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A diagnostic study of employee attrition in an Indian automotive company

Article  in  International Journal of Indian Culture and Business Management · January 2012


DOI: 10.1504/IJICBM.2012.048773

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Int. J. Indian Culture and Business Management, Vol. 5, No. 5, 2012 593

A diagnostic study of employee attrition in an Indian


automotive company

Prince Augustin
ITM-BIT Collaborative Research Program,
Kandivali East, Mumbai 400101, Maharashtra, India
E-mail: augustin.prince@mahindra.com

R.P. Mohanty*
SOA University,
Bhubaneswar 751 030, Orissa, India
E-mail: rpmohanty@gmail.com
*Corresponding author

Abstract: Employee commitment, productivity and retention issues are


emerging as the most critical human resource management challenges of the
immediate future driven by employee loyalty concerns, corporate restructuring
efforts and tight competition for key talent. This paper is centred on the critical
examinations of the demographic profiles of past employees, who have exited
from a major automotive company during the last five years. A construct has
been developed and checked for face validity, content validity and reliability
and has been administered in a sample of 629 past employees. This study
shows that in the future such organisations will be successful, if it can adapt
their organisational behaviour and human resource department systems to the
realities of the contemporary work environment. This includes playing an
active role in assisting and advising the employee on career development
decision, ensuring education and training; providing for adequate time to
pursue career development activities; encouraging cross-functional
training/assignments; engaging in innovative work practices and providing
meaningful feedbacks for performance improvements.

Keywords: attrition; Indian automotive company; human resource department;


employee retention.

Reference to this paper should be made as follows: Augustin, P. and


Mohanty, R.P. (2012) ‘A diagnostic study of employee attrition in an Indian
automotive company’, Int. J. Indian Culture and Business Management, Vol. 5,
No. 5, pp.593–612.

Biographical notes: Prince Augustin is the Executive Vice President Human


Capital of a major Indian automotive company and has been felicitated by
many Indian and global professional bodies for his outstanding contribution to
the field of knowledge in human resource management. He has been in a
Leadership position for over 10 years and with over 25 years of experience in
all facets of HR, IR, administration including organisational change and
transformation. He pursues his Doctoral research in the area of employee
engagement and its impact on organisation performance. He has been in many
organisational development interventions to bring about significant cultural
changes in a number of organisations.

Copyright © 2012 Inderscience Enterprises Ltd.


594 P. Augustin and R.P. Mohanty

R.P. Mohanty is the Vice Chancellor, SOA University, Bhubaneswar, Orissa,


India. He has 34 years of academic experiences in institutes of national (India)
importance and in some foreign universities. He has ten years of industry
experience in top management positions. He advises academic institutions and
industries, supervises research scholars and undertakes sponsored research
projects. He has published more than 250 papers in scholarly peer-reviewed
international journals and has also authored 8 books. Many professional
institutions both in India and in abroad have honoured him.

1 Introduction

This paper presents a diagnostic case study on attrition of employees (particularly


professionals belonging to the disciplines of engineering, management, finance and
accounts, etc.) of a major Indian automotive company. The company has multiple
manufacturing locations in India and multiple sales centres across the globe
(12 countries). Employee commitment, productivity and retention issues are emerging as
the most critical human resource management challenges of the immediate future driven
by employee loyalty concerns, corporate restructuring efforts and tight competition for
key talents (Bhatnagar, 2007). In the recent years, many Indian companies face ‘surprise’
key talent departures, which have significantly affected the execution of business strategy
and a decline in productivity. This phenomenon is especially true in light of the current
economic scenario and following corporate expansion when the impact of losing critical
employees increases exponentially. Recent research studies have shown that the manager,
whether a front-line supervisor, a project leader, a team leader or a senior manager,
actually has more power than anyone else to reduce unwanted employees departures.
Why? Because the factors that drive employee satisfaction and continuance commitment
are largely within the direct manager’s control. These include providing rewards,
recognition and feedback, the opportunity to learn and grow, fair compensation reflecting
an employee’s contributions and value to the organisation, a good work environment and
career advancement.
This paper is centred on the critical examination of the reasons of attrition with
respect to the demographic profiles of the past employees who have left the company
during the last five years. Further, it is intended to imply these dominant reasons to
facilitate the development of human resource intervention strategies for
arresting/restricting voluntary turnover. This paper, in essence, reflects the dynamics of
individual behaviour of professionals. If organisations have to survive and grow in the
current competitions for key talents, it is essential to carry out perpetually a diagnostic
study to understand the reasons of attrition.

