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Employee Retention needs to be looked at differently
The first step towards management of retention begins with acceptance of the reality that today it is not the company which determines the movement of its employees but the market. The reason for such conclusion is simple: It is now impossible for a single company to counter the pull of the market. In the world of internet that made availability of information so easy, no company can insulate its employees from the attractive opportunities thrown open by the aggressive recruiters in the market. This hard reality calls for a new paradigm in managing retention: Instead of attempting to minimize migration, the management practices must aim at influencing those who leaves and at what time. Acceptance of the reality thus enables the management to develop a focused retention programme duly accompanied by an effective contingency plan for filling the prospective gaps in skills. An honest assessment of an organizations’ need for a set of employees to remain with the company makes it clear as to which group should be handled with what ‘concern’ for retaining them. It is obvious that there would always be some employees who needed to be retained indefinitely for some of them could be highly creative such as design engineers, or sales persons most preferred by the customers, etc. There may be another set of people who are very critical in short run such as those who are engaged in the launching of a new product; those with certain skills which are under short supply in the market. Lastly, there would be another set of people about whose retention the management need not bother, since they are easily replaceable. Once this analysis is over and the management identifies who is to be retained for how long, and what replacement arrangements need to be put in place, it can customize retention practices to encourage employees to stay loyal to the organization, while simultaneously making arrangements to bridge the gaps likely to emerge, if any. Let us take a look at some of the practices that help organization build loyalty in the minds of employees.
Box 1: How to maintain Loyalty |
Leaders who have generated loyalty and sustained it for long have adopted relationship strategies based on the following fundamental principles:
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Adopted from “Lead for Loyalty” by Frederick F. Reichheld, Harvard Business Review, July-August 2001 |
2.1 Compensation
One of the age old retention mechanisms is compensation. Organisations try to hold back their most valuable employees by paying them over the market-defined salaries. But unfortunately a poaching company can always outsmart the original employer in weaning them away by paying a hefty ‘signing bonus’. Here again, smart poachers used to pay such ‘signing bonuses’ in installments, so that the employer can be sure of having him on rolls till payout is effected and such pay spreads can always be matched with the required period of retention of such skills in the organization. There are also practices in the market to pay what are today known as “hot skills” premium to attract such techies whose supply is short as it happened sometime back with SAP programmers. Of course, payment of such retention-intended compensations is not a real answer for long term retention and at the most it can only provide a cue as to who is leaving when and accordingly work towards bridging the migration-driven skill gaps. In the world of ‘golden handcups’ and ‘golden hellos’, no compensation, all by itself, can guarantee staying in of an employee for the periods desired by the organization, unless it is accompanied by other essential elements like job satisfaction and such atmospherics which are to the liking of the members.
2.2 Job Designing
Research indicates that by carefully and thoughtfully deciding which task to be assigned to which job, companies can exert greater influence on the retention rates of employees. It is commonly noticed that in the IT industry junior level programmers often move away from a company after gaining experience of working in a project or two. This was often found causing dislocation in the availability of skilled pool to execute ongoing or fresh projects. Taking a cue from this experience, many mid-caps IT companies today go to campuses and recruit raw graduates for executing a specific project, say of duration of two years and train them for imparting ‘project-specific’ skills so that they could work with commitment. Such job designing gives an advanced warning to the employers about the likely mobility of junior programmers along with the likely time of such exit. Such advance information enables a company to plan for bridging the skill gaps well in advance with either fresh recruitment or retraining the existing staff for enabling them to undertake such new jobs. Simultaneously, it also facilitates the junior programmers to show in their resume about their working on a project and thus build credibility to their resume. A good job design exercise can thus create a win-win situation both for the employer and the employee.
2.3 Job Sculpting
Butlar and Waldroop pointed out in their classical article of HBR 1999 – Job Sculpting: the art of retaining your best people – that unless a manager attempts to satisfy the deeply embedded “life interests” of an employee, no job satisfaction can ever be attained by the employee. This objective, they propose to achieve more effectively by using “job sculpting” as a tool. Here, by sculpting they meant “the art of matching people to jobs that allow their deepest embedded life interests to be expressed”. It involves creation of a customized career path.
