ABSTRACT factors influencing retention of employees Keywords: Attrition,

ABSTRACT

Employee attrition and retention of talented people
is a real challenge before any organization . Attrition is often viewed as the
realization of a company’s overall health. Frequent employee turnover is not a
positive sign for the business’s well-being.

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It is difficult to accept when organizations say
they have zero attrition rates. Companies may have healthier turnover rates,
however, there is no such thing as zero attrition. As a means of improving the
turnover, many companies strive to find methods to keep workers happy.
Generally Skills-development, progress/promotion incentives, and communication
are three major ways to improve attrition.

The current average employee attrition of about
20-30 per cent across industries only testifies the fact that it’s a critical
challenge in India’s growth.

This paper will help to identify and analyze the various reasons of workforce attrition in
different organizations and what are the various techniques that can be utilized to manage attrition and explore the factors influencing retention of
employees

Keywords:
Attrition, Attrition rate, Retention

INTRODUCTION:

Attrition
is one of the most serious concerns of the organisations today, irrespective of
the industry in which they are operating. Attrition is all about people leaving
organisations with the slightest provocation and having no respect and
commitment to the company in which they are working.

The
attrition rate plays a significant role in an organisation. High attrition rate
of employees in an organisation is a serious concern because the employees are
the human capital. Some of the organisations have started searching the cause
due to which the employees are leaving the organisation.

There
are some organisations specially belonging to IT, Telecom, and various other
sectors which are facing high attrition rate. Due to high attrition rate, cost
of the organisation increases due to training, development, socialisation and
other costs on the employees. Attrition rate is high basically in an
organisation whose work is mostly dependent on knowledge workers like BPO,
paramedical, aeronautics etc.

Attrition
is defined as reduction in the number of employees through retirement,
resignation or death. The rate of shrinkage in size or number of employees is
known as attrition rate. In India, the average annual attrition rate in the
business process outsourcing (BPO) sector hit a high of close to 50% a few
years ago. 

Different organisations use
different method to calculate the rate of attrition.

The
Most Commonly Used Formulae is:

Total no. of resigns
per month (voluntary or forced fully)     
X 100

(Total no. of Employees
at the beginning of the month

+ Total no. of new
joinees – total no. of resignations)

 

WHAT
IS ATTRITION?

Attrition has been a major concern for most of the
companies in the current competitive scenario.

The word Attrition means, a reduction in the number
of employees through resignation or separation at the employees will.
Retirement, VRS and employee leaving due to end of contract are not considered
as attrition.

 Attrition
rate is the rate of shrinkage in size or number. It is the mathematical representation of the attrition in a
particular organization or an institution.

Attrition
leads to dual loss to an organization:

·        
Firstly, company loses on a talent and
thus costs incurred on them are a waste.

·        
Secondly it employees a new employee and
thus needs to incur costs on them.

The highest rate of Attrition tends to be
among those who have recently joined a business. Longer?serving employees are more likely to stay,
mainly because they become used to the work and the business and have an
established relationship with those around them.

Attrition is an important parameter
indicating the overall health of any industry or an establishment in terms of
wages, industrial relations, working conditions and other welfare facilities
provided by the employers to the workers. Higher rate of attrition indicates
lack of stability in the labor force, which in turn, may not be considered to
be conducive to the productivity of labor. For higher productivity of labor, it
is essential that labor force remains stable over a period of time.

Reasons for attrition
Attrition does not happen for one or two reasons. The reason are various behind
leaving an organization & any attempt to find one comprehensive explanation
for this phenomenon would be futile. Though the rising attrition within
industries is a well-discussed topic but very few HR executives have been able
to pinpoint the ‘exact’ reason for this growing trend. It comes no surprise to
many that money is an important factor but what besides this, there are several
factors that influence an employee’s decision to leave.

