INTRODUCTION TO EMPLOYEE

TURNOVER In

IT INDUSTRY

There are some keys to win over the employees in an India

Software Company. The IT managers have forgotten those

soft-skills and techniques in the long-coarse of time. This is

one of the reasons why Software Companies faces high ratio

of employee turnover in a firm. The survey carried on Top

Software Companies in India tells that the employee

dissatisfaction level has increased up to 27% in 2007. Most

of the employees complained that the pressure given by

their boss and dumping work-load in Software Outsourcing

setting.

Now what worst could happen in Software Company, if the

company fails in delivering positive energy to the employees

and cares less about their employees. Such companies

usually lack the motivation to deliver to its worker due to ill-

prospect manager in the firm. Most of the managers find

difficult to delegate the work to their employees. They are

not at fault perhaps, but even they are not talk to do the

same.

India Software Development needs to have an organized

structure and management so as to retain their employees

for long-time. Consolidations should not be only in the

words, but all also action performed by the IT Manager.

MEANING OF EMPLOYEE TURNOVER:

Employee turnover occurs when employees voluntarily

leave their jobs and must be replaced. Turnover is

expressed as an annual percentage of the total workforce.

For example, 25 percent employee turnover would mean

that one-quarter of a company's workforce at the beginning

of the year has left by the end of the year. Turnover should

not to be confused with layoffs, which involve the

termination of employees at the employer's discretion in

response to business conditions such as reduced sales or a

merger with another company.

“Employee turnover has been defined as the rate of

change in the working staff of concern during the

definite period”.

In other words, it signifies the shifting of work force into

and out of an organization. It is a major of extent to which

old employees leave and new employees enter into service

in a given period. Employee turnover is the cause and effect

of instability of employment, apart from being a major of the

morale and efficiency or otherwise of worker.

Therefore, it can be concluded that Employee turnover is a

perpetual concern for companies. Having to replace staff at

regular interval can be headache for a busy manager and

the entire resource- shaping circus of hiring and training

new employee is one that company scarcely look forward to.

FACTORS RELATED TO EMPLOYEE TURNOVER:

There are several factors which are related to employee

turnover, thus, as shown with the help of diagram as below:

The explanation of these factors related to Employee

Turnover is as under:

1. The Economy in this model, the overall economy sets

the stage for alternative employment opportunities. In

a tight economy, generally there are less alternative

opportunities and employees are less willing to leave

their current jobs even if they are dissatisfied.

2. Company culture is another strong determinant of

turnover intentions. Company culture is determined by

a bunch of things as skills, leadership,

rewards/recognition, and communications.

3. Organizational Characteristics nested within an

industry is the specific organization. Within any

industry, there are some organizations that simply do a

much better job of retaining employees than others.

Some of this has little to do with enlightened practices

and is simply a product of workforce demographics.

All things being equal, a younger workforce will have

more job and company changes than an older

workforce. Part-time personnel are less stable than

full-time personnel and a workforce with greater

average tenure will have fewer turnovers than a

workforce with less average tenure.

4. Industry Trends the Health Care industry is a good

example of how industry trends interact with the

general economy. With managed health care has come

an increased focus on profitability and cost reduction,

and rapid consolidation of hospitals. This has created

an atmosphere of uncertainty and dissatisfaction for

many health care professionals.

The current good economy offers career opportunities

outside of the industry and can increase the level of

turnover that might already occur. The net effect is that

turnover is very high in this industry and there is an

increasing shortage of qualified professionals.

5. Job Characteristics one of the most researched areas

is the relationship between job satisfaction and

turnover. There is a well documented body of research

that suggests the following job characteristics are most

commonly associated with job satisfaction:

Variety - Jobs that offer a greater variety of tasks

are associated with higher satisfaction levels

Autonomy - Jobs that offer greater freedom and

choice in execution (i.e., empowerment) are

associated with higher satisfaction levels

Identity - Jobs that offer a sense of ownership and

personal accountability are associated with higher

satisfaction levels

Feedback - Jobs that offer intrinsic feedback on

quality of performance are associated with higher

satisfaction levels

Defining the Employee Turnover Problem:

Global outsourcing and the astounding amount of foreign

direct investment pouring into China, Russia, and India

have created tremendous opportunities and competition for

talented IT professionals in those countries. The downside

of this increased competition is a rising rate of turnover,

particularly in India.

