CHAPTER - I

INTRODUCTION

1.1 PREAMBLE
1.2 EMPLOYEE RETENTION STRATEGY
1.3 GLOBAL PERSPECTIVE OF RETENTION MANAGEMENT
1.4 INDIAN PERSPECTIVE OF RETENTION MANAGEMENT
1.5 OPERATIONAL DEFINITIONS
1.6 EMPLOYEE RETENTION STRATEGY: A THEORETICAL
PERSPECTIVE
1.7 INTRODUCTION TO EMPLOYEE RETENTION
1.8 GROWTH OF STRATEGIES FOR EMPLOYEE RETENTION IN
DIFFERENT PERIODS
1.9 IMPORTANCE OF EMPLOYEE RETENTION
1.10 CHALLENGES FOR THE ORGANIZATION TO RETAIN THE
EMPLOYEES
1.11 SUMMARY
 

CHAPTER - I
INTRODUCTION

1.1 PREAMBLE

In India IT companies are concentrated in certain places like Bengaluru,

Bhubaneswar, Cochin, Coimbatore, Chandigarh, Chennai, Delhi, Gurgaon,
Hyderabad, Calcutta, Mysore, Madurai, Mumbai, Noida, Pune and Trivandrum. Out
of these Bengaluru is considered to be the Silicon Valley of India as it houses many
domestic as well as Multinational IT Companies and some the companies have its
headquarters here. The Organizations are competing with one another in terms of their
employee friendly policies and practices aimed at attracting and retaining potential
workforce as there is acute shortage of skilled IT professionals. This is because the
above situation has bred highly demanding and egoistic workforce who leave or
threaten to leave the Organization even at the slightest discomfort and join the
competitor Organization. Job-hopping is a common phenomenon among IT
professionals. This is a costly affair for the Organization as stated by Fitz-enz (1997)
and will affect the bottom lines. This has posed a challenge to HR professionals of IT
Organizations to design effective retention strategy keeping in view this delicate
situation.

The decision of leaving the Organization is not easy for an individual

employee as well as significant energy is spent on finding new jobs, adjusting to new
situations, giving up known routines and interpersonal connection and is so stressful
(Boswell, Boudreau and Tichy, 2005). Therefore, if timely and proper measures are
taken by the Organizations, some of the voluntary turnover in the Organization can be
prevented. The reasons for employee turnover may vary from external environmental
factors such as economy that influence the business that in turn affects the
employment levels (Pettman 1975; Mobley, 1982, Schervish, 1983; Terborg and Lee,
1984) to Organizational variables such as type of industry, occupational category,
Organization size, payment, supervisory level, location, selection process, work
environment, work assignments, benefits, promotions and (Mobley, 1982; Arthur,
2001).

In this present investigation, the research design adopted is descriptive

research design. While developing, research design the IT sectors, IT sectors
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employees and HR Managers are taken as independent variables and employee

retention strategy (Compensation, Job Characteristics, Job flexibility, Working
Environment, Training and Career Development and Work Life Balance) and Job
attitude (Job Commitment, Job Involvement and Job Satisfaction) are taken as
dependent variables. In the present study quota and purposive sampling technique is
used. 1320 employees and 30 HR managers level employees are taken. Among them
there were male and female employees and who represent the IT sectors from
Bengaluru city, are taken as sample for this study. Later the IT sectors were classified
on the basis of following NASSCOM report. Employee retention strategy
questionnaire and Job attitude scale were used to collect data from the employees.
Further, factors influencing employee to retain and to leave the organization was
administered to both employees and HR managers. The collected data, which are
complete in every aspect, are scrutinized as per the instructions given in the manual of
the respective all instruments.

The results of the present study revealed that, among all three level of IT
sectors, difference was found among employees and HR managers on their perception
on factors influencing retention and factors influencing employees to leave the
organization. Among small, medium and large IT sectors employees differ
significantly on retention strategy and job attitude (job commitment, job involvement
and job satisfaction).

Compensation of employees of small IT sector, has significantly very high

correlation with Training and Career Development. Job characteristics of employees
of small IT sector, has significantly high correlation with Working Environment. Job
flexibility of employees of small IT sector, has negative and significant correlation
with Working Environment. Job Commitment of medium scale IT sectors employees
has positively very high significant relation with Job Involvement. Job Commitment
of medium scale IT sectors employees has positively very high significant relation
with Job Satisfaction. Job Involvement of medium scale IT sectors employees has
significantly very high relationship with job satisfaction.

