PROJECT REPORT ON
“DIAGNOSTIC STUDY OF EMPLOYEE ATTRITION IN LARSEN & TOUBRO LTD”
AT LARSEN & TOUBRO LTD. FARIDABAD
SUBMITTED BY DEEPALI UPADHYAY (44/06)
(In partial fulfillment for the requirement of the Two Year Full Time Post Graduate Programme in Management, 2006-08)
Acknowledgement
Behind every achievement lies an unfathomable sea of gratitude to those who have extended their support and without whom it would never have come into existence. To them I say my words of gratitude.
I would like to express my deepest sense of gratitude to Mr. Akhlesh Mohan, Head- HR, L&T for giving me this opportunity to undergo Summer Training at Larsen & Toubro (Far (Farid idaba abad) d).. I would would also also like like to exte extend nd my heart heartfe felt lt grat gratit itude ude to his his cons consta tant nt encouragement and valuable insight, guidance and facilities at all phases of the project.
The knowledge provided by them has been a great value addition for me and will go a long way in shaping my promising career.
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Executive Summary
The study was conducted with a few objectives in mind which were to study the HR pract practice icess in the organi organizat zation ion,, to find find out the proble problems ms faced faced by employ employees ees of the orga organi niza zati tion, on, to find find out out cert certai ain n fact factor orss resp respons onsib ible le for for high high attr attrit itio ion n rate rate in the the organization and to suggest some ways by which the company can retain its employees.
With these objectives a primary research was conducted in the months of April and May. For secondary data, a detailed analysis of the attrition patterns department wise, grade wise, time-span wise, rating wise, qualification wise and month wise was done. Based on which the hypothesis was formed. The primary data was collected through a few unstructured interviews and questionnaire which was administered to employees of L&T’s engineering division (LTen).
During During the resear research ch 38 employ employees ees were were covered covered.. Survey Survey result resultss reveal revealed ed that that most most important important factor behind employee attrition attrition is Opportunity Opportunity for development and growth, growth, second most important factor is Salary, third most important factor is Job content and fourth most important factor is Relationship with supervisor. Also contained in the report are talent report tables and tables which show the reasons that are central to attrition in L&T and their relative importance.
At the end I suggest certain activities that L&T can take in order to decrease attrition rate and retain employees.
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Table of Contents Executive Summary
Chapter 1 1 .1
Organization of the Study
6
1 .2
Background
6
1 .3
Objective
7
1 .4
Research Methodology
7
1 .5
Conceptual Framework
8
1 .6
Relevance of the Study
8
1 .7
Company Profile
9
1 .8
Literature Review
13
2 .1
Scope of the Study
22
2 .2
Hypothesis
22
2 .3
Sources of Data
22
2 .4
Questionnaire Design
23
2 .5
Target Population
23
2 .6
Sampling
23
2 .7
Procedure for data Collection
24
Chapter 2
Cha Chapte pter 3 3 .1
3 .2
Data ata Pre Presen sentati tation on Secondary Data 3.1. 3.1.1 1
Str Strengt ength h dat data
25
3 .1 . 2
Resigned employee data
31
Primary Data
4
Cha Chapte pter 4
3.2. 3.2.1 1
Dat Data from rom unst unstrruct uctured ured inter ntervi view ewss
37
3 .2 . 2
Employee survey data
38
Hypo ypothe thesis sis tes testting ing
4.1
Employee Survey Data
49
Findings
Chap Chapte terr 5
50
Sugg Sugges esti tion onss for for Impr Improv ovem emen ents ts
51
Conclusion
53
Assumptions
54
Limitations
54
Annexure 1
55
References
59
5
Chapter 1
1.1
Organization of the Study
Chapter 1 contains the objective of the study along with the relevance, conceptual framework and the literature review that helped in the research.
Chapter 2 contains the scope and the coverage of the study along with the hypothesis that needs to be tested for which the data was collected.
Chapter 3 presents the data in a graphical form that explains the data that has been collected over the duration of the research so as to help understand the analysis better.
Chapter 3 presents the various cross tabulations of attrition with department, time-span, grade, rating, month and qualification of resigned employees. It also tabulates the relative importance of factors responsible for employee attrition.
Chapter 5 tests the hypothesis based on the employee survey.
1.2
Background
Management Decision Problem
To decrease the rate of attrition and retain employees in the organization
Research Problem
To understand the factors central to high rate of attrition in the organization
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Objectives
1.3
1 To understand the factors which are central to employee attrition 2
To suggest certain activities that L&T might undertake in order to decrease attrition rate and retain employees.
1.4
Research Methodology
Scope of the Study- Employees of L&T (LTEN- Downstream).
Area- Faridabad.
Time- 2nd April – 2nd June 2005
Research Design – Exploratory and Descriptive Research
Sources of Data Primary- Employee Survey through structured questionnaire and unstructured Interviews Secondary- Resigned Employee Data and other relevant data provided by company
Sampling Technique – Random Sampling
Sample Size – 38
Statistical technique – Chi-square test
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1.5
Conceptual Framework
Business leaders everywhere face numerous challenges. At the forefront of those challenges is sustaining competitive advantage in today’s aggressive business environment. Both corporate customers and individual consumers, with more providers to choose from than ever before, often perceive that what they are purchasing is, for all practical purposes, a commodity that can easily be obtained elsewhere. Key to distinguish in a highly commoditized and competitive market lies within the top performers—those an organization can depend on to innovate and provide differentiating service. In other words, human assets are the key in an organization’s efforts to survive and thrive. Many organizations are struggling to find and keep these valued employees. Changing work force demographics, such as the shrinking of the most desirable labor pool (25- to 34-year-olds), and downsizing’s negative impact on employee loyalty, have organizations searching for answers to recruiting and retaining the strategic asset of the 21st century: talented people.
1.6
Relevance of the study
Many researches have been done in the past to understand the critical factors responsible for employee attrition. . Thus, this research has been conducted to know the reasons behind employee attrition in L&T. Apart from this the research would also help identify the problems that the employees of L&T (ENC) are facing and what are their demands and expectations from the organization.
