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PROJECT REPORT ON

“DIAGNOSTIC STUDY OF EMPLOYEE ATTRITION IN LARSEN


& TOUBRO LTD”

AT

LARSEN & TOUBRO LTD.


FARIDABAD

SUBMITTED BY

DEEPALI UPADHYAY (44/06)

(In partial fulfillment for the requirement of the Two Year Full Time Post
Graduate Programme in Management, 2006-08)
Acknowledgement

Behind every achievement lies an unfathomable sea of gratitude to those who have
extended their support and without whom it would never have come into existence. To
them I say my words of gratitude.

I would like to express my deepest sense of gratitude to Mr. Akhlesh Mohan, Head- HR,
L&T for giving me this opportunity to undergo Summer Training at Larsen & Toubro
(Faridabad). I would also like to extend my heartfelt gratitude to his constant
encouragement and valuable insight, guidance and facilities at all phases of the project.

The knowledge provided by them has been a great value addition for me and will go a
long way in shaping my promising career.

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Executive Summary

The study was conducted with a few objectives in mind which were to study the HR
practices in the organization, to find out the problems faced by employees of the
organization, to find out certain factors responsible for high attrition rate in the
organization and to suggest some ways by which the company can retain its employees.

With these objectives a primary research was conducted in the months of April and May.
For secondary data, a detailed analysis of the attrition patterns department wise, grade
wise, time-span wise, rating wise, qualification wise and month wise was done. Based on
which the hypothesis was formed.
The primary data was collected through a few unstructured interviews and questionnaire
which was administered to employees of L&T’s engineering division (LTen).

During the research 38 employees were covered. Survey results revealed that most
important factor behind employee attrition is Opportunity for development and growth,
second most important factor is Salary, third most important factor is Job content and
fourth most important factor is Relationship with supervisor. Also contained in the report
are talent report tables and tables which show the reasons that are central to attrition in
L&T and their relative importance.

At the end I suggest certain activities that L&T can take in order to decrease attrition rate
and retain employees.

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Table of Contents

Executive Summary

Chapter 1
1.1 Organization of the Study 6

1.2 Background 6
1.3 Objective 7
1.4 Research Methodology 7

1.5 Conceptual Framework 8


1.6 Relevance of the Study 8
1.7 Company Profile 9
1.8 Literature Review 13

Chapter 2
2.1 Scope of the Study 22
2.2 Hypothesis 22
2.3 Sources of Data 22
2.4 Questionnaire Design 23
2.5 Target Population 23
2.6 Sampling 23
2.7 Procedure for data Collection 24

Chapter 3 Data Presentation


3.1 Secondary Data
3.1.1 Strength data 25
3.1.2 Resigned employee data 31

3.2 Primary Data

4
3.2.1 Data from unstructured interviews 37
3.2.2 Employee survey data 38
Chapter 4 Hypothesis testing
4.1 Employee Survey Data 49

Findings 50

Chapter 5 Suggestions for Improvements 51

Conclusion 53

Assumptions 54

Limitations 54

Annexure 1 55

References 59

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Chapter 1

1.1 Organization of the Study

Chapter 1 contains the objective of the study along with the relevance, conceptual
framework and the literature review that helped in the research.

Chapter 2 contains the scope and the coverage of the study along with the hypothesis that
needs to be tested for which the data was collected.

Chapter 3 presents the data in a graphical form that explains the data that has been
collected over the duration of the research so as to help understand the analysis better.

Chapter 3 presents the various cross tabulations of attrition with department, time-span,
grade, rating, month and qualification of resigned employees. It also tabulates the relative
importance of factors responsible for employee attrition.

Chapter 5 tests the hypothesis based on the employee survey.

1.2 Background

Management Decision Problem


To decrease the rate of attrition and retain employees in the organization

Research Problem
To understand the factors central to high rate of attrition in the organization

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1.3 Objectives

1 To understand the factors which are central to employee attrition


2 To suggest certain activities that L&T might undertake in order to decrease attrition
rate and retain employees.

1.4 Research Methodology

 Scope of the Study- Employees of L&T (LTEN- Downstream).

 Area- Faridabad.

 Time- 2nd April – 2nd June 2005

 Research Design – Exploratory and Descriptive Research

 Sources of Data
Primary- Employee Survey through structured questionnaire and unstructured
Interviews
Secondary- Resigned Employee Data and other relevant data provided by
company

 Sampling Technique – Random Sampling

 Sample Size – 38

 Statistical technique – Chi-square test

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1.5 Conceptual Framework

Business leaders everywhere face numerous challenges. At the forefront of those


challenges is sustaining competitive advantage in today’s aggressive business
environment. Both corporate customers and individual consumers, with more providers to
choose from than ever before, often perceive that what they are purchasing is, for all
practical purposes, a commodity that can easily be obtained elsewhere.
Key to distinguish in a highly commoditized and competitive market lies within the top
performers—those an organization can depend on to innovate and provide differentiating
service. In other words, human assets are the key in an organization’s efforts to survive
and thrive.
Many organizations are struggling to find and keep these valued employees. Changing
work force demographics, such as the shrinking of the most desirable labor pool (25- to
34-year-olds), and downsizing’s negative impact on employee loyalty, have organizations
searching for answers to recruiting and retaining the strategic asset of the 21st century:
talented people.

1.6 Relevance of the study

Many researches have been done in the past to understand the critical factors responsible
for employee attrition. . Thus, this research has been conducted to know the reasons
behind employee attrition in L&T.
Apart from this the research would also help identify the problems that the employees of
L&T (ENC) are facing and what are their demands and expectations from the
organization.

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1.7 Company Profile

Larsen & Toubro Limited

Larsen & Toubro Limited (L&T) -a U.S. Dollar 2.1 billion company - is India's largest
integrated engineering and construction conglomerate. The Company also has interests in
information technology, electrical and electronic products.

L&T offers proven solutions for oil and gas, refinery,


petrochemical, fertilizer, chemical, cement, steel, power
and construction industries. The Company has established a reputation for technological
innovation and execution of multi-disciplinary projects of great complexity. L&T is the
only Indian company pre-qualified to handle large process-intensive projects on an EPC
basis.

