International Journal of Scientific & Engineering Research Volume 3, Issue 4, April-2012 1

ISSN 2229-5518

Attrition Issues and Retention Challenges of

Employees
Brijesh Kishore Goswami, Sushmita Jha

Abstract— In today’s fiercely competitive business landscape, success hinges much on the retention of employees. In a knowledge driven
economy, it is the people who are emerging as key competitive differentiators and retaining the talent has become a matter of paramount
importance. But swelling attrition levels across the businesses are strait-jacketing the distraught HR practitioner’s ability to come out with
good retention strategies. Willy-nilly, attrition is here to stay and is not a fringe concern for the companies any more. The trick lies in having
sound human resource practices in place that can effectively combat the scourge of attrition. This article would provide an insight into the
various issues surrounding the problem of attrition and what major challenges are being faced in retaining the employees. Acquiring skilled
workforce is not just enough in today’s changing economy; instead a lot needs to be done to retain them. Losing knowledgeable and
trained employees can cause serious damage to the company’s progress and performance in the market.

Index Terms—

——————————  ——————————

1 INTRODUCTION

C ompanies in India as well as in other countries face a

formidable challenge of recruiting and retaining talents
while at the same time having to manage talent loss
dered by them. The obvious, common and main reasons are
the ‘ergonomic discomfort’ experienced by the employee and
the ‘functional incompatibility’ between the corporate man-
through attrition be that due to industry downturns or agement and the employees. Very often an employee finds
through voluntary individual turnover. Losing talents and himself among colleagues and superiors he is unable to cope
employees result in performance losses which can have long up with. Or he finds himself totally out of tune in his functions
term negative effect on companies especially if the departing with the employee’s functional requirements, failing to rise to
talent leaves gaps in its execution capability and human re- the employer’s expectations. Another important reason is that
source functioning which not only includes lost productivity the employee’s remuneration is not voluminous enough to
but also possibly loss of work team harmony and social bear the brunt and cushion the concussions of his family and
goodwill. With attrition rates being a bane of every industry, social life.
companies are devising innovative business models for effec-
tive retention of talent. There are a lot of factors responsible 3 Factors affecting Attrition
for attrition and employers are getting increasingly conscious Some of the factors affecting attrition are:
of the factors that can keep an employee committed.
3.1 ‘Money’ is the culprit’
Companies are wooing the best of the talents with mind-
2 ATTRITION ISSUES boggling salary levels and attractive designations; therefore an
Attrition may be defined as gradual reduction in membership employee leaves an organization for another for a few thou-
or personnel as through retirement, resignation or death. In sands of rupees.
other words, attrition can be defined as the number of em-
3.2 Lack of Career Mobility and Challenges
ployees leaving the organization which includes both volunta-
ry and involuxntary separation. The employee gradually re- Given the choice between money and a challenging job, many
duces his/ her ties with the company than crib about the un- employees may still prefer the latter as it allows them an op-
derlying factors causing attrition. It is symptomatic of a much portunity to broad base their domain expertise and also pro-
deeper malaise that cuts deeper into the innards of organiza- vides an opportunity to work with cutting-edge technology. If
tions. Attrition rates vary from sector and industry to indus- the organizations do not deliver on these expectations, em-
try. ployee exodus cannot be contained.
Apart from the unavoidable ones like resignation, retirement, 3.3 Working Environment
death or disability, the causes are found to be many and va-
An employee may leave an organization if the fairness of the
ried. They vary according to the nature of business, the level
system does not inspire his/ her confidence.
pf the employees and the nature of the responsibility shoul-
3.4 High Levels of Stress and Lack of Work-Life
———————————————— Balance
 Brijesh Goswami is Asst. Prof. in Department of Humanities, Hindustan
Companies in the zeal to squeeze out every little ounce of
College of Science and Technology, Farah, Mathura, India,
productivity from the employees and further increase profita-
 Sushmita Jha is currently a Research Scholar in Department of Commerece
PH-+919917294048. E-mail:[email protected]
bility. Sooner or later this makes employees stressed out and
and Business Administration in Central University, Allahbad, India, they rethink about their priorities and join an organization
PH-+918938811189. E-mail: [email protected]
that promises a relaxed pace work and a breathing space.
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International Journal of Scientific & Engineering Research Volume 3, Issue 4, April-2012 2
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3.5 Lack of Confidence in Supervision now striving to put into practice several measures to counter
It may sound cliché but the fact is that many employees leave attrition, right from identifying the root cause to making the
an organization because of the immediate superior. If the su- right hires. Though there is no specific data available on the
pervisor lacks competence, empathy and trust in employees, gender differences in attrition levels, it has been found that
they will fail to command the respect of the subordinates. (1). women employees are less likely to switch job, merely for a
modest (10-15%) hike in salaries. If given the ‘right environ-
3.6 Lack of Employee-job Fit ment’, which implies work-life flexibility, women tend to stay
Employee’s innate talent & aptitude are given a short shrift. longer than men in job.
There is a widespread notion that the employee’s natural flair
per se is not as important as new skills and knowledge
Sectoral Attrition Rate in % as on March 2011
acquired on the job: that with the learning attitude and train-
ing employees can do wonders in any job, but its not true and
it creates immense frustration in employees, as employees 30.00%