Almost every sector in India is facing high rates of turnover

these days. A recent study revealed that employees leave

either because of compensation reasons or due to better

growth opportunities.

According to NASSCOM, Indian IT-ITES industry recorded

US$ 39.6 billion in revenues in 2006-07. The revenue of

US$ 49-50 billion has been projected in 2007-08 at a growth

rate of 24-27 per cent. The IT industry's contribution to GDP

was 4.8 per cent in 2005-06.

Though the IT/ITES sector is booming, it is constantly facing

high turnover rates of 25% - 30%. Even the big brands are

also facing the same problem.

Below are the details of turnover rates of various players in

IT sector shown with help of diagram:-

According to the survey conducted by BES and Data Quest,

Sierra Atlantic recorded highest turnover rate (29%)

followed by Kanbay with 25% and Accel Frontline with 20

per cent.

Turnover Rates of Major IT Players

To put these turnover numbers into perspective, if a

company has 100 programmers and a turnover 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% turnover 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 turnover.

TRUTHS ABOUT EMPLOYEE TURNOVER

It is difficult to accept when organizations say they have

zero attrition rates. Companies may have healthier turnover

rates, however, there is no such thing as zero attrition.

There are other such facts about turnover, about which

most of us are not aware.

Some of such facts relating to employee turnover have

been highlighted below:

1. Turnover Always Happens: Companies who believe

in zero attrition rates only fool themselves. This

happens because employees keep on moving due to

reasons like marriage or further education. Nothing

can top these employees from moving on. So, rather

than achieving zero attrition companies should focus

on identifying whom they want to keep so that they

have healthy attrition rate.

2. Some Turnover is Desirable: Zero attrition is not

desirable mainly because of two reasons. Firstly, if all

employees continue to stay in the same organization,

most of them will be at the top of their pay scale which

will result in excessive manpower costs. Secondly, new

employees bring new ideas, approaches, abilities &

attitudes which can keep the organization from

becoming stagnant.

3. Turnover Includes Costs: Turnover always includes

some costs. Consider the costs of replacing the key

employee who falls in to the category of high

performers. This includes the costs of recruitment

advertisement, referral bonuses, selection testing,

training costs, etc. Moreover, turnover results in loss of

time and efforts, low productivity, loss of morale, loss

of knowledge and so on.

4. High Salary Doesn’t Work: Most managers assume

that a high salary package is enough to keep

employees loyal to their organization. Employees may

face other problems like low job satisfaction, low

engagement levels, no recognition, poor working

conditions, less support from superiors and so on.

Salaries are not always the solution to attrition.

Managers should try to identify the roots of the

problem and then find a feasible solution.

5. The Manager Can Reduce Attrition: Managers

should take primary responsibility for retaining their

employees. Much of the employee’s perception of job

satisfaction stems from the relationship they share

with their immediate supervisor. Managers should try

to support their subordinates and give proper feedback

on performance. HR managers should work in

collaboration to make the key employees last in their

organization.

6. Reducing Turnover takes Commitment: Reducing

turnover takes an investment in coaching, developing,

motivating, mentoring & listening to people. There should

be universal acceptance of the goal of reducing turnover

along with top management commitment and dedication.

REASONS FOR EMPLOYEE TURNOVER

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 every one is

contributing to the prevailing attrition. Turnover 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 employee turnover.

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.

Working Environment:

Working environment is the most important cause of high

turnover. 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 Foreign

companies have gone up very high and it is highly

impossible for Indian IT 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.

Employee’s Advocate:

One of the main reasons why employees leave companies is

because of problems with their managers. An HR

professional can be termed an employee’s 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

company’s 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’ welfare…it is responsible for

making sure that their expectations are met. By doing this it

is easier to meet the company’s business targets.

EFFECTS OF EMPLOYEE TURNOVER

There is no set level of employee turnover which effects on

the employing organisation become damaging. Mostly it is

said that employee turnover is not good for the

organizations. But employers should remember that

turnover is not that bad either. What is required is an

optimum mix of turnover, not too high-not too low. An

optimum mix of employee turnover can help in many ways.

A little rate of employee turnover may result into:

1. Bringing in new ideas and skills from new hires.

2. Better employee-job matches.3. More staffing flexibility.4. Facilitate change and innovation.

High rate of turnover may lead to decrease in:

1. Productivity

2. Service delivery 3. Spread of organizational knowledge

4. Interdependence of workers which creates bottlenecks

in the smooth flow of activities which affects the

overall co-ordination.