Equally impressive is the Company's customer orientation. L&T's tradition of service is


widely acclaimed worldwide.

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L&T- Faridabad
L&T Engineering at Faridabad provides spectrum of engineering services from concept
to commissioning for Oil and Gas Sector. DEC Delhi is a

• A knowledge based group teaming highly skilled professionals to design and


engineer projects worldwide.
• Growing with a vision to be counted among the World’s finest Engineering
companies by consistently delivering Quality engineering at a competitive price.

E&C DIVISION
L&T's Engineering & Construction (E&C) Division plays a critical role in core sectors of
the industry. Over the years, it has engineered, manufactured and delivered world-class
plant and equipment to almost every sector of the Indian Industry as well as to countries
overseas.

The E&C Division possesses integrated strengths in process design, basic and detailed
engineering, project management, equipment fabrication, procurement, construction and
commissioning. It undertakes single point responsibility for execution of projects.
Strategic alliances with world leaders enable L&T to access advanced know-how and
deliver projects that meet stringent quality requirements and time schedules.

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L&T Engineering (LTen)

LTen is the engineering arm of L&T’s Engineering & Construction (E&C) Division.
L&T Engineering at Faridabad provides spectrum of engineering services from concept
to commissioning for Oil and Gas Sector. Services include: Technology evaluation,
conceptual studies, basic design, detailed engineering and 3D modeling. It address the
complete value chain of engineering

Business Areas: Deep Water Offshore, Onshore Oil and Gas Processing, Refinery,
Petrochemical, Reformers

Competitors: Bechtel, Saipem, Fluor, EIL

Job done by various Disciplines

Process Engineering

The Process Engineering discipline is responsible for executing conceptual designs, front end engineering
designs and detailed engineering. Process discipline supports entire spectrum of projects in Oil and Gas
sector.

Mechanical

Services range from design and engineering, preparation of MR’s for procurement, Bid analysis, vendor
document reviews, site issues, trouble shooting etc.

Mechanical discipline is staffed by engineers with experience in Oil and Gas Field projects, Refineries and
Petrochemicals, Power and Fabrication Industry.

Plant Design

Plant Design and piping discipline supports projects in Oil and Gas sector. Its major strength lies in
providing basic engineering and detail engineering for various projects.

Civil & Structural

Civil Engineering discipline provides pre-bid / conceptual design, detailed design and solutions to field
specific engineering issues for the entire spectrum of Oil and Gas industries. This discipline has expertise in
Civil & Structural Engg. and well trained personnel to provide high quality engineering solutions and bring
in values to clients.

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Electrical

Electrical discipline supports basic engineering, detailed engineering and field support for entire spectrum
of Oil and Gas Projects. Discipline is staffed with qualified personnel with knowledge of national /
international codes and standards and software used to do the design.

Project Controls

The Project Controls group is responsible for developing detailed Project schedules and monitoring of
projects. Primavera is the main software used. Project Control group supports projects by generating
necessary progress reports and invoicing.

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1.8 Literature Review

ATTRITION

Attrition rate is defined as the number of employees who leave a company during a
specified time period divided by the average total number of employees over that same
time period. It’s expensive, non-productive and frustrating. Harvard Business Review
article estimated the cost of turnover at around 150% of an employee’s annual salary and
could affect 40% of company profits.

ATTRITION CYCLE

• Attrition brings decreased productivity


• People leave causing others to work harder
• This contributes to more attrition, which contributes to increased costs and lower
revenue
• This forces additional cost reduction and austerity measures
• This in turn makes working more difficult, causing the best performers with the
most external opportunities to leave

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Employee attrition, a big cause for concern for firms, ranges between 15 per cent and 20
per cent. A company is not hurt because a certain person has left. The company is hurt
because he/she takes away certain knowledge, and there is no ready replacement in the
market.

Attrition, as such, is not a bad phenomenon. It has been known to exist all along.
However, when jobs were scarce, the technology change was less rapid, voluntary
attrition was small and companies managed it. However, with technology changing
rapidly and manpower costs increasing, attrition is high and hurts badly.

Large players often use money power to lure talent from smaller players. Companies also
use the `location' bait to attract employees. While a certain percentage of manpower
turnover is desirable to keep fresh blood coming in, and removing dead wood, higher
percentages are definitely not good indicators of an organization's culture and people
practices.

It is a challenge to find the right talent within constraints such as location, nature of work,
compensation and benefits.

Fresh graduates joining an organization make it a point to leave within the first year.
They equip themselves not for performing their current job but for attracting a new one.
Many a time, there is migration from bigger companies to smaller companies too, mainly
because of the prestige associated with a certain project or a particular client. In some
cases, smaller companies are even better paymasters than larger brands.

The success rates of retention programs are much higher if the management uses a direct,
employee-focused, approach and is ready to invest resources for the same.

PRESENT SCENERIO

Attrition is instigated by good economic conditions

Economy boom

Positive news about the economy- after 4-yr recession, the economy appears to be on the
rebound and is showing signs of sustainable momentum. Economic indicators support
this recovery: growth rate over 8%

The current economic forces are creating an environment just right for potential business
disaster - unexpected employee attrition and turnover at a level many businesses have

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never experienced. Companies already weakened by downsizing and cost cutting must be
prepared to heed the signs and take action if they are to survive, much less excel. Studies
have revealed the following:

• 83 percent of employees are likely to seek new employment as the economy


booms.
• 48 percent of managers are likely to seek new employment with the improving
economy.
• 75 percent of those managers are actively looking out.
• 56 percent of HR professionals indicated it is likely that voluntary turnover
would rise due to the improving economy.

Source: Employee Vulnerable Study by NFO India

Although some of these factors are beyond company’s direct control. When good talent
walks, chances of finding a suitable replacement are slim.