Job Sculpting touches the very deep and innate core of the human desire. It goes beyond the commonly perceived expectation of “doing what one is good at”. According to Butlar and Waldroop these life interests are considered to be “long-held, emotionally driven passions, intricately entwined with personality and thus born of an indeterminate mix of nature and nurture.” It is, therefore, essential for a manager to identify those deeply embedded ‘life-interests’ of an employee and sculpt the job or his assignment in such a way that it makes the best fit for the employee to express himself fully. This “double bind” kind of process makes job sculpting more an art than a science demanding all the time in the world of a manager to unearth those hidden interests and build a symmetry between the individual and his job to ensure job-satisfaction, and in turn capitalize on the potential of the employee.
Every manager should have a keen interest in his employees and have an aptitude to listen intently to what ever an employee talks about. He should keenly watch for signs of excitement while the employee executes a particular assignment. One should be attentive to pick the cues as to which job generates enthusiasm and which puts him off, to unearth the hibernating life interests. The need is to master the art of observing the employees’ behavior and probe into the underlying motives so as to identify the interests and accordingly sculpt a job. Such customization of jobs facilitates retention of middle and senior level managers for long.
2.4 Nurturing Social Ties
It is said that in good olden days pastoral relations were often found difficult to break. Even today, it is observed that people may be disloyal to the companies but not to their colleagues. It thus makes sense for organizations to nurse strong social ties among the employees by encouraging them to form employee clubs such as literary club, cinema clubs, games squads consisting of employees’ family members, etc. Similarly, building up of teams at work places with clearly defined objectives facilitates emergence of bondage among the employees besides effective execution of projects. Toyota is known to put tremendous effort in finding and screening prospective employees to ensure excellent individual performers to constitute a team. It is said that Toyota practices making team work as the foundation for individual performers to give their heart and soul to make the company successful. Building up of teams at work level and formation of social groups outside the work place goes a long way in nurturing social bonds among the employees. Once such strong social linkages are built among the employees’ families, there would always be a negative pull in action whenever an employee contemplates to migrate to another organization.
2.5 Job Location
‘Location’ of a job is another tool that is leveraged upon by many big companies to manage retention. It companies such as Infosys and Wipro are known to establish their developmental centers across the country with a view to retain the talent within the company by offering choicest locations to their employees. With the advent of BPO/KPO business where the attrition levels are considered to be pretty high, the need for these companies to move into two-tire, three-tire cities for establishing workplaces has intensified for reasons: one, work can be carried out from any location, and two, such spread across the geography enables an organization to locate the employees at their choicest-places and thereby minimize attrition.
Even international companies like IBM, GE, Oracle, and Microsoft are known to establish their knowledge centers within the ‘supply zones’ of talent, obviously for reducing employee turnover. Such multi-locations also facilitate tapping of new skills by way of attracting competitor’s employees. There is however a danger in this proposition: Projects that are having long lead-time are likely to be adversely effected by such high turnover. It is therefore desirable to locate projects such as Research & Development programs that have a long gestation period in serene isolated surroundings where by its very location the scope for high employee turnover is very limited.
2.6 Recognition programs
Alfie Kohn, Professor, Harvard University, argued forcefully against doling out the usual stream of incentives in his book – The Case against Incentives – and instead suggested for creating an atmosphere of destructive competition within a company. It is his argument that ‘recognition’ of well-performing employees helps win commitment of employees. To make recognition programs successful organizations need to follow certain guidelines:
- Determination of objectives – define what the company is trying to accomplish, reward tenure and what performance to be measured, etc.;
- Analysis of the demographics – who are the people working for the organization? What do they have in common? How do they relate to each other?;
- Determination of the statement the company wants to state – what are the prime goals of the recognition? How lavish the recognition would be;
- Drafting a communication strategy – how the proposed to be articulated? Is it through personal mailing from CEO or a brochure? How employees are to be reminded during the tenured period?;
- Development of awards strategy – recognition without gifts sounds hollow and at the same time lavishness is also not so warranted, so keeping the companies culture in mind an appropriate gift has to be selected;
- Involve employees – before announcing the program, it make a sense to setup a employees committee with those who are directly involved in the recognition program to define what to recognize, how to measure it and hurdles if any that needs to be removed for bettering the performance of individuals etc.;
- Drafting a meaningful presentation strategy – the recognition must be in annual awards banquets or meetings with the whole peer group where the top management presents the awards and thanks them for their excellence performance;
- Review mechanism – the program may be modified from year to year based on emerging industry trends so as to keep it relevant to the changing times.
It is increasingly becoming clear that recognizing employees as individuals is essential for long-term success and in that context recognition can be as broad concept as an organization wants to make it. It indeed penetrates, where money cannot.
