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Growth of the IT Sector in India

Disclaimer: This work has been submitted by a student. This is not an example of the work written by our professional academic writers. You can view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

Published: Fri, 02 Mar 2018

ACKNOWLEDGEMENTS

I would like to thank my supervisor JONATHAN C WESTLAKE for his insurmountable guidance and tremendous encouragement throughout this research. Without him I couldn’t get effective results in this research. His precious inputs and valuable suggestions helped me throughout my research.

I would like to thank my award leader PHILLMICKLEBURGH for his wonderful support and advice in technical and personal matters throughout my course and project work.

I would like to thank the working people (in Information Technology) for their valuable time for giving me requires data. Last but not the least I would like to thank all my family and friends for helping me in so many ways and for just being there when I needed that bit of extra strength to carry on.

It is pleasure to acknowledge contributions of all above people.

RESEARCH OVERVIEW

The whole research was divided into five chapters for the flexibility of reader to make this research meaningful and better understanding of what it explains. All these five chapters are interrelated to make this research appropriate and each chapter has its own importance in this research to make the necessary findings.

The first chapter contains brief description about this research, introduction to information technology industry in India and describes attrition meaning. Then this chapter describes purpose of this research, fundamental aim, objectives, research questions to be investigated in this research and the methodology applied to get effective result and necessary findings.

The second chapter contains information about literature review of this research, which contains the collection of data from researches done previously related to this topic. This data has been collected from books, journals, articles, web sources and magazines.

The third chapter describes well about the research methodology and explains how the researcher used different types of methods to collect primary and secondary data. The data has been collected from employees and managers of different Information Technology organizations in India. Two different questionnaires have been prepared by the researcher to collect the data. One is for employees to collect required data and second one is for managers to investigate the depth of the problems and related solutions of this research. A good response from the employees and managers made this research process easy to get the accurate information required.

The fourth chapter is the evolution part of this research. The information collected as means of primary data and secondary data, has been analysed by the researcher to find the required answers for research questions. The analysed data is presented in the form of tables and pie diagrams.

Fifth chapter is the finale report of this project, which is useful for IT organizations in India to prevent and reduce the Attrition rate. The recommendations were prepared on the basis of primary data, secondary data and analysis part of this research. The management can use these suggestions as upcoming strategies to curb the attrition in their organizations.

RESEARCH INTRODUCTION

IT (Information Technology) industry is booming in India. The growth of IT sector in India represents the potential of IT industry to perform at world class levels. Internationally famed companies and locally self-made small-medium sized companies are competing in developing new software with in this huge industry in India. These companies function mainly in two divisions, i.e. Technical (development of software) and Support (HR, Marketing and Finance). Big giants throughout the world are competing to get their software projects done from Indian companies due to some prominent reasons, which include Cheap Labour and Technical excellence. Taking advantage of these incoming clients, Indian companies are not leaving any stone unturned to provide the top quality service.

There are many reasons behind this growth of Information Technology market in India. These reasons belong to social, economical, technical and political issues. There are many Universities offering courses on science and mathematics and this kind of education system placed a great emphasis on increased number of science and engineering students. According to the NASSCOM (National Association of Software and Services Companies) of India These Universities are pumping out nearly 0.2 million engineering graduates every year. This population constitutes one of the greatest assets of Indian IT market. Even though there is shortfall of workers due to brain drain with many skilled workers interested to move overseas for better pay and living conditions. Software services sector occupied nearly seventy percent of technical industry of India and its abundant skilled man power is attracting international software companies to back end their operations in India. The advantage of India’s backend operations is geostrategic location which offers 24×7 services and reduction in turnaround times by leveraging time zone differences. Recently government of India set down new ministry for Information Technology which established comfortable environment for growth in IT developments and attracted many multinational companies by providing greater range of facilities with cheaper costs. According to the NASSCOM survey IT industry attained the revenue of US $17 billion in 2008 there by capturing 12% of world market and expected growth of nearly 16.5% by the end of year 2009.

Though the above points are considered as positive attributes in the growth and development of Indian software industry, so also, the negative impact comes into picture in the form of ATTRITION (Loss of Employees/ Work force), which can be explained in terms of large growth of the “number” of companies attracting talent/ work force (people) which is finally leading to confusion among the work force in deciding the company to work for depending upon the offers made by them.

Attrition can be defined as the out flow of employees from an organisation due to various reasons. This research will contribute to identify the reasons behind the dangerous attrition levels in IT industry with in India and will suggest possible solutions to fight this problem. The increasing growth of the industry is leading to equal opportunities for inexperienced and experienced workforce. Since the companies rely on senior and experienced workforce for the projects, there is an unhealthy competition among them to attract the so called senior and experienced workforce which is finally leading to attrition.

