Finalhardcopy Attrition

8/22/2019 Finalhardcopy Attrition

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Human Resource ManagementAttrition________________________________________________________________________

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In the best of worlds, employees would love their jobs, like their coworkers,

work hard for their employers, get paid well for their work, have ample

chances for advancement, and flexible schedules so they could attend to

personal or family needs when necessary. And never leave.

But then there's the real world. And in the real world, employees, do leave,

either because they want more money, hate the working conditions, hate

their coworkers, want a change, or because their spouse gets a dream job in

another state. So, what does all that turnover cost? And what employees are

likely to have the highest turnover? Who is likely to stay the longest?

Defining Attrition: "A reduction in the number of employees throughretirement, resignation or death"

Defining Attrition rate: "the rate of shrinkage in size or number"

Attrition is beginning to significantly affect offshore ROI. Just as businesses

faced a scarcity of talented IT resources during the dotcom era, organizationsin offshore countries such as India are experiencing similar pains. Skilled

employees are hopping from job to job and taking with them the customer

knowledge and technical expertise that any company needs. Their salaries

are increasing, along with their perks, benefits, and bonuses.

If employees are to be products,

their shelf-lives are getting shorter


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Defining the attrition problem

Global outsourcing and the astounding amount of foreign direct investment

pouring into China, Russia, and India have created tremendous opportunitiesand competition for talented IT professionals in those countries. The

downside of this increased competition is a rising rate of attrition,

particularly in India. Fiscal third-quarter 2005 (ended December 2004)

results filed by Infosys, Wipro, Satyam, and TCS listed attrition rates

between 7.6% and 17.7%. Vendors that we have interviewed place the

numbers much higher, at 25%60%, while an April 2005 BusinessWeek

article estimated an attrition rate of 60%, with some India service providersexperiencing up to 80% turnover.

To put these attrition numbers into perspective, if a company has 100

programmers and an attrition rate of 25%, then 25 of its IT staff will leave

each year. Think about the time and money it took to find, interview, hire,

train, and coach those 25 people. Now think about losing them and starting

the hiring and training processes anew.

How do the hiring and training processes break down in terms of total costs

in India? The typical time for advertising, interviewing, screening,

negotiating, and hiring a new employee is about two weeks. Companies

usually allot one week for programmers to become familiar with the new

business, two more weeks for technical training, and one last week for

customer training. Now imagine a 25% attrition rate and replacing 25 of

these programmers each year. Based on a yearly salary of $15,000 for the

human resource person and $25,000 for the programmer, it would cost an

additional $63,000 annually in acquisition and employee training costs. After

considering these figures, it quickly becomes apparent why companies are

investing in strategies to prevent attrition.


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Reasons for attrition

It is not easy to find out as to who contributes and who has the control on the

attrition of employees. Various studies/survey conducted indicates that everyone is contributing to the prevailing attrition. Attrition does not happen for

one or two reasons. The way the industry is projected and speed at which the

companies are expanding has a major part in attrition.

For a moment if we look back, did we plan for the growth of this industry and

answer will be no. The readiness in all aspects will ease the problems to some

extent. In our country we start the industry and then develop the

infrastructure. All the major IT companies have faced these realities. If you

look within, the specific reasons for attrition are varied in nature and it is

interesting to know why the people change jobs so quickly. Even today, the

main reason for changing jobs is for higher salary and better benefits. But in

call centers the reasons are many and it is also true that for funny reasons

people change jobs. At the same time the attrition cannot be attributed to

employees alone.

Organizational matters:The employees always assess the management values, work culture, work

practices and credibility of the organization. The Indian companies do have

difficulties in getting the businesses and retain it for a long time. There are

always ups and downs in the business. When there is no focus and in the

absence of business plans, non-availability of the campaigns makes people to

quickly move out of the organization.


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Working environment:

Working environment is the most important cause of attrition. Employees

expect very professional approach and international working environment.

They expect very friendly and learning environment. It means bossism; rigid

rules and stick approach will not suit the call center. Employees look for

freedom, good treatment from the superiors, good encouragement, friendly

approach from one and all, and good motivation.

Job matters:

No doubt the jobs today bring lots of pressure and stress is high. The

employees leave the job if there is too much pressure on performance or any

work related pressure. It is quite common that employees are moved from one

process to another. They take time to get adjusted with the new campaigns

and few employees find it difficult to get adjusted and they leave

immediately. Monotony sets in very quickly and this is one of the main

reasons for attrition. Youngsters look jobs as being temporary and they

quickly change the job once they get in to their own field. The other option is

to move to such other process work where there is no pressure of sales and

meeting service level agreements (SLA). The employees move out if there are

strained relations with the superiors or with the subordinates or any

slightest discontent.

Salary and other benefits:

Moving from one job to another for higher salary, better positions and better

benefits are the most important reasons for attrition. The salary and offered

from MNC companies in Bangalore, Delhi and Mumbai have gone up very

high (Rs 15000 to Rs 18000 per month) and it is highly impossible for Indian


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companies to meet the expectation of the employees. The employees expect

salary revision once in 4-6 months and if not they move to other

organizations.