demonstrate a good deal of commitment, job satisfaction, self

25.00%
motivation and productivity when they are assigned a job that
is in tune with their natural talents. 20.00%

Percen tage
3.7 People don't get integrated 15.00%
Most organizations have an orientation program which is
more of data-dump or focused on compliance trainings being 10.00%
completed. The focus should be more on enabling employees
5.00%
to form networks within themselves.

3.8 Goal setting unscientific & performance goals are 0.00%

unclear

G
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ri n

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Most organizations impose a normal curve fitment, but do not
Se

ac

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Te

s tr
ac

to
uf
led

ra

Au
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an
train managers to set realistic goals or goals that tie up with

In f
ar
ab

M
Ph
En

organizational or functional goals and rarely are performance

IT

goals thought through and employees told as to which re- Sectors

sources to approach for help.

Figure 2: Attrition rate across various sectors
3.9 Lack of Role Clarity Source: survey conducted by HR Consultancy Firm Aon He-
Nothing can be more frustrating or discouraging for an em- witt.
ployee than the lack of a clear understanding of what is ex-
pected of him on the job. In a performance driven workplace a 5 IMPACT OF ATTRITION
lack of clarity regarding job duties and expectations can cause
The attrition of employees has a lasting impact on the firm’s
fear and anxiety among employees who are unclear of what is
bottom line. When an employee quits, the need for replace-
expected of them. Even worse outright anger can occur when
ment arises, the organization incurs some tangible costs. The
a team member receives a negative performance evaluation
impact ranges from costs of replacement to culture manage-
based on expectations and job duties that he or she was una-
ment issue with the new recruit.
ware of or unclear about.
5.1 Direct impact
3.10 Lack of Proper Feedback A high attrition indicates the failure on the company’s ability
to set effective HR priorities. Clients and business get affected
Most team members enjoy frequent feedback about how they
and the company’s internal strengths and weaknesses get hig-
performing. Shortening the feedback loop will help to keep
hlighted. New hires need to be constantly added, further costs
performance level high and will reinforce positive behavior.
in training them, getting them aligned to the company culture,
But now-a-days firms fail to realize the importance of feed-
etc.,—all a challenge
back mechanism, which in turn creates dissatisfaction among
workforce. 5.2 Indirect impact
Typically, high attrition also leads to a chronic or systemic
4 ATTRITION SCENARIO IN INDIA cycle—attrition brings decreased productivity, people leave
causing others to work harder and this contributes to more
Almost all the sectors in India are facing attrition, but the rea-
attrition. All this has a significant impact on the company’s
sons and effects are unique to each sector. The attrition rate in
strength in managing their business in a competitive environ-
different sectors are depicted in Figure 2, While the IT Enabled
ment
services has the highest attrition rate, other sectors that are
currently facing significantly high attrition are Telecom,
Pharmaceuticals, Retail etc. As a result, every organization is
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International Journal of Scientific & Engineering Research Volume 3, Issue 4, April-2012 3
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6 POSITIVE IMPACT OF ATTRITION than two to three times the salary of the employee.
The impact on work progress is tremendous, particularly if
Attrition is not bad always if it happens in a controlled man-
a project is underway and one of the key people leaves. “ It
ner. Some attrition is always desirable and necessary for orga-
leads to dip in entire organizational efficiency, and a lot de-
nizational growth and development. The only concern is how
pends on how it is able to cover the setback,” pointed out Rao.
organizations differentiate “ good attrition” from “ bad attri-
Organizations should execute top of the line retention poli-
tion” . The term “ healthy attrition” or “ good attrition” signifies
cies in the right earnest and consistency. They should be more
the importance of less productive employees voluntarily leav-
employee-centered and look for further ways to “ bond” em-
ing the organization. This means if the ones who have left fall
ployees to their companies. “ Company performance is opti-
in the category of low performers, the attrition in considered
mally aligned to the skills its employees possess. High attri-
being healthy. Attrition rates are considered to be beneficial in
tion implies that certain necessary skills are vulnerable or are
 If all employees stay in the same organization for a
some ways.
not present due to employees being lost. This results in lower
than optimal levels of business performance. If the skills are
very long time, most of them will be at the top of their
constantly not available, the situation gets compounded into a
pay scale which will result in excessive manpower
crisis with key projects, revenues, etc., getting affected. Busi-
 When certain employees leave, whose continuation of
costs.
ness is then reduced to just managing crisis,” added Bhardwaj.
For example, a 2 percent attrition difference can make a signif-
service would have negatively impacted productivity
icant difference in the ultimate business impact.
and profitability of the company, the company is be-

