REVIEW OF LITERATURE

The literature clearly indicated that there are six keys to retaining personnel. They are
recruiting, communications, training, job satisfaction, pay, and benefits.

RECRUITING

The effort to retain the best personnel begins with recruiting. Attracting and retaining the
best people are not two different things, but are the same thing. Both require creating and
maintaining a positive reputation, internally as well as externally. Employers must be
honest with the recruit about the beliefs, expectations, organizational culture, demands, and
opportunities within the organization. By representing the organization realistically, a
department will attract those who will be content working within the culture (Marx, 1995).
Denton (1992, p.47) follows this up by stating that, “ the better the match between recruits
and the organization the more likely you are to retain them.” Lynn (1997)
believes that you must take time during the hiring process to make wise decisions. The
employer must be candid about the working conditions, responsibilities, opportunities and
other details to reduce the chances of making hiring mistakes. Taylor and Cosenza (1997)
strengthen this thought by noting that it is imperative that companies give prospective
employees a true picture of the organization, if they hope to match the personality type
with the climate and culture of the organization.
The literature was clear in pointing out that if departments want to increase retention they
must start with a solid recruiting process.

COMMUNICATIONS

Carney (1998) believes that the key to employee retention is quite simple: communicate,
communicate, communicate. Communication with the employees must begin early on in
the relationship.
He believes that the imprinting period of a new employee is probably less than two weeks.
Employers must engage the employee early on by sharing how important the job they do is.
Lynn (1997) follows this up by stating that early on an atmosphere of fairness and openness
must be created by clearly laying out company policies.
Taylor and Consenza (1997) indicate that it is important to communicate the values of the
organization to its employees in order to increase their level of consent, participation, and
motivation.
Lynn (1997) echoes this thought by pointing out that the vision of the organization must be
shared with the employee as well as the importance the employees play in helping fulfill it.
Lack of communication may result in gaps between management’s perceptions of quality
employment and the employees desired and perceived quality of employment (Taylor &
Consenza, 1997). There must be a common purpose and trust among employees. People
want to feel as if they are a vital piece of something larger (Carney, 1998). As Denton
(1992) points out, managers must make sure employees know what they should do and
why it is important.
Lynn (1997) notes that communications must be a two way street to be effective.
Employers must listen to what employees have to say. An atmosphere must be created in
which employees feel comfortable making suggestions and trying our new ideas.
The literature revealed that communication must begin early in the employer/employee
relationship. Organizational values and culture must be made clear to all employees and
their importance within the organization must be continually emphasized.

CAREER GROWTH

As was noted earlier it is important that the employee feel like a valued member of the
organization. Training helps underscore this message. Training personnel is a way to show
you respect them and want them to grow. The department is making an investment in the
employee by offering training (Marx, 1995). Good training can de-emphasize salaries and
benefits, in part by building a positive work environment and by giving employees
advancement opportunities (Lynn, 1997). Lynn goes on to say that training helps
strengthen employee loyalty.
Training can help revitalize personnel. For an increasing number of people, the chance to
learn new skills is a significant personal goal for both the career opportunities education
can provide and for the chance to do something a little different (Mendonsa, 1998).
Training emphasizes to the employee that they are valued and respected. This in turn to
increased loyalty and retention.

RELATIONSHIP

While an organization must be competitive in terms of compensation and benefits, it is the

relationship with the supervisor that is often a crucial factor in determining whether a
person stays or goes (Mendonsa, 1998). Employees want more interaction with
management, more self-satisfaction on the job, more responsibility and more control over
decisions affecting them. They want their work to make a difference and want to be part of
something that matters (Taylor, 1997).
Departments should encourage innovation by soliciting the advice and input of their staff
members, followed by responses to ideas, complaints or questions (Taylor, 1997). It is
difficult to keep people on the job if they have no say in how to do it (Spragins, 1992).

People need to be recognized for their accomplishments in the workplace. In most

organizations the feeling of under-recognition is the most pervasive feeling in the
workplace (Mendonsa, 1998). Provide a great deal of personal and team recognition
(Carney, 1998). Recognize achievements with memos, mentions in staff meetings or
articles in the newspapers (Lynn, 1997).
To retain employees, departments must offer career advancement opportunities.
Departments failing to offer employees career opportunities, room for advancement and
enhancement of skills and knowledge may find it difficult to retain qualified employees
(Taylor, 1997). Marx (1995) concludes this by pointing out that promoting from within is
one of the proven methods of employee retention.
Promoting from within shows that there is truly room for advancement and growth within
thedepartment.
Employee involvement, recognition, importance of work, and career advancement
opportunities are all important, when dealing with employee retention.
COMPENSATION:

In general people think that money and benefits or lack thereof, are the main reasons
people leave their jobs, but this is not the case. While compensation and benefits may be a
key factor in the final decision-making process, a money shortage is usually not what
causes people to look in the first place (Mendonsa, 1998).
Money may be the reason they give when they resign, but it’s like “white noise”. They are
conscious of it for a while but if they are bored on the job, money alone is not going to
keep them there (Branch, 1998).

Although traditional benefits such as vacation and health are still important, today’s
workers are also looking for more non-traditional benefits. Benefits such as flexible work
ours, availability of childcare tuition assistance programs and discounts on services now
top the list of desired benefits (Denton, 1992).
The literature clearly indicates while still factors, money and benefits are not as important
as job satisfaction in terms of employee retention.