Compensation of employees of large IT sector, has negative and significantly

very high correlation with Training and Career Development. Job Characteristic of
employees of large IT sector, has positive and significantly very high correlation with
Job Flexibility. Job Involvement of employees of large IT sector has positive and

2 
 
 

significantly very high relationship with Job Satisfaction. Job Commitment of

employees of small IT sectors has negative and significantly very high relationship
with Job Flexibility. Job Commitment of employees of small IT sectors has positive
and significant relationship with Training and Career Development. Job Commitment
of employees of small IT sectors has positive and significant relationship with Work
Life Balance. Job Commitment of employees of medium IT sectors has positive and
significantly high relationship with compensation. Job Commitment of employees of
medium IT sectors has negative and significantly very high relationship with job
characteristics.

Job Involvement of employees of medium IT sectors has positive and

significantly very high relationship with compensation. Job commitment of
employees of medium IT sectors has negative and significantly high relationship with
Training and Career Development. Job involvement of employees of Large IT sectors
has positive and significantly very high relationship with Compensation. Job
Involvement of employees of Large IT sectors has positive and significant
relationship with Working Environment. Job Commitment of employees of Large IT
sectors has negative and significantly high relationship with Training and Career
Development. Job satisfaction of Large IT sectors has positive and significantly very
high correlation with compensation. Job Satisfaction of Large IT sectors has positive
and significant correlation with Working Environment. Job Satisfaction of Large IT
sectors has negative and significantly high correlation with Training and Career
Development. Many personal factors have contributed and influenced retention
strategy and Job Attitude. Finally, suggestions for better HR practices have been
highlighted.
1.2 EMPLOYEE RETENTION STRATEGY

Employee retention is a process in which the employees are encouraged to

remain with the organization for the maximum period of time or until the completion
of the project. Employee retention is beneficial for the organization as well as the
employee. Employees today are different. They are not the ones who don’t have good
opportunities in hand. As soon as they feel dissatisfied with the current employer or
the job, they switch over to the next job. It is the responsibility of the employer to
retain their best employees. If they don’t, they would be left with no good employees.
A good employer should know how to attract and retain its employees.

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Employee retention refers to the various policies and practices which let the
employees stick to an organization for a longer period of time. Every organization
invests time and money to groom a new joiner, make him a corporate ready material
and bring him at par with the existing employees. The organization is completely at
loss when the employees leave their job once they are fully trained. Employee
retention takes into account the various measures taken so that an individual stay in an
organization for the maximum period of time. During the 1990’s, job seekers had a
dizzying array of choices when they searched for work. It was a difficult task for
employers to keep employees. Losing employees always meant losing knowledge,
capital, skills, and experience. Losing knowledge was a major concern to
organization. If an organization lost an employee with a great amount of knowledge,
it essentially lost revenue that the employee would have generated.
If an employer lost an employee with a great amount of experience, it would
take lots of time and money to retain a new employee for positive production.
Experience is an intangible that is relied up heavily. Every worker carries with him or
her at least three basics types of experience. Every worker possesses a certain amount
of industry, company and position specific experiences. Employees leave for a variety
of reasons including poor supervision, unchallenging position, limited advancement
opportunities, lack of recognition, limited control over work, perceived pay in equity
and perception of more favorable opportunities in other companies. High employee
turnover is one greatest cause of declining productivity and decreased morale in
corporate world. While morale decreases, recruiting and training cost increases and an
organization can find itself in a vicious cycle.
1.3 GLOBAL PERSPECTIVE OF RETENTION MANAGEMENT
From the global point of view, retention management includes competitive
salary, work life balance, providing adequate training to the employees, conducting
semi-annual reviews to determine employee’s job performance, conducting
celebrations and providing suitable rewards and recognitions for the employees as an
act to motivate them for their good performance. These factors could be viewed
globally both from employer and employee perspective.
When it comes to retaining current employees, the latest research shows that
two inter-related retention strategy out perform all others by a considerable margin.
Firms are strongly advised to adopt these measures. The first relates to the assessment
and reward of managers. The second to use the periodic retention focused interviews.
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Managers are the linking factor between the two strategies and their role is a vital one
if the plan is to succeed. Without the support of managers many a retention strategy
that looked good on paper has failed to deliver in practice. Other measures may be
applicable in certain circumstances. It is important to take note of the destinations of
departing employees. It may be that employees are leaving to join indirect
competitors for their services rather than traditional rivals. Understanding the appeal
of the real competition is a vital element of any retention effort. This can be done on a
micro or macro basis though it is wise to recognize that it is the individual that makes
the decision to leave and their criteria are what really matters. Employee attitude
surveys will sometimes provide valuable insight with regards to turnover. However, it
has to be said that there are serious reliability issues with both surveys and exit
interviews. Where additional employee insight is needed, the nominative group
technique is to be recommended. This form of focus group is especially appropriate
for diagnosing the causes of turnover within different groups.
Besides these the other factors are depicted that the top three retention factors
are employee engagement, work life balance, and learning and development
opportunities. The other five factors also remain significantly important to retaining
talented employees which include role clarity, organizational value alignment, career
advancement opportunities, employee recognition/appreciation, and compensation.
1.4 INDIAN PERSPECTIVE OF RETENTION MANAGEMENT
As of now, some strategies are followed in retaining any the employees which
has become a challenge for any company in the market. The management has to
provide a good working environment, better compensation both monetary as well as
non-monetary, better co-ordination and communication among superiors and
subordinates, providing flexible working schedules, better investment for training and
development so that they can provide the employees a better learning environment. In
addition to this the management should provide support, promote corporate culture
and employee empowerment so that they will have job satisfaction which will lead to
high employee retention. The Indian perspective of retention management where
higher preference is given for better communication among superior and subordinates,
training and growth opportunities.