 New employees bring new ideas, approaches, abilities

nefited.
8 RETENTION CHALLENGES
& attitudes which can keep the organization from be- Employee retention refers to policies and practices compa-
 There are also some people in the organization who
coming stagnant. nies use to prevent valuable employees from leaving their
jobs. How to retain valuable employees is one of the biggest
have a negative and demoralizing influence on the problem that plague companies in the competitive market-
work culture and team spirit. This, in the long-term, is place. Not too long ago, companies accepted the “ revolving
 Desirable attrition also includes termination of em-
detrimental to organizational health. door policy” as part of doing business and were quick to fill a
vacant job with another eager candidate. Nowadays, business-
ployees with whom the organization does not want to es often find that they spend considerable time, effort, and
continue a relationship. It benefits the organization in money to train an employee only to have them develop into a
the following ways: valuable commodity and leave the company for greener pas-
o It removes bottleneck in the progress of the tures. In order to create a successful company, employers
company should consider as many options as possible when it comes to
o It creates space for the entry of new talents retaining employees, while at the same time securing their
 There are people who are not able to balance their
o It assists in evolving high performance teams trust and loyalty so they have less of a desire to leave in the
future.
performance as per expectations, lack potential for fu-
ture or need disciplinary action. Furthermore, as the Employees need to be retained because good, faithful, trained
rewards are limited, business pressures do not allow and hard working employees are required to run business.
the management to over-reward the performers, but They have acquired good product knowledge over the long
when undesirable employees leave the company, the run and a trained employee can handle customers better and
good employees can be given the share that they de- also solve problems of peers who are new to the organization.
serve. When an employee leaves he takes away with him all compa-
Some companies believe attrition in any form is bad for an ny information such as ongoing projects, etc. Goodwill of the
organization for it means that a wrong choice was made at the company gets hampered due to more employee turnover rate
beginning while recruiting. Even good attrition indicates loss and the competitors start poking their nose to recruit best tal-
as recruitment is a time consuming and costly affair. The only ents from them. Efficiency of work is hampered to a large ex-
positive point is that the realization has initiated action that tent. Let me give you an example – If an employee leaves in
will lead to cutting loss the middle of an ongoing project its very difficult to fill that
Vacuum and a new employee can never replace an old and
7 ANALYZING THE IMPACT talented employee so this leads to delayed completion of
projects and less work satisfaction among other team members
Productivity and profitability are both impacted, either ne-
gatively and positively, according to the type of attrition. Even
good attrition is indicative of loss as recruitment is a time con- 9 RETENTION STRATEGIES….
suming and costly affair. “ It is tantamount to investment that When we are aware of the facts leading to attrition of an
has gone astray. Having said that, good attrition minimizes employee we can take few measures to retain them.
the adverse impact on business while bad attrition accentuates They are –
the loss,” stated Nair. The cost of hiring is sometimes not less 1. Provide good working conditions and introduce positive
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International Journal of Scientific & Engineering Research Volume 3, Issue 4, April-2012 4
