AN EMPIRICAL ANALYSIS OF EMPLOYEE ATTRITION AND

RETENTION STRATEGIES IN INFORMATION TECHNOLOGY

(IT) INDUSTRY, PUDUCHERRY

A Thesis submitted to Pondicherry University in partial fulfillment of the

requirements for the award of the degree of

DOCTOR OF PHILOSOPHY

IN

COMMERCE

By

Mrs. G. ARUNMOZHI

Under the Guidance of

Dr. P. NATARAJAN

Professor and Research Supervisor

DEPARTMENT OF COMMERCE

SCHOOL OF MANAGEMENT

PONDICHERRY UNIVERSITY

PUDUCHERRY – 605014

JANUARY-2018

i

Dr. P. Natarajan

Professor and Research

Supervisor

Department of Commerce

School of Management

Pondicherry University

Puducherry-605 014

CERTIFICATE

This is to certify that the thesis entitled “AN EMPIRICAL ANALYSIS OF

EMPLOYEE ATTRITION AND RETENTION STRATEGIES IN INFORMATION

TECHNOLOGY (IT) INDUSTRY, PUDUCHERRY” submitted for the award of the

degree of Doctor of Philosophy by Mrs. G. ARUNMOZHI is based on the original

work done by her in the Department of Commerce, Pondicherry University,

Puducherry, India and that the work has not previously formed the basis for award of

any Degree, Diploma, Associateship, Fellowship or any other similar title.

Place: Puducherry

Date: (Dr. P. NATARAJAN)

Countersigned

Dean Head

School of Management Department of Commerce

ii

DECLARATION

I hereby state that the thesis entitled “AN EMPIRICAL ANALYSIS OF

EMPLOYEE ATTRITION AND RETENTION STRATEGIES IN

INFORMATION TECHNOLOGY (IT) INDUSTRY, PUDUCHERRY”,

submitted to the Department of Commerce, Pondicherry University, for the award of

degree of Doctor of Philosophy in Commerce is my original work under the supervision

and guidance of Dr. P. NATARAJAN, Professor, Department of Commerce,

Pondicherry University. It has not previously formed the basis for the award of any

degree, Diploma, Associateship, Fellowship or any other similar title.

Place: Puducherry

Date: (G.ARUNMOZHI)

MRS. G. ARUNMOZHI

Doctoral Research Scholar

Department of Commerce

School of Management

Pondicherry University

iii

ACKNOWLEDGEMENT

“If each of my words were drop of water, you would see through and glimpse

what I feel: gratitude, acknowledgement” - Octavio Paz

This research work has given me an immense sense of satisfaction. This is

because of learning so many things and developing many skills during my research work.

I express my sense of gratitude to the Department of Commerce, School of

Management, Pondicherry University for giving me an opportunity to pursue my

research work.

I wish to express my sincere thanks to Dr. P. Natarajan, Professor, Department

of Commerce, Pondicherry University, who throughout this journey of research acted as a

friend and philosopher as being a guide. Who not only agreed wholeheartedly to be my

guide for my research work, but also provided me all necessary direction and motivation

to keep me spirited up throughout the execution of this research. His dynamism and

enthusiasm motivated me and energized me in pursuing this work with its all ups and

down.

I would like to wholeheartedly be grateful to my Doctorial Committee members

Dr. Y. Venkata Rao, Professor & Head, Department of Tourism Studies, Pondicherry

University, and Dr. M. Banumathi, Associate Professor, Department of International

Business, Pondicherry University for their help and valuable suggestions in completing

my work.

iv

I extend my sincere thanks to Dr. Malabiko Deo, Professor and Head,

Department of Commerce, Pondicherry University, for her continuous support

throughout my research work.

I extend my thanks to all Faculty members and Office staff of department of

commerce for their moral support and encouragement in completing my research work.

I express my gratitude to the Principals, Dr. W.V.Balaji, Perunthalaivar

Kamarajar Arts College, Madhagadipet, and to the former principals Dr.V. Ramasamy,

Dr.P. Nallasamy, Dr. Cheryl-Ann Gerardine Shivan, Perunthalaivar Kamarajar Arts

College, Madhagadipet, who have encouraged me and extended their helping hands for

completing my research work.

My sincere and heartfelt thanks to Dr.A.Senthamizhraja, HOD, Department of

Commerce, Perunthalaivar Kamarajar Arts College, Madhagadipet and my dear

colleagues Dr. V.Veeraperiyanayagi, Mr. C.Chandrakasan, and Mr.A.Albert

Joseph Raj, who had been extremely considerate, co-operative and encouraging me

throughout my research work.

The pace of research work gets accelerated only in a sustained research

environment. I must be very thankful to my scholar friends, Dr.P. Nalini, Mr.D. Sadish

Kadhane, Ms. R.Bhuvaneswari, Mr.P. Nikhil and Mrs.M. Gowri, for creating a

research environment of information, knowledge and experience sharing.

Success is impossible without the warmth and loving family. I am indebted to my

parents who wished me to be doctorate. I pay my sincere appreciation to my life partner

Mr.S.Pushparaj, without whose motivation, co-operation and moral support, it is

v

impossible to complete the work. I thank my loveable kids P.Geetika and

P.Neerthikan for tolerating with me all along the research work and during the

preparation of this report.

Last but not least I thank my students particularly I batch B.Com.(PKAC)

students Gunasekar, Elango and Thulasi who helped me during my data collection

process and wished me to complete the research as earlier as possible.

(G.ARUNMOZHI)