Personal reasons:

The personal reasons are many and only few are visible to us. The foremost

personal reasons are getting married or falling in love or change of place. The

next important personal reason is going for higher education. Most of the BE,

MCA and others appear for GATE examination or other examinations and

once they get cleared they quickly move out.

Health is another aspect, which contributes for attrition. Employees do get

affected with health problems like sleep disturbances, indigestion, headache,

throat infection and gynecological dysfunction for lady employees. Employees

who have allergic problems and unable to cope with the AC hall etc will tend

to get various other health problems and loose interest to work.

Poaching:

The demand for trained and competent manpower is very high. Poaching has

become very common. The big companies target employees of small

companies. The placement agencies have good days for doing more business.

The employees with 4-6 months experience have very good confidence and

dare to walk out and get a better job in a week's time. Most of the

organizations have employee referral schemes and this makes people to

spread message and refer the know candidates from the previous companies

and earn too.


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Employees advocate:One of the main reasons why employees leave companies is because of

problems with their managers. An HR professional can be termed an

employees advocate and a bridge between top management and employees at

all levels. There is a huge gap between HR professionals and employees in

terms of understanding challenges and delivering requirements. HR has not

really understood the problems associated with employees careers and jobs.

The companys overall plans and strategies also depend on HR professionals

as they voice employees problems and requirements. The HR department

should have genuine interest in the employees welfareit is responsible for

making sure that their expectations are met. By doing this it is easier to meet

the companys business targets.


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Handling attrition?

Earlier the retention was the sole responsibility of HR Department and at the

most the department heads will be accountable for the retention of talent. Incompanies the wheels have changed and multi dimensional approach needs

to be adopted. More of concerted efforts only would help to retain the talent.

Everyone has to contribute to hold the employees little longer period. All the

leading companies are trying several methods to retain the talent and few of

those innovative HR practices are: (based on a survey)

Providing stimulating work environment:In terms of stated work pressure, only 17% have claimed light pressure. This

may point to a reasonably high-pressure environment in conventional terms,

not realized as most respondents have no other industry experience. The

atmosphere at the workplace however, was generally positive. Almost half

worked more than 45 hours per week.


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Free transport and free food:

Majority of the breaks were for meals and there were no significant problems

faced in taking the breaks.

Almost 2/3rd employees travel more than 10 kms to work everyday. This is a

huge strain on quality time available with the family and ostensibly results

in stress in numerous ways compared with other industries. The root cause is

that most BPOs are located outside the city as government lands have been

allocated to the MNCs at better rates there.


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Although taxi / bus services are provided by most employers, as many as 30%

workers travel crammed (more than 5 persons to a taxi). Whats more, 79%

waste more than 30 minutes of their productive lives everyday waiting for

commute. Interestingly, lower salary workers get no such benefits.

Good rewards and recognition programmes:

As many as 56% admitted to being asked to work overtime. 44% refused the

question implying that conditions are created such that all probably are

coerced into working overtime. The oppressive part was further that as high

as 41% claimed to not having been paid for overtime.

Recreation clubs, Canteens, Entertain programmes , fun activities with inthe work area:

Many companies have canteens though the quality of food is not great.


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Good pay and benefits:

A huge 58% of starters are dissatisfied with their promised packages vis--vis

delivered salary.


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Other practices include:

- Promotions and salary increase on a regular basis.

- Better learning opportunities, Encourage enroll for distance learning

programmes.

- Regular holiday packages, gifts, outings etc.

All the above activities are being undertaken to a greater extent or little more

in all large Companies. Surprisingly the attrition rate is not coming down in

any of the companies, but it is going up and it may increase in the coming

days. This is a time to introspect as to what is lacking in the approach. One

thing is missing is attention to individual needs. Employees have varied

expectations and it is becoming difficult to understand them and by the time

you make an attempt to understand the expectation changes and it is still

becoming difficult to meet the customized demands or expectations. To quote

an example, if a friend leaves, another close friend will also leave and he will

lure another 3-5 persons. Moving for higher education and marriage are the


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major reasons for attrition. To tackle these will be impossible with any type

of strategies and approaches. The HR personnel have become silent

spectators and start hunting for new personnel to replace.

The broader approach is to bring sanctity in the recruitment process like

demand the relieving letter from the previous company, have non-hire

agreements with the companies in the particular area. It is not easy to bring

the entire company under a forum. Nasscom has attempted to bring out

certain guidelines on the matter and the impact is not felt yet. The MNC

culture, high salary level and benefits offered by them are the only two major

aspect of attrition and no one can halt them doing so.

How Insights Can Help Build Strong Manager/Employee Relationships:

The Insights Discovery System is based on perspectives and attitudes

relevant to understanding organizational and cultural requirements and

needs of people in relation to motivation and leadership. The understanding

of individual differences that Insights provides is fundamental to improving

communication, co-operation and building effective and high morale teams.

This understanding is what bridges the gap between manager and employee.

The Insights Discovery System generates reports that reveal personal

preferences or triggers of each individual - including issues that cause stress.

In essence, Insights can bring about a closer relationship between employee

and manager to enable both parties to better adapt, connect and understand

one another.

An employee may be highly competent but his or her style may be different

from that of the direct manager. The "Value to a Team" section of an Insights

report provides crucial information to a manager who tends to evaluate all

employees against one set of standards. Insights can help managers recognize

the value and uniqueness of each person's contributions then reward them


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accordingly.

