- Most of the HR functions of IT organizations spend more than 50 % their time and energy in hiring new resources without investing much time in the way their human resources can be retained. Fact is, it takes 25 to 30 % more for organization to retain the existing qualified resource as compare to spending more than 50 % in getting new resource as a replacement of an existing resource.
And the recent turnover figures about U.S. are
Overall U.S. voluntary turnover increased slightly to 23.4% annually, up from 22.7% the previous year. The highest turnover by far is still in the Accommodation and Food Services sector at 56.4% and the Leisure and Hospitality sector at 52.2%. Sectors that saw the highest increase in turnover were Accommodation and Food Services, up 7% from the previous year, Leisure and Hospitality, up 5.4% and Information, up 4.5%. The only sectors seeing a (slight) decrease in turnover were Real Estate, Natural Resources and Mining, and Professional and Business Services.
In the Government sector, turnover was up slightly at 8.2% with the Federal sector increasing the most to 9.3% up from 5.7%. Regionally, all areas were up slightly except the Northeast which saw a slight decrease.
A Challenge
10 Reasons Why Employees Leave
1. Expectations not met:
Expectations play a large part in determining whether an employee is satisfied or dissatisfied with the current state of affairs.
On joining the firm the individual will have a range of expectations covering areas such as the style of management, the working hours, holidays, pay, bonus and so on.
It is not unusual for employees to leave within the first six months when they discover that things aren’t quite as they imagined they would be.
Their expectations may have been unrealistic from day one, but each departure is yet more disruption, harming productivity, adding extra unnecessary costs and making it more difficult to reach goals for sales, revenue and profitability.
Few firms seem to appreciate the importance of expectations. They don’t ask candidates about their expectations, giving them the opportunity to select someone who is unlikely to be disappointed, and therefore, more likely to stay.
2. Mismatch between the person and the role
Employees who find themselves in roles that do not suit their individual strengths, tend not to stay around that long.
A productive employee gets promoted into a position that requires skills that they do not possess. A role that exposes their weaknesses, and as a result, a role that they do not enjoy.
Faced with the prospect of having to spend many months, perhaps years, in a job that is a struggle, a job that they find difficult, a job that is a mismatch for their specific talents, most of them choose to leave the company and go.
3. Mismatch between person and the culture of the firm
It is not so much that there is a single ideal culture, more that cultures vary, and as many departures show, not everyone is likely to be ideally suited to culture of your firm.
Some workplaces are high pressured, fast paced, dynamic. Ideal for people who thrive on adrenaline, who enjoy this tempo, constantly being on the go. Others are caring, emotional, long discussions, shared views. Endless dialogue before action is taken. Everyone’s opinion counts.
Put an employee in a culture that suits their temperament and they feel at home. It is an environment in which they can function to the best of their abilities. But put an employee in a firm whose culture does not suit their personality, their style or their approach and it rarely works. They don’t settle, they under-perform, they miss the feel of previous employers where they were able to contribute more. They leave.
4. Insufficient opportunities for growth and advancement
Employees want to make progress, to get ahead. They want to make that next step up the career ladder. They think about where they would like to be in 5 years time, in 10 years time.
Their loyalty is largely to themselves, to make the most out of the natural talents, the skills, and determination they possess.
They recognize the importance of building new skills, refining current ones, getting new experiences. If the opportunities aren’t available with their current employer, they will find look elsewhere.
5. Insufficient recognition or appreciation
The Employees that don’t receive adequate recognition for their contribution, that get little appreciation for their efforts, start to wonder why they bother. And it doesn’t take much to tempt them away.
Employees that did not feel valued, that felt that their efforts, their hard work, was not appreciated. That their achievements, their contribution to the success of the business, was not recognised.
Employees want to feel valued; as though their role is important, as though the business needs them. They want someone to say thank you. Thanks for that piece of work, thanks for helping out in a crisis, thanks for dealing with that problem.
6. Problems with direct manager
The state of the relationship between an employee and their direct manager goes a long way towards determining whether they stay or leave.
Some employees stay far longer than might otherwise be expected because of the relationship they have with their supervisor. Others leave jobs in the first few months because they sense their manager is not someone that brings the best out of them.