Better economic conditions instigates employee attrition because

• Survival mode - In response to the recession, companies hunkered down,


tightened their belts, focused on cutting costs and cutting corners - sometimes
even customers. As a result, many organizations as a whole have lost sight of or
destroyed their reason for being. Little emphasis is placed on preparing for
expansion opportunities as the economy recovers. With a decimated strategy and
no visible commitment or active engagement toward building the future, a
company's high-potential employees have little incentive to stay when a
competitor offers a more compelling future.
• Career recession - With the flattening and downsizing of organizations,
opportunities for career growth have been severely limited - both vertically and
laterally. When advancement opportunities appear elsewhere, employees will be
looking. In addition, some are contemplating business ventures of their own.

• No investment in managers - When people look for greener pastures, they're not
necessarily looking for a new company. As documented in the groundbreaking
study by the Gallup Organization, the number one reason people look for another
position is to leave their manager, not because they don't like their job or the
company. Reduced investment in management development ultimately leads to
employee dissatisfaction with their manager, their primary reason for leaving.
• Disenfranchised employees - Many employees feel they have been taken
advantage of: overworked, stifled, and burned out by excessive hours and stress,
only to be rewarded with reduced benefits and/or pay. Lifetime employment no
longer exists, and company loyalty is becoming a thing of the past.

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Attrition is spreading to traditional sectors as well

ATTRITION is not just rampant in the BPO sector, but it is fast catching up in other
traditional sectors such as manufacturing and engineering, public sector undertakings and
services.

According to an Employee Vulnerable Study by NFO India, employees in the traditional


sectors are most dissatisfied and would switch jobs at the first available opportunity.
However, employees belonging to new-age sectors such as financial services, insurance
and banking, FMCG and white-goods, IT and telecom seem to be relatively more
satisfied.

The "possible vulnerability" of white-collar workers should ring alarm bells for HR
heads. The major pitfalls were found to be lack of growth opportunities, dissatisfaction
with job content, inadequate emphasis on policies and systems and interpersonal
relationships.

There is a crying need for companies to engage the employees' interest by creating a
conducive environment for growth, learning, bolster `we-feeling' and compensate as per
industry standards. As the hidden costs incurred in attracting the right workforce and on-
the-job training, is phenomenal.

While recruitment is up sharply from last year, anecdotal evidence suggests employee
attrition is on the rise again, causing more than a few gray hairs in the manpower
departments of engineering companies. And higher level technology companies such as
chip design firms are finding that the more specific the skill required, the harder it is to
get. These companies also see salaries rising and fear that much of benefits accruing to
Indian firms from lower employee costs may fade, though company heads do not see that
happening in the next five years or so. To be sure, employee costs arising from higher
salaries are rising as they did not during 2001 and 2002, but enough companies are
willing to dole out more.

Some Indian companies are already feeling the pinch. Satyam Computer Services, the
No.4 exporter, last month reported an employee attrition rate of almost 20 percent in the
quarter ended June 30, 2007, compared with about 17 percent a year earlier.

To stem defections, Satyam raised its workers' pay in India and other low-cost countries
by 18 percent in July. Tata Consultancy and Infosys increased wages by 15 percent in
April.
Wage inflation in India- Wages are going up at the rate of 10 to 15 percent year after
year.

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Source: THE HINDU, Friday, Oct 13, 2006

Talent Poaching

Losing employees to competitors is common; but now partners are increasingly finding
their employees poached by their own vendors and distributors
The term 'employee poaching' can be defined as an act of enticing key employees to
move from one firm to a competitor. It has emerged as the biggest HR challenge for
enterprises, both big and small, across all industry verticals.
In the recent times, the aviation sector has been the worst hit, and state-owned airlines
have lost several of their in-flight crew and ground staff to the new airlines. Retail is
likely to emerge as the next hotspot for poaching, as large players enter the fray and roll
out their stores.
The IT industry has traditionally been a happy hunting ground for poachers, for obvious
reasons. Attrition rates of engineering, software and BPO companies have always been
steep compared to the rest of the industries.
Employee attrition is part of every manpower-intensive business.

There is a misconception among employers that emoluments matter most in attracting


talent. An employee changes jobs for many reasons. Retaining human resource,
especially on whom much has been spent to hone their skills, is a headache for firms. Job
satisfaction is something that varies from individual to individual.

Job satisfaction and employee loyalty are better in companies that allow their staff the
freedom to unleash their creativity and never fail to appreciate a job well done.

Too much of interference and bossing stifles growth and creativity, the motivation levels
of employees plunges and they look for the exit. An atmosphere of distrust too could lead
to employee attrition.

It is in the institution's interest to provide a congenial atmosphere and take initiatives that
would keep the workforce morale high. Contentment and job satisfaction certainly matter
more than fat pay packets and perquisites though with the usual exceptions.

There are many factors that contribute to the problem of employee turnover. Some of
these factors cannot be directly controlled by organizations, such as area economic or
labor market conditions. It appears that the high unemployment rate of graduates looking
for professional work experience is a major force responsible for excessive employee
turnover in India.

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The level of turnover may exceed a company's capability to handle it and can force a
strategic crisis - schedule slips, quality degradation, business process breakdown,
delivery delays, and the resulting potential of customer attrition.

The kind of treatment meted out to the new recruit by the organization and co-workers
during this crucial transition period can determine the candidate's decision to either
continue in the job or call it quits.

Considering that it can cost a company between 50 and 150% of an employee's salary to
find a suitable replacement, it is simpler and far more economical to extend the red carpet
treatment to new recruits, and go all out to ensure that they fit in comfortably with the
office culture.

Reports indicate that much of the voluntary turnover of companies takes place within the
first one year of employment, corroborating the widely held belief that first impressions
play a significant role in an organization's ability to find and retain talented employees.

During this time, newcomers are often quietly sizing up the organization and testing
waters to see if the job is an ideal fit. Not surprisingly, organizations that make them feel
wanted and welcome are the ones they choose to build their careers with.

COST OF ATTRITION

Employee attrition could affect 40% of company profits.

Around 150% of an employee’s salary (source- Harvard Business Review article)

Tangible recovery costs include recruiting, rehiring, and retraining. In fact, a new
employee typically is a cost to the company until he or she reaches a threshold of
productivity. In higher level technical and management positions this can exceed 6
months. For companies that have cut all expenses not deemed mission critical, such as
training and recruitment efforts, the lag in performance, additional cost, and stress on
remaining employees creates a vicious downward spiral.