Employee Retention
Employee Retention involves taking measures to encourage employees to remain in the
organization for the maximum period of time. Corporate is facing a lot of problems in
employee retention these days. Hiring knowledgeable people for the job is essential for
an employer. But retention is even more important than hiring. There is no dearth of
opportunities for a talented person. There are many organizations which are looking
for such employees. If a person is not satisfied by the job he’s doing, he may switch
over to some other more suitable job. In today’s environment it becomes very
important for organizations to retain their employees.

The top organizations are on the top because they value their employees and they know
how to keep them glued to the organization. Employees stay and leave organizations for
some reasons.
The reason may be personal or professional. These reasons should be understood by the
employer and should be taken care of. The organizations are becoming aware of these
reasons and adopting many strategies for employee retention.

In this section we are going to study about various topics related to employee retention,
why is it needed, basic practices, myths, etc. in detail.
What is Employee Retention?
Employee retention is a process in which the employees are encouraged to remain with the
organization for the maximum period of time or until the completion of the project.
Employee retention is beneficial for the organization as well as the employee.

Employees today are different. They are not the ones who don’t have good
opportunities in hand. As soon as they feel dissatisfied with the current employer or the
job, they switch over to the next job. It is the responsibility of the employer to retain
their best employees. If they don’t, they would be left with no good employees. A good
employer should know how to attract and retain its employees. Retention involves five
major things:

<<Compensation>> <<Environment>> <<Growth>>

<<Relationship>> <<Support>>

COMPENSATION :

Compensation constitutes the largest part of the employee retention process. The
employees always have high expectations regarding their compensation packages.
Compensation packages vary from industry to industry. So an attractive compensation
package plays a critical role in retaining the employees.

Compensation includes salary and wages, bonuses, benefits, prerequisites, stock options,
bonuses, vacations, etc. While setting up the packages, the following components should be
kept in mind:
SALARY AND MONTHLY WAGE: It is the biggest component of the compensation
package. It is also the most common factor of comparison among employees. It includes

o Basic wage
o House rent allowance
o Dearness allowance
o City compensatory allowance

Salary and wages represent the level of skill and experience an individual has. Time to
time increase in the salaries and wages of employees should be done. And this increase
should be based on the employee’s performance and his contribution to the
organization.

BONUS: Bonuses are usually given to the employees at the end of the year or on a
festival.

ECONOMIC BENEFITS: It includes paid holidays, leave travel concession, etc.

LONG TERM INCENTIVES: Long term incentives include stock options or stock
grants. These incentives help retain employees in the organization's startup stage.

HEALTH INSURANCE: Health insurance is a great benefit to the employees. It saves

employees money as well as gives them a peace of mind that they have somebody to
take care of them in bad times. It also shows the employee that the organization cares
about the employee and its family.

AFTER RETIREMENT: It includes payments that an Employee gets after he retires

like EPF (Employee Provident Fund) etc.

Miscellaneous compensation: It may include employee assistance programs (like

psychological counseling, legal assistance etc), discounts on company products, use of
a company cars, etc.

Growth and career:

Growth and development are the integral part of every individual’s career. If an employee
can not foresee his path of career development in his current organization, there are
chances that he’ll leave the organization as soon as he gets an opportunity.

The important factors in employee growth that an employee looks for himself are:

Work profile: The work profile on which the employee is working should be in sync with
his capabilities. The profile should not be too low or too high. Personal growth and
dreams: Employees responsibilities in the organization should help him achieve his
personal goals also. Organizations can not keep aside the individual goals of employees
and foster organizations goals. Employees’ priority is to work for themselves and later on
comes the organization. If he’s not satisfied with his growth, he’ll not be able to contribute
in organization growth.

Training and development: Employees should be trained and given chance to improve
and enhance their skills. Many employers fear that if the employees are well rained, they’ll
leave the organization for better jobs. Organization should not limit the resources on which
organization’s success depends. These trainings can be given to improve many skills like:

• Communications skills

• Technical skills

• In-house processes and procedures improvement related skills

• C or customer satisfaction related skills

• Special project related skills

Need for such trainings can be recognized from individual performance reviews, individual
meetings, employee satisfaction surveys and by being in constant touch with the
employees.

Importance of Relationship in Employee

Retention Program
Sometimes the relationship with the management and the peers becomes the reason for an
employee to leave the organization. The management is sometimes not able to provide an
employee a supportive work culture and environment in terms of personal or professional
relationships. There are times when an employee starts feeling bitterness towards the
management or peers. This bitterness could be due to many reasons. This decreases
employee’s interest and he becomes de-motivated. It leads to less satisfaction and
eventually attrition. A supportive work culture helps grow employee professionally and
boosts employee satisfaction. To enhance good professional relationships at work, the
management should keep the following points in mind.

Respect for the individual: Respect for the individual is the must in the organization.

Relationship with the immediate manager: A manger plays the role of a mentor and a
coach. He designs ands plans work for each employee. It is his duty to involve the
employee in the processes of the organization. So an organization should hire managers
who can make and maintain good relations with their subordinates.

Relationship with colleagues: Promote team work, not only among teams but in different
departments as well. This will induce competition as well as improve the relationships
among colleagues.

Recruit whole heartedly: An employee should be recruited if there is a proper place and
duties for him to perform. Otherwise he’ll feel useless and will be dissatisfied. Employees
should know what the organization expects from them and what their expectation from the
organization is. Deliver what is promised.

Promote an employee based culture: The employee should know that the organization is
there to support him at the time of need. Show them that the organization cares and he’ll
show the same for the organization. An employee based culture may include decision
making authority, availability of resources, open door policy, etc.

Individual development: Taking proper care of employees includes acknowledgement to

the employee’s dreams and personal goals. Create opportunities for their career growth by
providing mentorship programs, certifications, educational courses, etc.