v

Table of Contents

Certificate

Declaration

Acknowledgement

Table of Contents

List of Tables

List of Figures

Abbreviations used

CHAPTER TITLE PAGE No

I INTRODUCTION AND DESIGN OF THE STUDY 1-14

II REVIEW OF LITERATURE 15-36

III EMPLOYEE ATTRITION AND EMPLOYEE

RETENTION: A CONCEPTUAL OVERVIEW

37-61

IV EMPLOYEE PREFERENCE TOWARDS AN

ORGANIZATION

62-97

V EMPLOYEE ATTRITION: CAUSES AND

MEASUREMENT

98-113

VI EFFECTS OF EMPLOYEE ATTRITION AND RETENTION

STRATEGIES: EMPLOYER’S PERCEPTION 114-138

VII SUMMARY OF FINDINGS, SUGGESTIONS

AND CONCLUSION

139-152

BIBILIOGRAPHY

APPENDIX

vi

List of Tables

Table No Title Page No

1.1 Reliability Test for Employees Interview Schedule 7

1.2 Reliability Test for Employers Interview Schedule 7

1.3 Demographic Profile of the Employees of IT Industry 8

1.4 Demographic Profile of the Employers of IT Industry 10

1.5 Kolmogrov-Smirnov Test for data analysis for employees

Interview Schedule

12

1.6 Kolmogrov-Smirnov Test for data analysis for employers

Interview Schedule

12

4.1 Variable descriptions of Employee Preference towards an

Organization

63

4.2 Descriptive Statistics of Employee’s perception about

Nature of Job

65

4.3 Descriptive Statistics of Employee’s perception about

Working Condition

66

4.4 Descriptive Statistics of Employee’s perception about

Motivation

66

4.5 Descriptive Statistics of Employee’s perception about

Company Policies

67

4.6 Descriptive Statistics of Employee’s perception about

Remuneration

68

4.7 Descriptive Statistics of Employee’s perception about Inter-

Personal Relationship between Employees

69

4.8 Descriptive Statistics of Employee’s perception about

Interpersonal Relationship between Employee and Superior

69

4.9 Descriptive Statistics of Employee’s perception about HRD

practices

70

vii

4.10 Descriptive Statistics relating to overall ranking of factors of

Employee Preference towards an Organization

71

4.11 Perceptional difference of employees preference towards an

organization with regard to their Age, Education and

Experience

73

4.11.1 Age and Motivation 74

4.11.2 Age and Remuneration 74

4.11.3 Education and HRD practices 77

4.12 Perceptional difference of Employees Preference towards an

Organization with regard to their Gender and Marital Status

79

4.13 Model fitness for Measurement Model 90

4.14 Model fitness for Path Model 95

4.15 Results of Employee Preference Model 96

5.1 Descriptive Statistics of Employee’s perception about

Avoidable Causes of Attrition

99

5.2 Descriptive Statistics of Employee’s perception about

Unavoidable Causes of Attrition

99

5.3 Descriptive Statistics of Avoidable Causes vs. Unavoidable

Causes

100

5.4 Association between Demographic Variables of Employee

and Causes for Employee Attrition

101

5.5 Perceptional difference of Employees on Causes of

Employee Attrition with regard to their Age, Education and

Experience

104

5.5.1 Age and Unavoidable Causes 104

5.5.2 Education and Avoidable Causes 105

5.6 Perceptional difference of Employees with regard to their

Gender and Marital Status

106

viii

5.7 Employees details of IT industry Puducherry 108

5.8 Attrition rate in IT Industry, Puducherry 108

5.9 IT Industry Category Wise Employee Attrition Rate 109

5.10 IT Industry Category Wise and Employee Category Wise

Employee Attrition Rate

110

5.11 Attrition rate among Gender Category in IT Industry 111

6.1 Descriptive Statistics of Employer’s perception about

Positive Effects of Employee Attrition

115

6.2 Descriptive Statistics of Employer’s perception about

Negative Effects of Employee Attrition

115

6.3 Association between Demographic Variables of Employer

and their perception about Effects of Employee Attrition

116

6.4 Perceptional difference of Employers on the Effects of

Attrition with regard to their Age

118

6.5 Perceptional difference of Employers on the Effect of

Employee Attrition with regard to their Gender and Marital

Status

119

6.6 IT firm having Separate Retention Policy 120

6.7 Descriptive Statistics of Employer’s perception about

Importance of Employee Retention

121

6.8 Descriptive Statistics of Employer’s perception about

Remuneration

122

6.9 Descriptive Statistics of Employer’s perception about

Organizational Environment

123

6.10 Descriptive Statistics of Employer’s perception about

Growth and Career

124

6.11 Descriptive Statistics of Employer’s perception about Inter-

Personal Relationship

125

ix

6.12 Descriptive Statistics of Employer’s perception about Moral

Support

126

6.13 Descriptive Statistics of Employer’s perception about the

factors influencing Retention

127

6.14 Perceptional difference on factors influencing Retention

with regard to their Age

128

6.15 Perceptional difference of employers on factors influencing

Employee Retention with regard to their Gender and

Marital Status

129

6.16 Descriptive Statistics relating to Retention Strategy at Entry

Level Professionals

132

6.17 Descriptive Statistics relating to Retention Strategy at Mid-

Level Professionals

133

6.18 Descriptive Statistics relating to Retention Strategy at Senior

Level Professionals

133

6.19 Perceptional difference of Employers on the Retention

Strategy with regard to their Age

135

6.20 Perceptional difference of Employers on Retention strategy

with regard to their Gender and Marital Status

136

x

List of Figures

Fig. No Title Page No

4.1 Confirmatory Factor Analysis for Nature of Job 83

4.2 Confirmatory Factor Analysis for Working Condition 83

4.3 Confirmatory Factor Analysis for Motivation 84

4.4 Confirmatory Factor Analysis for Company Policies 84

4.5 Confirmatory Factor Analysis for Remuneration 84

4.6 Confirmatory Factor Analysis for Employee-Employee

Relationship

85

4.7 Confirmatory Factor Analysis for Employee-Superior

Relationship

85

4.8 Confirmatory Factor Analysis for HRD practices 86

4.9 Relationship between nature of job, working

condition, company policy and remuneration

87

4.10 Relationship between HRD practices, Employee-

Employee and Employee Superior Relationship and

Motivation

89

4.11 Overall Relationship model for Employee Preference

towards an Organization

90

4.12 Impact of Nature of Job on Working Condition,

Company Policy and Remuneration

92

4.13 Impact of HRD practices on Employee-Employee

Relationship, Employee-Superior Relationship and

Motivation

93

4.14 Overall Structural Equation Model for Employee

Preference towards an Organization

95

xi

Abbreviations Used

ACER A Computer Entrepreneurial Revolution

AMOS Analysis of a Moment Structures

ANOVA Analysis of Variance

BPM Business Process Management

BPO Business Process Outsourcing

CFA Confirmatory Factor Analysis

CFI Comparative Fit Index

CP Company Policy

DIC Directorate of Industries and Commerce

EER Employee-Employee Relationship

ESR Employee-Superior Relationship

F value Fisher Snedecor Distribution value

FY Financial Year

GDP Gross Domestic Product

GFI Goodness of Fit Index

GPRO Group Procurement

HCL Hindustan Computers Limited

HITEC Health Information Technology Economic and Clinical Health Act

HP Hewlett- Packard

HR Human Resource

HRD Human Resource Development

H0 Null Hypothesis

H1 Alternative Hypothesis

xii

IT Information Technology

ITes Information Technology enabled services

IT IS Information Technology Infrastructure Services

LV Latent Variable

MNC Multi National Company

MOT Motivation

NASSCOM National Association of Software and Services Companies

NFI Normed Fit Index

OV Observed Variable

PG Post Graduate

P value Probability value

RMR Root Mean Square Residual

RMSEA Root Mean Square Error of Approximation

SEM Structural Equation Model

SPSS Statistical Package for Social Sciences

TCS Tata Consultancy Services

TLI Tucker-Lewis Index

UG Under Graduate

US United States

USP Unique Selling Proposition

Vs Versus

WC Working Condition

WIPRO Western India Products

Y2K Year 2000

CHAPTER I

INTRODUCTION AND DESIGN OF THE STUDY

1.1 INTRODUCTION

1.2 EMPLOYEE ATTRITION

1.3 EMPLOYEE RETENTION

1.4 STATEMENT OF THE PROBLEM

1.5 SIGNIFICANCE OF THE STUDY

1.6 SCOPE OF THE STUDY

1.7 OBJECTIVES OF THE STUDY

1.8 HYPOTHESES OF THE STUDY

1.9 RESEARCH METHODOLOGY

1.9.1 PILOT STUDY

1.9.2 MAIN STUDY

1.9.2.1 DEMOGRAPHIC PROFILE OF THE EMPLOYEES OF IT INDUSTRY

1.9.2.2 DEMOGRAPHIC PROFILE OF THE EMPLOYERS OF IT INDUSTRY

1.9.3 SAMPLE SELECTION

1.9.4 DATA SELECTION

1.9.5 DATA ANALYSIS

1.10 LIMITATIONS OF THE STUDY

1.11 CHAPTERIZATION

1

CHAPTER I

INTRODUCTION AND DESIGN OF THE STUDY

“The key to growth is the introduction of higher dimensions of consciousness into our

awareness”. - Lao Tzu

1.1 INTRODUCTION

Without efficient professionals an organization cannot build a good team of work

force1. This can be possible when the organization provides all the facilities and

competitive salary to its employees then the employees will be committed to the

organizational goals and motivated to organizational success when they have an

enhanced sense of their own wellbeing. Otherwise employees will be dissatisfied and

move on in search of new job.

Attrition is a critical issue and pretty high in all the industries nowadays,

particularly in the IT sector. Many corporate in India face a formidable challenge in

recruiting and retaining talents2. Attrition takes place when employees leave his or her

current job due to various reasons. It means employees reduction in an organization for

various reasons such as marriage, sickness, retirement, death or resignation. Attrition

happens in an organization when the employees are dissatisfied with the facilities and

amenities provided by the organization in return to their services provided to the concern.

There are many factors that play an important role in attrition in any industry and these

can arise from either from the management or from the employees or from the both3.

Retention of employees involves steps to motivate employees to be remained in

an organization for a longer period of time. Nowadays companies face more problems in

retaining their employees, selecting the right person for the job is crucial for an

organization, but compare to recruiting an employee, retaining an employee is even more

essential. There are wide opportunities for the efficient people.They might switch to some

other suitable jobs4.

Among the Information Technology Capitals in the world, India is the one among

the biggest IT capital. IT industry provides a large number of employment opportunities

in India. It is the biggest job provide in India. More than 10 millionpeople directly or

2

indirectly involved in this sector. IT business in India is the biggest support for the

nation’s development5.

BPO in India is first started in started in 1980’s. Cheap labor and fluency in

English are the main attractions in India. This industry grew in spite of Y2K problems

and dot boom. When compared to other countries, business outsourced to India has cost

advantage. India has highly qualified professionals and cheap labor compared to other

countries. Due to these reasons MNCs were attracted to run their business in India and

there has been a consistent growth in the Indian IT sector and IT professionals.

