHATIS ATTRITION?Attrition has been a major concern for most of thecompanies in the current competitive scenario. The word Attrition means, a reduction in the numberof employees through resignation or separation at the employees will.
Retirement, VRS and employee leaving due to end of contract are not consideredas attrition. Attritionrate is the rate of shrinkage in size or number. It is the mathematical representation of the attrition in aparticular organization or an institution.Attritionleads to dual loss to an organization:· Firstly, company loses on a talent andthus costs incurred on them are a waste. · Secondly it employees a new employee andthus needs to incur costs on them.The highest rate of Attrition tends to beamong those who have recently joined a business. Longer?serving employees are more likely to stay,mainly because they become used to the work and the business and have anestablished relationship with those around them.
Attrition is an important parameterindicating the overall health of any industry or an establishment in terms ofwages, industrial relations, working conditions and other welfare facilitiesprovided by the employers to the workers. Higher rate of attrition indicateslack of stability in the labor force, which in turn, may not be considered tobe conducive to the productivity of labor. For higher productivity of labor, itis essential that labor force remains stable over a period of time. Reasons for attrition Attrition does not happen for one or two reasons.
The reason are various behindleaving an organization & any attempt to find one comprehensive explanationfor this phenomenon would be futile. Though the rising attrition withinindustries is a well-discussed topic but very few HR executives have been ableto pinpoint the ‘exact’ reason for this growing trend. It comes no surprise tomany that money is an important factor but what besides this, there are severalfactors that influence an employee’s decision to leave. Those days are gone when salary was the sole motivator for anemployee to leave an organization. According to a survey there are three mainreasons that are followed by other common reason:· Bad work culture· Relocation· Job insecurity· No social or family life· Target pressure· Bettersalary· Better job opportunity Commonreasons experienced by HR manager are discussed here: *Mismatch of job profile.*Job stress and work-life imbalances*Odd working hours/Early morning-night shifts*Job hopping *Lack of authority provided to accomplish ones task *Monotony of job The list can be endless but the reason why employees leavethe organization vary according to the nature of the business. Therefore it’s very challenging task for an HR expert to copeup with this situation and retain talent with an organization.
Consequences ofattritionPositiveconsequences · Infuses New blood · New ideas, creativity , innovation · Restructing sections or departments. · Displacement of poor performers· Healthy competition Negativeconsequences · Loss of key skills, knowledge & businessrelationship · Productivity , profitability & creativity maydiminish · Significant operational disruption· Employee dissatisfaction & loss of moralAssociated costwith high Attrition:The tangible costs of employeeattrition would be the cost of trainingnew employees, the recruitment and selection costs, adjustment time,possible product and/or service quality problems,costs of agency workers/ temporary staff, the cost of training, the cost ofloss productivity, the cost of lost knowledge and the cost of theposition remaining vacant till a suitable replacement is found. The intangiblecosts, which may be even more significant than the tangibles, involve theeffect of turnover on organizational culture, employee morale, socialcapital or organizational memory. All these costs would significantly take awaythe profitability and the competitiveadvantage of the firm.Various cost associated with attrition: i) Talent costsii) Recruitment costsiii) Training costsiv) Motivational costsv)Lost productivity cost OBJECTIVES OF THE STUDYa) Toidentify and analyze the various reasons of workforce attrition indifferent organizations.b) To getinsights into various techniques that can be utilized to manage attrition.c) Identify &explore the factors influencing retention of employees.
LITERATURE REVIEWOrganizations invest a lot on their employeesin terms of induction and training, developing, maintaining and retaining themin their organization. Employee turnover rates, within the lastseveral years, become a nationwide epidemic. There is no standard framework forunderstanding the employee’s turnover process as whole. Thereare many reasons why employees may leave a firm. Traditionally labour turnoverhas been seen to be either voluntary (the volition of the employee) orinvoluntary. Voluntary turnover includes push factors such as staff leaving due to lack of interest in the job,and pull factors such as staff being attracted to another job by incentives. The experience of job related stress (jobstress), the range factors that lead to job related stress(stressors), lack ofcommitment in the organization and job dissatisfaction generally make employeesto quit. Bowen and Shuster (1986) stated that while all constituting elementsof an organization are important for its success, it is its enhanced ability toattract and retain the best quality talent that separates it from the others.
