IMPACT OF ORGANIZATIONAL RETENTION STRATEGIES ON

EMPLOYEE TURNOVER
Shraddha Ladia Saloni Gupta
Asst. Professor Asst. Professor
Jagran College of Arts, Science and Commerce Jagran College of Arts, Science and Commerce
Abstract
Worldwide, numerous factors have been ascribed to the rise in the level of employee turnover.
The way employees are paid, promoted and recognized are some of the critical factors in
attracting, retaining and motivating employees. Employees are the assets of any organization and
an organization cant afford to lose its key performers. Companies are making efforts to retain
their talents by implementing effective retention strategies that would meet the aspirations of
employees and at the same time enhance their productivity. The objective of this study was to
find out the causes of employee turnover and to point out how recognition and rewards,
induction programmes, the work environment and training and career management opportunities
influence an organizations rate of employee turnover. Our exploratory study examined and
reviewed historical facts and past literatures. Personal and telephonic interviews of key personnel
belonging to various companies were also taken. It was found that there is a significant influence
of organizational retention strategies on employee turnover. The study also showed that job
satisfaction, training and development programmes and cordial relations in organization
influence the rate of employee turnover.
Key words: Retention strategies, Employee, Turnover, Employee satisfaction, Organizational
culture.
Introduction
Successful companies such as Microsoft and General Electric have for many years confirmed
that having a superior workforce is the key to sustainable market domination and business
success (Pitiris, 2009). They also emphasize the value and the importance of retaining skilled
human capital in ensuring that it achieves its objectives. Employee retention entails a
combination of activities that, when working well together, results in employee staying with the
organization for a long time. According to Hendricks, employee retention should focus on:
Attracting employees to join the organization through focused recruitment and ensuring
that employee with crucial skills who are already in the organization stay.
Keeping employees motivated;
The fact that skills retention depends upon all the other human resource management
practices within the organization and is not just the recruitment issue (Hendricks,2006).
Another study in retention of employees suggests that employee retention starts at the job
description, recruitment, selection and orientation stages. The author argues that the four
elements mentioned above form the foundation for any retention strategy that a company may
adopt (Dibble, 1999). Organizations are accelerating their talent retention strategies which would
increase the stickiness of the employees to their jobs for longer terms. The fact that retention is
most cost effective than hiring, is now being brought out strongly in research as well. According
to LBW Consulting (Leadership in Business, Worldwide) the cost of replacing an employee
ranges from 29% (non-management) to 46% (management) of the persons annual salary. Then
there are the sunk costs such as, induction and training expenses, other administrative people
costs incurred on the person, expenses are also incurred when someone else does the persons job
in the interim, leading to the domino effect on employee cost. Subsequently there is a new hiring
cost that on average would be 25% of the annual salary. There is also the probability that the new
employees salary would be higher. Companies are increasingly mapping employee retention and
hiring costs and eventually retention is emerging as a cost effective tool. At companies like
Asian Paints, the talent strategy is strongly tilted towards the old paradigm of grow from
within (Times of India, 2012). Therefore, managers must recognize the employee as a major
contributor to the efficient achievement of the organizational success (Abbasi et al, 2000).
Specifically in our study we set out to find causes of employee turnover and effective retention
strategies that can help in curbing the rate of employee turnover. To get the answers historical
facts, data and past literatures were reviewed. Exploratory research method was followed in this
study. Both primary and secondary data were used. Personal and telephonic interviews were
taken of several key personnel and employees working in Deloitte, Direct I, Google, Coca cola,
IBM, etc. The paper makes several contributions to the increasing debate on employee turnover
in organizations. Our study emphasizes on the various retention strategies that can help
significantly in controlling the employee turnover.
Literature Review
Effective employee retention is the systematic effort by the employers to create and foster an
environment that encourages current employees to remain employed by having policies and
practices in place that address their diverse needs. A strong retention strategy eventually
becomes a powerful recruitment tool. Employee retention matters as training, time, investment,
lost knowledge and candidate search are involved in recruitment of a new employee. Hence,
these employees are extremely crucial to the organization since their value to the organization is
essentially intangible and not easily replicated (Meaghan et al, 2002). According to Gaan (2011),
employee turnover has been a major issue pertaining to IT personnel. It has been noted
frequently that IT personnel have a stronger than average tendency to leave their current
employer to work for another (Chart 2). Employee retention involves taking measures to
encourage employees to remain in the organization for the maximum time period. Employee
turnover often results in a drain on management time, and creates pressures in workforce
planning. Intangible costs include: negative impact on employee morale; adverse effect on social
capital; erosion of organizational memory (Dess and Shaw, 2001). Best way to enhance
employee retention is to understand what the employees require from organization and provide it
to them. Each employees need would be different, but organizations should be able to reach the
limits and act accordingly. They should make the employees feel that they are most valuable for
the organization (Leena and Lissy, 2012). Many companies fail to understand that one of the
basic reasons for high staff turnover in any company could be the way the management team
deals with their employees. This is an important concept to understand because no matter how
well you design your strategy, the managers who have to implement and execute that strategy
can render it ineffective (Pitiris, 2009). Companies need to focus on the long-term sustainable
human issues in the beginning of the life of the organizations or operations. If this is well
managed and aligned with the expectations of the employees and well communicated across the
organizations, they are most likely to stay with the organization and management. They feel they
can trust even though the end approaches. A successful strategy will focus on the people and
ensure they are treated fairly (Londolani Rampfumedzi, 2009).
Why Employees Leave?
Organizations in India must give serious thought to what drives employee commitment. Firms
need to focus on employees with mission-critical skills, as well as high-potentials and those
holding crucial roles. According to the study Preparing for Take-Off, conducted in association
with the Centre for Economics and Business Research, Employee turnover in India is predicted
to rise to 26.9% in 2013 with an employee base of 30 million compared with 26% in 2010 on an
employee base of 28 million. Worldwide, attrition is predicted at 21.2% in 2013 on an employee
base of 716 million compared with 20.3% in 2010 on an employee base of 644 million. The
number of workers expected to take flight will reach 161.7 million in 2014 - a 12.9% increase
compared with 2012 - as growth builds and employment opportunities increase. Comparatively,
turnover was minimal between 2010 and 2012. In the next five years, 49 million employees will
leave their employers globally (India Times, 2013).
Chart 1: Expected employee turnover in 2013 in different countries