Many colleges and universities are producing more number of IT professionals

every year. The demand ofhas heavily affected the IT industry in India. Due to this crisis

companies started to reduce their employees, decrease their remuneration and reduce

employee amenities. This circumstance creates high level dissatisfaction among

employees that result in a job changing scenario.

“Disengagement and job search behavior of the employees are on the rise” (Mark

and Andrea, 2005), and the attrition rate of employees that happens is serious and great

concern. The fact is that, this problem crates a great upset in various industries such as

the cost of losing efficient professional is greatly high and the organization strength and

firms success have been deeply affected. It becomes essential that the organization

should understand the reason for employee attrition and to find out the ways to retain

their efficient work force6.

In India, IT industry is playing a significant role in in the economic development

and has changed India’s image from slow moving bureaucratic economy to a land of

innovation7. “The sector has increased its contribution to India’s GDP from 1.2% in 1998

to 7.5% in 2012. The sector has aggregated a revenueof US$147 billion in 2015. The

sector has also led to massive employment generation. The industry continues to be a net

employment generator that add 2,30,000 jobs in fiscal year 2012, thus providing direct

employment to about 2.8 million and indirectly employing 8.9 million people

(NASSCOM), making it a dominant player in the global outsourcing sector”8.

3

“Though the picture seems to be bright, people-related issues continue to be the

most critical in almost all technology-driven organizations in the country. The rate of

turnover of IT professionals has been historically high” (Cannoly, 1988), “which is about

twice the average of business managers and professionals”(Ludhlum, 1988) “and is in

the range of 20 to 40 % in some organizations in India”(Atlas. 2005). Employee attrition

is one of the chronicle busters in IT industry9.

Blessed with unexploited nature and being a famous exotic tourist destination,

Puducherry has been credited as a rapidly growing Union Territory in India. Home of

several big IT software and Hardware giants, ithas attained significant growth in theIT,

ITes and BPO industry. IT hardware giants like Lenevo, HCL, ACCER, HP and WIPRO

have set up their units in Puducherry. The top IT software companies include Webby

logic solutions, GPRO Technology, Prapthi Technology services, Effinidi Technology

etc10.

1.2 EMPLOYEE ATTRITION

Employee Attrition means the proportion of number of employees that leave

anorganization for various reasons such as illness, dissatisfaction with job or wages,

marriage, retirement, death during a given period when compared to average number of

employees on payroll during the same period. In other words it means the inflow and

outflow of labor employed by an enterprise11.

In today’s competitive environment, the attrition in a business can affect both the

operation of the business as well as morale of employees. To some extent employee

attrition may be allowable, but beyond a certain limit it involves more expense in

replacing the employees who left the organization, which includes selection and

recruitment costs and training and development costs. It is a great loss for the

organization which losses its key performers and it is difficult to replace such key

employees.

1.3 EMPLOYEE RETENTION

Organizations are strongly striving or struggling for retaining manpower in all

possible ways. It is a great botheration among employers to design and implement a

retention policy. Employee retention is a continuous effort made by employers that create

and promotes an environment and frame policies and practices that fulfills the employees

4

diverse needs that stimulates present employees to stay in their organization for a longer

period12.

Employees are the assets of an organization, they are considered as the heart and

soul of every concern. Employee attrition may cause more problems to a concern, in the

form of costs, operational disturbances and loosing efficient employees which affects the

morale of other employees. To overcome such problems arising in a concern, employee

retention becomes very important one for the organization. It describes the ways to attract

and retain innovative, efficient and dedicated employees in the concern. It is not about

managing the retention, but managing the human resource of a concern which will

automatically take care of employee retention.

1.4STATEMENT OF THE PROBLEM

“India witnessed attrition rates of up to 25 per cent in 2015. Fresher level attrition

was around 12-14 per cent while at senior-level employees it was in the range of 8-10

per cent. The sectors that were severely impacted were IT, ITES and software as these

segments are witnessed attrition of 25 per cent or more at entry-level positions as per the

survey”( survey by Job Portal Wisdom Jobs)13.

There are 37 IT firms under different categories, Hardware, Software and BPO

functioning at Puducherry. From the observation and personal interview with the officials

of Directorate of Industries and Commerce and Department of Labor Welfare,it has

beennoticed that employee attrition is increasing in IT firms in Puducherry. No

comprehensive study has been under taken so far as to look into this issue and redress it

in this union territory. Hence, an attempt is being made to study the issue in depth and to

prescribe workable solutions to solve this chronic problem in Puducherry.

1.5 SIGNIFICANCE OF THE STUDY

Most of the engineering students opt for jobs in IT sector. This study gives a

better understanding to the society about employee attrition and employee retention in IT

industry. This will be helpful for the young graduates in choosing the right career.

The organization’s success mostly depends on the human resources, who are

deemed to be an asset and backbone of the industry. The present study was carried out to

5

find out the various causes of employee attrition. Once these factors have been identified

then it necessitates the organization to take appropriate steps to reduce the attrition rate in

their concern.

Employee Retention is considered to be very essential for any organization. The

study gives various retention strategies followed by the IT industry. This will be helpful

for firms not having separate retention policy to implement their own strategy to retain

their employees.

This study also paves way for the future researchers to choose their research area

on measurement of employee attrition rate and effects of employee attrition as there are

very few research articles based on these areas.

1.6 SCOPE OF THE STUDY

The study covers the topics of employee preference towards an organization,

employee attrition and employee retention and includes the various causes of employee

attrition, measurement of attrition rate, effects of employee attrition, factors influencing

employee preference towards an organization, importance of employee retention, factors

influencing employee retention and retention strategies followed by the organization.

The study area is IT units in and around the union territory of Puducherry. The

study covers a period of seven years from 2010 to 2017.

1.7 OBJECTIVES OF THE STUDY

The Specific Objectives of this study are:

To explore the factors that influence employee’s preference towards an

organization.

To identify the causes of employee attrition and to measure employee attrition in

the IT industry in Puducherry.

To trace out the effects of employee attrition, factors facilitating and influencing

employee retention and retention strategies followed by employers to mitigate this

issue.

6

1.8 HYPOTHESES OF THE STUDY

The following hypotheses were framed on the basis of objectives:

H1: There is no significant difference in the employee preferences towards an

organization with respect to demographic variables of the employees.

H2: There is no association between causes of employee attrition and

demographic variables of the employees.

H3: There is no significant difference in the causes of employee attrition with

respect todemographic variables of the employees.

H4: There is no association between the perception of employer about the effect of

employee attrition anddemographic variables of the employer.

H5: There is no significant difference in the effect of employee attrition with

respect to demographic variables of the employer.

H6: There is no significant difference in the factors influencing employee

retention with respect to demographic variables of the employer.

H7: There is no significant difference in employee retention strategy with respect

todemographic variables of the employer.

1.9 RESEARCH METHODOLOGY

This study is an empirical research based on both primary and secondary data. IT

units of Puducherry comprises of hardware firms, software firms and BPO firms which

were identified as sampling units taking into account the serious issue of employee

attrition in the IT companies.

1.9.1 Pilot Study

Two separate interview schedules were prepared both for employees and

employers. Pilot study was conducted and information was elicited from 30 employees

and 10 employers of IT industry in Puducherry. The purpose of this pilot study was to

test the reliability of the interview schedule and to confirm the feasibility of the study.

Cronbach’s Alpha reliability test was applied to test the reliability of the interview

schedule. An Alpha value of more than or equal to 0.70 is considered to be

significant14(Nunnally, 1978). The result of reliability test shows that the p values are

7

more than 0.7 and it shows that the interview schedules for both employees and

employers were highly reliable and it paved the way collecting the data in full range. The

result of Cronbach’s Alpha test is given below.

Table 1.1 Reliability Test for Employee’s Interview Schedule

Variables Alpha value

Nature of job 0.753

Working Condition 0.785

Motivation 0.911

Company Policies 0.774

Remuneration 0.871

Employee- Employee Relationship 0.851

Employee-Superior Relationship 0.914

HRD Practices 0.933

Avoidable causes 0.870

Unavoidable causes 0.751

Source: Author’s calculation from primary data.

