HRM Project 1
09P061 Abhinav Narula
09P082 Harsha Muzumdar
09P084 Hitesh Yeolekar
09P093 Mohit Rungta
09P098 Pallavi Madan
09P108 Gagan Rajpal
Employee Retention is the tools and policies that are adopted by an organization to
encourage employees to remain in the organization for the maximum period of time. Key
employee retention is critical to the long term health and success of your business. It is
important to retain the talent in the company. Retention is sometimes more important
than hiring of employees.
The employee satisfaction has become an important factor for a company as well as
employee. Decent salaries, bonuses and allowances are the top expectations of an
employee towards the company. Additionally, challenging and interesting roles and
responsibilities are also aspirations of employees. If a person is not satisfied with his job,
he may leave the organization as in present corporate world, employee has number of
options available for more suitable jobs. Managers readily agree that retaining your best
employees ensures customer satisfaction, product sales, satisfied coworkers and reporting
staff. The basic factors which makes employee retention important are:
• If an employee resigns, a good time and resource is required to look for new
employees able to fulfill particular requirements.
• The expected level of talent and efficiency is difficult to obtain in the new
• Sudden resignation of employee brings current business process to standstill.
Hence new hiring becomes immediate necessity.
• The resignation can also trigger a chain reaction in other workforce to look in the
same direction of better opportunities.
• At higher hierarchy level, retention is also important not to get shared some in
house information and strategies to other competitive firms.
The cost of loosing talent involves the time and resources that are utilized to hire
new employees. The costs are both direct and indirect. There are the direct costs to recruit
and train new workforce. It is hard to get the same level of talent back, additionally for a
new employee, it also takes time to adjust to new working conditions and environment
resulting in low level of efficiency in early stage which results in a greater indirect costs
and loss of productivity. Less obvious are the costs of maintaining morale when there are
change and threats of job cuts. According to the American Management Association, the
cost to replace an employee who leaves is, conservatively, 30 percent of their annual
salary. For those with skills in high demand, the cost can rise to a frightening 1.5 times
the annual salary to replace them.
Roger Herman, in his classic book on employee retention, has described that
Employee retention involves being sensitive to people's needs and demonstrating the
various strategies in the five families. The five families are:
These families are actually various factors that may affect the employee. To retain
employees in an organization, it is important to recognize which factor is working
significantly to affect employees. When the cause factor is recognized, it is easier to
address the factor.
Employee retention approaches also differ at different level of operations. Since the
problem differs at different levels, the solutions also differ. It is easier to provide lower
level incentives with limited resources while to provide high level benefits, higher
resource and time needs to be utilized.
At lower level, the occasional gifts, scholarships for children, personalized
appreciations etc help to motivate workers and employers to remain in the organization.
While at higher level, approach for employee retention are various memberships,
sabbatical leaves, benefits and insurance schemes etc. The highest level of employee
retention strategies involve mentorship workshops, vocational councelling and
personalized career guidance by experts.
ECP model of employee retention:
HOWATT consulting provides a simple model to understand the importance of employee
retention. In today’s economy, the bottom line in business is profits. The model use this
underlined concept including employee retention in importance.
E---Employee retention and employee satisfaction. When you have satisfied employees
(who are not caught up in the quagmire of bureaucracy and leave), they are more able to
help the customer.
C— Customer retention. The more effective the customer services the greater the
Employee Satisfaction + Customer Satisfaction = Increased Profits
The equation is simple from this point on. When we keep customers that are satisfied,
and continue to add more, the corporation has increased the likelihood of increased
Modern Model for employee retention(ERC’s retention model):
ERC or employee retention connection is the recent mission by James Rolo and Ingrid
Bens to work with organizations to attract, develop and retain their most valuable
resource: their employees.
It designs three basic drivers of employee retention. The basic drivers with their key
1: Stimulating Work
• Variety of assignments
• Autonomy to make decisions
• Resources and support provided to do good work
• Opportunity to learn
• Feedback on results
• Understanding the significance of one's personal contributions
2: Motivational Leadership Champion change and are open to new ideas
• Inspire a share vision of organization direction
• Motivate and recognize contributions
• Develop the capabilities of others
• Model behavior that reflects organization values
3: Recognition & Reward
• Say "Thank you" for a job well done
• Reinforce desired behaviors
• Create an emphasis and focus on recognition
• Celebrate successes
• Build self-esteem
• Enhance camaraderie and teamwork
There are various reasons for an employee to leave an organization.