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1.7
Company Profile
Larsen & Toubro Limited Larsen & Toubro Limited (L&T) -a U.S. Dollar 2.1 billion company - is India's largest integrated engineering and construction conglomerate. The Company also has interests in information technology, electrical and electronic products.
L&T offers proven solutions for oil and gas, refinery, petrochemical, fertilizer, chemical, cement, steel, power and construction industries. The Company has established a reputation for technological innovation and execution of multi-disciplinary projects of great complexity. L&T is the only Indian company pre-qualified to handle large process-intensive projects on an EPC basis. Equally impressive is the Company's customer orientation. L&T's tradition of service is widely acclaimed worldwide.
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L&T- Faridabad L&T Engineering at Faridabad provides spectrum o f engineering services from concept to commissioning for Oil and Gas Sector. DEC Delhi is a •
•
A knowledge based group teaming highly skilled professionals to design and engineer projects worldwide. Growing with a vision to be counted among the World’s finest Engineering companies by consistently delivering Quality engineering at a competitive price.
E&C DIVISION L&T's Engineering & Construction (E&C) Division plays a critical role in core sectors of the industry. Over the years, it has engineered, manufactured and delivered world-class plant and equipment to almost every sector of the Indian Industry as well as to coun tries overseas. The E&C Division possesses integrated strengths in process design, basic and detailed engineering, project management, equipment fabrication, procurement, construction and commissioning. It undertakes single point responsibility for execution of projects. Strategic alliances with world leaders enable L&T to access advanced know-how and deliver projects that meet stringent quality requirements and time schedules.
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L&T Engineering (LTen) LTen is the engineering arm of L&T’s Engineering & Construction (E&C) Division. L&T Engineering at Faridabad provides spectrum o f engineering services from concept to commissioning for Oil and Gas Sector. Services include: Technology evaluation, conceptual studies, basic design, detailed engineering and 3D modeling. It address the complete value chain of engineering Business Areas: Deep Water Offshore, Onshore Oil and Gas Processing, Refinery, Petrochemical, Reformers Competitors: Bechtel, Saipem, Fluor, EIL
Job done by various Disciplines
Process Engineering The Process Engineering discipline is responsible for executing conceptual designs, front end engineering designs and detailed engineering. Process discipline supports entire spectrum of projects in Oil and Gas sector.
Mechanical Services range from design and engineering, preparation of MR’s for procurement, Bid analysis, vendor document reviews, site issues, trouble shooting etc. Mechanical discipline is staffed by engineers with experience in Oil and Gas Field projects, Refineries and Petrochemicals, Power and Fabrication Industry.
Plant Design Plant Design and piping discipline supports projects in Oil and Gas sector. Its major strength lies in providing basic engineering and detail engineering for various projects.
Civil & Structural Civil Engineering discipline provides pre-bid / conceptual design, detailed design and solutions to field specific engineering issues for the entire spectrum of Oil and Gas industries. This discipline has expertise in Civil & Structural Engg. and well trained personnel to provide high quality engineering solutions and bring in values to clients.
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Electrical Electrical discipline supports basic engineering, detailed engineering and field support for entire spectrum of Oil and Gas Projects. Discipline is staffed with qualified personnel with knowledge of national / international codes and standards and software used to do the design.
Project Controls The Project Controls group is responsible for developing detailed Project schedules and monitoring of projects. Primavera is the main software used. Project Control group supports projects by generating necessary progress reports and invoicing.
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1.8
Literature Review
ATTRITION Attrition rate is defined as the number of employees wh o leave a company during a specified time period divided by the average total number of employees over that same time period. It’s expensive, non-productive and frustrating. Harvard Business Review article estimated the cost of turnover at around 150% of an employee’s annual salary and could affect 40% of company profits.
ATTRITION CYCLE
• • •
• •
Attrition brings decreased productivity People leave causing others to work harder This contributes to more attrition, which contributes to increased costs and lower revenue This forces additional cost reduction and austerity measures This in turn makes working more difficult, causing the best performers with the most external opportunities to leave
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Employee attrition, a big cause for concern for firms, ranges between 15 per cent and 20 per cent. A company is not hurt because a certain person has left. The company is hurt because he/she takes away certain knowledge, and there is no ready replacement in the market. Attrition, as such, is not a bad phenomenon. It has been known to exist all along. However, when jobs were scarce, the technology change was less rapid, voluntary attrition was small and companies managed it. However, with technology changing rapidly and manpower costs increasing, attrition is high and hurts badly. Large players often use money power to lure talent from smaller players. Companies also use the `location' bait to attract employees. While a certain percentage of manpower turnover is desirable to keep fresh blood coming in, and removing dead wood, higher percentages are definitely not good indicators of an organization's culture and people practices. It is a challenge to find the right talent within constraints such as location, nature of work, compensation and benefits. Fresh graduates joining an organization make it a point to leave within the first year. They equip themselves not for performing their current job but for attracting a new one. Many a time, there is migration from bigger companies to smaller companies too, mainly because of the prestige associated with a certain project or a particular client. In some cases, smaller companies are even better paymasters than larger brands. The success rates of retention programs are much higher if the management uses a direct, employee-focused, approach and is ready to invest resources for the same.
PRESENT SCENERIO Attrition is instigated by good economic conditions Economy boom
Positive news about the economy- after 4-yr recession, the econo my appears to be on the rebound and is showing signs of sustainable momentum. Economic indicators support this recovery: growth rate over 8% The current economic forces are creating an environment just right for potential business disaster - unexpected employee attrition and turnover at a level many businesses have
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never experienced. Companies already weakened by downsizing and cost cutting must be prepared to heed the signs and take action if they are to survive, much less excel. Studies have revealed the following: •
•
• •
83 percent of employees are likely to seek new employment as the economy booms. 48 percent of managers are likely to seek new employment with the improving economy. 75 percent of those managers are actively looking out. 56 percent of HR professionals indicated it is likely that voluntary turnover would rise due to the improving economy.
