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attrition

attrition

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07/04/2013

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  • Defining the attrition problem
  • Reasons for attrition
  • Handling attrition?
  • How to save high attrition rates?
  • How to curb attrition?
  • Costs of Turnover
  • Article -
  • ‘Attrition at Call Canters’
  • Case Study -

Human Resource Management – ‘Attrition’ _______________________________________________________________________ _

“If employees are to be products, their shelf-lives are getting shorter”
In the best of worlds, employees would love their jobs, like their coworkers, work hard for their employers, get paid well for their work, have ample chances for advancement, and flexible schedules so they could attend to personal or family needs when necessary. And never leave. But then there's the real world. And in the real world, employees, do leave, either because they want more money, hate the working conditions, hate their coworkers, want a change, or because their spouse gets a dream job in another state. So, what does all that turnover cost? And what employees are likely to have the highest turnover? Who is likely to stay the longest? Defining Attrition: "A reduction in the number of employees through retirement, resignation or death" Defining Attrition rate: "the rate of shrinkage in size or number" Attrition is beginning to significantly affect offshore ROI. Just as businesses faced a scarcity of talented IT resources during the dotcom era, organizations in offshore countries such as India are experiencing similar pains. Skilled employees are hopping from job to job and taking 1 _______________________________________________________________________ _

Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ with them the customer knowledge and technical expertise that any company needs. Their salaries are increasing, along with their perks, benefits, and bonuses.

Defining the attrition problem
Global outsourcing and the astounding amount of foreign direct investment pouring into China, Russia, and India have created tremendous opportunities and competition for talented IT professionals in those countries. The downside of this increased competition is a rising rate of attrition, particularly in India. Fiscal third-quarter 2005 (ended December 2004) results filed by Infosys, Wipro, Satyam, and TCS listed attrition rates between 7.6% and 17.7%. Vendors that we have interviewed place the numbers much higher, at 25%–60%, while an April 2005 BusinessWeek article estimated an attrition rate of 60%, with some India service providers experiencing up to 80% turnover. To put these attrition numbers into perspective, if a company has 100 programmers and an attrition rate of 25%, then 25 of its IT staff will leave each year. Think about the time and money it took to find, interview, hire, train, and coach those 25 people. Now think about losing them and starting the hiring and training processes anew. How do the hiring and training processes break down in terms of total costs in India? The typical time for advertising, interviewing, screening, negotiating, and hiring a new employee is about two weeks. Companies usually allot one week for programmers to become familiar with the new business, two more weeks for technical training, and one last week for customer training. Now imagine a 25% attrition rate and replacing 25 of these programmers each year. Based on a yearly salary of $15,000 for the human resource person and $25,000 for the 2 _______________________________________________________________________ _

Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ programmer, it would cost an additional $63,000 annually in acquisition and employee training costs. After considering these figures, it quickly becomes apparent why companies are investing in strategies to prevent attrition.

Reasons for attrition
It is not easy to find out as to who contributes and who has the control on the attrition of employees. Various studies/survey conducted indicates that every one is contributing to the prevailing attrition. Attrition does not happen for one or two reasons. The way the industry is projected and speed at which the companies are expanding has a major part in attrition. For a moment if we look back, did we plan for the growth of this industry and answer will be no. The readiness in all aspects will ease the problems to some extent. In our country we start the industry and then develop the infrastructure. All the major IT companies have faced these realities. If you look within, the specific reasons for attrition are varied in nature and it is interesting to know why the people change jobs so quickly. Even today, the main reason for changing jobs is for higher salary and better benefits. But in call centers the reasons are many and it is also true that for funny reasons people change jobs. At the same time the attrition cannot be attributed to employees alone. • Organizational matters:

The employees always assess the management values, work culture, work practices and credibility of the organization. The Indian companies do have difficulties in getting the businesses and retain it for a long time. There are always ups and downs in the business. When 3 _______________________________________________________________________ _

Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ there is no focus and in the absence of business plans, non-availability of the campaigns makes people to quickly move out of the organization.

Working environment:

Working environment is the most important cause of attrition. Employees expect very professional approach and international working environment. They expect very friendly and learning environment. It means bossism; rigid rules and stick approach will not suit the call center. Employees look for freedom, good treatment from the superiors, good encouragement, friendly approach from one and all, and good motivation. • Job matters:

No doubt the jobs today bring lots of pressure and stress is high. The employees leave the job if there is too much pressure on performance or any work related pressure. It is quite common that employees are moved from one process to another. They take time to get adjusted with the new campaigns and few employees find it difficult to get adjusted and they leave immediately. Monotony sets in very quickly and this is one of the main reasons for attrition. Youngsters look jobs as being temporary and they quickly change the job once they get in to their own field. The other option is to move to such other process work where there is no pressure of sales and meeting service level agreements (SLA). The employees move out if there are strained

4 _______________________________________________________________________ _

The salary and offered from MNC companies in Bangalore. better positions and better benefits are the most important reasons for attrition. indigestion. • Salary and other benefits: Moving from one job to another for higher salary. throat infection and gynecological dysfunction for lady employees. headache. Employees who have allergic problems and unable to cope with the AC hall etc will tend to get various other health problems and loose interest to work. MCA and others appear for GATE examination or other examinations and once they get cleared they quickly move out. The foremost personal reasons are getting married or falling in love or change of place. The employees expect salary revision once in 4-6 months and if not they move to other organizations. The next important personal reason is going for higher education. Health is another aspect. Delhi and Mumbai have gone up very high (Rs 15000 to Rs 18000 per month) and it is highly impossible for Indian companies to meet the expectation of the employees. Most of the BE. • Poaching: 5 _______________________________________________________________________ _ . Employees do get affected with health problems like sleep disturbances. • Personal reasons: The personal reasons are many and only few are visible to us.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ relations with the superiors or with the subordinates or any slightest discontent. which contributes for attrition.

