Attrition‟s a Blessing for ITeS Companies

Posted by TJinsite on August 10, 20110 Comment

A mass exodus is seen as a cost-saver. Most junior employees leave for better pastures in an industry where tasks get repetitive, but companies notch up savings in crores
Attrition is not always a dirty word. For many organisations in the information technology enabled sector (ITeS), it spells cost savings. Take Symphony Services, a mid-sized product manufacturing company with an employee base of 3,300, and an attrition of 15%. The company saves nearly Rs 9.6 crore every year by preferring to hire “attrition backfills” — positions that become vacant when an employee leaves — at junior levels. At least 50 out of an average of 250 employees are hired at 20% lesser cost each month. “Companies paint a very negative picture (of attrition) but actually, one can gain from it as well,” says C Mahalingam, VP and CFO. For sure, losing employees does not augur well for a company‟s health. But those that have to wrestle with a structure wherein after a few years, retaining employees becomes expensive, attrition isn‟t such a bad thing after all. This is especially true in ITeS companies, where the base is large and the employee structure tapers at the top, explains Ashok Reddy, MD of staffing firm Team Lease. “Those that are in the lower rung just become more expensive to keep after a few years,” he adds. There is a reason for this: the sector battles 35% unemployability, and companies are forced to make do with those who very often don‟t make the cut. Attrition in this sector is seen mainly at the junior levels, where those who have work experience of a few months to a few years are difficult to retain. Night shifts, higher education, better salaries and positions offered by competitors are the main reasons for the shift. Those that do high-end work, however, find it more difficult to get employees and therefore prefer to curtail attrition. Bangalore-based ITeS company MphasiS employs 41,000 and deals with an annual 35% attrition. A back-of-the envelope calculation done by a senior HR executive showed the company saves around Rs 5 crore each year from

” says Team Lease‟s Reddy. most turn out to be misfits who ultimately drop out. the job he does remains the same and therefore.” says Aditya Narayan Mishra. Recruitment firms too keep a watch out for companies that take in people at a lower cost and check the company‟s track record so they do not have to replace a candidate within six months of placement.” says Abhijit Bhaduri. Getting the best out of attrition should not. otherwise despite the silver lining in the form of cost savings. who does not wish to be named. only 25% are fit to take up additional responsibilities while the rest soon find out they are not meant for the role. his income is around 75% more than his initial salary. and it faces a challenge in retaining employees who have completed nearly two years.” says the executive. Wipro has made attrition as one of the mandates to be officially accounted for when variable pay will be doled out to the top brass this year. If a company hires 400 employees. In addition. however. but employability remains a concern. “At the junior levels. The desirable attrition for the company is 45%. companies would rather go with someone who does not dent the coffers as much. The savings are calcluated by subtracting training costs and the time taken to get the new employee to the required quality scale.” says Bhaduri. replacing them is not tough. .5 crore every year from an attrition of 60%. the job is less complex and the skills learnt are quicker. The company prefers to work with firms where just 20% of positions are re-filled. go waste. “A „pink dress code day‟ will not help keep back someone who is disgruntled.attrition. because if the candidate leaves within the first few months to a year. The recruitment industry to sees an erratic attrition of 35-100% where infant mortality (those who leave firms with the first two years) is high. Robust performance management system and employee engagement. Mumbai-based business process outsourcing (BPO). GM of staffing firm Mafoi-Randstad. Consulting firms like Aon Hewitt have seen an increase in clients asking for managers‟ salary structure to be changed. This makes everything the company invests in the employee. At MphasiS. says chief people officer SM Gupta. Desirable or “unregrettable” attrition is when the low performers leave the company. where exits are more than the division that deals with IT. mean ignoring it. says Bhaduri. we do not get retention fees. are seen reducing attrition numbers. “There is no point in refilling a leaking bucket. he adds. whereas regrettable attrition is when the better lot decides to part ways with the employer. There‟s another reason companies don‟t cry over employees who quit at this level: an employee with a BPO company gets a cumulative raise of 10-12% per year. Aegis saves Rs 7. therefore the new employee can manage to return the investments in his training within three to five months. he adds.” says the executive. This is mainly from its BPO vertical. attrition at the grass root level can be recovered but those who work in the higher rungs are best retrained. especially in training. All things considered. “Only a certain percentage of attrition is good. “Blame it on the system where employability of a person is so low that companies have to stretch the standards and after some time. “The break-even reached by an employee at the ground level also takes a shorter while and therefore. trained hands in any business are crucial. chief learning officer at Wipro. companies are getting serious about curbing attrition. we have to provide for a replacement without charge. The IT and ITeS sector annually invests nearly $1billion in training employees. and after five years. However. with a percentage of variable pay linked to controlling attrition and increasing subordinates‟ employability. where more roles are assigned within the company.

The other sector that hires in large numbers is retail. where they would rather have them leave than stay. Compared with ITeS.” says Sukhi Iyer. “Attrition at the ground level is at times 60-80%. HR for outsourcing firm EXL Service. For now. Anything beyond that is transferred to the senior manager. Article Courtesy: The Economic Times . which does not happen in retail.There are companies. The CEO said that retail sector has not reached the stage where the employees will remain with the firm for even two years since attrition is 60-80% and therefore companies will have to hire at least 10 people for five posts in a short span of time because they leave within few months. but for attrition to yield benefits will take some more time. according to recruitment firm Absolute HR International. says Sanjay Gupta. that face up to 120% attrition and they can work because the job profile is exact. “There is still a long time to go till this sector becomes like ITeS. telecom numbers are at 20-23%. global head. For a company to feel employees are becoming expensive in a pyramid-like structure. In such cases.” she adds. Such employees do not require much training and therefore. the IT industry sees an average of 23% attrition. manufacturing at 13% while FMCG at 12%. the employee is asked only a set of questions from customers. a retail recruitment firm. attrition does not hinder them. CEO of Reach. they have to be around for at least a few years. only ITeS seems to have the advantage. says Gupta. though. and therefore there is not enough time for employees to feel the pressure of a stagnant workforce.