Source: Centre for Economics and Business Research
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
26.8%
25.8%
26.9%
24.4%
21.8%
21.3%
14.6%
21.2%
A recent Mercer survey highlights that no fewer than 54% of Indian workers are seriously
considering leaving their jobs, and that figure spikes to 66% in the 16-24 year age bracket. And
they are not wrong other independent studies confirm the correlation between intention to leave
and actual turnover. The really tricky part is that the people considering leaving are not even
desperately unhappy. 76% of Indians surveyed reported satisfaction with their jobs and 75% with
their organizations (www.forbes.com).
Chart 2: Attrition rates in major IT companies of India

Source: Motilal Oswal (Q1FY12)
When there are so many benefits such as good package, challenging job role, efficient
performance appraisal system, training and development programmes, job rotation, ESOP
facilities, etc associated with companies. When there are so many privileges for the employees
then what makes them change the organization? Is it only money that matters or anything else as
well? It is essential for the senior management and human resources team to understand the
reasons that lead to exit of top performers. This will help them to design and implement an
effective retention strategy. DeMicco points out that a high labour turnover may mean poor
personnel policies, poor recruitment policies, poor supervisory practices, poor grievance
procedure and lack of motivation (DeMicco et al, 1987). There are also other factors which make
employees to quit from organization and these are poor hiring practices, managerial style, lack of
recognition, lack of competitive compensation system and toxic workplace environment (Abassi
et al, 2000). Here are some of the reasons for employees to change his/her job:
Job is not what employee expected to be.
Lack of opportunities for personal and career development in the organization.
Lack of appreciation and recognition.
Stress from overwork and work life imbalance.
Financial consideration.
Inappropriate organizational culture and work environment.
Resistance to change.
23.0%
24.0%
25.0%
26.0%
27.0%
Wipro
Infosys
HCL Tech
TCS
26.8%
25.8%
26.9%
24.4%
For higher education.
Lack of cordial relations with peers and superiors.
Job and person mismatch.
Sexual harassment
To gain new experience.
Key Retention Strategies
Retention of key employees is critical to the long-term health and success of any organization. It
is a known fact that retaining your best employees ensures customer satisfaction, increased
product sales, satisfied colleagues and reporting staff, effective succession planning and deeply
embedded organizational knowledge and learning. Intelligent employers always realize the
importance of retaining the best talent. Retaining talent has never been so important in the Indian
scenario. The need of the hour is an attempt by organizations to build on their Employer Brand
Equity as well as focus on leadership coaching, mentoring and development to ensure that the
industry is able to train and retain a strong workforce amidst a restless generation of knowledge
workers (Anubha Bhargava, 2012).Strategies to minimize employee turnover are given below:
Flexibility: Promoting work life balance by launching flexible working hour policy.This
can be extended to no fixed dress code for the employees and also instead of a fixed desk
to sit and work, allowing employees to sit wherever they feel comfortable in the
organization.
Stress free work environment: People want to enjoy their work. Employers should make
work and work place cheerful. Facilities like yoga, gym, free massage service, reading
rooms, sports zone, swimming pools, etc should be provided.
Conducting exit interviews: This will help in analyzing various factors that lead to
employee dissatisfaction and turnover. A study by Reed Consulting, UK showed that
employee who received an exit interview while leaving the organization left with a more
positive opinion than those who did not. The positive opinion definitely helps in
protecting employer brand and also retaining the remaining employees.
Offer an attractive, competitive, benefits packages: Packages that fulfill your employee
needs like health insurance, life insurance, retirement savings plan (Atul Mathur, 2013).
Financial rewards: Offering financial rewards for employees who meet performance
goals and stay for a predetermined time period say 3 or 5 years should be provided with
meaningful annual raises. Nothing dashes employee enthusiasm more than a paltry rise.
Recognition for work: Make sure that employees know that their work is important for
the organization. Feeling valued by the employer is the key to higher employee
motivation and morale. Employee must feel rewarded, recognized and appreciated.
Excellent career growth prospects: Encourage and groom employees to take up higher
positions. If they dont get opportunities for growth within the organization they will look
elsewhere for it. There should be proper room for employees to grow (Hay Group).
Instill a positive culture: A company should establish a series of values as a culture such
as honesty, excellence, attitude, respect, teamwork, etc (IOMA, 2008). Company that
creates the right culture will have an advantage when it comes to attracting and keeping
good employees.
Clarity of work responsibility and authority: An employee work must be communicated
to him clearly and thoroughly. The details of the job, its importance, the way it should be
done, time taken to complete the work must be clear. If the role is clear to the employee
then it ultimately leads to the improved efficiency and thus, in boosting his/her morale.
Never threaten a team members job or an income: Threatening an employee with
termination and demotion might seem like a sure fire way to get the results needed from
him/her but doing so will likely cause the employee to leave the organization.