2 Understanding the phenomenon of attrition

Attrition is the reduction in employees in an organisation due to retirement, resignations


and deaths. Often, attrition and turnover are used interchangeably. Attrition may be
voluntary and involuntary. Voluntary attrition comprises of functional and dysfunctional
attrition. Functional attrition is the exit of good performers. Employees who leave an
A diagnostic study of employee attrition 595

organisation on their own discretion are examples of voluntary attrition (Price, 1977). It
is the voluntary and functional attrition, which affects the performance, creates costs to
the organisation and is disruptive to the routine functioning of the organisations.
Some of the studies that have been conducted in the past have reported:
x Leisure and retail sectors depict high attrition rates and low job tenure of 1.5–2
years, as they employ large numbers of transient employees with limited scope for
development and progression.
x Finance, information technology and professional services industries such as
consulting, insurance, etc. employ large number of employees with specialised skills,
knowledge and expertise. These employees have job tenure of 2–2.5 years and are
much sought after, as there is shortage of skills.
x Manufacturing, engineering, transport industries and large organisations with 5,000+
employees have longer job tenure of 3+ years.
The main reasons for attrition according to Reed Consulting Report (2004) are lack of
opportunities for personal and career development, issues with working relationships,
compensation and benefits.
There are many issues affecting turnover in the Indian companies. They are basically
global competition, shifting loyalties of new generation professionals, shortage of skilled
engineers – fitness for use directly by the sector, etc. On the other hand, in a competitive
economy, employees are faced with opportunities with higher compensation, challenging
roles and improved employee value propositions, which pull the employee from the
exiting organisations. Similarly, the dissatisfaction and its antecedents push the employee
away from the existing organisations. It is the pull and push factors (Ho et al., 2010),
which influence the intent to turnover. The organisations put in their best efforts to
acquire, develop and retain the employees by formulating innovative retention strategies
and aiming at becoming the employer of choice.
Dismissals, exits due to serious illness and retirements are examples of involuntary
attrition. Voluntary attrition comprises of functional, which is the exit of top performers
and dysfunctional which is the exit of poor performers (Loquercio, 2005). Attrition of
employees is a global phenomenon and also a major concern. Employees in their early
careers treat jobs as commodities and move from job to job and go on seeking for the
company of their choice. Most job tenures last less than three years. Average job tenure
differs across industry sectors.
A list of costs related to employee turnover has been well discussed in the literature
by Cascio (1991), Fitz-enz (2000), Kay and Jordan-Evans (1999) and Herman (1999).
When managers or supervisors are asked why good people leave, most respond by
saying – it is about money. Or, they simply state the attrition is a general phenomenon
that the employee – received a better offer. Managers often blame organisational policies
or pay scales for the loss of talented employees (Kay and Jordan-Evans, 1999). Contrary
to expectations, research indicates that money is not even in the top five reasons
employees give when asked why they are leaving an organisation. The way an
organisation distributes money indicates what management really wants. However, it
sends a message to employees whether the company truly pays for performance.
Incentive plans indicate service or sales to customers; and an organisation that pays and
supports employee development will generously pay for academic and training courses.
596 P. Augustin and R.P. Mohanty

