Employee Retention What is employee retention?

The picture states the latest statement that corporate believes in “Love them or Lose them”

Employee Retention involves taking measures to encourage employees to remain in the organization for the maximum period of time. Corporate is facing a lot of problems in employee retention these days. Hiring knowledgeable people for the job is essential for an employer. But retention is even more important than hiring. There is no dearth of opportunities for a talented person. There are many organizations which are looking for such employees. If a person is not satisfied by the job he’s doing, he may switch over to some other more suitable job. In today’s environment it becomes very important for organizations to retain their employees. The top organizations are

on the top because they value their employees and they know how to keep them glued to the organization. Employees stay and leave organizations for some reasons. The reason may be personal or professional. These reasons should be understood by the employer and should be taken care of. The organizations are becoming aware of these reasons and adopting many strategies for employee retention.

A first-ever AIMA study reveals the best practices in keeping your human capital. It marks the restitution of retention. Do your only assets go home every evening at 5.30 p.m.? Do you feel paranoid that they won't return the next morning at 9 a.m.? Welcome to the organisational angst of the New Millennium. A.k.a. the Employee Retention Syndrome. With every business slowly becoming knowledge-based even in this economy, it has become imperative for CEOs to preserve the only dynamic repositories of learning in their companies: employees. That's why, across sectors, sizes, and statures, corporate India now deploys myriad techniques to retain its people. From sharing the CEO's vision and career-counselling to welfare-

management and conflict-resolution programmes, there is little that companies will not do today to keep their people. And, as in any other marketplace, only CEOs who are innovative about their retention strategies appear to be winning the war for people. To benchmark this, the All India Management Association (AIMA) conducted a first-ever national survey late last year. Grouping companies into 4 categories-manufacturing, marketing, services, and hi-tech-in order to facilitate intra-industry comparisons, 2 cutoff criteria were drawn up: a minimum turnover of Rs 25 crore, and an employee-strength of 50. Then, the responses of the 135 companies that participated in the study were analysed across sectors and turnovers to identify the most prevalent practices in retention-management. Rate yourself against these yardsticks to find out just how good-or bad-your retention strategies are.

THE Retention Malady Don't shrug it away; it's real. Three out of every 4 software companies surveyed, and almost 1 in every 2 manufacturing and services companies confess that their retention-related woes are acute. Indeed, more than 90 per cent of the companies surveyed

admit that they all have some sort of people problem although these percentages indicate the perceptions within, and not the retention-levels of, these organisations. SAMEs (Small And Medium Enterprises)-with a turnover of less than Rs 100 crore and fewer than 100 employees-feel the threat of attrition stronger than the others. On the one hand, the fewer number of employees on their rolls makes every departure significant; on the other, SAMEs are happy hunting-grounds for larger firms that can offer the best employees in such units more in terms of monetary as well as nonmonetary compensation. While the actual turnover-rates are much lower than the perceived threat of attrition, across industries and management-levels, they showed a rising trend that should worry every CEO. Undoubtedly, the junior management level is most vulnerable to poaching: turnover-rates range from 7 per cent in manufacturing companies to 13 per cent in hi-tech organisations. That's because junior managers, typically, experience more problems related to fit and culture than their senior colleagues. Of course, they are also more susceptible to monetary inducements at this stage of their careers. Analysed on the basis of size, their track-records indicate that retention-levels have declined the most in mid-sized companies (with turnovers of between Rs 200 crore and Rs 500 crore). And

they have either remained the same (83 per cent) or increased (17 per cent) in organisations with turnovers of more than Rs 1,000 crore. The logic in hindsight: a small organisation is an exciting workplace, with their fewer number making every employee feel wanted. And large organisations have elaborate peoplemanagement practices in place, which define the role that each individual is expected to play, and the route his or her career is likely to take within the organisation. But mid-sized companies are trapped in limbo: they are placid places to work in and, more often than not, do not have the kind of systems that their larger cousins do. Marketing and services companies, though, would do well to look beyond the simplistic assumption that retention is a critical issue only in hi-tech industries. That may be the case in absolute terms but, while the retention-levels in 16 per cent of the infotech and telecom companies sampled have declined, they have fallen in 26 per cent of the marketing and services companies. Across industries, though, the function which witnesses the maximum attrition varies. In manufacturing and marketing companies, it is the production function. In services companies, it is the finance function. And in infotech companies, it is the line function of information technology. Evidently, the problem of retention is quite wide-spread in corporate India.