This research paper clearly lays emphasis on the importance of considering attrition in perspective of individuals and organization because attrition destroys the value of business, causes companies to lose knowledge there by leading to never ending cycle of hiring. The researcher here emphasised on the reasons behind the attrition levels in IT industry in India and the possible solutions to curb it. Questionnaires used in this research serve as channels to understand the specific reasons behind attrition.

RESEARCH TITLE:

Reasons behind the increase in attrition rate in the Indian IT Industries – focussing Employee Turnover and techniques to reduce the Attrition.

RESEARCH AIM:

The main purpose of this research is to investigate the reason behind the day to day increasing Attrition rate in the Indian subcontinent with respect to the IT industry and there- by develop a report with the factors affecting attrition and possible solutions to overcome these issues.

RESEARCH QUESTIONS:

The proposed research questions are as follows:

  1. What are the reasons behind high attrition rate in the IT sector of Indian sub continent?
  2. What factors determine the attrition rate?
  3. How can this attrition rate be reduced in IT organizations’ perspective?

OBJECTIVIES:

  1. The main objective of this research paper is to determine the relationship between good human resource practices and the reasons behind the employee attrition.
  2. To analyse various factors that affect an individual’s decision to leave a job for a better opportunity, including individual related, job related and organizational related.
  3. To discover various threats and issues those impact the business performance, organisational health and rise in business cost, thus emphasising the importance of attrition in perspective of IT organisations.
  4. To evaluate the issues those affect the performance of the industry and minimise the attrition rate and also to analyse the techniques of motivation those will help in reducing the same?

ACTIVITIES TO ACHIVE THE OBJECTIVE:

Primary data collection will be done by conducting online survey with managers and employees in the organisation; the main reason being to gather accurate information. Moreover, while collecting primary data if the researcher can get to meet any of the old staff who have retired or who have left the organisation due to some reason, researcher would collect information from them to enquire the reason behind their exit from the organisation and their experiences while they were working for the organisation, the difference between their old and new organisation they have joined, whether they are satisfied at the new work place and their expectations from the new company.

Conducting a survey with employees would result in measuring the level of satisfaction they have attained in the organisation. To achieve the above task two different questionnaires aimed specifically at managers and employees respectively contribute to the collection of relevant information to understand the problem of attrition in the organisation’s perspective.

The secondary data collection in this research will be done by reading books, journals, web sources, articles, magazines and collecting the old data which is related to human resource management etc related to the research topic.

Thus, data analysis of the information gathered would bring in a clear picture of the reasons behind the increasing attrition rate.

THE RESEARCH METHODOLOGY:

  1. To study the previous works done (on this research topic), making a list of them and analysing them by means of literature review.
  2. Discovering the designations where in attrition is more and creating the attrition chart by conducting organization study.
  3. Conducting a job satisfaction survey and evaluating the work environment by interviewing IT employees and spreading questionnaires.
  4. Conducting a survey with managers to have a look at recruitment process, benefits, training and motivation techniques implemented in the organization to cut down the level of attrition.
  5. Considering the reasons for attrition by the analysis of interview data.
  6. Suggesting and implementing techniques on how to reduce the attrition.

LITERATURE REVIEW

Attrition in Indian IT sector is rising drastically due to rapid globalisation and high economic growth. According to the researcher, the attrition is occurring mainly among technically skilled persons due to vast growth of opportunities and booming job market. This booming job market is creating enthusiasm not only among the graduates but also among the most satisfied employees. Due to this act organizations are unable to predict the start of attrition. One of the main reasons put forth for attrition is external inequity of compensation. The affect of attrition is seen in the form financial imbalances in organisations, which can be balanced by reducing attrition through retention of employees which is possible by the diligence of people in managerial positions.

ATTRITION IN INDIA

Almost all major business sectors in India are facing high attrition rates; these include BPO (Business Process Outsourcing), Telecom sector, Retail sector, Services sector, Biotechnology and Pharmaceutical. Attrition rates in different sectors for 2007 are shown below.

Source [online]: http://www.qcin.org/nbqp/qualityindia/Vol-3-No1/retaining.htm

As evidence in the figure 1, BPO sector is the worst affiliated by attrition and IT sector is at ninth place with the attrition rate of 27%. This shows attrition in India is an enormous problem with wide range of concerns. As this research is narrowed by only concentrating on IT sector, a brief introduction was given below as a table about top Indian IT organizations.