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Some Main Reasons for Employee Attrition:

• Employee/manager relationship.
• Inability to use core skills.
• Not able to impact the organization’s goals, mission.
• Frequent reorganizations; lack of control over career.
• Inability to grow and develop.
• Employee/organization values misalignment.
• Lack of resources to do the job.
• Better organizational climate.
• Unclear expectations.
• Lack of flexibility; no work life balance.
• Salary with other non-monetary benefits.

Source: Research report ‘Employee Attrition’, Reed Consulting, UK

Employee retention strategy help organizations provide effective employee

communication to improve commitment and enhance workforce support for key
corporate initiatives. This strategy also provides full support to the marketing-
communication efforts by helping the organization build customer loyalty by
distinguishing and positioning the organization’s unique products and services in
today’s crowded marketplace.
Effective employee retention is a systematic effort by employers to create and
foster an environment that encourages current employees to remain employed, by
having policies and practices in place that address their diverse needs. A strong
retention strategy, therefore, becomes a powerful recruitment tool.
The method of calculating employee turnover is number of the employees at
the beginning of year divided by the number of employees at the closing of year
multiplied by 100, i.e.
No. of employees at beginning of year
Employee Turnover = ×100
No. of employees at the end of year

After implementing various initiatives that the company has so far, the
attrition rate has come down.

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The decision of leaving the Organization is not easy for an individual

employee as well as significant energy is spent on finding new jobs, adjusting to new
situations, giving up known routines and interpersonal connection and is so stressful
(Boswell, Boudreau and Tichy, 2005). Therefore, if timely and proper measures are
taken by the Organizations, some of the voluntary turnover in the Organization can be
prevented. The reasons for employee turnover may vary from external environmental
factors such as economy that influence the business that in turn affects the
employment levels (Pettman 1975; Mobley, 1982, Schervish, 1983; Terborg and Lee,
1984) to Organizational variables such as type of industry, occupational category,
Organization size, payment, supervisory level, location, selection process, work
environment, work assignments, benefits, promotions (Mobley, 1982; Arthur, 2001).
The other factors that influence employee turnover in Organizations include
the individual work variables like demographic variables, integrative variables like
job satisfaction, pay, promotion and working condition (Pettman, 1975; Mobley 1982;
Arthur 2001) and the individual nonworking variables such as family related variables
(Pettman, 1975; Mobley, 1982). High rates of voluntary turnover of such employees
are often found to be harmful or disruptive to firm’s performance (Glebbeck & Bax,
2004). When poor performers, choose to leave the Organization, it is good for the
Organization (Abelson & Baysinger, 1984), thus it is important to differentiate
between functional and dysfunctional turnover and accordingly encourage or
discourage employee turnover.
Studies on employee retention focused on the broad array of factors that
influence a person’s staying in a job termed as job-embeddedness construct by
Mitchell et al in 2001. The dimensions considered show linked the employee has to
other people, how she or he fits in the Organization and what the employee would
sacrifice on leaving the Organization. He reported that job embeddedness was
negatively correlated with intention to leave and predicted subsequent voluntary
turnover. A subsequent study (Lee, Mitchell, Sablynski, Burton, & Holtom, 2004)on
job embeddedness revealed that off the job embeddedness was significantly predictive
of subsequent voluntary employee turnover and volitional absences, whereas on the
job embeddedness was non-significant. Job embeddedness theory was further
examined (Mallol, Holtom & Lee, 2007) and the findings suggest that while job
embeddedness may vary in strength across different demographic groups, it is
nonetheless a robust predictor of employee retention.
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Demographic factors like as age, length of service, level of education, level of

income, job category, gender have influenced employee retention and have been
found to have stable relationship with turnover intention. Personal factors, such as
age, length of service, and income were negatively related to attrition. level of
education is positively associated with turnover, highly educated the employees there
was a propensity to leave and also studies have found male employees leave the
organization than female employees for better job and to feed family in better way.
Keeping in view all the above aspects studied so far, a holistic approach towards
understanding attrition is felt important to effectively control attrition in the IT
Organization by designing specific employee need based retention strategy.
1.5 OPERATIONAL DEFINITIONS

