A DIAGNOSTIC STUDY ON EMPLOYEE ATTRITION
This document is the outcome of a diagnostic study on attrition of employees (particularly professionals belonging to disciplines of engineering, management, finance and accounts etc.) of the automotive sector of M&M. Employee commitment, productivity and retention issues are emerging as the most critical human resource management challenges of the immediate future, driven by employee loyalty concerns, corporate restructuring efforts and tight competition for key talent. For many companies, “surprise” employee departures can have a significant effect on the execution of business plans and may eventually cause a parallel decline in productivity. This phenomenon is especially true in light of current economic scenario and following corporate expansion when the impact of losing critical employees increases exponentially. Recent research studies have shown that the manager, whether a front-line supervisor, a project leader, team leader, or senior manager, actually has more power than anyone else to reduce unwanted turnover. Why? Because the factors that drive employee satisfaction and commitment are largely within the direct manager’s control. These include providing rewards, recognition and feedback, the opportunity to learn and grow, fair compensation reflecting an employee’s contributions and value to the organization, a good work environment, and career advancement.
The study is centred on the critical examinations of the demographic profiles of such professionals (past employees who have left the company during the last 5 years; current employees, who are now engaged in various functions across the country; and engineering and management graduates, who are likely to be the prospective future employees). It is intended to understand the causal linkages of different demographic profiles with the dominant elements of attrition and thereby to derive the motivational strategies for retention.
In order to attain the above stated intentions, it was attempted to collect the responses from past, current and future employees by designing relevant questionnaire and administering across the sector and also in some selected engineering and management colleges.
The questionnaire was constructed by using relevant literature on attrition and retention as well as by intellectual interactions with the experts from the company and other industries. Such a questionnaire was checked for face validity, content validity, and reliability.
Questionnaire was administered in a sample of 629 past employees, 1470 current employees and 2217 future employees. These samples have been drawn in a randomized manner covering past employees who have exited from the company during April 2007 to March 2009. Current employees from levels of graduate engineer trainee to senior management such as Deputy General Managers and prospective future employees representing the entire country.
For the past employees two sets of questionnaire were used, one for telephonic interview and the other one for exit interview company format. For the current employees, two sets of questionnaire were used; set 1 refers to rating given by employees to 17 elements of attrition. Set 2 a comparative rating with an aspirational company of their choice. Similarly for future employees 2 sets of questionnaire were used. Set 1 refers to the degree of attractiveness on the 17 elements and in set 2 a comparative rating between the short term and the long term on these elements.
The database was developed from the responses and such a database was subjected to quality checks in order to ensure accuracy and relevance. Varieties of statistical analysis were conducted by using SPSS 16.0 and Microsoft Excel 2007. Results of the analyses led to definitive interpretations and pertinent conclusions.
Broadly, this diagnostic study might help in:
· Enhancing the effectiveness, commitment and retention of an incumbent workforce though increased understanding of human behaviour
· Motivating and retaining employees whose basic monetary and material needs may have been satisfied, but who are seeking to find their internal “drives”
· Improving human resource planning and development in organizations
· Identifying motivational and managerial issues related to interpersonal style
· Reducing the impact of turbulence and organizational transition on employee commitment and productivity
The direct implication of this study is that as attracting scarce talent becomes more competitive, corporate investments are likely to shift from increasingly expensive recruiting programs, to lesser expensive retention initiatives in an effort to hold on to truly scarce and valuable talent. Even corporations traditionally sheltered from manpower instability will, at a minimum, be forced to adopt a defensive retention posture in order to protect their most valued talent from turnover. Bottom line, employee retention may be the break-point issue, which finally forces organizations to invest in a rigorous study of the contemporary workforce, with the intent of gaining insights into the motivators of employee loyalty, commitment and productivity.
The broad findings of the study are described briefly in the subsequent sections:
Findings from analysis of past employees data:
Telephonic interviews conducted for 143 respondents revealed the top 5 reasons for attrition as:
· Compensation package.