THE Retention Diagnosis You've heard them all. Sure, the typical reasons why employees wish to leave your organisation for another are the same: better compensation, better opportunities, the nature of the job, health problems. At all levels of management, the pattern remains the same across manufacturing, marketing, and service companies: junior managers cite compensation as the primary reason for leaving; managers at all other levels choose career opportunities; and health and the nature of the job are relevant only for seniorlevel and top managers. Hi-tech companies are, again, different. Most junior managers who work in infotech and telecom companies look at every job they hold as a learning experience that will increase their market value, and prepare them for the next. Thus, even junior managers in hitech companies quote better career opportunities ahead of compensation as the motivation for leaving.

THE Retention Responsibility Carry the Pareto Principle to an extreme: as 20 per cent of your employees account for 80 per cent of your success, focus 80 per cent of your retention efforts on 20 per cent of your people. Across industry-types, manufacturing, marketing, and services companies believe that it makes little sense to retain all their employees all the time. The real objective: retain only those people who contribute to the company's performance in terms of improving the quality of goods and services, or increasing the level of customer satisfaction. However, hi-tech companies insist that their strategies must focus on retaining all employees. Their logic is that organisations get the kind of employee-performances they deserve. Given the high costs involved in mid-career hires, especially in software and telecom companies, it does make sense to create an environment where all their employees can continuously upgrade their skills-sets rather than let go of them. Expectedly, the hr department and the senior management are the organisational centres vested with the responsibility of retention management. However, the process is shared: in most organisations, the hr department, the individual functions, the top

management, teams, and the trade unions manage the retention function, individually and together. The choice of the unit varies across industries: 50 per cent of the companies where the union has a role to play belong to the manufacturing sector; teams are popular with manufacturing (37 per cent) and services (35 per cent) companies; and 32 per cent of the companies where the senior management involves itself in retention are infotech and telecom companies. Obviously, the high attrition-rates and the almost-perennial demand for skilled manpower in these industries is why. Size too matters. 89 per cent of the companies where the senior managers concerned themselves with retention had turnovers of less than Rs 500 crore. And 69 per cent of them had less than 500 employees. Obviously, it is easier for senior managers to concern themselves directly with retention management when they do not have to deal with too many employees. Expectedly, teams and trade unions have a significant role to play in large companies (more than 500 employees and turnovers exceeding Rs 500 crore). BEST PRACTICES. The best organisations focus on retaining and getting the best out of every employee. They believe in creating multiple responsibility-centres for retention management,

and ensure that senior managers find the time to be personally involved in the processes of retention management.

THE Retention Measures Companies now adopt more than one technique to create an internal environment that will retain their employees. As per the survey, the most popular retention-oriented initiatives include:

INCREASING THE ORGANISATION'S LEVEL OF PROFESSIONALISM. Employees leave companies where intra-organisational interactions are unstructured, and decisions, ad-hoc and driven more by personal prejudice rather than professional consideration. By adopting systems that introduce an element of objectivity into its internal operations, a company can create a better workplace.

MOVING FROM FAMILY TO PROFESSIONAL MANAGEMENT. In most family-managed organisations, professional managers leave because they cannot see themselves holding key positions, or functioning with the level of independence that their designations merit. By inducting professionals into senior management positions, a company can lower its attrition-rate.

MAKING PERFORMANCE APPRAISALS OBJECTIVE. Employees like to know how, when, and by whom their performance is going to be measured. An appraisal process that lists objective and measurable criteria for performance appraisal removes the uncertainty in the minds of employees that their superiors can rate their performance any which way they please.

INVOLVING EMPLOYEES IN THE DECISIONMAKING PROCESS. People like to work in organisations where their opinions count. The higher an employee's involvement in decision-making, the higher the organisation's retention-level. A participative decision-making process is good; total empowerment, better.

ENSURING A MATCH BETWEEN AUTHORITY AND ACCOUNTABILITY. Most companies fall into the trap of holding an employee accountable for a specific activity without empowering her with the authority to perform it well. Often, the situation is exacerbated by the fact that they vest another employee with the same authority, but do not hold him accountable!

MEASURING EMPLOYEE SATISFACTION. Obsessed with catering to the demands of their external customers,

companies ignore their internal customers. Periodic employee satisfaction surveys can highlight the potential flash-points, and enable the company to take corrective action.

ACHIEVING A MATCH BETWEEN INDIVIDUAL AND ORGANISATIONAL GOALS. Many companies fall into the trap of expecting their employees to subsume their individual objectives before the organisational one. Which forces employees to leave. The best companies achieve a balance between the two.

