Friday, July 13, 2007

Managing attrition in the face of competitive challenges

What is employee attrition?

To ensure that we have a pre-defined framework around this hotly debated subject, it is important to clarify that attrition here means the rate of employee turnover, solely attributable to the employment termination actions initiated by the employee himself and does not include any involuntary terminations initiated by the organization. It is important to provide this context because the organizations would only like to control that part of employee turnover that they themselves did not initiate.

Organizations get really serious about attrition control only when it starts affecting their day to day efficiency. The effects can be seen in terms of cost of lost productivity (during notice period, time to recruit and induction) and cost of lost knowledge, expertise and business relationships (perhaps picked up by a competitor). However, it is important to note that these tangible losses are invariably and also inevitably accompanied by the intangibles such as low motivation, low morale, lack of sustained and mutually dependent relationships, to name a few.

Factors responsible for attrition

I know of some organizations running with annualized attrition rates of 100+%! Flip off the coin, I also know organizations that have managed to contain their annualized attrition around 10%. This is certainly no apples to apples comparison; yet, these starkly contrasting statistics give me the following leads:

Ø Attrition is a function of economic forces

It is very important for us to first understand how the economic forces at a global/regional/national level can influence attrition in specific organizations. The most powerful example that comes to my mind is that of dot com boom that took the whole world by the storm around the turn of the millennium. Suddenly the young IT professionals in India found multiple opportunities to work in their dream locations in Silicon Valley, leading to very high attrition rates in Indian IT sector.

Ø Some industries have greater difficulty in retaining employees than others

The ITeS, catering, leisure, hotel and retail industries are associated with very high attrition rates. The 100+% example is from ITeS segment. These industries are in a ferociously expansion mode trying to figure out ways of better managing demand-supply gap for human resources. The predominant workforce in these industries are young professionals who are required to work all kinds of odd hours in highly demanding work environments without any clarity on personal development/progression.

The Financial services and IT sector is also in the growth mode, although the attrition rates there are not in the same league as in case of the above mentioned industries. My example of 10% annualized attrition is from a very well-managed IT organization. Employees working in these industries are also subjected to demanding work environments, although in different degrees, when compared to the industries in the first category mentioned above. Even here the skills shortages are prevalent and the macro-level skill shortages keep on influencing micro-level attrition.

Now let’s look at the more traditional industry sectors such as manufacturing and engineering. The growth rates in these industries are moderate and the employees working there have the mindset of a lifetime employment with one organization. As a result, attrition is a non-existent issue there.

Ø Geographic location of the organization impacts average job tenure

The variation in job tenure in different locations is perhaps due to the type of industry prevalent and the labour market available within particular regions. Let’s take a specific example here. Bangalore - the IT hub of India, has attrition running at significantly higher levels when compared to other markets such as Hyderabad or Pune.

The reasons for understanding the above external factors are twofold.

1. Creating an awareness that every measure around managing employee attrition does not lie within the organization’s purview.
2. Clearly establishing external factors that cause employee attrition with a view to help the organization become better prepared to manage their human resources in the wake of changing external environment.

Now comes the real challenge. Giving due credence to these external factors, how can organizations deal with internal factors effectively, so that they can still manage to keep attrition within their control. It is conceivable that within the same economy different companies bear the brunt of employee turnover very fundamentally different to each other. And conversely, it is therefore conceivable, that organizations in the same economy/geography/industry with fundamentally different employee retention strategies can manage employee attrition with varied levels of effectiveness.

So, what do organizations typically end up doing to curb attrition?

Organizations, at this stage, start closely scrutinizing various data cuts around employee attrition e.g. what are the predominant reasons for attrition, is there a pattern emerging? – are more employees being lost in a particular experience band or those working on some specific projects or departments etc. This is done with a view to create initiatives and programs around the identified patterns related to attrition. While the organizations believe, that putting such initiatives in place would eventually bring down the attrition, it does not necessarily yield results at the levels expected. Reason? – such initiatives emanate from the information gathered only from the exiting employees, leaving a much larger pool of existing employees out of its purview.

