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ccccccccccccccccccccSubmitted in partial fulfillment of the requirement for the
Award of degree of



Uttar Pradesh Technical University, Lucknow


Pallavi Visen

Under The Supervision of

Farzana Bano

United Institute of Management

(Affiliated to UP technical University, Lucknow)

50, Knowledge park-III, Greater Noida-201306

ROLL NO-0921270064 2011


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I take the opportunity to express my sincere thanks and gratitude to all the people who have

helped me during the preparation of this report, without their help it would have not been

possible for me to reach such a juncture where a confluence of knowledge and experience

takes place.

First I would like to extend my sincere thanks to my faculty guide, Mrs. Farzana Bano whose

guiding hand has made this project possible. She has always been available to assist me

whenever I required her help. It was her providence of sound base fundamentals that made

my dissertation projects a success.

Last but not least I would like to thank all software companies and their officials for helping

me in collecting all the information.




Chapter 1. Introduction

Chapter 2. An Overview of IT Industry

Chapter 3. Research Methodology

Chapter 4. Employees Attrition & Retention In IT Industry

Chapter 5. Conclusion

Chapter 6. Summary

Chapter 7. Finding

Chapter 8. Suggestion


Knowledge based industries such as information technology is increasingly becoming more

important in development as well as developing economies. In India, the IT industry has

grown at the rate of about 50% in the domestic as well as the export market for the last 5

years. The phenomenal growth of IT industry in India has been possible due to the

availability of highly competent and cost competitive IT professionals. This unique advantage

has led to Indian IT industries becoming supplies are mushrooming at a very rapid rate. Thus,

creating the demand for it professionals far exceeding the supply become all the more crucial

and difficult task.

All the above factors have made the task of managing and retaining IT professionals in India

very complex and demanding. This has as of now given a whole new focus to HR practices in

IT industries. In the above light, this research project was done on *

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!)cThe main objective of which was to determine the best and

unique practices for attraction, retention employees in IT industry.

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#&*'c for the study involved the collection of secondary data. Secondary data

was collected by browsing through relevant books magazines and journals and through


The finding and analysis drawn after the study brought out some of the best practices for

attrition, retention and recruitment of IT professional. It also gave an insight into the unique,

innovative practices followed by some of the companies for attracting, retaining and

managing performance of its knowledge workers. A part from this study also brought out the

leverage that companies have on having a documented recruitment and HR/ retention policy.
It also brought into light the attrition trend, benchmarking followed, recruitment duration and

cost, mode of getting employee feedback that are prevalent in IT industry.

The conclusion thus drawn was if organizations have to survive and grow in the competitive

IT industry, it has to keep pace with the trends and adopt some of the best unique innovative

practices for attracting, retaining and managing the best of its knowledge workers.

The main objective of the research is to determine the best and unique practices for attrition

retention employees in IT industry.

Apart from the discussed objective the project will also help us in answering few of the

questions which can be pointed as following:

1.c To find out main reasons behind employee disengagement and quitting.

2.c To fine our options alternative that can motivate them to stay for long.

3.c To find that what do the companies do to make their employees stay.

4.c To know about different practices adopted by companies to attract the talent.

5.c Employees stay and leave organization for some reasons.

The top organizations are on the top because they value their employees and key 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.

HR professional all over the word, working is Call-Center or Contact Center or BPO industry

are breaking their heads to formulate Retention Strategies but nothing is working in their

favor. The average attrition rate in this sector is still 35-40%. No perks, no rewards« just

nothing is working. Before proceeding further, let¶s see why people are leaving? Why there is

high attrition rate.

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When there are so many benefits associated with BPO industry««..when there are so many

privileges for IT employees than what makes them to changes the company/industry?? Is it

only money that matters or anything else as well?? After taking exit-interviews and analyzing

the trend I am able to list out following reasons for IT professional to changes his/her job.

c No growth opportunity/lack of promotion

c For higher salary

c For higher education

c Misguidance by the company

c Policies and procedures are not conducive

c No personal life

c Physical strains

c Uneasy relationship with peers or managers

Let¶s also see as what the various benefits«. Those have been extended to people working in

this sector.

1.c (c#!-&! c ( c%.cThis insurance scheme is to provide adequate

insurance coverage of employees for expense related to hospitalization due to illness,

disease or injury or pregnancy in case of female employees or spouse of male

employees. All employees and their dependent family members are eligible.

Dependent family members include spouse, non-earning parents and children above

three months.

2.c  &c!#

c ( c%. This scheme is to provide adequate insurance

coverage for hospitalization expenses arising out of injuries sustained in an accident

this covers total/partial disablement/death due to accident and due to accidents.

3.c (/!#!0#c #c  #c  

! .c The organizations provide transportation

facility to all the employees from home till office at subsidized rate. The lunch

provided is also subsidized.

4.c % 'c #c %%#

! . Some of the companies provide shared

accommodation for all the out station employees in fact some of the BPO companies

also undertakes to pay electricity/ water bills as well as the Society charges for the

shared accommodation. The purpose is to provide to the employees to lead a more

comfortable work life balance.

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!1c c  #c  !*c $!&!
!.c The recreation facilities

include pool tables, chess tables and coffee bars. Companies also have well equipped

gyms, personal trainers and showers at facilities.

c #!
c #.cThe main purpose of the corporate credit card is enable the

timely and efficient payment of official expenses which the employees undertake for

purposes such as travel related expenses like Hostel bills, Air tickets etc.
7.c &&(&c  c 2&
. Cellular phones and/ or Laptop are provided to the

employees on the basis of business need. The employee is responsible for the

maintenance and safeguarding of asset.

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cc *(&c %#!&c4-(".cSome of the BPO¶S provides

the facility for extensive health check-ups. For employees with above 40 years of age,

the medical check-up can be done once a year.

9.c  .cMany companies provide loan facility on threecdifferent occasions employees

are provided with financial assistance in case of a medical emergency. Employees are

also provided with financial assistance at the time of their wedding. And, the new

recruits are provided with interest free loans to assist them in their initial settlement at

the work location.

10.c #(
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. Many BPO companies have this policy to develop the

personality and knowledge level of their employees and hence reimburse the expenses

incurred towards tuition fees, examination fees, and purchase of books subject, for

pursuing MBA, and/ or other management qualification at India¶s top most Business


11.c$% c /#c ! 

!+. In many BPO companies they have plans for,

performance based incentive scheme. The parameters for calculation are process

performance i.e. speed, accuracy and productivity of each process. The pay for

performance can be as much 22% of the salary.

!%.c The main objective of the flextime policy is to provide opportunity to

employees to work with flexible work schedules and set out conditions for availing

this provision. Flexible work schedule are initiated by employees and approved by

management to meet business commitments while supporting employee personal

13.c!$c #: The factors on which flexi time is allowed to an employee include: child

or parent care, health situation, maternity, formal education program.

14.c&6!/&c&'c5 $!
.cIts main objective is to provide flexibility to the employees

to plan a tax-effective compensation structure by balancing the monthly net income,

yearly benefits and income tax payable. It is applicable of all the employees of the

organization. The salary consists of basis, DA and Conveyance Allowance. The

Flexible benefit plan consists of: House Rent Allowance, Leave Travel Assistance

Medical Reimbursement, and Special Allowance.

15.c *(&c 
c (&
(&c *%.c The companies organizes

cultural program as and when possible but most of the times, once in a quarter, in

which all the employees are given an opportunity to display their talents in dramatics,

singing, acting, dancing etc.

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(IT) industry has become of the most robust industries in the word. IT, more than any other

industry or economic facet, has an increased productivity, particularly in the developed

world, and therefore is a key driver of global economic growth, Economic of scale and

insatiable demand from both consumers and enterprises characterize this rapidly growing


The information Technology Association of America (ITAA) explains ³information

technology´ as encompassing all possible aspect of information system based on computers.

Both software development and the hardware involved in the IT industry include everything

from computer system, to the design, implementation, study and development of IT and

management systems.

Owing to its easy accessibility and the wide range of IT products available, the demand for IT

services has increased substantially over the years. The IT sector has emerged as a major

global source of both growth and employment.

The Indian software industry is remarkable is a number of respects. It is service rather than

product oriented; heavily export oriented, and is largely managed by professional and

entrepreneurial management. Also, domestic market experience and expertise appears to have

very little benefits for successful importees. Although the industry has grown is spectacular

fashion, sustaining this performance will pose a number of challenges. In order to counteract
the widely reported shortages of skilled software professional and the possible competition

from other low wage, human capital rich countries, Indian firms are trying to move up the

value chain by acquiring deeper knowledge of business domains and management capability,

and to reduce costs by developing superior methodology and tools. Whether firms will

succeed will depend critically on their management skills and willingness to invest along a

number of dimensions. From a social perspective, the disconnect between domestic and

export markets is a major challenge, but one that the growing diffusion of computers and the

improvement of the communication infrastructure should make easier to confront. In the end,

the greatest impact the software industry is likely to have on the Indian economy is indirect,

in its role as an exemplar of the new business organizational from and as an inspiration to

other entrepreneurs.

