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Term Paper of Human Resource Management
Course Code: MGT513
Topic: Turnover Management in IT sector
Submitted to: Submitted by:
Mr. Ujjwal Kanti Paul Sajal Kumar
Regd. No.:3440070073
Section: K77B1A70
ACKNOWLEDGEMENT
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I convey my sincere thanks to those who have enabled me on different occasions giving their
valuable suggestions and ideas in order to improve my term paper. Apart from this I am highly
obliged and grateful to Mr. Ujjwal Kanti Pauland other faculty members for mentoring meduring the course of study, providing me the support to undertake this work and shared their
valuable time to go through the report and have given me valuable suggestions. In conclusion I
am once again mentioning that it would not have been possible for me to complete the paper
without cooperative assistance.
Sajal Kumar (3440070073)
Lovely Faculty Of Technology and Sciences
Lovely Professional University
Preface
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The objective of this term paper is to provide an exhaustive detail of the Turnover Management
and the various restraints of the subject keeping the IT industry as prime. In this term paper,
examples of the major IT players have been sited and the analysis has been done on the basis of
several data sources. The term paper has been an outcome of the exhaustive study of the subject
with due support from the mentors and worthy classmates but the limitations mentioned could
not be avoided.
Contents
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1. Introduction
1.1 Meaning of the topic
1.2 Factors affecting the turnover
2. Background of the Study
2.1 Objective
2.2 Defining the problem
2.3 Analysis
Turnover rates of major IT players
Reasons in the sector
Effects of employee turnover
Methods of reduction of the same
Managing retention strategies
3. Turnover practice as a lead of HRM
4. Benefits of managing turnover
5. Conclusion5.1 Suggestions
5.2 Conclusion
5.3 Limitations of the study
6. Bibliography
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1. Introduction
There are some keys to win over the employees in an India Software Company. The IT managers
have forgotten those soft-skills and techniques in the long-coarse of time. This is one of the
reasons why Software Companies faces high ratio of employee turnover in a firm. The survey
carried on Top Software Companies in India tells that the employee dissatisfaction level has
increased up to 27% in 2007. Most of the employees complained that the pressure given by their
boss and dumping work-load in Software Outsourcing setting. Now what worst could happen in
Software Company, if the company fails in delivering positive energy to the employees and cares
less about their employees. Such companies usually lack the motivation to deliver to its worker
due to ill-prospect manager in the firm. Most of the managers find difficult to delegate the work
to their employees. They are not at fault perhaps, but even they are not talk to do the same. India
Software Development needs to have an organized structure and management so as to retain their
employees for long-time. Consolidations should not be only in the words, but all also action
performed by the IT Manager.
1.1 Meaning of employee turnover: Employee turnover occurs when employees voluntarily
leave their jobs and must be replaced. Turnover is expressed as an annual percentage of the
total workforce. For example, 25 percent employee turnover would mean that one-quarter of
a company's workforce at the beginning of the year has left by the end of the year. Turnover
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should not to be confused with layoffs, which involve the termination of employees at the
employer's discretion in response to business conditions such as reduced sales or a merger
with another company. Employee turnover has been defined as the rate of change in the
working staff of concern during the definite period.
Employee turnover is the cause and effect of instability of employment, apart from being a
major of the morale and efficiency or otherwise of worker. Therefore, it can be concluded
that Employee turnover management is a perpetual concern for companies. Having to
replace staff at regular interval can be headache for a busy manager and the entire resource-
shaping circus of hiring and training new employee is one that company scarcely look
forward to.
1.2 Factors related to employee turnover management
There are several factors which are related to employee turnover, thus, as shown with the help of
diagram as below:
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The explanation of these factors related to Turnover Management is as under:
1. The Economy in this model, the overall economy sets the stage for alternative employment
opportunities. In a tight economy, generally there are less alternative opportunities and
employees are less willing to leave their current jobs even if they are dissatisfied. 2. Company
culture is another strong determinant of turnover intentions. Company culture is determined by a
bunch of things as skills, leadership, rewards/recognition, and communications. 3.