Abbasi and Hollman (2000) sought to determine the impact of employee turnover on anorganization and found that excessive employee turnover often engenders farreaching consequences and at the extreme may jeopardize efforts to attain theorganizational objectives.Elangovan (2001)has argued that there is a reciprocal link between organizational commitmentand turnover intention, i.e. lower commitment increases turnover intention,which lowers commitment further.Van Dick et al. (2004) have also identified job satisfaction as a predictor of turnoverintention; however, they argue that it is a mediating variable betweenorganizational identification and attrition.Naqvi and Ramay (2008) revealed that job satisfaction and organizational commitment had anegative effect on turnover intentions, whereas perceived alternative jobopportunities had a significant positive correlation with turnover intentions.
Zheng and Lamond (2009) found out that training, size, length of operation and the nature ofthe industry are significantly related to attrition.ATTRITIONRATES IN DIFFERENT SECTORS IN INDIA Asper study of myhiringclub.com , India is likely to see attrition rates as highas 31% in 2015-16. SECTORS ATTRITION RATE Insurance sector 50-65% In BPO 55% Retail 40% IT sector 31% Telecom sector 26% Banking 23% Aviation & Hospitality industry 22% FMCG 21% Automobile & Manufacturing 19% Real estate 15% By this figure we can see that Insurance Industry is having thehighest attrition rate.Most people who join in enthusiastically,spurred by dreams of “working at one’s own hours, getting full reward forthe hard work” and other such motivational spiel, meet reality soonenough. Once the initial list of potential customers such as close relatives,friends and neighbors is exhausted, the climb for an insurance employee isuphill.
Even meeting the minimum requirement of bringing in two viableinsurance proposals every month proves daunting. For some companies, the targetin terms of sum assured is Rs 1 lakh. For some others, it is as low as Rs10,000.When the rejectionsstart and the doors start getting banged in the face, people confront failure.The dropouts begin. S Roy Chowdhary, Executive Director (Marketing), LIC,says, “The attrition rate is about 35 per cent in the first year ofrecruitment.
This goes down to about 18 per cent by the fourth year. Most ofthose who drop out are non?performers”. Agrees Ms. ElizabethVenkataraman –senior vice president and Head Marketing at Kotak Mahindra OldMutual Life Insurance Company, and says, “Last year, the attrition ratewas much worse than 30 per cent. It has been a cause for worry and we aretrying our best to stem it.” She attributes it to the high expectations onthe part of the insurance employees. Some insurance companies complain that thebooming economy has caused the rampant poaching of insurance employees.
Theyalso say that it will settle down once they have their expanding networks inplace. Insurance companies believe that adequate training will help in containthe problem in some measure. They say that in a business such as insurance onehas to accept the fact that 20 per cent of the work force will bring in 80 percent of their business. But, while private insurance companies are stillstruggling to break even, the rising attrition rate is yet another challengethat they have to battle.FactsJudhajitDas, Chief of Human Resources, ICICI Prudential Life Insurance Company, explained what hadtranspired in insurance since it was opened up to private players over a decadeago.He recalled that the period between 2002 and 2008 was one of rapidexpansion, focused on top line growth.
Multiple players had entered the field.High increments had led to wage inflation and high attrition, and rapidpromotions had caused job inflation. The key proposition forpeople to join was that insurance was a fast-growing sector, and one would getaccelerated career growth. There was an unprecedented war for talent.
Circa2006, ICICI Prudential Life was hiring about 25,000 people a year.The period between 2008 and 2010 bore the keywords ‘financialcrisis’ and ‘market volatility’. This watershed saw ‘a bit of uncertainty’ onwhere the sector was headed, as more than one industry executive now admits.
Morale was low. Promotions were absent. Increments were minimal. There was a’no bonus’ year for many.
But by then, most insurance companies had already added capacityfor much higher growth. People had to start ‘right sizing’. From a staff count of 30,000in 2007, ICICI Prudential Life is down to 14,000 people today. And the numbersare not going up in a hurry. For Das, who has been with the company since 2000,it’s been a roller coaster ride. “We did right sizing in a calibrated manner.Every six months we would look at performance and take a call on the bottom 10per cent. It was not that we simply brought down numbers,” explains Das, inconversation with The New Manager.
In India, in the first threequarters of the financial year 2011-12, more than 3 lakh active insuranceemployees have quit the profession. Insurance companies such as Life InsuranceCorporation of India (LIC), ICICI Prudential and HDFC Life have seen massexodus owing to lesser incentive to insurance employees when compare with othersimilar sophisticated industries.The major factor effect them to changeis the package provided by the company. The promotion and transfer policies,Working hours, work environment, employee disputes, family problems, better jobopportunity available also play important role in attrition. To ignore why people are leaving theorganization is to ignore the organization greatest assets – its people.People in organization are needed to perform the task; but they are not justmachine but more than that.