Technological revolutions sometimes bring unexpected opportunities for countries. India, a

relative laggard among developing countries in terms of economic growth, seems to have

found such an opportunity in the IT revolution as an increasingly favored location for

customized software development. India¶s success at software has led to speculation about

whether other developing countries can emulate its example, as well as weather this

constitutes a competitive challenge to software industries in the developed world.

The Indian software industry has attracted a disproportionate amount of interest as a source of

software. Its $4 billion software revenues in 1998-99 are just a tiny fraction of the estimated

world software market of over $300-500 billion. Most of impressive of all, the industry has

grown at over 50% per year over the last five or six years, and if current trends persist,

software exports may account for a full quarter of Indian exports within the next five years.
Software development can be broadly categorized into custom developed software and

packages or generic software products. Software companies providing customized software

concentrate on particular vertical market segments or domain areas, like retail, banking and

manufacturing. Software products may be targeted to a vertical segment or may cut across

segments, but rarely to a specific user. Information technology consultants, such as Anderson

Consulting, provide ³Solutions´, which may involve some combination of custom developed

software and commercial off- the- shelf software and hardware products.

The Indian software industry consists of a large and growing number of firms: Using

NASSCOM membership as a measure, the number of Indian software firms has grown from

around 430 in 1996-97 to over 620 in 1997-98. Many of these firms entered the industry

during or just before the economic liberalization, computer hardware. Tata Consultancy

Services, (TCS) was the first firm to agree to export software in return for being able to

import hardware, in 1974. TCS currently the largest Indian software firm employs around

10,000 people. Entry barriers were low because firms could start small, since initial

investments required were fairly small, little more than office space and communication

facilities. With the growing need for maintenance services many firms began by providing

these services, often by sending software programmers to the client on a temporary basis.

The domestic market has a higher proportion of revenues from the sale of software packages

and products. Whereas product accounted for nearly 40% of the domestic market 5, they

account a little fewer than 10% of exports. Over 80% of exports are software services

including custom software development, consultancy and professional services. The second

difference between the domestic and export sectors relate to the stages of software

development as described earlier. Indian firms usually provide low-level design, coding and
some types of testing services for export. For domestic clients the industry provides a wider

range of services that usually spans the entire lifecycle of software development. Some of the

domestic projects are much larger and more challenging than export projects, with the screen

based trading system for the Bombay stock Exchange and the Reservation System for

Railways, both by executed by CMC, an experienced public sector firm, being two recent

examples. Information Technology is one of the most important industries in the Indian

economy. The IT industry of India has registered huge growth in recent years. India¶s IT

industry grew from 150 million US Dollars in 1990-1991 to a whopping 50 billion UD

Dollars in 2006-07. In the last ten years the information Technology industry in India has

grown at an average annual rate of 30%.

The liberalization of the Indian economy in the early nineties has played a major role in the

growth of the IT industry of India. Deregulation policies adopted by the Government of India

have led to substantial domestic investment and inflow of foreign capital to this industry. In

1970, high import duties had forced IBM to leave India. However, after the early nineties,

many multinational IT companies, including IBM, have set up their operations in India.

During the ten year period 1992-2002, the Indian software industry grew at double the rate as

the US software industry.

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>c Abundant availability of skilled manpower

>c Reduced telecommunication and internet costs

>c Reduced import duties on software and hardware products

>c Cost advantages

>c Encouraging government policies

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>c Tata Consultancy Services (TCS)c

>c Infosysc

>c Wiproc

>c IBMc

>c HP

>c HCL

>c Cognizant Technology Solutions (CTS)

>c Patni

>c Satyam



A large fraction of the domestic software industry consists of resale of software packages

developed by foreign, principally US, firms, thus overstating the extent of software written

for the domestic market. On the other hand, there is a great deal of in-house software written

by users, especially large Indian firms that not being captured by these figures. A number of

Indian software firms have also developed software firms have also developed packages

aimed at the domestic market. However, with very few exceptions, these packages have not
been very successful is tempting to point to weak intellectual property rights as a culprit for

the failure of Indian firms to develop successful packages, our interviews suggest that at least

as important, if not more, has been the experience, especially design and marketing

experience, necessary to produce a successful product.

Firms that had domestic experience with consulting do not appear to device any advantage

from it in the export market. Given the simpler and more routine tasks involved in current

software exports, the sophisticated capabilities and expertise that firms had developed from

serving domestic customers have not been of great value to them in the export market.


In just about decade and a half, India has emerged as a major exporter of software service of

international economy. This remarkable feat has been accomplished through the

extraordinary growth of Indian software: between 1995 and 2000 also sales grew at a

compound rate of over 50%. Despite all the fears that market for Indian software would

surely collapse with the recession in the US software growth held on at slower rate of growth

and the industries diversified into other geographical and related markets. In the last two

years the most phenomenal boom in the growth has come from the IT enabled services

(ITES) sector which grew at 70% in 2001-2002. This sector was estimated to employ about 2,

00.000 persons at the end of March 2005. As we have seen, Indian software consists

primarily of software services. The activities carried out by most firms in India are essentially

maintenance tasks for application on legacy systems, such as IBM mainframe computers,

development of small applications on legacy enhancements for existing system, migration to

client- server systems, often referred to as porting or re-engineering. Table-5, displaying

results from our survey, shows that application solutions are that most common type of
export followed by reengineering (also called porting) and conversion projects, such as Y2K

projects. Although Y2K projects were an important source of revenue, most of the leading

Indian software firms have limited their dependence on such projects. Table-6 shows that the

US accounts for over half of all export revenues (58% in 1997-98), compared with 21% for

Europe and 4% for Japan. Managers at most of the US firms we interviewed agreed that the

type of work outsourced was neither technologically very sophisticated nor critical to their

business. Requirement analysis and high- level design is typically done either in house or by

US based consultants.

Although competition from other countries such as Philippines and Europe cited in the press,

as Table -6 shows, most software exporters indicate that their main competitions are located

either in the US or in India itself.

Many MNCs have set up liaison offices and subsidiaries as well. Increasingly, however, the

objective is to use India as a place for software development as well, rather than merely as a

place to sell. Some companies have established, or are in the process of doing so, software

development centers in India, and are exporting packages or components of systems to other

countries from India. The work being done at these development centers is fairly

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It is widely believed that the key to the success of the Indian software exports in the supply

trained, low cost software professionals. Table-7 shows that estimated wage costs in India

were about 1/3rd to 1/5 th of the corresponding US levels for comparable work. The size of

the talent pool complements the cost advantage.

In 1997, the total number of software professionals in India was estimated to be about

160,000 compared with 140,000 in the previous year. Most of the leading firms recruit either

engineers or students with degrees in mathematics or science. Many also have in-house

testing and training program. Responses to our questionnaire survey indicate that 80% of the

software professionals employed had engineering degrees, while 12% had diplomas from

private training institutes. India graduates about 155,000 engineers of various sorts, and

another 200,000 diploma holders per year. About 60,000 of these enter the IT sector. Despite

the apparently large stock of human capital in India, NASSCOM claims that by year 2008,

demand will outstrip supply.

Despite paying substantially above Indian standards, virtually all firms find in difficult to

retain talented professionals. A very large fraction of the over one hundred firms I surveyed

mentions employee turnover and difficulty in attracting suitable employees as a major

problem and so does the following table-8 shows:

There are a number of public sector and industry initiatives to increases the supply of

software professionals. A number of engineering colleges have increased their emphasis on

information technology and, in some cases, have started IT management programs. A number
of private sectors, for profit, institutes providing graduate level education, such as joint

venture between the Mahindra Group and British Telecom to teach methods and techniques

for software development, are coming online.

This phenomenal growth in IT industry in India has been possible due to availability of

highly competent and qualified and cost competitive professionals. There unique advantages

have led to Indian IT industry becoming suppliers of software to a large no. of fortune 500

companies. Moreover, the Indian IT professionals have been getting opportunities to work on

site with a no. of those to graded companies. By working with the best of the companies in

different parts of the world, Indian IT professionals have learnt a lot and in terms of

professional capabilities are on the par with IT professionals anywhere in the world. This has

created a massive demand for Indian IT professionals far exceed the demand. All this has

thereby created a dearth of qualified and competent IT professionals in our country.

Therefore the task of % *! *c  #c 

! ! *c $! &c has become a very %&6c

 #c#% #! * operation for Indian IT companies. This task has as of now become a major

cause of concern and a factor, which needs for an explanation.

Tata Consultancy Services Limited (TCS) is the world-leading information technology

consulting, services and business process outsourcing organization that envisioned and

pioneered the adoption of the flexible global business practices that today enable companies

to operate more efficiently and produce more value.

We commenced operations in 1968, when IT services industry didn¶t exist as it does today.

