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How to retain your employees
Rituparna Chatterjee | December 27, 2005
When office managers considered their budgets for 2005, what should they have invested in? The popular vote would have probably been for pool tables and cappuccino machines. What wouldn't have been top of the list is revolving doors. But with employees leaving, almost leaving, leaving and then returning, the dizzying churn in India Inc was more worthy of a few rounds in a revolving door.
It will get worse before it gets better. "Organisations must consider attrition while drawing their recruitment plans. That's realistic," concludes Hema Ravichandar, a strategic HR advisor who was previously with Infosys.
According to a report by human resources consultancy Mercer, India will suffer 12.8 per cent voluntary attrition in 2006, a shade lower than 2005's 14.7 per cent (the highest in Asia, incidentally).
With 88 per cent of Indian companies expected to recruit employees next year, 3 percentage points more than 2005's 85 per cent (Asia Pacific Compensation Forecast Report: October 2005), the likelihood is that the churn will be even bigger.
And expensive. It's not easy to quantify the cost of attrition - intangible costs form a fair percentage of the total - but nobody doubts that it is high. Various studies and HR consultants have made elaborate calculations that estimate the cost of replacing an employee at between one-and-a-half and two-and-a-half times his annual salary.
Obviously, then, it's better for an organisation if its employees don't make beelines for the exit. So, what does it take to persuade employees to stay on? Higher salaries, stock options and perks are obvious answers, but there's more. The Strategist analyses the retention policies in three industries (outsourcing, retail and infotech) with the highest attrition rates to see what works.
Dial an employee
For some time now, the BPO industry has been equating attrition with death and taxes: inescapable, and a part of life. But even as the industry shoots ahead at 40 to 50 per cent a year, it is now losing 35 to 40 per cent of its 350,000-odd employees as well. And that's making it sit up and take notice.
The BPO industry is caught in a trap of its own making: for some years now, outsourcing firms have been recruiting fresh graduates and 20-somethings by promising them a "fun" place to work.
That image has two problems: one, people soon realise that working shifts in a call centre is no party; two, as they grow older, their career goals move beyond having a good time. And call centres aren't seen as serious career options. Analysts estimate that more than half the employees who quit leave for better jobs, but close to 15 per cent leave to pursue their education.
So, call centres are now offering their employees what they want. While recruitment spiels still tom-tom the perks of working in a call centre, they also emphasise the "serious" nature of the job and the opportunities to grow there. "We give a clear picture of the job profile and work hours at the recruitment stage itself. This helps us to recruit only serious candidates," says Radhika Balasubramanian, chief support officer, Intelenet Global Services, a Mumbai-based outsourcing organisation that employs over 5,000 people and provides back office service to American and European clients.
ICICIOneSource, one of India's largest third-party BPO outfits, offers employees who've been with the company for 18 months the opportunity to move across the ICICI group.
Of course, they need to be suitably qualified and pass all the necessary tests, but the opportunity works as a huge incentive. Not only does it help retain trained talent within the group, it also sends the critical message down the line that employees are being trained in skills that have a market value.
Points out Aashu Calapa, vice president, HR, ICICI OneSource, "Our employees are trained for real-time scenarios and to develop managerial skills. This leads to high-levels of customer satisfaction, besides developing a strong employee bond."
Training and higher education opportunities are also significant carrots companies dangle in front of their employees. e-Serve, Citigroup's captive BPO centre, tied up with ICFAI in 2004 to offer a three-year MBA programme for its employees.
Classes are held on weekends and the top 10 students will have their fee reimbursed by the organisation. Intelenet and OneSource, too, offer on-site education programmes, apart from the regular on-the-job training.
In most cases, the courses are loyalty rewards and offered to employees who've lasted at least six to 12 months. Intelenet has promised to reimburse the fees of all students who graduate from its on-site MBA course by Narsee Monjee Institute of Management Studies - only, of course, if they are still employed with the organisation.
Meanwhile, BPOs are also looking at other avenues for loyal employees. Establishing operations in smaller towns - where fewer opportunities means people can't job hop as they do in the cities - is one such option.
Genpact and ICICI One Source, for instance, have set up shop in places like Jaipur, Visakhapatnam and Indore. Points out Genpact senior vice president, human resources, Piyush Mehta, "Getting an educated workforce in tier II cities isn't tough, and salaries here are considerably lower than in metros."
The retail detail
How does a floor manager in a department store know that the person talking to the counter assistant is a serious shopper, and not a head hunter for a rival store? He doesn't, and that's worrying the Indian organised retail industry.
According to retail consultancy KSA Technopak, the industry is worth Rs 35,000 crore (Rs 350 billion) and employs over 150,000 people. Of this, 40 per cent are likely to have quit this year, 10 per cent more than last year (source: Retailers Association of India).