The employees with 4-6 months experience have very good confidence and dare to walk out and get a better job in a week's time. • Employee’s advocate: One of the main reasons why employees leave companies is because of problems with their managers. 6 _______________________________________________________________________ _ . By doing this it is easier to meet the company’s business targets. HR has not really understood the problems associated with employees’ careers and jobs. An HR professional can be termed an employee’s advocate and a bridge between top management and employees at all levels. The company’s overall plans and strategies also depend on HR professionals as they voice employees’ problems and requirements.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ The demand for trained and competent manpower is very high. There is a huge gap between HR professionals and employees in terms of understanding challenges and delivering requirements. Poaching has become very common. The HR department should have genuine interest in the employees’ welfare…it is responsible for making sure that their expectations are met. The big companies target employees of small companies. Most of the organizations have employee referral schemes and this makes people to spread message and refer the know candidates from the previous companies and earn too. The placement agencies have good days for doing more business.

In companies the wheels have changed and multi dimensional approach needs to be adopted. This may point to a reasonably high-pressure environment in conventional terms. only 17% have claimed ‘light pressure’. not realized as most respondents have no other 7 _______________________________________________________________________ _ .Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Handling attrition? Earlier the retention was the sole responsibility of HR Department and at the most the department heads will be accountable for the retention of talent. All the leading companies are trying several methods to retain the talent and few of those innovative HR practices are: (based on a survey) • Providing stimulating work environment: In terms of stated work pressure. Everyone has to contribute to hold the employees little longer period. More of concerted efforts only would help to retain the talent.

8 _______________________________________________________________________ _ . • Free transport and free food: Majority of the breaks were for meals and there were no significant problems faced in taking the breaks. was generally positive.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ industry experience. The atmosphere at the workplace however. Almost half worked more than 45 hours per week.

This is a huge strain on quality time available with the family and ostensibly results in stress in numerous ways compared with other industries. The root cause is that most BPOs are located outside the city as government lands have been allocated to the MNCs at better rates there. 9 _______________________________________________________________________ _ .Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Almost 2/3rd employees travel more than 10 kms to work everyday.

Entertain programmes . Interestingly. • Recreation clubs.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Although taxi / bus services are provided by most employers. 79% waste more than 30 minutes of their productive lives everyday waiting for commute. • Good rewards and recognition programmes: As many as 56% admitted to being asked to work overtime. Canteens. What’s more. fun activities with in the work area: Many companies have canteens though the quality of food is not great. as many as 30% workers travel crammed (more than 5 persons to a taxi). 10 _______________________________________________________________________ _ . 44% refused the question implying that conditions are created such that all probably are coerced into working overtime. The oppressive part was further that as high as 41% claimed to not having been paid for overtime. lower salary workers get no such benefits.

11 _______________________________________________________________________ _ .Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ • Good pay and benefits: A huge 58% of starters are dissatisfied with their promised packages vis-à-vis delivered salary.

Employees have varied expectations and it is becoming difficult to understand them and by the time you make an attempt to understand the expectation changes and it is still becoming difficult to meet the customized demands or expectations. This is a time to introspect as to what is lacking in the approach. One thing is missing is attention to individual needs.Better learning opportunities. gifts. .Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ • Other practices include: . . if a friend leaves.Regular holiday packages. All the above activities are being undertaken to a greater extent or little more in all large Companies. Surprisingly the attrition rate is not coming down in any of the companies. outings etc.Promotions and salary increase on a regular basis. but it is going up and it may increase in the coming days. To quote an example. another close friend will also leave and he will lure 12 _______________________________________________________________________ _ . Encourage enroll for distance learning programmes.

13 _______________________________________________________________________ _ .Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ another 3-5 persons. To tackle these will be impossible with any type of strategies and approaches. co-operation and building effective and high morale teams. The broader approach is to bring sanctity in the recruitment process like demand the relieving letter from the previous company. It is not easy to bring the entire company under a forum. The MNC culture. This understanding is what bridges the gap between manager and employee. high salary level and benefits offered by them are the only two major aspect of attrition and no one can halt them doing so. Nasscom has attempted to bring out certain guidelines on the matter and the impact is not felt yet. Insights can bring about a closer relationship between employee and manager to enable both parties to better adapt.including issues that cause stress. The Insights Discovery System generates reports that reveal personal preferences or triggers of each individual . connect and understand one another. Moving for higher education and marriage are the major reasons for attrition. In essence. The understanding of individual differences that Insights provides is fundamental to improving communication. • How Insights Can Help Build Strong Manager/Employee Relationships: The Insights Discovery System is based on perspectives and attitudes relevant to understanding organizational and cultural requirements and needs of people in relation to motivation and leadership. The HR personnel have become silent spectators and start hunting for new personnel to replace. have nonhire agreements with the companies in the particular area.

Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ An employee may be highly competent but his or her style may be different from that of the direct manager. The Insights Discovery System is a powerful workforce enhancement tool. It can: . may have been satisfied. commitment and retention of an incumbent behavior . The "Value to a Team" section of an Insights report provides crucial information to a manager who tends to evaluate all employees against one set of standards. Insights help managers and employees better identify what values (needs) are most important to each individual and how these values impact the person's attitude towards work.Enhance the effectiveness.Motivate and retain employees whose basic monetary and material needs drives .Identify motivational and managerial issues related to interpersonal style Reduce the impact of turbulence and organizational transition on employee commitment and productivity. Insights can help managers recognize the value and uniqueness of each person's contributions then reward them accordingly. but who are seeking their internal workforce though increased understanding of human 14 _______________________________________________________________________ _ .Improve HR planning and development . Insights also serve as a communication vehicle for discussions about an employee's current and future interests. Values can range from an employee feeling stable and secure to someone enjoying challenge.

we become accustomed to personality and quirks and develop a common trust. and drive. employees are an investment. 15 _______________________________________________________________________ _ . do they keep it? Well. You probably know someone who owns an outdated. Why. the owner has probably invested substantial time.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ How to save high attrition rates? • How much would you invest to keep your employees focused and happy? This is the question on the minds of CEOs and managers worldwide as the technology boom lifts and the employment market opens. It seems senseless to throw it away. overused vehicle but won't entertain the thought of trading it in even though they can afford to upgrade. not to mention the dependability that has taken them to countless doctors appointments. motivation. From the employer's perspective. You interview to make sure an individual has good work ethic. There is a significant emotional investment that is crucial to accelerating business strategies and reaching organizational goals. The cost of replacing the vehicle would be enormous compared to the cost of upkeep on the old one. baseball practices and events. money and care into keeping it in top condition. Yet there's much more to it than that. you might ask. Even with inanimate objects. employees are considered a financial investment. Most of the time.

All these factors can and will be effected by turnover. there are many other contributing factors such as the effect attrition has on customer service. Thankfully. companies have come to realize that keeping employees is more cost-effective than replacing them. corporate culture and employee morale and loyalty. However. Yes. there are financial reasons behind this focus on retention. • Drivers of Turnover is often driven by corporate restructuring and tight Turnover competition for key talent. when good people leave an organization they take their training and knowledge and often times. Even organizations choose to spend more time and resources on retaining existing employees than starting from scratch.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ When this same logic is applied to employees. hiring. relationships with them. benefits and administrative costs put an organization upside down on the investment. we find the cost of replacing employees comparable to that of investing in a new automobile. For many firms. Recruitment. Basically.retaining the vault of knowledge that's been accumulated. Retaining valuable employees has other benefits . surprise employee departures can have a significant effect on the execution of business plans and may eventually cause a parallel decline in productivity. This 16 _______________________________________________________________________ _ . skills learned and trust and relationships they have built with • customers and co-workers. People Are Not Easily Replaced though today's pool of unemployed workers is deep.

they dismiss the departure matter-offactly by stating the employee "received a better offer. Bottom line." Or. competitive market position and customer satisfaction. most respond. research indicates that money is not even on the list of top five reasons employees give when asked why they are leaving an organization. receive recognition and have a chance to learn and grow. it is adaptive and thereby ensures its future meaning that following a major upheaval or transition.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ phenomenon is especially true in light of current economic uncertainty and following corporate downsizing when the impact of losing critical employees increases exponentially." Contrary to popular belief. In fact. A healthy organization also responds well to the need for change. they have the resources and skills to satisfy customer needs and they are generally confident in the abilities of the leadership team. When viewed from the employees' perspective. a healthy organization is one in which people are generally satisfied with the quality of their work life. "It’s about money. the healthy organization rebounds and employees remain committed. disliking or not respecting the boss is the primary reason for talent 17 _______________________________________________________________________ _ .even when they are well paid. From the organization's perspective. They feel empowered to help shape decisions that affect them. When managers or supervisors are asked why good people leave. People will leave if they don't like their manager . On most days they feel good about going to work. it is the role of the manager. that most influences an employee's decision to stay or depart from an organization. the organization is healthy if it is viable as measured by profitability.

Frequent reorganizations. Inability to use core skills 3. lack of control over career 5. Salary/benefits It is very important to know that the above factors are often NOT the ones mentioned in most attrition studies published by individual organizations. Inability to grow and develop 6. The rationale behind this discrepancy is that exit interviews are frequently conducted by the departing employee's manager or HR manager. Research shows the reasons for employee departures are (in descending order): 1. reference. Typically. hindering honest responses. Additionally. employees are hesitant to tell these company representatives the truth for fear of burning bridges or getting a bad 18 _______________________________________________________________________ _ . Lack of flexibility. Lack of resources to do the job 8. mission 4.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ loss. Not able to impact the organization's goals. Employee/manager relationship 2. Employee/organization values misalignment 7. no 'whole life balance' 10. Unclear expectations 9. this information does not match the data frequently obtained during an employee's exit interview when asked about the reasons for departing.