Salary and benefits tend to attract people to organisations but that are not usually the
reasons for which employees leave (Herman, 1999).
Viewed from employees’ perspective, a healthy organisation is one in which people
are generally satisfied with the quality of their work life. On most days they feel good
about going to work. They feel empowered to help shape decisions that affect them, they
have the resources and skills to satisfy customer needs and they are generally confident in
the abilities of the leadership team (O’Malley, 2000; Thomas, 2000). From the
organisation’s perspective, the organisation is – healthy if it is viable as measured by its
profitability, competitive market position and customer satisfaction. A healthy
organisation also responds well to the need for change; it is adaptive and thereby ensures
its future – meaning that following a major upheaval or transition, the healthy
organisation rebounds and employees remain committed (O’Malley, 2000). When an
employee leaves an organisation it has got variety of effects that not only impact the
organisation, but also the individual employee and wider society (Mobley, 1982) These
can be positive or negative (Hom and Griffeth, 1995, pp.13–33; Mobley, 1982) and a
greater understanding of the process of labour turnover can increase the degree to which
organisation and employees within organisations can influence these effects (Dalton
et al., 1981, 1982). Current explanation of employee turnover fails to offer either
predictive or explanatory power (Aquino et al., 1997). Despite an enormous literature on
turnover in organisations (Mobley, 1982; Price, 1977), there is as yet no universally
accepted framework for why people choose to leave (Lee and Mitchell, 1994). This
prohibits understanding the phenomena after the event, yet neither is there an accepted
means of assessing the likelihood of an individual’s decision to leave in the future
(Terborg and Lee, 1984), which prohibits prediction of turnover. What makes
individuals, who express dissatisfaction with their jobs and organisations, desire to quit
their jobs and even fully intend to quit in the near future more or less likely to actually
quit? Although considerable research shows that job dissatisfaction, low organisational
commitment and specially withdrawal cognitions like intentions to quit are consistent
predictor of turnover, the mechanism translating desire to quit into turnover behaviour
remains ambiguous and require greater attention (Hom and Kinicki, 2001). We know a
good deal about the factors that push employees to voluntarily leave organisations (e.g.
job dissatisfaction), factors that pull employees away from the organisations (e.g.
alternative job opportunities) and the processes by which individual make turnover
decisions. However, our ability to explain and predict individual voluntary turnover
decisions remains limited. Some employees who satisfied with their jobs leave, while
many who are dissatisfied stay. Alternative opportunities sometimes lead employees to
quit, but often do not. Even the majority of employees who report intending to quit their
jobs do not actually do so. Attitudes typically only explain around 5% of turnover
variance, while intentions to quit rarely exceed 10–15% (Griffeth et al., 2000; Hom and
Griffeth, 1995), and the relationship between intentions to quit and turnover varies widely
(Vandenberg and Jodi-Barnes, 1999).
Broadly, we find conclusive evidences from the literature that there are three different
sets of reasons of attrition. They are: economic, psychological and sociological. We
attempt in this paper to study such reasons of attrition.
A diagnostic study of employee attrition 597

3 The case of an automotive company

India is one of the largest passenger vehicles producing country ranked eleventh in the
world and the fourth largest in heavy vehicles production. The automotive company
under study is a major automobile manufacturer of utility vehicles, passenger cars,
pickups, commercial vehicles and two wheelers. The company has a global presence and
its products are exported to many countries. It has made its entry into the passenger car
segment in April 2007 and has made its maiden entry into the heavy trucks segment in a
joint venture with International Truck, USA. It offers over 20 models including new
generation multi-utility vehicles. The company has a turnover of INR 106.15 billion, i.e.
USD 2.36 (US$ 1 = INR 45), which has doubled during the last five years. Similarly, due
to the expansions of manufacturing facilities and sale centres, the manpower strength at
present stands at 3,279. Therefore, the company recruits every year more than 1,400
graduate engineers and other professionals. The attrition on an average is 30% per year.
Such a high rate of attrition has major consequences for this company. They are as
follows:
x productivity shortfall due to loss of skills
x lost productivity costs
x loss of expertise and knowledge
x cost of overtime or temporary help to get the work done during selection and training
of replacement
x lost efficiency, including the interaction and institutional knowledge
x lower morale of co-workers
x recruiting costs (advertising, time to place ads, development of promotional
materials, management of web sites)
x search firm fees (often equivalent to 30% of new hire’s first year salary)
x screening of applicants (time to review resumes)
x interviewing time (how many people interview each applicant)
x hiring costs such as testing, background checks, medical screens
x relocation expenditures, temporary housing
x time spent in orientation
x training, assimilation into work team
x loss of business relationship.
Due to the major implications of the consequences stated above, a diagnostic study of
employee attrition particularly engineering and management professionals is a major
imperative for this company.

4 Research design

This diagnostic research is designed using a structured methodology as outlined in the


flowchart as shown in Figure 1 (Mohanty and Malekar, 2009).
598 P. Augustin and R.P. Mohanty

Figure 1 Diagnostic study design (see online version for colours)

4.1 Purpose and scope of the study


The causes of attrition differ at various levels and it is, therefore, necessary to ascertain
the reasons specific to an organisation. The automotive company where the study was
carried out has seen sizeable attrition and an in-depth analysis is carried out by carrying
out a survey from past employees to ascertain the causes of attrition keeping in view that
many multi-national companies are now entering Indian automotive sector and attracting
professionals. The past employees rate the factors on a percentage scale for their current
company and their exited company.
This Indian automotive company today is interested to reassess the human resource
(HR) practices, test underlying assumptions and challenge them by surveying to future
prospective employees and asking them what they want from the organisation in the short
and long terms. The past employees rate the elements in two different contexts: namely
attrition and retention.