And they need to get away. Because the daily challenge of dealing with someone they dislike, someone that lacks basic people skills, is just too much to bear.
Poor relationships between employees and their managers are one of the most common reasons for employee turnover.
7. Dissatisfaction with pay
Not receiving a fair salary, a fair pay rise, a fair bonus. Dissatisfaction with financial rewards is complex.
Much of the dissatisfaction is due to comparisons. A previously adequate salary starts to feel insufficient when you have just learnt that a new arrival is receiving a higher wage for performing a similar role.
Salaries rarely remain a secret. The information leaks out. If it isn’t fair, if it isn’t equitable, if the procedure for determining pay settlements is tainted, employees become dissatisfied. And in time many of them leave.
8. Stress
The stress of work, the stress from working long hours, the stress related to pressure from above; employees can take only so much.
Stress drives employees into the arms of alternative employers. They simply want to get away from the workplace, from the people involved, from the firm.
A stressful workplace is rarely a productive one. Attrition is high, people don’t matter; there will always be someone else to fill the vacancy. And in time they too will probably leave for much the same reasons.
Stressful work environments tend to be high turnover environments. If there is an alternative, people take it.
9. Lack of work life balance
Employees have responsibilities to their employer, to their families, to their friends. There are times when the demands of work require extra hours, staying late to get things finished, working during weekends to meet deadlines.
For some employees the demands of work are no longer compatible with the needs of their family, the needs that exist beyond the workplace. Perhaps they coped better when they were younger, before they got married, before they had a family. But now the arrangement just isn’t practical.
They need a better balance. They need to have time for themselves. Time to take care of loved ones. Free time not devoted to work.
10. Loss of confidence in the firm, particularly leadership.
Confidence matters. Companies go bust; you just need to read the papers, watch the news, to realize the risk involved.
When employees lose confidence in the firm’s leadership they head towards the exit door.
They know that confidence matters, that seemingly invincible companies can collapse in days, if not hours. They don’t want to be left without a job, should the company go under, or be taken over.
Other factors for Retention being a challenge are:
- A robust economy
- Shift in how people view their careers
- Changes in the unspoken "contract" between employer and employee
- Corporate cocooning
- A new generation of workers
- Changes in social mores
Employee Retention Strategies
1) Retention Focused Recruitment:
Recruitment and retention are interlinked. Some departures are almost inevitable from day one. Make sure you select the right person in the first place.
• Realistic job preview - To avoid new recruits leaving during the first few weeks when they discover the job is somewhat different to what they had expected, provide a realistic job preview.
• Sharing expectations at interview – Expectations regarding the pay policy, willingness to work long hours, ability to work effectively in teams, need to conform to the firm's culture, willingness to travel and the candidate’s expectations regarding career advancement, expected rate of rise in salary, preferred management style
• Person - culture fit - It is important that employees share similar values and are able to function within the cultural environment of the firm. A fair proportion of early departures are employees that were never likely to be able to perform to an appropriate level within the firm, due to having values that are incongruent with those of the firm.
• Person/skills - job fit - Think carefully about the skills needed to do the job well.
Study your best performers.
Determine their competencies.
Select for competencies:
- Talents
- Knowledge
- Self-management traits
- Motivations
• Referrals - new recruits that were referred by current employees tend to stay longer. They have the advantage of inside information and so are less likely to find the job or role contains unpleasant surprises. Current employees are unlikely to want to jeopardise their own standing by referring friends who are just not appropriate for the work involved.
• Including team members in the recruitment process - For roles that a largely team based, or managerial, it is worth taking into consideration the opinions of those who will have daily contact with the post holder. It is a fact of life that many hiring failures come down to clashes of personality. When interviewing prospective managers, consider the notion of upward feedback.
• Promote rather than hire - Internal promotions send a signal to employees that they too may get the chance of career advancement, if they remain with the firm. Conversely, if strong internal candidates are not selected, it may look like the best option is to leave, if you want to get ahead.
- save money on recruitment
- save money on signing bonuses
- signal to employees
- person - culture fit known
2) Retention Focused Orientation:
Effective orientation plays a vital role in the longer term retention of employees, yet many orientation programs are little more than induction. The purpose of orientation is to get the new recruit settled into position as quickly as possible.