Insights also serve as a communication vehicle for discussions about an

employee's current and future interests. Insights help managers and

employees better identify what values (needs) are most important to each

individual and how these values impact the person's attitude towards work.

Values can range from an employee feeling stable and secure to someone

enjoying challenge.

The Insights Discovery System is a powerful workforce enhancement tool. It

can:

- Enhance the effectiveness, commitment and retention of an incumbent

workforce though increased understanding of human behavior

- Motivate and retain employees whose basic monetary and material needs

may have been satisfied, but who are seeking their internal drives

- Improve HR planning and development

- Identify motivational and managerial issues related to interpersonal style

- Reduce the impact of turbulence and organizational transition on employee

commitment and productivity.

How to save high attrition rates?

How much would you invest to keep your employees focused and happy?


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This is the question on the minds of CEOs and managers worldwide as the

technology boom lifts and the employment market opens.

From the employer's perspective, employees are an investment. You

interview to make sure an individual has good work ethic, motivation, and

drive. Most of the time, employees are considered a financial investment. Yet

there's much more to it than that. There is a significant emotional

investment that is crucial to accelerating business strategies and reaching

organizational goals.

You probably know someone who owns an outdated, overused vehicle but

won't entertain the thought of trading it in even though they can afford to

upgrade. Why, you might ask, do they keep it? Well, the owner has probably

invested substantial time, money and care into keeping it in top condition,

not to mention the dependability that has taken them to countless doctors

appointments, baseball practices and events. It seems senseless to throw it

away. The cost of replacing the vehicle would be enormous compared to the

cost of upkeep on the old one. Even with inanimate objects, we become

accustomed to personality and quirks and develop a common trust.

When this same logic is applied to employees, we find the cost of replacing

employees comparable to that of investing in a new automobile. Recruitment,

hiring, benefits and administrative costs put an organization upside down on

the investment.

Thankfully, companies have come to realize that keeping employees is more

cost-effective than replacing them. Retaining valuable employees has other

benefits - retaining the vault of knowledge that's been accumulated, skills

learned and trust and relationships they have built with customers and co-


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workers.

People Are Not Easily Replaced

Even though today's pool of unemployed workers is deep, organizations

choose to spend more time and resources on retaining existing employees

than starting from scratch. Yes, there are financial reasons behind this focus

on retention. However, there are many other contributing factors such as the

effect attrition has on customer service, corporate culture and employee

morale and loyalty. All these factors can and will be effected by turnover.

Basically, when good people leave an organization they take their training

and knowledge and often times, relationships with them.

Drivers of Turnover

Turnover is often driven by corporate restructuring and tight competition for

key talent. For many firms, surprise employee departures can have a

significant effect on the execution of business plans and may eventually cause

a parallel decline in productivity. This phenomenon is especially true in light

of current economic uncertainty and following corporate downsizing when the

impact of losing critical employees increases exponentially.

When managers or supervisors are asked why good people leave, most

respond, "Its about money." Or, they dismiss the departure matter-of-factly

by stating the employee "received a better offer." Contrary to popular belief,

research indicates that money is not even on the list of top five reasons

employees give when asked why they are leaving an organization.

When viewed from the employees' perspective, a healthy organization is one

in which people are generally satisfied with the quality of their work life. On


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most days they feel good about going to work. They feel empowered to help

shape decisions that affect them, they have the resources and skills to satisfy

customer needs and they are generally confident in the abilities of the

leadership team.

From the organization's perspective, the organization is healthy if it is viable

as measured by profitability, competitive market position and customer

satisfaction. A healthy organization also responds well to the need for change;

it is adaptive and thereby ensures its future - meaning that following a major

upheaval or transition, the healthy organization rebounds and employees

remain committed.

Bottom line, it is the role of the manager, that most influences an employee's

decision to stay or depart from an organization. People will leave if they don't

like their manager - even when they are well paid, receive recognition and

have a chance to learn and grow. In fact, disliking or not respecting the boss

is the primary reason for talent loss. Research shows the reasons for

employee departures are (in descending order):

1. Employee/manager relationship2. Inability to use core skills3. Not able to impact the organization's goals, mission4. Frequent reorganizations; lack of control over career5. Inability to grow and develop6. Employee/organization values misalignment7. Lack of resources to do the job8. Unclear expectations9. Lack of flexibility; no 'whole life balance'10.Salary/benefits


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It is very important to know that the above factors are often NOT the ones

mentioned in most attrition studies published by individual organizations.

Additionally, this information does not match the data frequently obtained

during an employee's exit interview when asked about the reasons for

departing. The rationale behind this discrepancy is that exit interviews are

frequently conducted by the departing employee's manager or HR manager,

hindering honest responses. Typically, employees are hesitant to tell these

company representatives the truth for fear of burning bridges or getting a

bad reference.

How to curb attrition?

Money is not everything


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Although the importance of higher packages is slowly diminishing, among

fresher or laterals with less than three years of work experience, money is

still considered to be the highest priority. Employees want not only work

recognition, but also extra perks." A number of professionals are looking at

more challenging jobs. "In several cases, faced with a choice between more

money and a challenging job, employees have opted for the latter as it allows

them to learn new technology and increase domain expertise." People analyze

the training programmes of prospective companies with those of their current

organization, which means that how an organization grooms an employee is

weighed to a greater extent. This is because they know that developing next-

level skills will keep them ahead in the job market, and finally result in

better compensation. They also look for a job with higher levels of

responsibility, better learning opportunities.