Source: Employee Vulnerable Study by NFO India
Although some of these factors are beyond company’s direct control. When good talent walks, chances of finding a suitable replacement are slim. Better economic conditions instigates employee attrition because •
•
•
•
Survival mode - In response to the recession, companies hunkered down, tightened their belts, focused on cutting costs and cutting corners - sometimes even customers. As a result, many organizations as a whole have lost sight of or destroyed their reason for being. Little emphasis is placed on preparing for expansion opportunities as the economy recovers. With a decimated strategy and no visible commitment or active engagement toward building the future, a company's high-potential employees have little incentive to stay when a competitor offers a more compelling future. Career recession - With the flattening and downsizing of organizations, opportunities for career growth have been severely limited - both vertically and laterally. When advancement opportunities appear elsewhere, employees will be looking. In addition, some are contemplating business ventures of their own. No investment in managers - When people look for greener pastures, they're not necessarily looking for a new company. As documented in the groundbreaking study by the Gallup Organization, the number one reason people look for another position is to leave their manager , not because they don't like their job or the company. Reduced investment in management development ultimately leads to employee dissatisfaction with their manager, their primary reason for leaving. Disenfranchised employees - Many employees feel they have been taken advantage of: overworked, stifled, and burned out by excessive hours and stress, only to be rewarded with reduced benefits and/or pay. Lifetime employment no longer exists, and company loyalty is becoming a thing of the past.
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Attrition is spreading to traditional sectors as well ATTRITION is not just rampant in the BPO sector, but it is fast catching up in other traditional sectors such as manufacturing and engineering, public sector undertakings and services. According to an Employee Vulnerable Study by NFO India, employees in the traditional sectors are most dissatisfied and would switch jobs at the first available opp ortunity. However, employees belonging to new-age sectors such as financial services, insurance and banking, FMCG and white-goods, IT and telecom seem to be relatively more satisfied. The "possible vulnerability" of white-collar workers should ring alarm bells for HR heads. The major pitfalls were found to be lack of growth opportunities, dissatisfaction with job content, inadequate emphasis on policies and systems and interpersonal relationships. There is a crying need for companies to engage the employees' interest by creating a conducive environment for growth, learning, bolster `we-feeling' and compensate as per industry standards. As the hidden costs incurred in attracting the right workforce and onthe-job training, is phenomenal. While recruitment is up sharply from last year, anecdotal evidence suggests employee attrition is on the rise again, causing more than a few gray hairs in the manpower departments of engineering companies. And higher level technology companies such as chip design firms are finding that the more specific the skill required, the harder it is to get. These companies also see salaries rising and fear that much of benefits accruing to Indian firms from lower employee costs may fade, though company heads do not see that happening in the next five years or so. To be sure, employee costs arising from higher salaries are rising as they did not during 2001 and 2002, but enough companies are willing to dole out more. Some Indian companies are already feeling the pinch. Satyam Computer Services, the No.4 exporter, last month reported an employee attrition rate of almost 20 percent in the quarter ended June 30, 2007, compared with about 17 percent a year earlier. To stem defections, Satyam raised its workers' pay in India and other low-cost countries by 18 percent in July. Tata Consultancy and Infosys increased wages by 15 percent in April. Wage inflation in India- Wages are going up at the rate of 10 to 15 percent year after year.
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Source: THE HINDU, Friday, Oct 13, 2006
Talent Poaching Losing employees to competitors is common; but now partners are increasingly finding their employees poached by their own vendors and distributors The term 'employee poaching' can be defined as an act of enticing key employees to move from one firm to a competitor. It has emerged as the biggest HR challenge for enterprises, both big and small, across all industry verticals. In the recent times, the aviation sector has been the worst hit, and state-owned airlines have lost several of their in-flight crew and ground staff to the new airlines. Retail is likely to emerge as the next hotspot for poaching, as large players enter the fray and roll out their stores. The IT industry has traditionally been a happy hunting ground for poachers, for obvious reasons. Attrition rates of engineering, software and BPO companies have always been steep compared to the rest of the industries. Employee attrition is part of every manpower-intensive business.
There is a misconception among employers that emoluments matter most in attracting talent. An employee changes jobs for many reasons. Retaining human resource, especially on whom much has been spent to hone their skills, is a headache for firms. Job satisfaction is something that varies from individual to individual. Job satisfaction and employee loyalty are better in companies that allow their staff the freedom to unleash their creativity and never fail to appreciate a job well done. Too much of interference and bossing stifles growth and creativity, the motivation levels of employees plunges and they look for the exit. An atmosphere of distrust too could lead to employee attrition. It is in the institution's interest to provide a congenial atmosphere and take initiatives that would keep the workforce morale high. Contentment and job satisfaction certainly matter more than fat pay packets and perquisites though with the usual exceptions. There are many factors that contribute to the problem of employee turnover. Some of these factors cannot be directly controlled by organizations, such as area economic or labor market conditions. It appears that the high unemployment rate of graduates looking for professional work experience is a major force responsible for excessive employee turnover in India.
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The level of turnover may exceed a company's capability to handle it and can force a strategic crisis - schedule slips, quality degradation, business process breakdown, delivery delays, and the resulting potential of customer attrition. The kind of treatment meted out to the new recruit by the organization and co-workers during this crucial transition period can determine the candidate's decision to either continue in the job or call it quits. Considering that it can cost a company between 50 and 150% of an employee's salary to find a suitable replacement, it is simpler and far more economical to extend the red carpet treatment to new recruits, and go all out to ensure that they fit in comfortably with the office culture. Reports indicate that much of the voluntary turnover of companies takes place within the first one year of employment, corroborating the widely held belief that first impressions play a significant role in an organization's ability to find and retain talented employees. During this time, newcomers are often quietly sizing up the organization and testing waters to see if the job is an ideal fit. Not surprisingly, organizations that make them feel wanted and welcome are the ones they choose to build their careers with.
