study on retention

7/29/2019 Study on Retention

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Advances In Management - ,- .. :zi: - .-. > r:. Vol. 4 (12) Dec. (2011)Case Study:A Study on the Leyel of Commitment towards Retention Practicesin IT and Non - IT Com panies in Chennai

Ramanaiah G.''and Lavanya L.^1. School of Management , SRM University, Kattankulathur, Chennai (T.N.), INDIA

2. Depar tment of Management, National Institute of Management Studies, Old Mahabalipuram Road, Chennai (T.N.), INDIA*drgr2005@hotmai l .com

AbstractThere is no magic wand to make employees stay

with the organization. Retaining is challenging with thecurrent day knowledge work force and organizationsare increasingly taking efforts in this direction. Manyinnovative retention practices are in force but attritionhas also become unavoidable. Now the question ariseswhether the companies are committed towards itsretention practices. Tliis research was conducted toanswer this question in both IT and Non-IT companies.30 samples in each category were chosen from Chennaicity and questionnaire was administered. Findings showthat IT companies should identify the differencebetween avoidable and unavoidable dep'arture and takemeasures to retain their key talerit. They should treattheir employees as an asset and not as cost. Employee-centric work culture and Performance-linked salary andbonus are the factors to be improved in Non-ITsegment. The results show that there is definitecommitment towards retention practices but there is adifference in commitment levels in IT and Non - ITcompanies.Keywords: Retention practices. Employee-centric workculture, commitment levels, productivity, recruitment cost.Introduction

In this era of globalization, employees are blessedwith good opportunities. As soon as they feel dissatisfiedwith the current employer or the job, they switch over. Also,competition for talent is on the increase and many companiesare going to great lengths to retain their best em ployees.A recent survey shows that employee turnover cancost the organization almost 4 to 5 times more than an armualemployee salary. So, an effective retention strategy needs tobe in place. Employee retention involves a lot of energy,efforts and resources but the results are worth it. Employeeretention involves 5 major things - Compensation,Environment, Growth, Relationship and Support. C reation ofretention strategy means involving these factors and placingthe employee's needs and expectations at the centre of thecompany's long-term agenda in order to ensure theprofessional satisfaction of the employee and create a trusted

relationship. In this stable relationship, the employee stays inthe company by personal choice based on free will andconsidered decision.Concept of Employee Retention

Employee retention is a systematic effort byemployers to create and foster an environment thatencourages current employees to remain employed by havingpolicies and practices in place that address their divetseneeds. Employee retention is commonly considered to meanthe ability to maintain a stable workforce. Employee retentionis a process in which the employees areencouraged to remainwith the organization for the maximum period of time or untilthe completion of the project.

These definitions drive home thepoint that retentionis conscious effort by the organization to ensure that itsemployees are happy and stay with them. Employee retentionis beneficial for the organization as well as the employee.Employee retention is a concern for companies in this strongjob market.Literature Review

Reichheld' asserts that the vital factor in retainingcustomers is retaining employees. Kirschner' proposes thatfirms with an employee turnover of 10 percent or less have acustomer retention rate advantage of as much as 10 percentover a firm with anemployee turnover of 15 percent or more.Therefore, a high employee retention rate causes a highercustomer retention rate which results in higher profits andgrowth in net income. This implies that employee retention iskey to customer retention.As more companies hire, fire and do both

concurrently, the overall growth of the workforce is slowing,according to the findings of the American ManagementAssociation's (AMA) 13"" annual survey of the U.S.workforce. The survey of 1,192 large and mid-sized firmsshows that staffing increased by an average 5.0percent in thetwelve months ending in June 1999 compared to 7.7 percentin the prior twelve months. Of those surveyed, 77.2 percentreported creating new jobs, up from 72 percent in theprevious twelve-month period, while 49.6 percent eliminatedjobs, up from 40.9 percent previously. Actual downsizing ornet reductions in the workforce rose to 24.1 percent of the

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Advances In Management . Vol. 4 (12) Dec. (2011)surveyed compatiies from 21.9. Matiy job cuts were offset byconcurretit hiritig: 36 percetit of surveyed firms both creatednew jobs atid cut existing jobs in the period.

Davis and Landa^ observed that "customer loyalty,the outcome of superior customer service and investorloyalty, the outcome of protected and enhanced shareholdervalue, are each dependent upon the business gaining thecommitment and loyalty of its employees". Karia and Asaari''believe that teamwork has a significant positive impact on jobsatisfaction and employee commitment because the greater isthe extent of teamwork; the greater is the enhancement ofjob-related attitudes.

Rothwell* has listed 12 factors which may be used asa simple tool to focus management attention on what could bedone to improve retention. For each item listed, yes or noshould be answered. If total number of yes is less than 10,then there is room for improvement. The objective of therespondent (com pany) is to achieve a score of 12, 1 beingscored for yes and 0 for no.

