employee attrition

PROJECT REPORT ON

“DIAGNOSTIC STUDY OF EMPLOYEE ATTRITION IN LARSEN & TOUBRO LTD”

AT

LARSEN & TOUBRO LTD.FARIDABAD

SUBMITTED BY

DEEPALI UPADHYAY (44/06)

(In partial fulfillment for the requirement of the Two Year Full Time Post

Graduate Programme in Management, 2006-08)

Acknowledgement

Behind every achievement lies an unfathomable sea of gratitude to those who have

extended their support and without whom it would never have come into existence. To

them I say my words of gratitude.

I would like to express my deepest sense of gratitude to Mr. Akhlesh Mohan, Head- HR,

L&T for giving me this opportunity to undergo Summer Training at Larsen & Toubro

(Faridabad). I would also like to extend my heartfelt gratitude to his constant

encouragement and valuable insight, guidance and facilities at all phases of the project.

The knowledge provided by them has been a great value addition for me and will go a

long way in shaping my promising career.

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Executive Summary

The study was conducted with a few objectives in mind which were to study the HR

practices in the organization, to find out the problems faced by employees of the

organization, to find out certain factors responsible for high attrition rate in the

organization and to suggest some ways by which the company can retain its employees.

With these objectives a primary research was conducted in the months of April and May.

For secondary data, a detailed analysis of the attrition patterns department wise, grade

wise, time-span wise, rating wise, qualification wise and month wise was done. Based on

which the hypothesis was formed.

The primary data was collected through a few unstructured interviews and questionnaire

which was administered to employees of L&T’s engineering division (LTen).

During the research 38 employees were covered. Survey results revealed that most

important factor behind employee attrition is Opportunity for development and growth,

second most important factor is Salary, third most important factor is Job content and

fourth most important factor is Relationship with supervisor. Also contained in the report

are talent report tables and tables which show the reasons that are central to attrition in

L&T and their relative importance.

At the end I suggest certain activities that L&T can take in order to decrease attrition rate

and retain employees.

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Table of Contents

Executive Summary

Chapter 1

1.1 Organization of the Study 6

1.2 Background 6

1.3 Objective 7

1.4 Research Methodology 7

1.5 Conceptual Framework 8

1.6 Relevance of the Study 8

1.7 Company Profile 9

1.8 Literature Review 13

Chapter 2

2.1 Scope of the Study 22

2.2 Hypothesis 22

2.3 Sources of Data 22

2.4 Questionnaire Design 23

2.5 Target Population 23

2.6 Sampling 23

2.7 Procedure for data Collection 24

Chapter 3 Data Presentation

3.1 Secondary Data

3.1.1 Strength data 25

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3.1.2 Resigned employee data 31

3.2 Primary Data

3.2.1 Data from unstructured interviews 37

3.2.2 Employee survey data 38

Chapter 4 Hypothesis testing

4.1 Employee Survey Data 49

Findings 50

Chapter 5 Suggestions for Improvements 51

Conclusion 53

Assumptions 54

Limitations 54

Annexure 1 55

References 59

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Chapter 1

1.1 Organization of the Study

Chapter 1 contains the objective of the study along with the relevance, conceptual

framework and the literature review that helped in the research.

Chapter 2 contains the scope and the coverage of the study along with the hypothesis that

needs to be tested for which the data was collected.

Chapter 3 presents the data in a graphical form that explains the data that has been

collected over the duration of the research so as to help understand the analysis better.

Chapter 3 presents the various cross tabulations of attrition with department, time-span,

grade, rating, month and qualification of resigned employees. It also tabulates the relative

importance of factors responsible for employee attrition.

Chapter 5 tests the hypothesis based on the employee survey.

1.2 Background

Management Decision Problem

To decrease the rate of attrition and retain employees in the organization

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Research Problem

To understand the factors central to high rate of attrition in the organization

1.3 Objectives

1 To understand the factors which are central to employee attrition

2 To suggest certain activities that L&T might undertake in order to decrease attrition

rate and retain employees.

1.4 Research Methodology

Scope of the Study- Employees of L&T (LTEN- Downstream).

Area- Faridabad.

Time- 2nd April – 2nd June 2005

Research Design – Exploratory and Descriptive Research

Sources of Data

Primary- Employee Survey through structured questionnaire and unstructured

Interviews

Secondary- Resigned Employee Data and other relevant data provided by

company

Sampling Technique – Random Sampling

Sample Size – 38

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Statistical technique – Chi-square test

1.5 Conceptual Framework

Business leaders everywhere face numerous challenges. At the forefront of those

challenges is sustaining competitive advantage in today’s aggressive business

environment. Both corporate customers and individual consumers, with more providers to

choose from than ever before, often perceive that what they are purchasing is, for all

practical purposes, a commodity that can easily be obtained elsewhere.

Key to distinguish in a highly commoditized and competitive market lies within the top

performers—those an organization can depend on to innovate and provide differentiating

service. In other words, human assets are the key in an organization’s efforts to survive

and thrive.

Many organizations are struggling to find and keep these valued employees. Changing

work force demographics, such as the shrinking of the most desirable labor pool (25- to

34-year-olds), and downsizing’s negative impact on employee loyalty, have organizations

searching for answers to recruiting and retaining the strategic asset of the 21st century:

talented people.

1.6 Relevance of the study

Many researches have been done in the past to understand the critical factors responsible

for employee attrition. . Thus, this research has been conducted to know the reasons

behind employee attrition in L&T.

Apart from this the research would also help identify the problems that the employees of

L&T (ENC) are facing and what are their demands and expectations from the

organization.

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1.7 Company Profile

Larsen & Toubro Limited

Larsen & Toubro Limited (L&T) -a U.S. Dollar 2.1 billion company - is India's largest integrated engineering and construction conglomerate. The Company also has interests in information technology, electrical and electronic products.