Induce loyalty: Organizations should be loyal as well as they should promote loyalty in
the employees too. Try to make the current employees stay instead of recruiting new ones.

Organization Environment
It is not about managing retention. It is about managing people. If an organization manages
people well, employee retention will take care of itself. Organizations should focus on
managing the work environment to make better use of the available human assets.

People want to work for an organization which provides

 Appreciation for the work done

 Ample opportunities to grow

 A friendly and cooperative environment A feeling that the organization is second

home to the employee

Organization environment includes

• Culture

• Values

• Company reputation

• Quality of people in the organization

• Employee development and career growth

• Risk taking

• Leading technologies
• Trust

Types of environment the employee needs in an organization

• Learning environment: It includes continuous learning and improvement of the

individual, certifications and provision for higher studies, etc.

• Support environment: Organization can provide support in the form of work-life

balance. Work life balance includes:

o Flexible hours
 o Telecommuting

o Dependent care

o Alternate work schedules

o Vacations

o Wellness

• Work environment: It includes efficient managers, supportive co-workers,

challenging work, involvement in decision-making, clarity of work and
responsibilities, and recognition.

Lack or absence of such environment pushes employees to look for new opportunities. The
environment should be such that the employee feels connected to the organization in
every respect Importance Of Employee Retention

Now that so much is being done by organizations to retain its employees, why is retention
so important? Is it just to reduce the turnover costs? Well, the answer is a definite no. It’s
not only the cost incurred by a company that emphasizes the need of retaining employees
but also the need to retain talented employees from getting poached.

The process of employee retention will benefit an organization in the following ways:

1. The Cost of Turnover: The cost of employee turnover adds hundreds of thousands of
money to a company's expenses. While it is difficult to fully calculate the cost of turnover
(including hiring costs, training costs and productivity loss), industry experts often quote
25% of the average employee salary as a conservative estimate.

2. Loss of Company Knowledge: When an employee leaves, he takes with him

valuable knowledge about the company, customers, current projects and past
history (sometimes to competitors). Often much time and money has been spent on
 the employee in expectation of a future return. When the employee leaves, the
investment is not realized.

3. Interruption of Customer Service: Customers and clients do business with a

company in part because of the people. Relationships are developed that encourage
continued sponsorship of the business. When an employee leaves, the relationships
that employee built for the company are severed, which could lead to potential
customer loss.

4. Turnover leads to more turnovers: When an employee terminates, the effect is

felt throughout the organization. Co-workers are often required to pick up the slack.
The unspoken negativity often intensifies for the remaining staff.

5. Goodwill of the company: The goodwill of a company is maintained when the

attrition rates are low. Higher retention rates motivate potential employees to join
the organization.

Regaining efficiency: If an employee resigns, then good amount of time is lost in hiring a
new employee and then training him/her and this goes to the loss of the company directly
which many a times goes unnoticed. And even after this you cannot assure us of the same
efficiency from the new employee

What Makes Employee Leave?

Employees do not leave an organization without any significant reason. There are certain
circumstances that lead to their leaving the organization. The most common reasons can be:
 Job is not what the employee expected to be: Sometimes the job responsibilities
don’t come out to be same as expected by the candidates. Unexpected job responsibilities
lead to job dissatisfaction.

 Job and person mismatch: A candidate may be fit to do a certain type of job which
matches his personality. If he is given a job which mismatches his personality, then he
won’t be able to perform it well and will try to find out reasons to leave the job.

• No growth opportunities: No or less learning and growth opportunities in the

current job will make candidate’s job and career stagnant.
 • Lack of appreciation: If the work is not appreciated by the supervisor, the
employee feels de-motivated and loses interest in job.

• Lack of trust and support in coworkers, seniors and management: Trust is the
most important factor that is required for an individual to stay in the job. Non-
supportive coworkers, seniors and management can make office environment
unfriendly and difficult to work in.

• Stress from overwork and work life imbalance: Job stress can lead to work life
imbalance which ultimately many times lead to employee leaving the organization.

• Compensation: Better compensation packages being offered by other companies

may attract employees towards themselves.

• New job offer: An attractive job offer which an employee thinks is good for him
with respect to job responsibility, compensation, growth and learning etc. can lead
an employee to leave the organization.

Employee Retention Strategies

The basic practices which should be kept in mind in the employee retention strategies are:

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 3 levels: Low, medium and high level.

Low Level Employee Retention Strategies

 appreciating and recognizing a well done job

 Personalized well done and thank-you cards from supervisors

 Congratulations e-cards or cards sent to spouses/families

 Voicemails or messages from top management

 Periodic days off for good performance

 Rewards ( gift, certificates, monetary and non monetary rewards)

 •  Recognizing professional as well as personal significant events Wedding gifts

• Anniversary gifts

• New born baby gifts

• Scholarships for employee’s children

• Get well cards/flowers

• Birthday cards, celebrations and gifts

 Providing benefits

o Home insurance plans

o Legal insurance

o Travel insurance

o Disability programs

 Providing perks:

It includes coupons, discounts, rebates, etc

o Discounts in cinema halls, museums, restaurants, etc.