DESIGNING A COMPETITIVE COMPENSATION PACKAGE. Money isn't a motivator, but it is an effective de-motivator. While organisations that pay best-in-industry salaries may find themselves unable to use that fact to motivate their employees, those that do not could find their best employees leaving.

INCREASING ORGANISATIONAL TRANSPARENCY. People do not like to work in black-box like organisations, where information is rationed out on a need-to-know basis. They prefer a transparent organisation that is willing to share every aspect of its functioning with its employees.

PROMOTING EMPLOYEES FROM WITHIN. A company that constantly fills vacancies by hiring from outside is certain to face retention problems. Employees who realise that they are unlikely to be promoted to fill the vacancies will leave the organisation. Growing your own is a sound retention strategy.

HELPING EMPLOYEES ACQUIRE NEW SKILLS. As the job-profiles and desired skills-sets for a particular job change, companies may feel the need to hire employees with new skills, or retrain their existing employees. Companies that choose to do the latter will find it easier to retain their people since the training signals that the organisation values their contribution, and is willing to invest in upgrading their skills.

OFFERING STOCK OPTIONS. ESOPs are a sign that the organisation recognises the role of the individual in its performance, and is willing to share the benefits with her.

FOCUSING ON WELFARE MEASURES. Employees are not just warm bodies; they are individuals with families and lives of their own outside the workplace. Organisations that recognise this, and help employees achieve a better balance

between life and work are likely to face fewer problems than those that do not. Across industry-types, increasing the organisation's level of professionalism, instituting an objective performance appraisal system, and ensuring a match between responsibility and authority are the 3 most-used techniques to improve retention. In addition, infotech companies focus their efforts on 3 more techniques: increasing employee satisfaction, designing competitive compensation-packages, and involving employees in decisionmaking. Hi-tech companies differ from other industries in one other aspect. Most manufacturing, marketing, and services companies are not able to achieve the desired level of performance along any of the retention techniques they adopted, but infotech and telecom companies exceed the desired level. High potential attrition-rates, and the growing demand for trained infotech professionals is, evidently, a motivation enough for companies operating in this sector to focus on retention management. BEST PRACTICES. The best companies focus on professionalisation, appraisal, employee satisfaction, and participative decision-making. However, their higher-than-average retention levels can be attributed to the way in which they go about

these initiatives rather than the choice of initiatives themselves. So, the best companies set themselves stretch targets on each dimension, and then, try and better them. THE Retention Action Plan In these competitive times, the specific measures to improve an organisation's retention record range from career counselling workshops to team-building exercises. Of course, the exact nature of the initiatives to be used is a function of the industry in which the company operates, and the level of management at which the initiative is targeted. However, the ideal practices remain constant across manufacturing, marketing, and services companies: careercounselling and job-enrichment exercises at the junior level; promoting from within and training at the middle level; teambuilding exercises and welfare initiatives at the senior level; and culture-building and empowerment at the top level. Most companies believe that retention is far more important at the junior, middle, and senior management levels than at the top. This is evident from the number and intensity of initiatives used. For instance, the proportion of manufacturing companies using specific initiatives to improve their retention-records at the junior, middle, and senior management levels ranges from 24 per cent to 78 per

cent while the corresponding range for senior management is 8 per cent to 43 per cent. Infotech and telecom companies are, predictably, different. They use the same techniques as companies operating in other industries do. Only, the number of companies using them is far higher. These companies rate team-building efforts, culture-building, careercounselling, and designing best-in-industry compensationpackages important at the junior level; promoting from within, instituting objective appraisal systems, and team- and culturebuilding at the middle level; designing better compensationpackages, and helping employees grow into leaders at the senior level; and empowering employees, and sharing the organisational vision with them at the top level. Across levels, compensation, and vision-sharing seem to be more critical to the retention plans of hi-tech companies than to those operating in other industries. Thus, while 77 per cent of infotech and telecom companies believe that sharing the organisation's vision with their junior-level employees will help them keep their employees, only 16 per cent of the manufacturing companies do. And the corresponding figure for services and marketing companies is 35 and 17 per cent.