L&T offers proven solutions for oil and gas, refinery,petrochemical, fertilizer, chemical, cement, steel, powerand construction industries. The Company has established a reputation for technological innovation and execution of multi-disciplinary projects of great complexity. L&T is the only Indian company pre-qualified to handle large process-intensive projects on an EPCbasis.

Equally impressive is the Company's customer orientation. L&T's tradition of service is widely acclaimed worldwide.

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L&T- Faridabad

L&T Engineering at Faridabad provides spectrum of engineering services from concept to commissioning for Oil and Gas Sector. DEC Delhi is a

A knowledge based group teaming highly skilled professionals to design and engineer projects worldwide.

Growing with a vision to be counted among the World’s finest Engineering companies by consistently delivering Quality engineering at a competitive price.

E&C DIVISION

L&T's Engineering & Construction (E&C) Division plays a critical role in core sectors of the industry. Over the years, it has engineered, manufactured and delivered world-class plant and equipment to almost every sector of the Indian Industry as well as to countries overseas.

The E&C Division possesses integrated strengths in process design, basic and detailed engineering, project management, equipment fabrication, procurement, construction and commissioning. It undertakes single point responsibility for execution of projects. Strategic alliances with world leaders enable L&T to access advanced know-how and deliver projects that meet stringent quality requirements and time schedules.

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L&T Engineering (LTen)

LTen is the engineering arm of L&T’s Engineering & Construction (E&C) Division. L&T Engineering at Faridabad provides spectrum of engineering services from concept to commissioning for Oil and Gas Sector. Services include: Technology evaluation, conceptual studies, basic design, detailed engineering and 3D modeling. It address the complete value chain of engineering

Business Areas: Deep Water Offshore, Onshore Oil and Gas Processing, Refinery, Petrochemical, Reformers

Competitors: Bechtel, Saipem, Fluor, EIL

Job done by various Disciplines

Process Engineering

The Process Engineering discipline is responsible for executing conceptual designs, front end engineering designs and detailed engineering. Process discipline supports entire spectrum of projects in Oil and Gas sector.

Mechanical

Services range from design and engineering, preparation of MR’s for procurement, Bid analysis, vendor document reviews, site issues, trouble shooting etc.

Mechanical discipline is staffed by engineers with experience in Oil and Gas Field projects, Refineries and Petrochemicals, Power and Fabrication Industry.

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Plant Design

Plant Design and piping discipline supports projects in Oil and Gas sector. Its major strength lies in providing basic engineering and detail engineering for various projects.

Civil & Structural

Civil Engineering discipline provides pre-bid / conceptual design, detailed design and solutions to field specific engineering issues for the entire spectrum of Oil and Gas industries. This discipline has expertise in Civil & Structural Engg. and well trained personnel to provide high quality engineering solutions and bring in values to clients.

Electrical

Electrical discipline supports basic engineering, detailed engineering and field support for entire spectrum of Oil and Gas Projects. Discipline is staffed with qualified personnel with knowledge of national / international codes and standards and software used to do the design.

Project Controls

The Project Controls group is responsible for developing detailed Project schedules and monitoring of projects. Primavera is the main software used. Project Control group supports projects by generating necessary progress reports and invoicing.

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1.8 Literature Review

ATTRITION

Attrition rate is defined as the number of employees who leave a company during a specified time period divided by the average total number of employees over that same time period. It’s expensive, non-productive and frustrating. Harvard Business Review article estimated the cost of turnover at around 150% of an employee’s annual salary and could affect 40% of company profits.

ATTRITION CYCLE

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Attrition brings decreased productivity People leave causing others to work harder

This contributes to more attrition, which contributes to increased costs and lower revenue

This forces additional cost reduction and austerity measures

This in turn makes working more difficult, causing the best performers with the most external opportunities to leave

Employee attrition, a big cause for concern for firms, ranges between 15 per cent and 20 per cent. A company is not hurt because a certain person has left. The company is hurt because he/she takes away certain knowledge, and there is no ready replacement in the market.

Attrition, as such, is not a bad phenomenon. It has been known to exist all along. However, when jobs were scarce, the technology change was less rapid, voluntary attrition was small and companies managed it. However, with technology changing rapidly and manpower costs increasing, attrition is high and hurts badly.

Large players often use money power to lure talent from smaller players. Companies also use the `location' bait to attract employees. While a certain percentage of manpower turnover is desirable to keep fresh blood coming in, and removing dead wood, higher

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percentages are definitely not good indicators of an organization's culture and people practices.

It is a challenge to find the right talent within constraints such as location, nature of work, compensation and benefits.

Fresh graduates joining an organization make it a point to leave within the first year. They equip themselves not for performing their current job but for attracting a new one. Many a time, there is migration from bigger companies to smaller companies too, mainly because of the prestige associated with a certain project or a particular client. In some cases, smaller companies are even better paymasters than larger brands.

The success rates of retention programs are much higher if the management uses a direct, employee-focused, approach and is ready to invest resources for the same.

PRESENT SCENERIO

Attrition is instigated by good economic conditions

Economy boom

Positive news about the economy- after 4-yr recession, the economy appears to be on the rebound and is showing signs of sustainable momentum. Economic indicators support this recovery: growth rate over 8%

The current economic forces are creating an environment just right for potential business disaster - unexpected employee attrition and turnover at a level many businesses have never experienced. Companies already weakened by downsizing and cost cutting must be prepared to heed the signs and take action if they are to survive, much less excel. Studies have revealed the following:

83 percent of employees are likely to seek new employment as the economy booms.

48 percent of managers are likely to seek new employment with the improving economy.

75 percent of those managers are actively looking out. 56 percent of HR professionals indicated it is likely that voluntary turnover

would rise due to the improving economy.

Source: Employee Vulnerable Study by NFO India

Although some of these factors are beyond company’s direct control. When good talent walks, chances of finding a suitable replacement are slim.