Now, with a presence in 34 countries across 6 continents, & a comprehensive range of

services across diverse industries, we are one of the world¶s leading Information Technology

companies Seven of the Fortune Top 10 companies are among our valued customers.

We are part of one of Asia¶s largest conglomerates ± the Tata Group- which, with its interests

in Energy, telecommunication, Financial Services, Chemicals, Engineering & Materials,

provides us with a grounded understanding of specific business challenges facing global



HCL Enterprise is a leading Global Technology and IT enterprises that comprises two

companies listed in India ± HCL technologies & HCL info systems. The 3- decade-old

enterprise, founded in 1976, is one of India¶s original IT garage start-ups. Its range of

offerings span Product Engineering, Technology and Application Services, BPO,

Infrastructure Services, IT hardware, Systems Integration, and distribution of ICT products,

The HCL team comprise approximately 42,000 professionals of drivers nationalities, who

operate from 16 countries including 300 points of presence in India. HCL has global

partnerships with several leading Fortune 1000 firms, including leading IT and Technology


HCL Technology is one of India¶s leading global IT services companies, providing software

IT solutions, remote infrastructure management services and BPO. Having made a foray into

the global IT landscape in 1999 after its IPO, HCL Technologies focuses on transformational

Outsourcing, working with clients in areas that impact and re-define the core of their
business. The company leverages an extensive global offshore infrastructure and its global

network of offices in 16 countries to deliver solutions across select verticals including

Financial Services. Retail & Consumer, Life Sciences Aerospace, Automotive,

Semiconductors, Telecom and MPE (Media Publishing & Entertainment). For the quarter

ending 31 st December 2006, HCL Technologies, along with its subsidiaries had revenue

(TTM) of US $ 1.155 billion (Rs. 5220 cores) and employed 38,317 professionals.


Quark was founded in Denver, Colorado in 1981. Named after the particle proposed as the

building block for all matter, the goal was to create software that would be the platform for

publishing. Quark Xpress made an immediate impact when it was released in 1987. Desktop

publishing was in its infancy, and most publications were produced mechanically. Quark X

press introduced precision typography, layout, and color control to the desktop computer, and

delivered those feature to designers at a fraction of the cost of proprietary typesetting

systems. There are now more than three million Quark X press users worldwide. In 1988,

Quark began international operations with the establishment of offices across Europe and the

Far East. Quark maintains service, support and development offices in France, Germany,

India, Japan, Switzerland, the United Kingdom and the United States, Customers in more

than 100 countries worldwide rely on Quark product to create, design and manage their

documents ± from newspapers, magazines and books to catalogs, brochures, packaging and

online material.

Today, Quark maintains its industry leadership with a product line that ties together

traditional print publishing with enterprise content management, personalization, and tools

for creating collaborative, cross- media workflows.

With Quark Xpress, we helped spark the revolution in desktop publishing. With the Quark

suite of enterprise publishing software ± Quark Publishing System, Quark Content manager,

and Quark Dynamic Document Server ± Quark is paving the way for custom publishing in a

multiple ± channel environment. The company¶s industry ± leading design, is publishing in a

multiple ± channel environment. The company¶s industry ± leading design, publishing.

Personalization and content management software let publishing efficiently create content

once and deliver it anywhere, now. Quark is headquartered in Denver, Colorado. The

company is privately held.

NIIT, the global IT learning Solutions Corporation, is known for its pioneering work in the

field of IT education and training. Our strong research orientation has helped us continuously

innovate in the areas of instructional design methodologies and curricula development that is

cutting edge. NIIT¶s vast education delivery network spread over 30 countries in the

America, Europe, Asia, and Middle East Africa and Australia/ Oceania, blends classroom and

online learning. The company provides a comprehensive education environment to

individuals and enterprises offerings training that is the varied needs of audiences with

diverse backgrounds.


 can be defined as the search for knowledge or any systematic investigation to

establish facts. The primary purpose for applied research as opposed to basic research is

discovering, interpreting and the development of methods and systems for the advancement

of human knowledge on a wide variety of scientific matters of our world and the universe.

Research can use the scientific method, but need not do so.

!$!c c relies on the application of the scientific method, a harnessing of

curiosity. This research provides scientific information and theories for the explanation of the

nature and the properties of the world around us. It makes practical applications possible,

Scientific research is founded by public authorities by charitable organizations and by private

groups, including many companies, Scientific research can be subdivided into different

classifications according to their academic and application disciplines.

!&ccis embodied in the scientific method.

The goal of the research process is to produce new knowledge, which takes three main forms

(although as previously discussed, the boundaries between them may be obscure.)

c Exploratory research, which structures and indentifies new problems

c Constructive research, which develops solutions to a problem

c Empirical research, which tests the feasibility of a solution using empirical evidence \

the research room at the New York Public Library, an example of secondary research

in progress.
Research can also fall into two distinct types:

c Primary research

c Secondary research

In social sciences and later in other disciplines, the following two research methods can be

applied, depending on the properties of the subject matter and on the objective of research:

c Qualitative research

c Quantitative research

#&*'ccan be:

1.c ³The analysis of the principals of methods, rules and postulates employed by a

discipline ³the systematic study of methods that are, can be or have been applied

within a discipline´.


a  may be a description of process, or may be expanded to include a

philosophically coherent collection of theories concepts or ideas as they relate to a particular

discipline on field of inquiry methodology may refer to nothing more than a simple set of

methods or procedures, or it may refer to the rationale and the philosophical assumptions that

underline a particular study relative to the scientific method. For example, Scholarly literature

often includes a section on the methodology of the researchers.


Collect the data through the secondary research. Secondary research through magazines,

books, journals, internet etc.

Secondary research occurs when a project requires a summary or collection of existing data.

As opposed to data collected directly from respondents or ³research subjects´ for the express

purposes of a project, (often called ³empirical´ or ³primary research´) secondary sources

already exist.

These secondary sources could include previous research reports, newspaper, magazine and

journal content and government and NGO statistics, Sometimes secondary research is

required in the preliminary stages of research to determine what is known and what new data

is required, or to inform research design. At other times, it may make be the only research

technique used.

A key performance area in secondary research is the full citation of original sources, usually

in the form of a complete listing or annotated listing.

 &c c &c4 7 cc!
 &c #'c" c

Secondary research is research already published, and is the cheapest from of research

because the data already exists for your acquisition. Secondary research can be split into

internal and external research.

Internally an organizational has access to a wealth of information, which can be a useful tool

for decision making for managers. Information available may assist the organization in

discovering why sales are decreasing why customers are not satisfied, customer usage rate

and so on sources of internal research may include:

>c National product sales.

>c Regional product sales.

>c Customer usage rates.

>c Guarantee cards.

>c Customer comments or complaints.

>c Sales people, research and development staff.

>c Past research conducted.

Clearly as this information can be generated internally the only cost implication will be of

staff time obtaining the data.

 &c #'cc

Source of external secondary data include:

Specialist marketing reports i.e mintel

Industry magazines

Chamber of commerce

Government statistics.


Statistics agencies

Trade associations

General business publications

Magazine and newspaper articles

Annual reports

Academic publications

Library source

The two major advantages of using secondary data in market research are time and cost


>c The secondary research process can be completed rapidly ± generally in 2 to 3 week.

Substantial useful secondary data can be collected in a matter of days by a skillful


>c When secondary data is available, the researcher need only locate the source of the

data and extract the required information.

>c Secondary research is generally less expensive than primary research. The bulk of

secondary research data gathering does not require the use of expensive, specialized,

highly trained personal.

>c Secondary research expenses are incurred by the originator of the information.

>c Limitations of secondary research.

It is easy to find and collect secondary data, however, you need to be aware of the limitations

the data may have and the problems that could arise if these limitations are ignored.

1.c Secondary data can be general and vague and may not really help companies with

decision making.

2.c The information and data may not be accurate. The source of the data must always be


3.c The data may able old and out of date.

4.c The sample used to generate the secondary data maybe small.



³A reduction in the number of employees through retirement, resignation or death´

Talking about the problem of attrition in India, Pramod Bhasin, CEO, Genpact said ³Attrition

is like a disease in the country, where the employees are always leaving for something better

Today in the voice segment for BPOs we are seeing attrition rate as high as 30 percent.´

In the 1970 & early µ90s¶, people still talked about ³lifetime employment´ and a career within

a company. Starting in late 90s, the pendulum started swinging. The unspoken employee &

employer contract was broken, as companies across industries restricted operations and

reduced headcount. People then started talking about ³Owning their own careers´, collecting

experiences and skills in various jobs at various companies to enhance their ongoing


By the year 2000, due to a growing imbalance between an expanding demand or talent and

limited supply, we reached other extreme in the pendulum¶s swing. Employees became ³free

agents´, more concerned, some would argue, with their own employability and personal gain

than with long-term job security ± or employer¶s success.

IT is well known the world over that India¶s main competitive advantage is software and

services are its abundant, high quality and cost effective pool of skilled knowledge workers.