They also look for a job with higher levels of responsibility. money is still considered to be the highest priority. better learning opportunities." People analyze the training programmes of prospective companies with those of their current organization. which means that how an organization grooms an employee is weighed to a greater extent.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ How to curb attrition? • Money is not everything Although the importance of higher packages is slowly diminishing. faced with a choice between more money and a challenging job." A number of professionals are looking at more challenging jobs. and finally result in better compensation. employees have opted for the latter as it allows them to learn new technology and increase domain expertise. but also extra perks. • Vision and objectives 19 _______________________________________________________________________ _ . Employees want not only work recognition. "In several cases. This is because they know that developing next-level skills will keep them ahead in the job market. among fresher or laterals with less than three years of work experience.

a crucial part of retention. especially new is a entrants. The youth should feel proud to be a part of the billion-dollar industry.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ The next level of communication.” about the pass on their goals and achievements. Respect for the job should be created by BPOs. Mentoring and handholding new recruits from day one to four months are important tasks. • Treat employees like Customers Even while companies strive to understand which organizational. If a company strives to retain an employee in the same way it tries to retain a customer. Companies should have a similar approach to employees and customers. It is at this time that new entrants experiment with different options. starts with acquainting employees with the company’s vision and objectives. Conducting regular meetings updating company’s status and achievements They should concentrate on leadership and brand building as people prefer to be associated with a brand. employees will be confident about the future and not try to look for better options.” If they are informed about regular happenings in the company. during this period. industry experts have found several loopholes at the top management and HR management level. Hence they should be exposed to the best values the company has. and reward factors will contribute to holding back employees. must. job. they should be familiarized with the culture of the company. and Organizations successful in retaining employees clearly employees. him leaving the organization could be out of question. 20 _______________________________________________________________________ _ .

This communication begins right from recruitment. but also affects him financially. At this juncture. This could be achieved by brand building. If the team has under-performers who despite given sufficient support and training is unable to perform. firing can be an excellent tool to contain attrition. Communication is the foundation for the entire process of managing attrition. as well as promoting potential ones. personal reasons. firing can look like attrition. lack of job security etc. A performer will not want to be part of the team. Attrition can simply be defined as employee leaving his current job due to reasons like. which attracts the right talent and helps in retention as well. job pressure. but they continue to be part of the team damage the morale of the team. In cases of peer pressure. All the above reasons are interlinked and can be the reasons for good workers to quit. the performer realizes 21 _______________________________________________________________________ _ . A continuous job pressure results in health problems. an employee aims to join a well-known company. Understanding an employee’s needs at various levels is a recommended HR practice. inefficient boss.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Since software professionals have different priorities at different points of time. Looking at firing and attrition together in a different light. Having frequent health problems not only reduces his performance. thereby increasing his job output/pressure. organizations need to structure their offer-mix while recruiting new hires. • Firing Sometimes. which has non-performers because he will have to compensate for the non-performer. health problems.

and through exit interviews. educational assistance. onsite cafeteria. based on their revelations. performance-based bonuses. With the above. the performer employee feels insecure and resigns. The Wipro Listens and Responds initiative at Wipro aims to capture the concerns and grievances of its employees. healthcare benefits. “The feedback we get through this tool will be analyzed.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ that he is working with an inefficient manager who is not capable of “cleaning up” the team by firing non-performers. Exit interviews help management learn the reasons why employees leave the company. 22 _______________________________________________________________________ _ . the organization can address the problems of existing employees. thereby curb attrition. feedback can be got in two ways—during the employee’s tenure. Our employees are very excited that their feedback is being taken seriously. Standard perks for an India-based "fresher" (a new entrant in the IT services industry with little work experience) typically include free transportation. the perks associated with the job start to pile up. Inputs can be secured from existing employees through various employee relationship management tools. • Spend Time Developing and Benchmarking Incentives Whenever the demand for a professional in a particular field heats up.” says Sahoo. As industry experts point out. and action will be taken on it. • Consider feedback It is important to take feedback from employees through different means and work with the HR department to iron out differences. Firing non-performers can be an efficient tool to contain attrition. and interest-free loans to absorb the cost of relocation or maybe to finance the purchase of a two-wheeler. stock options.

Salaries in India grew by 11.6% overall. Nonstop evaluation and benchmarking are "need to do" activities for IT managers. while China trailed with a 6. the Philippines showed a 7. As far as salaries. • Subsidize Education and Certification In the United States. its employees even have access to an agency that will handle such "domestic chores" as paying bills. HR firm Hewitt Associates reports that India showed the largest overall salary increase in the Asia-Pacific region in 2004.8%. Salary increases for middle managers in India were even more dramatic: Nasscom. the opposite was true in India. These salaries are often paired with expansive benefit packages that include standard entrylevel benefits as well as special services such as help finding and buying a home or enrolling children in school. Until recently. but that trend has begun to change as businesses have discovered that a significant portion of their attrition problems stem from employees leaving to pursue a master's degree. thereby giving IT workers more free time.7% increase.4%–8. Captive centers and IT service providers have to offer innovative compensation and benefits—or risk losing valued employees to competitors. and Korea saw wages jump by 6. An important part of designing incentives is aligning them with market benchmarks. Several offshore service providers have 23 _______________________________________________________________________ _ . India's software association found that salaries for middle managers rose by as much as 30% in the last two years.4% hike.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ According to Wipro's web site.4%–7. many companies reimburse employees for advanced degrees or certifications that relate to their area of expertise.4%–6.