Organizational Characteristics nested within an industry is the specific organization. Within
any industry, there are some organizations that simply do a much better job of retaining
employees than others. Some of this has little to do with enlightened practices and is simply a
product of workforce demographics. 4. Industry Trends the Health Care industry is a good
example of how industry trends interact with the general economy. With managed health care
has come an increased focus on profitability and cost reduction, and rapid consolidation of
hospitals. This has created an atmosphere of uncertainty and dissatisfaction for many health care
professionals. 5. Job Characteristics one of the most researched areas is the relationship
between job satisfaction and turnover. There is a well documented body of research that suggests
the following job characteristics are most commonly associated with job satisfaction: Variety,
Autonomy, Identity, Feedback.
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2. Background of the Study
2.1 Objective: To analyze the employee turnover problem in IT Sector.
2.2 Defining the Employee Turnover Problem:
Global outsourcing and the astounding amount of foreign direct investment pouring into China,
Russia, and India have created tremendous opportunities and competition for talented IT
professionals in those countries. The downside of this increased competition is a rising rate of
turnover, particularly in India. Almost every sector in India is facing high rates of turnover these
days. A recent study revealed that employees leave either because of compensation reasons or
due to better growth opportunities.
3. Analysis: According to NASSCOM, Indian IT-ITES industry recorded US$ 39.6 billion in
revenues in 2006-07. The revenue of US$ 49-50 billion has been projected in 2007-08 at a
growth rate of 24-27 per cent. The IT industry's contribution to GDP was 4.8 per cent in 2005-
06. Though the IT/ITES sector is booming, it is constantly facing high turnover rates of 25% -
30%. Even the big brands are also facing the same problem.
3.1 Turnover Rates of Major IT Players
To put these turnover numbers into perspective, if a company has 100 programmers and a
turnover rate of 25%, then 25 of its IT staff will leave each year. Think about the time and
money it took to find, interview, hire, train, and coach those 25 people.
3.2 Reasons for Employee Turnover
It is not easy to find out as to who contributes and who has the control on the attrition of
employees. Various studies/survey conducted indicates that everyone is contributing to the
prevailing attrition. Turnover does not happen for one or two reasons. The way the industry is
projected and speed at which the companies are expanding has a major part in employee
turnover. Even today, the main reason for changing jobs is for higher salary and better
benefits. The other factors are: Organizational Matters, Working Environment, Job Matters,
Monotony, Salary and Other Benefits, Personal Reasons, Poaching.
3.3Effects of Employee Turnover
There is no set level of employee turnover which effects on the employing organisation becomedamaging. Mostly it is said that employee turnover is not good for the organizations. But
employers should remember that turnover is not that bad either. What is required is an optimum
mix of turnover, not too high-not too low. An optimum mix of employee turnover can help in
many ways.A little rate of employee turnover may result into: 1. Bringing in new ideas and skills
from new hires. 2. Better employee-job matches. 3. More staffing flexibility. 4. Facilitate change
and innovation.
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High rate of turnover may lead to decrease in: 1. Productivity 2. Service delivery 3. Spread of
organizational knowledge 4. Interdependence of workers which creates bottlenecks in the smooth
flow of activities which affects the overall co-ordination. 5. Additional direct and indirect cost
increase the cost of production and in turn there is a reduction in the profit.
3.4 Reducing Employee Turnover
With today's baby boomer generation beginning to retire from the labor market, many IT
companies are finding it increasingly difficult to retain employees. Turnover is becoming a
serious problem in today's corporate environment. The employment culture is changing as well.
It is now relatively common to change jobs every few years, rather than grow with one company
throughout the employment life as was once commonplace. In addition, employees are
increasingly demanding a balance between work and family life. Therefore, there are Seven
Major Areas of Intervention that helps to Reduce Employee Turnover mentioned below:
1. Early Interventions 2. Skill Interventions 3. Leadership Interventions
4. Communication Interventions 5. Reward/recognition Interventions 6. Job Enrichment
Interventions 7. Selection Interventions
3.5 Managing Employee Retention Strategies
Apart from above mentioned Intervention Techniques another means to Reduce Employee
Turnover, is applying Employee Retention Strategies. Therefore, the basic practices which
should be kept in mind in the employee retention strategies are as following: 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.