Equally critical to an organization's viability are its Vital Intangibles (VIs), which can
take the form of informal relationships, networking connections, or a web of favors a key
employee has spun during his or her tenure - favors from vendors or other business
contacts that can be called in as needed. VIs are hard to identify and may be even harder
to recoup. Many companies will take the steps to protect trade secrets, intellectual
property, copyrights and patents, but intangible assets are less obvious, though no less
critical to an organization, and their loss is no less damaging.

Undocumented workarounds, tricks, tips and "the knack" that come from experience in
multiple roles within the organization make up another collection of VIs. These are the

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subtleties that allow an employee to do a task more efficiently, thereby increasing their
performance - and the company's. How much is this knowledge worth to your business?

1. Cost of the person(s) who fills in while the position is vacant. This can be either
the cost of a temporary or the cost of existing employees performing the vacant
job as well as their own.
2. Cost of lost productivity at a minimum of 50% of the person's compensation and
benefits cost for each week the position is vacant, even if there are people
performing the work.
3. Cost of conducting an exit interview to include the time of the person conducting
the interview, the time of the person leaving, the administrative costs of stopping
payroll, benefit deductions, benefit enrollments, COBRA notification and
administration, and the cost of the various forms needed to process a resigning
employee.
4. Cost of the manager who has to understand what work remains, and how to cover
that work until a replacement is found.
5. Cost of training your company has invested in this employee who is leaving.
Include internal training, external programs and external academic education.
6. Impact on departmental productivity because the person is leaving.
7. Cost of severance and benefits continuation provided to employees who are
leaving that are eligible for coverage under these programs.
8. Cost of lost knowledge, skills and contacts that the person who is leaving is taking
with them out of your door.

Recruitment Costs

1. Cost of advertisements
2. Cost of the internal recruiter's time to understand the position requirements,
develop and implement a sourcing strategy, review candidates backgrounds,
prepare for interviews, conduct interviews, prepare candidate assessments,
conduct reference checks, make the employment offer and notify unsuccessful
candidates. This can range from a minimum of 30 hours to over 100 hours per
position.
3. Cost of the hiring department (immediate supervisor, next level manager, peers
and other people on the selection list) time to review and explain position
requirements, review candidates’ background, conduct interviews, discuss their
assessments and select a finalist. Also include their time to do their own sourcing
of candidates from networks, contacts and other referrals. This can take upwards
of 100 hours of total time.
4. Cost of the various candidate pre-employment tests to help assess a candidates'
skills, abilities, aptitude, attitude, values and behaviors.

Training Costs

1. Cost of orientation

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2. Cost of departmental training
3. Cost of supervisory time spent in assigning, explaining and reviewing work
assignments and output. This represents lost productivity of the supervisor.
Consider the amount of time spent at 7 hours per week for at least 8 weeks.

Lost Productivity Costs

As the new employee is learning the new job, the company policies and practices, etc.
they are not fully productive. Use the following guidelines to calculate the cost of this
lost productivity:

1. Cost of coworkers and supervisory lost productivity due to their time spent on
bringing the new employee "up to speed."
2. Cost of mistakes the new employee makes during this elongated indoctrination
period.

New Hire Costs

1. Cost of bring the new person on board including the cost to put the person on the
payroll, establish computer and security passwords and identification cards,
business cards, internal and external publicity announcements, telephone
hookups, cost of establishing email accounts, costs of establishing credit card
accounts, or leasing other equipment such as cell phones, automobiles.

SITUATION IN L&T

L&T is facing a high attrition rate of over 25%. L&T is the only Indian Engineering
multinational company with such a great potential and talent, and it should try to improve
its performance by retaining this talent. Change in policies and strategy due to this is
ultimately going to benefit the company, which has already started Talent crisis.
L&T will always attract good people but the only question mark is whether it will retain
them.

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ATTRITION RATE CALCULATION

Attrition rate= [No of resignations]/ [(No of emp. at yr start +No of emp. at yr


end)/2]

Attrition Rate in LTen:

05-06:

[11]/ [(35+102)/2]

=17.5%

06-07:

[38]/ [(102+187)/2]

=26.29%

Sharp increase in attrition rate in 06-07 from 05-06

Resignations in project duration:

April 07- 4

May 07- 7

Resignation letters in May 07- 9

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Chapter 2

2.1 Scope of the Study

The study was conducted on employees of L&T- Engineering and Construction Division,
Faridabad. Employees were interviewed with questionnaires which had structured
questions on their importance attached to various factors behind employee attrition.

Area: L&T- Faridabad

Time: The primary data collection and analysis was conducted between 2nd April 2007
and 2nd June 2007.

2.2 Hypothesis

S.No. Research Question Hypothesis


1. Is salary the most important reason Ho: Salary is the most important reason
why employees leave the organization? why employees leave the organization

H1: Salary is not the most important


reason why employees leave the
organization.

2.3 Sources of Data

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Data was collected from both primary as well as secondary sources. Firstly,
secondary data available was reviewed to know the current scenario in the
industry, calculation of attrition rate, the cost of attrition, the most common
reasons behind attrition. The resigned employee data was also analyzed.
This was followed by a primary survey to find the problems that the employees
are facing and the importance they attach to various factors behind attrition.

2.4 Questionnaire Design

The questionnaire was designed based on the literature review done as well as
with the views of the industry experts.
The questions in the questionnaire helped us correlate and find out the relative
importance of various factors that are responsible for attrition. The relationship
has been found using chi-square test.

2.5 Target Population

The target population was employees of L&T- ENC division (Faridabad)

2.6 Sampling

2.6.1 Sampling Design – The employees were sampled on the basis of Random
Sampling.

2.6.2 Sample Size – The sample size for the employee survey was 38 which
would be approximately 20% of the target population.

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2.7 Procedure for Data Collection

For the purpose of data collection both primary as secondary data would be used.
For the purpose of primary data collection of employee research, employees were
administered with a questionnaire which had structured questions. Also few
unstructured interviews were carried out. Secondary data of resigned employees
and other relevant information was provided by the company.