• Compensation
Compensation is getting money in the form of fair salary and other benefits
from the company.
• Job Characteristics
Job Characteristics is something which includes better opportunity to show
competency, initiatives and decision making in given a job.
• Job Flexibility
Job Flexibility is having freedom to choose the work schedule to complete the
given task according to their convenience.
• Working Environment
Working Environment is a situation and condition, related to work place,
where a particular kind of treatment will be given to the employees.
• Training and Career Development
Training and Career Development is an opportunity to develop skills, having
learning opportunities to have advanced career.
• Work Life Balance
Work Life Balance is getting proper time to balance both personal and
professional life to get professional success.
• Job Commitment
Job Commitment is the feeling of responsibility to complete the task and goals
of the company.

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• Job Involvement
Job Involvement is the psychological and emotional interest for active
participation in the professional work in the company.
• Job Satisfaction
Job Satisfaction is an emotional state of getting happiness and pleasure from
the given work in the company.

1.6 EMPLOYEE RETENTION STRATEGY: A THEORETICAL

PERSPECTIVE
Concept of Employee Retention
In the era of economy based on intellectual skills, knowledge, technology,
global village, fierce competition and varying business environment, handling
business is intriguing and is of decisive in nature of an organization. This is a gain for
all stakeholders who are expecting upper level quality products, uninterrupted
services, more anticipation and high level of satisfaction from any organization.
Attaining these goals is thought-provoking for the organization, but it is possible only
from the caliber persons, who are hired for your organization. In addition, employees
are the cornerstone and worthy assets of the organization to achieve its targeted goals.
Eventually, satisfying customer anticipation and their demands are possible only from
the employees whose role is prominent in organizational growth and development.
So, for any organization to sustain their business in the long run it is truly important to
realize and live up to the employee’s expectation and fulfill their needs. This is the
reason why organizations are giving top most priority to retain their employees.
Hence, the term employee retention is very difficult to understand in a broad sense
and defining the term employee retention is distinctly separate across various
organizations. In this regard, no single definition can explain the term employee
retention. But, few explanations mentioned by J. Leslie Mekeown are as hereunder:

• “Employee retention means stopping people from leaving this organization.”

• “Employee retention is all about keeping good people.”
• “Getting our compensation and benefits into line with the marketplace.”
• “Stock options, creche facilities, and other people.”
• “It’s got to do with our culture and how we treat people.”

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Postulating employee retention strategies requires encouraging employees to

continue in the organization for the best possible period of time”. “Retention is the
process for members or volunteers remain active with the organization. Retention is
not a particularly formal process. Instead it focuses on maintaining a welcome
environment, member morale, and organizational process.”
GetLes McKeon defined employee retention as “A systematic effort by
employers to create and foster an environment that encourages current employees to
remain employed by having policies and practices in place that address their diverse
needs. The costs associated with turnover may include lost customers, business and
damaged morale. In addition, there are the hard costs of time spent in screening,
verifying credentials, references, interviewing, hiring and training the new employee
just to get back to where you started.”
Employee retention pertains to policies and practices of the organization that
forbid valuable staff from exiting. Employing talented individuals for the job is
crucial for an employer. And retention is significantly greater than employing. In
reality it is underestimated by many employers for the costs related with turnover of
key employees (Ahlrichs, 2000). Turnover costs can incur with matters such as
reference appraisal, security clearance, casual worker costs, resettlement costs, formal
training costs and induction disbursals (Kotzé and Roodt, 2005). Missed deadlines,
loss of organizational knowledge, lower morale, and client’s negative perception of
company image are other unavoidable costs and hidden costs which may also take
place.
The new age economics, socio-cultural and political environment has altered
significantly and stays on. The social evolution such as globalization, scientific
innovation, and rising global challenges effects on organizations and foregrounds on
sustainable maintenance of the business enterprise. The above mentioned points
encode the message to utilize employee’s intellectual skills and abilities at least in
part through upholding the skills of their employees. Organizations should foresee
technological development through innovation and adapt themselves for global
competitiveness with other organizations. This demands organizations to evolve
through a never-ending learning and development process of the employees. Hiring
and retaining intellectually competent employees has become the key for
organizations to be economically competitive (Hiltrop 1999). Hence, it is significant
that employers give employees the prospects to develop and learn (Arnold2005;
10 
 
 