• First impressions count.
• The time window is very small.
Common mistakes
• Not having the new employee's equipment in place
• Ignoring them or leaving them to read manuals
• Long lectures, too much information, endless form filling
• Not involving the new recruit's manager and department
• Monologue rather than dialogue
Instead,
• Make sure equipment is in position
• Show them how they can achieve
• Explain what is expected of them
• Explain how to add value
• Explain how to be a team player
• Help them to feel at home
• Buddies
On their first day:
• Introduce the new employee to team members
• Give them a brief tour of the workplace, showing them where things are kept
• Explain the importance of their role in the success of the business
• Introduce them to their buddy
• Brief them on the company's business strategy, objectives, values etc
• Ask the employee to promise that they will come and talk to you before deciding to leave the company
During the first week:
• Ask them how they like to be managed, motivated
• Give appropriate assignments
• Get them started so they can make a real contribution
• Establish medium term goals including both personal and career development goals
• Detail available resources, schedule any training, arrange a mentor if appropriate
• Arrange short meetings to check how they are doing
• Get colleagues to meet them to explain how best to communicate
• Invite them to the next social event
3) Job Sculpting:
Many departures arise from frustrations due to the day to day experience of the role, rather than the issues relating to the firm or to individuals.
• Move them internally first - If someone is unhappy in their role, see if you can find them a new position internally, before they opt to leave.
• Match talents to the requirements of the role - Match talents to the requirements of the role. Get employees to use their natural strengths, their intrinsic talents. If you want people to stay, get them to use their natural talents. Most people enjoy doing what they are good at. They like being able to excel.
• Increase job variety - Sometimes the lack of variety involved in their role can frustrate employees to the extent that they decide to leave. Some people like routine, others like change. Again, a little imagination, a small adjustment, can be the difference between losing them and retaining them.
• Tailor roles to suit individuals - If you have individuals you wish to retain, it makes sense to tailor roles to suit them. This way they get far more value from work and it is more difficult for other firms to attract them away. Customizing roles to suit individuals can be a winning retention strategy for some firms.
• Enriching jobs - Enriched jobs have long been shown to offer extra value to many employees
The keys to job enrichment: Skill variety, Task completion, Task significance, Autonomy and Feedback
• Intrinsic motivation - Understand why people want to work in the first place
• Passions - Individuals that get to focus on their passions are far more difficult to tempt away. Connecting to passions is a great way can be a great way to improve retention. Most alternatives will start to look far less attractive once an employee gets the chance to focus on something they are passionate about.
• Meaningful work - Some employees find it difficult to connect their day to day work with the end product. In a sense their work appears to lack meaning. By explaining how their job fits into the big picture, you can create meaning, thus increasing their motivation, and perhaps their willingness to stay.
4) Retention focused managing:
People join companies, but leave managers. It’s one of those common sayings that are mentioned in almost every book on retention.
• Select managers with good people skills - The selection of managers is crucial. Don’t promote individuals into people management roles when their strengths lie elsewhere.
• Use incentives, recognition and support to encourage retention - Use incentives, recognition and additional support to encourage managers to adopt behaviour that reduces the push factor
• Ask managers to help you - Asking managers to help you. Sometimes the smart tactic is to explain the problem and ask managers to help.
• Do reassign poor people managers so they can use their strengths - Do reassign poor people managers into areas where they can use their strengths. It is far easier to build on natural strengths than to fix weaknesses.
• Pay careful attention to the way you assess and reward managers - If you assess managers on the numbers, that is what they are likely to focus on. If their pay is determined solely by results, don’t expect them to pay much attention to retaining employees.
Think about ways in which their assessment, and perhaps even reward, can be designed to encourage behaviour that will assist retention. Focus on creating value for employees.
• Consider upwards feedback - To encourage managers to pay attention to employee development, get employees to provide upwards feedback.
• Explain why their work is significant
• Work life balance guide
• Performance agreement
• Development plan
• Dialogue
• Goal setting
• Provide the resources they need to the job
• Delegation, autonomy and initiative
• Encourage ideas
• Provide challenging work
5) Retention Focused Career Support:
The new psychological contract between employee and employer appears to be largely focused around career development.
