Myth of corporate retention

Myth of corporate retention

Retention sits right atop the corporate agenda of chief executives and human resources heads. It’s a much thrown-around buzzword. So retaining employees as best as you can makes sense, right? Wrong.

Employee churn is occurring today in India’s companies at rates much greater than before. Glance through a “Best Employer" survey and you will still find churn levels upwards of 10%. The business process outsourcing (BPO) industry could witness a churn of as high as 50% in the voice-based sector in the coming years (this was the reported attrition in 2007).

Yet, stronger brands have churn levels that are much lower than industry average: For example, the Big Three in information technology (IT)—Wipro, Infosys and Tata Consultancy Services—have an attrition rate of around 12%, which is almost half the IT industry average of around 22%.

So retention does deserve its place. It will foster loyalty, training talent that understands an organization’s culture. Hence the investment in retention, such as employee engagement surveys, benefit programmes, recognition for service, and the like.

There are two important factors for an organization to consider while determining its retention effort. The first is what we call the “uniqueness of labour". This includes factors such as competition in the labour market for the given type of talent; the size of the talent pool available for a specific job; and specialization required in performing the job on multiple fronts.

The second metric is advancement opportunities as defined by linkage of the job with the career ladder; opportunities available within the given industry in similar firms; and opportunities for job enrichment or rotation into other jobs.

Advancement opportunities are determined by both the structure of the firm and the nature of the industry itself. This metric includes variables such as compensation and job title increments, but also focuses on the overall scope of the job as a whole.

A research laboratory such as the Defence Research and Development Organisation (DRDO) would need to put in a very high effort to retain scientists, as would the Indian Institutes of Management (IIMs) to retain professors: These employees are unique, and can avail of advancement opportunities elsewhere. Yet retention is obviously necessary in both these places. Hence it’s here that retention through psychological factors (such as pride in patriotism or collegial atmosphere) work better than merely the tangible ones.

The other extreme is a BPO— there are limited opportunities to promote, and it’s a pyramid with a very large base. So instead of trying and compensating for the fact that there are limited opportunities, embracing churn and accounting for it is a great idea. Short crisp induction training works while employment bonds are not needed.

Still, in a technical manufacturing set-up with engineers starting right on the shop floor, there has to be a high retention effort. The effort is eased by the fact that there are job opportunities up the ladder—and regular training and retention rewards will make sure the people stay in the organization. While advancement opportunities may act as a glue, acquiring industry-specific know-how will also make labour more unique, and hence the need to retain.

So when you do see that attrition figure, let’s not cringe and crib about it. Depending on the industry, it can often be a good thing— implemented out of deliberate choice.

Abhishek Thakore is a management consultant. Comments are welcome at