Those days are gone when salary was the sole motivator for an
employee to leave an organization. According to a survey there are three main
reasons that are followed by other common reason:

·        
Bad work culture

·        
Relocation

·        
Job insecurity

·        
No social or family life

·        
Target pressure

·        
 Better
salary

·        
Better job opportunity

 

Common
reasons experienced by HR manager are discussed here:               

*Mismatch of job profile.
*Job stress and work-life imbalances
*Odd working hours/Early morning-night shifts
*Job hopping                                                                                                          
*Lack of authority provided to accomplish ones task                                           
*Monotony of job

 

The list can be endless but the reason why employees leave
the organization vary according to the nature of the business.

Therefore it’s very challenging task for an HR expert to cope
up with this situation and retain talent with an organization.

Consequences of
attrition

Positive
consequences

·        
Infuses New blood

·        
New ideas, creativity , innovation

·        
Restructing sections or departments.

·        
Displacement of poor performers

·        
Healthy competition

 

Negative
consequences

·        
Loss of key skills, knowledge & business
relationship

·        
Productivity , profitability & creativity may
diminish

·        
Significant operational disruption

·        
Employee dissatisfaction & loss of moral

Associated cost
with high Attrition:

The tangible costs of employee
attrition would be the cost of training
new employees, the recruitment and selection costs, adjustment time,
possible product and/or service quality problems,
costs of agency workers/ temporary staff, the cost of training, the cost of
loss productivity, the cost of lost knowledge and the cost of the
position remaining vacant till a suitable replacement is found. The intangible
costs, which may be even more significant than the tangibles, involve the
effect of turnover on organizational culture, employee morale, social
capital or organizational memory. All these costs would significantly take away
the profitability and the competitive
advantage of the firm.

Various cost associated with attrition:        

i) Talent costs

ii) Recruitment costs

iii) Training costs

iv) Motivational costs

v)Lost productivity cost

 

 

OBJECTIVES OF THE STUDY

a)     
To
identify and analyze the various reasons of workforce attrition in
different organizations.

b)     
To get
insights into various techniques that can be utilized to manage attrition.

c)     
Identify &
explore the factors influencing retention of employees.

LITERATURE REVIEW

Organizations invest a lot on their employees
in terms of induction and training, developing, maintaining and retaining them
in their organization. Employee turnover rates, within the last
several years, become a nationwide epidemic.

There is no standard framework for
understanding the employee’s turnover process as whole. There
are many reasons why employees may leave a firm. Traditionally labour turnover
has been seen to be either voluntary (the volition of the employee) or
involuntary. Voluntary turnover includes push factors such as staff leaving due to lack of interest in the job,
and pull factors such as staff being attracted to another job by incentives. The experience of job related stress (job
stress), the range factors that lead to job related stress(stressors), lack of
commitment in the organization and job dissatisfaction generally make employees
to quit.

 Bowen and Shuster (1986) stated that while all constituting elements
of an organization are important for its success, it is its enhanced ability to
attract and retain the best quality talent that separates it from the others.

Abbasi and Hollman (2000) sought to determine the impact of employee turnover on an
organization and found that excessive employee turnover often engenders far
reaching consequences and at the extreme may jeopardize efforts to attain the
organizational objectives.

Elangovan (2001)
has argued that there is a reciprocal link between organizational commitment
and turnover intention, i.e. lower commitment increases turnover intention,
which lowers commitment further.

Van Dick et al. (2004) have also identified job satisfaction as a predictor of turnover
intention; however, they argue that it is a mediating variable between
organizational identification and attrition.

Naqvi and Ramay (2008) revealed that job satisfaction and organizational commitment had a
negative effect on turnover intentions, whereas perceived alternative job
opportunities had a significant positive correlation with turnover intentions.

Zheng and Lamond (2009) found out that training, size, length of operation and the nature of
the industry are significantly related to attrition.

ATTRITION
RATES IN DIFFERENT SECTORS IN INDIA

     
As
per study of myhiringclub.com , India is likely to see attrition rates as high
as 31% in 2015-16.

SECTORS

ATTRITION
RATE

Insurance
sector

50-65%

In BPO

55%

Retail

40%

IT sector

31%

Telecom
sector

26%

Banking 

23%

Aviation
& Hospitality industry

22%

FMCG

21%

Automobile
& Manufacturing

19%

Real
estate

15%

By this figure we can see that Insurance Industry is having the
highest attrition rate.