Name of organization

Number of employees

1. TATA CONSULTANCY SERVICES

Employee strength 141,642 with 30% women.

2. Infosys Technologies

Number of employees 1,03,905

3. WIPRO Technologies

98,521

4. Cognizant Technologies

63,700

5. HCL Technologies Limited

54,026

6. Hewlett-Packards

48,000 (approximately)

7. GE Capital International Services

36,200

8. Mphasis LTD

33,810

9. IBM

30,000 with 9 locations

10. Intelnet Global Services LTD

27,000

11. Tech Mahindra

25,482

12. Oracle LTD

12,000

SOURCE [online]: www.economictimes.indiatimes.com/photo/4835043.cms

The above table provides overview about working human resources in top IT organizations. Thousands of organizations were equipped with human resources as main source of business.

Arup Chowdary, CIO of Everyday Industries explains “major challenges are in terms of resources. The kind of attrition that we have in the IT industry today is one of the business challenges. It is extremely important that the resources that are given into the project actually continue for a longer period of time, which is not really the case; because the IT industry so volatile. So one is managing resources and number two is training those resources with adequate means to come to the market standards” .This statement gives clear indication of attrition affect on Indian IT industry.

According to the CCI (Chambers of Commerce of India) research study in India, attrition rate for 2007 was 27% and for 2008 was 29%, and according to Hewitt Associates survey for 2009-2010 most companies continued to experience attrition rates in double digits despite economic downturn.

According to the India Attrition study 2008, which was done between October 2008 and March 2009 by partnership between BT and PeopleSoft, key drivers for employees leaving their jobs are opportunity or career growth, salary, type of work, training or development, family circumstances, current job dissatisfaction, health, work load and working environment. According to this survey highest percentage of people are leaving their jobs for career growth and next for salary. Among the people who leave IT organizations, more number of people is top performers (45%) of whole employees.

Figure 3: Leaver type across Indian IT industry .

REASONS FOR ATTRITION

According to researcher, the major reasons for attrition other than monetary reasons (high salaries) are thought to be:

Ø The aspect of exploring new avenues by the employees where they get a bigger opportunity to hone their existing skills.

Ø Many employees, who work in IT sector, leave behind their interests and finally when they identify the clichéd nature of these jobs they willingly opt out and look for something novel and exciting even if it costs their careers.

According to Dr. A. Oliver Bright, causes for attrition vary from one organizational level to another. Considering at senior management level many firms chase the dearth of top talent in business, this situation results in senior managers getting new offers with more compensation than existing job. At medium level, employees seek to move from one zone to another like moving from technical role to managerial role or slower moving sector to faster one. At junior level, hike in salary and demand for employees in the market make employees to move to another job. There is a rapid development in Indian IT business sector, because many organizations from the USA and the UK outsource their work to Indian companies, thus resulting in the rise of opportunities. Hence people want to reach the top of the career at faster pace. It makes the employees to skip from one company to another.

Employee as reason for attrition:

An employee might get the feeling of “insecurity” regarding his job if the management neglects his career ladder. There are chances of an employee leaving the organisation if the so called training does not emphasise on his area of work and career growth. The communication gap between higher managerial personnel and the employees could be another possible reason of attrition. Another reason is the delay of intra-organisational promotions, which if offered by a different organisation will lead to the loss of employees (attrition). Employees tend to leave the organisation if they are not engaged in projects, which can be avoided by focussing on their growth. Several reasons for attrition could be due to the employee himself/herself. The employee might not have grasped the job profile at the start of his/her tenure and/or the profile was not explained in detail by the company. Poor work habits of employees from their previous job get carried over to their new jobs which disturbs their comfort zone. As explained earlier due to insufficient knowledge about the job profile the employee might not be competitive both in his/her organizational skills and interpersonal skills. This leads to improper job handling. A poor job fit, which is explained by the inversely proportional relationship between the new job preferences and the employee attitude/interest.

High female staff attrition is great problem these days in IT organizations as many number of female employees quit their jobs to give focus on their families even their salary is with six digits. WIPRO joint CEO Mr Vaswani says male to female ratio is almost same at entry level, but women employees drops to about fifteen to twenty percent at middle management levels and further about five to ten percent at senior management levels, and he continuous that it is a loss when trained and talented employee leaves. Currently Infosys employs 33.4% of women, TCS 30% and Wipro 29%. A women project manager says “I had to stretch myself and the team till late nights to fit into client’s time zone. Women also quit at mid level because their priorities change. They want to show their excellence as a homemaker, which was the case with me”.To reduce this attrition organizations increased maternity leave, offering work from home policies for women, relocating them if their husbands get transferred, trying to be gender neutral and making easier to women for working.