Vision and objectives

The next level of communication, a crucial part of retention, starts

with acquainting employees with the companys vision and objectives.

Organizations successful in retaining employees clearly pass on their goals

and achievements. Conducting regular meetings and updating employees,

especially new entrants, about the companys status and achievements is a

must. They should concentrate on leadership and brand building as people

prefer to be associated with a brand. Respect for the job should be created by

BPOs. The youth should feel proud to be a part of the billion-dollar industry.

Mentoring and handholding new recruits from day one to four months are

important tasks; during this period, they should be familiarized with the

culture of the company. It is at this time that new entrants experiment with

different options. Hence they should be exposed to the best values the


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company has. If they are informed about regular happenings in the

company, employees will be confident about the future and not try to look for

better options.

Treat employees like Customers

Even while companies strive to understand which organizational, job, and

reward factors will contribute to holding back employees, industry experts

have found several loopholes at the top management and HR management

level. Companies should have a similar approach to employees and

customers. If a company strives to retain an employee in the same way it

tries to retain a customer, him leaving the organization could be out of

question.

Since software professionals have different priorities at different points of

time, organizations need to structure their offer-mix while recruiting new

hires, as well as promoting potential ones. Communication is the foundation

for the entire process of managing attrition. This communication begins right

from recruitment. In cases of peer pressure, an employee aims to join a well-

known company. This could be achieved by brand building, which attracts the

right talent and helps in retention as well.

Understanding an employees needs at various levels is a recommended HR

practice.

Firing

Sometimes, firing can look like attrition. Looking at firing and attrition

together in a different light, firing can be an excellent tool to contain


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attrition. Attrition can simply be defined as employee leaving his current job

due to reasons like, job pressure, health problems, personal reasons,

inefficient boss, lack of job security etc. All the above reasons are interlinked

and can be the reasons for good workers to quit. If the team has under-

performers who despite given sufficient support and training is unable to

perform, but they continue to be part of the team damage the morale of the

team. A performer will not want to be part of the team, which has non-

performers because he will have to compensate for the non-performer,

thereby increasing his job output/pressure. A continuous job pressure results

in health problems. Having frequent health problems not only reduces his

performance, but also affects him financially. At this juncture, the performer

realizes that he is working with an inefficient manager who is not capable of

cleaning up the team by firing non-performers. With the above, the

performer employee feels insecure and resigns. Firing non-performers can be

an efficient tool to contain attrition.

Consider feedback

It is important to take feedback from employees through different means and

work with the HR department to iron out differences. As industry experts

point out, feedback can be got in two waysduring the employees tenure,

and through exit interviews. Inputs can be secured from existing employees

through various employee relationship management tools. The Wipro Listens

and Responds initiative at Wipro aims to capture the concerns and

grievances of its employees. The feedback we get through this tool will be

analyzed, and action will be taken on it. Our employees are very excited that

their feedback is being taken seriously, says Sahoo. Exit interviews help

management learn the reasons why employees leave the company; based on

their revelations, the organization can address the problems of existing

employees, thereby curb attrition.


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Spend Time Developing and Benchmarking Incentives

Whenever the demand for a professional in a particular field heats up, the

perks associated with the job start to pile up. Standard perks for an India-

based "fresher" (a new entrant in the IT services industry with little work

experience) typically include free transportation, educational assistance,

healthcare benefits, performance-based bonuses, onsite cafeteria, stock

options, and interest-free loans to absorb the cost of relocation or maybe to

finance the purchase of a two-wheeler. According to Wipro's web site, its

employees even have access to an agency that will handle such "domestic

chores" as paying bills, thereby giving IT workers more free time.

An important part of designing incentives is aligning them with market

benchmarks. As far as salaries, HR firm Hewitt Associates reports that India

showed the largest overall salary increase in the Asia-Pacific region in 2004.

Salaries in India grew by 11.6% overall, while China trailed with a 6.4%

8.4% hike, the Philippines showed a 7.4%7.7% increase, and Korea saw

wages jump by 6.4%6.8%. Salary increases for middle managers in India

were even more dramatic: Nasscom, India's software association found that

salaries for middle managers rose by as much as 30% in the last two years.

These salaries are often paired with expansive benefit packages that include

standard entry-level benefits as well as special services such as help finding

and buying a home or enrolling children in school.

Captive centers and IT service providers have to offer innovative

compensation and benefitsor risk losing valued employees to competitors.

Nonstop evaluation and benchmarking are "need to do" activities for IT

managers.


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Subsidize Education and Certification

In the United States, many companies reimburse employees for advanced

degrees or certifications that relate to their area of expertise. Until recently,

the opposite was true in India, but that trend has begun to change as

businesses have discovered that a significant portion of their attrition

problems stem from employees leaving to pursue a master's degree. Several

offshore service providers have teamed with universities to offer their

workers management-level master's courses at a subsidized rate, and

watched attrition rates drop as a result.