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Better economic conditions instigates employee attrition because

Survival mode - In response to the recession, companies hunkered down, tightened their belts, focused on cutting costs and cutting corners - sometimes even customers. As a result, many organizations as a whole have lost sight of or destroyed their reason for being. Little emphasis is placed on preparing for expansion opportunities as the economy recovers. With a decimated strategy and no visible commitment or active engagement toward building the future, a company's high-potential employees have little incentive to stay when a competitor offers a more compelling future.

Career recession - With the flattening and downsizing of organizations, opportunities for career growth have been severely limited - both vertically and laterally. When advancement opportunities appear elsewhere, employees will be looking. In addition, some are contemplating business ventures of their own.

No investment in managers - When people look for greener pastures, they're not necessarily looking for a new company. As documented in the groundbreaking study by the Gallup Organization, the number one reason people look for another position is to leave their manager, not because they don't like their job or the company. Reduced investment in management development ultimately leads to employee dissatisfaction with their manager, their primary reason for leaving.

Disenfranchised employees - Many employees feel they have been taken advantage of: overworked, stifled, and burned out by excessive hours and stress, only to be rewarded with reduced benefits and/or pay. Lifetime employment no longer exists, and company loyalty is becoming a thing of the past.

Attrition is spreading to traditional sectors as well

ATTRITION is not just rampant in the BPO sector, but it is fast catching up in other traditional sectors such as manufacturing and engineering, public sector undertakings and services.

According to an Employee Vulnerable Study by NFO India, employees in the traditional sectors are most dissatisfied and would switch jobs at the first available opportunity. However, employees belonging to new-age sectors such as financial services, insurance and banking, FMCG and white-goods, IT and telecom seem to be relatively more satisfied.

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The "possible vulnerability" of white-collar workers should ring alarm bells for HR heads. The major pitfalls were found to be lack of growth opportunities, dissatisfaction with job content, inadequate emphasis on policies and systems and interpersonal relationships.

There is a crying need for companies to engage the employees' interest by creating a conducive environment for growth, learning, bolster `we-feeling' and compensate as per industry standards. As the hidden costs incurred in attracting the right workforce and on-the-job training, is phenomenal.

While recruitment is up sharply from last year, anecdotal evidence suggests employee attrition is on the rise again, causing more than a few gray hairs in the manpower departments of engineering companies. And higher level technology companies such as chip design firms are finding that the more specific the skill required, the harder it is to get. These companies also see salaries rising and fear that much of benefits accruing to Indian firms from lower employee costs may fade, though company heads do not see that happening in the next five years or so. To be sure, employee costs arising from higher salaries are rising as they did not during 2001 and 2002, but enough companies are willing to dole out more.

Some Indian companies are already feeling the pinch. Satyam Computer Services, the No.4 exporter, last month reported an employee attrition rate of almost 20 percent in the quarter ended June 30, 2007, compared with about 17 percent a year earlier. To stem defections, Satyam raised its workers' pay in India and other low-cost countries by 18 percent in July. Tata Consultancy and Infosys increased wages by 15 percent in April.Wage inflation in India- Wages are going up at the rate of 10 to 15 percent year after year.

Source: THE HINDU, Friday, Oct 13, 2006

Talent Poaching

Losing employees to competitors is common; but now partners are increasingly finding their employees poached by their own vendors and distributors

The term 'employee poaching' can be defined as an act of enticing key employees to move from one firm to a competitor. It has emerged as the biggest HR challenge for enterprises, both big and small, across all industry verticals. In the recent times, the aviation sector has been the worst hit, and state-owned airlines have lost several of their in-flight crew and ground staff to the new airlines. Retail is likely to emerge as the next hotspot for poaching, as large players enter the fray and roll out their stores.

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The IT industry has traditionally been a happy hunting ground for poachers, for obvious reasons. Attrition rates of engineering, software and BPO companies have always been steep compared to the rest of the industries.

Employee attrition is part of every manpower-intensive business.

There is a misconception among employers that emoluments matter most in attracting talent. An employee changes jobs for many reasons. Retaining human resource, especially on whom much has been spent to hone their skills, is a headache for firms. Job satisfaction is something that varies from individual to individual.

Job satisfaction and employee loyalty are better in companies that allow their staff the freedom to unleash their creativity and never fail to appreciate a job well done.

Too much of interference and bossing stifles growth and creativity, the motivation levels of employees plunges and they look for the exit. An atmosphere of distrust too could lead to employee attrition.

It is in the institution's interest to provide a congenial atmosphere and take initiatives that would keep the workforce morale high. Contentment and job satisfaction certainly matter more than fat pay packets and perquisites though with the usual exceptions.

There are many factors that contribute to the problem of employee turnover. Some of these factors cannot be directly controlled by organizations, such as area economic or labor market conditions. It appears that the high unemployment rate of graduates looking for professional work experience is a major force responsible for excessive employee turnover in India.

The level of turnover may exceed a company's capability to handle it and can force a strategic crisis - schedule slips, quality degradation, business process breakdown, delivery delays, and the resulting potential of customer attrition.

The kind of treatment meted out to the new recruit by the organization and co-workers during this crucial transition period can determine the candidate's decision to either continue in the job or call it quits.

Considering that it can cost a company between 50 and 150% of an employee's salary to find a suitable replacement, it is simpler and far more economical to extend the red carpet treatment to new recruits, and go all out to ensure that they fit in comfortably with the office culture.

Reports indicate that much of the voluntary turnover of companies takes place within the first one year of employment, corroborating the widely held belief that first impressions play a significant role in an organization's ability to find and retain talented employees.

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During this time, newcomers are often quietly sizing up the organization and testing waters to see if the job is an ideal fit. Not surprisingly, organizations that make them feel wanted and welcome are the ones they choose to build their careers with.

COST OF ATTRITION

Employee attrition could affect 40% of company profits.

