The Growing Relevance Of Employee Retention Strategies In India

In the past, it was not uncommon for employees to stay with a company for several decades. These days, it has become extremely rare. From an average of 8+ years (baby boomers), the median employee tenure has come down to just under 18 months at present.

Among other things, the generational shift from baby boomers to millennials and Gen Z, new attitudes towards work and life, and changing workplace culture are considered the main reasons for this trend.

Employee retention has become a hot topic, particularly in the last few years, due to the ‘Great Resignation’ trend. In this context, we explore the need for employee retention and the innovative employee retention strategies being unveiled by businesses.

Employee Retention Basics – Turnover vs. Attrition

For the sake of clarity, we need to specify the two different ways in which employees can leave your business:

• Employee Attrition – due to retirement, obsoleting, or elimination of the job position.
• Employee Turnover – due to voluntary resignation or termination, often as a result of burnout, toxic corporate culture, lack of career advancement, and lack of recognition.

While both terms are often used interchangeably, there are significant differences between the two. In attrition, when an employee retires, or their job is rendered obsolete, the company does not immediately seek to fill that position by recruiting someone else.

But on the other hand, when someone resigns or gets terminated, the HR team has to struggle to find someone else to fill that newly vacated position. From an employee retention perspective, turnover is a critical factor.

Why Employee Retention is Important

A sudden, unplanned loss of employees is always a bad news for any business. Apart from the immediate headache to your recruiting teams, persistently high staff turnover levels are dangerous from a long-term perspective as well. Here are some reasons why:

Replacement costs

According to the Harvard Business Review, the cost of replacing an employee could go as high as 250% of the annual salary for that particular position. If they were laid off or left by mutual consent, you have to pay severance costs. Recruitment ads, screening tests, interviews, new hire training and orientation all cost a lot of money.

Impact on productivity

It can take at least several weeks for HR teams to find suitable candidates to fill the vacancy. Meanwhile, the rest of your staff are forced to take up extra work. And if the employee who left held a critical leadership role or had specialised knowledge, productivity could take a nosedive.

Impact on morale

Whether it be lay-offs or resignations due to lack of career progression, toxic workplace culture, or low salaries, the actual reason for employee turnover usually has a lingering effect on other employees. If you don’t fix the root cause, workplace morale will decline, triggering a vicious circle.

Impact on recruitment

Persistently high employee turnover at a company is a sign of deeper systemic malaise. Left unaddressed, this will affect your employer's brand and reputation among jobseekers. Top-quality talent may think twice before accepting any job offers from your HR teams in future.

Talent drain

Losing highly experienced and talented workers can deal a severe blow to your company’s knowledge base. Worse still, if your rivals hire these employees, it can put your business at a competitive disadvantage.

Employee retention strategies are essential to keep turnover rates under manageable levels. With a carefully crafted employee retention policy, you can improve workplace morale, maintain high productivity, reduce HR costs, and help you retain your best and brightest talent for a longer time.

3 Promising Employee Retention Strategies

Lay-offs are usually a result of macroeconomic factors or corporate restructuring. Keeping that aside, we will focus on the other major factors for high employee turnover – dissatisfaction among employees.

In the immediate aftermath of the pandemic, several factors have emerged as the main causes of workplace dissatisfaction among employees – a lack of work-life balance, toxic management, and a lack of career growth opportunities.

You may have significant success in addressing these issues if you try the following strategies:

Focus on improving organisational culture

Strong, positive company culture is a key driver for workplace satisfaction and employee retention. Not surprisingly, an MIT Sloan study cited it as 10 times more important than compensation in compelling employees to quit an organisation.

Provide flexible work arrangements

With the rise of remote work and hybrid workplace arrangements, employees simply do not want to spend all their time in the office. According to a NASSCOM-BCG study, only 5% of tech workers were interested in full-time office work. With more than 80% preferring remote or hybrid arrangements, you need to craft new workplace strategies to remain relevant.

Pay more attention to career growth

Lack of growth opportunities was cited as a reason for quitting by 41 per cent of respondents in a McKinsey global survey. Employers who focus on employee retraining, upskilling, and mentorship programmes are less likely to experience attrition on this front.

Make your employees feel valued

Along with industry-leading pay packages and perks, employees also need constant support and encouragement. This can be achieved through incentives, performance awards, and stay interviews – candid one-on-one conversations where you tell employees how they are valued by the organisation.

Final Takeaway

In the first half of 2022, attrition levels in Indian companies were estimated to be 20.3%, only marginally lower than the previous years. And the road ahead does not look too bright, with multiple studies forecasting a shortage of talented workers in the coming decade. Employers are already struggling to fill vacant positions, particularly those involving IT expertise, due to a shortage of 5 lakh professionals. Now it is not a good time to be haemorrhaging workers – employee retention will remain a priority for executives and HR professionals for years to come.