For example. launched a management-education seminar series called "Beyond Knowledge. an IT service firm with 17. and the search to find qualified people may take longer.000 employees. firms with little international experience to recognize this desire among employees and design programs accordingly. partially reimburses Indian staff that pursues master's degrees at BITS. Multiple providers have followed the lead of Cognizant and 24/7. Such benefits come at a price: The infrastructure quality lags that of more advanced cities. India. Business process outsourcing (BPO) player 24/7 Customer. in association with the Indian Institute of Management Bangalore. Cognizant Technology Solutions. and watched attrition rates drop as a result. advanced degrees are considered crucial to social standing." through which 24/7 aims to educate employees about the BPO industry and discuss related careers. where labor and real estate costs as well as attrition may be cut in half. 24 _______________________________________________________________________ _ . a higher-education institution located in Pilani. In several offshore countries.S. It's important for U. • Change Locations The high prices and resource crunch in top-tier Indian cities such as Bangalore and Mumbai have led many companies to execute alternative location strategies. Many vendors are sending work to tiertwo cities (Hyderabad or Chennai) or even tier-three cities (Noida or Chandigarh).Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ teamed with universities to offer their workers management-level master's courses at a subsidized rate.

a software solutions provider with 4.000 employees and six development centers in India. has implemented a similar program. The Tampa-based company thinks the work is better suited for the other Asia-Pacific offshore centers in its portfolio. and technologies. such as China. • Combat Poaching by Encouraging Referrals 25 _______________________________________________________________________ _ .8–$1. disclosed that it is relocating the customer contact management work at its Bangalore. for example.5 million for its plan to relocate work. companies such as TCS have programs that rotate employees into different disciplines about every two years and expose them to new locations. L&T InfoTech. India. In response. Established U. Sykes Enterprises.S. facility because the center delivered an inadequate return and a limited competitive advantage. Sykes expected to incur total charges of approximately $0. • Rotate Employees Employees who don't feel challenged by their work often leave. Companies practicing off shoring need to provide new challenges and opportunities for skills development through training or job rotation. It may become the only reason your best employees stay with you.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Another option to combat the rising attrition rates in India is to locate in other countries. Offshore employees are asking for a clear career path with increased responsibility and frequent recognition of achievement. projects. and European multinational companies have long had learning programs that set expectations for performance goals such as learning a particular tool or proprietary software.

and act on the data gathered. as it drives up salaries and discourages employee loyalty.000-plus employees found that referrals constituted 23% of new hires. • Just Ask: Are Your Employees Satisfied? Retention is inextricably linked to employee satisfaction. For some companies. which don't reveal as much as the reasons they stay. at 40%. An employee referral program can serve as an alternative and effective recruiting strategy. the number was even higher. The study also observed that recruits hired through employee referral programs are "stickier". A Voice & Data survey of the top 15 Indian outsourcing companies with 1. Poaching is generally a bad idea. Many companies examine the reasons employees leave. and to define the traits of productive. The aim is to determine why some employees depart and some remain with the company. that is. An important aspect of implementing a retention program understands that it should not be one-size-fits-all.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Rather than going through a prolonged posting process and screening a deluge of résumés. successful employees. employers and employees disagree on 26 _______________________________________________________________________ _ . they stay with companies longer than non-referrals. Satisfied employees can be a company's best sales tool and add a personal touch that a print or radio campaign lacks. Too often. so it pays to periodically survey employees —hopefully before their exit interviews —about job satisfaction issues. then they truly have to be designed with the employee in mind. If incentives are meant to keep employees happy. some companies poach employees directly from their competitors and offer to double salaries or buy out contracts on the spot to scale up quickly.

Knowing your employees and personalizing rewards makes a difference. such as incorporating skills tests that relate directly to the job in question. and organizations should tailor incentives for their employees if they want to retain them. however. a company might reward a father with three young children a monetary bonus as thanks for working overtime for five months straight. Costs of Turnover The impact of employee turnover on company performance is often understated by organizations. However. days off might have been more attractive. The global workforce has different. • Spend More Time Recruiting With huge projects ramping up within exceedingly short windows. individualized needs. can help companies to determine whether the applicant is indeed an expert programmer or merely an intermediate programmer. For example. This describes how the cost of turnover 27 _______________________________________________________________________ _ . If your company doesn't bother. Having employees interview candidates also may increase the chances of success. it can be hard to convince management to allot more time to the recruiting process. Simple measures.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ what constitutes a good incentive. since they would have allowed him to spend time with his family. it's difficult to retain good employees if the company doesn't have a process to hire the right people in the first place. To the father. don't be surprised if workers head for the door as soon as year-end bonuses are handed out or stock options vest. as these employees can better identify potential personality clashes that HR personnel may not spot.

The purpose of this document is to provide talent cost of turnover calculator with insight into how costs are calculated and the reasons why certain costs were include or excluded form the calculator. • New Hire costs Once a person has been employed an organization generally spends significant resources in the induction and administration of bringing them into the organization. If the desire is to understand the true cost of turnover then it is suggested that a greater degree of analytical work is undertaken. • Lost productivity 28 _______________________________________________________________________ _ . testing and attracting applicants. The key areas used in the calculation of turnover are:  • Administration and sourcing costs These include the administration of the termination and recruitment functions together with the costs associated with interviewing.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ is can be calculated using some basic organizational parameters. The calculator should only be used as a guide in understanding the impact of turnover on a company.