Today, India is a magnet for software client because of its vast resource of skilled manpower.

The most immediate concern facing the industry is the increasing levels of attrition. Other

than the natural rate of the attrition, ³poaching of employees´, ³burn out ´ and high stress
environments are causing an increasing churn rate. Managing attrition is becoming

increasingly important, not only because knowledge professionals are the lifeline of a service

oriented industry, but also staffing costs are one of the largest expenses regularly charged

To the budget of a company in the IT/ITES sector. When one counts salaries, benefits,

bonuses, training and other personal costs, companies invest a great deal of resource in their


Thus, attrition becomes a two-fold issue, one that¶s cost related and the second, retaining

much needed and often, experience talent.

Now the solution lies with another shift. The pendulum is to make settle into a new

equilibrium as companies and the people who for them enter into a new partnership based on

mutual benefits. As companies recognize the role & importance of their people assets, they

are getting creative about how they attract and retain those assets.

In this cut throat completion it¶s the HR greatest challenge for retaining employees. Attrition

is one time considered to be a business cost but it¶s actually a loss when it comes in terms of


New motivational theories need to be established on the part of the Retention Strategy. Apart

from psychological & safety needs, the generation X and Y needs more emphasis on other

needs. More organization HR creates portraits their organization as heaven to the new joiners

and when it comes in front it is not less than hell. Motivational training is still to evolve in

this industry. Today¶s outlook of an employee towards the organization is ³If you are looking

for loyalty, buy a dog´ I have a life´. c

 5 c  c c

For all this a much more work to done by all HR managers. As the challenges are growing

the treats of loosing business is increasing. And without proper, effective and efficient

workforce no organization can achieves that. Needs innovative approaches and thinking

which is framed on courage. Hence it is said that.

³If you are going to have ideas ahead of the times (i.e., creative), you will have to get used to

living with the fact that most people are going to believe you are in the wrong´ Bruce Lloyd.

The cost advantage in India is getting the challenge due to this cost attrition. Thus managing

attrition is not just a nice thing to do in Indian call centre it¶s a route to their SURVIVAL.

HR is hence the mirror of the company¶s both industry & financial/ business prospective.

! c!c&(&

Attrition = 100* (total resigns per month)/ (Total no+ New Joiners- Total Resigns) It is

difficult to control the attrition rate because this depends on many factors. If one employee

gets job elsewhere with high pay the present employer will not agree to this. There is a

³mindset´ that will be prevailing against each employee by the management and they will not

budge and blue eyed boys alone will be rewarded. Not all will have the red carpet treatment.

Hence people need to quit. Some are always considered for US and UK travel where others

are neglected and not considered. Thus the employee feels frustrated and leaves.
The management should be open and promote open culture in letter and sprit. It is not just

HR department but they should practice in it day to day and ensure that cause of attrition is


Companies don¶t care and they always want to have their say in any aspect without

considering the employee¶s views and this definitely increase the attrition. Senior

management should bring in HR professionals who are seasoned and not with mere MBA

degree since people should understand the perceptions of employees in-depth before decision

making. This onus is definitely on the senior management and unless the CEO brings proper

HR person this problem is like a virus and bound to continue and spread.

Reminder to CEO to have a good HR team and have a pragmatic approach the case analyzes

the management of human resource in the IT industry with a special emphasis on the factors

responsible for the high rate of employee turnover in the industry. The IT industry, being

knowledge ±based sector, requires a workforce that is highly competent. Also, the demanding

nature of work in the industry requires effective strategies to retain its workforce. With

growing demand for Indian IT professionals overseas and with multinational IT companies

establishing their offices in India, retention becomes very difficult. To handle the challenge,

companies have started using a variety of retention tools such as ESOPs and RSUs. They

have also taken other initiative like improving the work ±life balance of their employees,

encouraging learning and development, developing a positive organization culture, etc, to

retain their employees. The case examines the retention tools used by Indian IT companies to

combat attrition. It ends with the discussion on the challenges the Indian IT industry faces in

the future in view of the growing need to retain its talent pool.
  c   c

Strategic Business Futurists who speak on workforce and workplace trends, The Herman

Group focuses on issues related to employee Retention and Future Trends. Founded in 1980,

by Roger Herman, known as ³The father of Employee retention´.

To maintain a stable workforce, employers must deliberately engage in rotation activities.

These efforts range from re ±recruiting interviews to family activities and individualized

compensation packages. People need to feel wanted, valued, appreciated. They want to do

meaningful work and have some say in how their jobs are designed, managed and measured.

Today¶s employees want to be stable, but are often ³chased out´ by those who are more

concerned with power and position than with caring for people.

  c   cc3 c c c

Today¶s labor force is different. Supervisors must take responsibility for their own employee

repetition. If they don¶t they could be left without enough good employees. A wise employer

will learn how to attract and keep good employees, because in the long run, this workforce

will make or break a company¶s reputation.

New supervisors must be prepared to be collaborative, supportive, and nurturing of their

people. The old style of ³my ± way ± or- the - highway´ stale of management is a thing of the

past. Most new supervisors need training understand what it really takes to retain employees.
Employee retention involves being sensitive to people¶s needs and demonstrating the various

strategies in the five families detailed in Roger Herman¶s classic book on employee retention,

keeping Good People.

1.c Environmental

2.c Relationship

3.c Support

4.c Growth

5.c Compensation

Employee retention takes effort, energy and resources«and the results are worth it.

! c

As we have seen, while the annual turnover rate can be a useful statistic it doesn¶t tell you

that much. Combining it with the retention rate gives you more insight into what is really

happening in the organization. Retention rate is always based on a fixed period of time. For

instance, a one year retention rate calculates the percentage of individuals who are still with

the organization after one year.

One year retention rate = Number of specific people hired in previous year (x - 1) still

employed in current year (x) + people hired in previous year (x -1)* 100

For example:

Oc In 2004, the company hired 12 people

Oc In 2005, 8 of those are still employed

Oc In 2006, 6 of those are still employed

Oc In 2007, 4 of those people are still employed

Oc Retention rate calculations:

Oc 1 ±year retention rate = (8 + 12)* 100 =67 Percent

Oc 2 ± Year retention rate = (6 + 12)* 100 = 50 Percent

Oc 3 ± Year retention rate = (4 +12)* 100 =33 Percent

Based on this information, we see that the organization lost four people the first year, two

more the second year, and two more the third year. However, even though the organization

lost half as many people in year three as it did in year one, the three ± year retention rate is

Considerably lower than the one year retention rate.

This apparent contradiction points out an important characteristic of retention rates. The

retention rate for a particular time period (for example, three years) can never be higher than

it was the previous year. It could be the if no one same if no one left between years two and

three, but it cannot be higher. In other words, organizations can¶t¶s make up for what¶s

initially lost; it will always trend down. Therefore a low one ±year retention rate creates

problems that last well into the future.

9 c   c c  c   c

Retaining employees and developing a stable work force involves a two ± step process ±

Understanding why employees leave in the first place, and developing and implementing

strategies to get them to stay.

Employees leave jobs for:

1.c Lack of challenge

2.c Lack of autonomy

3.c Better salary.

4.c Low growth potential.

5.c Lack of motivation.

6.c Feeling of isolation.

7.c Lack of recognition and stress.

8.c Management issue.

9.c Conflict between Generation X and Generation Y.

Overcoming these reasons requires the implementation of five distinct categories of retention


 strategies create and maintain a workplace that attracts retains and

nourishes good people.

   Strategies focus on how you treat the people and how they treat each


Strategies involve giving people the tools, equipment and information to get

the job done.

 Strategies deal with personal and professional growth.
 Strategies cover the board spectrum of total compensation, not just base

pay and salary.

  c  c

Selecting and retaining top notch staff is the key for business success. Talented people

continue to develop skills and increase their value to organization and to the customers are

the company¶s most important resource. How do you select and retain talented people? How

do you create an environment in which talented people continue to grow and contribute? The

primary elements of any plan to improve the quality of the staff you employ include

improving the quality of new hires, identifying and retaining superior employees and

developing employees (especially those with high potential for growth). A performance

development approach to providing job expectations and feedback will assist with this

process. At the same time you need to take hard look at underperforming staff members. Ask

whether each individual is in the wrong job. Determine whether you have provided specific

and clear requirements so the individual knows what you expect from him. Make sure you

have provided feedback against measurable goals and objectives so the person knows he is

not meeting expectation. Decide if a performance improvement plan will help the individual

contribute within the organization. If you have done your part to create an environment in

which an individual can succeed ± and the person is not succeeding - let the person go. Your

organization will be better off for his absence and the individual will have opportunity to

locate a job in which the can perform.

5. Select the right people in the first place through behavior ± based testing and c

competency screening. The right person, in the right seat, on the right bus is

the starting point.

6. Offer an attractive, competitive, benefits package with components such as life

insurance, disability insurance and flexible hours.

7. Provide opportunities for people to share their knowledge via training

sessions, Presentations, mentoring others and team assignments.