 o Retail store discounts

o Computer peripherals purchase discounts

 Providing workplace conveniences

o On-site ATM

o On-site facilities for which cost is paid by employees

 laundry facility for bachelors

 Shipping services

o Assistance with tax calculations and submission of forms

o Financial planning assistance

o Casual dress policies

o Facilities for expectant mothers

 Parking

 Parenting guide
  Lactation rooms

 Flexi timings

 Fun at work

o Celebrate birthdays, anniversaries, retirements, promotions, etc

o Holiday parties and holiday gift certificates

o Occasional parties like diwali, holi, dushera, etc

o Organize get together for watching football, hockey, cricket matches

o Organize picnics and trips for movies etc

o Sports outings like cricket match etc

o Indoor games

 Occasional stress relievers

o “Casual dress” day

o “Green is the color” day

 o Handwriting analysis

o Tatoo, mehandi, hair braiding stalls on weekends

o Mini cricket in office

o Ice cream Fridays

o Holi-Day breakfast

 Employee support in tough time or personal crisis

o Personal loans for emergencies

o Childcare and eldercare services

o Employee Assistance Programs ( Counseling sessions etc)

o Emergency childcare services

Medium Level Strategies for Employee

Retention
• Appreciating and recognizing a well done job

• Special bonus for successfully completing firm-sponsored certifications

 • Benefit programs for family support

• Child adoption benefits

• Flexible benefits

• Dependents care assistance

• Medical care reimbursement

Providing conveniences at workplace

 Gymnasiums

 Athletic membership program

 Providing training and development and personal growth opportunities

o Sabbatical programs

o Professional skills development

Individualized career guidance Promoting Work/Life Effectiveness

 Develop flexible schedules

 Part-time schedules

 Extended leaves of absence

 Develop Support Services

 On-site day care facility etc.

 Understand employee needs: This can be done through proper management style and
culture

 Listen to the employee and show

interest in ideas High Level Strategies
 • Appreciate new ideas and reward risk-taking

• Show support for individual initiative

• Encourage creativity

 Encouraging professional training and development and/or personal growth

opportunities: It can be done through:

o Mentoring programs

o Performance feedback programs

o Provide necessary tools to the employees to achieve their professional and personal
goals

o Getting the most out of employee interests and talents

o Higher study opportunities for employees

o Vocational counseling

o Offer personalized career guidance to employees

 Provide an environment of trust: Communication is the most important and effective

way to develop trust.

o Suggestion committees can be created

 o Open door communication policy can be followed

o Regular feedbacks on organization’s goals and activities should be taken from the
employees by:

 Management communications

 Intranet and internet can be used as they provide 24X7 access to the
information

 Newsletters, notice boards, etc.

 Hire the right people from the beginning: employee retention is not a process that
begins at the end. The process of retention begins right from the start of the recruitment
process.

o The new joinees should fit with the organization’s culture. The personality,
leadership characteristics of the candidate should be in sync with the culture of the
hiring organization.

o Referral bonus should be given to the employees for successful hires. They are the
best source of networking.

o Proper training should be given to the managers on interview and management

techniques.

o An internship program can be followed to recruit the fresh graduates.

Retention Myths
The process of retention is not as easy at it seems. There are so many tactics and strategies
used in retention of employees by the organizations. The basic purpose of these strategies
should be to increase employee satisfaction, boost employee morale hence achieve
retention. But some times these strategies are not used properly or even worse, wrong
strategies are used. Because of which these strategies fail to achieve the desired
results.There are many myths related to the employee retention process. These myths exist
because the strategies being used are either wrong or are being used from a long time.
These myths prevent the employer from successfully implementing the retention strategies.
Let us learn about some of these myths.

1. Employees leave an organization for more pay: Money may be the motivating
factor for some but for many people it is not the most important factor. Money
matters more to the low-income-employees for whom it’s a survival issue. Money
can make an employee stay in an organization but not for long. The factors more
important than money are job satisfaction, job responsibilities, and individual’s skill
development. The employers should understand this and work out some other ways
to make employees feel satisfied. When employees leave, management tries to
retain them by offering more money. But instead they should try to figure out the
main reason behind it. Issues that are mainly the cause of dissatisfaction are
organization’s policies and procedures, working conditions, relationship with the
supervisor and salary, etc. For such employees, achievement, growth, respect,
recognition, is the main concern.

2. Incentives can increase productivity: Incentives can surely increase productivity

but not for long term. Cash incentives, volume work targets and speed awards are
old management beliefs. They can generate work speedily and in volumes but can’t
boost employee commitment. Rather speed can hamper the quality of work
produced. What really glues employees to their work and organization is quality
work, meaningful responsibilities, recognition, respect, growth opportunities and
friendly supervisors.

3. Employees run away from responsibilities: It is a myth that employees run from
responsibilities. In-fact employees feel more responsible if they are given extra
responsibilities apart from their regular job. Employees look for variety, greater
control on the processes and authority to take decisions in their present job. They
want opportunities to learn and grow. Management can assign extra responsibilities
to their employees and appreciate them on the completion of these tasks. This will
induce a sense of pride in the employee and will improve the relationship between
the management and the employee.
 4. Loyalty is a thing of the past: Employees can be loyal but what they need is an
employer for whom they can be loyal. There is no reason for the employee to hop
jobs if he’s satisfied with the employer.

Taking measures to increase employee satisfaction will be expensive for the organizations:
The things actually required to improve employee satisfaction like respect, career
growth and development, appreciation, etc. can’t be bought. They are free of cost. An
employer or management that reacts well to the employee’s ideas and suggestions is
enough for the employees to be retained.

Benefits Of Attrition

Attrition is not bad always if it happens in a controlled manner. Some attrition is always
desirable and necessary for organizational growth and development. The only concern is
how organizations differentiate “good attrition” from “bad attrition”. The term “healthy
attrition” or “good attrition” 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 attrition in considered being healthy. Attrition rates are
considered to be beneficial in some ways:

• 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.

• When certain employees leave, whose continuation of service would have

negatively impacted productivity and profitability of the company, the company is
benefited.