4.2 Development of questionnaire


The employees were given a questionnaire and asked to give their ratings. The elements
used in the questionnaire have very carefully selected from a thorough review of
literature and have been subjected to a variety of validity tests, such as expert opinions
from professionals, senior executives of the company for content validity and reliability
and consistency tests. The list of the selected attrition elements is given in Appendix A.

4.2.1 Selection of scale


A comparative rating scale of 0–100 was selected for assigning the importance attached
to each of the 17 elements. The value 100 represents the benchmark or the best possible
value with which comparison is made and rating is given accordingly. Since,
employees/respondents are comfortable with percentages; a scale of 0–100 is selected.
This also helps in understanding as a percentage scale can be visualised easily. Also it
helps in comparison.
A diagnostic study of employee attrition 599

4.2.2 Details of questionnaire


A questionnaire was designed for administering to the employees who have exited the
organisation. The questionnaire is given in Appendix B.

4.3 Sampling design


Random sampling was done for the respondents. About 486 employees have left the
company from April 2007 to March 2009. Out of these past employees, 30% were
randomly chosen for telephonic interviews. In case of no response, another employee
would be randomly chosen. Contact details and other personal data of the 486 employees
were shared by the company.

4.4 Collection of data


We have studied the responses of past employees to two questionnaires. Questionnaire 1
was responded by past employees vide telephonic interviews. The questionnaire 2 was
responded by past employees at the time of exit interview conducted by the company.
The sample size consists of random telephonic interview data (N = 143) and exit
interview source data (N = 486). These data pertain to past employees .who have left the
company between April 2007 and March 2009.

5 Data analysis, results and discussions

Data analysis for the past employee categories comprises of descriptive statistics, factor
analysis, rank order analysis, gap analysis, test of hypotheses using analysis of variance
(ANOVA) and correlation analysis using SPSS 16.0 and Microsoft Excel 2007.

5.1 Analysis of telephonic interview data (N = 143)


5.1.1 Descriptive statistics of telephonic interview data
The descriptive statistics in terms of sample parameters (age group, number of years of
service, qualifications, place of work and process) reveal the facts that are shown in
Table 1.

5.1.2 Factor analysis


The main applications of factor analytic techniques are:
1 to reduce the number of variables
2 to detect structure in the relationships between variables, that is to classify variables.
Therefore, factor analysis is applied as a data reduction or structure detection method. An
attempt is made to reduce the 17 attrition elements to a smaller number. Factor analysis
yielded four factors on the basis of principal component analysis, which is presented in
Table 2.
600 P. Augustin and R.P. Mohanty

Table 1 Descriptive statistics of telephonic interview data

Age profile 21–25 years 20


26–30 years 62
31–35 years 39
36–40 years 16
40–45 years 3
46 and above 3
No. of year of service in the company <1 years 43
under study 1–3 years 92
4–8 years 6
9–15 years 2
Qualification profile Diploma 22
BE 83
MTech/ME 7
MBA 16
CA/ICWA 2
BA/BCom 5
MA/M.Com 6
PhD 2
Process profile Accounts/IT/business planning 6
R&D 14
Manufacturing 92
Marketing 20
Materials 1
HR 5
Projects 5
Current company class Another sector within M&M 2
Own business 3
Automotive/anxillary 77
Non-automotive manufacturing 25
IT 8
Overseas 1
Education 13
Others 14

These four factors represent the following loading pattern: factor 1 is heavily loaded on
job security, harmonious and collaborative working relationship with superiors and
subordinates, innovative and forward thinking, autonomy at the work place, enriching job
content and opportunities for individual capability development. Factor 2 is heavily
loaded on rewards and recognition, opportunities for career advancement, opportunities
for individual capabilities development and inspirational mentorship. Factor 3 is heavily
loaded on compensation and opportunities for higher education. Factor 4 is heavily
loaded on preferred location and negatively loaded on international assignments.
A diagnostic study of employee attrition 601