Most people who join in enthusiastically,
spurred by dreams of “working at one’s own hours, getting full reward for
the hard work” and other such motivational spiel, meet reality soon
enough. Once the initial list of potential customers such as close relatives,
friends and neighbors is exhausted, the climb for an insurance employee is
uphill. Even meeting the minimum requirement of bringing in two viable
insurance proposals every month proves daunting. For some companies, the target
in terms of sum assured is Rs 1 lakh. For some others, it is as low as Rs
10,000.

When the rejections
start and the doors start getting banged in the face, people confront failure.
The dropouts begin. S Roy Chowdhary, Executive Director (Marketing), LIC,
says, “The attrition rate is about 35 per cent in the first year of
recruitment. This goes down to about 18 per cent by the fourth year. Most of
those who drop out are non?performers”. Agrees Ms. Elizabeth
Venkataraman –senior vice president and Head Marketing at Kotak Mahindra Old
Mutual Life Insurance Company, and says, “Last year, the attrition rate
was much worse than 30 per cent. It has been a cause for worry and we are
trying our best to stem it.” She attributes it to the high expectations on
the part of the insurance employees. Some insurance companies complain that the
booming economy has caused the rampant poaching of insurance employees. They
also say that it will settle down once they have their expanding networks in
place. Insurance companies believe that adequate training will help in contain
the problem in some measure. They say that in a business such as insurance one
has to accept the fact that 20 per cent of the work force will bring in 80 per
cent of their business. But, while private insurance companies are still
struggling to break even, the rising attrition rate is yet another challenge
that they have to battle.

Facts

Judhajit
Das, Chief of Human Resources, ICICI Prudential Life Insurance Company, explained what had
transpired in insurance since it was opened up to private players over a decade
ago.

He recalled that the period between 2002 and 2008 was one of rapid
expansion, focused on top line growth. Multiple players had entered the field.
High increments had led to wage inflation and high attrition, and rapid
promotions had caused job inflation. The key proposition for
people to join was that insurance was a fast-growing sector, and one would get
accelerated career growth. There was an unprecedented war for talent. Circa
2006, ICICI Prudential Life was hiring about 25,000 people a year.

The period between 2008 and 2010 bore the keywords ‘financial
crisis’ and ‘market volatility’. This watershed saw ‘a bit of uncertainty’ on
where the sector was headed, as more than one industry executive now admits.
Morale was low. Promotions were absent. Increments were minimal. There was a
‘no bonus’ year for many. 

But by then, most insurance companies had already added capacity
for much higher growth. People had to start ‘right sizing’. From a staff count of 30,000
in 2007, ICICI Prudential Life is down to 14,000 people today. And the numbers
are not going up in a hurry. For Das, who has been with the company since 2000,
it’s been a roller coaster ride. “We did right sizing in a calibrated manner.
Every six months we would look at performance and take a call on the bottom 10
per cent. It was not that we simply brought down numbers,” explains Das, in
conversation with The New Manager. 

In India, in the first three
quarters of the financial year 2011-12, more than 3 lakh active insurance
employees have quit the profession. Insurance companies such as Life Insurance
Corporation of India (LIC), ICICI Prudential and HDFC Life have seen mass
exodus owing to lesser incentive to insurance employees when compare with other
similar sophisticated industries.

The major factor effect them to change
is the package provided by the company. The promotion and transfer policies,
Working hours, work environment, employee disputes, family problems, better job
opportunity available also play important role in attrition. To ignore why people are leaving the
organization is to ignore the organization greatest assets – its people.
People in organization are needed to perform the task; but they are not just
machine but more than that. They are
organization dreams, hopes, ambitions, creativity and innovation. And to
retain these valuable assets is one of the surest ways to build an organization
rather than just to go in global markets. And this is the only way an
organization can lower its attrition rate.

 

What is Retention?

Employee retention is a systematic effort by employers to
encourage valued employees to remain with their organization.

A large part of keeping valued employees is attracting the
right people to the organization in the first place by the use of an effective
workforce plan and recruitment and selection practices.