• Employee does not believe that they have been given the tools needed to do the
• Employees feel unappreciated and there is lack of meaningful feedback and
as to what they are doing. Many employees know that they need to be responsible
their own career planning, though it is still important for employee sto be
for what they are doing that is proactive and positive.
• Employee is unclear or unmotivated to obtain the company's goals. The corporate
are not in line with the employees’. It is important that all employees be
their own goals, so that they can build them to be congruent with the company's.
• Employees do not see any opportunities to grow and advance in their positions
• Employees will leave due to personality conflicts. The number one reason
leave is not money; it is conflict with their direct supervisor. Most personality
are rooted in poor communication and a lack of communication skills focused on
• Employees will not stay if they are not involved in decision making, especially if
it is in
their area of expertise. They see themselves as devalued in this case.
Ways of retention of employees:
• High salaries and incentives is the primary tool for employee retention. Most of
the companies attract the employees by paying them high salaries and other
incentives time to time. Monetary packages are able to attract and retain talent,
however, in long run it becomes limiting for the organization to pay huge cash.
• The best and foremost HR practice to retain employees is proper and tangible
recognition and appreciation to employees for their individual performance. The
tools like employeer of the year/month, best performer/trainee of the project etc
are those appreciations which not only retain employees but also encourage them
for better performance.
• For employee satisfaction, the most important aspect to take care by the
organization is that the job profiles offered should match with individual
capabilities and aspirations. This makes the employee feel satisfied and glad in his
• Better work culture is also very important where the relationship between
employee and employer is such that individual problems and conflicts are
properly addressed with time.
• Excellent career growth should be provided to the employees to move on the
vertical ladder of organizational hierarchy. The most common reason for leaving
the job is the expectation of higher level of responsibility and position.
• Work-life balance initiatives are important. Innovative and practical employee
policies pertaining to flexible working hours and schemes, granting
compassionate and urgency leave, providing healthcare for self, family and
dependants, etc. are important for most people. Work-life balance policies would
have a positive impact on retaining skilled employees, as well as on attracting
• Organised training, counselling and development programmes for employees also
used to motivate them for their work. Best performers ahould be encourage to
share their experiences with others and guide others. The emphasis is to create the
desire to learn, enjoy and be passionate about the work they do.
• On the cases of talent leaving the organization, fundamental reasons for the same
need to be seeked upon. It provides the organization an opportunity to learn from
possible loopholes in its own HR strategy.
• Sometimes employee actually leaves its supervisor or employer rather the
organization. Reasons may be individual conflicts or miscommunication in a
team. Hence The employee should be made independent to address his problems
and complaints freely. Mentorship programs are employed to provide freedon to
employees regarding individual contentions.
• In any circumstance, the employee should never be threatened about his job or
income. Whatever be the issue, it should be shared in a mature manner and
underperformance should be addressed in fruitful manner.
Employee retention and employee engagement:
Willian A kahn has given a concept of employee engagement which now a days in
present competitive corporate have replaced the employee retention policy and brought it
to higher level. It was termed as ‘harnessing of organizational members’. In engagement,
people employ and express themselves physically, cognitively, and emotionally during
role performances. It brings high level of employee satisfaction in organization culture.
When people are emotionally attached to their work, team and organization, the target of
employee retention becomes easier. Additionally, it also brings high level of
effectiveness in the work.
Attrition rate/ churn rate is a measure of the number of individuals or items moving into
or out of a collection over a specific period of time.
It is a reduction in the number of employees through retirement, resignation or death.
Thus we can see that attrition rate and retention rate are very closely related and loosely
speaking attrition rate is inverse of retention rate.
Calculating attrition rate:
Attrition rate has always been a sensitive issue for all organizations. No common formula
can be used by all organizations. Formula has to be designed keeoing in view the nature
of business and the different job functions. However a general formula used by most
Attrition = (No. of employees who left in the year / average employees in the year) x 100
The difference arises while calculating the values of No. of employees who left in the
year and average employees in the year. Some firms may not include attrition of freshers
who leave because of higher studies or within three months of joining. Various types of
attrition rates used by organizations for performance measurement are:
• Fresher attrition that tells the number of freshers who left the organization within
one year. It tells how many are using the company as a springboard or a launch
• Infant mortality that is the percentage of people who left the organization within
one year. This indicates the ease with which people adapt to the company.