COST OF ATTRITION Employee attrition could affect 40% of company profits. Around 150% of an employee’s salary
(source- Harvard Business Review article)
Tangible recovery costs include recruiting, rehiring, and retraining. In fact, a new employee typically is a cost to the company until he or she reaches a threshold of productivity. In higher level technical and management positions this can exceed 6 months. For companies that have cut all expenses not deemed mission critical, such as training and recruitment efforts, the lag in performance, additional cost, and stress on remaining employees creates a vicious downward spiral. Equally critical to an organization's viability are its Vital Intangibles (VIs), which can take the form of informal relationships, networking connections, or a web of favors a key employee has spun during his or her tenure - favors from vendors or other business contacts that can be called in as needed. VIs are hard to identify and may be even harder to recoup. Many companies will take the steps to protect trade secrets, intellectual property, copyrights and patents, but intangible assets are less obvious, though no less critical to an organization, and their loss is no less damaging. Undocumented workarounds, tricks, tips and "the knack" that come from experience in multiple roles within the organization make up another collection of VIs. These are the
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subtleties that allow an employee to do a task more efficiently, thereby increasing their performance - and the company's. How much is this knowledge worth to your business?
1. Cost of the person(s) who fills in while the position is vacant. This can be either the cost of a temporary or the cost of existing employees performing the vacant job as well as their own. 2. Cost of lost productivity at a minimum of 50% of the person's compensation and benefits cost for each week the position is vacant, even if there are people performing the work. 3. Cost of conducting an exit interview to include the time of the person conducting the interview, the time of the person leaving, the administrative costs of stopping payroll, benefit deductions, benefit enrollments, COBRA notification and administration, and the cost of the various forms needed to process a resigning employee. 4. Cost of the manager who has to understand what work remains, and how to cover that work until a replacement is found. 5. Cost of training your company has invested in this employee who is leaving. Include internal training, external programs and external academic education. 6. Impact on departmental productivity because the person is leaving. 7. Cost of severance and benefits continuation provided to employees who are leaving that are eligible for coverage under these programs. 8. Cost of lost knowledge, skills and contacts that the person who is leaving is taking with them out of your door. Recruitment Costs
1. Cost of advertisements 2. Cost of the internal recruiter's time to understand the position requirements, develop and implement a sourcing strategy, review candidates backgrounds, prepare for interviews, conduct interviews, prepare candidate assessments, conduct reference checks, make the employment offer and notify unsuccessful candidates. This can range from a minimum of 30 hours to over 100 hours per position. 3. Cost of the hiring department (immediate supervisor, next level manager, peers and other people on the selection list) time to review and explain po sition requirements, review candidates’ background, conduct interviews, discuss their assessments and select a finalist. Also include their time to do their own sourcing of candidates from networks, contacts and other referrals. This can take upwards of 100 hours of total time. 4. Cost of the various candidate pre-employment tests to help assess a candidates' skills, abilities, aptitude, attitude, values and behaviors. Training Costs
1. Cost of orientation
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2. Cost of departmental training 3. Cost of supervisory time spent in assigning, explaining and reviewing work assignments and output. This represents lost productivity of the supervisor. Consider the amount of time spent at 7 hours per week for at least 8 weeks. Lost Productivity Costs
As the new employee is learning the new job, the company policies and practices, etc. they are not fully productive. Use the following guidelines to calculate the cost of this lost productivity: 1. Cost of coworkers and supervisory lost productivity due to their time spent on bringing the new employee "up to speed." 2. Cost of mistakes the new employee makes during this elongated indoctrination period. New Hire Costs
1. Cost of bring the new person on board including the cost to put the person on the payroll, establish computer and security passwords and identification cards, business cards, internal and external publicity announcements, telephone hookups, cost of establishing email accounts, co sts of establishing credit card accounts, or leasing other equipment such as cell phones, automobiles.
SITUATION IN L&T L&T is facing a high attrition rate of over 25%. L&T is the only Indian Engineering multinational company with such a great potential and talent, and it should try to improve its performance by retaining this talent. Change in policies and strategy due to this is ultimately going to benefit the company, which has already started Talent crisis. L&T will always attract good people but the only question mark is whether it will retain them.
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ATTRITION RATE CALCULATION Attrition rate= [No of resignations]/ [(No of emp. at yr start +No of emp. at yr end)/2]
Attrition Rate in LTen: 05-06: [11]/ [(35+102)/2] =17.5% 06-07: [38]/ [(102+187)/2] =26.29% Sharp increase in attrition rate in 06-07 from 05-06 Resignations in project duration: April 07- 4 May 07- 7 Resignation letters in May 07- 9
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Chapter 2 2.1 Scope of the Study
The study was conducted on employees of L&T- Engineering and Construction Division, Faridabad. Employees were interviewed with questionnaires which had structured questions on their importance attached to various factors behind employee attrition.
Area: L&T- Faridabad
Time: The primary data collection and analysis was conducted between 2nd April 2007 and 2nd June 2007.
2.2
Hypothesis
S.No. Research Question Hypothesis 1. Is s alary t he most i mportant reason Ho: Salary is the most important reason why employees leave the organization?
why employees leave the organization
H1: Salary is not the most important reason
why
organization.
2.3
Sources of Data
22
employees
leave
the
Data was collected from both primary as well as secondary sources. Firstly, secondary data available was reviewed to know the current scenario in the industry, calculation of attrition rate, the cost of attrition, the most common reasons behind attrition. The resigned employee data was also analyzed. This was followed by a primary survey to find the problems that the employees are facing and the importance they attach to various factors behind attrition.
2.4
Questionnaire Design The questionnaire was designed based on the literature review done as well as with the views of the industry experts. The questions in the questionnaire helped us correlate and find out the relative importance of various factors that are responsible for attrition. The relationship has been found using chi-square test.
2.5
Target Population The target population was employees of L&T- ENC division (Faridabad)
2.6
Sampling 2.6.1
Sampling Design – The employees were sampled on the basis of Random
Sampling.
2.6.2
Sample Size – The sample size for the employee survey was 38 which
would be approximately 20% of the target population.