Table 2 Factor analysis of telephonic interview data

Component
Rotated component matrix 1 2 3 4
Job security 0.790 0.013 0.300 0.005
Compensation package 0.184 0.069 0.873 0.019
International assignments 0.063 0.423 0.222 0.572
Harmonious and collaborative working 0.653 0.351 0.022 0.180
Innovative and forward thinking 0.655 0.372 0.243 0.201
Autonomy on workplace 0.752 0.250 0.019 0.039
Enriching job content 0.719 0.313 0.113 0.043
Preferred location 0.014 0.219 0.150 0.739
Challenging role and responsibility 0.495 0.485 0.050 0.012
Rewards and recognitions 0.189 0.741 0.105 0.390
Work life balance 0.287 0.433 0.079 0.077
Company as a responsible corporate citizen 0.606 0.063 0.105 0.390
Opportunities for career advancement 0.428 0.711 0.021 0.013
Opportunities for individual capability 0.625 0.525 0.102 0.051
development
Opportunities for higher education 0.059 0.331 0.459 0.343
Inspirational mentorship 0.231 0.794 0.068 0.056
Appraisal process 0.150 0.699 0.193 0.100

5.1.3 Rank order analysis


Ranking is used to make comparisons between various elements of attrition and sequence
them in order of priority on basis of frequency. Table 3 gives the rank order of reasons of
attrition. The reasons of attrition of the past employees as revealed through telephonic
interview data analysis are:
x Past employees have indicated career advancement and compensation package as
major reasons of attrition across grade, number of years of service tenure, business
processes and place of work.
x Some exited employees have indicated extended work hours at workplace as one of
the reasons of attrition which creates disorder in work life balance.
Table 3 Rank order of reasons of attrition

Rank Reason Percentage of response


1 Compensation package 50
2 Career advancement 36
3 Location 30
4 Extended work hours 26
5 Relationship with superior 16
6 Family circumstances 10
7 Higher studies 8
8 Health/medical 1
602 P. Augustin and R.P. Mohanty

5.1.4 Gap analysis


Gap analysis is carried out to ascertain the extent to which the ratings differ on individual
elements of attrition. Gap is defined here as follows:
Rating given to present company (where they have joined after attrition) out of
100  Rating given to the company under study (where they were working
before attrition) out of 100.
Summarily it has been found the company under study lacks in 14 elements of attrition
and figures high on three elements, namely job security, responsible corporate citizen and
appraisal process as mentioned in Table 4. It is found that 55% of the past employees
who responded to the telephonic interview have joined automotive manufacturing and
auto ancillary companies.
Table 4 Company under study is rated higher (+) and lower () compared to other automotive
companies

Ashok
Elements Leyland Bajaj Caterpillar Cummin Daimler Ford GM Honda Maruti Toyota Volkwagen
1   + + + +   +  
2           
3    +       
4 +     +  + +  
5    +  +  +   
6 +    +    +  
7 +  + +       
8        + +  
9 +          
10  + + +  +   +  
11   +   +   +  
12 +  + + + + + + +  +
13 + + + +  +   +  
14 +  + + + +  + +  +
15 +   + + +  + +  
16 +   +  + + + +  
17 + + + +  +   +  +

5.1.5 Test of hypotheses


A statistical hypothesis test is a method of making decisions using experimental data. In
statistics, a result is called statistically significant if it is unlikely to have occurred by
chance. Hypothesis testing is sometimes called confirmatory data analysis, in contrast to
exploratory data analysis. In frequency probability, these decisions are almost always
made using null-hypothesis tests. One use of hypothesis testing is deciding whether
experimental results contain enough information to cast doubt on conventional wisdom.
Our aim here is to study whether significant difference exists between various subgroups
in sample parameters (such as age group having subgroups as 21–25, 26–30, etc.) with
A diagnostic study of employee attrition 603

respect to ratings given by each of these subgroups to various elements of attrition for the
company under study.
The sample parameters considered were:
x age
x gender
x place of work
x process
x number of years of experience in the company under study.
Several hypotheses were tested using ANOVA. ANOVA results show no significant
differences in the ratings given to individual elements by respondents from different
processes, with different experience profile, gender profile and age profile. However, the
following hypotheses were accepted:
Ha1: Place of work has significance with respect to rewards and recognitions. This
hypothesis was accepted at a p-value ”0.05. It was found to be 0.043 from the test.
Ha2: Place of work has significance with respect to preferred location. This hypothesis
was accepted at a p-value <0.05. It was found to be 0.025 from the test.
Ha3: Place of work has significance with respect to work life balance. This hypothesis
was accepted at a p-value <0.05. It was found to be 0.016 from the test.
From the test of hypotheses, it may be inferred that the policy of rewards and
recognitions of the company under study has to be reformed to bring in equity and
fairness across all places of work. It was found the employees in the age group of 26–35
years who has less than three years of work experience having engineering and
management qualifications are displeased with inequitable rewards and recognition
policy.
Furthermore, same set of respondents working in manufacturing and sales unit have
rated work life balance as the reason for attrition. R&D establishment of the company has
indicated good work life balance.