Bernsen et al. 2009; Herman 2005) such that the personnel maintain their capacities as
effective employees, withstand layoff, and are retained by their organizations. In
addition to these economic pressures, organizations confront some distressful
demographic changes. In Western countries, the average age group of employees is
increasing constantly with gradual retirement of baby boom generate on workers
(Burke and Ng 2006; Frank et al. 2004). Due to retirement, there is a significant loss
of skills from the baby boom generation and other capacities which is hard to
substitute from new hiring’s. The increased retiring ratio of the baby boom generation
has led the organizations to lose in competencies (i.e. knowledge, and skills), resulting
to compete among the organizations in the current economic environment (Hiltrop
1999).
In reality, employee retention is a conceptual component for the organization,
retaining the employees is essential for every organization. The real challenging task
for an organization is to retain the employees in a long run; reason being diversity in
each employee for their perception, intention, expectation and psychological mindset
when they become a part of the organization.
1.7 INTRODUCTION TO EMPLOYEE RETENTION
During late 1970s and early 90s the term employee retention was officially
came into usage in regularity on the business scene. Until then, during the early and
mid-1990s, job aspirants had a giddy range of options when they looked for
employment. At that time, employers were subjected to keep employees with a
philosophy of the connectedness between each other. It was a relationship of status
quo between the employer and employee for a job as long as economic conditions
allowed, the employment continued. This was not unusual for persons who entered
the job market in-between late 1950s and 60s who remained with one employer for a
very long time, some even for their entire working life.
Employee retention is a process in which the employees are encouraged to be
with the organization for the maximum time. However, employee – employer
connectedness has undergone a fundamental change, which has significance on the
abrasion, motivation and retention of talented employees. Employee retention is
advantageous for both the organization and employee. Employee’s long look is
directly dependent on employee retention policies coupled with best HR practices of
an organization. Fitzenz (1990) reported that retention is backed by various key
factors, which should be handled congruently: organizational culture, strategy, pay
11 
 
 

and benefits philosophy, and career development systems. Organizational

performance is ascertained by employee retention. If the organization is not able to
retain its employees, it will not be able to capitalize on human assets developed within
the organization (Shekshnia, 1994).
Employee retention has become a phenomenon which is attributed as
“controllable element” by the organization. As J.Leslie Mekeown quotes “No single
plan that fits every situation. Instead, the term employee retention has to be
discovered in our organization, and even for specific departments or divisions in our
organization. We will learn how to set up realistic, and tactics too, we’ll learn how to
measure the success of those strategies and tactics. Finally, and most importantly,
we’ll learn how to monitor and vary our employee retention goals, strategies, and
tactics over time, as our organization circumstances change.” (S, K. Bhatia 2006).
Suitable Person for Retention
Murty (2004) reported three categories of employees; those who would need
to be retained indefinitely; those who are critical to the organization in the short run
and those who are easily replaceable. When such categories of employees are known,
customizing retention strategies will help to achieve and encourage organizational
commitment among employees. Looking to the long term positive repercussions
employees falling under first category can be offered rewarding compensations, perks
and schemes. Secondly, employees even with the supply of lesser contribution were
critically required for completion of any project by situation necessitating their
presence in the short run. They would thus be the 'celebrities' in the watch of the
market. Retention of such critical intellects would necessitate offers which would
shine bright in the short run. Lastly, those employees having least priority in retention,
with their skills easily replaced will be offered voluntary separation from the
organization.
Reason for Retention
This will turn out to be much more significant in near future to recognize the
loyalty of individuals to an organization, apart from the organization’s need to create
an ambience which will allow them to stay (Harris, 2000). The massive blow of
excessive employee turnover rate on organizations has been found to have caused far-
reaching consequences, even to the extent of threatening efforts to attain
organizational objectives (Abbasi and Hollman, 2000). Abbassi and Hollman (2000)
further recommended that upon losing a critical employee, organizations suffer major
12 
 
 

setback on innovations losing customer focus through delays in delivery of services,

finally affecting the profitability of the organization. According to Hale, (1998)
recruitment expenditure will come around 50 to 60 percent of an employee's first
year's salary and even extends up to 100 percent for certain highly-talented
professional positions. Fitz-enz (1997) reported that when direct and indirect costs are
calculated, net income cost of an employee is a minimum of one’s years' total
remuneration, or a maximum of two years' total remuneration and it is estimated that
out of ten managerial and high-skilled employees' organization loses around $1
million who resigns from the organization. Apart from this, the organization also loses
strategic knowledge and leadership with the exit of its key employees. An
organization also has to bear the cost of training a new staff on the loss of employee
turnover. As indicated by the American Management Association, the real cost of
employee replacement with an employee is close to 30 percent of his total
remuneration. Employee turnover generally includes direct costs combined with
separation costs (including severance package, exit interview and outplacement
expenses, etc.) and replacement cost (including recruitment expenses, sourcing
expenses, interviewing time, orientation and training costs, etc.). Indirect costs of
employee turnover would include loss of productivity (due to loss of a productive
staff and lesser productivity of new staff, until fully trained); arising competitive
pressures on account of losing topnotch performers to potentially competitive
companies including sales drop down and lost customers.
1.8 GROWTH OF STRATEGIES FOR EMPLOYEE RETENTION IN
DIFFERENT PERIODS
The move towards employee retention has evolved gradually and over a
period of time it has underwent several changes (J. Leslie Mekeown):