How to Retain
Employees:

Retaining employees has always proved to be fruitful across
many industries rather than to search for new & efficient talent. So to
gain the fruit of this tree, different companies devise different strategies
for retaining their employees. Simply hiking ones salary in an endeavor to
retain your valuable employee will serve no purpose as today’s workforce has a
lot going during his/her decision making process and it’s certainly not
restricted to just pay. 

*Maintain
work life imbalances
* Allow flexi-timings       
*Make workplace more flexible
*Recognition of merits & rewards
*Participation in decision making
*Job rotation        

Factors to retain the talented employees in the
organization

1.     
It is impossible to stop
employees leaving the organization. But by the below mentioned methods one can
atleast minimize it to some extent.     

2.     
Offer fair and competitive salaries. Fair compensation alone does not guarantee employee loyalty, but
offering below-market wages makes it much more likely that employees will look
for work elsewhere.

3.     
Remember that benefits are important too. Although benefits are not a key reason why employees stick with
a company, the benefits you offer can’t be markedly worse than those offered by
your competitors  

4.     
Train your front-line supervisors, managers and administrators. A good employee/manager relationship is critical to employee
satisfaction and retention. Make sure your managers aren’t driving
technologists away. Give them the training they need to develop good
supervisory and people-management skills.      

5.     
Clearly define roles and responsibilities. Develop a formal job description for each title or position in
your department. Make sure your employees know what is expected of them every
day, what types of decisions they are allowed to make on their own, and to whom
they are supposed to report.

6.     
Provide adequate advancement opportunities. To foster employee loyalty, implement a career ladder and make
sure employees know what they must do to earn a promotion. Conduct regular
performance reviews to identify employees’ strengths and weaknesses, and help
them improve in areas that will lead to job advancement.

7.     
Make someone accountable for retention. Measure your turnover rate and hold someone (maybe you!)
responsible for reducing it.    

8.     
Conduct employee satisfaction surveys. You won’t know what’s wrong … or what’s right … unless you
ask. To check the pulse of your workplace, conduct anonymous employee
satisfaction surveys on a regular basis. One idea: Ask employees what they want
more of and what they want less of.      

9.     
Foster an environment of teamwork. It takes effort to build an effective team, but the result is
greater productivity, better use of resources, improved customer service and
increased morale.     

10. 
Communicate openly. Employees
are more loyal to a company when they believe managers keep them informed about
key issues.    

11. 
Be flexible. Today’s employees
have many commitments outside their job, often including responsibility for
children, aging parents, chronic health conditions and other issues. They will
be loyal to workplaces that make their lives more convenient by offering
on-site childcare centres, on-site hair styling and dry cleaning, flexible work
hours, part-time positions, job-sharing or similar practices. For example,
employees of school-age children might appreciate the option to work nine
months a year and have the summers off to be with their children.

FUTURE
SCOPE OF THE STUDY

Ø  The study will help different companies to increase
their efficiency, productivity, profitability& morale & reduce
associated cost of high attrition by finding the factors to retain the talented
employees in the organization.

Ø  This
study can help the management to find the weaker parts of the employee feels
towards the organization and also helps in converting those weaker part into
stronger by providing the optimum suggestions or solutions.

Ø  The
study can also be replicated in other sectors like- BPO, IT, Hospitality,
Retail, Education etc. where attrition has become a common problem.

 

CONCLUSION:

Frequent employee attrition means there is
something, which needs immediate attention and cure. The tangible cost of employees’
attrition would be the cost of training new employees, recruitment and
selection costs, adjustment time, possible product and/or service quality
problems, cost of agency workers/ temporary staff. The cost of training, cost
of less productivity, cost of lost knowledge and cost of position remaining
vacant till a suitable replacement is found. The intangible costs which may be
even more significant than the tangibles, involve the effect of turnover on
organisational culture, employee morale, social capital or organisational
memory. All these costs would significantly take away profitability and
competitive advantage of the firm. The organisational costs associated with
turnover in terms of hiring, training and productivity loss.

Employees today are different. They are not the ones
who don’t have good opportunities in hand. As soon as they feel dissatisfied
with the current employer or the job, they switch over to the next job.