Table 1.2 Reliability Test for Employer’s Interview Schedule

Variables Alpha value

Positive consequences 0.803

Negative consequences 0.904

Retention strategy at entry level professionals 0.945

Retention strategy at mid-level professionals 0.955

Retention strategy at senior level professionals 0.962

Remuneration 0.904

Organization environment 0.945

Growth and career 0.944

Inter-personal relationship 0.947

Moral support 0.932

Importance of employee retention 0.885

Source: Author’s calculation from primary data

8

1.9.2 Main Study

The primary data were collected for the study from the employees and employers

of IT Industry in Puducherry using a well-structured interview schedule. Interview

schedules for employees and employers were divided into two sections. The I section is

designed as objective type to get demographic profile of the respondents. The II section is

designed usingLikert’s 5 point scale ranging from 5-strongly agree, 4-agree, 3- neither

agree nor disagree, 2-disagree and 1-strongly disagree.

1.9.2.1 Demographic Profile of the Employees of ITIndustry

To understand more about the respondents, demographic profile of the IT

employees were collected from the study area of Pondicherry.

Table 1.3 Demographic Profiles of the Employees of IT Industry

S.No. Personal Profile Attributes No of

Respondents Percentage

1.

Age

18-25 years 142 47.3

26-35 years 112 37.3

36 years &above 46 15.4

2. Gender Male 185 61.7

Female 115 38.3

3. Marital status Married 130 43.3

Unmarried 170 56.7

4. Education

Under graduate 154 51.3

Post graduate 113 37.7

Technical education 33 11.0

5. Experience

Up to 2 years 92 30.7

2-5 years 138 46.0

6-10 years 48 16.0

Above 10 years 22 7.3

6. No. of organizations worked earlier

1 159 53.0

2-5 104 34.7

6-10 37 12.3

Source: Primary Data

9

The Table 1.3 shows the demographic profile of the respondents with regard to

their age, gender, marital status, education and the number of organization worked

earlier. It is clear that out of the sample size 300, 142 respondents (47.3%) fall in the age

category 18 to 25 years. It was not surprising as the industry was characterized by the

young lot as their primary work force. Both the environment and job description suit the

young professionals who are primaryfeatures of the IT industry. 112 respondents (37.3%)

are in the category 26 to 35 years and 46 respondents are in the category of 36 years and

above. Although the instrument had other age categories like 46 to 55 years and above 55

years but none of them fell in those categories, thus the category was reduced to 3 i.e.,

18-25, 26 -35 and 36 to 45.

Male and female employees have different views on employee attrition. With this

view in mind, the entire sample was divided into male and female category. Gender

classification given in table 1 shows that among the total respondents 185 (61.7%) are

male respondents and only 115(38.3%) are female respondents. It shows that majority of

the workforce of IT industries comprises of male category.

Since marital status plays an important role in employee attrition, marital status of

the respondents was also collected for the study. It was categorized into two i.e., married

and unmarried. Since majority of the respondents fell in the age group18- 25years, 170

(56.7%) respondents were unmarried and only 130 (43.3%) respondents were married.

Educational qualification influences the requirement of the employees and hence

it may lead to different opinion in the perception about the employee attrition and

employee preference towards an organization. So it is considered as one of the most

important socio-economic factor and hence it was collected. Classification based on the

educational qualification shows that 154 (51.3%) respondents are under graduates, 113

(37.7%) respondents have post graduates and only few i.e., 33 (11%) were technically

qualified. It indicates that majority of the respondents were possessed UG degree.

Employee perception regarding attrition may differ due to period of his stay in the

organization i.e., the number of years of experience of the respondents.It was also

collected for the study. Out of 300 respondents majority i.e., 138(46%) respondents are

having 2 to 5 years of experience, 92 (30.7%) respondents are having less than 2 years of

10

experience, 48 (16%) respondents are having 6 to 10 years of experience and only few

22(7.3%) respondents are having experience more than 10 years. Since most of the

respondents belong to young age group, experience is also less.

Out of the total sample, 159 (53%) respondents have worked only in one

organization, that is, in the present job, 104 ( 34.7%) respondents have worked in 2 to 5

organizations and only few i.e., 37 (12.3%) respondents have worked in 6 to 10

organizations. This demographic profile show that nearly one third of the respondents has

frequently changed their job due to some reason.

1.9.2.2 Demographic profile of the employers of IT Industry

Employers and employer’s representatives in the organizations either

administrative officer or HR manager were approached to elicit their views on the chosen

problem. To have better understanding about the respondents, demographic profile of the

respondents were collected and education.

Table 1.4 Demographic profiles of the employers of IT Industry

S.No. Personal Profile Attributes Respondents Percentage

1.

Age

26-35years 17 56.7

36-45years 10 33.3

46-55 years 3 10.0

2. Gender

Male 24 80.0

Female 06 20.0

3. Marital status Married 25 83.3

Unmarried 05 16.7

4. Education Post graduate 23 76.7

Technical education 07 23.3

Source: Primary Data

The table 1.4 vividly shows the demographic profile of the respondents with

regard to their age, gender, marital status thatout of the sample size of 30, 17 respondents

(56.7%) fall in the age group of 26 to 35 years and this was not surprising as the industry

was characterized by young professionals who are the salient featuresof the IT industry.

10 respondents (33.3%) are in the category 36 to 45 years and 3 respondents are in the

category 46 to 55 years. Although the instrument had other age categories like 18- 25

11

years 55 years and above but none of them fell in those categories, thus the category was

reduced to 3 i.e., 26 -35, 36-45 and 46 to 55.

Male and female managers have different views about employee retention. With

this point in view, the sample was divided into male and female category. Gender

classification given in the table 1 shows that among the total respondents 24 (80%) are

male respondents and only 6 (20%) are female respondents. It shows that majority of the

managers of IT industries belong to the male category.

Marital status of the respondents was also collected for the study. It was

categorized into two i.e., married and unmarried. 25 (83.3%) respondents were married

and only 5 respondents were unmarried. It shows that majority of the managers were

married.

Classification based on the educational qualification shows that 23 (76.7%)

respondentscompleted post-graduation, rest of them only 7 (23.3%) were technically

qualified. Although the instrument has another category called undergraduate, none of the

respondent fell in this category. This indicates that managers need higher qualification.

1.9.3 Sample Selection

Non-probability convenient sampling method is used to collect primary data from

employees of IT industry, Puducherry, and census survey method was used to collect

information from employers.The sample size of employees is 300 and sample size for

employers is 30, who belong to different IT firms in Puducherry.

1.9.4 Data Analysis

This study was based on primary and secondary sources of data. The primary data

were collected through interview schedule. The secondary data were collected from

books,registers, magazines,journals, etc. The data collected from both the sources were

scrutinized, edited and tabulated. Further the processed data were analysed using

Statistical Package for Social Sciences (SPSS). Kolmogrov-Smirnov

Test15(Chakravarti, Laha and Roy, 1967) is applied to find out whether the data falls

under normal distribution. Since the p value of all the variables are more than 0.5 for both

employees and employers, it paved way for applying parametric test for analysis of data.

The tests results were given below.

12

Table 1.5 Kolmogrov-Smirnov Testfor employee’s Interview Schedule

Variables One sample Kolmogrov-

Smirnov p value

Nature of job 2.022

Working Condition 2.223

Motivation 2.157

Company Policies 2.416

Remuneration 2.835

Employee- Employee Relationship 3.169

Employee-Superior Relationship 1.579

HRD Practices 1.675

Avoidable causes 1.097

Unavoidable causes 1.914

Source: Authors calculation from primary data

Table 1.6 Kolmogrov-Smirnov Test for employer’s Interview Schedule

Variables One sample Kolmogrov-

Smirnov p value

Positive consequences 0.771

Negative consequences 0.803

Retention strategy at entry level professionals 1.230

Retention strategy at mid-level professionals 1.229

Retention strategy at senior level professionals 1.309

Remuneration 0.948

Organization environment 1.312

Growth and career 1.052

Inter-personal relationship 1.420

Moral support 0.927

Importance of employee retention 0.948

Source: Authors calculation from primary data

13

The following are the various statistical tools used for the study:

i) Percentage Analysis wasconducted for the items in demographic profile of

the respondents

ii) Descriptive statistics viz., mean, standard deviation along with rank was

found out for variables.

iii) Chi-square is used to find out the association between demographic profile

of the respondents and other variables.

iv) One way Analysis of Variance (ANOVA) was used to find out the

significant difference in the opinion of the respondents with regard to

demographic profile of the respondents and other variables.

v) Independent Sample t test was applied to find out the significant difference

in the opinion of the respondents with regard to demographic profile of the

respondents and other variables.

vi) Structural Equation Modeling (SEM) has been used for analysis.