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Chapter 3
Data Presentation

L&T is into several business lines, ENC being one of them. A part of the ENC division in
Faridabad is L&T Engineering (LTen), which had a high rate of attrition.
Secondary data: 38 employees resigned in the year 06-07. Data of these resigned
employees was collated and analyzed to form a hypothesis.
Primary data: Data collected from unstructured interviews and employee survey was
analyzed to test the hypothesis.

3.1 SECONDARY DATA PRESENTATION


3.1.1 STRENGTH DATA
Total Employee Data
05-06:

Month Wise Report Of Total Strength Of Employees

Year Months Appointment Separations Total Strength


2004-2005

MARCH
'05 35
APR '05 6 0 41
MAY '05 6 0 47
JUN '05 6 2 51
JUL '05 6 0 57
AUG '05 7 1 63
2005 – 2006

SEP '05 4 1 66
OCT '05 3 0 69
NOV '05 1 2 68
DEC '05 8 2 74
JAN '06 3 0 77
FEB '06 14 3 88
MAR '06 14 0 102

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TOTAL 78 11

06-07:

Month Wise Report Of Total Strength Of Employees

Year Months Appointment Separations Total Strength


2005-2006

MARCH
'06 102

APR '06 3 0 105


MAY '06 2 4 103
JUN '06 3 2 (1 ADV) 105
JUL '06 12 2 114
AUG '06 29 2 141
2006 – 2007

SEP '06 11 3 149


OCT '06 23 3 169
NOV '06 14 3 180
DEC '06 12 2 190
JAN '07 1 2 189
FEB '07 2 4 187
MAR '07 13 13 (1 ADV) 187
TOTAL 125 40 (2 ADV)

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APPOINTMENTS
05-06:

MONTH WISE APPOINTMENTS

14

12

10

8
No of app
6

0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
'05 '05 '05 '05 '05 '05 '05 '05 '05 '06 '06 '06
Month

06-07:

MONTH WISE APPOINTMENTS

30

25

20

No of app 15

10

0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
'06 '06 '06 '06 '06 '06 '06 '06 '06 '07 '07 '07
Month

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RESIGNATIONS
05-06

MONTH WISE RESIGNATIONS

2.5

No of resg 1.5

0.5

0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
'05 '05 '05 '05 '05 '05 '05 '05 '05 '06 '06 '06

Month

06-07:

MONTH WISE RESIGNATIONS

12

10

No of resg 6

0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
'06 '06 '06 '06 '06 '06 '06 '06 '06 '07 '07 '07
Months

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STRENGTH
05-06:

MONTH WISE STRENGTH (05-06)

120

100

80

Tot strength 60

Series1
40

20

0
APR JUN AUG OCT DEC FEB
'05 '05 '05 '05 '05 '06
Month

06-07:

MONTH WISE STRENGTH (06-07)

200
180
160
140
120
Tot strength 100
80
60
40
20
0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
'06 '06 '06 '06 '06 '06 '06 '06 '06 '07 '07 '07
Month

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This data suggests that in the year 05-06 there has been a heavy recruitment drive
and few resignations. Strength of the company increased three fold from previous
year. On the other hand, in the year 06-07 there has been a heavy recruitment drive
but still the strength has not matched the set targets as there are many resignations
during the year.

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3.1.2 RESIGNED EMPLOYEE DATA

Department facing highest attrition rate

Departm ent

10
9
8
7
6
5
4
3
2
1
0
CIVIL M ECH INSTRU PIPING PROC ELEC PROJ
Dept

L&T has 7 engineering departments: Civil, Mechanical, Piping, Instrumentation, Process,


Electrical and Projects
PIPING Dept had highest attrition (9) followed by CIVIL (8).
Findings: Employees have left from each department. However highest number of
employees have left from the PIPING AND Civil Departments. Projects and HR
Department faces lowest attrition.

3.3 Time-span with highest rate of attrition


Time Span

Time-span of <1 yr has highest


2
attrition (21).
<1YR Findings: Highest number of
15 1-2 YRS
21 >2 YRS
employees have left in <1 yr of
their time-span in the
organization. This suggests that

31
people are using L&T as a spring board because of its brand name. Few have left in >2
yrs.

Grade with highest attrition

Grade Wise

16
14
12
10
No of resg em p 8
6

4
2

0
E1 E2 E3 MI TO M5 TO S JS
M4 M9

Executive Managerial Supervisory


Grade

There are three divisions of grade in the company. Supervisory grade is given to diploma
holding employees, executive grade is given to degree holding employees and managerial
grade is higher than executive grade. Executive Grade has highest attrition (24) followed
by Supervisory Grade (8). Very few resignations are from Managerial Grade (6).
Findings: Employees have left from each grade. However highest number of employees
have left from Executive grade. Managerial grade faces lowest attrition. The probable
reason for this is ESOPS being offered to them.

Qualification wise attrition

32
QUALIFICATION

ENG
DRAFT

31

L&T employs both engineers and draftsmen.


Highest attrition (31) was among engineers.
Findings: Employees with engineering qualification have left more than those with
draftsmanship qualification. This suggests loss of more qualified manpower.

Month wise attrition

MONTH WISE RESIGNATIONS

12

10

No of resg 6

0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
'06 '06 '06 '06 '06 '06 '06 '06 '06 '07 '07 '07
Months

MARCH month had highest attrition (12) followed by FEBRUARY (4) and MAY (4).

33
Findings: Employees have left in each month. Most employees have left in the month of
March, almost thrice the number from other months.

Monthly Attrition Rate

Month Wise Attrition Rate

4
Percentage
3

0
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
'06 '06 '06 '06 '06 '06 '06 '06 '06 '07 '07 '07

Month

MARCH month had highest attrition (6.2%) followed by MAY (3.7%).


Findings: Employees have left in each month. Most employees have left in the month of
March, almost thrice the number from other months.