3.6 How to Restraint Employee Turnover Employee Turnover has become a major concern for
organization today with labor shortage and competitive pressure making retention of key
employees a strategic issue, thus, following are the ways to curb employees in an organization as
under: Money is not everything: Although the importance of higher packages is slowly
diminishing, among fresher or laterals with less than three years of work experience, money is
still considered to be the highest priority. Employees want not only work recognition, but also
extra perks. A number of professionals are looking at more challenging jobs. "In several cases,
faced with a choice between more money and a challenging job, employees have opted for the
latter as it allows them to learn new technology and increase domain expertise." People analyze
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the training programmes of prospective companies with those of their current organization,
which means that how an organization grooms an employee is weighed to a greater extent. This
is because they know that developing next-level skills will keep them ahead in the job market,
and finally result in better compensation. They also look for a job with higher levels of
responsibility, better learning opportunities. Vision and Objectives: The next level of
communication, a crucial part of retention, starts with acquainting employees with the
companys vision and objectives. Organizations successful in retaining employees clearly pass
on their goals and achievements. Conducting regular meetings and updating employees,
especially new entrants, about the companys status and achievements is a must. They should
concentrate on leadership and brand building as people prefer to be associated with a brand. The
youth should feel proud to be a part of the billion-dollar industry.
3. Truly an HR practice!
Mentoring and handholding new recruits from day one to four months are important tasks;
during this period, they should be familiarized with the culture of the company. It is at this timethat new entrants experiment with different options. Hence they should be exposed to the best
values the company has. If they are informed about regular happenings in the company,
employees will be confident about the future and not try to look for better options. Treat
Employees like Customers: Even while companies strive to understand which organizational,
job, and reward factors will contribute to holding back employees, industry experts have found
several loopholes at the top management and HR management level. Companies should have a
similar approach to employees and customers. If a company strives to retain an employee in the
same way it tries to retain a customer, him leaving the organization could be out of question.
Since software professionals have different priorities at different points of time, organizations
need to structure their offer-mix while recruiting new hires, as well as promoting potential ones.
Communication is the foundation for the entire process of managing attrition. This
communication begins right from recruitment. In cases of peer pressure, an employee aims to
join a well-known company. This could be achieved by brand building, which attracts the right
talent and helps in retention as well. Understanding an employees needs at various levels is a
recommended HR practice. Consider Feedback: It is important to take feedback from employees
through different means and work with the HR department to iron out differences. As industry
experts point out, feedback can be got in two waysduring the employees tenure, and through
exit interviews. Inputs can be secured from existing employees through various employee
relationship management tools. The Wipro Listens and Responds initiative at Wipro aims tocapture the concerns and grievances of its employees.
Exit interviews help management learn the reasons why employees leave the company; based on
their revelations, the organization can address the problems of existing employees, thereby curb
attrition. Spend Time Developing and Benchmarking Incentives: Whenever the demand for a
professional arises in a particular field, the perks associated with the job start to pile up.
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Standard perks for an India-based "fresher" (a new entrant in the IT services industry with little
work experience) typically include free transportation, educational assistance, healthcare
benefits, performance-based bonuses, onsite cafeteria, stock options, and interest-free loans to
absorb the cost of relocation or maybe to finance the purchase of a two-wheeler. According to
Wipro's web site, its employees even have access to an agency that will handle such "domestic
chores" as paying bills, thereby giving IT workers more free time. IT service providers have to
offer innovative compensation and benefitsor risk losing valued employees to competitors.
Nonstop evaluation and benchmarking are "need to do" activities for IT managers. Change
Locations: The high prices and resource crunch in top-tier Indian cities such as Bangalore and
Mumbai have led many companies to execute alternative location strategies. Many vendors are
sending work to tier-two cities (Hyderabad or Chennai) or even tier-three cities (Noida or
Chandigarh), where labor and real estate costs as well as attrition may be cut in half. Such
benefits come at a price: The infrastructure quality lags that of more advanced cities, and the
search to find qualified people may take longer.