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2.7
Procedure for Data Collection For the purpose of data collection both primary as secondary data would be used. For the purpose of primary data collection of employee research, employees were administered with a questionnaire which had structured questions. Also few unstructured interviews were carried out. Secondary data of resigned employees and other relevant information was provided by the company.
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Chapter 3 Data Presentation L&T is into several business lines, ENC being one of them. A part of the ENC division in Faridabad is L&T Engineering (LTen), which had a high rate of attrition. Secondary data: 38 employees resigned in the year 06-07. Data of these resigned employees was collated and analyzed to form a hypothesis. Primary data: Data collected from unstructured interviews and employee survey was analyzed to test the hypothesis.
3.1
SECONDARY DATA PRESENTATION
3.1.1 STRENGTH DATA
Total Employee Data 05-06: Month Wise Report Of Total Strength Of Employees Year 5 0 0 2 4 0 0 2
6 0 0 2 – 5 0 0 2
Months
Appointment
Separations
Total Strength
MARCH '05 APR '05 MAY '05 JUN '05 JUL '05 AUG '05 SEP '05 OCT '05 NOV '05 DEC '05 JAN '06 FEB '06
6 6 6 6 7 4 3 1 8 3 14
0 0 2 0 1 1 0 2 2 0 3
35 41 47 51 57 63 66 69 68 74 77 88
MAR '06
14
0
102
25
TOTAL
78
11
06-07:
Month Wise Report Of Total Strength Of Employees
Year 6 0 0 2 5 0 0 2
7 0 0 2 – 6 0 0 2
Months
Appointment
Separations
MARCH '06
Total Strength
102
APR '06 MAY '06 JUN '06 JUL '06 AUG '06 SEP '06 OCT '06 NOV '06 DEC '06 JAN '07 FEB '07
3 2 3 12 29 11 23 14 12 1 2
0 4 2 (1 ADV) 2 2 3 3 3 2 2 4
105 103 105 114 141 149 169 180 190 189 187
MAR '07 TOTAL
13
13 (1 ADV)
187
125
40 (2 ADV)
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APPOINTMENTS 05-06: MONTH WISE APPOINTMENTS 14
12
10
8
No of app 6
4
2
0 APR '05
MAY JUN '05
'05
JUL '05
AUG SEP '05
'05
OCT NOV DEC '05
'05
'05
JAN
FEB
'06
'06
MAR '06
JAN
FEB
MAR
'07
'07
'07
Month
06-07: MONTH WISE APPOINTMENTS 30
25
20
No of app 15 10
5
0 APR '06
MAY JUN '06
'06
JUL '06
AUG SEP '06
'06
OCT NOV DEC '06
'06
Month
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'06
RESIGNATIONS 05-06 MONTH WISE RESIGNATIONS 3 2.5 2
No of resg
1.5 1 0.5 0 APR
MAY
JUN
JUL
AUG
'05
'05
'05
'05
'05
SEP '05
OCT NOV '05
'05
DEC
JAN
FEB
'05
'06
'06
MAR '06
Month
06-07: MONTH WISE RESIGNATIONS 12 10 8 No of resg
6 4 2 0 APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR '06 '06 '06 '06 '06 '06 '06 '06 '06 '07 '07 '07 Months
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STRENGTH 05-06: MONTH WISE STRENGTH (05-06) 120
100
80
Tot strength
60 Series1 40
20
0 APR
JUN
AUG
OCT
DEC
FEB
'05
'05
'05
'05
'05
'06
Month
06-07: MONTH WISE STRENGTH (06-07) 200 180 160 140 120 Tot strength 100 80 60 40 20 0 APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR '06 '06 '06 '06 '06 '06 '06 '06 '06 '07 '07 '07 Month
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This data suggests that in the year 05-06 there has been a heavy recruitment drive and few resignations. Strength of the company increased three fold from previous year. On the other hand, in the year 06-07 there has been a heavy recruitment drive but still the strength has not matched the set targets as there are many resignations during the year.
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3.1.2
RESIGNED EMPLOYEE DATA
Department facing highest attrition rate
Department 10 9 8 7 6 5 4 3 2 1 0 CIVIL
M ECH
INSTRU
PIPING
PROC
ELEC
PROJ
Dept
L&T has 7 engineering departments: Civil, Mechanical, Piping, Instrumentation, Process, Electrical and Projects PIPING Dept had highest attrition (9) followed by CIVIL (8). Findings: Employees have left from each department. However highest number of employees have left from the PIPING AND Civil Departments. Projects and HR Department faces lowest attrition.
3.3
Time-span with highest rate of attrition Time Span
Time-span of <1 yr has highest 2
attrition (21). Findings: Highest number of
<1Y R
15
1-2 Y RS
21
>2 Y RS
employees have left in <1 yr of their
time-span
in
the
organization. This suggests that
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people are using L&T as a spring board because of its brand name. Few have left in >2 yrs.
Grade with highest attrition
Grade Wise
16 14 12 10 No of resg e mp
8 6 4 2 0 E1
E2
E3
Executiv e
MI TO M5 TO M4 M9 Managerial
S
JS
Supervisory
Grade
There are three divisions of grade in the company. Supervisory grade is given to diploma holding employees, executive grade is given to degree holding employees and managerial grade is higher than executive grade. Executive Grade has highest attrition (24) followed by Supervisory Grade (8). Very few resignations are from Managerial Grade (6). Findings: Employees have left from each grade. However highest number of employees have left from Executive grade. Managerial grade faces lowest attrition. The probable reason for this is ESOPS being offered to them.
Qualification wise attrition
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QUALIFICATION
7
ENG DRAFT
31
L&T employs both engineers and draftsmen. Highest attrition (31) was among engineers. Findings: Employees with engineering qualification have left more than those with draftsmanship qualification. This suggests loss of more qualified manpower.
Month wise attrition
MONTH WISE RESIGNATIONS 12 10 8 No of resg
6 4 2 0 APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR '06 '06 '06 '06 '06 '06 '06 '06 '06 '07 '07 '07 Months
MARCH month had highest attrition (12) followed by FEBRUARY (4) and MAY (4).