Confirmatory Factor Analysis (CFA), Measurement model and Path model were

used to find the relationship between the variables of employee preference towards

an organization and to find the impact of job on working condition, company

policy and remuneration and the impact human resource practice on employee-

employee relationship, employee-superior relationship and motivation.

1.10 LIMITATIONS OF THE STUDY

The following were the limitations of the study:

The study focuses on employee attrition and retention strategies in IT industry

located in the union territory of Puducherry only.

The study is based on employees’ and employers’ perception and these

perceptions are subject to change in the days to come.

The dynamics of job market plays a crucial role in the effectiveness of factors

discussed in this research work. Hence any change in the job market has its

impact on the findings and conclusions of this study.

The study suffers from the limitation of primary data that is, it is time consuming

and the respondents are not prepared for an interview.

14

1.11 CHAPTERIZATION

The report is structured into seven chapters

Chapter I: Introduction and Design of the study deals with Introduction, Statement of

the problem, Significance of the study, Scope of the study, Objectives of the study,

Hypotheses of the study, Research methodology, Limitations and Chapter arrangement.

Chapter II: Review of Literaturecovers the reviews under various heads related to

employee attrition and retention strategies viz. causes of employee attrition, impact of

employee attrition, measurement of employee attrition, and retention strategies.

Chapter III: Employee Attrition and Employee Retention:AConceptual overview

covers conceptual framework of employee attrition and retention strategies, origin and

growth of IT sector in Puducherry, status of employee attrition and employee retention in

IT industry.

Chapter IV: Employee Preference towards an Organizationhighlights the factors

which influences employee preference towards an organization.

Chapter V:Employee Attrition:Causes and Measurement describes the causes of

employee attrition and the measurement of employee attrition rate in IT industry.

Chapter VI: Effects of Employee Attrition and Retention Strategies: Employer’s

perception highlights the effects of employee attrition and retention strategies followed

in IT industry at Puducherry to retain the employees.

Chapter VII:Summary of Findings, Suggestions and Conclusionsummarizes the

findings and conclusions of the study and suggestions to the employers to manage

employee retention effectively.

1

Chapter End References

1. www. Konkonworld.com

2. Lavanya Latha, K., “A Study on Employee Attrition and Retention in Manufacturing

Industries”, www.bvimsr.com., 5(1), (2013).

3. Shine David, Saakshi Kaushik, Harshita Verma and Shivani Sharma, “Attrition in IT

sector”, International Journal of Core Engineering and Management”, 2(1), 236-246,

Apr.(2015).

4. Mohan, S. and Muthuswamy, P.R., “A Study on Employees Retention in BPO sector

with special reference to Coimbatore city”, International Journal of Informative and

Futuristic Research, 2(6), 1609-1615, Feb. (2015).

5. www.dqweek.com

6. George A.P and Joji Alex.N,“Turnover intentions - perspectives of it

professionals in Kerala”, The IUP Journal of Organizational Behavior, X(1), (2011).

7. www.crscendoworldwide.org

8. NASSCOM

9. George A.P and Joji Alex.N,“Turnover intentions - perspectives of it

professionals in Kerala”, The IUP Journal of Organizational Behavior, X(1), (2011).

10. www.dqweek.com, Software companies boost IT growth in Pondicherry

11. www.investopedia

12. Ramanaiah G and Lavanya L, “A study on the level of commitment towards retention

practices in IT and non – IT companies in Chennai”, Advances in Management,

4(12), 53-56, Dec. (2011).

13. Job Portal Wisdom Jobs

14. www. Analytictech.com, Nunnally on Reliability

15. Chakravarti, Laha and Roy (1967), Handbook of Methods of Applied Statistics,

Volume 1.

http://www.bvimsr.com/http://www.investopedia/

CHAPTER II

REVIEW OF LITERATURE

2.1 STUDIES ON CAUSES OF EMPLOYEE ATTRITION

2.2 STUDIES ON IMPACT OF EMPLOYEE ATTRITION

2.3 STUDIES ON MEASUREMENT OF EMPLOYEE ATTRITION

2.4 STUDIES ON MODELS OF EMPLOYEE ATTRITION

2.5 STUDIES ON EMPLOYEE RETENTION

2.6 STUDIES ON EMPLOYEE ATTRITION AND EMPLOYEE RETENTION

2.7 RESEARCH GAP

15

CHAPTER II

REVIEW OF LITERATURE

“Freedom from desire for an answer is essential to the understanding the problem”. – JidduKrishnamurti

The objective of this chapter is to review various research studies related to

employee retention management. This study has been undertaken after critically

reviewing as many as 65 related research articles and projects. Out of 65 reviews 30

articles belonged to Indian context and remaining 35 to foreign context. Of the total, 20

articles were related to IT industry and remaining articles are on other areas like

manufacturing, retail business, marketing and other sectors. The reviewed research

articles and projects are broadly grouped and prescribed here under six heads viz., causes

of employee attrition, impact of employee attrition, measurement of employee attrition,

employee retention, employee attrition and retention and models of employee attrition..

2.1 STUDIES ON CAUSES OF EMPLOYEE ATTRITION

Changes are inevitable and it is costly to the organization. Employee attrition is an

element of change that directly affects the very foundation of the organization. So, it is

necessary to find the motives of employees leaving the job and devise an effective

retention strategy. This part of the chapter covers the various reviews that are related to

the causes of employee attrition of various sectors viz., manufacturing, information

technology etc. The following were the summary of the reviews collected for the study.

Sunil Kumar Dhal and AmareshNayak (2015)1 traced the factors that are

responsible for employee attrition in BPO industries. Authors found various factors

responsible for employee attrition they were the BPO Company operates 24 hours a day

and 365 days a year. Graveyard shifts and odd hours which suit the foreign clients create

problems to the employees. Symptoms of Insomnia and even depression werefound due

to change in the 24 hour biological rhythm of the body, and also loss of employees’

personal life.

16

Batty DoranceJeen (2014)2 analyzed the impact of employee attrition intention on

organizational outcomes. From the analysis it was found that various factors that causes

attrition were inconvenient working hours, personal reasons, dissatisfied working

environment and wages, lack of welfare facilities, lack of career development and poor

inter-personal relation with co-workers.

SnehaMankikar (2013)3tried to understand the cause and effect relationship

between infant attrition and employee satisfaction. It also considers the other dimensions

like leadership style of the management, job discrepancies and stress of employee. It

found that IT industry has the problem of infant attrition and the causes for such attrition

were employee’s stress, job discrepancies, organizational culture, employee

discrimination etc. Among these factors job discrepancies has the major influence on

infant attrition.

PushpendraPriyadarshi (2011)4 aimed to find out whether affective commitment,

turnover and satisfaction determines the employee brand image. The dependent variable

is turnover and independent variables are variety in job and work settings. The result

shows that the variety in job and work setting attributes are the factors positively

contributing to intention to quit. The author concluded that the employee’s perception

about the brand image of their employer depends upon their personal and professional

experiences and hence it determines the behavior and attitude of the employer.

George andJoji Alex (2011)5tried to analyze the importance of Internal Career

Anchors (ICA) and External Career Opportunities (ECO) in determining employee

Intention to Quit (turnover intentions) (ITQ) from an organization. IT employees formed

the sample of the study. The study is restricted to the state of Kerala. The finding shows

that there exists a negative relationship between ECO and ITQ and there is a positive

relationship between ICA and ITQ. The respondents were Information Technology

(IT) professionals working in the state of Kerala. The study revealed negative

relationship between the degree of ECO and ITQ and positive relationship between ICA

and ITQ. The relationship is negative and significant for two ICAs, namely, job security

and technical-functional competence. Among the demographic variables, experience of

the employee showed significant effect on ITQ. The author suggested that the IT firms in

17

Kerala should give special importance to ICA factors and provide ECO on the basis of

employee performance to reduce employee attrition.