5. Additional direct and indirect cost increase the cost of

production and in turn there is a reduction in the

profit.

REDUCING EMPLOYEE TURNOVER

With today's baby boomer generation beginning to retire

from the labor market, many IT companies are finding it

increasingly difficult to retain employees. Turnover is

becoming a serious problem in today's corporate

environment. The employment culture is changing as well.

It is now relatively common to change jobs every few years,

rather than grow with one company throughout the

employment life as was once commonplace. In addition,

employees are increasingly demanding a balance between

work and family life.

Therefore, there are Seven Major Areas of

Intervention that helps to Reduce Employee Turnover

mentioned below:

1. Early Interventions

2. Skill Interventions

3. Leadership Interventions

4. Communication Interventions

5. Reward/recognition Interventions

6. Job Enrichment Interventions

7. Selection Interventions

EARLY INTERVENTIONS:

The fact that large numbers of employees turnover in the

first six months of employment suggests that this is a

critical time for helping people adjust to new roles.

Managing employee’s expectations should actually start

before employment.

Thus the Orientation Programs should not be a one-day

event; they should span the first three months of

employment. A good orientation program helps prevent

misunderstandings, and gradually introduces the employee

into the organization. By providing just-in-time information

and training, rather than a one-day "core dump" of

information, gives better results of training efforts.

Most importantly, establish a support system for the new

employee. A good practice is to set up a "buddy" system for

new employees. A "buddy" is a seasoned employee who

volunteers to "look out for the new employee", making

introductions, providing advice, and helping avoid early

pitfalls.

SKILL INTERVENTIONS:

Keep employees motivated and committed by

enthusiastically offering both training and development

opportunities. On the hand, the personal development of

employees helps in employee retention. For Example, the

top-rated companies spend considerable time in training

their people, they have low turnover rates, and they have

impressive numbers of applicants per job.

LEADERSHIP INTERVENTIONS:

Better Bosses mean lower turnover. Establishing

performance expectations, providing coaching and positive

feedback, and interacting in a fair and considerate manner

are all things that good leaders do to help new employees

be successful and receive enjoyment from their jobs. To

impact turnover, make sure that supervisory promotion and

training programs have interpersonal skills as part of their

focus. Measure employee perceptions of leadership

behaviors and incorporate behavioral expectations into

leaders’ performance management expectations.

COMMUNICATION INTERVENTIONS:

There are certain ways of communication intervention that

helps to reduce turnover rates, such as:

1. Hold Open Forums: - Set up monthly or at least

quarterly forums in which employees can talk with

decision-makers on issues important to them.

2. Improve Credibility: - Do what you say you are going

to do or offer a good reason why you cannot.

3. Find Ways To Communicate: - Communication is the

solution to almost everything in this world. Same

applies to employee retention also, thus employers

should determine various ways of communication such

as a quarterly employee newsletter.

4. Eliminate Fear Of Reprisal: - Use suggestion boxes

as an anonymous way for employees to speak out.

5. Share Important Information: - Treat employees as

partners. Share important information so this might

make employees feel a sense of accomplishment or on

problems that might encourage them to go the extra

mile.

REWARDS/RECOGNITION INTERVENTIONS:

Money can talk volumes, but the creative use of money is a

key to retention. Various kinds of contingent bonus

strategies can be used to help with retention, which are:-

1. Deferred bonuses are paid out incrementally with a

significant back-end payoff for a combination of

performance and retention. This type of bonus system

can help guarantee service for a finite number of years

but also address long term retention.

2. Performance bonuses can help an employee reach

high levels of income providing they can consistently

demonstrate superior levels of performance. This type

of bonus can be very effective if performance metrics

are readily available and additional costs are

consistent with the value of superior performance.

3. Salary Adjustments a third option besides the use of

bonuses a regularly salary adjustments for your star

performers or an individual with key skill sets so that

they are not tempted to go elsewhere for bigger

paychecks.

JOB ENRICHMENT INTERVENTION:

Increasing the job satisfaction of high turnover jobs can

reduce turnover. For individuals who have a need for

growth, the following job design strategies are associated

with increased job satisfaction:

1. Increase the variety of tasks performed

2. Provide greater ownership and decision-making on

how the job is performed and hold the job holder

accountable for quality of outputs

3. Add more significant responsibilities

4. Improve the accuracy and quality of feedback on

performance

SELECTION INTERVENTION:

Improved selection may be the most powerful weapon

against turnover. Selection is a preventive technique for

reducing turnover. By improving the initial fit between an

individual and a job, you can have a huge impact on

turnover.