33
Findings: Employees have left in each month. Most employees have left in the month of March, almost thrice the number from other months.
Monthly Attrition Rate
Month Wise Attrition Rate 7 6 5 4
Percentage 3 2 1 0 APR '06
MAY JUN JUL '06
'06
'06
AUG SEP OCT NOV DEC JAN '06
'06
'06
'06
'06
'07
FEB MAR '07
'07
Month
MARCH month had highest attrition (6.2%) followed by MAY (3.7%). Findings: Employees have left in each month. Most employees have left in the month of March, almost thrice the number from other months.
Rating wise
34
Rating
18 16 14 12 No of resg em p
10 8 6 4 2 0 TOP
MIDDLE
LOWER
OTHERS
Rating
Employees in L&T are rated after the completion of 11 months of their service in the organization. Ratings given are Top, Middle, Lower and people who were not rated fall in the Others rating category. Highest attrition was from OTHERS Rating (17) followed by MIDDLE Rating (8). Findings: Employees of each rating have left. However highest number of employees have left from the OTHERS rating i.e. they we re not rated before leaving the organization as the rating of employees is done after completion of 1 year of service in the month of January . Some TOP rated people have also left the organization which means highest loss to an organization.
Reasons given by resigned employees
35
Reason Wise 18 16 14 12 No of resg 10 emp 8 6 4 2 0 SAL
BEN J OB
OPP SUP
PEE LO C MGM RE S
Reason
Reasons were asked from the nine factors: salary, benefits, job content, opportunity for development, relationship with supervisor, relationship with peers, location of work place, management policies and work culture, resources to do the job Among resigned employees, 17 employees gave salary, 16 employees gave opportunity for development and growth, 2 gave management policies and 1 gave location of work place as a reason for leaving. Findings: Salary and Opportunity for development and growth are the reasons given by most employees for leaving the company.
3.2
PRIMARY DATA PRESENTATION 36
3.2.1 DATA FROM UNSTRUCTURED INTERVIEWS
Areas of Dissatisfaction
Compensation and benefits are defaulted
Salary is not competitive
Discrimination in compensation among different units
Lack of training and mentoring programs
Lack of perks and facilities
Long work hours and no conveyance facility
Lack of social activities and initiatives for employee families
37
3.2.2 SURVEY DATA
3.8
Total Employees Covered in Survey
Year Wise Sample Composition
12 18
< 1yr 1to 2 yrs > 2yr s
8
The sample for survey consisted of 18 people whose time span in the organization was <1 yr, 12 people whose time span was 1-2 yrs and 8 people whose time span was >2 yrs.
Grade Wise Sample Composition
4
E
11
M
23
S
The sample for survey consisted of 23 people from E band, 11 people from M band and 4 people from S band.
38
Survey Results Tabulation of 1st most important reason and 2nd most important reason given by each of the 38 employees surveyed along with their grade and time span in the organization.
SURVEY RESULTS S NO.
ST
1
REASON
2ND REASON
GRADE
TIME SPAN
1
Salary
R/s with supr
E
<1 yr
2
Salary
opp for dev
E
<1 yr
3
job content
opp for dev
M
>2 yrs
4
Salary
location
M
1 to 2 yrs
5
Salary
opp for dev
E
<1 yr
6
opp for dev
salary
E
<1 yr
7
Salary
location
E
<1 yr
8
opp for dev
resources
M
1 to 2 yrs
9
Salary
opp for dev
E
<1 yr
10
job content
salary
M
<1 yr
11
Benefits
opp for dev
E
<1 yr
12
opp for dev
R/s with supr
E
>2 yrs
13
Resources
job content
M
>2 yrs
14
opp for dev
job content
M
>2 yrs
15
job content
opp for dev
M
>2 yrs
16
management policies
R/s with supr
E
1 to 2 yrs
17
R/s with supr
opp for dev
M
>2 yrs
18
R/s with peers
resources
M
>2 yrs
19
opp for dev
salary
S
1 to 2 yrs
20
opp for dev
salary
E
<1 yr
21
Salary
R/s with supr
E
<1 yr
22
opp for dev
job content
E
>2 yrs
39
23
Salary
opp for dev
E
1 to 2 yrs
24
opp for dev
job content
E
<1 yr
25
Salary
mgmt policies
M
>2 yrs
26
job content
opp for dev
S
<1 yr
27
opp for dev
salary
S
>2 yrs
28
Salary
job content
E
<1 yr
29
Salary
opp for dev
S
<1 yr
30
Salary
opp for dev
E
<1 yr
31
opp for dev
mgmt policies
E
<1 yr
32
Salary
opp for dev
E
1 to 2 yrs
33
job content
opp for dev
E
1 to 2 yrs
34
opp for dev
resources
E
>2 yrs
35
job content
salary
E
<1 yr
36
job content
salary
E
1 to 2 yrs
37
opp for dev
salary
E
<1 yr
38
R/s with peers
opp for dev
M
>2 yrs
40
Frequency of Most Important Reasons
1st Reason Frequency
1 1 1
2
Opp for dev
1
12
Salary Job Content R/S w ith supr
7
R/S w ith peers Benefits Resources Mgmt 13
13 people said that 1st most important reason for attrition was salary, 12 said opportunity for development and 7 said job content.
2nd Reason Frequency
2 3 Opp for dev
0 2
Salary 14
Job Content R/S w ith supr
4
Location Benefits Resources
5
Mgmt 8
14 people said that 2nd most important reason for attrition was opportunity for development, 8 said salary and 5 said job content.
41
Time-Span Wise
Less than 1 yr
6% 17% sal opp 49%
job ben
28%
FINDINGS: Among the people who have been working in the organization for less than 1 yr, most (49%) feel salary is the most important reason for attrition, some (28%) feel opportunity for development and growth is the most important reason. Some (17%) also feel job content is the most important reason and few (6%) feel benefits are most important.