· Career advancement
· Place of work
· Relationship with superiors
· Extended work hours
55% of the 143 respondents have joined other automotive companies. They have rated their present company’s vis-à-vis M&M out of 100 marks for the 17 elements of attrition. The following points are worth mentioning:
· Job Security – M&M ranks higher than Cummins, Caterpillar, Fiat, Daimler, and Maruti Suzuki. It however ranks lower when compared to Bajaj Auto, Honda Siel, General Motors, and Tata Motors.
· Compensation Package – M&M is rated lower than all other companies. This seems to be one of the major reasons for attrition.
· International Assignment – M&M is fairing low when compared to all other except Cummins. Again here international assignments can be given only if a company has a unit abroad or a collaborator who absorbs few of their employees on deputation or permanent positions.
· Harmonious and Collaborative Working – Companies like Bajaj Auto, Cummins, Caterpillar, General Motors and Volkswagen have been rated higher than M&M whereas, M&M fares better in comparison to Ashok Leyland, Fiat, Honda Siel and Maruti-Suzuki.
· Innovative and Forward Thinking – Bajaj Auto, Tata Motors and Volkswagen are rated higher than M&M, whereas M&M fares better than Cummins, Fiat and Honda Siel.
· Autonomy at Workplace – M&M scores higher than Ashok Leyland, Maruti- Suzuki, Daimler Benz whereas, it stands lower than Bajaj Auto, Cummins and Caterpillar.
· Enriching Job Content – Bajaj Auto and Volkswagen are far ahead than M&M whereas, Cummins, Caterpillar, Ashok Leyland are marginally lower than M&M.
· Preferred Location – M&M doesn’t deploy or place employees in their preferred location as compared to Ashok Leyland, Volkswagen, Maruti- Suzuki, Daimler Benz, Bajaj Auto, Cummins, Fiat, Honda Siel, Tata Motors and Caterpillar.
· Challenging Roles and Responsibilities – M&M fares better than Ashok Leyland, Honda Siel, Maruti- Suzuki whereas, it has lower aggregates as compared to Bajaj Auto, Cummins, Caterpillar and General Motors.
· Rewards and Recognitions – M&M fares better than Bajaj Auto, Cummins, Fiat, Maruti-Suzuki and Caterpillar whereas, it falls behind Honda Siel.
· Work-Life Balance – M&M fares poorly compared to Bajaj Auto, Honda Siel, General Motors, Volkswagen and Tata Motors.
· Company as a corporate social citizen – M&M scores well as compared to many companies except for Bajaj Auto, Tata Motors and General Motors.
· Opportunities for career advancement – M&M is better than Bajaj Auto, Cummins, Caterpillar, Maruti-Suzuki, Fiat and Ashok Leyland whereas, it falls below Honda Siel, General Motors, Daimler Benz, Tata Motors, Volkswagen and some ancillaries.
· Opportunities for individual capability development – M&M fall below Bajaj Auto, General Motors and Tata Motors, whereas it is better than all others.
· Opportunities for higher education – M&M is lower in ranking as compared to Bajaj Auto, Caterpillar, General Motors and marginally lower than Volkswagen and Tata Motors, whereas it is better than other companies.
· Inspirational mentorship - M&M ranks lower than Caterpillar, Daimler Benz, Volkswagen, Bajaj Auto and Tata Motors whereas, it fares better than other companies.
· Appraisal process - M&M fairs marginally lower than Honda Siel, General Motors and Daimler Benz, whereas it compares favourably with all other companies.
Principal component analysis yielded four factors:
· The first factor is loaded on job security, working relationships, autonomy, enriching job content and individual capability development.
· The second factor is loaded on opportunities for career advancement and inspirational mentorship.
· The third factor is loaded on compensation and opportunities for higher education.
· The fourth factor is loaded on preferred location.
Cluster analysis yielded 5 clusters. The interpretations of clusters are:
· Low ratings are given to international assignments by all the 5 cluster groups which are not of significance.
· Very low ratings are given by employees with ME qualifications that were posted at Igatpuri for all elements. Enriching job content and inspirational mentorship are prime areas of concern.
· Persons with BE qualifications who have left Igatpuri have however given very high ratings for all elements.
· All persons who have left Chakan belonging to different clusters have given good ratings to all elements. High ratings are given to work-life balance at Chakan, possibly due to better facilities and less work load.