For example, Cognizant Technology Solutions, an IT service firm with 17,000

employees, partially reimburses Indian staff that pursues master's degrees at

BITS, a higher-education institution located in Pilani, India. Business

process outsourcing (BPO) player 24/7 Customer, in association with the

Indian Institute of Management Bangalore, launched a management-

education seminar series called "Beyond Knowledge," through which 24/7

aims to educate employees about the BPO industry and discuss related

careers. Multiple providers have followed the lead of Cognizant and 24/7.

In several offshore countries, advanced degrees are considered crucial to

social standing. It's important for U.S. firms with little international

experience to recognize this desire among employees and design programs

accordingly.

Change Locations

The high prices and resource crunch in top-tier Indian cities such as

Bangalore and Mumbai have led many companies to execute alternative

location strategies. Many vendors are sending work to tier-two cities


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(Hyderabad or Chennai) or even tier-three cities (Noida or Chandigarh),

where labor and real estate costs as well as attrition may be cut in half. Such

benefits come at a price: The infrastructure quality lags that of more

advanced cities, and the search to find qualified people may take longer.

Another option to combat the rising attrition rates in India is to locate in

other countries. Sykes Enterprises, for example, disclosed that it is relocating

the customer contact management work at its Bangalore, India, facility

because the center delivered an inadequate return and a limited competitive

advantage. The Tampa-based company thinks the work is better suited for

the other Asia-Pacific offshore centers in its portfolio, such as China. Sykes

expected to incur total charges of approximately $0.8$1.5 million for its plan

to relocate work.

Rotate Employees

Employees who don't feel challenged by their work often leave. In response,

companies such as TCS have programs that rotate employees into different

disciplines about every two years and expose them to new locations, projects,

and technologies. L&T InfoTech, a software solutions provider with 4,000

employees and six development centers in India, has implemented a similar

program.

Offshore employees are asking for a clear career path with increased

responsibility and frequent recognition of achievement. Established U.S. and

European multinational companies have long had learning programs that set

expectations for performance goals such as learning a particular tool or

proprietary software. Companies practicing off shoring need to provide new

challenges and opportunities for skills development through training or job

rotation. It may become the only reason your best employees stay with you.


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Combat Poaching by Encouraging Referrals

Rather than going through a prolonged posting process and screening a

deluge of rsums, some companies poach employees directly from their

competitors and offer to double salaries or buy out contracts on the spot to

scale up quickly. Poaching is generally a bad idea, as it drives up salaries and

discourages employee loyalty.

An employee referral program can serve as an alternative and effective

recruiting strategy. Satisfied employees can be a company's best sales tool

and add a personal touch that a print or radio campaign lacks. A Voice &

Data survey of the top 15 Indian outsourcing companies with 1,000-plus

employees found that referrals constituted 23% of new hires. For some

companies, the number was even higher, at 40%. The study also observed

that recruits hired through employee referral programs are "stickier"; that is,

they stay with companies longer than non-referrals.

Just Ask: Are Your Employees Satisfied?

Retention is inextricably linked to employee satisfaction, so it pays to

periodically survey employeeshopefully before their exit interviewsabout

job satisfaction issues, and act on the data gathered. The aim is to determine

why some employees depart and some remain with the company, and to

define the traits of productive, successful employees. Many companies

examine the reasons employees leave, which don't reveal as much as the

reasons they stay.

An important aspect of implementing a retention program understands that

it should not be one-size-fits-all. If incentives are meant to keep employees


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happy, then they truly have to be designed with the employee in mind. Too

often, employers and employees disagree on what constitutes a good

incentive. For example, a company might reward a father with three young

children a monetary bonus as thanks for working overtime for five months

straight. To the father, however, days off might have been more attractive,

since they would have allowed him to spend time with his family.

Knowing your employees and personalizing rewards makes a difference. The

global workforce has different, individualized needs, and organizations

should tailor incentives for their employees if they want to retain them. If

your company doesn't bother, don't be surprised if workers head for the door

as soon as year-end bonuses are handed out or stock options vest.

Spend More Time Recruiting

With huge projects ramping up within exceedingly short windows, it can be

hard to convince management to allot more time to the recruiting process.

However, it's difficult to retain good employees if the company doesn't have a

process to hire the right people in the first place. Simple measures, such as

incorporating skills tests that relate directly to the job in question, can help

companies to determine whether the applicant is indeed an expert

programmer or merely an intermediate programmer. Having employees

interview candidates also may increase the chances of success, as these

employees can better identify potential personality clashes that HR personnel

may not spot.

Costs of Turnover

The impact of employee turnover on company performance is often

understated by organizations. This describes how the cost of turnover is can

be calculated using some basic organizational parameters. The purpose of


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this document is to provide talent cost of turnover calculator with insight into

how costs are calculated and the reasons why certain costs were include or

excluded form the calculator. The calculator should only be used as a guide in

understanding the impact of turnover on a company. If the desire is to

understand the true cost of turnover then it is suggested that a greater

degree of analytical work is undertaken.

The key areas used in the calculation of turnover are:

Administration and sourcing costs

These include the administration of the termination and recruitment

functions together with the costs associated with interviewing, testing and

attracting applicants.

New Hire costs

Once a person has been employed an organization generally spends

significant resources in the induction and administration of bringing them

into the organization.

