DQC HR SURVEY 2006: Attrition worries are back

Attrition-the second biggest concern for IT solutions providers last year
(as per DQC HR Survey 2005) has now become the top HR concern, according to DQC
HR Survey 2006.

Every organization, be it from the information technology sector or any
other, knows one thing that HR concerns are here to stay. And of all the HR
concerns, when 'attrition' takes the top slot, it is not a good sign.

DQ Channels asked the top 50 solution providers to rank the biggest HR
concern in their organization. We received varied answers. However, 'attrition'
figured as the top HR concern with an average attrition rate of 14 percent in
most SP organizations. This was followed by 'recruitment' as the next
biggest concern for the HR department. 'Training' and 'poaching' formed
the next few concerns for solution providers in India.

Attrition on the rise

Attrition is inevitable, but if the average rate of attrition takes an upward
trend, then there is something seriously wrong. Last year, the average rate of
attrition among solutions providers was around 12 percent. This year, at 14
percent, the survey shows that it is a marginal increase of just two percent.
However, since 'attrition' takes precedence over 'recruitment' as an HR
concern, it is reason enough to worry.

The need of the hour is to understand why attrition has become a top concern
for IT solutions providers across the country. Organizations need to evaluate
why employees 'jump ship'. Is it money, job satisfaction, work pressure or
inter-personal relations? Whatever be the reason, if an organization is unable
to handle them effectively, consider it the beginning of the end of the
organization.

Attrition is not just about losing people. What could be even worse are the
consequences of losing good people by way of losing money, productivity and
knowledge transfer. If an employee is jumping the ship, it is the right time to
evaluate and find that 'something' which is making the person leave. That
something would be either the ship or the captain or the weather. While some
hire external consultants, some even resort to analyzing exit interviews.
Whichever be the method, the important thing to find is to find out the reason
and work on it immediately.

In a nut shell

Attrition is the top HR concern for most IT solution providers. Last year, attrition was the second most bothering HR concern with recruitment at the top. Solution providers have begun to depend more on job sites and print advertisements for sourcing people. Last year most solutions providers depended on referrals as the best source of getting people. 'Better opportunities' remained the top reason for employees leaving the company. The average attrition rate in typical solution provider organizations has increased from 12 to 14 percent. The average attrition rate of technical staff in a SP outfit has come down from 16 to 13 percent. The average revenue per employee has reduced to Rs 17 lakh from Rs 20 lakh in the previous year. Around 70 percent of the SPs surveyed still have a separate salary structure for technical staff. The average salary hike in the SP community has remained more or less steady at 19 percent. This was 18 percent as per last year's survey. For technical staff the salary hike percentage remains same at 21 percent per annum. On an average about 38 percent of the total staff in any SP outfit are graduates. It was 40 percent last year. The ratio for staff with BE/BTech qualification also remained same at 24 percent (26 percent in the previous year). The age group break-up of employees remains the same for this year, with 57 percent staff in the age group of 25-35 years, and 24 percent below 25 years of age. There are more number of solutions providers spending on certifications, which on an average totals Rs 12 lakh. Only 20 percent of the tech staff employed in a typical SP firm has some technical certification. This used to be 30 percent last year. The number of solutions providers having its employees sign bonds have increased from 15 percent last year to 20 percent now. Methodology This year again DQ Channels took responses from top 50 solutions providers across the country. We asked the HR managers of these companies to provide us with exhaustive information. Based on the information collected, the data was analyzed using weighted averages.

Many of the HR issues of solutions providers are more or less the same. But
as they grow, they also adopt processes and best practices, thereby resolving
and tackling HR issues on the way. However, there are many solutions providers
who are still grappling with the usual HR issues, and seeking help. DQ Channels
HR Survey 2006 came up with many more findings. Read on and find out what other
HR issues haunt top solutions providers in their HR processes.

Organization structure

The business model that solutions providers follow is mainly technical in
nature. So to have a large number of technical staff is critical for the
survival of the company. DQC HR Survey 2006 found that 55 percent of the
employees in a typical solutions provider setup are technical staff. This is a
big improvement over the previous year's 30 percent. Of this, two-thirds are
devoted to technical support and customer care, which by and large is a very
good ratio for any solution provider outfit. About 18 percent of the average
staff relates to sales and marketing. According to industry analysts this is a
good mix of employees break-up and the industry should try and keep up this
ratio.