8. Demonstrate respect for employees at all times. Listen to them deeply; use

their ideas; never ridicule or shame them.

9. 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.

10. Enable employees to balance work and life. Allow flexible starting times, core

business hours and flexible ending times.

11. Involve employees in decisions that affect their jobs and the overall direction

of the company whenever possible.

12. Recognize excellent performance, and especially, link pay to performance.

13. 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.)

14. Recognize and celebrate success. Mark their passage as important goals are

15. Staff adequately so overtime is minimized for those who don¶t want it and

people don¶t wear themselves out.

16. Nature 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.

17. Provide opportunities within the company for cross- training and career

progression. People like to know that they have room for career movement.

18. Provide the opportunities for career and personal growth through training and

education, challenging assignment and more.

19. Communicate goals, role and responsibilities so people know what is expected

and feel like part of the in ± crowd.

20. Encourage employees to have good, even best, friends, at work.

21. Conduct exit interviews with employees who resign.

c-:c( #%
&c  cc %&'c! **%

cc 6

Every day, new hires enter organizations with a wide range of illusions and unrealistic

expectations. Some stay and adapt, some disengage and stay and many disengage and leave.

At the root of their disenchantment is an expectation that was not met. In some cases, the

employee¶s expectations may have been unrealistic and in some cases, they were not. When

all is said and done, it doesn¶t matter. Quite simply, unmet and unrealistic expectations both

cost a business untold millions of dollars. You, may never see an exit survey with a checklist

of reasons for leaving that includes the choice ³unmet expectations´ but it many well be the

number one reason employees leave. The more clearly an employee understands his or her

own expectations, the higher the probability of a match in expectations. Many new

employees fresh out of collage, however, are only dimly aware of their needs and desires.

That problem is compounded when the organization is also not clear about what it expects,

which is often the case.

7 c</c #c c

Research over the last 25 years has shown that 80 percent of workers feel they are not using

their strengths on a daily basis. When you consider it closely, though it¶s almost supervising

that 20 percent of the working population does get to use their strengths daily. The key

missing ingredient in so many companies is management¶s lack of passion for getting the

right people in the right jobs. Why is this so? While many obstacles come to mind, the

greatest of them all is a basic lack of understanding about the nature of human talent. Some

managers believe employees are interchangeable parts to be moved into whatever slots most
need to be filled. Others believe skills and knowledge are more important than talent. Those

two Misconceptions often lead to short ±term solutions that ignore the long ± term success

that can result from focusing on properly matching employee talent with appropriate jobs.


&c! *c #c$#/4 c

Performance coaching and feedback are essential for employees because they help employees

answer four basis questions:

1.c cc7c*! *ccc% ',c

2.c 37cc*! *c

3.c 37c#c'(c6

4.c 37c%cc#! *,c

The answers to these questions constitute much of what gives meaning to an employee¶s

efforts. Companies need to give feedback and coaching to make sure that employee¶ efforts

stay aligned with organizational goals and the expectationals of direct supervisors. This

alignment is a necessary precondition for employee engagement.

 c-?c&! *c#+&(#c #c( * !0# c

Everyone wants to feel important, yet many organizations manage to make their people feel

quite the opposite. It could be seen as a lack of simple appreciation, or a greater focus put on

making numbers and not valuing employees might feel like a mere number ± that no one in

any kind of position 

The dynamics of manager ± employee relationship are complex, but in the best ± case

scenarios, with a good faith effort and the right approach to coaching employees can be re-


c$c($(&c! *c

There are five essential steps in the process of being a successful coach.

c;: Get the employees agreement that a problem exists.

c=: Mutually discuss alternative solutions.

c>: Mutually agree on action to be taken to solve the problem.

c?: Follow up to measure results

c @: Reinforce any achievement when it occurs. This process is focused on producing

positive behavior going forward, not for assigning blame or motives for past behavior.

c #c#+ %
( !

So much has changed in the world wide business climate and in the way business now

operate that the impact of those changes on the careers of individuals working in

organizations needs to be acknowledged. Downsizing has changed the loyalty contract

between employee and employer and it has also heightened the level of stress over job

security. Focusing on short term bottom line results has created pressure on management to

reduce costs and push workers to do more with less. Productivity gains have come at cost ± in

reduced job satisfaction stalled job creation and stagnant careers contract has not materialized

in most organizations particularly ones that value control over autonomy and self ± direction.

Most employers of choice, however, communicate clearly that employees must take the
initiative in their own career development. They also give their people the tools and training

needed to accomplish this, enabling them to be the best they possibly can be.

Above them listens to them or even knows they exist, much less work there. Managers who

do show some appreciation might not show it in a timely manner or the rewards given might

have little if anything to do with what the employees truly find valuable.

c$%c+74c #c4c8&!$c%/& c

It is sobering to consider all the things there are to be stressed about in the workplace

overwork, personality conflicts, forced overtime, disorganized supervisors, gossip,

harassment, prejudice and so many others. Workers get stressed when they must sacrifice

family time to work extra hours, when they must deal with the insensitivity of some co ±

workers and when they really need a personal day but cannot take one because their company

does not offer them. These are the people who consistently work late, work through lunch,

work through sickness, take work home and express frustration in myriad unhealthy ways,

Company leaders must determine whether their organization¶s culture is unhealthy, or even

toxic. When you force workers into choosing between having a life and a career, your

organization has a toxic culture. Workers are not merely resources: They are people. You

should be empowering them, not attempting to control them, Address these things, this

culture or your employees will by leaving.

c #c $!# cc !c#c

Senior leaders are challenged with creating a culture of trust and integrity that strengthens the

bonds of employee engagement. While this challenge is shared by all managers and

employees, it is incumbent on take the opportunity to engage and inspire your people by

enacting policies that show you trust them. If you have an authoritarian, micromanaging

style, get rid of it. When you give that kind of power away, you increase the collective power

of the organization to innovate and meet new challenges thus enhancing your own power in

the long run.

cc c+! *c

1.c Calculate the cost of person who fills in while the position is vacant. Calculate the

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. Calculate the lost productivity at 100% if the position is completely vacant

for any period of time.

2.c Calculate the 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.

3.c Calculate the cost of manager who has to understand what work remains and how to

cover that work until a replacement is found.

4.c Calculate the cost of training your company has invested in this employee who is


5.c Calculate the impact on departmental productivity because the person is leaving. Who

will pick up the work whose work will suffer what departmental deadlines will not be

met or delivered late?

6.c Calculate the cost of lost knowledge skills and contracts that the person who is

leaving is taking with them out of your door, Use a formula of 50% of the person¶s

annual salary for one year of service, increasing each year of service by 10%.

7.c Subtract the cost of the person who is leaving for the amount of time the position is


1.c The cost of advertisements, agency costs; employee referral costs; internet posting


2.c The cost of the internet 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 hour per position.

3.c Calculate the cost of the various candidate pre-employment tests to help assess a

candidate¶s skills, abilities, aptitude, values and behaviors.

! ! *c

1.c Calculate the cost of orientation in terns of the new person¶s salary and the cost of the

person who conducts the orientation. Also include the cost of orientation materials.

2.c Calculate the cost of departmental training as the actual development and delivery

cost plus the cost of the salary of the new employee. Note that the cost will be

significantly higher for some positions such as sales representatives and call center

agents who require 4-6 weeks or more of classroom training.

3.c Calculate the cost of the person who conducts the training.

4.c Calculate the cost of various training materials needed including company or product

manuals computer or other technology equipment used in the delivery of training.



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


1.c Upon completion of whatever training is provided the employee is contributing at a

25% productivity level for the first 2 -4 weeks. The cost therefore is 75% of the new

employee¶s full salary during that time period.

2.c During weeks 5 -12 the employee in contributing at 50% productivity level. The cost

is therefore 50% of full salary during that time period.

3.c During weeks 13- 20 the employee is contributing at 75% productivity level. The cost

is therefore 25% of full salary during that time period.

4.c Calculate the cost of mistake the new employee makes during this elongated



1.c Calculate the 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, telephone hookups, cost of establishing email accounts. Or leasing other

equipment such as cell phones, automobiles.

2.c Calculate the cost of a manager¶s time spent developing trust and building confidence

in the new employee¶s work.


1.c Calculate the revenue per employee by dividing total company revenue by the average

number of employees in given year. Whether an employee contributes directly or

indirectly to the generation of revenue their purpose is to provide some defined set of

responsibilities that are necessary to the generation of revenue. Calculate the lost

revenue by multiplying the number of weeks the position is vacant by the average

weekly revenue per employee.

( +c

There are three main components associated with the cost of turnover.

Oc Staffing: In addition to the cost of recruiting and hiring the person initially the

organization must now spent a similar amount to hire the replacement.

Oc Vacancy: The period of time where that person isn¶t working in the company results

in lost productivity and potentially lost business.

Oc Training: Employees aren¶t 100 percent productive from the moment they start. So

it¶s necessary to invest time and resources for training orientation and development.