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work culture so that an employee is at ease and not stresses Figure 3: Retention Strategies for different levels of
while working.
Management
2. Appreciate all the good work and mentor him where he
his wrong. He will feel at ease and will be delighted that the The figure 3 above clearly explains that how money and un-
company cares for him. derstanding can create a congenial environment specially for
3. The management should check that there is no mis- the lower managerial level, whereas for the middle level
communication between the top management and employees managers appreciation of their work and various benefit
because a wrong message is really dangerous. programs for their families and training programs act as major
4. Flexible working hours for those who really need to ful- attrition blocker. The high level management retention
fill other important personal obligations. strategies includes creation of trustworthy environment and
5. Work life balance is very much necessary because if an freedom of decision making, thus by understanding the needs
employee has personal conflict will not work and finally leave. of various levels of management an effective retention strategy
6. Bonus should be given occasions and pay should be can be formulated
raised if an employee does good work.
7. Provide medical benefits.
8. If possible provide him with an insurance policy so that
10 CHALLENGES AHEAD……!!!!
he feels that company cares for him. Job Attrition is an ongoing phenomenon and has to be dealt
9. Recruit right person for the right job because a mismatch with psychologically. Giving a hefty pay need not satisfy an
will hamper the work and cost a lot to the company. employee totally. It is the responsibility of the HR Department
10. Train the employees from time to time so that their of the company to look at factors beyond immediate pay and
skills enhance and they serve the organization better. find out the motivational factors giving job satisfaction to the
11. Have faith in your employees and include them in im- employees. The companies have to try to create a congenial
portant decision making so that they feel they are part and work environment and offer a promising scope for career
parcel of the company. growth for the promising performers. The HR Department
should be made the part of the corporate strategy making
Each and every company has to understand the needs of its team and a comprehensive HR Policy should be framed by
employees and work accordingly. One approach cannot fit all, experts, if necessary taking the advice of an outside consul-
so each and every company should devise its own methods of tant. Organizations should set a standard while deciding em-
retaining employees apart from what is always practiced. ployee compensation levels and improve the reward structure
year after year.
Figure 3, throws light on the retention strategies that may be Involvement of employees in the decision-making process is
adopted to retain employees in all the three levels of manage- the path to the feeling of emotionally engaged outcomes such
ment i.e. Top, Middle and Lower levels, since every level re- as a feeling of being an important and integral part of the
quires a different treatment because of the difference in desig- company. Psychometric tests should be included in the inter-
nation, status in the organization and varied pay structures. view process to assess the behavior of the candidates. An in-
Adopting the right kind of strategy can help to combat the ternal program to receive employees’ feedback through a
problem of attrition arising at various levels of management feedback form at the time of bi-annual appraisal should be
implemented. It offers to better rate the management perfor-
mance and strategies can be carried out accordingly. Some
organizations are employing handicapped people. This is
profitable for organizations since they are known to be more
loyal and accept a lesser pay than their physically able col-
leagues.