Michael Davidson, Nils Timo and Ying Wang (2009)6

aimed to present the

findings of an extensive survey of employee attrition in the Australian accommodation

sector. The study is focused particularly on attrition rate and attrition costs. The finding

reveals that huge loss for the organization is due to attrition. These expenses or losses

should be carefully examined by the organization. It also indicates that there is a great

impact of attrition on level of service, consumer experience and value. Employees at

different levels expects for good working environment, better and competitive pay,

opportunities for career development and these factors can reduce attrition level to a

greater extent.

SaketJeswani and SourenSarkar (2009)7 attempted to identify the strength of

relationship among organizational citizenship behavior and psychological empowerment

within the employees of Bhilai Steel Plant Ltd.(BSP). Entry level employees and middle

level managers of BSP form the sample of the study. Results indicate that manager who

perceives psychological empowerment towards the organization, exhibit organizational

citizenship behavior. The research extends the theoretical framework and draws

implications for the employees enjoying psychological empowerment and exhibiting

organizational citizenship behavior having intention to stay or quit.

Chandreseker (2007-08)8 in his project analyzed the causes for attrition at Net

worth Stock Broking Ltd. with reference to sales department. Exit interview forms and

telephonic interview method is used for collecting data and weighted average method is

used for analysis The study concludes that expectations of the employees regarding their

salary, opportunity for promotion does not match with reality these factors induced

employees to move out of the job.

Abraham Vinoj (2007)9discussed the various determinants and types of employee

attrition. The data for the study was collected by survey method.It shows a high degree of

employee attrition in the industry. Logit approach is used for analyses to find the quitting

behavior of employees in the software industry. The result shows that while skill up-

gradation and informal learning are most influencing factors that affect the employee’s

decision to quit organization or not to quit and not the educational level of employees.

18

Higher salary in general prevents the employees moving form one firm to another firm.

But it is also up to a certain level.

John Hope and Patrick Mackin (2007)10

tried to find out the relationship between

employee attrition and firm size as it relates to compensation. National Longitudinal

Survey of Youth (NLSY) is used for data collection. The objective of the study is to find

whether there is any difference in wage benefits between small and big firms and to find

which is prone to attrition either small or big firm. It was found the employee of large

firms stay in their firm for a longer period than employees of small firms.

Win Van Breukeler, Rene’Van der Vlist and Herman Steensma (2004)11has aimed

to find out answer for the question about the three predicators of planned behavior

theory., that whether the organization provides satisfactory explanation for the behavior

and intention of the employees in voluntary attrition. It was also analyzed the factors

such as organizational commitment, age, job satisfaction and tenure were able to explain

the turnover intentions and voluntary turnover. The study is based on longitudinal

method, sample size is 296 and professionals in Royal Netherlands Navy werethe

respondents. The result shows that the behavioral intentions are proved to be the best

indicator of attrition. Tenure and job satisfaction showed variance in intentions after the

effect of predicators of theory of planned behavior.

Peter Elias (1994)12

conducted research within six local markets within Great

Britain, Abeerden,, Coventry, Kirkcaldy, Northampton, Rochdale and Swindon and the

sample size of the study is 1000 and data is collected through survey method. Interesting

results were found from the analysis that about job related training provided by employer

and attrition. It was found that employees provided job related training certainly helps in

retaining employees. It is particulary for female employee and it has negative effect on

male employees.

Andreas Diekmann and Peter Preisendoerfer (1988)13

analyzed the employment

fluctuation of blue-collar workers in West Germany engineering company during the

period 1976 to 1984. The authors emphasize on two aspects one is the time pattern of the

rate of leaving and the other is the determinants of the rate of leaving the firm. The time

pattern of the rate of leaving is shown by a risk function, i.e., the conditional probability

19

of an employment change, decreases with tenure and under certain conditions a non-

monotonic, a reverse U-shape of the tenure- dependent rate of turnover may arise. With

regard to the determinants of rate of leaving, contrary to the expectation, women’s job

tenure is longer on average than job tenure for men. The result supports the hypothesis

that increasing wage scales might act as a barrier to employment fluctuation.

George Lucas, Parasuraman, Robert Davis and Ben Eris (1987)14

focused to

investigate the relationship of employee characteristics and job attitudes of turnover. The

sample size is 2,357 respondents. The statistical tools used for analysis were regression,

MANOVA and discrimant analysis. Explores that tenure and age are the influencing

factor for sales force turnover and turnover are influenced by external factors than

internal factors.

Lawrence Peter, Ellen Jackofsky and James Salter (1981)15

predicted turnover

reasons of full and part time workers. The sample size is 71. Mean, S.D., point biserial

correlation were the statistical tools used. The study concludes that among full time

employees turnover is predicted from two variables viz., thought of quitting and job

satisfaction and within part time employees, none of the five variables viz. satisfaction,

thought of quitting, expectation for better job, job search behavior and intention to leave

were significantly related to actual withdrawal.

Dan Dalton and William Todor (1979)16

analyzed the turnover from the view point

of economic, social, psychological and organizational theories. The variables affecting

turnover were the level of pay, communication, centralization and integration.

From the organizational view point, attrition enhances organizational

effectiveness and creativity, assists in the efficient management and interim co-operation

and rapid technological change. And also the cost of reducing turnover exceeds the

attrition cost. From the economic viewpoint, mobility of labor increases net national

product and contributed to the long-term growth rate of the economy. It helps to reduce

the wage differentials of individuals. Sociologically, mobility may serve to reduce

inequity and inequality in social exchange; also it helps to reduce ecological pressure.

20

It is concluded that turnover of an employee forms a role model for others and

when the effort is made to stop the attrition process it may give way for irregularity,

detachment, unauthorized absence and other non-productive behaviors. If it is allowed

then it automatically rectifies the error in the process of job searching.

Wolfgang Teckenberg (1978)17

analyzed the functional theory of stratification

departs from the assumption that remuneration in a job is a function of its scarcity in a

society. As long as there is division of labour and scarcity of resources, there is a socialist

‘quasi-functional’ principle, ‘equal pay for equal work’. The high rate of labor turnover

shows that the principle is not achieved and there may be great differences in pay

package for the same job. This is due to the guarantee of bonuses in different section but

by increasing structural differencesof various enterprises and their socio-economic and

cultural services. The findings shows that the high rate of labor attrition in the Soviet

Union is not only due to the attempts and possibilities of workers aims to a maximum

degree of fulfillment of their needs. More number of express their opinion with regard to

dissatisfaction with work and conflict in the firm. The workers are more likely to quit the

unsatisfying job and search for a job.

Mobley (1977)18

conducted a study on the relationship between job satisfaction

and employee attrition. Even though it is clear that there is a significant and consistent

relationship betweenjob satisfaction and employee attrition, but it is not very strong. It is

suggested that there is a possibility of other variables that mediate the relationship

between these two. Among these variables behavior intentions are considered to be the

key factors.

Porter Steers, Mowday and Boulian(1974)19

examined the variation in the

organizational commitment and job satisfaction. The study is based onlongitudinal

method andrecently-employed psychiatric technician trainees were the respondents.From

the study it was found that it is able to differentiate the people who stay from the quitters

during the earlier phase of the study. After some times the result proved that the better

indicator of attrition is organizational commitment and not job satisfaction.

Magnus Hedberg (1961)20

applied actuarial methods to empirical turnover-data

indicated that a more detailed and precise description can be obtained. The first step to a

better understanding of the stable patterns shown by the companies in this study could be

21

taken through detailed descriptions of the differences have to be made in psychological

and sociological categories. Comparable descriptions of the jobs to which the new hires

are assigned could also helpful in order to compare turnover patterns.

Bartholomew (1959)21

analyses labour turnover processes, with the principal

object of assessing the value of crude turnover rate as a measure of stability. The method

used is based on a straightforward application of renewal theory. The purpose of the study

is to find how turnover rates are influenced by changes in the length of service structure

of group of men. If this influence can be shown to be large then value of the crude

turnover rate is seriously reduced. This rate is greatly influenced very much by the age

and recruitment history of the group to which it applies. It cannot, therefore be used as a

valid method of comparing the stability of groups of men unless they are similar in these

respects, It is finally concluded that not only must there be an adequate supply of

manpower initially, but replacements will be required at a much higher rate than for a

long established firm.