It¶s important to realize how much money is associated with these factors. And because these

isn¶t much that can be done to reduce the costs associated with these factors dramatically, the

most appropriate response is to reduce turnover itself.

Pure replacement cost estimates fail to cover the total impact of turnover on an organization.

For instance, factors such as lower morale, errors made by overburdened workers and the

inefficiencies of both the departing and replacement employees are hard to quantify and need
to be added into the total cost of turnover. High turnover can also spill over into other areas,

such as safety. In the manufacturing industry, high turnover often results in employees

without sufficient experience being used to train others. This may have an impact not only on

the quality of work but also on accident rates due to insufficient training and experience. This

inadequate training then snowballs, affecting all of those trained down the line.

Once you take all of these factors into consideration, the true cost of turnover is much larger

than the simple replacement cost described earlier. The Saratoga Institute, for instance,

estimates that when all of the direct and indirect costs are taken into consideration the

average cost of turnover is equal to one times the annual salary.


Calculating turnover rates is straight forward. However, looking at turnover by itself does not

provide the most meaningful information. The following describes some additional measures

that add insight into what is really going on with regard to turnover and retention of


Here is a simple formula to accurately calculate an organization turnover rate.

Turnover rate = Number of terminations per year + average active employees same year* 100

For example an organization that currently employees 100 employees hire 10 new employees

during the year.

Four employees leave during the year, regardless of when they were hired. The turnover rate

for this organization would be (4+110)* 100= 3.6 percent.

While turnover rate is useful index to compare to an industry benchmark, it fails to capture a

lot of information about the health of an organization. If in the example above the four people

who left the organization had been working there for 10 years, it¶s quite different than if the

four people had been there less than a year.

Perhaps a more telling calculation is the new hire turnover rate. This index focuses on how

many people were hired in one year and how many of those people left in subsequent year.

When employee leave within a short period of being hired, organization don¶t have enough

time to recoup their investment. The employees didn¶t provide enough output to make up for
the investment the organization put into them in terms of staffing, compensation and training.

A high new hire turnover rate is usually rated to issues with the selection process, such as

choosing candidates that aren¶t qualified or are a poor cultural or motivational fit. New hire

turnover rate = number of terminations within first year + Number of new hires* 100

For example, an organization that currently employs 100 employees hires 10 employees

during the year. Four employees leave during the year, with one of them being one of the 10

new hires. The turnover rate for the organization would be the same as before: (4 + 110) =3.6

percent. However, the new hire turnover rate would be (1 + 10) * 100 =10 percent.

In this example, we can say that new hire turnover rate is almost three times as high as the

standard turnover rate. While the sample size is very small, it may indicate problems in the

selection, orientation or training process.

 &(! c.c It is clear that there are massive costs associated with attrition or turnover and

while some of these are not visible to the management reporting or budget system, they are

none the less real. The µrule of thumb¶ appears to be very inaccurate indeed and, while it

depends upon the category of staff, it is probably better to estimate around 80% of salary as a

truer rule of thumb ± and this will be on the conservative side.

What does this mean? Well it means that if a company has 100 people doing a certain job

paid 25,000 and that turnover or attrition is running at 10% the cost of attrition is:

(Total staff x attrition rate %) x (annual salary x 80%)

. 100 staff at 10% attrition means 10 people leave and are replaced each year.

. A replacement cost of 80% of salary of 25,000 means the cost of each replacement is


. The cost of turnover is therefore 10 x 20,000 or 200,000 a year.

( +c( 
! &!
'c+c$B( 'c

Up to this point we have looked at measure of how many people are leaving (turnover), how

many are leaving within the first 12 months (new hire turnover), and how long people are

staying (retention rates). It¶s also important to look at who is leaving. If the majority of

turnover is among the better performing employees, that is a problem that needs to be

addressed quickly. If on the other hand, it¶s mostly the lower performers who are leaving, that

may not necessarily be a serious problem. In fact, according to author B.D. Smart, during the

1990s, a popular practice in many organizations was ³top grading´ a process by which they

routinely tried to eliminate the lowest 10 percent of performers to improve the quality of the

organization as a whole.

Focusing on the quality of those that are leaving vs simply the frequency with which they

leave is referred to as turnover functionality. A straightforward way to quantify turnover

functionality is to calculate a functionality ratio.

! &!
!cC (Number of poor performers who leave ± Number of good performers

who leave) = total number who leave.

For example:

* !0
! cc

100 employees

5 good Performers

10 poor performers leave

Turnover Functionality = (10 - 5) + 15 =5 + 15 = 33%

* !0
! c5c

100 employees

10 good performers leave

5 poor performers leave

Turnover Functionality = (5 - 10) + 15 = (-5) + 15 = - 33%

The ratio is designed such that if the ratio is positive (organization A), then more poor

performers are leaving; if the ratio is negative (Organization B), then more good performers

are leaving; and if the ratio is zero, them an equal number of good and poor performers are

As a general rule, if the ratio is positive, then turnover is not a problem in the organization. In

fact to the extent that the organization is able to replace the poor ± performing employees

with higher ±performing employees, it may be positive thing for the organization. On the

other hand, negative ratios; indicate potentially more serious problems that might be related

to systemic, cultural problems in the organization. Simply put, a negative ratio means that

better ±performing employees are leaving while poorer performers are staying.


Turnover costs for many organizations are very high and can significantly affect the financial

performance of an organization. Direct costs include recruitment, selection and training of

new people. Much time and expense go into this process. Indirect costs include such things as

increased workloads and overtime expenses for coworkers, as well as reduced productivity

associated with low employee morale. Estimated costs vary from organization to

organization, some as low as a few hundred dollars to as high as four times the annual salary

of the employee.

It has been estimated that, on average, it costs a company one ± third of new hire¶s annual

salary to replace an employee. Therefore, at minimum wage, the cost to replace an employee

is estimated at $ 3,700.

As we have seen, while the annual turnover rate can be a useful statistic, it doesn¶t tell you

that much. Combining it with the retention rate gives you more insight into what is really

happening in the organization. Retention rate always based on fixed period of time. For
instance , a one year retention rate calculated the percentage of individuals who are still with

the organization after one year.

One year retention rate = Number of specific people hired in previous year (x -1) still

employed in current year (x) + people hired in previous year (x 1)* 100

For example:

*In 2004, the company hired 12 people

* In 2005 8 of those people are still employed

*In 2006, 6 of those people are still employed

* In 2007, 4 of those people are still employed

Retention rate calculations:

*1 ±year retention rate = (8 + 12)* 100 = 67 percent

*2 ±year retention rate = (6 + 12)* 100 = 50 percentc

*3 ±year retention rate = (4 + 12)* 100 = 33 percent

Based on this information, we see that the organization lost four people the first year, two

more the second year and two more the third year. However, even though the organization
lost half as many people in year three as it did in year one, the three ±year retention rate is

considerably lower than the one ± year retention rate.

This apparent contradiction points out an important characteristic of retention rates. The

retention rate for a particular time period (for example, three years) can never be higher than

it was previous year. It could be the same if no one left between years two and three, but it

cannot be higher. In other words, organization can¶t make up for what¶s initially lost; it will

always trend down. Therefore a low one ± year retention rate creates problems that last well

into the future.


There are many potential causes for turnover. Area economic conditions and labor market

conditions affect general turnover rates and can be very difficult manage. However, certain

causes associated with turnover in any specific job or organization can be managed. These

include such things as non- competitive compensation, high stress, working conditions,

monotony, poor supervision, poor fit between the employee and the job, inadequate training

poor communications and organization practices.

There are a number of factors that contribute to employee turnover. We explore some of these

factors in more detail below.

1.c c %'c8 in exit interviews one of the most common reasons given for leaving

is availability of higher paying jobs. Some minimum wage workers report leaving one

job for another that pays only 50 cents an hour more. Obviously, in a better economy

the availability of alternative jobs plays a role in turnover, but this tends to be

overstated in exit interviews.

2.c c $% c $c

c * !0
! c -c an organization perceived to be economic

difficulty will also raise the specter of impending layoffs; workers believe that it is

rational to seek other employment.

3.c c* !0

! &c(&
(c 8cmuch has been written about organizational culture. It

is sufficient to note here that the reward system, the strength of leadership, the ability
of the organizations to elicit a sense of commitment on the part of workers and its

development of sense of shared goals among other factors, will influence such indices

of job satisfaction as turnover intentions and turnover rate.

4.c c 

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c /c 8c some jobs are intrinsically more attractive than

others. A job¶s attractiveness will be affected by many characteristics, including its

repetitiveness, challenge, danger, perceived importance and capacity to elicit a sense

of accomplishment. A job¶s status is also important, as are many other factors¶

5.c  &!

! c8cAnother factor is the unrealistic expectations and general

lack of knowledge that many job applicants has about the job at the time that they

receive an offer. When these unrealistic expectations are not realized the worker

becomes disillusioned and decides to quit.