5.2 Analysis of exit interview data (N = 486)


In this section, the responses to the exit interview questionnaire obtained from employees
who have left the company under study between April 2007 and March 2009 are
analysed. The company under study shared the exit interview data for 486 employees
exited during the above period. The exit interviews were conducted by the HR executives
of the company at time of exit.

5.2.1 Descriptive statistics of exit interview data


The descriptive statistics of the company recorded data for exit interviews in terms of
sample parameters (age group, number of years of service, qualifications, grade, process
and place of work) reveal the facts that are shown in Table 5.
604 P. Augustin and R.P. Mohanty

Table 5 Descriptive statistics of exit interview data

Age profile 21–25 years 140


26–30 years 198
31–35 years 86
36–40 years 41
41–45 years 9
46 and above 12
No. of year of service in the company <1 years 154
under study 1–3 years 294
4–8 years 21
9–15 years 16
21 and above 1
Qualification profile Diploma 81
BE 295
BE + MBA 14
MBA 15
MTech 13
MTech + MBA 2
BA/BSc/BCom 35
CA/ICWA/CS/MCom 7
Others 24
Process profile Accounts/IT/business planning 19
R&D 77
Manufacturing 213
Marketing 79
Materials 22
International operations 8
HR 30
Projects 38

5.2.2 Correlation analysis


During the exit interview, the employees were asked to rate the following in a scale of
1–4: they are physical working conditions, compensation package, employee recognition,
HR support and morale and growth opportunity:
We carried out correlation analysis with respect to sample parameters.
Results of correlation analysis are briefly described below:
x No significant correlation exists between age of the employee and ratings given to
physical working conditions.
x Significant correlation was found between age profile and ratings given to
compensation package. The negative value of Pearson coefficient 0.128 indicated
that higher age group employees gave low ratings to compensation package.
A diagnostic study of employee attrition 605

x Significant correlation was found between age profile and ratings given to employee
recognition. The negative value of Pearson coefficient 0.107 indicates that high age
group gives low ratings to employee recognition. Higher age employees rate
employee recognition in the company under study as low.
x No significant correlation exists between age profile and ratings given to HR
support.
x No significant correlation exists between age profile and ratings given to morale.
x Significant correlation is found between age profile and growth opportunity. The
negative value of Pearson coefficient 0.158 indicates that higher age group gives low
ratings to growth opportunity. Higher age group rates growth opportunity in the
company under study as low.
x No significant correlation was found between qualification profile and compensation
package.
Further diagnosis of correlation analysis indicated that the ratings given at the time of exit
interview are similar across age, qualification, place of work and grade.

5.2.3 Rank order analysis


The reasons of attrition of the past employees as revealed by exit interview data analysis
are shown in Table 6.
Table 6 Rank order of attrition elements in exit interview

Exit interview record Frequency out of 486 Percentage Rank


No perceived growth 198 41 1
Compensation package 190 39 2
Location of work 174 36 3
Family circumstances 103 21 4
Work load 85 17 5
Relationship with superior 78 16 6
Higher studies 63 13 7
Health/medical 13 3 8

5.3 Analysis of results


Top five reasons of attrition evidenced from the telephonic interview data for 143
respondents and 486 employees exit interview data are presented in the side bar. Table 7
summarises the comparative rankings.
Correlation analysis was conducted between the telephonic interview data and exit
interview data.
Spearman’s rank correlation coefficient value was 0.905 between the attrition
elements of telephonic interview data and attrition elements of exit interview data. The
correlation coefficient had a p-value of 0.002 indicating significance up to a level of
0.002. Hence, it can be concluded that the exit interview data corroborates with the
telephonic interviews recorded over a considerable lapse of time.
606 P. Augustin and R.P. Mohanty

x High correlation indicates that the data collected at the time of exit interview is
similar to the data collected by telephonic interview indicating that exited employees
have not changed their views about the company from which they exited over a
period of time. It may be noted here that telephonic interview samples have been
drawn in a randomised manner.
x It is worth to note here that the respondents in the telephonic interview willingly
participated in giving feedback and in taking part in provoked discussions.
x Since there is correspondence between the findings of the exit interview data
recorded by the company under study and telephonic interview, the designed
questionnaire has both construct and content validity.
x A recent research study conducted at a large multi-national technical firm showed
that a significant number of employees (96% of those interviewed) admitted they did
not provide the real reason for departure (Kreisman, 2002). For these individuals,
acknowledging that their manager was the primary reason they left seemed – too
risky. Instead, they chose to give reasons (for resigning) such as: better opportunity,
industry change, better working conditions and lack of development. Our findings
are almost similar to these observations of Kreisman (2002).
Table 7 Comparative ranking of attrition elements of telephonic interview and exit interview