Hearing the voice of exiting employees and taking corrective actions, therefore, is just one way of overall attrition management. I would actually call it a lagging way of attrition management--simply because these attrition control measures lag the actual attritions.

What if we were to change the paradigm here and focus our efforts on creating an environment that facilitates employee retention than only narrowly concentrating on attrition control measures? If we do that effectively, (and the existing highly competitive war for talent is compelling the organizations to look at newer ways of managing this problem) then we should actually be looking at the leading ways of employee retention. By definition, these are more proactive efforts that will lead to better employee retention.

Ø Developing a system that tracks "Early Warning Indicators" around those employees who are thinking of moving out of the organization

This will enable organizations to arrest the “flight risks”. These indicators are fairly common-sensical and are invariably reflected in employee’s declining or fluctuating productivity, increased absenteeism or tardiness, rejections for internal job postings, drop in work quality, visible signs of frustration, breaking of some workplace relationships and a multitude of others. While there is no perfect science around either picking up the incidence of such behaviour or the varying intensities of the same, managers with moderate levels of sensitivity should be able to pick some patterns indicating these “Early Warning Indicators". Managers can then dig deeper to address areas that cause such behaviour, hopefully leading to better employee retention.

Ø Another way can be finding out the organization’s strengths from the employees who have stayed with the organization for longer periods. Obviously the assumption here is that some of these organizational strengths have favourably impacted their long tenure.

Ø It is important to remember that, working only on the reasons pertaining to why employees have left the organization, will help us clinch the issue that, many a time the causes around attrition are not in congruence with those around retention. An example here might help illustrate the point. An employee who is frustrated with his/her work environment may continue to work in the same organization till he comes across an employment offer that has substantially higher compensation to offer. This employee may, therefore (and in all probabilities he would), state in the exit interview that the most important reason for him/her to leave the organization was “offer of a substantially high compensation”. Now if the organization were to understand this feedback as ‘attrition due to dissatisfaction over compensation’, it will then focus its efforts on compensation, whereas, the reason why this employee looked at the alternative proposition was anything but compensation! It is, therefore, important for the organization to base it’s efforts on what it hears from existing and exiting employees continuously and not one to the exclusion of the other.

Ø People join the organizations and leave the supervisors

Clichéd as it may sound; this truth does not go away. I strongly recommend that before getting into finding any reasons around employee attrition, one should always rule out a possibility of whether it was caused by the direct supervisor of the exiting employee. Supervisor’s behaviour has a huge impact on the work climate and is a critical component in any employee engagement and motivation initiative.

Here is a summary of what workers responding to a Gallup survey said, they wanted from their managers;

· Focus on me
· Know me
· Care about me
· Hear me
· Help me feel proud
· Help me review my contributions
· Equip me
· Help me see my value
· Help me grow
· Help me see my importance
· Help me build mutual trust
· Challenge me

And what should the supervisors do?

· Provide feedback and guidance
· Make real time to discuss problems
· Seek ideas and input from everyone
· Provide the resources to solve problems or to do a job well
· Give real recognition and/or reward
· Provide opportunities for people to develop their potential
· Keep the pressure to perform and achieve more
· Provide opportunities for social interaction
· Train people how to resolve interpersonal conflicts
· Promote joy and appropriate humor within the office
· Be flexible; help people to actively balance work and home responsibilities

Ø Quite often, organizations don’t realize that the employees’ continued interest in the organization is highly influenced by the quality of employees that the organization attracts and retains. This is particularly so, in the knowledge industry like IT, and I am not saying that it is not applicable to other industries as well. But let’s take the IT example. An attriting employee will rarely say that the cause of the exit is attributed to the fact that, the organization no longer has an edge over its competitors, when it comes to attracting and retaining talent. And yet, when the same employee was not in the mental state of leaving the organization, s/he drew a lot of energy and professional stimulation by interacting with colleagues that s/he perceived had a very high skill/knowledge/professional standing. It is therefore, my case, that any erosion in hiring process has a long term negative impact on talent retention.

