Are you losing the good people?

An attrition study now?
With companies desperate to cut headcount costs in any case? Right. Attrition cuts both ways, even in a downturn. While downturns can spawn lean and mean organisations, no company would like its best talent to walk away at any time, least of all when they are needed the most. Period.

So, while forced attrition was out of the purview of our survey sample, it has been added as part of the research when the jobs environment changed. Here’s a primer that tells you why employees leave. Because, there’s no greater time to stand up and ask: ‘Are we losing the wrong people?’

The India Attrition Study 2008, done between October 2008 and March 2009, is a partnership between BT and PeopleStrong to figure out why employees quit. In the good times before September-October 2008, attrition in India Inc. was as high as 20 per cent (and up to 40 per cent in the booming services sector). Now, with the economy in a recession, BTPeopleStrong Research says, India Inc. is not only losing fair bit of top performers but plenty of the ‘Universal Leavers’, who form any company’s backbone.

Also, organisations that have shed chunks of the workforce are left with insecure employees who tend to jump ship if they can to avoid a pink slip. HR experts underline that, in a downturn, voluntary attrition means letting go of top performers. Companies that ignore attrition in a downturn do so at their own peril.

“High-end talent is always high on aspiration,” says Shekhar Arora, Executive Director for HR at heavy vehicles maker Ashok Leyland. Their worry is not one of survival, but how fast they climb up the corporate ladder. “You tend to lose them at all times if you do not reasonably address their concerns,” says Arora.

Losing employees to the competition is also top of mind for SRF Ltd, the Delhi-based manufacturer of nylon tyre cord fabric and such like. “The main challenge at present is to instill confidence in people and allay their fears of losing jobs. Since it is a good time to pick up talent from the market, it is also a problem to retain talent. They could also be an easy pick for others,” says Suresh Tripathi, President (HR), SRF.

Managing attrition
Some companies are adopting a two-pronged approach. On one hand, companies are strengthening systems to identify the top performers and to reward and retain them. On the other, non-performers are being put on performance improvement exercises: if there is no improvement, they are asked to leave.  

The attrition challenge In a slowdown, companies are forced to check their staffing budgets Wages costs had ballooned in the past few years, due to a scramble for talent Though the intent is to ease out the bottom performers, that may not always happen Keeping top performers secure and motivated becomes a key challenge Understanding the pattern of leavers identified in the study can help

With companies looking at smaller headcounts, most are easing out at least five per cent of the bottom performers—or so they think. The question is: how good is a company in identifying real bottom performers?

Tripathi says organisational tolerance and values decide the timeframe and the process for handling poor performers. SRF itself has an individual who was considered a write-off in one role but has now become a key talent and one of the most sought-after professionals. “Our patience and process of giving opportunity has paid. At the same time, we have people who did not improve despite multiple role changes as well as different assignments. We let them go,” says Tripathi.

While SRF got it right, how many have the patience to do all this in a slowdown, when the focus is on cutting costs? “One of the first challenges HR must surmount while facing the economic downturn is resisting the pressure to right-size as first option,” says N.S. Rajan, Partner for Human Capital and Global Leader of HR Advisory, Ernst & Young.

Other major people challenges of the changed times, say HR experts, are performance management systems, scope of giving differential reward to top performers, controlling salary hikes as business profitability goes down, improving employee productivity and managing morale—things that stand true irrespective of market conditions.

Toppers and Early leavers
Spread across 59 companies from eight industry verticals (See Methodology), the BT-PeopleStrong India Attrition Study 2008 categorises Leavers as—Top Performers, Early Leavers (those who leave within 12 months of joining) and Universal Leavers (all the remaining Leavers who are important for sustaining current operations of a company).

The proportion of Early Leavers is relatively higher in the services sector—BFSI, ITES, Retail and Telecom. FMCG and Manufacturing have the smallest proportion of Early Leavers. In IT, close to one in two people leaving is a Top Performer, which doesn’t augur well for the future.