From the test of Hypotheses the following valid and significant propositions can be drawn:
· Rewards and recognition offered by M&M are perceived differently at different locations.
· Employees are deployed/positioned not on their preferred place of work.
· Extended hours of work leading to unbalanced work life differ from location to location.
Exit interview data yielded the top 5 reasons of attrition as:
· No perceived growth in M&M.
· Compensation package
· Place of work
· Family circumstances
· Work load
Correlation analysis was carried out for physical working conditions, compensation package, employee recognition, HR support, and morale and growth opportunity with respect to sample parameters. The results of correlation analysis are as follows:
· No significant correlation exists between age of the employee and physical working conditions.
· Significant correlation was found between age profile and compensation package.
· Significant correlation was found between age profile and employee recognition.
· No significant correlation exists between age profile and HR Support.
· No significant correlation exists between age profile and Morale
· Significant correlation is found between age profile and growth opportunity.
· No significant correlation was found between qualification profile and compensation package.
Cluster analysis of exit interview data yielded five clusters, out of these three comprising of 400 respondents have given ‘no perceived growth in M&M’ as the major reason for leaving the company. This is confirmatory evidence to telephonic data analysis.
There was a high degree of correlation (r = 0.96) between the telephonic interview data and exit interview data. The designed questionnaire has both construct and content validity because there is correspondence between the findings of the exit interview data recorded by M&M and telephonic interview.
Findings from the analysis of Current Employees data
Questionnaires were administered to 1470 current employees out of a total population of 3058 employees at the plants, marketing offices and R&D units. The questionnaire consisted of two sets. Set 1 dealt with the measure of affective commitment towards the company, while set 2 dealt with the comparative ratings for M&M and an aspirational company.
Details of demographic profile of respondents are as follows:
Ø 84% < 40 years of age
Ø 70% < 5years of work experience
Ø 43% are B.E and 28% are diploma holders
Ø 38% belonged to L8-O and 27% belonged to L7-O grade
Ø 46% are from manufacturing
Reliability of questionnaire was found to be Cronbach α = .896(for set 1 – ratings given to M&M from 1 to 5); Cronbach α = .931(for set 2 – ratings given to attrition elements from 100).
Principal component analysis yielded 3 factors
· The first factor is loaded on work environment, harmonious and collaborative working relationship with superiors and subordinates, effective work process, innovative work practices, facilities and support, rewards and recognitions, sharing knowledge, corporate citizenship, delight at work and employee involvement.
· The second factor is loaded on career progression, skills development, overseas assignments and higher education.
· The third factor is loaded on job security, compensation package, rewards and recognition, career progression and delight at work.
Correlation coefficient between past and current employees (Factor 1) was found to be 0.83 signifying that both the categories of employees rate the attrition elements in similar manner. It may be inferred here that both past and current employees are having homogeneity in perception about M&M.
Affective commitment was measured by the statement “I am delighted to work for M&M”. This correlated positively with other elements.
Regression analysis was carried out with all the 17 elements of attrition choosing the dependent variable as “I am delighted to work for M&M” and all other 16 elements as independent variables. The coefficient of determination was found to be 58.5%. Regression analysis for the same dependent variable with Compensation and Career Advancement as independent variables yielded a Coefficient of Determination of 36.2%. Hence these 2 variables explain 62% of the total variability of the dependent variable. This variable can be used as a predictor and also it can be seen as a reference for ways to improve continuance. The coefficients of job security, compensation, work environment, deliver value for money, responsible corporate citizen, rewards and recognition and employee involvement are significant and hence these are the elements which have positive effect on “I am delighted to work in M&M”.
The elements compensation and career progression were selected on the basis of importance from past employees. This indicates that there is considerable degree of congruence between perceptions of past and current employees. Therefore, the regression equation can be used as a predictor.
Cluster analysis yielded 5 clusters. The following conclusions are drawn from the 5 clusters:
· Engineering graduates in the age group of 26-30 years recruited in L7M grade and with no promotions in the last 2-3 years have a concern about career progression.
· Commerce graduates in L7O grade with 6-10 years of experience in M&M are satisfied working in M&M.
· Employees who are working in marketing and R&D have a concern for compensation package.