Top five reasons for attrition Telephonic interview Exit interview


1 Compensation package No perceived growth
2 Career advancement Compensation package
3 Place of work Place of work
4 Extended work hours Family circumstances
5 Relationship with superiors Work load

6 Conclusions

This paper is a diagnostic survey of 629 exited employees from the automotive company
under study brings out the following implications:
x The principles of fairness and equity so far as rewards and recognitions are
concerned need to be re-looked. Direct line managers have one of the most important
roles regarding rewards and recognition.
x Career progression within the company has emerged as the major reason of attrition.
We postulate here that: Career progression = f [individual capability level,
innovative work practices, performance rating related to on-the-job performance,
potential rating on the competency scale for the next level job]. All these have to be
seriously and critically examined by human resource department of the company
under study and a framework needs to be formulated, experimented and
communicated to all the employees. A strong career progression plan will provide a
sense of hope in the future and comfort in the fact that the company is concerned in
them as an individual. The key to this plan is to create a synergy between the
company’s goals with personal goals, in essence, the real nuts and bolts of employee
A diagnostic study of employee attrition 607

engagement. It is like envisioning a journey, the two are taking together. The result is
an employee with aspirations who will see that his current role should be performed
to the best of abilities in order that he may continue to the next position. The
credibility this establishes with the employee will do more to solidify the normative
intention to stay more than any gift or bonus. However, for career progression, all
other interventions such as mentorship, special projects, job rotation, unit rotation,
professional contributions to the field of knowledge, building corporate image, etc.
should be also considered for middle and senior level executives. We present here
two models specifically meant for M&M. Figure 2 is a career development model
and Figure 3 is a career progression model.

Figure 2 Career development model

Figure 3 Career progression model


608 P. Augustin and R.P. Mohanty

The process of globalisation consists of much more than simply seeing an organisation
integrated in the economic environment. Looking to the emerging competitive landscape
in the new millennium, the automotive company under study is viewing trans-Frontier
operations as a logical and even unavoidable step in developing their own competitive
potential. Managing the complexity associated with such moves require not only a sound
strategy, but also the knowledge base of people and organisations that can implement it
(Mohanty, 2001). This paper is an attempt towards understanding the consequences of
employee turnover in the rapid globalisation process for human resources management
and development. However, there is a need for a new theory. Research is still dominated
by thinking of influential theorist. So far many research papers have not made significant
impact on managerial practice. However, this paper has focused on understanding the
underlying causes of turnover in real-life situations and has captured the intentions and
aspirations of employees. The limitation is that we have not focused on the cognitive
processes leading to turnover which may differ across organisations. That is, employees
from different population or varying personal or organisational circumstances may focus
on different factors. The scope exists to develop a new theory of attrition and construct a
generalised model.

Acknowledgements

The authors express their sincere thanks to Prof. A. Gunasekaran, Editor-in-Chief for his
insightful comments and suggestions. We are also thankful to the anonymous reviewers
for their valuable comments.

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610 P. Augustin and R.P. Mohanty

Appendix A

Description of the elements of attrition


This study has identified the following common constructs (factors) for questionnaires to
be administered to the past, present and future employees. The constructs are defined and
briefly explained below:
1 Job security: job security is the probability that an individual will keep his or her job.
A job with a high level of job security is such that a person with the job would have a
small chance of becoming unemployed. Job security is dependent on economy,
prevailing business conditions and the individual’s personal skills.
2 Total compensation: compensation is the total pay or financial compensation of an
employee receives for his efforts. Compensation includes a basic salary, bonuses,
shares, options, perks and other benefits. Compensation below the industry standards
or disparity in the compensation within the organisation leads to turnover. It is one of
the major factors to evaluate an external opportunity as a pull factor.
3 International assignments: international assignments are jobs or projects at foreign
countries. Employees prefer international assignments for its lucrativeness and cross
border experiences. Organisations offering international assignments are much
sought after.
4 Collaborative working relationship with superiors and subordinates: a collaborative
working environment supports employees in their individual and cooperative work.
It provides the capabilities to share information and exchange views to reach a
common understanding. Such a level of common understanding enables an effective
and efficient collaboration among different expertise of employees.
5 Innovative and forward thinking: innovative thinking, brainstorming and creativity
exercises are encouraged and used by forward thinking businesses and corporations
to successfully plan, create and sell products and services.
6 Autonomy on the work place: autonomy is the degree to which a job provides an
employee with the discretion and independence to schedule their work and determine
how it is to be done. Higher levels of autonomy on the job have been shown to
increase job satisfaction, and in some cases, motivation to perform the job. Freedom
to execute the work in one’s own style and function empowers the employee.
7 Enriching job content: job enrichment is an attempt to motivate employees by giving
them the opportunity to use the range of their abilities. An expanding job content
utilises the functional skills and cross-functional skills of the employee.
8 Preferred location: employees desire working at locations to which they are
attached.
9 Challenging roles and responsibilities: employees join organisations for challenging
roles and responsibilities. They also overcome challenge stressors. Organisations
who do not offer challenges are affected by turnover.
A diagnostic study of employee attrition 611