BEST PRACTICES. The best organisations recognise the fact that the retention techniques that will work best for them depend on the dynamics of the industry of which they are a part, and the level of management at which they wish to focus their efforts. These organisations tier their retention strategies to suit their employees at various levels of the organisation. Often, recognising the individuality of employees is the best retention strategy. A focus on retention management can serve as a good startingpoint for improving the quality of systems and processes in an organisation. Retaining their best employees requires companies to launch initiatives along several dimensions: introducing good house-keeping practices in offices and shop-floors; making performance-appraisal systems transparent, objective, and participative; professionalising the senior management team; and ensuring that employees take pride in their work. Fast-growth companies, which are among the top-performers in their industry, will find it easier to retain employees than others provided they practise the essentials of retention management: objective appraisal, and good pay-packages. Everyone loves to work for a winner. But the only way a company can improve its performance is by hiring and retaining the best human capital, and

motivating it to deliver its best. If that isn't a vicious circle, nothing is. And best-in-class retention management is right at its centre. Select the right people in the first place through behaviorbased testing and competency screening. The right person, in the right seat, on the right bus is the starting point. ·Offer an attractive, competitive, benefits package with components such as life insurance, disability insurance and flexible hours. ·Provide opportunities for people to share their knowledge via training sessions, presentations, mentoring others and team assignments. ·Demonstrate respect for employees at all times. Listen to them deeply; use their ideas; never ridicule or shame them. ·Offer performance feedback and praise good efforts and results. ·People want to enjoy their work. Make work fun. Engage and employ the special talents of each individual.

·Enable employees to balance work and life. Allow flexible starting times, core business hours and flexible ending times. (Yes, his son's soccer game is important.) ·Involve employees in decisions that affect their jobs and the overall direction of the company whenever possible. ·Recognize excellent performance, and especially, link pay to performance. ·Base the upside of bonus potential on the success of both the employee and the company and make it limitless within company parameters. (As an example, pay ten percent of corporate profits to employees.) ·Recognize and celebrate success. Mark their passage as important goals are achieved. ·Staff adequately so overtime is minimized for those who don't want it and people don't wear themselves out. ·Nurture and celebrate organization traditions. Have a costume party every Halloween. Run a food collection drive

every November. Pick a monthly charity to help. Have an annual company dinner at a fancy hotel. ·Provide opportunities within the company for cross-training and career progression. People like to know that they have room for career movement. ·Provide the opportunity for career and personal growth through training and education, challengine assignments and more. ·Communicate goals, roles and responsibilities so people know what is expected and feel like part of the in-crowd. ·According to research by the Gallup organization, encourage employees to have good, even best, friends, at work

Employee engagement is an important tool for employee retention The exponential growth of the IT/ITES industry is supported by three strong pillars that lend themselves, in creating business excellence, new technological advances and an unparalleled intellectual capital. These are – employee

engagement, innovation and leadership. Times Ascent presents columns by three market leaders on these pillars of IT.

In the face of increasing competition for talent, while companies expand and grow within India and abroad, it has become increasingly important to ensure one’s current employees are fully engaged, integrated and feel invested in developing a career with their employer. Employee engagement’ is fast becoming the latest mantra for HR managers, CEOs and company executives. It is, however, a focus that has always been in existence and defines the true fabric and identity of a company. Whether an employee is truly engaged or not is determined by a few key elements that make up the workplace. Many dictionaries define the word ‘engaged’ as the condition of being ‘in gear’.The ideal state for any employer is to have employees who are ‘fully in gear’. An employee is fully in gear when certain elements about his/her work, manager, and the work environment are in alignment with the employment situation. There is no secret recipe that will suddenly engage all your employees. Many companies provide excellent work environments, perks and benefits from mother’s rooms, recreation

facilities, multi-cuisine restaurants, fitness centres, crèche facilities, concierge services to maternity and paternity leave, adoption leave, sabbaticals and part-time work. While these are great strategies to keep employees engaged, the real secret goes back to fundamental management practices – know your employees. Many companies are focusing on management excellence as a fundamental strategy to address employee retention. Equipping managers with the necessary skills so that they can connect and converse with employees in the right way is a critical engagement tool. What keeps a particular employee partially engaged vs. fully engaged is something a manager can easily discover by regularly connecting with the person. Driving a conversation around the person’s work and how well that matches his/her aspirations; discussing the work environment; the team environment and what is important to that individual are important decision making data for a manager. In addition, being aware of what employees need from you as a manager can help you modify your style, level of oversight and involvement to better match each employee. Work culture factors such as flexible schedules can impact engagement levels and can change over time as the employee’s personal situation changes. Organisational factors, such as the company’s