Direct Costs are actual dollars spent each time an employer has to attract.direct and indirect costs. the financial costs of turnover have attracted the attention of academics and practitioners alike. as well as increased administrative costs. Determining the cost of turnover is the first step in the process of developing a management plan. Hom and Griffeth define exit expenses as having two main components . select.may threaten overall firm productivity or client retention. departure of employees especially experienced or talented ones . To deal with an attrition issue effectively the reasons for turnover and an understanding of the demographics of turnover need to be understood. Besides the more familiar costs associated with the administration of terminated employees the economic costs such as productivity losses need to be included in any calculation. Human resource accounting experts Cascio. and induct a replacement for an employee who leaves the organization. • Dysfunctional and avoidable turnover Determining the level of dysfunctional and avoidable attrition provides a perspective on the scope of control that a company has to manage their turnover costs.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ The hidden costs associated with lost productivity of employees prior to leaving the organization and new less skilled employees are one the largest components of the total cost associated with turnover. Indirect costs are those expenditures attributable to 29 _______________________________________________________________________ _ . Furthermore. A company incurs both direct and indirect costs that result in losses in production dollars and overall production volume. In particular. Undoubtedly. personnel losses may endanger the firm’s future opportunities in the marketplace or the morale of their remaining work force.

Therefore. The assumption is that this is largely an administrative task conducted by people at 80% of the average company salary. • Administration & Sourcing costs The most visible cost of turnover is incurred by organizations in the area of recruitment administration and sourcing. Process Administration: Resignation Administration The time taken to administer a resignation will include activities such as: conducting exit interviews & processing of administrative tasks.that is costs for incomplete or disrupted work. 30 _______________________________________________________________________ _ . The time taken to perform these activities is ideally measured as a result of analyzing the processes involved. 1. The turnover costs calculated using the calculator represent dollars spent. The time associated with processing terminated employees and recruits places a burden on organizations where staff turnover is excessively high. In addition the direct costs to a company for recruitment agency and advertising costs are highly transparent. The cost of turnover can be calculated by measuring the time taken to administer each activity plus the direct costs such as advertising costs. loss of quality. The potential loss of revenue if these dollars were invested elsewhere or through lost productivity is not calculated. the figures are an indication of the minimum costs that the organization is subjected to when an individual leaves the company. etc.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ turnovers affects on production .

whether internal staff or outsourced. 3. Testing Companies are making greater use of psychometric and aptitude testing in their recruitment processes. Interviews make use internal resources. organizing agencies and reference checking all require the use of organizational resources. The hours spent involved in these activities does need to be factored into the cost of turnover. Writing the job ad.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Recruitment Administration A large amount of time is often spent in administering the recruitment process. Interview Costs: Interview A core component of recruitment administration is the cost associated with interviewing applicants. 2. Sourcing Costs: Agency expenses The cost of sourcing a successful applicant from an agency may be one of the largest single direct costs associated with recruitment. The average cost per vacancies is used within the calculation. These tests can be costly to 31 _______________________________________________________________________ _ . Advertising costs The cost associated with posting job ads to job boards or traditional media such as newspapers can be significant. posting it onto job boards. The more interviews held and the greater the number of candidates interviewed the larger the costs associated with these activities.

Although this may not be done for every candidate an average is used in the I4 calculator. eg. However. Also. 1. Travel Companies may pay the costs associated with bringing an applicant to the interview location. Youth wages. as all learning undertaken by employees will be used back on the job an add value to the business it is inappropriate to count it as a cost of attrition. where particular jobs have high training. It is the opportunity costs of these resources that must also be calculated. High staff turnover will necessitate greater levels of resources being made available to induct new employees. Induction Administration 32 _______________________________________________________________________ _ . is the induction of new staff to the organization.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ administer and as such need to be factored into the overall attrition costs. often there is a corresponding lower rate of pay which acknowledges the investment that the organization is making in the individual. When measuring the cost of attrition sometimes the total cost of training that an individual has received whilst in the employment of an organization is included. One aspect of training directly associated with turnover. however. • Cost of New Hire The two costs measured in this area are the administrative tasks associated with inducting a new hire into the organization and the associated induction training.

Deery and Iverson argue that according to progression-ofwithdrawal models the productivity of leavers may deteriorate before they depart. Relocation Expenses Similar to travel these cost are incurred by companies in an effort to source the best talent for alternate locations. An average cost needs to be captured as part of the calculation process. • Productivity Losses The most detrimental aspect of staff turnover is lost productivity. Induction Training Any initial training received by an employee on joining the company. The activities included here would include the processing of new hires into organization systems (HR) and introductions to fellow employees. This includes the costs of the materials.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ The process of induction into an organization can involve a substantial amount of time. Induction Fixed Costs The fixed costs associated with inductions include the cost of materials such as induction kits and staff manuals. Evidence has found that leavers often miss work or are tardy before they depart. 33 _______________________________________________________________________ _ . presenters and the opportunity costs associated with the new employee taking time off work to participate.

