the it sector having a cagr of over 24

7/30/2019 The IT Sector Having a CAGR of Over 24

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The IT sector having a CAGR of over 24% in the last decade, has played a prime role in generating revenue as well

as in providing direct employment to around 2.3 million people in India. Indias value proposition, as an outsourcing

destination, has been its productivity and the quality of work done. According to the industry body NASSCOM, Indian

IT sector is estimated to provide direct employment to around 10 million by 2020. In FY 2010 IT sector has

contributed around 5.6% to Indias GDP. Indias human capital advantage has been one of the prime reasons for the

burgeoning growth of the IT sector. Post recession, the IT sector has seen tremendous growth and today the market

has become extremely competitive. With other sectors also moving on a high growth trajectory, talent attraction and

talent retention has become a major challenge for the employers.


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Figure 1: Attrition Trends in different IT companies during 2010-11

Over the years, IT sector has been the most attractive sector to work in and thus has been attracting the finest talent

available in the country. It provides an admirable work environment, attractive compensation and rewards along with

good career growth opportunities. However the advent of economic downturn saw an adverse impact on the IT

companies with most of them going for huge salary cuts, downsizing and tightening of perks. The rising salary levels

in other sectors like manufacturing, financial services, FMCG has triggered a shift of interest among existing

employees to these sectors. The attrition rate for IT companies was in the range of 14-25 percent for the fiscal year

2010-2011. Recruiting the right employees is a challenge but motivating and retaining potential employees is anequally important HR function. Selecting and retaining top performers is essential for business success and

effectiveness. The scenario today looks quite complex on one hand with increasing work opportunities and seeking of

talent by organizations and on the other hand, they find it challenging to retain these key employees. An increase in

employee turnover means decrease in productivity, loss of expertise, lower quality thus leading to loss of business

opportunities coupled with higher recruitment cost for the employer.

Why employees leave?

It is imperative for the senior management and Human Resources team to understand the reasons that lead to exit of

top performers. This will help them to design and implement an effective retention strategy. However in most of the

cases there is a disparity between the factors that employers assume to be most influential in driving employees to

leave, and those factors that have actually caused respondents to leave the job.


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Figure 2: Comparison of employers perceptions of reasons for leaving and employees actual reasons for

leaving

Comparison of employers perceptions of reasons for leaving and employees actual reasons for leaving show the top

3 reasons as:

1. Lack of opportunities for personal and career development

2. Issues with working experience

3. Salary & benefits

Lack of opportunities for personal and career development clearly emerges three times as influential as any other

factor in an employees decision to quit. Under this employee generally cites reasons like insufficient training

opportunities, limited career development opportunities and lack of challenging projects. Issues with working

experience mainly crop up because of a mismatch between the actual role offered and the employees expectations.

Although salary and benefits is not a major reason for employee turnover, it surely adds to dissatisfaction if not met or

if pay levels are below the market rate.


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Figure 4: Managing and developing Talent

High growth in the IT sector brings along with it the problem of attrition in the foreseeable future. The need of the hour

is to accept the challenge and see what can be done best to reduce the impact. An Employee-Employer friendly

model needs to be developed that satisfies the needs of both sides of the coin.

Employer needs include recovering training and development costs, ensuring maximum returns per employee and

adequate manpower planning.

On the other hand Employee needs include challenging work assignments, better career growth, enhanced job

profile, commensurate compensation and due recognition for work done.The proposed Employee-Employer friendly model should formulate plans on the basis of tenure into Short and Long

term and on the basis of usage into Mitigation and Contingency.

Short Term Mit igat ion Plan

Break Even Period

This plan mainly focuses on employee retention for a specified period of time (Break Even period) so as to

recover the initial cost incurred on the employee. The break even period can be calculated as shown below:


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Figure 5: Cost Benefit Analysis and Calculation of Break even period

So in order to retain employees for this period, companies can implement an Employment Bond for this duration and

strict measures should be taken against employees who fail to adhere to this.

Recognition of key performers

Key performers can be recognized by applying 80-20 rule and concentrating on retention of those 20% of employees

who contribute to 80% of productivity.

Short Term Contingency Plan

This plan aims to provide a work conducive and fun filled environment thereby compensating for the social

life affected due to the monotonous and demanding nature of job. It includes implementing following measures:

Promoting work-life balance by launching flexible working hour policy. This can be extended to Work from

Home for a short term which may be really beneficial for women employees who quit due to maternity and other

family issues.

Implement 20 per cent work policy that encourages employees to spend one day per week to research

individually selected projects funded by the company.

Health benefits including a physician and dentist available onsite.

Facilities like yoga, free massage service, reading rooms, sport zones and recreation activities like video

game arcades and pool tables. Child care centre and crche present in office premises.

Onsite car washing, dry cleaning and laundry facilities.

Flexible salary structure and policies like My Pay, My Choice that helps employees design their own pay

packets.

Initiate performance recognition programs and implement variable pay package based on performance.

Offer benefits like sponsored vacations to ensure work life balance.


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Long Term Mitigation Plan

This plan aims to help the management reduce the impact of attrition and ensures that the firm does not

face long term losses. The following steps can be implemented:

Implement an effective Hiring strategy that changes with changes in business dynamics.

Define job roles that provide challenging, cutting-edge assignments and potential growth opportunities. Job rotation to prevent monotony and boredom to set in.

Identify training needs and provide requisite training to key performers.

Introducing transparency and clarity while documenting processes and jobs performed to avoid dependency

on an employee.

Offering ESOPs to employees to build a sense of ownership and belongingness.

Imparting Behavioural training by granting higher responsibility to key performers through enriched job

content and mentoring sessions with senior management.

Efficient performance appraisal systems to provide clarity about roles and responsibilities thus keeping the

employees engaged and motivated.

Involving employees in goal setting exercise and providing periodic feedback.

Long Term Contingency PlanThis is an attempt by the industry to reduce attrition on the whole.

Ensure a synergy with the government to improve quality of infrastructure, curriculum and teaching methods

and also work with academic institutions to periodically update the curriculum and avoid obsolescence. This will

ensure reduction in training costs since courses taught at academic level will be in line wi th industry requirements.

Emphasis on bilateral agreements between companies with basic norms and ethics in place so as to avoid

poaching of employees within industry.

Expanding to Tier-2 and Tier-3 cities will help in increasing resource pool and thereby reducing attrition.

Conducting Exit interviews will help in analysing various factors that lead to employee dissatisfaction and

turnover.

Figure 6: Employee response post Exit interview

The study shows that employees who received an exit interview while leaving the organization, left with a more

positive opinion than those who did not. The positive opinion definitely helps in protecting employer brand and also

retaining the remaining employees.

Focussing on imparting education and fostering a learning environment for the workforce and treating employees at

par with customers.


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Future Outlook- Cracking the Retention ConundrumHigh industry growth carries with it the risk of high employee attrition levels. Wage hike may be the only resort in the

short run but the crux of the issue lies in the lack of inspirational leadership at the middle management level. This

level mainly comprises of efficient, young operations managers buzzing with enthusiasm and a firm hold of the

operating metrics. In this process to climb their way up the corporate ladder, what these managers have left behind

them is the time for finer aspects of personal development like thought leadership. The need of the hour is an attempt

by organizations to build on their Employer Brand Equity as well as focus on leadership coaching, mentoring and

development to ensure that the industry is able to train and retain a strong workforce amidst a restless generation of

knowledge workers.

References

the it sector having a cagr of over 24

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