commitment to the environment, connections with customers, product quality, can also be important engagement factors. While managers may not have control over all factors, they must be aware of these hot spots to better predict actions and responses and be prepared for the right conversations. I see a deeper investment in developing management capability as a key retention strategy in many companies today. Many studies have shown that one of the top reasons an employee leaves a company is the manager. Encouraging managers to have regular meetings and spend quality time on understanding the employee go above and beyond having the employee update the manager on project status, resources and next steps. Many companies recommend that at least once per quarter there is a deeper conversation between each manager and his/her employees to focus on the many elements described above. In addition to the importance of the manager relationship, employers are also investing in corporate branding focused on the internal employee population. Identifying key attributes about why your employees love to work for your company and then celebrating that internally is a great way to tap into the existing pride and excitement of your employee population. Employees

become ambassadors for the company because they speak from the heart and help position your company as an employer of choice. This pride and excitement can create a deeper level of engagement amongst employees. At the end of the day, having a ‘fully engaged’ employee is a win-win situation. Those employees stay longer and contribute in a more meaningful way. ‘Employee engagement’ does feel like a new tag line – but it has been in existence since the very beginning as a core management practice. In today’s competitive environment, companies are ensuring that they have a philosophy and practice that acknowledge the importance of the manager in retaining employees. Many companies are investing resources in the way of training, skill development and mentoring. This also has a retention side effect. The more companies demonstrate that they value the management role; often the deeper engaged this population becomes. As companies continue to grow, it is this population of employees that can serve to build a bench for leadership positions. As solid management practices become embedded in the organisation, it becomes the true fabric of how the organisation operates and employees will remain more ‘fully in gear’.

The process of retention will benefit an organization in the following ways:

1. The Cost of Turnover: The cost of employee turnover adds hundreds of thousands of money to a company's expenses. While it is difficult to fully calculate the cost of turnover (including hiring costs, training costs and productivity loss), industry experts often quote 25% of the average employee salary as a conservative estimate.

Loss of Company Knowledge: When an employee leaves, he takes with him valuable knowledge about the company, customers, current projects and past history (sometimes to competitors). Often much time and money has been spent on the employee in expectation of a future return. When the employee leaves, the investment is not realized.


Interruption of Customer Service: Customers and clients do business with a company in part because of the people. Relationships are developed that encourage continued sponsorship of the business. When an employee leaves, the relationships that employee built for the company are severed, which could lead to potential customer loss.


Turnover leads to more turnovers: When an employee terminates, the effect is felt throughout the organization. Coworkers are often required to pick up the slack. The unspoken negativity often intensifies for the remaining staff.


Goodwill of the company: The goodwill of a company is maintained when the attrition rates are low. Higher retention rates motivate potential employees to join the organization.


Regaining efficiency: If an employee resigns, then good amount of time is lost in hiring a new employee and then training him/her and this

goes to the loss of the company directly which many a times goes unnoticed. And even after this you cannot assure us of the same efficiency from the new employee

Managing Employee Retention The task of managing employees can be understood as a three stage process: 1. Identify the cost of employee turnover 2. Understand why employee leave 3. Implement retention strategies

1) Identify the cost of employee turnover: The organizations should start with identifying the employee turnover rates within a particular time period and benchmark it with the competitor organizations. This will help in assessing the whether the employee retention rates are healthy in the company. Secondly, the cost of employee turnover can be calculated. According to a survey, on an average, attrition costs companies 18 months’ salary for each manager or professional who leaves, and 6 months’ pay for each hourly employee who leaves. This amounts to major organizational and financial stress, considering that one out of every three employees plans to leave his or her job in the next two years.

2) Understand why employees leave: Why employees leave often puzzles top management. Exit interviews are an ideal way of recording and analyzing the factors that have led employees to leave the organization. They allow an organization to understand the reasons for leaving and underlying issues. However employees never provide appropriate response to the asked questions. So an impartial person should be appointed

with whom the employees feel comfortable in expressing their opinions.

3) Implement retention strategy:

Once the causes of attrition are found, a strategy is to be implemented so as to reduce employee turnover. The most effective strategy is to adopt a holistic approach to dealing with attrition. An effective retention strategy will seek to ensure:

Attraction and recruitment strategies enable selection of the ‘right’ candidate for each role/organization

New employees’ initial experiences of the organization are positive

Appropriate development opportunities are available to employees, and that they are kept aware of their likely career path with the organization

The organization’s reward strategy reflects the employee drivers








organization’s reward strategy reflects the employee drivers

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