• Coaching and mentoring
• Career development interviews - Annual career development interviews are a sensible retention measure. Examine a wide range of options from new work assignments, job enrichment, special projects, additional responsibilities, job sculpting, training, to internal and external moves. Make sure the focus is on what is best for the employee.
• Development plans
• Qualifications: professional and educational
• Upwards feedback on manager as employee developer
• Internal job banks - Create new options so that employees can move internally, rather than having to leave the firm, not necessarily at the managerial level.
• Alternative career paths
• Filling unmet needs
Build a culture that promotes learning.
Not something that can be achieved overnight, but a few low cost strategies that encourage learning can have an impact in situations where employees are unhappy about the amount of career support they are getting.
If opportunities for genuine career advancement are limited, the best you can hope for is to extend the length of time an employee stays. Though this sounds a strange way to improve retention, it can work as employees are willing to stay while they are developing new skills that will benefit their career in the longer term.
6) Work – Life Balance Measures:
Offering a range of flexible working options can have a dramatic impact on employee turnover in certain circumstances.
Giving employees more control over the hours they work can be the difference between retaining them and having to spend a fortune trying to find a replacement.
Try to move towards focusing on productivity and results rather than hours worked.
• Part time work
• Flexi-time
• Job sharing
• Compressed workweek
• Working from home
7) Retention Focused Reward:
Profit sharing, or gain sharing, appears to be the most effective reward strategy from a retention perspective.
Of all the various reward strategies to have been implemented over recent years, profit sharing appears to be the most effective from a retention perspective.
8) Communication:
Recent years have seen firms place emphasis on communicating their message to employees. Communication in the opposite direction is rarely as effective.
It is possible to improve lines of communication should employee insight reveal this to be an issue that needs to be addressed.
Some firms use schemes that encourage employees to contribute their ideas on potential improvements. Others appoint people in roles specifically designed to listen in to employee opinion.
Annual employee attitude surveys are a common occurrence in many sectors. While a few firms choose to conduct pulse surveys to measure the temperature on certain key issues.
Conducting retention focused interviews every six months is a sensible way to keep track of the current state of play.
Benefits of Investing in Employee Retention
- Money invested in the “100 Best Companies to Work for”® would have returned almost three times more than the same amount of a portfolio in the S&P 500 during the past six years
- The Number 1 “Best Company” for 2007 is Google, where turnover is 2.6% -- a record low. Keep in mind that Google has a fast-paced, stressful and demanding work culture!
- The 2006/2007 Work USA® survey of more than 12,000 US workers across all job levels and in all major business sectors shows that financial performance of organizations is strongly related to employee engagement.
- This same study found that, for the typical S&P 500 organization, a significant improvement in employee engagement is associated with a $95 million increase in revenue.
- Additionally, the Watson Wyatt Human Capital Index® study of 147 employers found that firms that fill vacancies quickly (within a month) have financially outperformed those that take longer by 48 percentage points over a three-year period.
- A study by Cornell University professor Christopher Collins found that small businesses that implement employee-management strategies experience 22.1% higher revenue growth, 23.3% higher profit growth and a 66.8% reduction in turnover over companies that do not use similar practices.
Benefits Offered by BPO Companies
The average attrition rate in this sector is still 35-40%.
Employee Benefits Provided By Majority of the BPO Companies
A part from the legal and mandatory benefits such as provident-fund and gratuity, below is a list of other benefits…BPO professionals are entitled to the following:
1. Group Medi-claim Insurance Scheme: This insurance scheme is to provide adequate insurance coverage of employees for expenses 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. Personal Accident Insurance Scheme: 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. Subsidized Food and Transportation: The organizations provide transportation facility to all the employees from home till office at subsidized rates. The lunch provided is also subsidized.
4. Company Leased Accommodation: Some of the companies provides 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.
5. Recreation, Cafeteria, ATM and Concierge facilities: The recreation facilities include pool tables, chess tables and coffee bars. Companies also have well equipped gyms, personal trainers and showers at facilities.
6. Corporate Credit Card: The 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 Hotel bills, Air tickets etc
7. Cellular Phone / Laptop: Cellular phone and / or Laptop are provided to the employees on the basis of business need. The employee is responsible for the maintenance and safeguarding of the asset.