HR heads across banking, financial services and insurance (BFSI) need to handle a few more problems as at least one in two people leaving in the BFSI sector are Early Leavers. This leads to higher recruitment costs and an unsettled environment where supervisors and managers have to continually train new recruits.

ICICI Prudential Life Insurance has 15 to 20 per cent annual attrition at managerial level while frontline attrition is 40-50 per cent. “Of this, 50 to 60 per cent attrition would be involuntary as performance-led exits have been higher this year,” says Judhajit Das, HR Head, ICICI Prudential Life. “We do not have a phenomenon where top performers leave. Insurance is still witnessing high attrition at the entry levels,” he adds.

Propensity to leave should generally decrease from early career to mid-career transition. But, according to the study, BFSI and Retail particularly suffer from huge attrition at Managerial levels while IT and ITES managers settle down. Most of the attrition in new-age industries like IT and ITES happens at early and early-mid level.

According to the study, organisations in the North have to deal with the most restless workforce. The share of Early Leavers is seen to be highest in the North while the Rest of India has a high share of Universal Leavers. North India has a high share of both Early and Universal Leavers where, surprisingly, women form a major chunk of early leavers, defying the usually-accepted phenomenon of women being more stable.

So, is there a regional twist? At Quatrro BPO Solutions, Mumbai and Delhi alternate as worst in attrition while Chennai has the lowest attrition. SRF has a high percentage of early leavers in the North. Samsung India, which has a workforce of 3,000 across four regions and 50 branches, finds that employees in North are aggressive. “When we do exit interviews, we realise that titles and designations are bigger carrots in North. In South people look at leadership,” says Sanjay Bali, Vice-President (HR), Samsung India.

Does that make a case for region-specific policies? Says S.Y. Siddiqui, Managing Executive Officer Administration (HR, Finance and IT), Maruti Suzuki India: “Just as global companies have business and product strategies based on different geographies and regions, it will be prudent to tweak generic HR Policies to suit region-specific trends. This already exists in terms of Compensation Policy, Hiring Strategy and Transfers to some extent in many companies.”

However, there are counterviews. Says Tripathi, “While there is some merit in considering regionspecific HR policies, it is likely to create more problems… We keep rotating our people from one part of the country to other so commonality of policies is desirable lest any difference is seen as reduction or retrograde step by people.” Quality of work is the clear winner when pitted against salary. According to the study, career path is topmost priority. “A very high percentage of attrition at the entry level or the junior level happens purely because of salary. But yes, career growth is the main reason for attrition at the middle and senior levels,” says Tapan Mitra, Chief-HR, Apollo Tyres. Young and Footloose
The young and restless workforce is creating new challenges in the tough environment. At HSBC India, the majority of the workforce is 30 years old or less, so the current slowdown is the first that they are experiencing. What also differentiates the millennial workforce is the realisation that they are far more information savvy than their predecessors.

“This workforce has access to information that can often be mere speculation, and given the happenings, specifically over the last 6-9 months, they are likely to believe a lot of what they hear,” says Tanuj Kapilashrami, Head, HR, HSBC India.

The challenge for organisations with a young workforce is to keep the flock together and prevent undue anxiety from spreading. “We are committed to the governing principle that if our employees need to know anything about the bank, they will hear of it first from us,” says Kapilashrami.

So, what is it that companies are doing to hold on to their best? Two-and-a-half-year old Quatrro BPO Solutions has nurtured a concept that S. Varadarajan, Executive VP and Chief HR Officer, calls ‘Homing Pigeons’. “We are in touch with high performers who leave us and home in on them whenever they want to come back,” he says.

At Samsung India, attrition levels have always been below 10 per cent. Bali credits this to the fact that people have more options to move into other roles in the organisation. “While we do not believe in giving hefty bonuses, everyone has an opportunity to grow and move into a bigger role. A clear-cut career path is drawn out for key employees,” says Bali. If someone has spent more than 18 months with Samsung, chances of their staying back are more.