Rating wise

34
Rating

18
16
14
12
10
No of resg em p
8
6
4
2
0
TOP MIDDLE LOWER OTHERS
Rating

Employees in L&T are rated after the completion of 11 months of their service in the
organization. Ratings given are Top, Middle, Lower and people who were not rated fall
in the Others rating category.
Highest attrition was from OTHERS Rating (17) followed by MIDDLE Rating (8).
Findings: Employees of each rating have left. However highest number of employees
have left from the OTHERS rating i.e. they were not rated before leaving the organization
as the rating of employees is done after completion of 1 year of service in the month of
January . Some TOP rated people have also left the organization which means highest
loss to an organization.

Reasons given by resigned employees

35
Reason Wise

18
16
14
12
No of resg 10
emp 8
6
4
2
0
SAL BEN JOB OPP SUP PEE LOC MGM RES
Reason

Reasons were asked from the nine factors: salary, benefits, job content, opportunity for
development, relationship with supervisor, relationship with peers, location of work
place, management policies and work culture, resources to do the job
Among resigned employees, 17 employees gave salary, 16 employees gave opportunity
for development and growth, 2 gave management policies and 1 gave location of work
place as a reason for leaving.
Findings: Salary and Opportunity for development and growth are the reasons given by
most employees for leaving the company.

3.2 PRIMARY DATA PRESENTATION

36
3.2.1 DATA FROM UNSTRUCTURED INTERVIEWS

Areas of Dissatisfaction

 Compensation and benefits are defaulted


 Salary is not competitive
 Discrimination in compensation among different units
 Lack of training and mentoring programs
 Lack of perks and facilities
 Long work hours and no conveyance facility
 Lack of social activities and initiatives for employee families

37
3.2.2 SURVEY DATA

3.8 Total Employees Covered in Survey

Year Wise Sample Composition

12

<1yr
18
1to 2 yrs
>2 yrs

The sample for survey consisted of 18 people whose time span in the organization was <1
yr, 12 people whose time span was 1-2 yrs and 8 people whose time span was >2 yrs.

Grade Wise Sam ple Com position

E
11 M
S
23

The sample for survey consisted of 23 people from E band, 11 people from M band and 4
people from S band.

38
Survey Results
Tabulation of 1st most important reason and 2nd most important reason given by each of
the 38 employees surveyed along with their grade and time span in the organization.

SURVEY RESULTS
S NO. 1ST REASON 2ND REASON GRADE TIME SPAN
1 Salary R/s with supr E <1 yr

2 Salary opp for dev E <1 yr

3 job content opp for dev M >2 yrs

4 Salary location M 1 to 2 yrs

5 Salary opp for dev E <1 yr

6 opp for dev salary E <1 yr

7 Salary location E <1 yr

8 opp for dev resources M 1 to 2 yrs

9 Salary opp for dev E <1 yr

10 job content salary M <1 yr

11 Benefits opp for dev E <1 yr

12 opp for dev R/s with supr E >2 yrs

13 Resources job content M >2 yrs

14 opp for dev job content M >2 yrs

15 job content opp for dev M >2 yrs

16 management policies R/s with supr E 1 to 2 yrs

17 R/s with supr opp for dev M >2 yrs

18 R/s with peers resources M >2 yrs

19 opp for dev salary S 1 to 2 yrs

20 opp for dev salary E <1 yr

21 Salary R/s with supr E <1 yr

22 opp for dev job content E >2 yrs

39
23 Salary opp for dev E 1 to 2 yrs

24 opp for dev job content E <1 yr

25 Salary mgmt policies M >2 yrs

26 job content opp for dev S <1 yr

27 opp for dev salary S >2 yrs

28 Salary job content E <1 yr

29 Salary opp for dev S <1 yr

30 Salary opp for dev E <1 yr

31 opp for dev mgmt policies E <1 yr

32 Salary opp for dev E 1 to 2 yrs

33 job content opp for dev E 1 to 2 yrs

34 opp for dev resources E >2 yrs

35 job content salary E <1 yr

36 job content salary E 1 to 2 yrs

37 opp for dev salary E <1 yr

38 R/s with peers opp for dev M >2 yrs

40
Frequency of Most Important Reasons

1st Reason Frequency

1
1 1
2
Opp for dev
1
12 Salary
Job Content
R/S w ith supr
7
R/S w ith peers
Benefits
Resources
Mgmt
13

13 people said that 1st most important reason for attrition was salary, 12 said opportunity
for development and 7 said job content.

2nd Reason Frequency

2
3
0 Opp for dev
2 Salary
14
Job Content
4 R/S w ith supr
Location
Benefits
Resources
5
Mgmt
8

14 people said that 2nd most important reason for attrition was opportunity for
development, 8 said salary and 5 said job content.

41
Time-Span Wise

Less than 1 yr

6%
17%
sal
opp
job
49%
ben
28%

FINDINGS: Among the people who have been working in the organization for less than
1 yr, most (49%) feel salary is the most important reason for attrition, some (28%) feel
opportunity for development and growth is the most important reason. Some (17%) also
feel job content is the most important reason and few (6%) feel benefits are most
important.

1 to 2 yrs

25%
37%
sal
opp
mgmt
job
13%

25%

42
FINDINGS: Among the people who have been working in the organization for l to 2 yrs,
most (37%) feel salary is the most important reason for attrition, some (25%) feel
opportunity for development and growth is the most important reason. Some (25%) also
feel job content is the most important reason and few (13%) feel management policies are
most important.

Greater than 2 yrs

8% 17%
job
17%
opp
res
supr
8% peer
8% 42% sal

FINDINGS: Among the people who have been working in the organization for more than
2 yrs, most (42%) feel opportunity for development and growth is the most important
reason for attrition, some (17%) feel job content is the most important reason. Some
(17%) also feel relationship with peers is the most important reason, few (8%) feel
relationship with supervisor is most important and very few (8%) feel salary is most
important.

43
Grade Wise

Executive Grade

4% 13%
sal
4% 44% opp for dev
benefits
management
job content
35%

FINDINGS: Among the people from Executive Grade, most (44%) feel salary is the most
important reason for attrition, some (35%) feel opportunity for development and growth
is the most important reason. Some (13%) also feel job content is the most important
reason and few (4%) feel benefits are most important. Very few (4%) feel management
policies are most important.

