Attrition : Causes & Effects...What should be done!!

HIGH STAFF TURNOVER

Attrition: The Ticking Time Bomb in Industry

Shiv Shivakumar: Former chief of emerging markets, Nokia.

Attrition is a complex, cultural and leadership challenge with no easy answers. In 2012, according to HR consultant Towers Watson, attrition in India was 17%, higher than the 11.2% salary rise. At this level of attrition, an organisation in 2020 will have only 22% of the employees it had in 2012. The salary rise in 2013 is expected to be 12.4%; attrition will be higher. Attrition is at all levels, more in junior customer-facing jobs. Attrition in the banking, financial and insurance sectors was 30%, in IT services 28%, retail and consumer goods 16%, retail store-level 30%, healthcare 10% and hi-tech 14%, according to the report.

 What is the impact of high attrition? It erodes consumer loyalty, hurting brand reputation. High attrition creates a vacuum at middle-management, which should handle execution. Attrition creates a middle management that’s tasted neither success nor failure. Weak middle management delivers faulty, corner-cutting processes. It forces senior management to work a level lower, forsaking the bigger picture. A weak middle management means poor mentorship of entry-level managers, hurting long-term leadership development.  

Why do we see high attrition? The first is economic; new industries open up when GDP grows faster than 5%. Talent in established industries is raided to staff newer industries. FMCG is the talent bank in India, funding telecom, retail, health and entertainment industries. The next reason is “hurried aspiration.” Everyone is in a hurry to be a young vice-president or a CEO, to own the latest car and television or to take that exotic holiday. This forces people to take risks with their loans, and anyone with an EMI payment greater than 25% of his takehome salary is constantly in the job market, to reduce that to below 10%. Hurried aspiration is fuelled by average headhunters who create insecurity and peer pressure by transacting CVs between managers and firms. Performance evaluation is loose and incomplete, based more on potential and less on merit. 

What do Indians value at work? The top five factors are: job security, career advancement, base pay and title, learning and development, and the reputation of the organisation. A company must grow. If it doesn’t, people leave. Learning and development is the Achilles’ heel in India. Companies do not invest much in training and developing talent: this is the first reason quoted by exiting employees. The cost of training and development is minuscule, but it is the first item cut in tough times. On-the-job learning from leaders is something young people value. Leaders in India must coach young employees; this will lead to higher engagement, better performance and lower attrition.  

 

The world will see a talent shortage by 2021. The US, Canada and Europe will see a deficit of 12 million people to fill roles. India with 2.1 million, Indonesia with 1.5 million and South Africa with one million will be the top three countries with a talent surplus by 2021. This is an opportunity to develop global leaders. Culturally, we need to change. We should value contracts, which we don’t do today. Our contracts are social in nature and less legal or economic. Employees will need a moral compass of right and wrong: joining competition, refusing to join a new firm at the last minute, burning bridges and so on. Companies will need to be flexible, using innovative policies for women, building alumni networks and designing customised career paths. Firms must differentiate on merit early to keep top talent. They should build a stronger middle-management pool by rewarding those who stay. Senior leaders must engage, coach and grow talent. Firms should start learn-andearn internships. Companies are good at identifying the needs, wants and desires of consumers; they should identify the needs of their employees. Finally, young managers must realise that a good career is a 20-year journey. If they do not develop strong general skills and industry competence, younger and less-costly managers will substitute them. A rolling stone career strategy is a short-term success and a long-term liability for individuals and companies.