While employee retention is an important issue,important enough for 62 per cent of participants in a recentTMP survey to create a tailored retention program, it is stillbeing confused with remuneration strategy. According to thelast Australian Institute of Management's national survey,large companies recorded higher annual salary increases thisyear than last, of between 4.3 per cent and 4.7 per cent.But retention is not a money matter. It is a voluntarymove by the company to create an environment whichengages employees for the long term. This attachment

relationship is durable and constant and links the employee totheir company by common values and by the way in whichthe company responds to the needs of the employee.Rationale for the study

Preview of literature reveals that the studiesconducted are relrted to what would retention mean toorganizations, hiring and firing concurrently in organizations,talent management including retention and so. But, there is nostudy related to commitment levels of organizations towardsretention practices.The IT companies have been in talent crunch and

adopted the retention practices early which were suitablyfollowed in other industries as well. But, in today's scenario,with so called stagnatioti/slow-down/recession, are employersbothered about retention practices or they feel that employeeswould be there at their service when they want? The news ofso many job cuts raises the question of whether employers arestill committed towards retention practices? Is it different inIT and other companies?Methodology

A descriptive research design was adopted and the

study was conducted in Chennai city among various IT andNon-IT companies.Non-IT respondents were any company not under ITsector (e.g. Automobile, Apparel, Engineering, Packaging,Auto parts etc.). The sample size is 60 (30 from IT industry

and 30 from Non-IT industry) and convenient samplingmethod was adopted. The source of data is primary data.Secondary data relevant to the study were collected fromwebsites and journals. Percentage analysis and chi-squareanalysis were used for data analysis.Chi-square analysis was done on SPSS Ver.12.0Tool for data collection: The instrument used for thepurpose of data collection was developed by BenjaminChaminade to assess the commitment of companies to keepits employees engaged. The researcher administered thequestionnaire personally and the respondents were asked togive "yes" or "no" to each of the statements in thequestionnaire. The interpretation was done based on thefollowing:(a) If the score is under 5 for 20, The company is regularlyin the jo b market and finding it increasingly difficult toattract staff. Retention is not a priority because suchcompanies are more into thinking that a salary and a jobwould satisfy the employees. It is time to research theindividual satisfaction and personalized retention.

These companies are "Yet to start" with their retentionpractices.(b) Between 5 and 10: The retention practices of the

company are largely inspired by the concept of 'the carrotand the stick' and are centered on financial reward andFriday drinks. But the company has to recognize that thismass motivation, used to obtain better productivity hasreached its limits. Retention is not about "one size fitsall".These companies, though have retention programs, theyare just "be ginners" and indeed have a long way to go.

(c) Between 10 and 15: The Company is conscious thattheir employees are as important as their clients and thatthey need to concentrate on the former to assuresatisfaction of the latter. The company knows what is atstake with retention and they are committed to answeremployees' demands in a culture of engagement.Excellence is on its way! These companies are "runners "and soon to reach the winning position.(d) Between 15 and 20: The Company is an employer ofchoice and everybody should know it.

These companies are the "winners" but care shouldbe taken that they maintain their feather on their cap at alltimes!

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Advances In Management riVol. 4(12)D ec. (2011)Discussion

The responden ts w ere categorized under 4 categoriesbased on the tool used. Data collected were analyzed usingpercentage analysis and chi-square analysis.Table 1

CategorizationSector .

ITNon-IT

I(yet tostart)--

(Beginner)-3

''' H i : : \(Runners)1011

rv(Winners)

2016

It is evident from table 1 that none of therespondents in IT sector fall under category I and II. Out of30 IT companies, 10 companies fall under Category III whichmeans that the company is conscious that their employees areas important as their clients and they need to concentrate onthe former to assure satisfaction of the latter. The companyknows what is at stake with retention and they are committedto answer employees' demands in a culture of engagement.20 companies are under category IV titled as winners. Thesecompanies are "Employer of choice" and must havedefinitely obtained similar titles for their retention practices.These companies should ensure that they keep setting trendsfor the rest to follow.

As far as Non-IT companies are concerned, 3respondents fall under "Beginners" category. These respon-dents are largely inspired by the concept of 'the carrot and thestick' and are centered on financial reward. But the companyhas to recognize that this mass motivation, used to obtainbetter productivity has reached its limits. Retention is notabout "one size fits all". They have to formulate strategies tomotivate the high-performer and show way out to the non-performer.

11 respondents fall under category III and 16 fallunder category IV. None of the respondents are undercategory I.Testing of Hypothesis: Chi-Square Analysis1. There is a significant difference between emp loyee-c entricculture and industry. The chi-square value is 20.000 at 1degrees of freedom and p value is 0.000 which is significant@ 1 %. Hence, the stated hy pothesis is accepted.2. There is a significant difference between employee wellbeing and industry. The chi-square value is 5.455 and p valueis 0.020 which is significant at 5%. Hence the statedhypothesis is accepted.3. There is a significant difference between industry andperformance-linked bonus practices. The chi-square value is9.231 and p value is 0.002 which is significant at 1%. Hencethe stated hypothesis is accepted.

