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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
1 Introduction
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
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
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.
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
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
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 + + + + + + +
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.
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.
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
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.
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
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