• Critical resource attrition which tell the attrition in terms of key personnel like
senior executives leaving the organization.
• Low performance attrition: It tells the attrition of those who left due to poor
Attrition rates in India:
The below graph shows the attrition rate of employees in different sectors
Certain facts about employee turnover:
(source: research report on india employee turnover study by CII and CSEND
CII-Confederation of Indian industries
CSEND-centre of socio economic development)
• Managerial staff is high in regard to turnover. Executive ranks are perceived as
relatively stable. Clerical and operational workers are reported to have increased
turnover as well.
• Knowledge workers in today’s India exhibited the highest tendency for voluntary
job change across different categories of employees.
• Years of employment in the company did make a difference regarding turnover.
The highest turnover occurs between 1-4 years of employment.
• Salary, career development and individual relationships are the major reasons for
employee leaving a job. Job content, recognition etc comes later.
ESOPS: NEED AND EFFECTS
During the mid-1990s, corporates across the world were going through a peculiar phase -
while many of them were downsizing heavily, others were struggling hard to hold on to
their best employees. As employee turnover rates increased, employee retention
(especially technically skilled personnel) became one of the key issues for companies and
human resource (HR) officials across the world.
The boom in the information technology (IT) industry in the late 1990s was in a major
way responsible for this situation. In the 1990s, the job market was extremely vibrant and
the demand for skilled people reached an all time high during this period.
As a result, companies started paying exorbitant salaries and perks to retain their existing
employees. However, after a certain level, even increased salaries could not arrest the
employee turnover. It was reported that companies in the Silicon Valley invested around
$ 4 billion annually to retain employees and still, around 1,60,000 jobs were left unfilled.
Organizations started to devise new ways to retain their employees. It was the emergence
of ESOPS which is one of the innovative measures to keep talent in the company.
ESOPs can be defined as contribution of the employee pay package for investing in the
stocks of the employer company. ESOPs enable the employees to buy shares of the
company for which they work, at or below the market prices. They can gain from future
increase in the stock price.It provided a type of ownership to the employees in the
The concept of ESOPs was also present earlier from 1920s in form of stock bonus plans.
It was 90s when the concept was efficiently utilized. Pespi was the company to first
utilize esops as a key to retain talented employees in the company.
• Most of IT companies were having exceptional performance in the period and
additionally their stock prices were in bull. This made the ESOPs very attractive
• It overcome the limitations of IT companies to provide heavy cash to the
• Also the company did not have to pay anything directly and it also in turn helped
in rise of their own equity share prices.
• ESOPs also provided tax benefits to employees to make it more attractive.
MICROSOFT INDIA: BEST PLACE TO WORK
In 2008, Microsoft India was ranked first in best places to work rankings. It was
the result of effective retention schemes employees by Microsoft. According to Microsoft
India's HR growth model, HR was ultimately expected to be a change leader and business
driver. Talent management had been a key issue for Microsoft. Aligning the HR practices
with company mission and vision was also an important issue for Microsoft. The major
actions and policies of Microsoft are:
Microsoft India recruited both fresh graduates from academic campuses and experienced
professionals in the IT industry. It provided blend of all talent in company.
Microsoft India provided both vertical and lateral growth prospects for its employees in
all the six business units present in India.
A flexi-time policy enabled the employees to work according to their convenience
liberating them from rigid work timings
Microsoft Global Technical Support Center (MSGTSC)
For employee retention, Microsoft India initiated various programs particularly in
MSGSTC, Bangalore, where work was carried out around the clock (24 X 7) in order to
provide technical support services to its customers
Microsoft India followed a candid process while evaluating the performance of
employees and regarding their compensation packages. The process was transparent so as
to enable employees to identify their performance levels and have a clear idea of what
was required in terms of performance in order to reach to the next level.
In 2007, Microsoft India launched a program called 'Bring Your Child To Work' in a
move to improve work-life balance among its employees.