(i) The ‘status quo’ dominance in early 1980s between employers – employee
relationship has cut down the rate of employee turnover.
(ii) Focused attention on offering hygiene factors. Though, career mobility and
employee turnover increased due to changes in job market and
opportunities outside the organization. Employees did not remain with one
employer for a longer run or for a profession in working life, so they
started leaving organization voluntarily. Thus, to retain talents,
organizations emphasized in offering Hygiene factors (Herzberg two factor

13 
 
 

theory of motivation), i.e. remuneration, benefits and physical aspects of

working conditions (safety, health and comfort) at workplace. The
attention was to decrease employee turnover and also to workout data, i.e.
to hold turnover rates on regular basis in the organization.
(iii) Reinforcing on motivational factors. As suggested by Herzbergr, other
changes came when emphasis of employers became central on motivation
factors such as:
• Realization of success,
• Appreciation,
• Challenging task itself,
• Career advancement,
• Responsibility enhancement,
• Opportunity for growth as a person.

The importance was equally laid for growth or higher order needs of A.
Maslow social needs (affection, friendship, acceptance, belongingness in work
group), esteem or ego needs (status quo, recognition, self – respect, etc.) and self –
actualization needs (growth, achieving one’s potential, self-fulfillment, etc.).

(iv) Excellence in quality of work life. Organizations thereafter started

providing a choice of job redesigning along with great progress in quality
of work life (QWL) measures to facilitate employee’s variety of needs.
These are quantified as rewarding career, learning attributes and resolving
problems, job monitoring, collaborative work with colleagues. Workplace
of an individual has profound impact on shaping one’s personality,
performance rating, and commitment and well done job satisfaction.
(v) Developing organization culture. Additional area of focus comprises of
differentiation in total remunerations from competitor organization as a
foundation of organizational culture. After realization in 1990’s it came to
know that corporate culture is vital for corporate growth, success,
excellence and survival. These motivating factors had influenced
employee’s initiative, trust, support and innovation. Organizational culture
is usually represented by quality of excellence, honesty in communication,
involvement in decision-making, high standard of occupational safety,
first-class corporate citizenship. This sustainable employee retention is

14 
 
 

called as “holistic approach” that deals with staffs “higher needs” such as
recognition, admiration and self-fulfillment.
(vi) Retention factors for talented employees. According to J. Leslie Mekeown,
the present approach in talent retention is to give importance on following
factors in knowledge gear.
(a) Core competencies and outsourcing strategies.
C.K. Prahalad and Gary Hamel highlighted organizations to adopt the core
competency model (i.e. essential skills and activities required to an
organization’s success with competitive strategy). Organizations will focus on
recruiting employees only for their core activities and will be outsourcing non-
core products and services externally. This movement is continuing.
(b) Concentrating on Performance-related Rewards.
To meet the employee expectations who have their own core competencies
(knowledge workforce) focus will be on performance-related reward systems
followed by work-life balance programs. The employer has to attract highly
competent individuals and retain such talents who can perform the
organization’s “mission-critical” (core-competencies) tasks. Different
“retention stimuli” will be offered by an employer in winning potential
employee and not letting him to go in a different organization. This is also
referred as “employee value proposition” approach which stresses the
benchmarking activities and involving organizations in implementing the
employee retention best practice of similar organizations.
(c) Employee Retention Strategy, an ‘Employer of Choice’.
Employee retention model of becoming an “employer of choice or building
company image.” Its recommendations are hereunder:
• The method of becoming an employer of choice starts before appointment
highlighting in employment literature, i.e. adds, product branding, enterprise
image, organization reputation and other announcements for public. The
objective is, to attract right employees for right positions.
• Management has its significance, for what it says and do (does) after
employing. The process continues aspect for retention (beyond the higher
stage) to include, fair treatment with employees, their growth efforts and they
feel at home etc.

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• Additional aspect is to develop a retention outlook in the leadership for

structuring a welcoming environment where employees want to stay. It is
developing a retention culture- a retention way of life. Everything is about
creating genuinely workplace, where they love to work based on sincerity,
respect, fair-mindedness, superiority and solidarity. It is the best
performance management process, which will help improve retention such
as-
™ Use of job clarity and annual review of goal achievement,
™ Use of the performance appraisal mechanism to quantify those goals,
and
™ Employer’s mentor/coach role to inspire and guide to produce long-
term, productive employee- employer relationship.
• Jim Collins- author of Built to Last and Good to Great – “describes the first
key to success is indeed people. You have to find the right people first; the
vision and strategy can follow.” Deepak Chopra stated that, the critical
assessment of business leadership is what happens to a company after the CEO
leaves. To have meaning in life, business leader should have love and
compassion for his employees. Employees are the key to success for an
organization. (Indian Management, June 2004)
• Another key aspect which has become imperative is business leaders to fulfill
their corporate social responsibilities in the present global context. For
instances, companies in India such as – Infosys and Wipro, which have
reached status of the respected and reputed companies and are realizing the
virtues of the brand. These companies have built up their corporate images
mainly due to roles of their CEO’s.
(d) Ticks for Knowledge Workforce
Other existing retention procedures are towards following aspects:
• Provision of fun
• Nurture creativity
• Continuous learning
• Work and life balance
• Love and individual dignity
• Involvement and team working