• New employees bring new ideas, approaches, abilities & attitudes which can keep
the organization from becoming stagnant.

• 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.
 • Desirable attrition 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

• 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.

Some companies believe attrition in any form is bad for an organization for it means that a
wrong choice was made at the beginning while recruiting. Even good attrition 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.

Transparent Work Culture

In today’s fast paced business environments where employees are constantly striving to
achieve business goals under time restrictions; open minded and transparent work culture
plays a vital role in employee retention.

Companies invest very many hours and monies in training and educating employees. These
companies are severely affected when employees check out, especially in the middle of
some big company project or venture. Although employees most often prefer to stay with
the same company and use their time and experience for personal growthand development,
they leave mainly because of work related stress and dissatisfactions.

More and more companies have now realized the importance of a healthy work culture and
have a gamut of people management good practices for employees to have that ideal fresh
work-life. Closed doors work culture can serve as a deterrent to communication and trust
within employees which are potential causes for work-related apathy and frenzy.

A transparent work environment can serve as one of the primary triggers to facilitate
accountability, trust, communication, responsibility, pride and so on. It is believed that in a
transparent work culture employees rigorously communicate with their peers and exchange
ideas and thoughts before they are finally matured in to full-blown concepts. It induces
responsibility among employees and accountability towards other peers, which gradually
builds up trust and pride. More importantly, transparency in work environment discourages
work-politics which often hinders company goals as employees start to advance their
personal objectives at the expense of development of the company as a single entity.

Employees comprise the most vital assets of the company. In a work place where
employees are not able to use their full potential and not heard and valued, they are likely
to leave because of stress and frustration. In a transparent environment while employees get
a sense of achievement and belongingness from a healthy work environment, the company
is benefited with a stronger, reliable work-force harboring bright new ideas for its growth.

Quality Of Work
The success of any organization depends on how it attracts, recruits, motivates, and retains
its workforce. Organizations need to be more flexible so that they develop their talented
workforce and gain their commitment. Thus, organizations are required to retain employees
by addressing their work life issues.

The elements that are relevant to an individual’s quality of work life include the task, the
physical work environment, social environment within the organization, administrative
system and relationship between life on and off the job. The basic objectives of a QWL
program are improved working conditions for the employee and increase organizational
effectiveness.

Providing quality work life involves taking care of the following aspects:

Occupational health care: The safe work environment provides the basis for the person to
enjoy working. The work should not pose a health hazard for the person. The employer and
employee, aware of their risks and rights, could achieve a lot in their mutually beneficial
dialogue.

Suitable working time: Organizations are offering flexible work options to their
employees wherein employees enjoy flexi-timings for dedicating their efforts at work.

Appropriate salary: The appropriate as well as attractive salary has always been an
important factor in retaining employees. Providing employees salary at par with the other
counterparts of above that what competitors are paying motivates them to stick with the
company for long.

QWL consists of opportunities for active involvement in group working arrangements or

problem solving that are of mutual benefit to employees or employers, based on labor
management cooperation. People also conceive of QWL as a set of methods, such as
autonomous work groups, job enrichment, and high-involvement aimed at boosting the
satisfaction and productivity of workers. It requires employee commitment to the
organization and an environment in which this commitment can flourish.

Providing quality at work not only reduces attrition but also helps in reduced absenteeism
and improved job satisfaction. Not only does QWL contribute to a company's ability to
recruit quality people, but also it enhances a company's competitiveness. Common beliefs
support the contention that QWL will positively nurture amore flexible, loyal, and
motivated workforce, which are essential in determining the company's competitiveness.

Supporting Employees
Organizations these days want to protect their biggest and most valuable asset and they
want to do this in a way that best suits their organizational culture. Retaining employees is
a difficult task. Providing support to the employees acts as a mantra for retraining them.
Employers can also support their employees by creating an environment of trust and
inculcating the organizational values into employees. The management can support
employees directly or indirectly. Directly, they provide support in terms of personal crises,
managing stress and personal development. Management can support employees,
indirectly, in a number of ways as follows:

• Manage employee turnover: Employee turnover affects the whole organization in

terms of productivity. Managing the turnover, hence, becomes an important task. A
proactive approach can be adopted to reduce attrition. Strategies should be framed
in advance and implemented when the times arrives. Turnover costs should also be
taken into consideration while framing these strategies.
 • Become employer of choice: What makes a company an employer of choice? Is
the benefit it offers or the compensation packages it gives away to its employees?
Or is it measured in terms of how they value their employees or in terms of
customer satisfaction? Becoming an employer of choice involves following a road
map which tells where to go as a brand.
• Engage the new recruits: The newly hired employees are said to be least engaged
in the organization. Keeping them engaged is an important task. The fresh talent
should be utilized to maximum before they start feeling bored in the organization.

• Optimize employee engagement: An organization’s productivity is measured not

in terms of employee satisfaction but by employee engagement. Employees are said
to be engaged when they show a positive attitude toward the organization and
express a commitment to remain with the organization. Employee satisfaction also
comes with high engagement levels. So, organizations should aim to maximize the
engagement among employees.

Coaching and mentoring:

Employees whose work performance suffers due to poor interpersonal relationships or

because of lack of interpersonal skills should be provided proper coaching by their
superiors. Planed coaching sessions help an individual to work through issues,
maximize his potential and return to peak performance.

Feedback
Feedback acts as a channel of communication between the employee and his manager. The
amount of information employees receive about how well or how poorly they have
performed is what we call feedback. It is a dialog between a manager and an employee
which acts as a way of sharing information about the performance. It suggests where the
employee performance is effective and where performance has to improve.

