Why companies with Zero Attrition tend to lose more than gain.

Prelude:

I understand my blogs have been generally about some upcoming trends till now, but I thought I should take time out to discuss on one issue that has been running in my mind for some time. This blog is with regard to the attrition in the organization and in projects.

I do understand both of these issues are of different magnitude, different causes and different effect. I am in fact not even going to compare the cause and effect of these attritions etc. and how much the organization suffers from these attrition figures. But my blog is actually a take on the counter-point about the attrition.

I am actually thinking of mentioning why some organization and in select cases why some project need to have attrition. I know this might not sound all that sensible and neither do I expect all to agree to what I have posted here as they are my personal views.

My hypothesis is any organization which actually boasts of 0% attrition actually has a lot of things to loose than to gain.

Reasons why attrition is required in organizations:

Though I can think of many reasons for why it is required. Let me also try to make few points clear here that attrition can be classified according to me as, top management attrition and lower level attrition. Find the reasons for my hypothesis below:

1.       Diminishing rate of satisfaction

To keep an employee interested in his job profile is a challenge. The law of diminishing returns does kick-in even on one of the most productive employees. Normally there are factors that keep the employees motivated in their work. It very natural that the satisfaction (or rather the kick) an employee had out of his first appreciation mail or the first hiked salary doesn’t reflect in the future increment or future appreciations. There are many ways to counter this, but the law keeps kicking-in frequently.

With respect to projects: the point to be noted is that this factor is not just restricted to organization level this case is true with many long-term projects as well. The amount of satisfaction with the first roll-out of a product goes down each time the team makes subsequent roll-outs. Eventually to goes to the point where the employee starts feeling that he is rather tied up with a project and gets a notion that he will be typecast in the market.

2.       Clogged sink / blocked vent syndrome

This is a syndrome which is normally faced by companies popular around the job market to be termed as “best employer”. The employee friendly policy of the company and the amount of pampering the company provides is never equaled by other companies. In fact it goes to the extent that even if the employee knows that he deserves a better salary he will not be ready to quit the company.

This ends up in a bottleneck situation, where one level of management doesn’t quit the company. If the company has expansion plans its OK. But if there are no plans of expansion (like the situation faced during most of the companies during recession) then it would be in a place where employees in a position below, spend years together in the same position, just because there are no vacant slots in the position above them.

This situation is similar to a clogged sink or a closed vent. The other end is an organization can experience bottleneck at bottom or at the top.

Clogged at the top is a situation, which the top management stays put for years together creating attrition in lower part. But clogged at the bottom is also a possibilities, one example would be many governmental organization (esp. India), where lower level grades seldom opt to quit the company owing to its employee friendly policy. But only the middle management and top management keeps rotating.

This scenario is true with the project management front. There are project where the PM for the project remains the same owing to his understanding of the business and his comfort level with the customer that for people working below him, there is no scope for growth at all. Likewise, when an on-site resources gets adjusted, the situation turns head-on where his manager has to make adjustment to suit the needs of his onsite coordinator.

Either ways, the organization might go, the end result remains the same there will be no satisfaction among the employees and end product will be a degraded one.

3.       Complacent employees

Complacency is more like a symptom of disease than the issue. It is a corollary of the diminishing returns of satisfaction. The amount of dedication or interest an employee puts into the first project slowly starts coming down for subsequent projects. Especially once and employee gets to understand the nuances of the duration of promotion or the factors leading to promotion. Then the employee tends to make sure those are concentrated more than his regular job.

For example if an employee realizes the visibility one has in the organization plays a major factor in promotion, then the tendency of him attempting to gain visibility is higher than performing his duties.

4.       Not thinking out of box – Smartness quotient of the team

We have heard of IQ of a person, but one other term to be familiar with is the smartness quotient of a team. This is generally how innovative and how smart the team works in order to achieve a given task. It might sound a simple term but many companies have failed in improving the smartness quotient of its top management or its project teams. This is mainly because the top management of that company has been the same and there has no person who had thought out of box.

Same is very true when a team is working on a mission, if the same team is getting involved in all the jobs the amount of smartness quotient the team carries seldom changes owing to no new way of handling a challenge. One example that is commonly quoted is how the companies like MS, Yahoo, and IBM (early on) did miss the bus when there was revolution happening in search, social networking or mobile operating systems market.

5.       Forced to promote unkempt employees

Recurring question companies have faced is to promote internally or to recruit a more experienced person externally.

Note that employee who stays in a company especially in an employee friendly company tends to be more costly than the market. An external recruit with the same amount of experience and agreeably better external exposure tends to be cheaper. But since these companies tend to be employee friendly they end up promoting internal candidate, thus in a way promoting sub-competent employees in the company. Of course, owing to the amount of time the employee has been in the company, he would have had more insight into the company but for an external facing role he is ill-experienced. It is indeed a dilemma every HR manager would have faced in his lifetime.  

