DEPARTMENT OF MANAGEMENT STUDIES
FACTORS AFFECTING ATTRITION RATE A RESEARCH Paper
SUBMITTED IN PARTIAL FULFILLMENT OF MBA C331: Business Structure and Processes
UNDER THE SUPERVISION OF Dr. Anil K. Bhat
Professor, Management Group
SUBMITTED BY : Amitesh Kumar Shilpi Chakravorty Sumit Raj 1
ABSTRACT The pharmaceutical and IT service industries are growing exponentially; there is a constant thirst for the best and the brightest of employees. After information technology, the pharmaceuticals industry is grappling with the highest level of attrition rate of 30 to 35 per cent, according to a recent survey of Indian pharmaceutical companies by Interlink Marketing Consultancy. The article discusses current attrition rates of various companies. The attrition patterns of major pharmaceutical companies like Ranbaxy, Sun Pharma, Pfizer, Novartis, Merck, Sanofy Aventis etc and major IT companies HCL, Infosys, Satyam and Wipro are discussed. The various internal and external factors causing attrition are discussed. Roles of human resource management in meeting organizational needs and tasks are discussed. The Parameters for attracting potential employees are given percentage wise in tabular form. Factors used to differentiate rewards for superior performers like salary rise, growth opportunities, training programmes, etc. given percentage wise are given. Strategies to retain talented people, psychological environment, and career track management are discussed. Organizational environment like work culture, engaged leaders, effective communication practices, challenging assignments, international exposure, flexible worktime, quality of life, work-life-balance, etc. can increase employee engagement and improve productivity.
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TABLE OF CONTENTS Abstract
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1. Introduction
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2. Causes of Attrition
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3. Strategies to reduce Attrition
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4. Conclusions
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5. References
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6. Appendix
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1. Introduction: Attrition is a Persistent Problem The pharmaceutical and IT service industries are growing tremendously; companies are focusing from survival strategy to competitive strategy. These ever growing industries are facing the problem of heavy attrition. After the pharmaceutical industry, information technology is grappling with the highest level of attrition. The Pharmaceutical industry suffers an annual attrition rate of 30 to 35 per cent, according to a recent survey by Interlink Marketing Consultancy. Interlink surveyed a sample of 15 companies in the small, medium and large segments in the Indian pharmaceutical sector. The IT service industry faces an attrition rate of 15 to 18 per cent in 2009 according to the survey carried out by NASSCOM-McKinsey. Globally, the attrition rate is same as in India for IT industry. However in pharmaceutical industry it is only 10 to 12 per cent, says the IBS report. The research reveals that the pharmaceutical industry annually experiences an employee turnover of 30 to 40 per cent at the field level and 8 to 10 per cent at the managerial level.
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2.Causes of Attrition Attrition is a consequence of a variety of factors that can be classified broadly into internal (to the service provider) and external (industry-level or macro-level) factors.
Internal Factors Service providers face an array of career-related, work environment and cultural concerns that are attributable to increased attrition levels: 1. Monetary considerations. The expectations of employees in this industry have grown exponentially due to the strong demand in the marketplace. A number of people who leave do so because they have been offered a higher salary. In the current competitive scenario, it is easy for employees to find positions that leverage their experience and pay better. 2. Slow career growth for internal talent . Employees with prior relevant experience are a precious commodity in today’s fast growing market. Therefore, it is not unusual for fast-growing companies to fill new jobs with external applicants who have prior relevant experience with other companies, bringing them in at one level higher than their current level or providing them a new role with greater responsibilities. This contributes to the perception by “passed over” internal talent that career growth is slow in the current organization, which results in further attrition. 3. Shift timings. The majority of the work offshored to India has typically been from the United States (though share from Europe is growing) necessitating night-shift work due to time zone differentials. The proportion of employees who can work during the Indian work-day is low. Continuous night shifts affect the health of some, while others just cannot adjust to them. As a result of cultural and social factors, some women employees leave because they are not able to convince their families of the need to work nights. 4. Monotony. In general, BPO work (especially work that has been offshored) has been repetitive, mechanical, service-level-driven and involves high transaction volumes. Younger recruits find it monotonous once they have mastered the process. 5. Working environment. Attrition due to the work environment is typically due to a lack of trust in the fairness of the system, issues around safety and care of employees, effectiveness of the channels to address employee grievances, accessibility of the senior management team and other related environmental issues. 6. Limited training and development opportunities. Though not one of the top reasons for attrition increases, the lack of ample opportunities to learn new skills or undergo training or further education is occasionally cited as a reason for leaving. 7. Deficiencies in the recruitment process. To ensure that they rapidly meet high demand levels, service providers are not always able to hire resources with the right skills and experience when and where they are needed.