Around 150% of an employee’s salary (source- Harvard Business Review article)

Tangible recovery costs include recruiting, rehiring, and retraining. In fact, a new employee typically is a cost to the company until he or she reaches a threshold of productivity. In higher level technical and management positions this can exceed 6 months. For companies that have cut all expenses not deemed mission critical, such as training and recruitment efforts, the lag in performance, additional cost, and stress on remaining employees creates a vicious downward spiral.

Equally critical to an organization's viability are its Vital Intangibles (VIs), which can take the form of informal relationships, networking connections, or a web of favors a key employee has spun during his or her tenure - favors from vendors or other business contacts that can be called in as needed. VIs are hard to identify and may be even harder to recoup. Many companies will take the steps to protect trade secrets, intellectual property, copyrights and patents, but intangible assets are less obvious, though no less critical to an organization, and their loss is no less damaging.

Undocumented workarounds, tricks, tips and "the knack" that come from experience in multiple roles within the organization make up another collection of VIs. These are the subtleties that allow an employee to do a task more efficiently, thereby increasing their performance - and the company's. How much is this knowledge worth to your business?

1. Cost of the person(s) who fills in while the position is vacant. This can be either the cost of a temporary or the cost of existing employees performing the vacant job as well as their own.

2. Cost of lost productivity at a minimum of 50% of the person's compensation and benefits cost for each week the position is vacant, even if there are people performing the work.

3. Cost of conducting an exit interview to include the time of the person conducting the interview, the time of the person leaving, the administrative costs of stopping payroll, benefit deductions, benefit enrollments, COBRA notification and administration, and the cost of the various forms needed to process a resigning employee.

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4. Cost of the manager who has to understand what work remains, and how to cover that work until a replacement is found.

5. Cost of training your company has invested in this employee who is leaving. Include internal training, external programs and external academic education.

6. Impact on departmental productivity because the person is leaving. 7. Cost of severance and benefits continuation provided to employees who are

leaving that are eligible for coverage under these programs. 8. Cost of lost knowledge, skills and contacts that the person who is leaving is taking

with them out of your door.

Recruitment Costs

1. Cost of advertisements 2. Cost of the internal recruiter's time to understand the position requirements,

develop and implement a sourcing strategy, review candidates backgrounds, prepare for interviews, conduct interviews, prepare candidate assessments, conduct reference checks, make the employment offer and notify unsuccessful candidates. This can range from a minimum of 30 hours to over 100 hours per position.

3. Cost of the hiring department (immediate supervisor, next level manager, peers and other people on the selection list) time to review and explain position requirements, review candidates’ background, conduct interviews, discuss their assessments and select a finalist. Also include their time to do their own sourcing of candidates from networks, contacts and other referrals. This can take upwards of 100 hours of total time.

4. Cost of the various candidate pre-employment tests to help assess a candidates' skills, abilities, aptitude, attitude, values and behaviors.

Training Costs

1. Cost of orientation 2. Cost of departmental training 3. Cost of supervisory time spent in assigning, explaining and reviewing work

assignments and output. This represents lost productivity of the supervisor. Consider the amount of time spent at 7 hours per week for at least 8 weeks.

Lost Productivity Costs

As the new employee is learning the new job, the company policies and practices, etc. they are not fully productive. Use the following guidelines to calculate the cost of this lost productivity:

1. Cost of coworkers and supervisory lost productivity due to their time spent on bringing the new employee "up to speed."

2. Cost of mistakes the new employee makes during this elongated indoctrination period.

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New Hire Costs

1. Cost of bring the new person on board including the cost to put the person on the payroll, establish computer and security passwords and identification cards, business cards, internal and external publicity announcements, telephone hookups, cost of establishing email accounts, costs of establishing credit card accounts, or leasing other equipment such as cell phones, automobiles.

SITUATION IN L&T

L&T is facing a high attrition rate of over 25%. L&T is the only Indian Engineering multinational company with such a great potential and talent, and it should try to improve its performance by retaining this talent. Change in policies and strategy due to this is ultimately going to benefit the company, which has already started Talent crisis. L&T will always attract good people but the only question mark is whether it will retain them.

ATTRITION RATE CALCULATION

Attrition rate= [No of resignations]/ [(No of emp. at yr start +No of emp. at yr end)/2]

Attrition Rate in LTen:

05-06:

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[11]/ [(35+102)/2]

=17.5%

06-07:

[38]/ [(102+187)/2]

=26.29%

Sharp increase in attrition rate in 06-07 from 05-06

Resignations in project duration:

April 07- 4

May 07- 7

Resignation letters in May 07- 9

Chapter 2

2.1 Scope of the Study

The study was conducted on employees of L&T- Engineering and Construction Division,

Faridabad. Employees were interviewed with questionnaires which had structured

questions on their importance attached to various factors behind employee attrition.

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Area: L&T- Faridabad

Time: The primary data collection and analysis was conducted between 2nd April 2007

and 2nd June 2007.

2.2 Hypothesis

S.No. Research Question Hypothesis

1. Is salary the most important reason

why employees leave the organization?

Ho: Salary is the most important reason

why employees leave the organization

H1: Salary is not the most important

reason why employees leave the

organization.

2.3 Sources of Data

Data was collected from both primary as well as secondary sources. Firstly,

secondary data available was reviewed to know the current scenario in the

industry, calculation of attrition rate, the cost of attrition, the most common

reasons behind attrition. The resigned employee data was also analyzed.

This was followed by a primary survey to find the problems that the employees

are facing and the importance they attach to various factors behind attrition.

2.4 Questionnaire Design

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The questionnaire was designed based on the literature review done as well as

with the views of the industry experts.

The questions in the questionnaire helped us correlate and find out the relative

importance of various factors that are responsible for attrition. The relationship

has been found using chi-square test.

2.5 Target Population

The target population was employees of L&T- ENC division (Faridabad)

2.6 Sampling

2.6.1 Sampling Design – The employees were sampled on the basis of Random

Sampling.

2.6.2 Sample Size – The sample size for the employee survey was 38 which

would be approximately 20% of the target population.