may be the most critical in terms of organizational impact. The second effect of loss of productivity occurs when new hires join the organization. understanding of organizational processes or product/service knowledge to be effective.8 months to become effective in their new role. Not only does staff take more sick leave but Hom and Griffeth state that their overall productivity decreases as well. Studies have shown that a new hire will generally take between 3. although hidden. Examples of hidden costs are included below to highlight the organizational impact of attrition. The longer period is associated with more senior roles. 34 _______________________________________________________________________ _ . Costs that cannot be accurately measured or assumed have been excluded. Serving a common psychology function. withdrawal actions reduce the time spent in an adverse environment and thus reduce job dissatisfaction. These costs. resignations may disrupt other employees’ work if their work depends on the leavers or they must assume the leavers’ duties. Furthermore. but is also an early warning signal that an individual may be considering resigning from the organization. • Excluded costs Not all the costs associated with turnover have been included in the i4 attrition calculator.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Turnover is commonly viewed as belonging to a family of withdrawal behaviors that physically distance employees from unpleasant work settings. They will not have the networks. Studies have shown that employees leaving a company will have a greater level of absenteeism prior to leaving. Excessive sick leave is not only costly.

new employees may also provide less competent or less personalized service because they do not know the clients and can’t meet customer expectations through lack of knowledge and experience. • Impaired Quality of Service Turnover also hinders the delivery of service and retention of customers. A belief that a leaver has a “better” job elsewhere may change employees’ perceptions of their jobs. If satisfied employees make customers feel well treated. Their morale suffers because they lose friends and may interpret motives for quitting as social criticisms about the job. Customers' perceptions. attitudes and intentions seem to be affected by what employees’ experience. Attrition among service personnel impairs customer service because understaffed branches delay or withhold service. This phenomenon may lead to a cycle of attrition whereby employees leaving a company prompt other to do the same.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ • Employee Demoralization Turnover may erode the morale and stability of those who remain employed. which are the essential underpinnings of high quality service. As a result stayers may denigrate their present position in the light of superior alternatives and begin contemplating other employment. to successive generations of employees. Turnover also interrupts the transmission of service values and norms. disgruntled employees may provide careless service before they leave. Unlike experienced leavers. both in their specific role of service employees and their more general role of organizational employees. It has been found that there is a high 35 _______________________________________________________________________ _ .

That is that the exit of marginal performers may improve overall firm productivity.for their replacements are likely to be of lower caliber. facilitate change and innovation.can nonetheless reduce overhead costs. incur financial costs. • Turnover reason & cost impact Just as attrition can lower productivity. Therefore. personnel shrinkage especially infuse among companies with new ideas and technology. • Functional and Dysfunctional Turnover Departing from conventional beliefs. Further resignations may create more job and empowerment opportunities for employees who remain in firms. turnover can have the opposite ramifications under certain circumstances or for certain firms. some academics point out that turnover can prevent stagnation and complacency. the cost of decreased customer satisfaction and loyalty should be taken into account when considering staff turnover.representing a loss to the organization . The departure of poor performers is viewed as functional turnover . Though turnover is administrative staff .Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ correlation between employee turnover and customer turnover. and undermine stayers' morale. Turnover is not inherently negative. the organizational consequences of turnover are dependent on who leaves and who stays. Research into whether high performers or low performers leave tends to have found mixed results. 36 _______________________________________________________________________ _ . while new replacements for leavers can obviously costly. Although it creates personnel costs.because they are apt to be replaced by better performers. The departure of good performers is construed as dysfunctional turnover . and displace poor performers.

37 _______________________________________________________________________ _ . they do not resign because they are unhappy with their jobs or the organization. or by an employee’s quitting to follow a relocating spouse. Despite the appeal. organizations cannot control (that is. It is important to identify carefully those exits that are avoidable and those that are unavoidable. it is unavoidable) turnover caused by an employees death. terminated staff has on average a lower tenure than current staff and so have not had the time or opportunity to develop the skills necessary to perform well. • Avoidable and Unavoidable Further differentiation should occur between organizationally avoidable turnover and organizationally unavoidable turnover.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ A meta-analysis conducted by McEvoy and Cascio found that generally it is the poor performers that will leave their place of work. There is no benefit in including the cost of unavoidable turnover since a company has no control over these events and can therefore not put in place action plans to minimize the negative consequences of staff turnover. leavers whose departures are unavoidable resemble stayers more than they resemble the leavers whose departure is avoidable. After all. The cost of attrition is only calculated on the level of avoidable turnover. determining whether exits are avoidable or unavoidable may prove difficult because employees may falsify reports of their reasons for leaving. they may not wish to burn their bridges behind them. For example. or the current performance management systems which exist are encouraging high performers to stay and poor performers to quit. There are two possible explanations for this: firstly.

The software also saw this rate till the incident of September 11. The attrition rate varies from minimum 30 per cent to a maximum 90 per cent per annum.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Article ‘Attrition at Call Canters’ The evolving BPO industry has got the perplexing issue of managing human resources. how much responsibility should be 38 _______________________________________________________________________ _ . retail stores. says BHIMA RAO Attrition of employees in the call centre industry is mind-boggling and it is creating havoc for the industry and especially for the HR department. banking etc. Who has to introspect. I wonder why the attrition rate was not so high in any other new industry like telecom. 2001.