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• Performance- related compensation, etc.

In total, emphasis on retention procedures in different periods during

industrial, service sectors, information technology (IT) and Internet era (S.K. Bhatia
2006).1
1.9 IMPORTANCE OF EMPLOYEE RETENTION
Hiring is not an easy process:
The HR department selector shortlists few persons from a large pool of talent,
carries preliminary interviews and finally forwards it to the respective line supervisors
who further screen them to judge whether they are fit for the organization or not.
Hiring the right candidate is a time-consuming process.
An organization invests time and money in grooming an individual and makes
him ready to work and understand the corporate culture:
A new employee is completely raw and the organization really has to work
hard in imparting required skills for his overall development. It is a complete wastage
of time and money when ones leave an organization soon after hiring. The HR has to
start the hiring process once again for the same vacancy; a mere repetition of work.
That’s why finding a right employee for an organization is a time-consuming job and
all efforts simply go in vain when the employee leaves.
When an individual resigns from his present organization, it is more likely that
he would join the competitors:
In such situations, personnel tend to take all the strategies, policies from the
current organization to the new one. Individuals take all the important data,
proprietary information, trade secrets and inventions to their new organization and in
some cases, even they may leak the secrets of the previous organization. To avoid
such happening, the new employee is made to sign a confidentiality agreement
undertaking document which will forbids him from disclosing of any confidential
information even if he departs from organization. These kinds of stringent rules will
prevent the employees to join the competitors company which is an effective way to
retain the employees.

                                                            
1
S.K.Bhatia (2006) “Human Resource Management – A Competitive Advantage, Deep & Deep
Publications Pvt.Ltd. Page No. 299-303.

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The employees working for a longer period of time are more familiar with the
company’s policies, guidelines and thus they adjust better:
Employees with long look perform better than individuals with short term job
focus. Employees who spend his time extensively in an organization knows the in and
out of the organization and as a result they are in a position to contribute effectively.
Every individual need time to adjust with others:
Everyone needs sometime to know and understand the pulse of the team
members, be friendly and eventually gaining trust with each other. Employee
compatibility among the individuals is highly appreciated in an organization which
will help in discussing things among themselves to come out with something
beneficial for all. When a new joinee replaces an existing employee, adjustment issues
start compounding. Individuals find it really difficult with the other person to come
under a comfort zone. Building rapport is a real challenge between the existing
employees and new comer and most importantly trust in him. It is a human mentality
to compare a new comer with the previous employees and always find mistakes in
him.
An observation suggests that individuals sticking to an organization for a
longer period of time are sincerer and loyal towards the management and the
organization. Additionally, they enjoy all kinds of pay benefits from the organization
and as a result they are more attached with it. They hardly speak unfavorably and
always think in favor of their organization setting it as their first priority as compared
with other things.
For an organization retaining valuable and potential employees is always
essential: Every organization requires hardworking and talented personnel who are
unique and having creative mindset. Organizations can’t survive if all the top
performers exit. So, it is essential for the organization to retain employees with an
attitude of hardworking in nature and is indispensable for the system.
The organization must be able to differentiate a valuable employee and an
employee lesser contribution to the organization. To stop the employee turnover
honest efforts must be made to encourage the staff to stay happy in the organization.
The importance of retaining effective employees is as follows:

• The result of high turnover often puts employees and customers in vulnerable
conditions; as the employees take all essential competencies with them.

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• The sum of replacing an employee is calculated up to two folds of the

individual’s annual remuneration and this totally excludes the cost of lost
knowledge.
• Hiring new employees is a time-consuming process and sometimes efforts are
worthless.
• More time is required in bringing employees up to the mark. And when you’re
undermanned, extra hours are essential to get the work done on time.