44
Managerial Grade

18%
28% job
9% sal
opp
res
supr
9%
18% peer
18%

FINDINGS: Among the people from Managerial Grade, most (28%) feel job content is
the most important reason for attrition, some (18%) feel opportunity for development and
growth is the most important reason, some (18%) feel relationship with peers is the most
important reason. Some (18%) also feel salary is the most important reason and few (9%)
feel relationship with supervisor is most important. Very few (9%) feel resources to do
the job are most important.

Supervisory Grade

25%

opp for dev


job content
50% salary

25%

45
FINDINGS: Among the people from Supervisory Grade, most (50%) feel opportunity for
development and growth is the most important reason for attrition, some (25%) feel
salary is the most important reason. Some (25%) also feel job content is the most
important reason.

Thus, if we combine the data then we get that overall the most critical reason
responsible for employee attrition is Opportunity for development and growth. Next
important reason is Salary followed by Job content and Relationship with
supervisor.

46
Points Given to Each Reason by Each Employee in the Questionnaire
Tabulation of the points allotted to each factor by each of the 38 employees surveyed

S Dev R/s Locatio Mgmt


No. Salary Benefits Job opp R/s sup peers n pol Resrcs
1 16 14 9 13 15 6 9 12 14

2 17 7 12 16 15 14 8 8 11

3 14 1 17 17 13 11 10 14 11

4 17 14 8 12 15 9 17 11 5

5 16 8 13 16 13 11 8 10 13

6 15 8 14 16 10 9 11 12 13

7 15 13 12 12 12 10 15 8 11

8 8 13 12 16 13 11 9 12 14

9 16 14 9 15 11 10 8 12 13

10 15 9 15 14 11 10 9 11 14

11 12 16 9 15 13 13 9 9 12

12 14 9 11 17 15 12 4 12 14

13 14 9 17 16 6 6 8 14 18

14 13 8 14 14 14 11 10 11 13

15 11 9 16 15 11 11 7 13 15

16 10 12 11 11 15 14 8 16 11

17 15 10 14 17 18 0 8 11 15

18 11 2 13 15 11 17 9 14 16

19 14 11 11 16 12 10 12 10 12

20 14 10 12 16 14 8 9 11 14

21 23 10 7 13 15 10 8 10 12

22 14 7 16 18 12 10 7 13 11

23 19 5 13 17 11 10 10 10 13

24 12 8 17 17 13 8 8 13 12

25 17 9 13 12 10 8 11 15 13

26 8 7 18 17 13 11 8 13 13

27 15 12 13 15 9 9 10 13 12

47
28 18 7 17 15 12 10 10 7 12

29 17 13 14 15 14 13 1 13 8

30 20 12 15 16 13 10 5 9 8

31 11 9 13 15 13 13 8 15 11

32 17 6 13 14 13 13 10 12 10

33 19 3 20 19 8 9 6 8 16

34 10 7 16 17 12 15 5 9 17

35 14 7 18 13 13 9 13 12 9

36 18 4 19 15 12 9 8 10 13

37 14 9 12 16 13 11 9 12 12

38 10 10 13 15 15 16 7 13 9

Total 553 342 516 578 478 397 332 438 470

Reason Wise Points

600

500

400
Points 300

200
100

0
Sal Ben Job Opp sup peers Loc Mgm Res
Reason

Finding:
The survey results reveal that Opportunity for development and growth is the most
important factor behind employee attrition as it has the highest score. Second important
reason is Salary. Third important reason is Job content. Fourth important reason is
Relationship with supervisor.

48
Chapter 4

Hypothesis Testing for Employee Survey Data

Ho: Salary is the most important reason why people leave the organization.

H1: Salary is not the most important reason why people leave the organization.

Chi-Square Calculations

FACTOR E O (E-O) (E-O)^/E


Sal 904 553 351 136.28
Ben 400 342 58 8.41
Job 400 516 116 33.64
Opp 400 578 178 79.21
Supr 400 478 78 15.21
Peer 400 397 3 0.02
Loc 400 332 68 11.56
Mgmt 400 438 38 3.61
Resr 400 470 70 12.25
Total 4104 4104 300.19

df= 8, Significance level= 0.05


Table value= 15.507

The computed value is higher than the critical value. Hence we reject the null hypothesis.
The hypothesis is rejected and hence we accept the alternate hypothesis that salary
is not the most important reason why employees leave an organization.

49
FINDINGS

 Although salary is important, but it is not the most important reason for employee
attrition in the organization
 Most important reason for attrition is opportunity for development and growth
 Next important factor came out to be Salary followed by Job content and
Relationship with supervisor
 Almost every one surveyed from the <1 yr time-span category said salary was the
most important reason responsible for attrition. Almost none from >2 yr time-
span said Salary was most important
 Among the people who said salary was the most important reason, most were
from E and S Grade and very few from M grade

50
Chapter 5

Suggestions for Improvement

The most important factor that has come as a result of the employee survey and
unstructured interviews is Opportunity for development and growth. This is one
reason why many people leave. This is one area that needs immediate attention.

Another very important factor is Salary. Salary is not competitive. This point has
been pointed out by many employees.

Suggestions:

Opportunity for Growth and Development

 Induction process needs to be more effective and interesting. Employee


expectations should not be raised too high
 Provide 360 degree feedback. Online appraisal system (FAIR) needs to be more
effective and fair
 Recognize employees for good performance- MLP (managerial leadership
program) and ELP (employee leadership program) are to evaluate potential, but
instead they should be performance based
 Mentoring programs, on-line personal assessments
 Invest in training and development- programs should be frequently conducted and
customized to needs of employees- Competency Mapping.
 Fresh graduates should be provided sufficient amount of training before job is
assigned to them

51
Salary and Benefits

 Adopt pay-banding- competitive with market rates


 Standardized compensation for all business units (esp. within the same center) and
fair pay.
 Higher base pay raise on performance- presently it’s a meager amount of a few
hundreds
 Benefits like retention bonuses etc should be given

General

 Structured exit interviews should be conducted


 Opinion surveys, feedback forums, employee suggestion box or employee
suggestion committee and employee satisfaction surveys
 Holding meetings with employees on a regular basis to identify their desires and
needs

Most importantly implementing the most promising recommendations immediately

52
CONCLUSION

Study of HR practices and employee attrition in the organization was a great learning
experience. It helped in understanding the intricacies of HR role in an organization. The
study helped in finding out the most critical reasons responsible for employee attrition in
the organization. It brought various concerns of the employees to the forefront. Apart
from the project there was also a lot of on-the-job training which helped enhance HR
skills and gain a better understanding of the functioning of HR. It was an effective
learning in combining the theoretical and practical aspects relating to project.