Gap Analysis for ratings given to M&M and aspirational company suggests highest gaps are for international assignments, compensation gaps, appraisal process and work life balance. M&M is perceived to be a responsible corporate citizen as suggested by the negative gap.
- The highest gap has been observed in international assignments. Since many of the foreign automotive manufacturers have setup shops in India they might be sending employees to parent companies for training and other assignments.
- The second highest gap is in compensation package, which is obvious as there is a feeling in M&M employees that other foreign automotive manufacturers are better in compensation.
- The third highest gap is of appraisal process.
- Fourth gap is work- life balance. Many of the international companies have 5 day week and hence there is a perception that the other companies offer a better work life balance.
- M&M is perceived to be a responsible corporate citizen as indicated by the negative gap.
Discriminant Analysis was carried out for responses to the statement “I am delighted to work for M&M”. The employees were segregated on the basis of ratings given to this statement. Responses 1 and 2 (strongly disagree and disagree) came from 174 employees and 3, 4, 5 (undecided, agree and strongly agree) came from 1296 employees.
The following inferences may be drawn from the Discriminant analysis:
· This group of N2=174 current employees is most vulnerable to attrition as its profile matches with the profile of past employees.
· There is confirmation that past trends, as depicted by the past employees, are predicting the future trends for attrition in the N2=174 current employees group.
· It may be noted that N2=174 is only out of the sample collected. Their numbers may be higher when the entire population is considered.
It is observed that even on elements where past employees had given higher ratings to M &M i.e Job Security, Responsible corporate citizen, and Appraisal process; this group of 174 has given lower ratings to such elements in M&M. This infers that this category of employees has totally negative mind sets may have to be closely monitored.
Findings from Future Employees
Questionnaires were administered to 1658 engineering students and 559 management students from colleges in North, South, East and West regions of India.
Important findings were:
· 567 students were from Metros.
· 1563 students were from other cities.
· 85 students were from rural areas.
· 33 out of 47 pursuing ME belong to other cities and 8 belonged to rural areas whereas only 6 belong to metros.
It has been found that percentage of students pursuing M.E. and M. Tech. are more in rural areas. This may be due to lack of opportunities after graduation from rural colleges.
Principal component analysis for short term questionnaire yielded 2 factors:
- The first factor is loaded on innovation and forward thinking, enriching job content, challenging roles and responsibilities, career advancement, individual capability development, higher education, inspirational mentorship and appraisal process.
- The second factor is loaded on job security, compensation package, location and work life balance.
It can be interpreted that job security, compensation package, location and work life balance are clubbed together and given lower ratings by future employees.
Factor analysis of long term ratings yielded four factors:
- The first factor is loaded on international assignments, innovation and forward thinking, enriching job content, challenging roles and responsibilities.
- The second factor is loaded on autonomy at the work place, location and career advancement
- The third factor is loaded on higher education and inspirational mentorship.
- The fourth factor is loaded on job security, compensation package and work life balance.
It can be interpreted that the elements in the first factor is their immediate expectations from employers. The second factor looks at location and career advancement. The third factor indicates their yearning for inspirational mentorship and higher education. The fourth factor looks at benefits and long term preferences such as; job security, compensation package, location and work life balance.
· Correlation coefficient between There exists significant correlation between work process and all other elements. This means that the future generations of employees express their preference to work in an organization, which will have efficient and effective work systems/processes/methods.
· Contribution to innovative work practices does not have significant correlation with current and future employees (Factor 1) are only 0.02 and past and future employee is 0.17 which are very poor. The future employees have got different patterns of preferences both in short term and long term which are not similar to the pattern exhibited by the past and current employees.
Correlation analysis yielded:
Ø Interpersonal relationship
Ø Support from others
Ø Compensation
Ø Job security
Ø Hygienic factor like company provided facilities
It is indicative to interpret that future generation employees will prefer to contribute as individuals but not as teams and express to bring their ingenuity in the work place.
Rank order analysis between short term and long term yielded:
· Career Advancement and Capability development are in the top 5 ranks in the short and long term.
· Job Security is at 14th rank in the short term and 4th rank in the long term indicating that in the short term future employees are not bothered about a secured job rather they would like to see it in the long term when they are settled in their personal life.