10 Rewards and recognition: rewards and recognition programmes honour both


individuals and teams who go the extra mile to service their departments. Employee
recognition is a communication tool that reinforces and rewards the most important
outcomes people create for your business. An effective employee recognition system
is simple, immediate and powerfully reinforcing. Employees expect their efforts to
be recognised. Organisation that fail or inadequately reward and recognise the efforts
face turnover.
11 Work life balance: work life balance is a broad concept including proper prioritising
between ‘work’ (career and ambition) on one hand and ‘life’ (pleasure, leisure,
family and spiritual development) on the other hand. Employees need a proper work
life balance with adequate time for their personal lives, family and recreational
activities. Stress is one of the outcome of poor work life balance.
12 Company as a responsible corporate citizen: corporate social responsibility (CSR) or
corporate citizenship is a form of corporate self-regulation integrated into a business
model. Ideally, CSR policy would function as a built-in, self-regulating mechanism
whereby business would monitor and ensure its support to law, ethical standards and
international norms. Working for a company with a good CSR and image gives pride
and belonging to an employee.
13 Opportunities for career advancement: career development looks at how individuals
manage their careers within and between organisations. It is how organisations
structure the career progress of their employees; it can also be tied into succession
planning within some organisations. Career development is the total constellation of
psychological, sociological, educational, physical, economic and chance factors that
combine to influence the nature and significance of work in the total lifespan of any
given individual. Employees work for an organisation where there are opportunities
for career advancement. Long-term careers are made in organisations that have a
clear career path for their employees.
14 Opportunities for individual capability development: employees join organisations
for individual and organisational development. Organisations which provide periodic
need-based training to develop skills and capabilities of their employees retain their
employees.
15 Opportunities for higher education: organisations which sponsor or encourage their
employees for higher education and retain the employees.
16 Inspirational mentorship: mentorship refers to a personal developmental relationship
in which a more experienced or more knowledgeable person helps a less experienced
or less knowledgeable person. Mentoring involves communication and is
relationship based. Mentoring is a process for the informal transmission of
knowledge, social capital and the psycho-social support perceived by the recipient as
relevant to work, career or professional development; mentoring entails informal
communication, usually face-to-face and during a sustained period of time, between
a person who is perceived to have greater relevant knowledge, wisdom or experience
(the mentor) and a person who is perceived to have less (the protégé).
612 P. Augustin and R.P. Mohanty

17 Appraisal process: differentiate good and poor performers performance appraisal is


an analysis of an employee’s recent successes and failures, personal strengths and
weaknesses and suitability for promotion or further training. It is also the judgement
of an employee’s performance in a job based on considerations other than
productivity alone. It is the process of obtaining, analysing and recording
information about the relative worth of an employee to the organisation. Unfair
appraisal is one of the main causes for employee dissatisfaction leading to turnover.
Fair appraisal with feedback leads to imparting the required training and
development of the employees.

Appendix B

Questionnaire
B.1 Past employees
Given below are certain elements. Please allot marks between ‘0’ and ‘100’ against each
based on how important is the element to you.
Element Present company Company under study
Job security
Total compensation package
International assignments
Harmonious and collaborative working relationship with
superior and subordinates
Innovative and forward thinking
Autonomy on the workplace
Enriching job content
Preferred location
Challenging role and responsibilities
Rewards and recognitions
Work life balance
Company as a responsible corporate citizen
Opportunities for career advancement
Opportunities for individual capability development
Opportunities for higher education
Inspirational mentorship
Appraisal process differentiate good and poor performers

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