6.c %*!c 8 Empirical studies have demonstrated that turnover is associated in

particular situations with demographic and biographical characteristics of workers.

But to use lifestyle factors (e.g. smoking) or past employment history (e.g. many job

changes) as an explicit basis for screening applicants, it is important for legality and

fairness to job applicants to verify such resume empirically.

7.c c  c 8c In addition to the factors listed above, there are also specific to the

individual that can influence turnover rates. These include both personal and trait

based factors. Personal factors include things such as changes in family situation, a

desire to learn a new skill or trade, or an unsolicited job offer. In addition to these
personal factors, there are also traits ± based or personality features that are associated

with turnover. These traits are some of the same characteristics that predict job

performance and counterproductive behavior such as loafing, absenteeism, theft,

substance abuse on the job and sabotage of employer¶s equipment or production.

These traits can be measured and used in employee screening to identify showing

lower probability of turnover.

( +c

! c

c ;.c Determine what motivates your individual employees. For most employees

money is not the key issue; relationship, fulfillment and recognition are.c

c =.c Notice how much recognition an employee needs. Some employees can go

years without praise, whereas others will leave after six months.c

c >.c Understand that many employees are motivated by their social network at

work. Encourage activities that make your employees feel like valued members of a


c ?.c Realize that incentives don¶t have to be huge. A surprise gift certificate for

the local ice cream parlor in the weekly paycheck will generate positive feeling.c

c @.c Make benefits more accessible. If your company reimburses tuition for

college courses, have a college administrator come to your company so employees

can find out about classes and programs.c

c A.c Consider telecommunicating job sharing and other flexible working


c:.cOffer profit sharing incentives to encourage longevity.c

cD.cCreate clear career paths at the company.c

For a company to develop a retention strategy, several steps must be taken. First they must

assess the current situation and measure the turnover rate in their company. Turnover is

calculated simply by dividing the number of annual terminations by the average number of

employees in the work force.

A company must also measure the cost of turnover, develop retention strategies, and plan for

some expected turnover and a changing workforce culture. Employers must recognize that

quality of work life is becoming more and more important to employees.

What initial steps can be taken to reduce turnover?

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!c  Does your company

have an ongoing career development program, tuition reimbursement or skills training

program? An investment in upgrading the workforce is one of the best investments a

company can make when looking at long ±term growth. Hiring the people that are a good

³fit´ with the culture of the organization ± meaning that their values, principles and clearly

match those of the company ± and then training as necessary will go a long way toward

ensuring employee loyalty and retention.

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solicit input and involvement from all employees and maintain a true ³open-door´ policy that

avoids closed ± door meeting. Employees are given an opportunity for advancement and are

not micromanaged. Intrinsic rewards are critical. Employees must believe they have a voice

and are recognized for their contribution. Remember that ³trust´ and ³loyalty´ is a two ± way

street. Does your company¶s culture encourage open communication and employee input?

!#1c#+&c c+&&c

! c 4*cThat includes not only base and

variable pay scales, but long ±term incentive compensation, bonus and gain ± sharing plans

benefits plan to address the health and welfare issues of the employees and non ± cash
rewards and perks as well. To be competitive in today¶s labor market, most companies find it

necessary and leave policies and investment and retirement plans. But what more could be

done that would be cost effective toward creating an employee ± oriented work environment?

Creativity in compensation and benefits can make quite a difference to the welfare of the

employee. A company should asses overall employee needs when addressing retention issues.

If employee welfare is a genuine concern what about child care? How much employee

absenteeism is attributable to not having a dependable babysitter? Although the costs and

liabilities involved in providing onsite day care can be prohibitive, perhaps a company could

subsidize childcare is some manner. Sometimes, just negotiating rates for your employees

with area childcare providers could be very helpful. Maybe some kind of a company match

would be possible. Household chore assistance is another possibility that is being used by

some companies.

Consider other options ± such as alternative work schedules or flexi time, or perhaps

preventative health care and wellnessc programs such as fitness center memberships ± as

possible cost effective benefits. Don¶t forget that perks or non ±cash rewards to recognize

exceptional performance can be critical. Service recognition, event tickets, trips and public

recognition can send strong messages to the public regarding company culture and values.

Simply examine the issue and needs of your employees and try to develop creative programs

to address these needs.

Although many costs associated with these suggestions may seem prohibitive, as well they

may be the company must evaluate the costs of current turnover, analyze the reasons for the
individual organization and develop strategies that in the long term are less costly than

continues turnover. Some of these suggestions may not be so costly in comparison.

Just a word of caution: Be fair and consistent in establishing compensation. Promote from

within if possible. Attempt to avoid bringing new people on board at a higher rate than

current employees. Policies to prevent discussion of wages simply do not work. Furthermore,

such policies are in complete opposition of ³open- door´ communications.

Although many companies use contract employees to address flections in business, working

side by side with someone who is making twice the rate of pay without any commitment or

loyalty to the company can be a real morale killer. Avoid this if at all possible!

If a company follows these steps and shows a genuine concern for the well being of your

employees, you may not have to pay the highest wages n town to have the lowest employee

The following seven steps suggest the major areas of intervention through which turnover can

be further reduced.

1.c Early intervention

2.c Skill intervention

3.c Leadership intervention

4.c Communication intervention

5.c Reward / recognition intervention

6.c Job enrichment intervention

7.c Selection intervention

Let¶s now touch briefly on each area in order to understand the theory and practical aspect

each of the intervention.

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The fact that large number of employees turnover in the first few months of

employment suggest that this is a critical time for helping people to adjust to their

new roles. Managing employee¶s expectation should actually start before

employment. Realistic job preview can help ensure that employees walk into their

jobs with their eyes wide open. Orientation program should not be a one day event,

they should at least span for first 2 months employment. A good orientation program

helps in understanding and gradually introduces the employee to the organization. By

providing just ± in time information and training the training efforts will yield better

=c 4!&&c!

Keep employees motivated and committed by enthusiastically offering both training

and developmental opportunities. Smart companies know the importance of personal

development and which in turn help them in retaining their key employees. In fact, the

top rated companies have a lot in common. They spend considerable time in training

their people, they have low turnover rates and they have an impressive number of

applicants per job opening because of their HR practices.

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Better bosses means lower turnover. Establishing performance expectations providing

coaching and positive feedback and interacting in fair and continuous manner are all

things that good leaders do to help new employees. To impact turnover, make sure

thatcsupervisory promotions and training programs have interpersonal skills as a part

of their focus. Measure employee perception of leadership and incorporate behavioral

expectations into leader¶s performance management expectations.

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Communication can be greatly help in reducing the employee turnover. Following are

some suggestions for opening up of communication in the organization:

1.c Hold open forums: Set up monthly or at least quarterly forums in which

employees can talk with top management and decision makers on issues important

to them.

2.c Improve Credibility: Do what you say what are going to do or offer a good reason

why you can¶t.

3.c Find way to communicate: Eliminate the fear of reprisal. Share important

information Treat employees as partners. Communicate numbers both good and


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Money can talk volumes, but the creative use of money is the key to retention.

Various kinds of contingent bonus strategies can be used be used to help with

retention. Deferred bonuses are paid out incrementally with a significant back ± end

payoff for a combination of performance and retention. This type of a bonus system

can help an employee reach high levels of income, provided they consistently

demonstrate superior levels of performance. A third option besides the use of bonus is

to regularly make salary adjustments with the star performers or the individuals with

key skill sets so that they are not tempted to go elsewhere for bigger paybacks.

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Increasing the job satisfaction of the high turnover jobs can reduce turnover.For

individual who have a need for groth,the following job design strategies are associated

with increased job satisfaction:

1.c Increase the variety of task performed

2.c Provide greater ownership and dicision making on how the job is performed and hold

the job holder accountable for quality of output.

3.c Add more significant responsibilities.

4.c Improve the accuracy and quality of feedback on performance.

:c &
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With today¶s baby boomer generation beginning to retire from the labor market, many

companies are finding increasingly difficult to retain employees. Turnover is

becoming a serious problem in today¶s corporate environment. The employment

culture is changing as well. It is now relatively common to change jobs every few

years, rather than grow with one company throughout the employment life as was

once commonplace. In addition, employees are increasingly demanding a balance

between work and family life.

Simply improving the selection process is not a cure-all for reducing turnover.

Turnover is a process, not an event that is related to factors such as role ambiguity,

workload, stress, leadership, behavior or opportunity for advancement. Hiring high ±

potential employees into a bad environment may actually increase turnover. At the

same time, there are tools that can be used in the hiring process that can significantly

improve overall turnover, new hire turnover and retention rates. The following

provides a discussion of two primary approaches that have been shown to be

beneficial: evaluating risk factors and motivational fit.