Hiring managers have become more sophisticated in

identifying the candidate whose credentials best match the

requirements of an open position. However, the right

education and work experiences are not enough to ensure

employee survival, therefore, to avoid costly turnover, today

hiring managers must look beyond the candidates’ ability to

perform and make sure the candidate is also motivated to

perform in the work opportunity.

EMPLOYEE RETENTION STRATEGIES

Apart from above mentioned Intervention Techniques

another means to Reduce Employee Turnover, is applying

Employee Retention Strategies. Therefore, the basic

practices which should be kept in mind in the employee

retention strategies are as following:

1. Hire the right people in the first place.

2. Empower the employees: Give the employees the

authority to get things done.

3. Make employees realize that they are the most

valuable asset of the organization.

4. Have faith in them, trust them and respect them.

5. Provide them information and knowledge.

6. Keep providing them feedback on their performance.

7. Recognize and appreciate their achievements.

8. Keep their morale high.

9. Create an environment where the employees want to

work and have fun.

These practices can be categorized in three levels of

management i.e. Low Level, Medium Level and High

level which is shown with the help of Flow Chart as under:-

HOW TO RESTRANIT EMPLOYEE

TURNOVER

Employee Turnover has become a major concern for

organization today with labor shortage and competitive

pressure making retention of key employees a strategic

issue, thus, following are the ways to curb employees in an

organization as under:

Money Is Not Everything:

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 company’s

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 company’s status and

achievements is a must.” They should concentrate on

leadership and brand building as people prefer to be

associated with a brand. 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 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 employee’s needs at various levels is a

recommended HR practice.

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 ways—during the employee’s 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.

Spend Time Developing and Benchmarking Incentives:

Whenever the demand for a professional arises in a

particular field, 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.

IT service providers have to offer innovative compensation

and benefits—or risk losing valued employees to

competitors. Nonstop evaluation and benchmarking are

"need to do" activities for IT managers.

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 (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.

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.

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.

Just Ask: Are Your Employees Satisfied?

Retention is inextricably linked to employee satisfaction, so

it pays to periodically survey employees —hopefully before

their exit interviews—about 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 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.

EMPLOYEE TURNOVER COST CALCULATION

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 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 following table can be helpful to calculate the cost of

employee turnover per week or per month:-

Separation Cost/Employee Detachment Cost:

Cost of Exit Interview

……………………………………………………………

+ Cost of Termination Time

………………………………………………………..

+ Cost spent in Administrative Procedures

…………………………………………

+ Increased Unemployment Tax

……………………………………………………

Cost of Vacancy:

Cost of Additional Overtime

……………………………………………………...

+ Cost of Additional Temporary Help

……………………………………………...

- Wages and Benefits saved due to Vacancy

………………………………………

Cost of Replacement:

Pre Employment Administrative Expenses

+ Cost of Attracting Applicants

+ Cost of Entrance Interviews

+ Testing Costs

+ Staff Costs

+ Travel and Moving Expenses

+ Post Employment Information Gathering & Dissemination

Costs

+ Cost of Post Employment Medical Exams

Training Costs:

Cost of Informational Literature

+ Formal Training Costs

+ Informal Training Costs

Employee Performance Differential:

Differential in Performance Costs/Benefits

TOTAL TURNOVER COSTS PER EMPLOYEE

MEASUREMENT OF EMPLOYEE TURNOVER:-

Three different methods are used for measuring the Employee

turnover rate:

1)SEPARATION METHOD:

It is computed as: -

Number of separation in a period

------------------------------------------ X 100

Avg. no. of worker

2)REPLACEMENT METHOD:

It is calculated as:-

Number of replacement in a period

------------------------------------------- X 100

Avg. no. of worker

3)FLUX METHOD:

It is calculated as:-

Number of separation + Number of replacement

----------------------------------------------X 100

Avg. no. of worker

BENEFITS OF TURNOVER

Turnover is not bad always if it happens in a controlled

manner. Some turnover is always desirable and necessary

for organizational growth and development. The only

concern is how organizations differentiate “good turnover”

from “bad turnover”. The term “healthy turnover” or “good

turnover” signifies the importance of less productive

employees voluntarily leaving the organization. This means

if the ones who have left fall in the category of low

performers, the turnover in considered being healthy.