There has been immense learning in the field of employee retention. The basics about
attrition and retention, attrition calculation, cost of attrition, consequences of high
attrition rate and reasons for attrition.

The study helped in understanding the relative importance of various factors responsible
for employee attrition, also revealed the fact that that opportunity for development and
growth is most important for the employees of the organization. There is a crisis in
human capital management. We need fundamental reform in order to address this crisis
and ensure long-term ability to hire and manage a high-quality, high-performing
workforce. Most employees are not motivated solely by money. Historically, firms have
used money and financial rewards to retain employees. High tech employees are enjoying
the fastest salary progression of almost any profession, yet they are changing jobs
constantly. Today’s employees seek more than monetary compensation. Research
conducted in the company revealed that opportunity for development, salary, job content,
relationship with supervisor are important reasons for employee attrition. The myth that
salary is the most important reason for employee attrition was clarified as employees are
more concerned about opportunity for development. Salary is also important, salary
needs to be competitive with the market rates, other wise there is a high risk of loosing
your employees to your competitors. I also learned that even though the salary might be
high, an employee would be willing to change job for better development opportunity.

L&T can retain employees and reduce attrition rate by dealing with the two important
factors behind attrition, Opportunity for development and growth and Salary. More focus
on employee training and employee recognition is required. Salary needs to be made
more competitive. To retain employees it is important to provide sufficient opportunities
for development and growth, competitive salary, challenging jobs that use employee
skills efficiently and good managerial guidance, among other things. We are in a time of
manpower shortages that will not abate in the near term. Employers have to work smarter
and permit employees to work smarter.

53
ASSUMPTIONS

Certain assumptions were made while conducting the study.

• Sample is representative of the target population


• Probability of type 1 error is 5%

LIMITATIONS

The study suffers from some limitations due to the problems encountered during the
project study.

• Sample size was limited to one business unit, thus the results cannot be
generalized to other business units.

• The study is limited to a small time frame of two months and hence the results
may be biased.

• Some of the respondents were reluctant to part with certain information on the
text of sensitivity of the information and also, in some case the policy of the company
came in the way for a free revelation of the desired input.

• Some of the employees were not candid enough to divulge all the required
information.

The magnitude of the influence of these limiting factors can have a bearing on the report,
but is too little to alter the basic objectives of the report.

54
Annexure 1

Questionnaire

The objective of this questionnaire is to co-relate the important attributes that

one considers to work for an organization

Allocate 3 points between the two alternative reasons in each pair based on
perceived importance in the following fashion

0 or 1 or 2 or 3
3 2 1 0

Numbers assigned to each pair should add up to 3.

1 Job content
Resources to do the job

2 Salary
Benefits (like telephone, medical entitlement)

3 Opportunity for development and growth


Location of work place

4 Relationship with supervisor


Management policies and Work culture

5 Relationship with peers


Job content

6 Benefits (like telephone, medical entitlement)


Management policies and Work culture

7 Location of work place


Relationship with peers

55
8 Resources to do the job
Relationship with supervisor

9 Management policies and Work culture


Salary

10 Job content
Location of work place

11 Relationship with supervisor


Relationship with peers

12 Benefits (like telephone, medical entitlement)


Resources to do the job

13 Opportunity for development and growth


Management policies and Work culture

14 Salary
Location of work place

15 Job content
Relationship with supervisor

16 Benefits (like telephone, medical entitlement)


Opportunity for development and growth

17 Resources to do the job


Location of work place

18 Relationship with supervisor


Benefits (like telephone, medical entitlement)

19 Relationship with peers


Management policies and Work culture

20 Job content
Salary

21 Location of work place

56
Relationship with supervisor

22 Resources to do the job


Management policies and Work culture

23 Relationship with peers


Opportunity for development and growth

24 Job content
Benefits (like telephone, medical entitlement)

25 Management policies and Work culture


Location of work place

26 Salary
Resources to do the job

27 Relationship with peers


Benefits (like telephone, medical entitlement)

28 Opportunity for development and growth


Salary

29 Job content
Management policies and Work culture

30 Relationship with supervisor


Salary

31 Resources to do the job


Relationship with peers

32 Job content
Opportunity for development and growth

33 Salary
Relationship with peers

34 Opportunity for development and growth


Relationship with supervisor

57
35 Benefits (like telephone, medical entitlement)
Location of work place

36 Resources to do the job


Opportunity for development and growth

Employee Profile

Time-span in organization:
□ <1 yr □ 1-2 yrs □ >2 yrs

Grade:
□E □S □M

REFERENCES

58
 William Anthony, Pamela Perrewe & Michele Kacmar (1999)-HRM:A Strategic
Approach-3rd Ed.
 Cherrington, David J. (1995). The Management of Human Resources. Prentice-
Hall.
 Mondy, R. Wayne, and Noe, Robert M. (1996). Human Resource Management.
Upper Saddle River, Prentice-Hall.
 Nadler, Leonard, and Wiggs, Garland D. (1986). Managing Human Resource
Development. San Francisco: Jossey-Bass.
 Decenzo, D.A. and S.P. Robbins.1988. Human Resource Management. New
Delhi: Prentice- Hall of India Pvt. Ltd.
 William, B.W. and Keith Davis. 1993. Human Resource and Personnel
Management. MC Grow - Hill.
 The Hindu
 www.google.com
 www.humancapital.com

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