2.7 Procedure for Data Collection

For the purpose of data collection both primary as secondary data would be used.

For the purpose of primary data collection of employee research, employees were

administered with a questionnaire which had structured questions. Also few

unstructured interviews were carried out. Secondary data of resigned employees

and other relevant information was provided by the company.

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Chapter 3

Data Presentation

L&T is into several business lines, ENC being one of them. A part of the ENC division in

Faridabad is L&T Engineering (LTen), which had a high rate of attrition.

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Secondary data: 38 employees resigned in the year 06-07. Data of these resigned

employees was collated and analyzed to form a hypothesis.

Primary data: Data collected from unstructured interviews and employee survey was

analyzed to test the hypothesis.

3.1 SECONDARY DATA PRESENTATION

3.1.1 STRENGTH DATA

Total Employee Data

05-06:

Month Wise Report Of Total Strength Of Employees

Year Months Appointment Separations Total Strength

2004

-200

5

MARCH '05 35

2005

– 2

006

APR '05 6 0 41MAY '05 6 0 47JUN '05 6 2 51JUL '05 6 0 57AUG '05 7 1 63SEP '05 4 1 66OCT '05 3 0 69NOV '05 1 2 68DEC '05 8 2 74JAN '06 3 0 77FEB '06 14 3 88

MAR '06 14 0 102 TOTAL 78 11

06-07:

Month Wise Report Of Total Strength Of Employees

Year Months Appointment Separations Total Strength

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2005

-200

6MARCH '06 102

2006

– 2

007

APR '06 3 0 105MAY '06 2 4 103JUN '06 3 2 (1 ADV) 105JUL '06 12 2 114AUG '06 29 2 141SEP '06 11 3 149OCT '06 23 3 169NOV '06 14 3 180DEC '06 12 2 190JAN '07 1 2 189FEB '07 2 4 187

MAR '07 13 13 (1 ADV) 187 TOTAL 125 40 (2 ADV)

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APPOINTMENTS

05-06:

0

2

4

6

8

10

12

14

No of app

APR '05

MAY'05

JUN '05

JUL '05

AUG '05

SEP '05

OCT '05

NOV '05

DEC '05

JAN '06

FEB '06

MAR'06

Month

MONTH WISE APPOINTMENTS

06-07:

0

5

10

15

20

25

30

No of app

APR '06

MAY'06

JUN '06

JUL '06

AUG '06

SEP '06

OCT '06

NOV '06

DEC '06

JAN '07

FEB '07

MAR'07

Month

MONTH WISE APPOINTMENTS

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RESIGNATIONS

05-06

0

0.5

1

1.5

2

2.5

3

No of resg

APR '05

MAY '05

JUN '05

JUL '05

AUG '05

SEP '05

OCT '05

NOV '05

DEC '05

JAN '06

FEB '06

MAR '06

Month

MONTH WISE RESIGNATIONS

06-07:

0

2

4

6

8

10

12

No of resg

APR'06

MAY'06

JUN'06

JUL'06

AUG'06

SEP'06

OCT'06

NOV'06

DEC'06

JAN'07

FEB'07

MAR'07

Months


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STRENGTH

05-06:

0

20

40

60

80

100

120

Tot strength

APR'05

JUN '05

AUG'05

OCT'05

DEC'05

FEB'06

Month

MONTH WISE STRENGTH (05-06)

Series1

06-07:

0

20

40

60

80

100

120

140

160

180

200

Tot strength

APR '06

MAY'06

JUN '06

JUL '06

AUG '06

SEP '06

OCT '06

NOV '06

DEC '06

JAN '07

FEB '07

MAR'07

Month

MONTH WISE STRENGTH (06-07)

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This data suggests that in the year 05-06 there has been a heavy recruitment drive

and few resignations. Strength of the company increased three fold from previous

year. On the other hand, in the year 06-07 there has been a heavy recruitment drive

but still the strength has not matched the set targets as there are many resignations

during the year.

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3.1.2 RESIGNED EMPLOYEE DATA

Department facing highest attrition rate

Department

0

1

2

3

4

5

6

7

8

9

10

CIVIL MECH INSTRU PIPING PROC ELEC PROJ

Dept

L&T has 7 engineering departments: Civil, Mechanical, Piping, Instrumentation, Process,

Electrical and Projects

PIPING Dept had highest attrition (9) followed by CIVIL (8).

Findings: Employees have left from each department. However highest number of

employees have left from the PIPING AND Civil Departments. Projects and HR

Department faces lowest attrition.

3.3 Time-span with highest rate of attrition

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Time-span of <1 yr has highest attrition (21).

Findings: Highest number of employees have left in <1 yr of their time-span in the

organization. This suggests that people are using L&T as a spring board because of its

brand name. Few have left in >2 yrs.

Grade with highest attrition

0

2

4

6

8

10

12

14

16

No of resg emp

E1 E2 E3 MI TOM4

M5 TOM9

S JS

Executive Managerial Supervisory

Grade

Grade Wise

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Time Span

2115

2

<1 YR

1-2 YRS

>2 YRS

There are three divisions of grade in the company. Supervisory grade is given to diploma

holding employees, executive grade is given to degree holding employees and managerial

grade is higher than executive grade. Executive Grade has highest attrition (24) followed

by Supervisory Grade (8). Very few resignations are from Managerial Grade (6).

Findings: Employees have left from each grade. However highest number of employees

have left from Executive grade. Managerial grade faces lowest attrition. The probable

reason for this is ESOPS being offered to them.

Qualification wise attrition

QUALIFICATION

31

7

ENG

DRAFT

L&T employs both engineers and draftsmen.

Highest attrition (31) was among engineers.

Findings: Employees with engineering qualification have left more than those with

draftsmanship qualification. This suggests loss of more qualified manpower.