1.10 CHALLENGES FOR THE ORGANIZATION TO RETAIN THE

EMPLOYEES
Employees are making their way by entering into next-generation technology-
backed companies, to upgrade themselves with newer skills. Besides, “attrition levels
are about to rise as (more traditional) organizations are rectifying the employee
numbers based on project need. While their traditional business model is growing
slowly, the pace of growth for total addition of employees will hamper in future.” The
above circumstances and the dynamic business surroundings is a challenging task for
the organization to retain the employees for long run. Employees are highly satisfied
with the organization, their leadership, additional benefits, job flexibility, employees
faithfulness with the organization, not even ready to quit the organization at any point
of time or situation. It is even more complicated task with the organization to retain
the employees for longer duration, in a cut-throat market, pressure to axe the
manpower at the same time. The negative impact is on the organization which is
losing its top performers in quick succession and subsequently they face different
issues like loss of productivity, loosing intellectual capital, losing customers, low
profit and no growth. Sometimes employee attrition has positive impact and is
essential for the organization, due to underperformance of the employees, lack of
skills, knowledge, negative attitude and mentality of employees, lesser initiatives,
deficiency of soft skills and excess workforce.
Handling the flow of employees would be relatively easy (Anyelo S. Denisi
and Rickely W. Griffin 2009) when individuals start to depart from the organization.
Organization has to recognize employee expectation; otherwise employees will look
for better career opportunities outside the organization with more bunches of benefits
and for other reasons. But, in most of the situations employee turnover of the
organization is due to job dissatisfaction, stressful conditions, unsafe working

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conditions, less support from the line manager and unhappy with overall pay benefits
from the organization. And it is difficult task for the managers know their
anticipation, causes to leave the organization. However, attrition is always negative
for the organizational in many situations; sometimes it is positive for the organization.
Reduction in the attrition level is always safe for the organization; reason
attrition is the massive blow for the organization. When employees leave the
organization directly or indirectly the reputation of the organization is reduced
alongside with combating employee turnover cost and giving away trade secret to
other organization. To manage attrition level, it is important to understand the reasons
and influencing factors which make an employee to explore opportunities with other
organization. But in most of the cases job dissatisfaction or distressful job is the main
reason to exit from the organization.
In every organization, human resource manager play a vital role in
determining various levels of staff expectation and satisfaction needs. This liability
lies with HR manager and his metrics in reducing the attrition rates and retains the
employees for longer time. Effective human resource manager works to retain the
employees. Greater role of HR manager is to retain the intellectual talents who are
outperforming in the meanwhile retain the poor performer doubtful with given
enticement to leave. This is a matter of choice to all other employees who prefer to
stay with the same organization.
The Cost of Turnover: Employee turnover costs will add to several folds of capital
to organization operating expenditure. Although, calculating turnover cost (including
hiring costs, training costs and productivity losses), according to industry experts is
often quoted at 25% of the average employee package as a conservative estimate.
Loss of Company Knowledge: When an employee exits, the organization is about to
lose its valuable knowledge from him and also their customers, current projects and
past history (sometimes to competitors). Time and money is often invested on the
employee in hope of a future return. When the employee exits, the investment is not
realized.
Interruption of Customer Service: Business will establish when customers and
clients get associated with organization in part. A relationship builds with continuous
encouragement and sponsorship of the business. When employee leaves, these
relationships are severed, leading to potential loss of customers to the organization.

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Turnover leads to more turnover: Upon termination of an employee's services, the

symptoms are felt throughout the organization. Fellow associates are often observed
with a noticeable deterioration in performance or quality. The unexpressed trait often
intensifies for the remaining employees too.
Goodwill of the company: The goodwill of a company is achieved through reduced
attrition rates. Higher retention percentage will motivate valuable employees to join
the organization.
Regaining efficiency: Efficiency and productivity of an employee is lost through
resignation. And recruiting a new employee is a tedious job and subsequently training
him/her will account to losses to an organization, which many a time go unnoticed.
And even after this the organization is not assured of the same efficiency and
productivity from the new employee.
Advantages of not retaining the Bad Performer:
Retaining a dissatisfied underperformer will always bother the organization,
because this will increase the cost, they might impact other employees. Employee
morale status could go up if troublesome employees leave. New employees with long
look present their new ideas; inputs and fresh mindset by creating new opportunities
for their career advancement to remain with the organization.
1.11 SUMMARY
This chapter provided an overview of employee retention strategy and its
importance. Every organization must realize that employees are their best commodity.
Without competent individuals, a company might end in serious trouble. An employee
with long look benefits the company to save money. Searching, hiring and training the
best employees involve talent acquisition capital. Once a company has acquired
talented people, organization development requires closing the back door to forbid
them from stepping out. When employee leaves an organization for a rivalry
organization, there is always a threat of taking away business critical ideas and secrets
with them to be explained by the competition. Inevitably organization has to design
policies and practices which will help in retaining employees. While this design
seems a bit unscrupulous, it still happens quite frequently. Recruiting and hiring from
the competitors is probably as old as business itself. The newest thing in the industry
is how to attract and retain qualified personnel in a highly competitive market while
holding their own intellectual capital from migrating to their competitors.

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