Sillock (1954)22

categorized the characteristics of labour wastage into three heads

viz strongly marked characteristics, less prominent characteristics and the third group is

on the evidence is fragmentary The fact is that in full employment the majority of

terminations are at employees’ request may simply reflect the economic climate which

makes it profitable for the employer to retain the labor he recruits. The result shows the

wastage rate is lower for men than for women and for skilled workers compared with

semi-skilled and unskilled workers. The author suggests that what they are and how they

might be recognized would be to cross the boundary beyond which is unsafe to stay

without the collaboration of colleagues from industrial psychology and sociology.

Malar Mathi and Malathi23

interested to find the causes of attrition in IT

industries. The study was made only to the employees working in IT companies in

Chennai and the opinion of both employees and employers were collected for the

analysis. The major findings from the analysis are employee and employer has the same

opinion with respect to organizational and family related problems but their opinion

differs with HR and job related problems. It was finally concluded that the management

22

should consider the difference of opinion in order to reduce the attrition rate and increase

employee attitude in order to sustain in the organization.

To conclude the reviewed articles under the head causes of employee attritions,

the following were the commonly found reasons for employee attrition viz., inadequate

salary, lack of career growth, improper working condition, stress, job dissatisfaction, job

description discrepancies, organizational culture, organizational commitment, age, tenure,

inadequate training, communication problems, centralization, etc.

2.2 STUDIES ON IMPACT OF EMPLOYEE ATTRITION

In today’s competitive business world the effect or impact of employee attrition

on a business can be detrimental to both the basement of the organization and morale of

the employees. Employee attrition can have the loss of employees as well as loss of

customers. Both aspects over the time are a great challenge for the managers.

Gaia Garino and Christoper Martin (2005)24

analyzed the impact of labor turnover

on profits. They extended the efficiency wage model of Salop (1979) by separating

incumbent and newly hired workers in the production function. The results show that

external increase in attrition can cause increase in firm’s profit. This effect varies from

one firm to another firm as it depends on other factors such as attrition costs, the

substitutability of incumbents and new hires and etc. It was concluded that replaced

employee productivity is less compared to the incumbent in the firm and suggests that

high attrition affects productivity.

Preeti Thakur (2014)25

has aimed to find out the effect of employee engagement

on job satisfaction in IT sector. Officials and Clerks of IT sector were the respondents for

the study. The findings of the study reveals that officials can be motivated by delegation

of authority, responsibility and accountability, whereas for clerical level of employees

expects sanction and rewards and recognition that are significantly associated with

employee engagement. It was finally concluded that there exists a positive relationship

between employee engagement and job satisfaction.

23

Barry Staw (1980)26

explored the impact of employee turnover in an organization.

A number of positive as well as negative consequences of turnover are discussed in the

study. Entrenched conflict, increased mobility and morale and innovation and adaptation

were the positive consequences, selection and recruitment cost training and development

cost, operational disruption and demoralization of organizational membership were the

negative consequences were identified in the study and moderators of these effects are

also proposed.

2.3STUDY ON MEASUREMENT OF EMPLOYEE ATTRITION

Calculating the employee attrition rate of an organization allows the company to

determine the percentage of employees left the organization over a specified period of

time, usually one year.

Isobel Goddard (1927)27

examined four principal methods measurement of labour

turnover, they were separation rate, accession rate, flux method and replacement rate. The

data was collected from two factories during the period 1924-25 and four methods were

applied. The choice of the method lies in the judgment of the researcher, in the face of

adaption a to factory and trade conditions. The field is open for the use of one method as

of another, and as on the whole separation rate is the best on the basis of simplicity and

suitability of general application.

To conclude there are various methods used for the calculation of employee

attrition such as replacement method, separation method, flux method, crude wastage

method etc., separation method is used mostly to calculate employee attrition rate on the

basis of simplicity and suitability.

2.4 STUDIES ON MODELS OF EMPLOYEE ATTRITION

The models of employee attrition reviewed in this chapter apply constructs,

statistics and social psychology to facilitate understanding and to redirect theory

deployment and empirical research. The various models discussed are process and

content models of turnover, model of labor demand, a dynamic model with regard to the

ability of insiders to extract rents associated with exogenous turnover costs, a model of

quits and combined with a labor demand function to produce a model of layoffs, a model

of the relationship between labor turnover and wage structure, etc.

24

Carl Maertz. and Michael Campion (2004)28

developed process and content

models of turnover, process model focused on pattern of turnover and content model on

the reasons for attrition. Effort is being made to integrate these approaches to test whether

motives relate systematically to decision processes.It has been classified 159 leavers

using four process types and measured eight content motives for leaving. The findings

show that those leave the job with no job had more negative effect.

Daniel Hamermesh and Gerard Pfann (1996)29

developed and estimated a model

of labor demand that accounts for dynamics arising from the costs of both net and gross

changes in employment. The estimates suggest that observed lags in the demand for labor

at the aggregate level rise from slow adjustment in the both the level of employment and

in replacing workers who quit. The large procyclical fluctuations in voluntary mobility

are important in describing aggregate employment fluctuations only if one imposes

symmetric adjustment.

Henrik Vetter and Torben Andersen (1994)30

presented a dynamic model with

regard to the ability of insiders to extract rents associated with exogenous turnover costs.

If the rent is high then incentives for outsiders is also high, to obtain for to retain the

present employees and to control the new comers. As a consequence there is a lower limit

to the number of insiders which can avoid entrance of outsiders but the insiders cannot

obtain a rent equal to the turnover costs for each period. The insider model never explains

a lower but may result in a higher employment level than in the case where all workers

are wage-takers.

Simon Burgess and Stephen Nickell (1990)31

constructed a model of quits and

combined with a labor demand function to produce a model of layoffs. The main feature

of this is the explicit incorporation of the interaction between quits and layoffs. A linear

approximation and a structural form are estimated on UK manufacturing data for 1965-

82. It is shown that the most important determinants of separation is the state of demand

in the labor market, with some structural factors having a minor role to play.

Ellen Jackofsky and John Slocum (1987)32

formulated a model of Job Turnover

that includes job performance as a predictor and was presented and tested longitudinally

using path analysis. The model istested in the current work is based on the assumption

that job performance is related to factors involved in the voluntary job turnover process

25

(Jackofsky, 1984), hypothesized a relationship between job performance and all types of

turnover (voluntary and involuntary). It is predicted that job performance will affect both

the individual’s desire to leave and ease of movement.

Collier and Knight (1986)33

developed a model of the relationship between wage

structure and labor turnover and in the presence of firm-specific skills which provides a

cost-reduction rationale for seniority pay even in the case of expeditious skill acquisition

on recruitment. In this model the level of seniority premium depends on counterbalancing

forces. On the one hand, larger premium to employees has an effect in quit rates that is it

increasequit rates, the larger is the premium.On the other hand, the degree of wage

compensation required by the worker on account of the marginal utility of consumption is

also greater. The relative strengths of these two factors, together with the size of the

investment in training by the firm, determine the sudden decrease in the seniority scale.

Ellen Jackofsky(1984)34

developed an integrated model of turnover and job

performance, the model includes three primary partial determinants of voluntary

turnover, they were desirability of movement, ease of movement and intentions to quit.

Performance is hypothesized to have an impact on both ease and desirability of

movement. From the results it was found that there is an indirect relationship between

performance and satisfaction. With regard to performance and ease of movement,

performance will directly affect individual perception that an alternative to the current job

can be found.

YoavVardi (1980)35

developed a multifaceted model in which the individual and

organizational factors determines mobility patterns, the author perceived organizational

career mobility conceptually as all types of mobility by employees and related attitudes

and behaviors. This approach must first finds and ensures environmental, organizational

and individual career hurdles. The author suggests that there is a need for proper

information to handle the career mobility of existing employees. As more number of

executives are involved in planning and managing organizational careers, the need for

realistic based information increases. In many cases the vacancy rumors are converted by

superiors into false promises. Career mobility then becomes a threatening, discriminating

and political game. Thus management was responsible for the dissemination and control

26

of relevant information concerning opportunities and their contingencies throughout the

organization.