Month wise attrition

34

0

2

4

6

8

10

12

No of resg

APR'06

MAY'06

JUN'06

JUL'06

AUG'06

SEP'06

OCT'06

NOV'06

DEC'06

JAN'07

FEB'07

MAR'07

Months


MARCH month had highest attrition (12) followed by FEBRUARY (4) and MAY (4).

Findings: Employees have left in each month. Most employees have left in the month of

March, almost thrice the number from other months.

Monthly Attrition Rate

35

0

1

2

3

4

5

6

7

Percentage

APR'06

MAY'06

JUN'06

JUL'06

AUG'06

SEP'06

OCT'06

NOV'06

DEC'06

JAN'07

FEB'07

MAR'07

Month

Month Wise Attrition Rate

MARCH month had highest attrition (6.2%) followed by MAY (3.7%).

Findings: Employees have left in each month. Most employees have left in the month of

March, almost thrice the number from other months.

Rating wise

36

0

2

4

6

8

10

12

14

16

18

No of resg emp

TOP MIDDLE LOWER OTHERS

Rating

Rating

Employees in L&T are rated after the completion of 11 months of their service in the

organization. Ratings given are Top, Middle, Lower and people who were not rated fall

in the Others rating category.

Highest attrition was from OTHERS Rating (17) followed by MIDDLE Rating (8).

Findings: Employees of each rating have left. However highest number of employees

have left from the OTHERS rating i.e. they were not rated before leaving the organization

as the rating of employees is done after completion of 1 year of service in the month of

January . Some TOP rated people have also left the organization which means highest

loss to an organization.

Reasons given by resigned employees

37

0

2

4

6

8

10

12

14

16

18

No of resg emp

SAL BEN JOB OPP SUP PEE LOC MGM RES

Reason

Reason Wise

Reasons were asked from the nine factors: salary, benefits, job content, opportunity for

development, relationship with supervisor, relationship with peers, location of work

place, management policies and work culture, resources to do the job

Among resigned employees, 17 employees gave salary, 16 employees gave opportunity

for development and growth, 2 gave management policies and 1 gave location of work

place as a reason for leaving.

Findings: Salary and Opportunity for development and growth are the reasons given by

most employees for leaving the company.

3.2 PRIMARY DATA PRESENTATION

38

3.2.1 DATA FROM UNSTRUCTURED INTERVIEWS

Areas of Dissatisfaction

Compensation and benefits are defaulted

Salary is not competitive

Discrimination in compensation among different units

Lack of training and mentoring programs

Lack of perks and facilities

Long work hours and no conveyance facility

Lack of social activities and initiatives for employee families

3.2.2 SURVEY DATA

39

3.8 Total Employees Covered in Survey

Year Wise Sample Composition

18

8

12

<1 yr

1 to 2 yrs

>2 yrs

The sample for survey consisted of 18 people whose time span in the organization was <1

yr, 12 people whose time span was 1-2 yrs and 8 people whose time span was >2 yrs.

Grade Wise Sample Composition

23

11

4

E

M

S

The sample for survey consisted of 23 people from E band, 11 people from M band and 4

people from S band.

Survey Results

40

Tabulation of 1st most important reason and 2nd most important reason given by each of

the 38 employees surveyed along with their grade and time span in the organization.

SURVEY RESULTS

S NO. 1ST REASON 2ND REASON GRADE TIME SPAN

1 Salary R/s with supr E <1 yr

2 Salary opp for dev E <1 yr

3 job content opp for dev M >2 yrs

4 Salary location M 1 to 2 yrs


6 opp for dev salary E <1 yr

7 Salary location E <1 yr

8 opp for dev resources M 1 to 2 yrs


10 job content salary M <1 yr

11 Benefits opp for dev E <1 yr

12 opp for dev R/s with supr E >2 yrs

13 Resources job content M >2 yrs

14 opp for dev job content M >2 yrs

15 job content opp for dev M >2 yrs

16 management policies R/s with supr E 1 to 2 yrs

17 R/s with supr opp for dev M >2 yrs

18 R/s with peers resources M >2 yrs

19 opp for dev salary S 1 to 2 yrs


21 Salary R/s with supr E <1 yr

22 opp for dev job content E >2 yrs

23 Salary opp for dev E 1 to 2 yrs

24 opp for dev job content E <1 yr

41

25 Salary mgmt policies M >2 yrs

26 job content opp for dev S <1 yr

27 opp for dev salary S >2 yrs

28 Salary job content E <1 yr

29 Salary opp for dev S <1 yr


31 opp for dev mgmt policies E <1 yr

32 Salary opp for dev E 1 to 2 yrs

33 job content opp for dev E 1 to 2 yrs

34 opp for dev resources E >2 yrs

35 job content salary E <1 yr

36 job content salary E 1 to 2 yrs


38 R/s with peers opp for dev M >2 yrs

Frequency of Most Important Reasons

42

1st Reason Frequency

12

13

7

1

21 1 1

Opp for dev

Salary

Job Content

R/S w ith supr

R/S w ith peers

Benefits

Resources

Mgmt

13 people said that 1st most important reason for attrition was salary, 12 said opportunity

for development and 7 said job content.

2nd Reason Frequency

14

8

5

4

20

32

Opp for dev

Salary

Job Content

R/S w ith supr

Location

Benefits

Resources

Mgmt

14 people said that 2nd most important reason for attrition was opportunity for

development, 8 said salary and 5 said job content.

Time-Span Wise

43

Less than 1 yr

49%

28%

17%6%

sal

opp

job

ben

FINDINGS: Among the people who have been working in the organization for less than

1 yr, most (49%) feel salary is the most important reason for attrition, some (28%) feel

opportunity for development and growth is the most important reason. Some (17%) also

feel job content is the most important reason and few (6%) feel benefits are most

important.

1 to 2 yrs

37%

25%

13%

25%

sal

opp

mgmt

job

44

FINDINGS: Among the people who have been working in the organization for l to 2 yrs,

most (37%) feel salary is the most important reason for attrition, some (25%) feel

opportunity for development and growth is the most important reason. Some (25%) also

feel job content is the most important reason and few (13%) feel management policies are

most important.