Attrition is highest for entry-level, front-end staff - 80 per cent - but tapers off as you climb higher: 10-12 per cent for managers. "Mobility reduces as employees grow senior and settle both into the company and personally, with families and so on," points out Gangapriya Chakraverti, business leader, Mercer.
Typically, youngsters join the retail industry at lower salaries, get some much-needed experience and then move on to better jobs or back to school. Says Gibson Vedamani, CEO, Retailers Association of India, "Retailers need to look at incentives and performance-linked growth options to control the rising attrition."
Recognising this, retailers are now emphasising the career path in their organisations through strong human resources initiatives. Department store Lifestyle, for instance, recommends its top employees for transfers to its parent organisation, the Dubai-based Landmark group. "Such incentives help in motivating our staff to work for better prospects," says S Chandrasekaran, vice president, western region, Lifestyle.
Lateral movements within the chain is a popular way of combating boredom among employees, a common reason for quitting. Like Lifestyle, Pantaloons, too, offers its staff the chance to work at other stores in the group, which is why, says Pantaloons human resources head Sanjay Jog, the group maintains a low attrition rate of 8 per cent at the front-end and close to zero at the management level. "We give our employees opportunities for growth by developing new businesses," he points out.
Shoppers' Stop's strategies are a mix of old and new. The retail chain claims to pay salaries that are 20-25 per cent higher than what its rivals offer and also invests heavily in training its employees (up to 52 hours of training per employee per year). It claims to fill more than 65 per cent of its vacancies through internal promotions and has rejigged its incentive scheme, linking it to sales. (Earlier, a 5 per cent increment was given across the board.) On average, salaries have gone up by 9 per cent as a result.
Employees are encouraged to study further, and Shoppers' Stop picks up their tab for professional courses. The retail chain has also tied up City & Guilds, a major British awarding body, to administer certification programmes in retail selling for its employees. So far, 45 Shoppers' Stop associates have been awarded certificates.
Incidentally, all employees, irrespective of their place in the hierarchy, are called customer care associates, which, says, customer care associate and vice president, human resources, Vijay Kashyap, "helps build a healthy work environment, besides creating an emotional bond."
Clicking on emoticons
Attrition wasn't such a big problem for the Indian IT industry until 9/11 threw the American infotech industry off-gear. "Some of that insecurity percolated to India," says Mercer's Chakraverti.
Employee turnover increased to 20 per cent and then 23 per cent two years later (industry estimates) when multinational consultancies began poaching. It's now settled down somewhat. There are now an estimated 700,000 people employed in the software and services sector in India. Mercer estimates that about 15 per cent will switch jobs.
Unlike in other sectors, there's a pattern to attrition in IT. Most shuffles - especially of Indian workers deputed to projects in the US - happen around October, when H1-B visa quotas are reopened. The departing employees take about three years' experience with them. "By then, they're trained and have enough value to approach the market," remarks S Padmanabhan, executive vice president, global HR, Tata Consultancy Services.
Not surprisingly, big IT companies are prepared for the exodus and manage to keep their churn rates relatively low: 12 per cent for Wipro, 10 per cent for Infosys and 8.7 per cent at TCS. TCS hired 13,500 people this year, 3,000 more than the previous year; and Infosys added 8,026 employees to its rolls.
How do they manage to hold on to their employees? The answer may lie in fostering long-term relationships that extend beyond the workplace. "The bond should be emotional, not financial. Any company can offer to pay more for a Wipro-trained employee - it's a free market," says Rajesh Sahay, general manager, talent, engagement and development, Wipro Technologies.
More than a quarter of Wipro's 33,000 employees are women. They have the flexibility to work from home and relocate to Wipro offices in other cities. Wipro employees can enrol for a three-year programme in software management from the Indian Institute of Management, Bangalore; they attend lectures after work hours and on weekends. Fees are reimbursed if the employee graduates in the stipulated time.
Wipro's work-and-study programmes are close to eight years old and the company claims that attrition rates while employees are signed on for the programmes drop to just 2 per cent, and that too for reasons like marriage or attending to elderly parents.
Infy also believes in going beyond work. The average employee is 26 years old and the company plans programmes that will appeal to that age group. That includes musical, cultural and sports competitions. There are drama and cultural music clubs - Infosys has its own in-house rock band, the Algorithms - an art gallery where Infoscions can display their work and, of course, the much-talked-about verdant campus with food court, auditorium with 40-foot video wall, library and gym.
"Employees work eight or nine hours a day. They need stressbusters and fun events that bring them together," explains Bikramjit Maitra, vice president and head, HR development, Infosys Technologies.
All of which have gone a long way in helping employees turn back from the exit, but the war for talent isn't over yet. There's still scope for that revolving door.
With contributions from Meghana Biwalkar and Meenakshi Radhakrishnan-Swami