Turnover rates are considered to be beneficial in some

ways:

1. If all employees stay in the same organization for a

very long time, most of them will be at the top of their

pay scale which will result in excessive manpower

costs.

2. When certain employees leave, whose continuation of

service would have negatively impacted productivity

and profitability of the company, the company is

benefited.

3. New employees bring new ideas, approaches, abilities

& attitudes which can keep the organization from

becoming stagnant.

4. There are also some people in the organization who

have a negative and demoralizing influence on the

work culture and team spirit. This, in the long-term, is

detrimental to organizational health.

5. Desirable turnover also includes termination of

employees with whom the organization does not want

to continue a relationship. It benefits the organization

in the following ways:

o It removes bottleneck in the progress of the

company

o It creates space for the entry of new talents

o It assists in evolving high performance teams

6. There are people who are not able to balance their

performance as per expectations, lack potential for

future or need disciplinary action. Furthermore, as the

rewards are limited, business pressures do not allow

the management to over-reward the performers, but

when undesirable employees leave the company, the

good employees can be given the share that they

deserve.

However, some companies believe turnover in any form is

bad for an organization for it means that a wrong choice

was made at the beginning while recruiting. Even good

turnover indicates loss as recruitment is a time consuming

and costly affair. The only positive point is that the

realization has initiated action that will lead to cutting loss.

SUGGESTIONS

Employee turnover for instance may include cost that

results from employees’ slower work pace and increased

absenteeism. A company puts in maximum investment

towards developing its manpower in order to get best

output which results in high profit and productivity for the

company.

Following suggestions are given to decrease the percentage

of Employee Turnover in IT Industry as under:

1. Clearly define targets and goals. Setting a time frame and

numbers creates impetus for action, thus, MBO technique

can be applied so that employee set their own goals.

2. The grievance redressed procedure can be improved.

3. Better pay package for deserving employee can be

considered for their retention.

4. Implement careful and strategic planning for targeted

individuals’ career development. Being identified is not

enough. Consider potential benefits of encouraging

informal mentoring.

5. Ensure there is strong leadership and commitment from

senior management. Initial and on-going personal

involvement of the Chief Executive is crucial to success.

6. Integrate succession planning into business and diversity

objectives. A clear link between business goals and the

desired results of the succession planning will assist in

gaining commitment from the organization and staff. To

be successful it must be portrayed as a core issue.

7. The 3 R’s that is Recruitments, Retentions, and

Retirement benefits should be properly imposed.

CONCLUSION

The ever-increasing tangible and intangible costs of

replacing an existing employee with known skill sets and

knowledge of the organizational culture would leave any HR

executive with sleepless nights. But the fact remains that

however satisfied they may seem employees leave. So

employee turnover is sometimes referred to as a symptom

of many hidden problems. The main objective of this report

is to study vital causes of employee turnover and their

effects on the IT industry and to discover those hidden roots

of the trouble to reduce such employee turnover.

Therefore, the following points have been concluded:-

1. Inculcating values like trust and accountability among

the employees is the best way to hold back talents in

an organization

2. Employees leave not always for higher salaries. In fact,

there is a limit to the salaries an employer can afford

to pay even its best performing employees. Rather, the

major issues lie with the unarticulated needs of the

employees.

3. Employees often expect a sense of worth from peers,

seniors and other departments. They want to trust the

senior management and also walk the talk when it

comes to living the vision and mission, as well as the

other promises communicated.

4. They expect the management to get a buy-in from them

on critical decisions that effect the organization. With

all these they also, quite naturally yarn for a well-

planned career growth path.

5. To ensure that their skills and roles are aligned to that

of the organization, employees need to be trained

through role transitions. This allows employees change

their career path as per their skills and future goals.

6. The human resource department has a critical role to

play in this organization-individual competency

alignment. The responsibility of predicting process and

individual performance levels based on industry trends

is entirely on the HR team. They need to work on the

existing data on performances and generate actions

plans for individual level performance management.

7. Finally, employers need to take care of all the factors

that affect an employee, while formulating effective

employee retention programmed. The factors can be

encapsulated as Fit, Trust, Confidence & Trust, and

Listening.