4. Benefits of Turnover
Turnover is not bad always if it happens in a controlled manner. Some turnover is always
desirable and necessary for organizational growth and development. The only concern is how
organizations differentiate good turnover from bad turnover. The term healthy turnover or
good turnover 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
turnover in considered being healthy. Turnover rates are considered to be beneficial in some
ways:
1. If all employees stay in the same organization for a very long time, most of them will beat the top of their pay scale which will result in excessive manpower costs.
2. When certain employees leave, whose continuation of service would have negatively
impacted productivity and profitability of the company, the company is benefited.
3. New employees bring new ideas, approaches, abilities & attitudes which can keep the
organization from becoming stagnant.
4. 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.
5. Desirable turnover also includes termination of employees with whom the organization
does not want to continue a relationship.
6. 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,
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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.
However, some companies believe turnover in any form is bad for an organization for it means
that a wrong choice was made at the beginning while recruiting. Even good turnover indicatesloss 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.
5. Conclusion
5.1 Suggestions
Employee turnover for instance may include cost that results from employees slower work pace
and increased absenteeism. A company puts in maximum investment towards developing its
manpower in order to get best output which results in high profit and productivity for the
company. Following suggestions are given to decrease the percentage of Employee Turnover in
IT Industry as under:
1. Clearly define targets and goals.
2. The grievance redressed procedure can be improved.
3. Better pay package for deserving employee can be considered for their retention.
4. Implement careful and strategic planning for targeted individuals career development. Being
identified is not enough. Consider potential benefits of encouraging informal mentoring.
5. Ensure there is strong leadership and commitment from senior management. Initial and on-
going personal involvement of the Chief Executive is crucial to success.
6. Integrate succession planning into business and diversity objectives. A clear link between
business goals and the desired results of the succession planning will assist in gaining
commitment from the organization and staff. To be successful it must be portrayed as a core
issue. 7. The 3 Rs that is Recruitments, Retentions, and Retirement benefits should be properly
imposed.
5.2 Conclusion
The ever-increasing tangible and intangible costs of replacing an existing employee with known
skill sets and knowledge of the organizational culture would leave any HR executive with
sleepless nights. But the fact remains that however satisfied they may seem employees leave. So
employee turnover is sometimes referred to as a symptom of many hidden problems. The main
objective of this report is to study vital causes of employee turnover and their effects on the IT
industry and to discover those hidden roots of the trouble to reduce such employee turnover.
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5.3 Limitations of the Study
Every project has its limitations and this project is no exception. There were some hurdles
during the study. Following are the limitations of this study:
1. Time devoted for the study was short due to which many aspects could not be covered.
2. The project is entirely based on secondary data.
6. Bibliography
1. http://www.chillibreeze.com/articles/AShortWhitePaper.asp, Accessed on 28th March 2009
2. http://www.syncaline.com/hrservices.html, Accessed on 28th March 2009
3. http://retention.naukrihub.com/attrition-rate-in-it.html, Accessed on 28th March 2009
4. http://www.financialexpress.com/news/india-trumps-us-uk-on-ites-employeeturnover/79971/,Accessed on 9th April 2009
5. http://www.hrprofessor.com/article16.html, Accessed on 9th April 2009
6. http://retention.naukrihub.com/employee-turnover-cost-calculation.html, Accessed on 14th
April 2009
7. Poornima S C, Preferences as a Strategic Approach to Tackle Attrition: IT and ITES Industry
Perspective ,ICFAI Journal of Management Research, Vol. 3, March 2008, PP. 24-37.
8. Joshi Rashmi, Combating Attrition : An Emerging Challenge in the IT Sector, ICFAI HRMReview, Vol. 3, March 2008.
9. Srikanth P, Ramamirtham L,Strategies to Deal with Attrition Rate in the Indian BPO Industry
Using maslows Need Hierarchy Theory, Management Accountant, Vol.43, No.2, February
2008, Page 71-78.
10. Meier Kenneth J, Hicklin Alisa, Employee Turnover and Organizational Performance,
Journal of Public Administration Research and Theory, Vol.18, No.4, October 2008, PP 73-90