Lost productivity

The hidden costs associated with lost productivity of employees prior to

leaving the organization and new less skilled employees are one the largest

components of the total cost associated with turnover.


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Dysfunctional and avoidable turnover

Determining the level of dysfunctional and avoidable attrition provides a

perspective on the scope of control that a company has to manage their

turnover costs. Determining the cost of turnover is the first step in the

process of developing a management plan. To deal with an attrition issue

effectively the reasons for turnover and an understanding of the

demographics of turnover need to be understood.

Undoubtedly, the financial costs of turnover have attracted the attention of

academics and practitioners alike. Besides the more familiar costs associated

with the administration of terminated employees the economic costs such as

productivity losses need to be included in any calculation. In particular,

departure of employees - especially experienced or talented ones - may

threaten overall firm productivity or client retention. Furthermore, personnel

losses may endanger the firms future opportunities in the marketplace or the

morale of their remaining work force. Human resource accounting experts

Cascio, Hom and Griffeth define exit expenses as having two main

components - direct and indirect costs. A company incurs both direct and

indirect costs that result in losses in production dollars and overall

production volume, as well as increased administrative costs. Direct Costs

are actual dollars spent each time an employer has to attract, select, and

induct a replacement for an employee who leaves the organization. Indirect

costs are those expenditures attributable to turnovers affects on production -

that is costs for incomplete or disrupted work, loss of quality, etc.

The cost of turnover can be calculated by measuring the time taken to

administer each activity plus the direct costs such as advertising costs. The

turnover costs calculated using the calculator represent dollars spent. The


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potential loss of revenue if these dollars were invested elsewhere or through

lost productivity is not calculated. Therefore, the figures are an indication of

the minimum costs that the organization is subjected to when an individual

leaves the company.

Administration & Sourcing costs

The most visible cost of turnover is incurred by organizations in the area of

recruitment administration and sourcing. The time associated with

processing terminated employees and recruits places a burden on

organizations where staff turnover is excessively high. The assumption is

that this is largely an administrative task conducted by people at 80% of the

average company salary. In addition the direct costs to a company for

recruitment agency and advertising costs are highly transparent.

1. Process Administration:Resignation Administration -

The time taken to administer a resignation will include activities such as:

conducting exit interviews & processing of administrative tasks. The time

taken to perform these activities is ideally measured as a result of

analyzing the processes involved.

Recruitment Administration -

A large amount of time is often spent in administering the recruitment

process. Writing the job ad, posting it onto job boards, organizing agencies

and reference checking all require the use of organizational resources,

whether internal staff or outsourced. The hours spent involved in these

activities does need to be factored into the cost of turnover.


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2. Sourcing Costs:Agency expenses -

The cost of sourcing a successful applicant from an agency may be one of

the largest single direct costs associated with recruitment.

Advertising costs -

The cost associated with posting job ads to job boards or traditional media

such as newspapers can be significant. The average cost per vacancies is

used within the calculation.

3. Interview Costs:Interview -

A core component of recruitment administration is the cost associated

with interviewing applicants. Interviews make use internal resources. The

more interviews held and the greater the number of candidates

interviewed the larger the costs associated with these activities.

Testing -

Companies are making greater use of psychometric and aptitude testing

in their recruitment processes. These tests can be costly to administer and

as such need to be factored into the overall attrition costs.

Travel -

Companies may pay the costs associated with bringing an applicant to the

interview location. Although this may not be done for every candidate an

average is used in the I4 calculator.

Cost of New Hire


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The two costs measured in this area are the administrative tasks associated

with inducting a new hire into the organization and the associated induction

training. When measuring the cost of attrition sometimes the total cost of

training that an individual has received whilst in the employment of an

organization is included. However, as all learning undertaken by employees

will be used back on the job an add value to the business it is inappropriate to

count it as a cost of attrition. Also, where particular jobs have high training,

often there is a corresponding lower rate of pay which acknowledges the

investment that the organization is making in the individual, eg. Youth

wages. One aspect of training directly associated with turnover, however, is

the induction of new staff to the organization. High staff turnover will

necessitate greater levels of resources being made available to induct new

employees. It is the opportunity costs of these resources that must also be

calculated.

1. Induction Administration

The process of induction into an organization can involve a substantial

amount of time. The activities included here would include the processing of

new hires into organization systems (HR) and introductions to fellow

employees.

Induction Fixed Costs -

The fixed costs associated with inductions include the cost of materials

such as induction kits and staff manuals.

Induction Training -


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Any initial training received by an employee on joining the company.

This includes the costs of the materials, presenters and the

opportunity costs associated with the new employee taking time off

work to participate.

Relocation Expenses -

Similar to travel these cost are incurred by companies in an effort to

source the best talent for alternate locations. An average cost needs to

be captured as part of the calculation process.

Productivity Losses

The most detrimental aspect of staff turnover is lost productivity. Evidence

has found that leavers often miss work or are tardy before they depart. Deery

and Iverson argue that according to progression-of-withdrawal models the

productivity of leavers may deteriorate before they depart.

Turnover is commonly viewed as belonging to a family of withdrawal

behaviors that physically distance employees from unpleasant work settings.