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c Certain applicants have a higher propensity for turnover, and those

characteristics can often be identified prior to hire. Research has shown that the way

candidates respond to some questions on an application from correspond to a reduced or

increased like hood for turnover. Research has cited, for examples that new hires are less

likely to leave the company if they are referred by a current employee; have friend and

relative working in the organization and have longer tenure in their previous job. These

factors make intuitive sense since people with more contact in the organization are apt to
understand better the nature of the job and the organization. It may act as a vaccination effect

that reduces job are likely to repeat their past behavior and are therefore more prone to

change jobs after a short period of time.

An organization can dramatically reduce the turnover rate by including a turnover risk index

in the hiring process to filter out applicants with higher turnover risks. As an example, figure

2 shows a simple and straight forward point system. A candidate with six years of

manufacturing experience who felt that three unexcused absences per year was fine, had no

significant gaps in employment history in the last five years and had only one job in the past

five years would get three points (1+0+1+1=3) on the sample turnover risk index. The

candidate must then meet a present cutoff score to move on or be screened out.

! &c $!
c Another approach to reducing turnover is to target the compatibility or

motivational fit between the individual and the work environment. Organizations have

learned that finding qualified individuals may not be enough. Having both able and motivated

employees is the only way to ensure a productive and stable work force. The focus, therefore,

must go beyond the question of if a candidate can do the job well to if the candidate can do

the job despite certain unpleasant job demands.

Individual motivation in employee selection is generally defined as ³fir´. Fit can be

characterized as person- job fit, such as the fit between the individual¶s preferences for the

type of work and the actual job requirements, or person organization fit. Which is the

congruence between the person¶s preferences and the organizational culture? As one expect,

research consistently shows that fit does matter. Higher levels of motivational fit are

associated with greater job satisfaction organizational commitment, and lower turnover.
There is large and growing body of evidence showing that job fit, when evaluated objectively

in the hiring process, can predict future turnover behavior and job performance. For instance,

in the same large manufacturing company, we also found that level of job fit was related to

both voluntary and involuntary turnover. Essentially, employees with a higher fit were less

likely to be terminated or leave the company. In fact, candidates who passed the fit index

were less likely to stay with the job than candidates who didn¶t. Moreover, the combination

of motivational fit and turnover risk indices as pre-screening tools led to a 63 percent

reduction in the overall turnover. Considering the high cost of turnover a reduction of 50

percent to 60 percent in turnover within the first two to three years is a huge cost savings. The

costs associated with designing and implementing such up ± front screening were a fraction

of the long term cost saving and productivity improvements. The evidence is clear that

putting in the effort during the hiring process pays significant dividends in the future.

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To make the most effective use of these selection tools in reducing turnover, organizations

should take the following steps in implementing an improved selection system:

*Include a professionally developed, objectively scored measure of motivational fit and

turnover risk as early in the selection process as possible. Often, this is the first part of the

hiring process and can be conducted over the phone or the internet and second automatically.

* Before spending time on an interview, organizations could follow up the initial screening

with a validated assessment to measure the ³can- do´ aspects. This may include web ± based

assessments, personality inventories, situational judgment tests, or cognitive ability measure.

*After narrowing the applicant pool down considerably, a customized, structured behavior

interview conduct by a trained interviewer could assist in selecting the best qualified

candidates who have the right kind of key competencies for success and motivational fit to

grow with the organization.

As a whole, this process should ensure fairness, accuracy and effective resource utilization. In

addition, by following such and time spent on interviewing unqualified candidates, training

people who are not likely to stay with the organization, and disciplining and ultimately

releasing employees who do not meet organizational standards of performance. The bottom

line: Assessing candidates for job fit and skill fit is your best defense against costly turnover

and the best way to build a staff of capable motivated people.

In addition to improving candidate selection, organizations can benefit by ensuring that

supervisors and managers have proper skills, training and understanding of turnover cause

and cost. Effective orientation and training processes are crucial to keeping talent. If those

processes aren¶t exceptional, new hires will frequently leave within a short period of time for

a better job opportunity.


The present study indicates the following observations:

1.c Generally employees do not take a quick a decision of quitting their job, first they

weigh all their alternatives and at the same time they also give their organization

chance to make them stay in the organization and if the organization fail to do that

then they quit their job.

2.c The working environment plays a very critical role in making an employee leave their


3.c Performance appraisals are not given at regular intervals in order to keep employees

motivated for their work.

4.c The companies are required to be more vocal and communicative in showing the

employees the proper career advancement plans.

5.c In order to attract the best talent the companies are required to provide them better job

opportunities and better pay packages than their competitive brands.

6.c It is the responsibility of HR manager to keep a check on the morale in the employees

in the organization and if it¶s low them to find ways to improve.


Knowledge based industries such as information technology is increasingly becoming more

important in developed as well as developing economies. In India the IT industry has grown

at the rate of about 50% in the domestic as well as the export market for the last 5 years. The

phenomenal growth of IT industry in India has been possible due to the availability of highly

competent and cost competitive IT professionals. This unique advantage has led to Indian IT

industries becoming suppliers of IT professionals on a worldwide basis. Also within the

country IT companies are mushrooming at a very rapid rate. Thus, creating the demand for IT

professionals far exceeding the supply become all the more crucial and difficult task.

All the above factors have made the task of managing and retaining IT professionals in India

very complex and demanding. This has as on now given a whole new focus to HR practices

in IT industries. In above light this research project was done on ³

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!+ of which was to determine the best and

unique practices for attraction, retention employees in IT industry.

The %
#&*'c for the study involved the collection of both primary and secondary data.

Secondary data was collected by browsing through relevant books, magazines and journals

and through internet. The primary data was collected by administrating the questionnaire

method of research, which was then supported by a discussion. The collection of data was

followed by a comparative study and an analysis of the same.

The finding and analysis drawn after the study brought out some of the best practices for

attrition, retention and recruitment of IT professional. It also gave an insight into the unique

innovative practices followed by some of the companies for attracting, retaining and

managing performance of its knowledge workers. A part from this study also brought out the

leverage that companies have on having a documented recruitment and HR/ retention policy.

It also brought into light the attrition trend, benchmarking followed, recruitment duration and

cost, mode of getting employee feedback that are prevalent in IT industry.

The conclusion thus drawn was if organizational have to survive and grow in the competitive

IT industry it has to keep pace with the trends and adopt some of the best unique innovative

practices for attracting, retaining and managing the best of its knowledge worker, the

companies¶ only source to gain competitive advantages.

Employee retention is a persistent problem that plagues the industries today. There are plenty

of opportunities for talent. Top talent is always in demand and loyalty is not seen as that big a

virtue, so poaching is thriving and headhunters are having a field day. What exactly can you

do to keep your flock with you? How do you talented people?

Top performers always want to work with top companies that have good practices,

impressive branding and excellent management. You need to have a vision for the company

and you need to work towards it. If you work at making your company one of the bests, you

will instead be attracting the best yourself, instead of chasing it.

Either you love them or you lose them to your competitions. The HR department plays a very

important role in employee retention. Your HR staff needs to be efficient in understanding

distress signals. If any distress signals are found the fire fighting mode should be on.

Recognizing talent and then rewarding it ± it is a nice mantra for employee retention. The

rewards can be in many forms ± flexi timings exciting opportunities, time of etc.

Top performs constantly need challenges. If they feel stuck in a situation which they feel is

going nowhere, they will start looking. They are motivated and are lifelong learners. These

pointers can be woven into the employee retention policy of the company. Seminars,

trainings, workshops should ensure that the employee has plenty of opportunities available to

him to upgrade his skill Taking them for granted is not a very wise move.

In this age of instant gratification, it isn¶t too wise to expect your employees to put on

blinders. They are aware of the exponential salary increases and perks available outside. You

need to be aware of the undercurrents in your industry too. Employee retention is an

organizational challenge. Try to be in the know of your competitor¶s strategies and

capabilities. It certainly pays to pay a little attention to the informal communication, to that

irritating grapevine if you really are paranoid about employees.

Instead of searching for talent outside, it would be wise to nurture talent in your own

company. An employee needs to be content in your organization. To retain an employee one

basically needs to know him. Find out the things that really bother him. Find out what drives

him. What motivates him and this aspect in missed by the industry.

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The best attraction practices for fresh graduates which companies use are:

1.c Brand image

2.c Compensation and benefits

3.c Challenging work assignments

4.c Career growth plan and recognition to individual.

5.c Corporate culture and value system.

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The best practices for work experienced people which companies use are:

1.c Challenging work assignments

2.c Recognition to individuals

3.c Career growth plans and brand image

4.c Corporate culture and value system

5.c Compensation and benefits


1.c Improving the working life balance of their employees.

2.c Encpuring learning & development

3.c Developing a positive organization culture.

4.c High level of motivation.

5.c Availability of constructive feedback & mentoring.

55  3cc

c Research methodology by C.R. Kothari

c ³Retention ± career Centered´ by Jennifer J Salopek

c The 7 Hidden Reasons Employees Leave: How to recognize the Subtle Signs and act

Before It¶s Too late By ± Leigh Branham

c Ray Morgante, ³Secrets of employee retention´.