Managers can provide either positive feedback or negative feedback to employees. This
feedback helps the employee assess his performance and identify the improvement areas.

Positive feedback communicates managerial satisfaction. Positive recognition for good

performance boosts up morale of employees and results in performance improvement to a
higher productivity level. It is believed that positive feedback is the only type of feedback
that generates performance above the minimum acceptable level

Negative feedback obviously communicates manager’s dissatisfaction. However, negative

feedback sometimes make employee to put more efforts to improve his performance. But
such times are very rare. Moreover this improvement is short term.

Some managers do not provide any kind of feedback to their employees. Due to no
feedback, employees may assume that they are performing productively or they may feel
that the manager is satisfied with their performance. Studies reveal the performance tends
be same or even decreases if no feedback is provided.

Thus, feedback is necessary because:

• It builds trust and enhances communication between manager and employee.

• It gives managers and employees a way to identify and discuss skills and strengths.

• Positive feedback leads to employee retention and motivation.

• It helps in identifying performance areas that need improvement and specific ways
to improve them.

• It acts as an opportunity to enhance performance by identifying resources for skill

development.
 • It is an opportunity for managers and employees to assess and identify career and
advancement opportunities.

• It helps employees to understand the effectiveness of their performance and

contributes to their overall knowledge about the work

Managers have tendency to ignore good performances of their employees. Providing no

feedback may demotivate employees and may lead to employee absenteeism. Input from
manager’s side is necessary as it help employees to improve their performance and increase
productivity.

Communication Between Employee and

Employer
Communication is a process in which a message is conveyed to the receiver by the sender.
The message may be or may not be in a common format or language that both the sender
and receiver understand. So there is a need to encode and decode the message in the
process. Encoding and decoding also helps in the security of the message. The process of
communication is incomplete without the feedback.

Communication is the solution to almost everything in this world. Same applies to

employee retention also. Straight-from-the-shoulder communication is what the employees
need from their employers. Employees look for organizations where communication and
process are transparent. Nothing is hidden and shared with the employees.
There are 3 categories of employees:

• A: Who will leave their current employer in 3 years of their employment

• B: Who have a probability of leaving their current employer in next 3 years

• C: Who will stay with their current employer in the next 3 years

Category A: These are the employees who lack communication with their employers.

Category C: These are the employees who have proper, well structured communication
with their employers.
Communication is also the way to win the employees trust in the organization. Employees
trust the employers who are friendly and open to them. This trust leads to employee loyalty
and finally retention. Employers also feel that the immediate supervisors are the most
authenticated and trusted source of information for them. So the organizations should hire
managers who are active communicators.

Communication mediums

• Open door policy: Organizations should support open door policies so that the
employees feel comfortable and are able to express their doubts and feeling to their
employers.

• Frequent meetings and Social gatherings

• Emails, Newsletters, Intranet and many more

So there should be effective communication across the organization and this

communication should be two-way. Communication alone can lead to unimaginable
heights of employee retention.

Attrition Rate
The attrition rate has always been a sensitive issue for all organizations. Calculating
employee turnover rate is not that simple as it seems to be. No common formula can be
used by all the organizations. A formula had to be devised keeping in view the nature of the
business and different job functions. Moreover, calculating attrition rate is not only about
devising a mathematical formula. It also has to take into account the root of the problem by
going back to the hiring stage.
Attrition rate: There is no standard formula to calculate the attrition rate of a company.
This is because of certain factors as:

• The employee base changes each month. So if a company has 1,000 employees in
April 2004 and 2,000 in March 2005, then they may take their base as 2,000 or as
1,500 (average for the year). If the number of employees who left is 300, then the
attrition figure could be 15 percent or 20 percent depending on what base you take.

• Many firms may not include attrition of freshers who leave because of higher
studies or within three months of joining.
 • In some cases, attrition of poor performers may also not be treated as attrition.
Calculating attrition rate:

Attrition rates can be calculated using a simple formula:

Attrition =(No. of employees who left in the year / average employees in the year) x
100

Thus, if the company had 1,000 employees in April 2004, 2,000 in March 2005, and 300
quit in the year, then the average employee strength is 1,500 and attrition is 100 x
(300/1500) = 20 percent. Besides this, there are various other types of attrition that should
be taken into account. These 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.

Attrition Costs
One of the best methods for calculating the cost of turnover takes into account expenses
involved to replace an employee leaving an organization. These expenses are:

A. Recruitment cost
The cost to the business when hiring new employees includes the following six factors plus
10 percent for incidentals such as background screening:

• Time spent on sourcing replacement

• Time spent on recruitment and selection

 • Travel expenses, if any

• Re-location costs, if any n Training/ramp-up time

• Background/reference screening

B. Training and development cost

To estimate the cost of training and developing new employees, cost of new hires must be
taken into consideration. This will mean direct and indirect costs, and can be largely
classified under the following heads:

• Training materials

• Technology

• Employee benefits

• Trainers’ Time

C. Administration cost
They include:

• Set up communication systems

• Add employees to the HR system

• Set up the new hire’s workspace

Set up ID-cards, access cards, etc.