6.       Succession planning – Job rotation:

One commonly used method to make sure the employees staying in the company are made to grow is by rotating them in roles where they are less similar with.  This practice termed as military method of succession planning ensures the resources are trained in various aspects to make them ready to face any position provided to them. In many companies its policies empower employees to demand rotation, as it is recognized more as a way for the employee to grow inorganically. This creates an unbalanced equilibrium in the levels below affecting productivity of the company.

Conclusion:

Frankly I accept that for every point made above does have many counter points, which I accept. But my view is any organization is heading nowhere if it is targeting a Zero attrition. In fact I would even go to extent of saying that a company or for that matter a project team tends to lose a lot if there is no attrition in it.

But note the fact that there is no ideal amount of attrition which can be prescribed. It tends to change based on the type of the vertical the company is dealing and also based on the amount of flexibility and smartness quotient the company has.

There are ways a company can counter this tendency, one is by standardize roles and position based on job than based on people. There are companies which do establish standards but seldom follow it. One small thumb rule is that product based company should targets less attrition, but a service based company can even ingest something even around 20% attrition with good leeway. Gone are the days when attritions were considered additional overheads to the companies. They no longer are bad…

Your views are welcome, either comment on this blog or mail your views to me at ganesh.dg@gmail.com

Dilemma of recruiting a fresher: Points companies always forget when recruiting freshers

Ask any HR Manager of an 800+ headcount company or any VP of a company as to what his nightmare has been one standard response would be retaining freshers of the company.

One must distinguish fresher here are of two categories, ETs and MTs i.e. Engineering trainees and Management Trainees. The strategy and the cost of these two categories might be different but the root cause for them leaving the company is same nevertheless. Will discuss on that later.

It has been seen on average that somewhere around 50% of the fresh talents tend to leave the company and move on, as quick as within 18 months of joining. That is the stats for Indian companies, for foreign countries I am told the rate of people leaving is even more.

When one considers the investment put on fresher, cost spent to retain them, time spent on fresher HR managers get to think was it worth all the effort to recruit a fresher note that it has been mentioned that UK companies loose around GBP 350 mln every year just on fresh talents (Src: http://goo.gl/Hysr1)

This is not a small problem at all. I agree to have a better idea we must see both perspectives to get to the ground of the problem.

Just like any argument I agree it has both sides, but let me try to put some main points across on why freshers quit within 18 months:

1. Directionless-ness:

The companies show much enthusiasm in recruiting freshers, but all the fiesta ends with recruitment. Many of the employees recruited are left with managers who most of the time have no idea on what kind of job can be given to a fresher.

A good manager makes the company’s job easier to retain the talent

2. Motivation:

A fresher needs to have a sense of fulfillment when he gets into a company. But depts. invariably give a task like correcting total of big sheet, noting down Minutes etc. This makes him loose his urge to stay back in the company.

Companies assume salary is the decider but that’s just half the case. Giving him right set of task is the actual challenge.

3. Peer Pressure:

One major challenge is there are few companies especially bigger ones where fresher is not given any crucial tasks, but his classmate in other companies (relatively smaller) assign him critical tasks, which makes the person A to feel ignored in his company.

4. Offers when completing one year:

This is the point where most of the company gets it wrong.

It is the cue which every HR manager misses out. There are lots of companies out there who do not take chances with fresh grads, but everyone in the market is looking out for a 1+ year exp person. That being the case a resource that the recruiting company still sees as a fresher is a potential candidate for someone else. The employee normally who is 50-50 about looking out starts getting calls when he completes 12-15 months. He feels proud of having been able to prove his worth to the company which still treats him as a fresher. He surely chooses the one he feels values him more.

Companies out to change its manner in which it treats a one year old.

5. Distinction between Engineering trainees and Management trainees:

Companies get this one wrong too. Companies hire engineers and try to get them management roles, and vice versa. This produced a confused team of freshers.

E.g. Companies ask an engineering grad to play a role of Asst. Project Lead / Business Analyst. For a grad looking for programming and excelling in coding. These kinds of roles hardly interest him. (Though I must say there are lots of people who get thro this and excel in their job, but let us not take exceptions as examples).

Alternately, there are companies who hire Tier 2 MBA grads (especially in India) and give them operational jobs like programming, Monitoring calls, Quality testing etc. These are again an insult to injury already faced by him.

Conclusion:

I have been in roles mentioned above: as a fresher, as first year dude, as a mentor to a fresher and as a manager to a fresher. One thing that has stuck me always is:

One must understand that recruiting is more of a marketing function than analysis function. Recruiting a fresher is like Marketing to a customer new to the market and retaining him is like retaining a new customer. It takes a good deal to understand his needs, mentoring them, and making them realize their importance in the organization.

Remember the marketing rules, ensuring the new customer is happy will make sure he remains loyal to brand for a long time. Likewise ensure the fresher is happy in the few initial years he will remain loyal to the company and will one day become a great asset to the company.