4. There is a significant difference between industry and keyemployee retention practices. The chi-square value is 6.667and p value is 0.01 which is significant at 1%. Hence thestated hy pothesis is accepted.5. There is a significant difference between industry andmeasuring the effect of retention strategy. The chi-squarevalue is 8.523 and p value is 0.004 which is significant at 1 %.Hence the stated hyp othesis is accepted.Findings

The key findings of the study are presented belowseparately for Non-IT and IT companies: Employee-centric work culture is prevalent only in 50%of Non- IT companies. This shows that the companiesdo not have employee centered retention strategies. Themore a company is employee-centric, the more it istowards employee retention. Else this leads to hightiu"nover. It is apparent from the study that only 57% ofthese companies are able to maintain their turnover lessthan the industry average. The companies (57%) do notspend much on their retention program and hence, keepspending on recruitment. It is a well-known fact that thecost of recruitment is higher than retention. Hence, the.secompanies should ensure that retention practices areeffectively implemented and also that they continuouslymeasure the effect of their retention strategy. This isnecessary because only such measurements will revealwhether the retention strategy is effective or not. Thestudy reveals that only 57% of the companies adopt thispractice.

It is significant to note that only 37% of IT companiesspend more time and money on retention practicescompared to recruitment costs. This leads to highturnover which is evident from the study that only 33%of companies have turnover less than industry average.The companies should effectively implement retentionstrategies and also concentrate on measurement of theeffect of retention strategy. Also, many companies(53%) do not use job satisfaction survey to understandthe requirements of their employees. Retentionstrategies are more effective if they are based on inputsfrom the employees. Job satisfaction survey will helporganization to identify on those inputs/requirements ofthe employees.

SuggestionsIt is essential for companies to know why anemployee leaves and the difference between an avoidable andunavoidable departure. IT companies should concentratemore on this and ensure that they retain their key em ployees .

1. Employees are an asset and not a cost to the company.The IT companies should ensure that their employees areaware that their companies treat theth so; so that theywork with pleasure and not in pain.

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Advances In Management Enz2rcz:z^z - z z i r2. The Non-IT companies should promote employee-centricculture so that the internal customers (employees) aretreated at the same level as external customers. Thiswould create a sense of respect of the company towardsthem (Employees) and motivate them to stay with thecompany.3 . Also, the Non-IT companies should provide theemployees with opportunity for them to understand howtheir work contributes to the bottom line of the company.This would assure them that they are valuable and theirefforts contribute towards the profit and growth of thecompany.4. Performance- linked salaries and bonuses are though notnew, but not much in Non-IT companies. These aremotivation and retention tool which the companies canmake use of.5. Not only implementing the retention strategy is required,but also the measurement of the effect of strategy paves

way for better understanding of the company's position.This should be increased in Non-IT companies.6. The rate of turnover is higher than the industry averagewhich shows that the retention practices are noteffectively implemented in these companies. Thecompanies should understand why their employees leaveand what measures can make them stay.7. It is well-known that cost of hiring is higher than cost ofretaining the employee. Hence the companies shouldensure that they spend time and resources for theirretention program.8. Job satisfaction survey is a useful tool to understand theemployees' requirements. This should be carried out on aregular basis in the co mpanies.Conclusion

One can conclude that the commitment levelstowards retention is present in both IT and Non-IT companieswhereas the IT companies, as said are pioneers in this and theNon-IT companies are catching up with them. But the currentlevel of commitments is not enough to retain the talent. The

Vol. 4 (12) Dec. (2011companies. Non IT in particular and IT in general shoulrealize that employees are asset and not cost, offeperformance linked salaries, conduct job satisfaction surveyperiodically, provide employee centric culture etc which wilgo a long way in retaining the employee, sustain and grow inthe competitive business environment. The companies shouldunderstand it is the internal customer who is to be taken carof first only then he contribtites for external customesatisfaction. Retention practices should be continued andmade effective to yield better results than the present.References1. Kirschner Comeau C , "Making Retention work". ManagemenReview, S (U), 15-21 (1998)2. Davis T. and Landa M., "Creating Shareholder ValueImpossible Dream or Achievable Business Objective?", CanadianManager, 25 (2), 23-28 (2000)3. IDS, Improving Staff Retention, IDS HR Studies, 692, July(2000)4. Karia N. and Asaari M.H.A.H., "The effects of Total QualityManagement Practices on Employee's work-related Attitudes," Th eTQM Magazine, 18 (1), 30-43 (2006)5. Reichheld F.F., "The Loyalty Effect", Harvard Business SchooPress, Boston, MA (1996)6. Rothwell W., Organisation retention assessment. In Beich E.The 2007 Pfeiffer annual: Consulting, 177-188 (2007)7. Rothwell William J. and Sherwani N aseem S., "Role oemployee retention in a comprehensive talent managemenStrategy", NHRD Journal, 1 (3), May, 9-13 (2007)8. http://www.humanresourcesmagazine.com.au/articles/24/0C03C824.asp?Type=60&Category=9199. http://www.eweek.eom/article2/0,1895,2078486.asp10. http://retention.naukrihub.com/retention.html11. http://wfnetwork.bc.edu/new/glossary_entry.php?term=Retention,%20Definition(s)%20of&area=All12. http://www .contentwriter.in/articles/hr/employee-retention.htm.

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