Serving a common psychology function, withdrawal actions reduce the time

spent in an adverse environment and thus reduce job dissatisfaction.

Studies have shown that employees leaving a company will have a greater

level of absenteeism prior to leaving. Excessive sick leave is not only costly,

but is also an early warning signal that an individual may be considering

resigning from the organization. Not only does staff take more sick leave but

Hom and Griffeth state that their overall productivity decreases as well.

Furthermore, resignations may disrupt other employees work if their work

depends on the leavers or they must assume the leavers duties.


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The second effect of loss of productivity occurs when new hires join the

organization. They will not have the networks, understanding of

organizational processes or product/service knowledge to be effective. Studies

have shown that a new hire will generally take between 3- 8 months to

become effective in their new role. The longer period is associated with more

senior roles.

Excluded costs

Not all the costs associated with turnover have been included in the i4

attrition calculator. Costs that cannot be accurately measured or assumed

have been excluded. These costs, although hidden, may be the most critical in

terms of organizational impact. Examples of hidden costs are included below

to highlight the organizational impact of attrition.

Employee Demoralization

Turnover may erode the morale and stability of those who remain employed.

Their morale suffers because they lose friends and may interpret motives for

quitting as social criticisms about the job. A belief that a leaver has a better

job elsewhere may change employees perceptions of their jobs. As a result

stayers may denigrate their present position in the light of superior

alternatives and begin contemplating other employment. This phenomenon

may lead to a cycle of attrition whereby employees leaving a company prompt

other to do the same.

Impaired Quality of Service

Turnover also hinders the delivery of service and retention of customers.

Attrition among service personnel impairs customer service because

understaffed branches delay or withhold service. Unlike experienced leavers,


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new employees may also provide less competent or less personalized service

because they do not know the clients and cant meet customer expectations

through lack of knowledge and experience.

If satisfied employees make customers feel well treated, disgruntled

employees may provide careless service before they leave. Turnover also

interrupts the transmission of service values and norms, which are the

essential underpinnings of high quality service, to successive generations of

employees. Customers' perceptions, attitudes and intentions seem to be

affected by what employees experience, both in their specific role of service

employees and their more general role of organizational employees. It has

been found that there is a high correlation between employee turnover and

customer turnover. Therefore, the cost of decreased customer satisfaction and

loyalty should be taken into account when considering staff turnover.

Turnover reason & cost impact

Just as attrition can lower productivity, incur financial costs, and undermine

stayers' morale, turnover can have the opposite ramifications under certain

circumstances or for certain firms. That is that the exit of marginal

performers may improve overall firm productivity, while new replacements

for leavers can infuse companies with new ideas and technology. Though

turnover is obviously costly, personnel shrinkage - especially among

administrative staff - can nonetheless reduce overhead costs. Further

resignations may create more job and empowerment opportunities for

employees who remain in firms.

Functional and Dysfunctional Turnover


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Departing from conventional beliefs, some academics point out that turnover

can prevent stagnation and complacency, facilitate change and innovation,

and displace poor performers. Turnover is not inherently negative. Although

it creates personnel costs, the organizational consequences of turnover are

dependent on who leaves and who stays. The departure of good performers is

construed as dysfunctional turnover - representing a loss to the organization -

for their replacements are likely to be of lower caliber. The departure of poor

performers is viewed as functional turnover - because they are apt to be

replaced by better performers. Research into whether high performers or low

performers leave tends to have found mixed results. A meta-analysis

conducted by McEvoy and Cascio found that generally it is the poor

performers that will leave their place of work. There are two possible

explanations for this: firstly, terminated staff has on average a lower tenure

than current staff and so have not had the time or opportunity to develop the

skills necessary to perform well; or the current performance management

systems which exist are encouraging high performers to stay and poor

performers to quit.

Avoidable and Unavoidable

Further differentiation should occur between organizationally avoidable

turnover and organizationally unavoidable turnover. For example,

organizations cannot control (that is, it is unavoidable) turnover caused by an

employees death, or by an employees quitting to follow a relocating spouse. It

is important to identify carefully those exits that are avoidable and those that

are unavoidable. After all, leavers whose departures are unavoidable

resemble stayers more than they resemble the leavers whose departure is

avoidable; they do not resign because they are unhappy with their jobs or the

organization.


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Despite the appeal, determining whether exits are avoidable or unavoidable

may prove difficult because employees may falsify reports of their reasons for

leaving, they may not wish to burn their bridges behind them.

The cost of attrition is only calculated on the level of avoidable turnover.

There is no benefit in including the cost of unavoidable turnover since a

company has no control over these events and can therefore not put in place

action plans to minimize the negative consequences of staff turnover.

Article -Attrition at Call Canters


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The evolving BPO industry has got the perplexing issue of managing humanresources, says BHIMA RAO

Attrition of employees in the call centre industry is mind-boggling and it is

creating havoc for the industry and especially for the HR department. The

attrition rate varies from minimum 30 per cent to a maximum 90 per cent per

annum. The software also saw this rate till the incident of September 11,

2001. I wonder why the attrition rate was not so high in any other new

industry like telecom, retail stores, banking etc. Who has to introspect, how

much responsibility should be borne and are we collectively contributing

directly or indirectly for the attrition.