{Source [online]: http://economictimes.indiatimes.com/News/News-By-Industry/Jobs/TCS-Wipro-Infosys-go-all-out-to-check-high-female-staff-attrition/articleshow/5324809.cms?curpg=2.Accessed on 13/12/2009}

Ashok Arora, executive director for HR, Ashoka Leylands says “high end talent is always high on aspiration; their worry is not one of survival, but how fast they climb up the corporate ladder. Management people tend to lose them every time if they do not reasonably address their concerns.

The reasons behind people changing their jobs:

  1. Employees expect more salary and more compensation than within their present position.
  2. Overseas opportunities, which may give hike in salary and position. A higher position in Indian culture means status and respect.
  3. If employees want to change their locations for personal and family reasons. Especially in India family plays a crucial role where a family decision can change the career path of a young professional and make employee to change his/her job (Dr. Elena Groznaya).
  4. People are interested in new technologies rather than working with same technology.
  5. To balance the social life and flexibility with working hours.
  6. Taking into account the company image and future growth of the organization.
  7. Employees will be self motivated to leave the company because of job insecurity, no freedom of decision making, relationship with peers, less compensation packages and lack of motivation.

Management as cause of reason:

It is very important for the management to meet the expectation of employees, if there is any such kind of problem or communication gap between management and employees then the persons would like to leave the organization. Another reason for attrition in organization is if management fails at satisfying employee needs and management does not follow correct policies or does not have appropriate tools to manage the employee related tasks then this situation leads to further dissatisfaction.

Azim Premji (CEO, WIPRO Technologies) stated that “when talented people leave organizations despite of high salaries, they don’t leave the organizations but they leave their managers”. When there is continuous process of good employees resigning their jobs then management should have a look at their immediate supervisor. Advantage of Indian IT industry is the availability of large number of human resources in market, when managers show their concern as “plenty of fish in the pond” towards their employees by not considering their personal values then there is chance of increase rate of attrition rate. When first time employees face difficulties with their managers they look forward to solve that situation, second time they will think about leaving, but third time they will look for external opportunity.

Job profile as a cause of reason:

Job profile may cause the increase in attrition by considering the following factors. While dealing with the outsourced projects the employees have to work according to the time zone of client place, employees have to work by travelling most of the time to reach their targets, and if the employee is not satisfied with his job profile all these factors push the employees to look for a different alternative.

REFLECTING FACTORS OF ATTRITION

According to the researcher high attrition level may cause the employees to feel insecure and leave the organization, while lower rate of attrition will act as a retention policy. High attrition level indicates the poor ability of organization to hold its people.

“Attrition is unfortunately viewed as a management flaw when in fact it could well be a recruitment error”. (MONISHA ADVANI, CEO, EMMAY HR)[source:http://www.expresscomputeronline.com/20050822/technologylife01.shtml)]

Attrition level not only reflects the flaws in recruitment strategies but also training methods, retention strategies, work culture and company value in the market.

CALUCULATING EMPLOYEE ATTRIRION

It is very much important to concentrate on the rate of attrition in an organization which can be achieved by analysis and debate for. According to Sudiptha dev calculation of employee attrition may vary from one organization to another. Anil Naronha one of the director and HR of Novell software limited states that the standard method used to calculate the attrition of employees is dividing the number of employees who left during the year by the average number employed for that year.

According to the researcher it is very important to consider the root problem while calculating the attrition level of employees by going back to the hiring stage. Fresher (newly recruited) attrition level will be calculated by considering the number of these employees left and critical level attrition will be calculated when key persons leave.

Some organizations may not consider the attrition of beginners when they leave the organization for higher studies and moreover, termination of employees (whose performance is not met to the standards) is also not considered as attrition. But these exemptions depend on the policies/ methods followed by the organizations to calculate the levels of attrition.

COST OF ATTRITION

There are both visible and invisible costs associated with attrition. The invisible costs are low production rate which in turn creates loss in future sales, loss of customers and degradation of brand name in the market, loss of clients and contacts that person had with industry. Visible costs are the costs due to workforce leaving the organization, recruitment costs, training costs, loss of productivity costs and new hire costs etc. Costs due to loss of workforce includes the cost of the temporary recruitment to fill in while the position is vacant, compensation and benefits, administrative costs like clearing the benefits and stopping the payroll and cost of lost knowledge. Every person who leaves an organization becomes its ambassador, for better or for worse.

