Professional Documents
Culture Documents
EMPLOYEE
RETENTION
Submitted by:
Group 6
Section B
• The expected level of talent and efficiency is difficult to obtain in the new
employee.
• The resignation can also trigger a chain reaction in other workforce to look in the
same direction of better opportunities.
• At higher hierarchy level, retention is also important not to get shared some in
house information and strategies to other competitive firms.
The cost of loosing talent involves the time and resources that are utilized to hire
new employees. The costs are both direct and indirect. There are the direct costs to recruit
and train new workforce. It is hard to get the same level of talent back, additionally for a
new employee, it also takes time to adjust to new working conditions and environment
resulting in low level of efficiency in early stage which results in a greater indirect costs
and loss of productivity. Less obvious are the costs of maintaining morale when there are
change and threats of job cuts. According to the American Management Association, the
cost to replace an employee who leaves is, conservatively, 30 percent of their annual
salary. For those with skills in high demand, the cost can rise to a frightening 1.5 times
the annual salary to replace them.
Roger Herman, in his classic book on employee retention, has described that
Employee retention involves being sensitive to people's needs and demonstrating the
various strategies in the five families. The five families are:
1. Environmental
2. Relationship
3. Support
4. Growth
5. Compensation
These families are actually various factors that may affect the employee. To retain
employees in an organization, it is important to recognize which factor is working
significantly to affect employees. When the cause factor is recognized, it is easier to
address the factor.
Employee retention approaches also differ at different level of operations. Since the
problem differs at different levels, the solutions also differ. It is easier to provide lower
level incentives with limited resources while to provide high level benefits, higher
resource and time needs to be utilized.
At lower level, the occasional gifts, scholarships for children, personalized
appreciations etc help to motivate workers and employers to remain in the organization.
While at higher level, approach for employee retention are various memberships,
sabbatical leaves, benefits and insurance schemes etc. The highest level of employee
retention strategies involve mentorship workshops, vocational councelling and
personalized career guidance by experts.
ECP model of employee retention:
HOWATT consulting provides a simple model to understand the importance of employee
retention. In today’s economy, the bottom line in business is profits. The model use this
underlined concept including employee retention in importance.
E---Employee retention and employee satisfaction. When you have satisfied employees
(who are not caught up in the quagmire of bureaucracy and leave), they are more able to
help the customer.
C— Customer retention. The more effective the customer services the greater the
customer retention.
P— Profit.
Employee Satisfaction + Customer Satisfaction = Increased Profits
The equation is simple from this point on. When we keep customers that are satisfied,
and continue to add more, the corporation has increased the likelihood of increased
profits.
• Opportunity to learn
• Feedback on results
• Celebrate successes
• Build self-esteem
as to what they are doing. Many employees know that they need to be responsible
for
their own career planning, though it is still important for employee sto be
acknowledged
are not in line with the employees’. It is important that all employees be
responsible for
their own goals, so that they can build them to be congruent with the company's.
• Employees do not see any opportunities to grow and advance in their positions
• Employees will leave due to personality conflicts. The number one reason
employees
leave is not money; it is conflict with their direct supervisor. Most personality
conflicts
achieving agreement.
• Employees will not stay if they are not involved in decision making, especially if
it is in
• The best and foremost HR practice to retain employees is proper and tangible
recognition and appreciation to employees for their individual performance. The
tools like employeer of the year/month, best performer/trainee of the project etc
are those appreciations which not only retain employees but also encourage them
for better performance.
• For employee satisfaction, the most important aspect to take care by the
organization is that the job profiles offered should match with individual
capabilities and aspirations. This makes the employee feel satisfied and glad in his
job.
• Better work culture is also very important where the relationship between
employee and employer is such that individual problems and conflicts are
properly addressed with time.
• In any circumstance, the employee should never be threatened about his job or
income. Whatever be the issue, it should be shared in a mature manner and
underperformance should be addressed in fruitful manner.
ATTRITION RATE:
Attrition rate/ churn rate is a measure of the number of individuals or items moving into
or out of a collection over a specific period of time.
It is a reduction in the number of employees through retirement, resignation or death.
Thus we can see that attrition rate and retention rate are very closely related and loosely
speaking attrition rate is inverse of retention rate.
Calculating attrition rate:
Attrition rate has always been a sensitive issue for all organizations. No common formula
can be used by all organizations. Formula has to be designed keeoing in view the nature
of business and the different job functions. However a general formula used by most
organizations is:
Attrition = (No. of employees who left in the year / average employees in the year) x 100
The difference arises while calculating the values of No. of employees who left in the
year and average employees in the year. Some firms may not include attrition of freshers
who leave because of higher studies or within three months of joining. Various types of
attrition rates used by organizations for performance measurement are:
• Fresher attrition that tells the number of freshers who left the organization within
one year. It tells how many are using the company as a springboard or a launch
pad.
• Infant mortality that is the percentage of people who left the organization within
one year. This indicates the ease with which people adapt to the company.
• Critical resource attrition which tell the attrition in terms of key personnel like
senior executives leaving the organization.
• Low performance attrition: It tells the attrition of those who left due to poor
performance.
• Knowledge workers in today’s India exhibited the highest tendency for voluntary
job change across different categories of employees.
• Years of employment in the company did make a difference regarding turnover.
The highest turnover occurs between 1-4 years of employment.
• Salary, career development and individual relationships are the major reasons for
employee leaving a job. Job content, recognition etc comes later.
CASES:
ESOPS: NEED AND EFFECTS
During the mid-1990s, corporates across the world were going through a peculiar phase -
while many of them were downsizing heavily, others were struggling hard to hold on to
their best employees. As employee turnover rates increased, employee retention
(especially technically skilled personnel) became one of the key issues for companies and
human resource (HR) officials across the world.
The boom in the information technology (IT) industry in the late 1990s was in a major
way responsible for this situation. In the 1990s, the job market was extremely vibrant and
the demand for skilled people reached an all time high during this period.
As a result, companies started paying exorbitant salaries and perks to retain their existing
employees. However, after a certain level, even increased salaries could not arrest the
employee turnover. It was reported that companies in the Silicon Valley invested around
$ 4 billion annually to retain employees and still, around 1,60,000 jobs were left unfilled.
Organizations started to devise new ways to retain their employees. It was the emergence
of ESOPS which is one of the innovative measures to keep talent in the company.
ESOPs can be defined as contribution of the employee pay package for investing in the
stocks of the employer company. ESOPs enable the employees to buy shares of the
company for which they work, at or below the market prices. They can gain from future
increase in the stock price.It provided a type of ownership to the employees in the
company.
The concept of ESOPs was also present earlier from 1920s in form of stock bonus plans.
It was 90s when the concept was efficiently utilized. Pespi was the company to first
utilize esops as a key to retain talented employees in the company.
• Most of IT companies were having exceptional performance in the period and
additionally their stock prices were in bull. This made the ESOPs very attractive
for employees.
• Also the company did not have to pay anything directly and it also in turn helped
in rise of their own equity share prices.
• http://retention.naukrihub.com/high-level.html
• http://www.howatthr.com/images/pdf/pplmgmt/Employee%20Retention%20A
%20Discussion%20Model.pdf
• www.wikipedia.com
• http://www.strategic-change.com/erc/about.html