· Compensation package is at the 12th rank in the short term and at 6th rank in the long term, which is a desirable expectation.
· Work life balance is at the 1st rank in the long term, because of personal and family life.
It can be inferred that future generation employees are more pragmatist and have the desire to maximize their individual objectives through progression in career path, capability development, and being innovative. Of course, over a period of time, when they get settled due to family pressure, they have shown preference for work-life balance, job security and compensation package.
Cluster analysis yielded 7 clusters. It is observed that in none of the 7 clusters, respondents have given rating 1 (Not Important) to any of the elements indicating that the future employees give importance to all these elements. The first cluster stands out distinctly as it has given highest rating to most of the elements and second highest to facilities, training abroad, project assignments and future employment.
Comparative analysis was carried out for short and long term ratings. The analysis suggested that inspirational mentorship and opportunities for higher education are required in the short term. So far as short term expectation of future employees vs. expectation of current employees (1 – 3yrs of experience) is concerned; there is considerable degree of similarity in the ratings given to most of the 17 elements. This is obvious that ratings given for aspirational company by the current employees are congruent with the expectations of the future employees. However, there is some divergence; as current employees have given more importance to the following 3 elements:
· Job security
· Compensation Package
· Preferred location
Comparative analysis also suggested congruence between the long term expectations of future employees with the expectations of current employees having 3-5 years of experience.
Since we did not find the differences in current employees (having 3-5 yrs. of work experience) aspirations level and the future employees’ long term expectations, it is necessary to revisit the analysis presented in this document representing the gaps of aspirational rating and M&M rating given by current employees. The future employees have also expressed similar kind of expectations.
The scores of those who have rated 3 &4 are marginally higher than those who rate 1&2 on “I would work for an organization in which my work will be a springboard for future employment” for all the elements of attrition, except in case of company as a responsible corporate citizen where the average score is 98 as compared to 68.
Comparative analysis for past, current and future employees
For all the employees career progression is the number one priority and the main cause of attrition
For past and current employees compensation package and work life balance are the two important concerns.
Current employees and future employees look forward to challenging roles and responsibilities, individual capability development and innovative and forward thinking.
Inspirational mentorship and enriching job content and efficient work processes are amongst the priorities of future employees.
M&M has to strategize mainly 3 aspects such as career progression, individual capability development and innovative work practices to minimize attrition in the future. These 3 aspects are not independent of each other. From the employees’ viewpoints, they are the interrelated causes for turnover.
So how can managers of M&M make sense of all these findings? The study shows that in the future, organization like M&M will be successful, if it can adapt their organizational behaviour and HRD systems to the realities of the contemporary work environment. Sustainability and success will depend upon innovation, career development and capability development in a highly competitive automotive sector. Further, the dynamics of the work environment will have to reflect a diverse population comprised of individuals drawn from a pluralistic country like India whose motivations, beliefs and value structures differ vastly from the past and from one another. Supervisors have to be responsible for creating an environment that enables their employees to reach their full leadership potential and goals. This includes playing an active role in assisting and advising the employee on career development decisions; ensuring education and training; providing for adequate time to pursue career development activities; encouraging cross-functional training/assignments; engaging in innovative work practices; and providing meaningful feedbacks for performance improvements.
Recruiting and selecting employees with the competencies associated with
successful performance will result in a better job fit, aligning performance
management and professional development processes with the career progression model
should strengthen employees’ abilities to effectively meet the challenges of the
automotive sector. Employee loyalty and retention will increase when employees
clearly understand what is expected of them and receive constructive feedback
on how they are doing. Capability-based
development provides employees with the insights and tools necessary to become
better professionals and prepares them for future advancement.
This document is organized into 8 chapters. Chapter 1 is the introduction. Chapter 2 is a critical review of literature relating to attrition, retention and commitment. Chapter 3 is the enumeration of the research design process. Chapters 4, 5, 6 discuss the results of the empirical analysis relating to past employees, current employees and future employees respectively. Chapter 7 is a description of a comparative analysis of the findings. Chapter 8 presents summary, significant concluding remarks and some recommendations.