Ø Yet another powerful retention anchor, albeit, oft understated, is how effectively the organization has leveraged its brand internally. Somewhere, the organizations seem to work on the notion that branding dollars are best spent in creating external visibility. While that is not untrue, we must remember that strong internal branding leads to inculcation of pride among the employee constituency. An employee’s emotional ties with the brand are very important when it comes to his making long term emotional contracts with the organization. The enthusiasm, with which an employee flaunts his /her business card in social situations, is generally directly proportional to his/her pride for working with the organization.

As some closing food for thought, I will quote from Curt Coffmans and Gabriel Gonzalez-Molinas’ book titled Follow this Path 2002 - "Great organizations achieve sustainable growth and profits because they do what other organizations don't: they maximize the innate, individual talents of their employees to connect with customers. They know that tapping the resources of humans is the only remaining area where significant improvements can--and do--lead to an unlimited source of competitive advantages." –and that, to my mind, underscores the importance of retaining talent.


Abhay Valsangkar said...


Thanks a lot for your responses. I know many of you were not able to post comments on the blog owing to some technical snag. I would like to acknowledge comments received from Lata Sapre, Vijay Karakare, Ravindra Pandit, Nandan Gangolli, K J Shankar, Ashutosh Ojha and Dnyan Shah.


Abhay Valsangkar said...


I wanted to post Mohinish's views here for your reading as well. This is what he wrote to me:
Thanks Abhay.

As ever …an insightful article.. it comes across that you are a boss in this area.

Just couple of points – hope you find these helpful:

1. In the business circles, this topic is very common and hence everyone has an opinion around it. Not to forget loads of research etc. In order to “break in” and grab attention in this noise, you need a “spin” – your key idea that stands tall amongst the prevailing ideas! Some re-packaging is necessary for it.
2. You have taken 1/3rd of the article explaining the concept – my suggestion will be that your audiences will typically be familiar with it or have an appreciation for it. You may therefore devote lesser space towards it and give the “how to solve” discussion more space or edit to make the article crisper.
3. one suggestion – do include if you can – few anecdotes to anchor the key hinges on which your argument sits or for that matter which helps explain the solutions.
4. I thought your ideas and suggestions are great… about emphasizing the environment than just mining data of attrition etc. It needs to be packaged to give a punch.

Thanks again for seeking my views

Warm Regards...Mohinish

Mohinish Sinha

Managing Director
iDiscoveri Enterprise 'Crucible'
Near The Heritage School
Sector - 57, Sushant Lok - III
Gurgaon - 122 003

Abhay Valsangkar said...

Posting Ranjit's views also, for the benefit of all...
Thanks for sending this insightful article which is getting published in CSI. There are a number of key points that I was very impressed with as being insightful --

1)Proactive measures should be taken to develop an environment that facilitates employee retention --and not only narrow measures on attrition control which focus on employees who have left/leaving,

2)The point about hiring process was an important point that most HR departments do not evaluate -- because it is also important ( esp in IT type new age
industries) for employees to have their peers, superiors and juniors to be qualitatively good, so that they can engage with them on an intellectual and inspiring plane.

3)Many organisations run helter skelter only when they start seeing the impact of attrition on day to day efficiency. That point too is well made in the article. Thats a very narrow approach.

....I guess paradigm change in the way HR strategises, involves and impacts, is very important. The CEO too needs to be aligned on this in an organisation that seriously plans long term measures to curb attrition , especially with external factors the way they are.

I recollect reading an article a few months back about an organisation which gives colour codes to its employees individually -- segmented based on Risk of attrition( not on level of importance to the organisation). And then a series of measures are put in depending on the colour code the employee falls under ; additionally customised for the most important people ( could be at any level) who seem to be at highest risk of leaving.
Apparently this company looks at various indicators( some of which are as mentioned in the article you sent me)including cues during office interactions to classify the employees on risk of attrition.


Gauri said...