Box 2: How IT industry in India managing Attrition: A Case Study |
In the year 2004-2005 IT industry in India enjoyed a record inflow of $22 bn. The employee base also showed a huge increase to cross the one million mark. However, companies were struggling to retain their existing employees. Analysts observed that managing attrition in the industry was important because skilled professionals formed the crux of this knowledge-intensive industry. Companies were beginning to realize the importance of factors other than salary which could motivate their employees to stay. In 2004, Infosys Technologies Limited (Infosys) devised a policy of taking security deposits from fresh graduates who joined the company at the entry level to discourage them from leaving the company during the training period, whereas Wipro Technologies Ltd., (Wipro) started a matchmaking service for its employees. The purpose of this service was to help employees choose their life partners within Wipro in the hope that if employees picked spouses from the same company, they could spend more time together, say while traveling/dining, etc., thereby improving the work-life balance. Combating Attrition In 2003, National Association of Software and Service Companies (NASSCOM) survey identified some of the major drivers of attrition: • Improper recruitment. • Lack of communication and positive direction among the various levels of the organization. • Lack of proper training. • Ambiguous organizational values and mission. • Inequitable measures and rewards. • Overwork and burnout. It brought to light the need for more effective retention strategies and some such strategies practiced by industry are: Recruitment In 2000, Infosys implemented a recruitment strategy with clear selection criteria based primarily on the individual’s ability to learn, academic achievement, conceptual knowledge, and temperament to fit into the work culture. A specific selection criterion that the company used was termed ‘learnability’ or the individual’s ability to derive general conclusions from specific situations that could be applied to future unstructured situations. Companies like Infosys, Wipro and Satyam incorporated management practices that would facilitate international recognition and help in overall brand building. In 2001, Wipro was awarded the ‘Most Valuable Company’ award by Business Today. In 2002, Satyam bagged the ‘Golden Peacock Award’ for excellence in corporate governance. In 2003, Wipro was ranked 7th amongst software companies in the world by BusinessWeek. In 2004, Infosys was ranked by BusinessWeek as the 3rd top IT service company in the world. Again in 2004, Infosys was ranked as the world’s most respected company by The Financial Times-PwC annual survey. In 2005, Infosys was named ‘India’s Best Managed Company’ based on a study conducted by Business Today and A T Kearney. All these awards were used to build the ‘brand’ image of the respective companies as good employers. Compensation and Rewards In 1994, Infosys pioneered the use of ESOPs in India and other IT companies like Wipro, Satyam, Polaris, etc. also began to use ESOPs as an employee retention tool. ESOPs helped employees identify themselves with the firm. ESOPs remained one of the most important tools for employee retention and motivation till 2000 (Refer Exhibit VI for benefits of ESOPs). In 2001, the US the Financial Accounting Standards Board (FASB) directed firms to expense ESOPs which meant ESOPs were to be taxed in view of their being an item of expenditure. Since most of the IT companies were listed in the US stock market, the situation had a direct effect on the Indian firms too. For this reason, by 2002, many Indian companies stopped issuing ESOPs. By 2003, companies initiated a variant of ESOPs called the Employee Stock Purchase Plan (ESPP) and Restricted Stock Units (RSUs) as retention tools. Under ESPP, the employer gave the employee a plan period of say, six months in which the employee contributed a monthly sum to a fund. At the end of the fixed six-month period, the company allotted shares to the employee in exchange of that sum at a 15% discount where the buying price for the employee was the lower price between the start and end date of the period. RSUs are specific units of stocks awarded to the employees for a fixed period of time called the vesting period. The vesting period is the length of time before the restrictions on the stock units are lifted, hence the name. At the end of the vesting period, the RSUs get converted into equity and the employee can convert the equity into cash. Commenting on the benefits of RSUs, Atul Nishar, Chairman, Hexaware Technologies said, “It is an interesting compensation scheme which combines some aspect of market price along with an assured return to the employees; it is good for companies which do not want to expand their equity further.” By 2004, Wipro had begun issuing RSUs to its employees and many other companies were formulating the resumption of ESOPs. Wipro recorded an all-time high stock market price in 2004, and this led many of its employees to exercise their option to sell. During February and March 2005, ESOPs were being revived in most of the IT-service companies like Infosys, Wipro, Satyam, HCL, Mastek, Hexaware Technologies, Patni Computers, i-flex solutions, etc. (Refer Exhibit VII). Organization Culture Analysts emphasize effective communication as a retention tool. With a view to improving communication between its employees, Wipro started a portal for its employees called Channel [W] in 2001. Channel [W] was a channel on the employee’s