Genpact, the BPO pioneer, uses a pre-hiring process to help arrest attrition. “We bring people before they join and have them look at what we do. If they choose to not join, that reduces potential attrition,” says Piyush Mehta, Senior Vice-President, HR.

Mehta says a young workforce tends to leave for higher education, so Genpact provides education at work. “Attrition levels are half for those employees who have taken this opportunity,” says Mehta.

The ‘Right’ to stay
But the bigger question is that, when companies are looking at lightening the ship, how do they ensure they are losing the ‘right’ people? “There really is no fool-proof way to ensure that only some people leave and others don’t during a time when the company is looking to reduce its headcount,” says Mitra. However, having said that, each company follows certain patterns.

For Apollo Tyres, the key issue is to ensure that the process is transparent at all times. Employees who are seen as under-performers are clearly told to improve their performance. “Chances are given, and we have found that this has often resulted in improvement. However, repeated failure or inability/ disinterest in improving performance is taken seriously,” Mitra says.

Ashok Leyland constantly scrutinises the quality of talent, all the more in bad times. It has a 3x3 matrix that tracks potential vs performance across nine levels. “We take care of the high value talent by offering them a development-linked career plan and insulating them against business cycles. They are our best people and we need them all the more in bad times,” says Arora.

The middle-level talent is used in projects that require good performance but are low in strategic thinking. It takes every exit very seriously. “We do this for low value talent also as the same reasons could trigger dissatisfaction among the high-end performers too,” says Arora.

While it is not easy to regulate the attrition trends to ensure that only the non-performers leave, there’s no better time than a slowdown to put your house in order.

— Saumya Bhattacharya with N. Madhavan
For more details on the BTPeopleStrong Attrition Study log onto www.businesstoday.in

 

Aadesh Goyal, Chairman & CEO, PeopleStrong The gameplan for HR professionals Attrition can never be wished away. One can reduce it to the right level. But what is even more important is—are you losing the right people? BT-PeopleStrong Attrition Study has thrown some interesting data. Since the study covered 59 companies in eight industry sectors across India, for the first time, we have comprehensive data on attrition. Until now, each company had only its own data, since others would shy away from sharing theirs. But, we now have the benefit of seeing some trends that could be used to make HR strategies. Here are some highlights: Reducing Attrition: Losing new employees early leads to a lot of loss of opportunity as well as wasted expense and energy. The study shows that 33.8 per cent of those who quit are Early Leavers. One of the most effective ways to reduce attrition would be to cut this down by half. If the overall attrition of a company is 15 per cent and early leavers are one-third of this, then cutting down the latter by half would mean that attrition would get lowered to 12.5 per cent, a huge change! A strong new employee induction and orientation programme would create strong glue to hold them back. The first 90 days are most risky. Early Leavers constitute a whopping 54 per cent in BFSI, followed by a significant 40 per cent each in ITES and Retail. If your company operates in these industry segments, you know where the priority must be. Regional Practices: While each region may have its own cultural flavour, they all fall under the gamut of common corporate policies. This study clearly shows that different regions need to execute a different implementation plan for the same HR strategy. For example, 40 per cent of leavers in the North and 27 per cent of leavers in Rest of India are Early Leavers. What this means is that there is a different need in North because of which a stronger and different approach is needed, so a common broad brush may not work. And the gains would be much higher, too. Also, as an HR Head, it makes more sense to implement ‘reduce Early Leavers’ plan in the North as the gains there would be maximum. Quality of Attrition: No company likes to lose the Top Performers. They are the ones who drive growth as well as the key strategic initiatives. Surprisingly, the IT sector has emerged as the dubious winner here with 45 per cent of quitters rated as Top Performers, followed by Manufacturing at 23 per cent and BFSI at 22 per cent. The best are Pharma (9 per cent) followed by Retail and Telecom (10 per cent each) and FMCG (11 per cent). One of the best ways to keep the top performers engaged would be by implementing a strong career planning program for them. Give attention to everyone, but focus on them. This is well supported by the study’s findings—the biggest driver of attrition is Opportunity for Career Growth (25 per cent) followed by Salary (10 per cent).