Greater than 2 yrs

17%

42%8%

8%

17%

8%job

opp

res

supr

peer

sal

FINDINGS: Among the people who have been working in the organization for more than

2 yrs, most (42%) feel opportunity for development and growth is the most important

reason for attrition, some (17%) feel job content is the most important reason. Some

(17%) also feel relationship with peers is the most important reason, few (8%) feel

relationship with supervisor is most important and very few (8%) feel salary is most

important.

Grade Wise

45

Executive Grade

44%

35%

4%

4% 13%sal

opp for dev

benefits

management

job content

FINDINGS: Among the people from Executive Grade, most (44%) feel salary is the most

important reason for attrition, some (35%) feel opportunity for development and growth

is the most important reason. Some (13%) also feel job content is the most important

reason and few (4%) feel benefits are most important. Very few (4%) feel management

policies are most important.

Managerial Grade

28%

18%18%

9%

9%

18%job

sal

opp

res

supr

peer

46

FINDINGS: Among the people from Managerial Grade, most (28%) feel job content is

the most important reason for attrition, some (18%) feel opportunity for development and

growth is the most important reason, some (18%) feel relationship with peers is the most

important reason. Some (18%) also feel salary is the most important reason and few (9%)

feel relationship with supervisor is most important. Very few (9%) feel resources to do

the job are most important.

Supervisory Grade

50%

25%

25%

opp for dev

job content

salary

FINDINGS: Among the people from Supervisory Grade, most (50%) feel opportunity for

development and growth is the most important reason for attrition, some (25%) feel

salary is the most important reason. Some (25%) also feel job content is the most

important reason.

Thus, if we combine the data then we get that overall the most critical reason

responsible for employee attrition is Opportunity for development and growth. Next

important reason is Salary followed by Job content and Relationship with

supervisor.

47

Points Given to Each Reason by Each Employee in the Questionnaire

Tabulation of the points allotted to each factor by each of the 38 employees surveyed

S No. Salary Benefits Job

Dev opp R/s sup

R/s peers Location

Mgmt pol Resrcs

1 16 14 9 13 15 6 9 12 14

2 17 7 12 16 15 14 8 8 11

3 14 1 17 17 13 11 10 14 11

4 17 14 8 12 15 9 17 11 5

5 16 8 13 16 13 11 8 10 13

6 15 8 14 16 10 9 11 12 13

48

7 15 13 12 12 12 10 15 8 11

8 8 13 12 16 13 11 9 12 14

9 16 14 9 15 11 10 8 12 13

10 15 9 15 14 11 10 9 11 14

11 12 16 9 15 13 13 9 9 12

12 14 9 11 17 15 12 4 12 14

13 14 9 17 16 6 6 8 14 18

14 13 8 14 14 14 11 10 11 13

15 11 9 16 15 11 11 7 13 15

16 10 12 11 11 15 14 8 16 11

17 15 10 14 17 18 0 8 11 15

18 11 2 13 15 11 17 9 14 16

19 14 11 11 16 12 10 12 10 12

20 14 10 12 16 14 8 9 11 14

21 23 10 7 13 15 10 8 10 12

22 14 7 16 18 12 10 7 13 11

23 19 5 13 17 11 10 10 10 13

24 12 8 17 17 13 8 8 13 12

25 17 9 13 12 10 8 11 15 13

26 8 7 18 17 13 11 8 13 13

27 15 12 13 15 9 9 10 13 12

28 18 7 17 15 12 10 10 7 12

29 17 13 14 15 14 13 1 13 8

30 20 12 15 16 13 10 5 9 8

31 11 9 13 15 13 13 8 15 11

32 17 6 13 14 13 13 10 12 10

33 19 3 20 19 8 9 6 8 16

34 10 7 16 17 12 15 5 9 17

35 14 7 18 13 13 9 13 12 9

36 18 4 19 15 12 9 8 10 13

37 14 9 12 16 13 11 9 12 12

38 10 10 13 15 15 16 7 13 9

49

Total 553 342 516 578 478 397 332 438 470

0

100

200

300

400

500

600

Points

Sal Ben Job Opp sup peers Loc Mgm Res

Reason

Reason Wise Points

Finding:

The survey results reveal that Opportunity for development and growth is the most

important factor behind employee attrition as it has the highest score. Second important

reason is Salary. Third important reason is Job content. Fourth important reason is

Relationship with supervisor.

Chapter 4

Hypothesis Testing for Employee Survey Data

Ho: Salary is the most important reason why people leave the organization.

H1: Salary is not the most important reason why people leave the organization.

50

Chi-Square Calculations

FACTOR E O (E-O) (E-O)^/E

Sal 904 553 351 136.28Ben 400 342 58 8.41Job 400 516 116 33.64Opp 400 578 178 79.21Supr 400 478 78 15.21Peer 400 397 3 0.02Loc 400 332 68 11.56Mgmt 400 438 38 3.61Resr 400 470 70 12.25Total 4104 4104 300.19

df= 8, Significance level= 0.05

Table value= 15.507

The computed value is higher than the critical value. Hence we reject the null hypothesis.

The hypothesis is rejected and hence we accept the alternate hypothesis that salary

is not the most important reason why employees leave an organization.

FINDINGS

Although salary is important, but it is not the most important reason for employee

attrition in the organization

Most important reason for attrition is opportunity for development and growth

Next important factor came out to be Salary followed by Job content and

Relationship with supervisor

51

Almost every one surveyed from the <1 yr time-span category said salary was the

most important reason responsible for attrition. Almost none from >2 yr time-

span said Salary was most important

Among the people who said salary was the most important reason, most were

from E and S Grade and very few from M grade

Chapter 5

Suggestions for Improvement

The most important factor that has come as a result of the employee survey and

unstructured interviews is Opportunity for development and growth. This is one

reason why many people leave. This is one area that needs immediate attention.