desktop featuring business and personal sections. The objective of this initiative was to bring Wipro employees together by a medium that would generate and sustain interest among them by being topical and dynamic, and simultaneously promoting two-way communication between the company and the employee. The idea of scientific feedback has been appreciated as a retention tool. Girish Nair, Vice- President, Human Resources, Aztec Software, said, “A new recruit in a company comes across several counter offers. To encourage retention of new recruits, it’s imperative to have regular surveys to know their preferences and problems, and act accordingly. At Aztec, 30th day, 60th day, and 90th day surveys are done for new employees individually, and their satisfaction levels are measured.” Recognition plays an important role in retaining the employees as it gives their morale a boost and also motivates them to put in optimal efforts for realization of their goals in accordance with the organizational goals. Raising employee self-esteem and recognizing employee contributions can help stem attrition. Satyam initiated special recognition and clubs for its top performers. It also conferred annual awards on employees for excellence in their special areas of expertise. Wipro also initiated many awards for its employees such as the ‘Mastermind’ award for innovative ideas, ‘Feather in My Cap’ award for effort in a team, ‘Thanks a Zillion Award’ in appreciation of the help given to a fellow employee in a difficult situation and ‘Dear Boss’ award in appreciation of managerial and leadership skills of team leaders and managers. Enjoying being at the place of work is also a factor that contributes to employee satisfaction. Companies started initiatives to make the office a fun workplace. For instance, Wipro strove to create a culture that was conducive to work and at the same time incorporated the fun factor so that employees could enjoy their work. Informal interest groups for music, dance, dramatics, literary activities, adventure, quizzing and sports were formed. These groups conducted events and activities that brought together employees from various departments, divisions, locations and hierarchies with the spirit of “For the team! Of the team! By the team—Wipro!” Infosys, on its part, initiated ‘forums’ that encouraged employees to express their various interests and display their skills. An ‘Art Gallery’ to display the work of Infoscions was established on campus. ‘Infoculcom’ was the base organization that carried out the various events and activities. Daily quiz competitions, regular music meetings and other activities ensured a work environment that promoted the overall development of the employee. Work-life Balance Flexi-timing is one of the popular initiatives that IT companies have implemented to bring in work-life balance. Employees are allowed to put in an average of nine hours of work a day according to their convenience. Working mothers were offered a choice to work half days and allowed to complete their work from home. Telecommuting was another facility allowing greater flexibility; here, employees could work from their homes using new technologies such as broadband for conferencing. The importance of employees’ families began to be recognized and efforts were made to build a strong bond between the company and the entire family of each employee. Some companies gave a day off on the employee’s birthday or on an anniversary while some took to organizing annual events, parties and picnics for employees and their families. Some firms provided easy educational loans to benefit the children of the employees while others initiated school drop and pick-up services for them. In 2002, TCS started the ‘Maitree’ initiative. The idea was to build a sense of extended family among the families associated with the company. The program was targeted at the wives of employees who were asked to volunteer a few hours a day for a social cause in association with NGOs. In addition to this program, maitree.com, an employee portal was also established simultaneously to help TCS employees in relocation, children’s education, etc. Learning and Growth Infosys set up an Education and Research Department in 1992 with a view to developing its employees’ skills. Wipro also trained their engineers not only on the technical side but also aimed at making them ‘consultants’ enabling them to handle larger and bigger projects with ease. In 2001, Wipro incorporated the ‘Virtual Campus’, a Web-based learning initiative, which integrated multimedia and instructor-led learning with other real-time techniques that helped the employees to set their own pace for learning. Wipro also tied-up with institutions such as Illinois Institute of Technology, Indian Institute of Management, Bangalore (IIM-B) and BITS to provide facilities for education to its employees. In 2002, Infosys became the first company to win the CII-EXIM award for Business Excellence. One of the criteria that formed the basis for the award was ‘caring and development of people’. Infosys also established its ‘Global Foundation School’ for its newly recruited employees. It comprised generic conceptual courses, platform specific courses, mini-projects for application, and an end-term project based on real-life projects. In 2003 and 2004, the American Society for Training and Development awarded Infosys’ Global Foundation School, the ‘Excellence in Practice’ award. Satyam established its Satyam Learning Center (SLC) in 2002 to facilitate employee learning and development. SLC mandates all senior employees to undergo 80 