They areorganization dreams, hopes, ambitions, creativity and innovation. And toretain these valuable assets is one of the surest ways to build an organizationrather than just to go in global markets. And this is the only way anorganization can lower its attrition rate. What is Retention?Employee retention is a systematic effort by employers toencourage valued employees to remain with their organization.A large part of keeping valued employees is attracting theright people to the organization in the first place by the use of an effectiveworkforce plan and recruitment and selection practices.How to RetainEmployees:Retaining employees has always proved to be fruitful acrossmany industries rather than to search for new & efficient talent.
So togain the fruit of this tree, different companies devise different strategiesfor retaining their employees. Simply hiking ones salary in an endeavor toretain your valuable employee will serve no purpose as today’s workforce has alot going during his/her decision making process and it’s certainly notrestricted to just pay. *Maintainwork life imbalances* Allow flexi-timings *Make workplace more flexible*Recognition of merits & rewards*Participation in decision making*Job rotation Factors to retain the talented employees in theorganization 1. It is impossible to stopemployees leaving the organization. But by the below mentioned methods one canatleast minimize it to some extent. 2. Offer fair and competitive salaries.
Fair compensation alone does not guarantee employee loyalty, butoffering below-market wages makes it much more likely that employees will lookfor work elsewhere. 3. Remember that benefits are important too. Although benefits are not a key reason why employees stick witha company, the benefits you offer can’t be markedly worse than those offered byyour competitors 4.
Train your front-line supervisors, managers and administrators. A good employee/manager relationship is critical to employeesatisfaction and retention. Make sure your managers aren’t drivingtechnologists away. Give them the training they need to develop goodsupervisory and people-management skills.
5. Clearly define roles and responsibilities. Develop a formal job description for each title or position inyour department. Make sure your employees know what is expected of them everyday, what types of decisions they are allowed to make on their own, and to whomthey are supposed to report.
6. Provide adequate advancement opportunities. To foster employee loyalty, implement a career ladder and makesure employees know what they must do to earn a promotion. Conduct regularperformance reviews to identify employees’ strengths and weaknesses, and helpthem improve in areas that will lead to job advancement.7. Make someone accountable for retention. Measure your turnover rate and hold someone (maybe you!)responsible for reducing it.
8. Conduct employee satisfaction surveys. You won’t know what’s wrong … or what’s right … unless youask. To check the pulse of your workplace, conduct anonymous employeesatisfaction surveys on a regular basis.
One idea: Ask employees what they wantmore of and what they want less of. 9. Foster an environment of teamwork. It takes effort to build an effective team, but the result isgreater productivity, better use of resources, improved customer service andincreased morale. 10. Communicate openly. Employeesare more loyal to a company when they believe managers keep them informed aboutkey issues. 11.
Be flexible. Today’s employeeshave many commitments outside their job, often including responsibility forchildren, aging parents, chronic health conditions and other issues. They willbe loyal to workplaces that make their lives more convenient by offeringon-site childcare centres, on-site hair styling and dry cleaning, flexible workhours, part-time positions, job-sharing or similar practices. For example,employees of school-age children might appreciate the option to work ninemonths a year and have the summers off to be with their children.
FUTURESCOPE OF THE STUDYØ The study will help different companies to increasetheir efficiency, productivity, profitability& morale & reduceassociated cost of high attrition by finding the factors to retain the talentedemployees in the organization.Ø Thisstudy can help the management to find the weaker parts of the employee feelstowards the organization and also helps in converting those weaker part intostronger by providing the optimum suggestions or solutions. Ø Thestudy can also be replicated in other sectors like- BPO, IT, Hospitality,Retail, Education etc.
where attrition has become a common problem. CONCLUSION:Frequent employee attrition means there issomething, which needs immediate attention and cure. The tangible cost of employees’attrition would be the cost of training new employees, recruitment andselection costs, adjustment time, possible product and/or service qualityproblems, cost of agency workers/ temporary staff. The cost of training, costof less productivity, cost of lost knowledge and cost of position remainingvacant till a suitable replacement is found. The intangible costs which may beeven more significant than the tangibles, involve the effect of turnover onorganisational culture, employee morale, social capital or organisationalmemory.
All these costs would significantly take away profitability andcompetitive advantage of the firm. The organisational costs associated withturnover in terms of hiring, training and productivity loss.Employees today are different. They are not the oneswho don’t have good opportunities in hand.
As soon as they feel dissatisfiedwith the current employer or the job, they switch over to the next job.