Attrition is not a new problem and it has existed earlier and will continue to

exist in any industry. But there is a limit for every thing. The call center

industry is new and every one is in a great hurry to make some thing or do

some thing, become someone in the sun rise industry. The government,

promoters, management team, employees, consultants, media and so many

others play a major role in developing any new industry and extend helping

hand for stabilization and finally growth of the industry.

Our country is fortunate to be identified as one of the best places for BPO and

the beginning is really good. Now the growth of BPO industry is mainly

depending on the cost effectiveness and quality of the manpower. All other

factors are being taken care by the government through liberalized laws,

providing infrastructure like telecom and we are best in the IT. The cost

effectiveness will depend mainly on controlling the running cost and quality

is dependent on the manpower employed. Attrition of employees increases

the cost of recruitment and training. It has impact on maintaining the quality

and competent manpower to meet the standards set by international


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customers.

Four reasons why youngsters quit BPOs

What drives young people to quit call centres and data processing units as

fast as they join them? As industry attrition rates (how soon people quit jobs)

climb as high as 80 percent in some companies, human resource executives in

various BPO firms tried to pinpoint the reasons that make young people

between the ages of 22 and 26 shuffle jobs in months. They were

participating in a seminar on key HR issues for the BPO industry in

Bangalore today. This is what they came up with.

1. BPO not seen a long term career

"This industry is still not being accepted for a long term career," said Mphasis

BPO Services' chief human resources officer Manab Bose.

2. High aspirations that the industry cannot meet

BPO employees have high aspirations. They want to see 'wealth' in this

lifetime and have low respect for authority. This is because most BPO

employees have immense family support.

3. Good talent is prone to poaching

ICICI OneSource President and CEO Raju Bhatnagar said the pulls of the

market (poaching by competitors) cannot be countered easily. BPO firms try

to pick the best talent, he explained, and good talent is prone to be poached or

to shifting jobs. He suggested that firms should instead look at the average

person, train and retain him/ her for the longer haul.


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4. Employees face pressure at home and at work

Philips Software CEO Bob Hoekstra felt BPO employees are in a piquant

situation, having to handle pressure both from their customers and at home.

"There is an enormous conflict in age group [in terms of the fact that]

youngsters are serving mature customers, and they are prone to make

mistakes," he said.

Case Study -'I'll never work at a call centre again!'


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Subhash Mukherjee | November 18, 2004

The BPO/ITES sector is only expected to grow larger, and more profitable,

over the next few years. Most young people are eager to jump on the money-making BPO bandwagon.

But is working for a BPO all that it's made out to be?

No, says Subhash Mukherjee (name changed on request), who recently quithis job at a call centre.

This, in his own words, is his story:

I am 20 years old. I was recently hired by a call centre in Kolkata to work for

an overseas-based company. I was earning Rs 7,500 per month.

My workday began with calls I had to answer for five hours continuously,

without a break. As soon as I was through with one call, the next one would

be waiting. There was no time for me to even say a few words to the person

sitting next to me. After five hours of constantly answering calls, I would get

a 20-minute break. Then, I would take calls again for another three hours.

Without a break. I would take around 350 calls a day.

One day, I reached breaking point. After taking 156 calls at a stretch, my

throat started to hurt terribly. I paused to take a breath and, in the process, I

missed a call. The calls that are directed to us were constantly monitored by a

machine. Immediately, it alerted my supervisor to the fact that I had missed

a call. My supervisor came and asked me why I was in the 'wrap mode'.


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What this means is that my dialer shows a red bar when the person on the

other end of the line hangs up without getting a response. The red bar is an

indication that I did not take the call -- that the call was not 'live'. At that

moment, I just wanted to pick up my bag and leave. Permanently. Instead, I

stayed calm for the duration of my hours at work.

I fielded all my calls till 1 am. But I had made up my mind -- I would quit

this job with its inhuman pressures and its lack of empathy for employees.

Workplaces like this have only one goal -- to make money. This job expects

you to work even if you are feeling ill; even if your throat hurts. You cannot

take even a 10-second break; the dialer throws calls at you continuously and

you have to start pitching (taking them) immediately. If you do not respond

to the person at the other end of the line, s/he might hang up. That shows on

your machine. You have to ask for permission to go to the toilet. Often, your

request is denied by your supervisor.

You repeat the same five sentences 350 times a day. Isn't it pathetic?

When I started out, there was no pressure. Gradually, though, the stress

grew beyond the levels of human tolerance. Working at the call centre was a

great learning experience for me. Now, it was time for a break. When I

worked, I had no time to watch a film, no time to read a book, no time to meet

friends, no time to swim. For the last few months that I worked at the call

centre, I had time only for two meals a day. As a result, I lost my appetite. I

would return home at 2.30 am and go to sleep at 4 am. I would get up at noon

and go back to work at 3.30 pm. Now that I have quit, I can go out with my

friends. I can spend time rediscovering myself. With the approximately Rs 65

per hour that I made, I can buy a few books and have some fun. Maybe that

will take away the pain that came with this job. But, believe me; the money

could in no way make up for the pain!


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I'll never work at a call centre again. Nothing is worth the ordeal I went

through.

Subhash Mukherjee quit his job in mid-October. He is now pursuing anEconomics degree at the Kolkata State University.

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