But there is a limit for every thing. employees. The cost effectiveness will depend mainly on controlling the running cost and quality is dependent on the manpower employed. management team. • Four reasons why youngsters quit BPOs What drives young people to quit call centres and data processing units as fast as they join them? As industry attrition rates (how soon people quit jobs) climb as high as 80 percent in some companies. promoters. human resource executives in various BPO firms tried to pinpoint the reasons that make young people between the ages of 22 and 26 39 _______________________________________________________________________ _ . The call center industry is new and every one is in a great hurry to make some thing or do some thing. Now the growth of BPO industry is mainly depending on the cost effectiveness and quality of the manpower. Attrition is not a new problem and it has existed earlier and will continue to exist in any industry.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ borne and are we collectively contributing directly or indirectly for the attrition. Attrition of employees increases the cost of recruitment and training. Our country is fortunate to be identified as one of the best places for BPO and the beginning is really good. consultants. become someone in the sun rise industry. The government. providing infrastructure like telecom and we are best in the IT. It has impact on maintaining the quality and competent manpower to meet the standards set by international customers. media and so many others play a major role in developing any new industry and extend helping hand for stabilization and finally growth of the industry. All other factors are being taken care by the government through liberalized laws.

40 _______________________________________________________________________ _ . He suggested that firms should instead look at the average person. 3." said Mphasis BPO Services' chief human resources officer Manab Bose. 1. Employees face pressure at home and at work Philips Software CEO Bob Hoekstra felt BPO employees are in a piquant situation. 2. BPO firms try to pick the best talent. They were participating in a seminar on key HR issues for the BPO industry in Bangalore today. High aspirations that the industry cannot meet BPO employees have high aspirations. This is because most BPO employees have immense family support. BPO not seen a long term career "This industry is still not being accepted for a long term career. 4.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ shuffle jobs in months. having to handle pressure both from their customers and at home. Good talent is prone to poaching ICICI OneSource President and CEO Raju Bhatnagar said the pulls of the market (poaching by competitors) cannot be countered easily. They want to see 'wealth' in this lifetime and have low respect for authority. and good talent is prone to be poached or to shifting jobs. train and retain him/ her for the longer haul. This is what they came up with. he explained.

2004 The BPO/ITES sector is only expected to grow larger. over the next few years." he said.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ "There is an enormous conflict in age group [in terms of the fact that] youngsters are serving mature customers. and they are prone to make mistakes. 41 _______________________________________________________________________ _ . Most young people are eager to jump on the money-making BPO bandwagon. Case Study 'I'll never work at a call centre again!' Subhash Mukherjee | November 18. and more profitable.

Without a break. I missed a call. my throat started to hurt terribly. After taking 156 calls at a stretch. The red bar is an indication that I did not take the call -. I reached breaking point. I would get a 20-minute break. This. I would take calls again for another three hours. Then. the next one would be waiting. I was recently hired by a call centre in Kolkata to work for an overseas-based company. After five hours of constantly answering calls. in his own words. I just wanted to pick up my bag and leave. My workday began with calls I had to answer for five hours continuously. One day. says Subhash Mukherjee (name changed on request).that the call was not 'live'. it alerted my supervisor to the fact that I had missed a call. My supervisor came and asked me why I was in the 'wrap mode'. without a break. I would take around 350 calls a day. Immediately. There was no time for me to even say a few words to the person sitting next to me. What this means is that my dialer shows a red bar when the person on the other end of the line hangs up without getting a response. 42 _______________________________________________________________________ _ .Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ But is working for a BPO all that it's made out to be? No. I was earning Rs 7.500 per month. in the process. is his story: I am 20 years old. As soon as I was through with one call. I paused to take a breath and. who recently quit his job at a call centre. At that moment. The calls that are directed to us were constantly monitored by a machine.

You cannot take even a 10-second break. I lost my appetite. no time to read a book. When I worked. For the last few months that I worked at the call centre.30 am and go to sleep at 4 am. I stayed calm for the duration of my hours at work. I can buy a few books and have some fun.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ Permanently. no time to swim. no time to meet friends. I would get up at noon and go back to work at 3. believe me. I fielded all my calls till 1 am. though. even if your throat hurts. I had no time to watch a film. s/he might hang up. Instead. With the approximately Rs 65 per hour that I made. the money could in no way make up for the pain! 43 _______________________________________________________________________ _ . You have to ask for permission to go to the toilet. Often. Gradually. That shows on your machine. it was time for a break. Isn't it pathetic? When I started out.to make money. there was no pressure. I had time only for two meals a day. You repeat the same five sentences 350 times a day. your request is denied by your supervisor. Now.I would quit this job with its inhuman pressures and its lack of empathy for employees. the stress grew beyond the levels of human tolerance. Maybe that will take away the pain that came with this job. This job expects you to work even if you are feeling ill. If you do not respond to the person at the other end of the line. Workplaces like this have only one goal -. But.30 pm. I would return home at 2. But I had made up my mind -. Now that I have quit. I can spend time rediscovering myself. Working at the call centre was a great learning experience for me. As a result. the dialer throws calls at you continuously and you have to start pitching (taking them) immediately. I can go out with my friends.

Nothing is worth the ordeal I went through. 44 _______________________________________________________________________ _ . He is now pursuing an Economics degree at the Kolkata State University.Human Resource Management – ‘Attrition’ _______________________________________________________________________ _ I'll never work at a call centre again. Subhash Mukherjee quit his job in mid-October.

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