Attrition S A Blessing For Ites Companies

Attritions a Blessing for ITeS Companies
Posted by TJinsite on August 10, 20110 Comment
A mass exodus is seen as a cost-saver. Most junior employees leave for better pastures in an industry where tasks get repetitive, but companies notch up savings in crores
Attrition is not always a dirty word. For many organisations in the information technology enabled sector (ITeS), it spells cost savings. Take Symphony Services, a mid-sized product manufacturing company with an employee base of 3,300, and an attrition of 15%. The company saves nearly Rs 9.6 crore every year by preferring to hire attrition backfills positions that become vacant when an employee leaves at junior levels. At least 50 out of an average of 250 employees are hired at 20% lesser cost each month. Companies paint a very negative picture (of attrition) but actually, one can gain from it as well, says C Mahalingam, VP and CFO. For sure, losing employees does not augur well for a companys health. But those that have to wrestle with a structure wherein after a few years, retaining employees becomes expensive, attrition isnt such a bad thing after all. This is especially true in ITeS companies, where the base is large and the employee structure tapers at the top, explains Ashok Reddy, MD of staffing firm Team Lease. Those that are in the lower rung just become more expensive to keep after a few years, he adds. There is a reason for this: the sector battles 35% unemployability, and companies are forced to make do with those who very often dont make the cut. Attrition in this sector is seen mainly at the junior levels, where those who have work experience of a few months to a few years are difficult to retain. Night shifts, higher education, better salaries and positions offered by competitors are the main reasons for the shift. Those that do high-end work, however, find it more difficult to get employees and therefore prefer to curtail attrition. Bangalore-based ITeS company MphasiS employs 41,000 and deals with an annual 35% attrition. A back-of-the envelope calculation done by a senior HR executive showed the company saves around Rs 5 crore each year from
attrition. This is mainly from its BPO vertical, where exits are more than the division that deals with IT. At the junior levels, the job is less complex and the skills learnt are quicker, therefore the new employee can manage to return the investments in his training within three to five months, says the executive, who does not wish to be named. At MphasiS, attrition at the grass root level can be recovered but those who work in the higher rungs are best retrained, he adds. The break-even reached by an employee at the ground level also takes a shorter while and therefore, replacing them is not tough, says the executive. The savings are calcluated by subtracting training costs and the time taken to get the new employee to the required quality scale. Theres another reason companies dont cry over employees who quit at this level: an employee with a BPO company gets a cumulative raise of 10-12% per year, and after five years, his income is around 75% more than his initial salary. However, the job he does remains the same and therefore, companies would rather go with someone who does not dent the coffers as much. Mumbai-based business process outsourcing (BPO), Aegis saves Rs 7.5 crore every year from an attrition of 60%, says chief people officer SM Gupta. The desirable attrition for the company is 45%, and it faces a challenge in retaining employees who have completed nearly two years. Desirable or unregrettable attrition is when the low performers leave the company, whereas regrettable attrition is when the better lot decides to part ways with the employer. Getting the best out of attrition should not, however, mean ignoring it. Only a certain percentage of attrition is good, otherwise despite the silver lining in the form of cost savings, trained hands in any business are crucial, says Aditya Narayan Mishra, GM of staffing firm Mafoi-Randstad. The recruitment industry to sees an erratic attrition of 35-100% where infant mortality (those who leave firms with the first two years) is high. Blame it on the system where employability of a person is so low that companies have to stretch the standards and after some time, most turn out to be misfits who ultimately drop out, says Abhijit Bhaduri, chief learning officer at Wipro. If a company hires 400 employees, only 25% are fit to take up additional responsibilities while the rest soon find out they are not meant for the role. This makes everything the company invests in the employee, especially in training, go waste, he adds. The IT and ITeS sector annually invests nearly $1billion in training employees, says Bhaduri, but employability remains a concern. Robust performance management system and employee engagement, where more roles are assigned within the company, are seen reducing attrition numbers. A pink dress code day will not help keep back someone who is disgruntled, says Bhaduri. All things considered, companies are getting serious about curbing attrition. Consulting firms like Aon Hewitt have seen an increase in clients asking for managers salary structure to be changed, with a percentage of variable pay linked to controlling attrition and increasing subordinates employability. Wipro has made attrition as one of the mandates to be officially accounted for when variable pay will be doled out to the top brass this year. Recruitment firms too keep a watch out for companies that take in people at a lower cost and check the companys track record so they do not have to replace a candidate within six months of placement. There is no point in refilling a leaking bucket, because if the candidate leaves within the first few months to a year, we do not get retention fees. In addition, we have to provide for a replacement without charge, says Team Leases Reddy. The company prefers to work with firms where just 20% of positions are re-filled.
There are companies, though, that face up to 120% attrition and they can work because the job profile is exact, says Sanjay Gupta, global head, HR for outsourcing firm EXL Service. In such cases, the employee is asked only a set of questions from customers. Anything beyond that is transferred to the senior manager. Such employees do not require much training and therefore, attrition does not hinder them, says Gupta. Compared with ITeS, the IT industry sees an average of 23% attrition; telecom numbers are at 20-23%, manufacturing at 13% while FMCG at 12%, according to recruitment firm Absolute HR International. The other sector that hires in large numbers is retail, but for attrition to yield benefits will take some more time. Attrition at the ground level is at times 60-80%, and therefore there is not enough time for employees to feel the pressure of a stagnant workforce, where they would rather have them leave than stay, says Sukhi Iyer, CEO of Reach, a retail recruitment firm. There is still a long time to go till this sector becomes like ITeS, she adds. The CEO said that retail sector has not reached the stage where the employees will remain with the firm for even two years since attrition is 60-80% and therefore companies will have to hire at least 10 people for five posts in a short span of time because they leave within few months. For a company to feel employees are becoming expensive in a pyramid-like structure, they have to be around for at least a few years, which does not happen in retail. For now, only ITeS seems to have the advantage. Article Courtesy: The Economic Times

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Attritions a Blessing for ITeS Companies

Posted by TJinsite on August 10, 20110 Comment

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