Hey Abudada - Verey interesting read. Two things struck me while I was reading this. One, why are new-age organzations not looking at some of the old-economy 'people' practices? Have the operating principles changed so much? Are their things that one can pick-up? When a Tata Steel ad says - "we also make steel" or when a Bajaj ad says - "Bulund Bharat ki Bulund Tasveer" there is a great aspect of pride associated with it.Feeling 'proud' about the place one works for and ability to boast about that can be a great motivator. Or perhaps, Superannuation plans that dare to talk about the employee's crucial post-retirementat days and force the youg nerds to talk about Systematic Planning. Are their other things worth emulating? Also, on another note, while I was going through your article, I have started wondering if an exited-employee's survey can also help throw up some results that can be actioned upon. Let me try that and if there is anything interesting that comes-up shall report it here!!

Warmly, Gauri

Abhay Valsangkar said...

Hi Gauri..All very valid points.Thanks for your inputs.I agree with you that the time-tested people practices should be emulated by the 'new economy'
'new age' companies.In pursuit of introducing innovative HR practices,one should not lose track of what has worked for several years!I also agree with your thought on conducting a survey of exited employees.I have some material on that.It is in fact a 'distilled exit interview.'If you want, I can share some learnings of mine, having run such surveys for some time now.As you can imagine, exited employees are even more forthright than the exiting employees.Cheers

Unknown said...

A good article and was a delight reading it.

Two points -
1) Will help if you share more of your insights that you have gathered over your varied experiences.
2) The 'immediate supervisor' remains one of the key reason for attrition and ensuring that such leaders are adequately sensitised that they could be a culprit in the attrition rates is crucial. It will be great if you can add some more in that section.


Anonymous said...

Hi Abhay
Small world indeed. I started looking up to you as a role model over four years ago during my Carrercruise - AmEx interaction with you and here I am once again truely inspired by your thoughts on the blog.

Your notes on attrition are very insightful and the only thing I'd like to add is the fact that it might just be worthwhile taking a step back and looking at our own recruitment processes to understand attrition better.

A well designed recruitment strategy might be one of our better alternatives for idenitfying applicants prone to turnover quickly. This depends on the extent to which our recruitment strategies are linked to your personnel selection systems. Needless to say, refinement of existing methods would involve a considerable amount of research looking at turnover patterns for different "groups" of applicants (i.e., those who are "graduates" versus those who are not, those looking for part-time employment versus those looking for full time employment, older workers versus younger workers, etc.). After identifying which "groups" of applicants are most prone to turnover behavior, our recruitment strategies can be adjusted accordingly. In addition, a well designed employment interview may help to identify the triggers and motivations of a candidate which inturn helps aligning the same with company culture, values and environment..

In addition, if we look back on our interview assessment sheets and the documented (or perhaps unwritten) hunch that we had at the time of selection, we might be able to see signs that we chose to ignore for the pressure of filling jobs at the right time within the right budgets / constraints. These signs can inturn act as pointers for future recruitment endeavours and give us insights on what to predict of the candidate's stability / continuity.

Puja Kumar

Abhay Valsangkar said...

Dear Amol and Puja..first of all,thanks a lot for your comments and profuse apologies for my delayed response.

Amol...very valid comments.Since Jack Welsh himself has said"people join organisations and leave leaders",I don't have anything more profound to add!You are absolutely right in pointing out that the role played by the direct supervisor is most crucial in retaining talent within the organisation.I'll be happy to share with you specific additional details/insights based on my experience.We can do it off-line at your convenience,if that is ok with you.

Puja..yes,indeed the world is small and round.Thanks for your complimentary remarks.I agree with you that any QA done at the 'input'stage will go a long way in retaining talent more effectively.In fact, we track one metric around 'talent lost during first 90 days of employment',as we believe that such attrition can be directly attributed to the gaps that may exist in the hiring process.It is an idea similar to the membership attrition that the card companies aggressively track for the newly acquired members.Puja,are you still in Scotland?pls send me your co-ordinates.Cheers...Abhay