8. Personal Health Care (Regular medical check-ups): Some of the BPO'S provides the facility for extensive health check-up. For employees with above 40 years of age, the medical check-up can be done once a year.
9. Loans: Many BPO companies provide loan facility on three different 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. Educational Benefits: Many BPO companies have this policy to develop the personality and knowledge level of their employees and hence reimburses 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 Schools.
11. Performance based incentives: 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 as 22% of the salary.
12. Flexi-time: 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 schedules are initiated by employees and approved by management to meet business commitments while supporting employee personal life needs .The factors on which Flexi time is allowed to an employee include: Child or Parent care, Health situation, Maternity, Formal education program
13. Flexible Salary Benefits: Its 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 Basic, DA and Conveyance Allowance. The Flexible Benefit Plan consists of: House Rent Allowance, Leave Travel Assistance, Medical Reimbursement, Special Allowance
14. Regular Get together and other cultural programs: 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. Apart from that the organizations also conduct various sports programs such as Cricket, football, etc and regularly play matches with the teams of other organizations and colleges.
15. Employee Referral Scheme: In several companies employee referral scheme is implemented to encourage employees to refer friends and relatives for employment in the organization.
Compensation & Benefits in the IT and ITES Sector
Compensation:
1. 91 per cent of IT and 97 per cent of ITES companies have a stated philosophy of benchmarking compensation against the market; 48 per cent companies position their compensation above the market median.
2. IT and ITES industry companies have a very high cash orientation compared to other traditional industries, with a Cash to Benefits ratio of 75:25.
3. Bangalore is the most expensive in terms of compensation for IT - 17 per cent higher than the national average.
4. An 18 percentage point increase was reported in variable pay plans in the industry, when compared with last year.
5. Performance-based increases in the IT industry rose by 23 percentage points when compared with last year.
6. A jump in the average salary increases from 12.2 per cent in 2002 to 15.4 per cent in 2003 in the ITES companies and from 12.9 per cent to 14.5 per cent in the IT companies for the Professional/Supervisor/Technical Level (i.e. Junior Management). The ITES and IT companies are currently in a high-growth phase, and this supports the high salary increases.
7. Cash based components (base salary, cash emoluments and variable pay) have gone up from last year, whereas Benefits (loans, conveyance and housing) have gone down. More and more companies are now using a higher proportion of their total employee budget towards variable pay to drive business results.
Benefits:
Organizations in both the IT and ITES industry are consolidating benefits, with a greater focus on employee attraction and retention.
Company Cars: An 18-20 percentage point reduction was reported in company car programs in the IT and ITES industry, as more companies moved towards cash-based programs.
Loan Programmes: A 5 to 15 percentage point decrease was reported in the various loan schemes (housing, vehicle, and other loans) from last year.
Stock Options: Stock options are losing their charm in the IT and ITES industry. A 10 percentage point drop was reported in the prevalence of stock option programs between 2002 and 2003.
Non-Statutory Retirement Benefits: There was a 5 to 10 percentage point decrease in the number of companies offering non-statutory retirement benefits, such as superannuation programs.
People Practices:
Recruitment: A 7 - 14 percentage point reduction was reported in the allocated budget for recruitment, hiring, and orientation from 2002 to 2003.
Training: Training hours in the IT industry decreased by 13 per cent, whereas the ITES industry reported a 4.3 per cent increase in training hours over last year.
Career Paths: ITES organizations are focusing on more long-term orientation for employees. A 14 percentage point increase was reported in the number of organizations offering employees a formalized career path.
Workforce: 41 per cent of the IT companies saw a significant workforce reduction (affecting 5 per cent or more employees). This figure for the ITES industry stood at 11.5 per cent.
Rewards and Recognition: There has been a 4 percentage point increase in the number of organizations offering special recognition awards to their employees, with 95 per cent of the ITES companies having these awards in place.
Bibliography
Textbook:
Human Resources Management - Ashwathappa
Websites:
- www.entrepreneur.com/encyclopedia/term/82184.html
- www.employeeretentionstrategies.com
- www.bpoindia.org/research/retention-strategies-call-center-industry.shtml
- www.employee-retention-guide.com