Employee Turnover Cost Calculation

The following table can be helpful to calculate the cost of employee turnover per week or
per month

Employee Detachment Cost

Exit interview (One Hour: Preparation, interview, follow up) _______

Cost of termination time _______
Cost spent in administrative procedures _______
Increased unemployment (based on the Department of Labor) _______
Cost of vacancy

Overtime _______
Labor _______
Wages _______

Cost of substitution

Job advertising _______

Pre-employment administration _______
Cost of new hires’ interviews _______
Staff cost _______

Cost of training

Stationary cost (Books, training manuals, etc.) _______

Formal training sessions (Class room, lab, etc) _______
Informal training (Mentors, etc.) _______

Employee performance differential

Difference in performance (Productivity, learning, etc.) _______

TOTAL TURNOVER COST PER EMPLOYEE _______

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 have been highlighted below:

 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.

• 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.

• 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.

• 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.

• 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.

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.

Ways To Reduce Employee Turnover

Let us explore some ideas to reduce employee turnover

 Hire the best candidate.

 Welcome new employees. Customize your induction program for new employees
according to the requirements. Same induction program can not be applied to all the
candidates. Make them feel welcomed.

 Produce quality managers who can really manage employees well.

 Provide employees with work schedules that is flexible enough to suit their needs.

• Don’t be too demanding. You re hiring human beings who have their own life and
family commitments. Respect them.

• Provide career counseling and development.

• Discuss your future plans regarding the candidate with the candidate. Let them
know that the management is interested in retaining them and cares for them.
• Take proper feedback from employees regarding their grievances.
• Remember your ex-employees. They can be of help in future. It is also a part of
employee retention.

Attrition Rates In Asia

In Asia, organizations faced an overall attrition rate of 16% in 2005. Attrition rate was 14%
in 2004 and 10% in 2003.

According to Hewitt’s Attrition and Retention Study Asia Pacific 2006, the no.1 reason for
this growing attrition rate is compensation unfairness. 21% of the organizations who took
part in the survey said that their employee left the organization because they got offers
from other organizations offering better pay packages. The no. 2 reason was less growth
opportunities and no. 3 reason was role stagnation. The study also revealed that the top
employee retention strategy being used by the organizations in Asia was to pay above the
industry standards, providing opportunities to employees to learn new skills, and provide
work life balance.
From employee point of view

According to the employees, attrition at the professional/supervisor/technical level was the

highest (39%) and lowest at the senior/top management level (1% approximately).

Attrition Rates in Different Sectors In

India
 All
the sectors are facing attrition. But the reasons and effects of attrition in every sector are
different. Let us discuss the attrition rates of these sectors in detail:

• FMCG Sector

• Manufacturing Sector

• Capital Goods Sector

• Construction Sector
 • Non-voice BPO Sector

• IT – ITES Sector

o Attrition Rates Of Wipro, TCS, Satyam and Infosys

• Telecom Sector

• Pharmaceuticals Sector

• Biotechnology Sector

• Services Sector

• Financial Sector

• Aviation Sector

• Retail Sector

• Voice-based BPO Sector

Managing Employee Retention

Retention Home » Managing Employee Retention The task of managing employees can be
understood as a three stage process:

1. Identify the cost of employee turnover

2. Understand why employee leave
3. Implement retention strategies

Identify the cost of employee turnover:

The organizations should start with identifying the employee turnover rates within a
particular time period and benchmark it with the competitor organizations. This will help in
assessing the whether the employee retention rates are healthy in the company. Secondly,
the cost of employee turnover can be calculated. According to a survey, on an average,
attrition costs companies 18 months’ salary for each manager or professional who leaves,
and 6 months’ pay for each hourly employee who leaves. This amounts to major
organizational and financial stress, considering that one out of every three employees plans
to leave his or her job in the next two years.

Understand why employees leave:

Why employees leave often puzzles top management. Exit interviews are an ideal way of
recording and analyzing the factors that have led employees to leave the organization. They
allow an organization to understand the reasons for leaving and underlying issues. However
employees never provide appropriate response to the asked questions. So an impartial
person should be appointed with whom the employees feel comfortable in expressing their
opinions.

Implement retention strategy:

Once the causes of attrition are found, a strategy is to be implemented so as to reduce
employee turnover. The most effective strategy is to adopt a holistic approach to dealing
with attrition. An effective retention strategy will seek to ensure:

• Attraction and recruitment strategies enable selection of the ‘right’ candidate for
each role/organization

• New employees’ initial experiences of the organization are positive

• Appropriate development opportunities are available to employees, and that they

are kept aware of their likely career path with the organization

• The organization’s reward strategy reflects the employee drivers

 • The leaving process is managed effectively

How To Increase Employee Retention

Companies have now realized the importance of retaining their quality workforce.
Retaining quality performers contributes to productivity of the organization and increases
morale among employees.

Four basic factors that play an important role in increasing employee retention include
salary and remuneration, providing recognition, benefits and opportunities for individual
growth. But are they really positively contributing to the retention rates of a company?
Basic salary, these days, hardly reduces turnover. Today, employees look beyond the
money factor.

employee retention can be increase by inculcating the following practices:

1. Open Communication: A culture of open communication enforces loyalty among

employees. Open communication tends to keep employees informed on key issues.
Most importantly, they need to know that their opinions matter and that
management is 100% interested in their input.
 2. Employee Reward Program: A positive recognition for work boosts the
motivational levels of employees. Recognition can be made explicit by providing
awards like best employee of the month or punctuality award. Project based
recognition also has great significance. The award can be in terms of gifts or
money.

3. Career Development Program: Every individual is worried about his/her career.

He is always keen to know his career path in the company. Organizations can offer
various technical certification courses which will help employee in enhancing his
knowledge.

4. Performance Based Bonus: A provision of performance linked bonus can be made

wherein an employee is able to relate his performance with the company profits and
hence will work hard. This bonus should strictly be productivity based.