Whitemore (1979)36

drafted a model of employee job attachment. The model

implies a defective inverse Gaussian distribution form for employee service times. It is

shown that the model provides a useful basis for formulating and testing hypotheses

about turnover phenomena. Finally, intra- and inter-industry studies of turnover rates and

related labor statistics are set on a firmer conceptual base with the model. For example,

Lancaster’s successful application of an inverse Gaussian model to strike duration data

(Lancaster, 1972) suggests that the model may provide a significant theoretical link

between work stoppages and labor turnover experience.

Clowes (1972)37

developed a two stage model to represent the process of labour

turnover. Labor turnover in this model is defined in terms of primary and secondary

termination processes separated by an induction period. The rates of the two termination

processes vary markedly between firms; firms with low initial labor turnover rates do not

necessarily have low secondary labor turnover and vice versa. The rates at which recruits

adapt to the ways of different firms are markedly similar. The parameters controlling the

turnover process seem to have a realistic significance in terms of quantifying some of the

factors involved in the interaction of personnel and organizations.

A better understanding about the models of employee attrition is derived from the

above reviews. The findings show that those who quit with no job alternative had more

negative effect than users of decision types, the estimates suggest that observed lags in

the demand for labor at the aggregate level rise from slow adjustment in the both the level

of employment and in replacing workers who quit, there is a lower limit to the number of

insiders which can avoid entrance of outsiders but and the insiders cannot in each period

obtain a rent equal to the turnover costs. With regard to performance and ease of

movement, performance will directly affect individual perception that an alternative to

the current job, etc.

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2.5 STUDIES ON EMPLOYEE RETENTION

Employee retention refers to an effort made by a business to maintain the working

environment which makes the existing employees to stick on to the same organization.

Most of the retention strategies are focusing the fulfillment of various needs of

employees to increase their job satisfaction and to avoid the substantial costs involved in

recruiting and training the new staff.

BodjrenouKossivi, Ming Xu and BombomaKalgora (2016)38

focused on

reviewing the findings of previous studies conducted by various researchers with the aim

to identify the determinant factors of employee retention. The research had a look on the

factors like compensation, development opportunities, work-life balance, management,

social support, work environment, autonomy and training and development. The authors

concluded that further investigation need to be carried out regarding employee retention

to better comprehend the complex field of human resource management.

Antony Joe Raja and AnbuRanjith Kumar (2016)39

tried to understand the opinion

and attitudes of the various categories of employees of education institutions towards

employee retention. The primary objective of the study is to analyze about the employee

retention in education sector. The study revealed that job satisfaction, salary, promotion

was important among the teachers. There are intrinsic as well as extrinsic factors that

affect the academic retention process. This is because the teachers see job satisfaction as

the most important aspect; job satisfaction was regarded as an intrinsic element that

motivates staff to stay within their job.

Sultana Nazia and Bushra Begum (2013)40

examined the employee retention

practices adopted by Indian MNC’s. 10 MNCs were selected for the purpose of the study

and from each of these 10 companies 10 employees are selected at random from the

middle level management. It was concluded that steps must be taken by the organization

to relieve the employees from the workload through job rotation, change in work location

and other recreational activities. Three R’s such as reward, recognition and respect have

to be followed to retain employees. It is found that welfare measure and grievance

handling procedure is quite insufficient, employees opted either yoga or other

recreational activity to manage the employees stress.

28

ChandranshuSinha and RuchiSinha((2012)41

identified the main factors of

retention management strategies in organization. The data was collected from 100

employees holding middle managerial positions in two organizations. The study reveals 3

factors as retention management strategies followed by the organizations under study

viz., competence and relationship oriented factors, scholastic and futuristic oriented

factors and developmental and reward oriented factors.

James and Mathew (2012)42

suggested some important retention strategies. They

include rewards and recognition, training and development opportunities, mentoring and

coaching sessions, career planning, flexi work timing, annual performance appraisal, on

site and day care facilities. At graduate level flexible work timing is very important

retention strategy. Rewards and recognition are very important for retaining the

employees. Best way to enhance the employee retention is to understand what employees

want from the organization.

Ghosh and SangeetaSahney (2010)43

diagnosis the organizational, social and

technical subsystem elements that moderate the turnover of junior and middle level

managers in the company. The SAP-LAP framework has been adopted as the diagnostic

instrument of organizational analysis. The findings show that organizational socio-

technical factors have an impact on managerial retention.

NanditaChatterjee (2009)44

analyzed the key factors which affect employee

performance and triedto understand the effect of organizational culture on employee

retention. In the modern organization, employee retention is the important term which

summarizes the efforts of the HR manager. Various tools are being employed in order to

ensure high employee morale and also to find employee expectation and match them in

with attrition level. The quality of employees and the organizational culture plays a major

role in determining the effectiveness of the tool. The researcher investigates the overall

satisfaction of employee with regard to organizational culture. It also examines the

expectation of employees from organization and gives a clear understanding about the

changes needed in the organizational culture to improve retention rates.

Eva Kyndt, Fillip Dochy, Maya Michielsen, BastiaanMoneyaert (2009)45

focused

on the organizational and personal factors that influence employee retention. The result

shows a large positive contribution of appreciation and simulation of the employees,

29

individual differences, leadership skill and seniority have positive relationship with

employee retention.

Bridget Riley (2009)46

examined the variety of dimensions of employee

satisfaction of Direct Care Employees at Archieve (Newyork). Survey method is used for

data collection and ANOVA, correlation and multiple regression have used for analysis.

The author concludes that team building, training, conducting an organizational culture

inventory, increase recognition and implementation of 360 degree evaluations of all

employees were the factors expected by the employees for their retention.

MadihaShoaib, Ayesha Noor, Syed RazaTirmizi and Sajid Bashir (2009)47

conducted the study to find the impact of career development opportunities, supervisor

support, working environment, rewards and work-life policies on employee retention in

Telecom sector of Pakistan. The result shows that the independent variables such as

career development opportunities, supervisor support, working environment, rewards and

work-life policies have a direct and positive impact on the dependent variable employee

retention which means that enhancement of one independent variable causes the

enhancement of the dependent variable i.e., employee retention.

Michael Samuel and CrispenChipunza (2009)48

evaluated and identified the key

intrinsic and extrinsic motivational variables which have been used by selected public

and private sector organizations in retaining their employees. The study adopted the

cross- sectional survey research design, exploring the extent to which selected

influencing variables influence employees’ decision to either to quit or to remain in the

firm. It examined two public and two private sector organizations in South Africa. The

result showed that employees in both public and private sector organizations were greatly

influenced to remain in the organization for both intrinsic and extrinsic motivational

factors such as training and development, freedom for innovative thinking, challenging/

interesting work and job security.

Hannay and Northam(2000)49

stated that it is very important for employers to

retain their employees. For retaining the employees organization has to frame effective

retention strategies and to implement the strategy on the need basis. The strategies like

competitive pay as it builds loyalty and commitment among employees. Tailoring jobs to

30

satisfy employee’s needs for autonomy and creativity, growth opportunities,

understanding the labor market by hiring experienced persons for the organization,

providing realistic job previews to candidates at the time of during recruitment and

selection process and providing a reimbursement facilities for educational fees and

medical expenses. These were the retention strategies that contributes to improve

employee retention to a greater extent.

John Sheridan (1992)50 investigated the retention rate of 904 college graduates

hired in public accounting firms over six year period. Organizational culture values

varied significantly among firms. The variation in cultural values had a significant effect

on the rate at which the newly hired employees voluntarily terminated employment. The

relationship between employee’s job performance and the retention also varied

significantly with organizational values.

Kissan Joseph and ManoharKalwani (1992)51

aimed to examine whether the

existence of a bonus component in the sales compensation structure enhance sales force

retention and also studied the impact of total sales compensation, relative to industry

norms, on sales force retention. It was found that bonus payments enhance sales force

retention among firms whose total compensation is above industry average but not among

firms whose total compensation is below industry average.

It is understood from the reviewed articles the retention strategies followed by

most of the organizations were compensation and rewards, job security, training and

developments, supervisor support culture, work environment, organization justice, build

loyalty and commitment, freedom for innovative thinking, challenging/ interesting work,

team building, conducting an organizational culture inventory, increase recognition and

implementation of 360 degree evaluations of all employees appreciation and simulation

of the employees.

2.6 STUDIES ON EMPLOYEE ATTRITION AND EMPLOYEE RETENTION

Nowadayscommonly used terms in the competitive business world are employee

attrition