Suggestions and Recommendations
After reviewing the historical facts, examining the past literatures, and taking
personal/telephonic interviews of key personnel and employees of different organizations such
as Deloitte, Direct I, Infosys, Dell, HP, Google, Coca cola, IBM, etc we came up with certain
suggestions and recommendations that can improve employee retention. To sum up following
are the suggestions that can reduce employee turnover:
Work from home: Companies should provide the facility of working from home which
can be really beneficial for disabled employees, women employees, who quit due to
maternity and other family issues.
Open door policy: Managers should hold regular meetings in which employees offer
ideas and ask questions. They should be provided with an environment where they can
freely go and speak with their managers without fear of repercussion.
Shorten the feedback loop: Most employees enjoy frequent feedback about how they
are performing rather than waiting for an annual performance evaluation. Managers
should simply stop by a team members desk and let them know that they are doing a
great job. A simple thank you or nice job, a thank you card or an E-card, movie
tickets or an engraved gift, appreciation in front of management can do wonders for
improving the retention in the Organization.
Family Day: Family day should be conducted by the companies. On this day spouse and
kids of the employees should be invited and introduced with the work culture, kind of job
done by them in the companies. Thus, helping in reducing the stress of employees and
creating respect for the work they are doing.
Grievance redressal & Suggestion box: Listen and solve employees complaint and
problems as much as possible. Suggestions given by employees if genuine should be
implemented and they should be appreciated for their efforts.
CSR Policies: There are many employees who love to do social work but are not able to
take out time out of their work schedules. Companies should provide paid sabbaticals so
that employees can get break from regular jobs and can accord their time in doing social
work which also helps in reducing stress.
Happy hours: Companies should arrange social gathering, barbecues, party on certain
occasions, outing with families of all the employees. These happy hours will help in
building cordial relationships among the employees and it also acts as the good source of
entertainment.
Amenities: To attract employees, organizations should provide them with various
facilities such as shopping discounts, coupons, gifts on celebrations, new gadgets
launched in the market, bean bags in the companies, free internet usage 24 hours, free
snacks and meals, company transportation, child care centre and crche facilities.
Work life balance: When work begins to put a significant brunt on ones family, no
amount of money will keep an employee around. Emphasis should be given on balancing
work and ones personal life. HR solutions should be followed for maintaining such
balance.
Exemplary and Empathetic managers: Apart from materialistic benefits what matters
the most to retain employees in the companies is that immediate manager should be
understanding and empathetic towards the employees. This helps in building good
relations and friendly work environment.
Conclusion
From the above findings it is clear that having proper retention strategy is important to retain
employees. Employees need to feel valued and appreciated. This study has provided readers with
a better understanding of tools to motivate and retain individuals through best techniques
available. These strategies helps the companies in minimizing employee turnover, drain on
management time, cost of training new employees, interruption of work, reduction in
productivity, etc. The important reasons of employees leaving the organization are salary and the
organizational culture. It is very essential for the companies to make an effective compensation
policy and to create such a culture that, employees are motivated to stay back. By using various
practices like flexi time, work from home, employee involvement, work life balance, etc
employee retention can be increased. Hence if these practices are implemented in a company, its
employee turnover will surely minimize.




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