5. Recreation facilities: Recreational facilities help in keeping employees away from

stress factors. Various recreational programs should be arranged. They may include
taking employees to trips annually or bi-annually, celebrating anniversaries, sports
activities, et al.

6. Gifts at Some Occasions: Giving out some gifts at the time of one or two festivals
to the employees making them feel good and understand that the management is
concerned about them.

Retention Bonus
Higher attrition rates within a particular industry have forced companies to use some
innovative strategies to retain employees. Retention Bonus is one of the important tools
that are being used to retain employees. Retention bonus is an incentive paid to an
employee to retain them through a critical business cycle. Retention bonuses are becoming
more common in the corporate world because companies are going through more
transitions like mergers and acquisitions. They need to give key people an attractive
incentive to stay on through these transitions to ensure productivity. Retention bonuses
have proven to be a useful tool in persuading employees to stay.
A retention bonus plan is not a panacea. According to a survey, non-management
employees generally receive about 10 percent of their annual salaries in bonuses, while
management and top-level supervisors earn an additional 50 percent of their annual
salaries. While bonuses based on salary percentages are the generally used, some
companies choose to pay a flat figure. In some companies, bonuses range from 25 percent
to 50 percent of annual salary, depending on position, tenure and other factors. Employees
are chosen for retention bonuses based on their contributions to management and the
generation of revenue. Retention bonuses are generally vary from position to position and
are paid in one lump sum at the time of termination. However, some companies pay in
installments as on when the business cycle completes. A retention period can run
somewhere between six months to three years. It can also run for a particular project. A
project has its own life span. As long as the project gets completed, the employees who
have worked hard on it are entitled to receive the retention bonus. For example, the
implementation of a system may take18 months, so a retention bonus will be offered after
20 months.

Although retention bonuses are becoming more common everywhere, some industries are
more likely than others to offer them. Retail/wholesale companies are the most appropriate
to implement stay-pay bonuses, followed by financial service providers and manufacturing
firms. Companies of all sizes use retention bonus plans to keep knowledge employees
retained in the company. To retain its key senior employees post merger with EDS
Corporation, Mphasis is providing cash component based retention bonus plan for its
employees. This is mainly to retain good employees and provide them a cash incentive to
keep them motivated.

Hire Right Talent

employee retention starts with recruitment. Early departures arise from the wrong
recruitment process. Here are a few ways to ensure how to hire the right talent for a
particular job.

 Hire appropriate candidates. Hire candidates who are actually suitable for the job.
For this the employer should understand the job requirements clearly. Don’t hire under
qualified or clearly overqualified candidates.

 Provide realistic job preview at the time of hiring: Mostly employees leave an
organization because they are given the real picture of their job responsibilities at the time
of joining. Attrition rate can be reduced if a right person is hired for a right job.

Realistic preview of the job responsibilities can be given to the employment seekers by
various methods like discussions, trial periods, internships etc.

 Clearly discuss what is expected from the employee: Before joining the organization,
tell the candidate what is expected from him. Setting wrong expectations or hiding
expectations will result in early leaving of employees.
 Discuss what the expectations of the employees are: Ask employees what they
expect from the organization. Be realistic. If their requirements can be fulfilled only then
promise them. Or tell them before hand that their requirements can not be fulfilled. Don’t
show them an unrealistic picture.

 Culture fit: Try to judge individual’s capability to adapt to the organization’s culture.
A drastic change in the culture may give a culture shock to the candidate.

 Referrals: According to the research, referred candidates stay longer with the
organization. There is a fear of hampering the image and reputation of the person who
referred the candidate.

When asked about why employees leave, low salary comes out to be a common excuse.
However, research has shown that people join companies, but leave because of what their
managers’ do or don’t do. It is seen that managers who respect and value employees’
competency, pay attention to their aspirations, assure challenging work, value the quality of
work life and provided chances for learning have loyal and engaged employees. Therefore,
managers and team leaders play an active and vital role in employee retention

Manager Role in Retention

Managers and team leaders can reduce the attrition levels considerably by creating a
motivating team culture and improving the relationships with team members. This can be
done in a following way:

• Creating a Motivating Environment: Team leaders who create motivating

environments are likely to keep their team members together for a longer period of
time. Motivation does not necessarily have to come through fun events such as
parties, celebrations, team outings etc. They can also come through serious events
e.g. arranging a talk by the VP of Quality on career opportunities in the field of
quality. Employees who look forward to these events and are likely to remain more
engaged.

• Standing up for the Team: Team leaders are closest to their team members. While
they need to ensure smooth functioning of their teams by implementing
management decisions, they also need to educate their managers about the realities
on the ground. When agents see the team leader standing up for them, they will
have one more reason to stay in the team.

• Providing coaching: Everyone wants to be successful in his or her current job.

However, not everyone knows how. Therefore, one of the key responsibilities will
 be providing coaching that is intended to improve the performance of employees.
Managers often tend to escape this role by just coaching their employees. However,
coaching is followed by monitoring performance and providing feedback on the
same.

Delegation: Many team leaders and managers feel that they are the only people who can do
a particular task or job. Therefore, they do not delegate their jobs as much as they should.
Delegation is a great way to develop

• competencies.

• Extra Responsibility: Giving extra responsibility to employees is another way to get

them engaged with the company. However, just giving the extra responsibility does
not help. The manager must spend good time teaching the employees of how to
manage responsibilities given to them so that they don’t feel over burdened.

Focus on future career: Employees are always concerned about their future career. A
manager should focus on showing employees his career ladder. If an employee sees that his
current job offers a path towards their future career aspirations, then they are likely to stay
longer in the company. Therefore, managers should play the role of career counselors as
well.