Attrition Rate Management In Software Industry Commerce Essay

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The Software industry is witnessing the highest attrition rates among talented employees, making retention of critical manpower resources a key challenge. Staff attrition and absenteeism represent significant costs to most organizations. It is to be regretted that many organizations appear to accept them as part of the cost of doing business. However, it is one of the areas in which HR can make a difference by effectively managing this situation. As Dennis R Briscoe [1] mentioned 'Attrition is an issue when a crisis is handled poor'. The research scholar explores all the relevant issues about challenges in managing attrition rate in software industry, theories and case studies of solutions related to employee attrition rate and collaborates the findings of study on employee motivation, employee performance , employee satisfaction, employee turnover to deal the reduction of employee attrition rate in software industry.

Software industries : An overview

The software industry is engine of generating business for installation, maintenance and exhibiting software that are backbone of modern technology.The industry is inclusive of excelling software services such as solution providing, documentation, logical reasoning and documentation. Siddharth Sarawgi [2] says software industry is about to register the historic landmark of US $ 50 billion exports during 2012. The domestic market is also slotted to witness 12% growth during this period. Potential size of India's offshoring industry is estimated at US $ 120 to 180 billion by 2015. The industry currently employs around 1 million people and provides indirect employment to around 2.5 million people. It is expected to add another 1, 50,000 jobs in the next fiscal according to NASSCOM. As software industry grabs the attention of all , the objective of the study at this juncture is to determine the attrition rates in software industries, to identify the causes for attrition by collecting data from software industry and to suggest methods based on analysis of the data to reduce staff attrition.

Definition of Attrition:

Attrition is the reduction in the number of employees through retirement, resignation or death. On the other hand, attrition rate may be defined as the percentage rate at which employee of an organization is reduced by, over a period. Peter Goudge [3] informed 'A report produced by the Hay Group showed that those employees who are dissatisfied with their lot at work are much more likely to exhibit withdrawal behaviours such as absenteeism as well as to resign'.

Employee Attrition Types:

Attrition can be divided into two types as Functional and Preventable attrition.

Functional Attrition: This type of attrition cannot be avoided in an organization. Examples are regular retirement, Voluntary retirement due to health and family issues, transfer of spouse job, death of the employee etc.,

Preventable Attrition: This type of attrition can be avoided in an organization but usually with difficulties. Few examples are as follows

Low salary and no rewards

Improper head/sub ordinates

No flexible work schedules

Lack of appreciation by top management

Mismatch between profile and nature of job

Stress due to over work and work-life imbalance

Attractive offers from competitive organizations

Factors affecting Employee Attrition:

Prof Firth [4] says 'The experience of job related stress, the range factors that lead to the same , lack of commitment in the industry play a major role for an employee to quit' .

Bruce L Katcher [5] says 'Employees are not happy when they aren't free to make their own decisions. They hate management for not trusting them and not respecting their abilities'.

Prof Griffeth [6] says 'Pay and pay-related variables have a modest effect on turn over. There is relationship between pay, a person's performance and turnover.'

Calculation of Attrition rate:

((no. Of attritions x 100) / (Actual Employees + New Joined)) /100.

Motivation to reduce Attrition rate:

Theories on motivation can be broadly classified as Need Based and Performance based. One of the famous theories on Need based motivation is Maslow's need Hierarchy which said about the five needs of an individual such as physiological needs, the safety needs, love need, esteem needs and the need for self-actualization. Unsatisfied needs are the motivate factor and an employer should find out the need of an employee and should act accordingly to reduce attrition.

Adams equity theory said that individuals had the tendency of comparing one's own performance with others and as per the theory

individuals outcome relational partners out come


individuals own input relational partners input

If an employee found that another person is getting more recognition for the same quantity and quality of work, it would persuade the employee to be dissatisfied. This dissatisfaction would lead into basis for employee turnover.

Job satisfaction and Attrition rate

Job satisfaction and attrition rate are directly propotional. A.H.Maslow[7] said 'The 'good' or healthy society would then be defined as one that permitted man's highest purposes to emerge by satisfying all his prepotent basic needs'. Sound manager can identify the employee's needs easily so that job satisfaction of an employee would be fulfilled.

Challenges in handling Attrition rate

B.B Mahapatro [8] said 'One of the toughest challenges for the HR managers in the IT industry is to deal with the prevalent high attrition levels. Though there is an adequate supply of qualified staff at entry level, there are huge gaps in the middle and senior level management in the industry. Further, the salary growth plan for each employee is not well defined. This situation has resulted in increased levels of poaching and attrition between organisations. The industry average attrition rate is 30-35 per cent and could range up to 60 per cent.'

In Employee engagement Brad federman [9] said 'When employees decide to leave within the first year, it is usually due to a poor organizational and/or job fit. Now that sounds like the organization made a poor hiring decision. However, this type of turnover is far more reflective of recruiting errors. While these challenges occur during the selection process, they are specifically caused by selling the candidate on the company and job too much and not providing candidates a completely honest and full picture of the role and the company.'

The HAY Group [10] emphasized that 'Although pay is often a factor in people's decisions to resign, it's seldom the only factor. Dissatisfaction with pay is typically not what leads employees to begin exploring alternatives, though the prospect of better compensation elsewhere may solidify their decision to leave once they have started their search. Nonetheless, retention strategies often mistakenly focus solely on compensation such as higher base salaries, retention bonuses, and more stock options. In contrast, many employees would welcome opportunities for personal development and growth. Aware that they're responsible for managing their own careers, they know that their futures depend on continuously improving their skills. If they don't expand their capabilities, they risk compromising their employability where they currently work-and elsewhere. There are two more essentials for employees today: understanding the organization's strategic direction and having confidence in senior management'

From Jay Liebowitz ,[11] it is seen that method of calculating knowledge loss is to examine new business opportunities lost due to a perceived lack of talent from impending retirements and attrition. If key individuals in the organization leave, the prestige and "worth" of the organization may diminish.


It is always more profitable by retaining employees than acquiring new employees. Managers have to build an effective employee retention program.

It has been rightly told by John putzier[12] 'when a high performer leaves, don't let your ego get in the way of your success as an employer. Show regret, wish the person well, and tell her that you would love to have her back if the new employment situation doesn't work out the way she hopes it will'. Management has to understand 'why employees leave' and identify the high risk of attrition by accurately predicting attrition rate.