hours of training every year. In addition to this, Satyam also initiated corporate learning programs in association with the Indian School of Business (ISB), Hyderabad and BITS. Leadership Wipro initiated the ‘Wipro Leaders’ Qualities Survey’ in 1992. The program was end-to-end in nature with a 360 degrees survey process. In this plan, each leader would eventually prepare a ‘Personal Development Plan’ depending on the feedback he/she got. Wipro also incorporated ‘Life Cycle Leadership Programs’ that included different leadership programs for employees at various levels of management. For instance, the ‘Entry-Level Program’ (ELP) was targeted at campus hires and lateral hires at the junior level, and aimed at developing managerial qualities within the employee. Similarly, the ‘New Leaders’ Program’ (NLP) and ‘Wipro Leaders’ Program’ (WLP) were aimed at developing potential managers and middle-level employees. The ‘Business Leaders’ Program’ (BLP) was for senior leaders with business responsibility. The BLP program covered commercial orientation, client relationship development, and team building and performance management responsibilities among other things. The ‘Strategic Leaders’ Program’ (SLP) covered the top management employees with a focus on vision, values, strategy, global thinking and acting, customer focus and building star performers. Wipro conducted the SLP in association with leading business schools of international repute. Satyam incorporated a ‘Leadership Development Program’ through SLC. This program enabled associates to realistically manage lateral and vertical growth in business, technical and delivery streams. The company initiated leadership training programs such as the ‘Harvard Global Leadership Program’ which included lectures from professors of Harvard University. Satyam’s other initiatives included Quadrant 1 leadership which termed associates registering superior performance as Quadrant 1 leaders. These leaders were offered opportunities for all-round growth as well as significant monetary and non-monetary rewards and recognition. Leadership forums were also initiated at Satyam; these comprised a leader and a number of team members who strove to enhance the maturity levels of processes and service offerings in order to delight stakeholders. In 2001, Infosys established the Infosys Leadership Institute to identify and groom future Infosys leaders. The prime objective was to equip employees with leadership qualities so that the company would have leaders working with leaders for the success of the organization. |
Source: Adopted form “Managing Attrition in the Indian Information Technology Industry”, Aisha Khan, Former Research Associate, The ICFAI Center for Management Research and Ruchi Chaturvedi, Former Faculty Member, The ICFAI Center for Management Research, Case Folio, March 2006. |
2.7 Recruiting Techniques
Unwittingly, every company makes an attempt to recruit such people as are prone to migration. Instead, if companies could focus on such ‘talent’ that could perform the job under reference well and yet are not right now on high demand, they can, to a great extent, protect themselves from poachers. It is only the ‘celebrities’ who are under the watch of the market. Hence, it makes great sense for companies to hire people who are likely to become celebrities rather than the celebrities. This philosophy has of course caught the attention of many recruiting companies and in the recent past they are recruiting a band of raw candidates with average scores and train them at the induction stage itself to make them competent enough to man the jobs. Such recruits, for obvious reasons, usually remain grateful to the company and make every effort to grow along with it. They ultimately constitute the core of the company for a long time to come.
2.8 Creating Enabling Organic Bureaucracy
As against a majority of the bureaucracies of companies which are static, internally focused on efficiency, unresponsive to external developments and therefore unpleasant to work with, Toyota is reported to have built a flexible and organic bureaucracy that focuses on effectiveness, adaptation to change and empowerment of their employees. Toyota is known to exhibit its faith in the worker as the most valuable resource – not just a pair of hands taking orders, but an analyst and problem solver (Jaferey K. Liker – The Toyota Way, Tata McGraw-Hill Publishing Company Limited, 2004). Such practices generate ‘satisfaction’ among the employees and make them love to work with commitment.
3 Conclusion
It is time companies accepted the fact of competent employees leaving the organizations as and when they find more stimulating and challenging new jobs. There is no single reason that can be attributed to such migration, for each employee is driven by his own intrinsic-motivation. Hence, compensation however attractive it might be, fails in retaining the talent on its own. Market forces are certainly bigger than that of the individual companies in influencing the employees’ decision. Managing retention of talent has thus become a big challenge, though all is not lost. Companies, taking a cue from Peter Drucker’s observations, must hone up their HRM practices to transform their workplaces into that famous Egdon Heath of Thomas Hardy so that no employee ever feel like leaving the organization. Managements must strive to create ‘pastoral calm’ at work places, enjoying ‘whose tranquility’ employees become unexcited by other possibilities/opportunities and refuse to change their job.
GRK Murty
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