52

Another very important factor is Salary. Salary is not competitive. This point has

been pointed out by many employees.

Suggestions:

Opportunity for Growth and Development

Induction process needs to be more effective and interesting. Employee

expectations should not be raised too high

Provide 360 degree feedback. Online appraisal system (FAIR) needs to be more

effective and fair

Recognize employees for good performance- MLP (managerial leadership

program) and ELP (employee leadership program) are to evaluate potential, but

instead they should be performance based

Mentoring programs, on-line personal assessments

Invest in training and development- programs should be frequently conducted and

customized to needs of employees- Competency Mapping.

Fresh graduates should be provided sufficient amount of training before job is

assigned to them

Salary and Benefits

Adopt pay-banding- competitive with market rates

Standardized compensation for all business units (esp. within the same center) and

fair pay.

Higher base pay raise on performance- presently it’s a meager amount of a few

hundreds

53

Benefits like retention bonuses etc should be given

General

Structured exit interviews should be conducted

Opinion surveys, feedback forums, employee suggestion box or employee

suggestion committee and employee satisfaction surveys

Holding meetings with employees on a regular basis to identify their desires and

needs

Most importantly implementing the most promising recommendations immediately

CONCLUSION

Study of HR practices and employee attrition in the organization was a great learning experience. It helped in understanding the intricacies of HR role in an organization. The study helped in finding out the most critical reasons responsible for employee attrition in the organization. It brought various concerns of the employees to the forefront. Apart from the project there was also a lot of on-the-job training which helped enhance HR skills and gain a better understanding of the functioning of HR. It was an effective learning in combining the theoretical and practical aspects relating to project.

54

There has been immense learning in the field of employee retention. The basics about attrition and retention, attrition calculation, cost of attrition, consequences of high attrition rate and reasons for attrition.

The study helped in understanding the relative importance of various factors responsible for employee attrition, also revealed the fact that that opportunity for development and growth is most important for the employees of the organization. There is a crisis in human capital management. We need fundamental reform in order to address this crisis and ensure long-term ability to hire and manage a high-quality, high-performing workforce. Most employees are not motivated solely by money. Historically, firms have used money and financial rewards to retain employees. High tech employees are enjoying the fastest salary progression of almost any profession, yet they are changing jobs constantly. Today’s employees seek more than monetary compensation. Research conducted in the company revealed that opportunity for development, salary, job content, relationship with supervisor are important reasons for employee attrition. The myth that salary is the most important reason for employee attrition was clarified as employees are more concerned about opportunity for development. Salary is also important, salary needs to be competitive with the market rates, other wise there is a high risk of loosing your employees to your competitors. I also learned that even though the salary might be high, an employee would be willing to change job for better development opportunity.

L&T can retain employees and reduce attrition rate by dealing with the two important factors behind attrition, Opportunity for development and growth and Salary. More focus on employee training and employee recognition is required. Salary needs to be made more competitive. To retain employees it is important to provide sufficient opportunities for development and growth, competitive salary, challenging jobs that use employee skills efficiently and good managerial guidance, among other things. We are in a time of manpower shortages that will not abate in the near term. Employers have to work smarter and permit employees to work smarter.

ASSUMPTIONS

Certain assumptions were made while conducting the study.

Sample is representative of the target population Probability of type 1 error is 5%

55

LIMITATIONS

The study suffers from some limitations due to the problems encountered during the project study.

Sample size was limited to one business unit, thus the results cannot be generalized to other business units.

The study is limited to a small time frame of two months and hence the results may be biased.

Some of the respondents were reluctant to part with certain information on the text of sensitivity of the information and also, in some case the policy of the company came in the way for a free revelation of the desired input.

Some of the employees were not candid enough to divulge all the required information.

The magnitude of the influence of these limiting factors can have a bearing on the report,

but is too little to alter the basic objectives of the report.

Annexure 1

Questionnaire

The objective of this questionnaire is to co-relate the important attributes that

one considers to work for an organization

56

Allocate 3 points between the two alternative reasons in each pair based on

perceived importance in the following fashion

0 or 1 or 2 or 3

3 2 1 0

Numbers assigned to each pair should add up to 3.

1 Job content

Resources to do the job

2 Salary

Benefits (like telephone, medical entitlement)

3 Opportunity for development and growth

Location of work place

4 Relationship with supervisor

Management policies and Work culture

5 Relationship with peers

Job content

6 Benefits (like telephone, medical entitlement)


7 Location of work place

Relationship with peers

8 Resources to do the job


9 Management policies and Work culture

Salary

10 Job content


57







14 Salary


15 Job content



Opportunity for development and growth







20 Job content

Salary

21 Location of work place






24 Job content


58

25 Management policies and Work culture


26 Salary





Salary

29 Job content



Salary



32 Job content


33 Salary








Employee Profile

Time-span in organization:

59

□ <1 yr □ 1-2 yrs □ >2 yrs

Grade:□ E □ S □ M

REFERENCES

William Anthony, Pamela Perrewe & Michele Kacmar (1999)-HRM:A Strategic Approach-3rd Ed.

Cherrington, David J. (1995). The Management of Human Resources. Prentice-Hall.

Mondy, R. Wayne, and Noe, Robert M. (1996). Human Resource Management. Upper Saddle River, Prentice-Hall.

Nadler, Leonard, and Wiggs, Garland D. (1986). Managing Human Resource Development. San Francisco: Jossey-Bass.

Decenzo, D.A. and S.P. Robbins.1988. Human Resource Management. New Delhi: Prentice- Hall of India Pvt. Ltd.

60

William, B.W. and Keith Davis. 1993. Human Resource and Personnel Management. MC Grow - Hill.

The Hindu www.google.com www.humancapital.com

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http://www.google.com/

employee attrition

Documents

primary data

study chapter

relevant data

strength data

data collection

study employees

primary research

high attrition rate