1 to 2 yrs
25% 37%
sal opp mgmt job
13% 25%
42
FINDINGS: Among the people who have been working in the organization for l to 2 yrs, most (37%) feel salary is the most important reason for attrition, some (25%) feel opportunity for development and growth is the most important reason. Some (25%) also feel job content is the most important reason and few (13%) feel management policies are most important.
Greater than 2 yrs
8%
17%
job
17%
opp res supr peer
8% 8%
42%
sal
FINDINGS: Among the people who have been working in the organization for more than 2 yrs, most (42%) feel opportunity for development and growth is the most important reason for attrition, some (17%) feel job content is the most important reason. Some (17%) also feel relationship with peers is the most important reason, few (8%) feel relationship with supervisor is most important and very few (8%) feel salary is most important.
43
Grade Wise
Executive Grade
13%
4%
sal
4%
44%
opp for dev benefits management job content
35%
FINDINGS: Among the people from Executive Grade, most (44%) feel salary is the most important reason for attrition, some (35%) feel opportunity for development and growth is the most important reason. Some (13%) also feel job content is the most important reason and few (4%) feel benefits are most important. Very few (4%) feel management policies are most important.
44
Managerial Grade
18%
28%
job sal
9%
opp res supr
9%
peer
18% 18%
FINDINGS: Among the people from Managerial Grade, most (28%) feel job content is the most important reason for attrition, some (18%) feel opportunity for development and growth is the most important reason, some (18%) feel relationship with peers is the most important reason. Some (18%) also feel salary is the most important reason and few (9%) feel relationship with supervisor is most important. Very few (9%) feel resources to do the job are most important.
Supervisory Grade
25% opp for dev job content 50% 25%
45
salary
FINDINGS: Among the people from Supervisory Grade, most (50%) feel opportunity for development and growth is the most important reason for attrition, some (25%) feel salary is the most important reason. Some (25%) also feel job content is the most important reason.
Thus, if we combine the data then we get that overall the most critical reason responsible for employee attrition is Opportunity for development and growth. Next important reason is Salary followed by Job content and Relationship with supervisor.
46
Points Given to Each Reason by Each Employee in the Questionnaire
Tabulation of the points allotted to each factor by each of the 38 employees surveyed
S No.
Dev opp
Job
R/s sup
R/s peers
Locatio n
Mgmt pol
Salary
Benefits
1
16
14
9
13
15
6
9
12
14
2
17
7
12
16
15
14
8
8
11
3
14
1
17
17
13
11
10
14
11
4
17
14
8
12
15
9
17
11
5
5
16
8
13
16
13
11
8
10
13
6
15
8
14
16
10
9
11
12
13
7
15
13
12
12
12
10
15
8
11
8
8
13
12
16
13
11
9
12
14
9
16
14
9
15
11
10
8
12
13
10
15
9
15
14
11
10
9
11
14
11
12
16
9
15
13
13
9
9
12
12
14
9
11
17
15
12
4
12
14
13
14
9
17
16
6
6
8
14
18
14
13
8
14
14
14
11
10
11
13
15
11
9
16
15
11
11
7
13
15
16
10
12
11
11
15
14
8
16
11
17
15
10
14
17
18
0
8
11
15
18
11
2
13
15
11
17
9
14
16
19
14
11
11
16
12
10
12
10
12
20
14
10
12
16
14
8
9
11
14
21
23
10
7
13
15
10
8
10
12
22
14
7
16
18
12
10
7
13
11
23
19
5
13
17
11
10
10
10
13
24
12
8
17
17
13
8
8
13
12
25
17
9
13
12
10
8
11
15
13
26
8
7
18
17
13
11
8
13
13
27
15
12
13
15
9
9
10
13
12
47
Resrcs
28
18
7
17
15
12
10
10
7
12
29
17
13
14
15
14
13
1
13
8
30
20
12
15
16
13
10
5
9
8
31
11
9
13
15
13
13
8
15
11
32
17
6
13
14
13
13
10
12
10
33
19
3
20
19
8
9
6
8
16
34
10
7
16
17
12
15
5
9
17
35
14
7
18
13
13
9
13
12
9
36
18
4
19
15
12
9
8
10
13
37
14
9
12
16
13
11
9
12
12
38
10
10
13
15
15
16
7
13
9
553
342
516
578
478
397
332
438
470
Total
Reason Wise Points 600 500 400 Points 300 200 100 0 Sal
Ben
Job
Opp
sup peers Loc
Mgm Res
Reason
Finding: The survey results reveal that Opportunity for development and growth is the most important factor behind employee attrition as it has the highest score. Second important reason is Salary. Third important reason is Job content. Fourth important reason is Relationship with supervisor.
48
Chapter 4
Hypothesis Testing for Employee Survey Data
Ho: Salary is the most important reason why people leave the organization.
H1: Salary is not the most important reason why people leave the organization.
Chi-Square Calculations
FACTOR Sal Ben Job Opp Supr Peer Loc Mgmt Resr Total
df= 8,
E
O 904 400 400 400 400 400 400 400 400 4104
(E-O) 553 342 516 578 478 397 332 438 470 4104
351 58 116 178 78 3 68 38 70
(E-O)^/E 136.28 8.41 33.64 79.21 15.21 0.02 11.56 3.61 12.25 300.19
Significance level= 0.05
Table value= 15.507
The computed value is higher than the critical value. Hence we reject the null hypothesis. The hypothesis is rejected and hence we accept the alternate hypothesis that salary is not the most important reason why employees leave an organization.
49
FINDINGS
Although salary is important, but it is not the most important reason for employee attrition in the organization
Most important reason for attrition is opportunity for development and growth Next important factor came out to be Salary followed by Job content and Relationship with supervisor
Almost every one surveyed from the <1 yr time-span category said salary was the most important reason responsible for attrition. Almost none from >2 yr timespan said Salary was most important
Among the people who said salary was the most important reason, most were from E and S Grade and very few from M grade
50
Chapter 5 Suggestions for Improvement The most important factor that has come as a result of the employee survey and unstructured interviews is Opportunity for development and growth. This is one reason why many people leave. This is one area that needs immediate attention.