When employees leave the organization continuously, it is important to consider the recruitment process which in turn will become a never ending cycle. Recruitment costs include cost of advertisement, employee referral costs and agency cost.

Recruitment is a long-term process which consists of many stages and tasks to perform. These steps include understanding the requirements of position, advertising the vacancies, search for new talent, checking the background of applicants, preparing and conducting interviews and notify results to candidates whether they are successful or not.

Training is the next aspect to consider which involves high costs. It is an important task to hire a person who conducts the orientation which includes the cost of orientation materials. Cost for training material includes cost of hardware, software and printing manuals.

By considering the above factors one can lead to a conclusion that there are massive costs associated with attrition.

TECHNIQUES TO REDUCE THE ATTRIRION

The attrition levels can be reducedby the active input from HR people of the concerned organizations. Since they are the first line of contact for employees, they need to emphasise on the necessity to communicate with employees very often, motivating them and identifying any troubles and disturbances which if not done will gradually encourage the employee to leave the organisation. When the management neglects career ladder of an employee, that person might get the feeling of future insecurity. This can be reduced by conducting well prepared training sessions to improve employee skills and attitude. Some of the solutions that have been implemented successfully by the organisations in recent years to reduce attrition include, work-life balance, recognition and corporate brand building, healthy work environment, continuous employee learning (Subramaniam 2005).

It is very important to follow the effective recruitment strategies rather than following traditional recruitment methods. This can help the company to improve the response between organization goals and individual expectations to reduce the attrition level.

The type of Indian IT market can be called as people driven business, because it is a huge industry which is mainly depend on Human resources. So it is big challenge for human resource department to handle high stream of employees coming in and going out of the organizations.Padmaja Alaganandan, Principal Consultant, Mercer HR Consulting, India says “recruitment should be strategic to scale back organizations business targets because of their inability to recruit quality talent at the pace and scale called for. In such organizations with large scale of hiring, recruitment needs to be seen as a separate function with strong linkage to the business”.

Compensation and rewards play vital role in IT organisations to motivate and satisfy the employees. When a company makes high profits, it should make an effort to recognise the contribution of employees in this success by releasing bonuses which will lead to a positive employee response in future endeavours. Dr Elena Groznaya(freelance researcher and consultant in the field of intercultural relations and diversity management) suggested some motivation methods, they are extrusive motivation by money (pay rises, bonus and promotion), by showing long-term perspective towards employee including the family and enabling personal development. In order to motivate staff, experts claim that it is important to recognise set of values and needs, those vary in each particular culture. According to the classical theory of Maslow the hierarchy of needs includes :

  • Psychological, survival needs
  • Safety and security needs
  • Social needs of acceptance
  • Esteem and acknowledgment needs
  • Self-actualization and self-development needs

Major impacts on the employee behaviour are organizational culture and working environment. Providing good work environment and acknowledging the employee as a customer is an effective technique to reduce the attrition level.

A good employer can be differentiated from other employers by thoroughly looking at the priorities of them, while considering the goals and needs of employees. Maintaining work-life balance among the employees is the main technique to reduce the attrition level.

The nature of IT industry is to upgrade its operations frequently to achieve the business requirements and for this there is a need of dynamic change in deploying and using the upgraded technologies. To achieve the above requirements the management needs to take measures to help employees to update their knowledge through training programs from time to time.

It is important to identify top performers to reward and retain them, but keeping them secure and motivated becomes a key challenge. One of the best ways is to engage them by implementing strong career program for them. One of the top companies of India, National Information Technology, has implemented structured staff communication program which includes periodic sessions with business heads, skip level meeting, star performing bonus for high level performers and national or business level recognition programme. On other hand identify non performers to put on performance related exercises. To keep employees engaged there is need for staff involvement programmes like pre festive events, in-house sports activities and participation in outside activities.

According to the WIPRO leaders’ quality survey, perfect leadership is one of the techniques to reduce attrition levels.

Marcia Robinson and Ravi Kalakota (2005) suggested seven strategies for recruiting and retaining employees.

  1. Spend time developing and Bench marking incentives which include free transportation, education allowances, health related allowances, bonuses and performance based appraisals.
  2. The main problem in Indian IT industry is that most of the newly recruited students/employees are leaving the organization to pursue masters/ higher studies. This situation can be overcome by the organisations, through the provision of subsidies for the higher education of beginner employees, to improve their knowledge in their area of expertise.
  3. Change the locations of work by sending the projects to places where labour and real est

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