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8. Mismatched resources. Resources who are put on assignments that are not in line with their skills or career aspirations may leave if they are not rotated to a favourable assignment soon enough.
External factors There are several “environmental factors” outsi de the immediate control of industry and clients that also must be considered and strategically addressed to reverse attrition: 1. Concentration of demand for talent. Most service providers are located in five to six large Indian cities (known as “Tier 1” cities), which has led to excessive concentration of demand and competition for resources in these geographies. 2. Supply Vs Demand. The demand comes from the growth of the industry and the policy of the company. These two things decide whether there is a demand of fresher or experienced employees. On the other hand, the supply comes from the educational institutions and the market. The supply from the educational institutions is enough to meet the demands of the pharmaceutical industry and IT industry but, there is a lack of experienced people in the industry, which in turn has created an imbalance. 3. Shortage of management pool. The supply of supervisory and management talent is relatively limited because it requires prior experience. Given the pace at which jobs are created in this market, it is difficult to find management staff with the optimal experience levels. 4. Career outlook. The workforce entering the BPO sector is very young and sometimes immature (entry level graduates with a three-year college degree are only 21 or 22 years old). Many of this younger population are not sure what they want to achieve in their careers and represent flight risks.
Figure 1: Causes of Attrition
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3. Strategies to Reduce Attrition The different strategies that will help in decreasing the attrition rate in pharmaceutical and IT industry sector:
Recruit : Focus on the right-fit model, robust evaluation procedure (both technical and practical tests) and reference checks are some of the ways of sourcing talent.
Develop and train: Training helps in identifying the potential talent from employees and later helps to sharpen their latent skills. The best people have to be elevated into potential prospects of succession planning.
Retain: Retention of talented employees is always the most important agenda for any company to grow. Giving them higher salaries (48%),Faster growth opportunities (62%), Better performance based bonus amounts (46%), Advanced training opportunities (38%), Recognition awards (54%), Reflects in the salary increase (50%) are some factors used to differentiate rewards for superior performers.
Psychological relationship: Employees in pharmaceutical and IT sectors companies are generally intellectual staff and hence the psychological relationship between leaders and employees is very crucial.
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4.CONCLUSIONS With changes and innovations in the human resource management’s strategy, using tools like. Good recruitment strategy, Development and training, Talent retention strategy, Good psychological relationship, Organizational culture, Career track management, it is possible to reduce attrition in the pharmaceutical and IT service industry. The primary causes and remedies of the high attrition rate at the pharmaceutical and IT service industry in India marketplace:
Attrition levels are high primarily due to strong demand in the marketplace, concentration of delivery centres in a few cities, the youthful workforce and some internal, process- related issues in service provider organizations arising from rapid growth.
Service providers are taking measures to control attrition, yet these need to be reassessed comprehensively to determine their effectiveness in controlling attrition and managing its impact.
Buyers of services may assuage the impact of attrition by offering the service provider meaningful financial incentives, recognition programs, on-site rotation to select employees and other such tactics.
All industry participants should compute attrition in a standardized manner so that the information published by service providers is comparable on a like-to-like basis.
A scenario analysis shows a talent crunch by 2010 that could turn severe if demand continues unabated.
Attrition rates may come down, albeit slowly, with the efforts being made by service providers individually and collectively.
We would like to conclude with the famous saying, “Profitability is the sovereign criterion of the enterprise and business has two basic functions-marketing & innovation .-By Peter Drucker.”
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5.reference Research Journal – ATTRITION IN PHARMACEUTICAL INDUSTRY: HRM ROLS & STRATEGY International Research Journal, August 2010 ISSN- 0975-3486 RNI: RAJBIL 2009/30097 VOL I *ISSUE 11 Research Journal – AN ATTRACTIVE ITES INDUSTRY DESTINATION MARRED BY ALARMING ATTRITION. By Dinesh Goel, Prabhakar Thakur, Global service delivery advisory services, TPI, 2007
Fred Luthans: (11th edition), Organization Behaviour, Mc Graw-Hill International Publication (page no.157 to 192.) Stephen P. Robbins, Timothy A. Judge, (12th edition), Organization Behaviour, Prentice –Hall Of India Pvt. Ltd. New Delhi. (page no.72 to 89.)
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6.APPENDIX
Figure 2: Annual Attrition Rate of Indian ITES Companies
Figure 3: REASONS FOR EMPLOYEES LEAVING ORGANIZATION
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