Another very important factor is Salary. Salary is not competitive. This point has been pointed out by many employees.
Suggestions:
Opportunity for Growth and Development
Induction process needs to be more effective and interesting. Employee expectations should not be raised too high
Provide 360 degree feedback. Online appraisal system (FAIR) needs to be more effective and fair
Recognize employees for good performance- MLP (managerial leadership program) and ELP (employee leadership program) are to evaluate potential, but instead they should be performance based
Mentoring programs, on-line personal assessments
Invest in training and development- programs should be frequently conducted and customized to needs of employees- Competency Mapping.
Fresh graduates should be provided sufficient amount of training before job is assigned to them
51
Salary and Benefits
Adopt pay-banding- competitive with market rates
Standardized compensation for all business units (esp. within the same center) and fair pay.
Higher base pay raise on performance- presently it’s a meager amount of a few hundreds
Benefits like retention bonuses etc should be given
General
Structured exit interviews should be conducted
Opinion surveys, feedback forums, employee suggestion box or employee suggestion committee and employee satisfaction surveys
Holding meetings with employees on a regular basis to identify their desires and needs
Most importantly implementing the most promising recommendations immediately
52
CONCLUSION Study of HR practices and employee attrition in the organization was a great learning experience. It helped in understanding the intricacies of HR role in an organization. The study helped in finding out the most critical reasons responsible for employee attrition in the organization. It brought various concerns of the employees to the forefront. Apart from the project there was also a lot of on-the-job training which helped enhance HR skills and gain a better understanding of the functioning of HR. It was an effective learning in combining the theoretical and practical aspects relating to project. There has been immense learning in the field of employee retention. The basics about attrition and retention, attrition calculation, cost of attrition, consequences of high attrition rate and reasons for attrition. The study helped in understanding the relative importance of various factors responsible for employee attrition, also revealed the fact that that opportunity for development and growth is most important for the employees of the organization. There is a crisis in human capital management. We need fundamental reform in order to address this crisis and ensure long-term ability to hire and manage a high-quality, high-performing workforce. Most employees are not motivated solely by money. Historically, firms have used money and financial rewards to retain employees. High tech employees are enjoying the fastest salary progression of almost any profession, yet they are changing jobs constantly. Today’s employees seek more than monetary compensation. Research conducted in the company revealed that opportunity for development, salary, job content, relationship with supervisor are important reasons for employee attrition. The myth that salary is the most important reason for employee attrition was clarified as employees are more concerned about opportunity for development. Salary is also important, salary needs to be competitive with the market rates, other wise there is a high risk of loosing your employees to your competitors. I also learned that even though the salary might be high, an employee would be willing to change job for better development opportunity. L&T can retain employees and reduce attrition rate by dealing with the two important factors behind attrition, Opportunity for development and growth and Salary. More focus on employee training and employee recognition is required. Salary needs to be made more competitive. To retain employees it is important to provide sufficient opportunities for development and growth, competitive salary, challenging jobs that use employee skills efficiently and good managerial guidance, among other things. We are in a time of manpower shortages that will not abate in the near term. Employers have to work smarter and permit employees to work smarter.
53
ASSUMPTIONS
Certain assumptions were made while conducting the study.
• •
Sample is representative of the target population Probability of type 1 error is 5%
LIMITATIONS
The study suffers from some limitations due to the problems encountered during the project study.
Sample size was limited to one business unit, thus the results cannot be generalized to other business units. •
The study is limited to a small time frame of two months and hence the results may be biased. •
Some of the respondents were reluctant to part with certain information on the text of sensitivity of the information and also, in some ca se the policy of the company came in the way for a free revelation of the desired input. •
Some of the employees were not candid enough to divulge all the required information. •
The magnitude of the influence of these limiting factors can have a bearing on the report, but is too little to alter the basic objectives of the report.
54
Annexure 1 Questionnaire The objective of this questionnaire is to co-relate the important attributes that one considers to work for an organization
Allocate 3 points between the two alternative reasons in each pair based on perceived importance in the following fashion
0 3
or
1
or
2
2
or
1
3 0
Numbers assigned to each pair should add up to 3.
1
Job content Resources to do the job
2
Salary Benefits (like telephone, medical entitlement)
3
Opportunity for development and growth Location of work place
4
Relationship with supervisor Management policies and Work culture
5
Relationship with peers Job content
6
Benefits (like telephone, medical entitlement) Management policies and Work culture
7
Location of work place Relationship with peers
55
8
Resources to do the job Relationship with supervisor
9
Management policies and Work culture Salary
10
Job content Location of work place
11
Relationship with supervisor Relationship with peers
12
Benefits (like telephone, medical entitlement) Resources to do the job
13
Opportunity for development and growth Management policies and Work culture
14
Salary Location of work place
15
Job content Relationship with supervisor
16
Benefits (like telephone, medical entitlement) Opportunity for development and growth
17
Resources to do the job Location of work place
18
Relationship with supervisor Benefits (like telephone, medical entitlement)
19
Relationship with peers Management policies and Work culture
20
Job content Salary
21
Location of work place 56
Relationship with supervisor 22
Resources to do the job Management policies and Work culture
23
Relationship with peers Opportunity for development and growth
24
Job content Benefits (like telephone, medical entitlement)
25
Management policies and Work culture Location of work place
26
Salary Resources to do the job
27
Relationship with peers Benefits (like telephone, medical entitlement)
28
Opportunity for development and growth Salary
29
Job content Management policies and Work culture
30
Relationship with supervisor Salary
31
Resources to do the job Relationship with peers
32
Job content Opportunity for development and growth
33
Salary Relationship with peers
34
Opportunity for development and growth Relationship with supervisor
57
35
Benefits (like telephone, medical entitlement) Location of work place
36
Resources to do the job Opportunity for development and growth Employee Profile
Time-span in organization: □ <1 yr □ 1-2 yrs □ >2 yrs Grade: □E □S
□M
REFERENCES
58
