The IT industry in India has several challenges to overcome before it can become an indispensable contributor to India’s growth story. One of the key obstacles in its path is rapidly increasing attrition, due to varied reasons. Richard Cowley takes stock of the problem, and suggests steps Business and HR leaders can take to manage attrition in the Indian IT industry.
One of the hallmarks of the IT industry in India is that every single person is ambitious and has a focused desire to grow.
While we ponder the reason for the resignation numbers of Infosys (18.9 percent), Wipro (15 percent), and HCL (16.2 percent), and mourn the loss of 15,000 techie positions in Bengaluru in some of the largest software giants (TCS, Cisco, Altisource, IBM, Dell, and HP) due to various reasons – rightsizing, change of strategic direction, reducing margins, or simply lost business opportunities – we should also balance this view with the growing global and India-specific vacancies.
The demand continues – with an estimated 46,000 job vacancies in Bangalore alone, today.
There is demand
Indian nationals are known globally for their entrepreneurial spirit. Start-ups will continue to sprout in the immediate future-a phenomenon that should be encouraged, in my view. Other countries would consider this capability as a gap in their country, and Indian businesses must make use of this.
However, if you think about the nourishment this hunger receives, it’s far from being enabled, supported, and encouraged. The conversations about growth take place at various levels–business leaders, HR managers, employees; but these are siloed. One of the outcomes of these exclusionary conversations is attrition. Call it turnover, churn or redundancy: people are leaving!
Playing the scenario
The reasons for their departure are as rational as the reasons they joined IT in the beginning – personal growth on new technology platforms or software, the appeal of a nice office with perks, higher salary and/or benefits and of course, the opportunity to hit the jackpot in a start-up.
In the IT sector, the feeling of insecurity can be a challenge with companies starting and closing, and moving geography and strategies being the norm.
In my view, a healthy rate of the permanent full-time workforce that is manageable is in the range of 5-10 percent. We should expect a higher rate for our outsourced or contingent workforce (most people value the permanent full-time position). Given this, we could expect upwards of 20 percent.
What can and should we do about this challenge?
At a macro level, the service industry has been identified as a potential short term bubble–PM Modi is therefore driving an agenda focused on manufacturing and the general needs of the workforce, potentially using India as a sourcing pool for age-challenged countries.
The short and long term goals
Companies can address this current trend in the same way one does when buying a house – accept it, do what is necessary to deliver your opportunities and wait for the norm to return. It is not unusual for companies to pay a 100 percent bonus and provide incentives to retain high potential/performing employees!
Short-term incentives like the annual bonus are not as attractive as they once were, even at 100 percent, particularly when some employees can receive 30-50 percent increase on their base salary versus the traditional 15-20 percent of the past. LTIs or Long Term Incentives with high upside may retain the talent, assuming of course that you feel comfortable that you will have the business. There’s no reason to provide LTIs when you are as unsure about your company growth and position as employees are about their job security, working for you beyond 2-3 years.
Demands from the leadership
I believe the core retention tool is still with the leader. Leaders who show belief in their employees, make them feel nurtured, coached, and developed and have a healthy relationship with them beyond objectives, will retain employees beyond the hygiene factors related to base salary and benefits.
Line managers are also becoming more aware of the need to provide a new level of engagement with employees of all ages. This will deliver the desired outcome of a positive relationship between employers and employees, where employees want to stay because the company is investing in their future. Concurrently, HR is working on proactive solutions to drive improved hiring practices while focusing on leadership capability. I’m confident the two will deliver the necessary outcome.
• A continued growth of the IT talent pool is critical.
• Improved proactive hiring practices will make the attrition less impactful.
• Effective leadership can deliver the desired reduction of 5-10 percent for our permanent workforce.
Greater consideration needs to be given around the use of borrowed contingent workforce versus building your own-which might retain talent but creates challenges around fixed cost management and we need to manage this reality in an industry as unpredictable as IT.
This article first appeared on CIOL.