11 SOME RECOMMENDATIONS FOR EFFECTIVE

RETENTION

11.1 Employee Stock Option Plans/Schemes

(ESOP/ESOS)
The employee stock option plan is a good management tool
for retention of human talent and guarding against poaching
of staff of a running organization by a rival company. ESOP in
India is regulated by Securities Exchange Board of India (SE-
BI). According to guidelines issued by SEBI “ employee stock
option” means the option given to the whole-time Directors,
Officers or employees of a company which gives such Direc-
Source:http:/ / retention.naukarhub/ / retention-strategies.html (16) tors, Officers or employees, the benefit or right to purchase or
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International Journal of Scientific & Engineering Research Volume 3, Issue 4, April-2012 5
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subscribe at a future date, the securities offered by the compa- to 50 percent of annual salary, depending on position, tenure
ny at a predetermined price. and other factors. Employees are chosen for retention bonuses
based on their contributions to management and the genera-
11.2 Stock Appreciation Rights (SARS) tion of revenue. Retention bonuses are generally vary from
Under an SARS, a certain number of shares are allotted to the position to position and are paid in one lump sum at the time
employees. After the vesting period, the employee is free to of termination. A retention period can run somewhere be-
exercise his option, and if the value of the shares has appre- tween six months to three years. It can also run for a particular
ciated he is given shares or cash worth this appreciated value. project. As long as the project gets completed, the employees
If he is allotted shares equivalent to his appreciated value, he who have worked hard on it are entitled to receive the reten-
can sell them after a lock-in-period. The advantage of SARS is tion bonus. For example, the implementation of a system may
that it is a cashless transaction for the employees. take 18 months, so a retention bonus will be offered after 20
months.
11.3 Sweat Equity
When a company is newly formed or starts a new line of
business, the company engages the best executives and em- 4 CONCLUSION
ployees available, who bring in their IPR (Intellectual Property Organizations planning for the future should be giving close
Rights) and know-how, skill and expertise with them, which attention to why attrition is occurring in the preset. To ignore
make a value addition for the company. Certain key profes- why people are leaving the organization is to ignore the or-
sionals would like to invest in the company’s capital and ganization’s greatest asset – its people. People are needed to
would like to risk their own contribution to the capital of the accomplish the task, but people are more than just tasks they
company along with their own IPR, know-how, skill and ex- perform. They are dreams, hopes, ambitions, creativity and
pertise. Such employees would like to be a strategic part of the innovation. To recognize and cultivate these valuable assets is
promoter group and would like to make value addition to one of the surest ways to build an organization that leads ra-
their capital invested in the company. Such an employee is ther than follows in domestic and global markets.
awarded with Sweat Equity as an incentive to join the compa- Thus, Organizations should create an environment that fosters
ny. ample growth opportunities, appreciation for the work accom-
plished and a friendly cooperative atmosphere that makes an em-
Sweat equity shares to mean equity shares issued by the com- ployee feel connected in every respect to the organization. Reten-
pany to employees or directors at a discount or for considera- tion plans are an inexpensive way of enhancing workplace prod-
tion other than cash for providing the know-how or making uctivity and engaging employees emotionally. Proficient em-
available rights in the nature of intellectual property rights or ployees keep the quality up and business operations run smoothly
value additions, by whatever name called. It is, therefore, ne- along with the cost saving in the longer run paper.
cessary for the issue of sweat equity shares that the concerned
employee either provides the know-how, intellectual property ACKNOWLEDGMENT
rights or other value additions to the company.
The authors wish to thank Mr. Manish Sharma, Asst. Prof.
11.4 ‘Golden Hello’ and ‘Golden Handcuffs Mechanical Engineering Department of Hindustan College of
The golden hello, as the name suggests, is an incentive offered Science and Technology for his extended support in editing
to a select set of new recruits, mostly middle and senior-level the article.
executives poached from rivals who are well known in indus-
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11.5 Retention Bonus
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International Journal of Scientific & Engineering Research Volume 3, Issue 4, April-2012 6
ISSN 2229-5518

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