Getting the right people for the right job is the most common challenge HR
managers face in every industry. According to the results of the DQC HR Survey,
the same HR concern figured on the top for most solutions providers.

When DQ Channels asked SPs to rank the second biggest HR concern in their
organization, we received varied answers. However, on taking a weighted average
the results showed 'recruitment issue' as the second biggest HR concern.
This was followed by 'training' and 'poaching' as the next biggest
concerns for HR departments. Relatively, 'motivation' as a HR concern
remained an issue with lesser significance for the HR department.

Coming back to 'recruitment issues' as one of the top concerns, HR
managers feel, people are in abundance. But getting the right people with the
right set of qualification and expertise is a problem. The result of the survey
also revealed that, unlike last year, companies were depending more on print
advertisement and job websites for hiring people. Last year, most SP outfits
depended more on 'referrals' as the prime source of getting people.

When organizations fail to get the right people, it signifies extra work on
the part of the HR department and colleagues to train the new appointees. Many
companies do take the pain to train new recruits by conducting regular
workshops. However, analysts feel that the best training one can get is on the
job experience. Feedback on the training part showed that some com-panies have
given a lot of importance to the 'training'. But new comers use the company
as a learning ground and then leave after learning the trick of the trade.

Why do people jump ships?

The results of the DQC HR Survey 2006 showed that the reason people leave are
not very different from what it used to be in the last few years. The main
reason for employees leaving is the same as in any other industry-for 'better
opportunities'. Respondents felt employees change jobs looking for greener
pastures. At the same time, the respondents ranked 'salary issues' very
close to the above parameter, as a reason for leaving the company. For a
majority of the respondents 'job satisfaction' ranked third as a reason for
leaving the job. The fourth-most serious HR concern for any HR manager in a
solution provider outfit is 'performance of the employee'.

'Working abroad' as a reason for leaving an organization got the lowest
ranking. Generally, people tend to believe that people working in the field of
information technology always target the US as dream destinations for work.
However, in the solutions provider community not many have looked at the option
of opportunities abroad. It is probably because of the predominance of hardware
engineers in the field. Indian hardware engineers are not as popular as software
professionals in foreign markets.

Give opportunities within

The grass is always green on the other side. “If employees leave for better
opportunities, why can't organization create that 'better opportunity'
within?” asked an HR consultant. The general feeling is that employees leave
for better salary. But the survey results show that there are many other issues
apart from salary.

According to the survey, the average attrition rate of solution
providers surveyed stood at 14 percent, but there were companies with attrition
rates as high as 22 percent. The lowest was at three percent.

In a solution providing company, technical staff play a key role. If this set
of people are not handled smartly, losing them could be a big loss to the
company. The survey found that on an average 13 percent of the technical staff
leave every year. This is an improvement of over last year, which stood at 16
percent. As a means to tackle attrition, some companies have tried getting the
employees to sign a bond at the time of recruitment. This practice of getting
employees to sign bonds is very old. While this might have worked very well for
some, 80 percent companies surveyed said a big 'No' to bonds. Only 20
percent said 'Yes' to following such practices.

Salary structure

The results of the survey show salary as the second most important criteria for
an employee to be happy. It does influence a lot in employee retention.
According to the survey 70 percent of the SPs surveyed had a different salary
structure for technical staff. The rest did not differentiate between the two.
The survey also found that the average salary hike SPs give to its employees is
around 19 percent per annum. For the technical staff it is around 21 percent.

Just paying a good and hefty salary may not work all the time. What is more
important is to have a good appraisal process where performing employees are
rewarded. Salary hikes after measuring performance justifies employee
satisfaction. Defining the measurable is equally important. Policy makers within
the company should also remember that a flawed appraisal process could also make
things worse.

Young workforce

57 percent of employees in the companies surveyed were in the age group of 25-35
years, and 24 percent were below 25 years of age. Besides, a large chunk of the
employees working had decent qualifications to justify their job roles. Around
38 percent were graduates followed by 24 percent of the staff having a BE or
BTech qualification. That makes this community manned by a strong set of
qualified and young people.

Certified for the job

A company that spends more time and money in certification can expect to do well
in the market. DQ Channels through this survey tried to find out how many
solutions providers take serious interest in getting their employees certified.
The results were interesting: About 30 percent of the tech staff employed in a
typical SP firm had some certification. Of the 80 percent who actually spend on
certification, the average was Rs 12 lakh per annum.

NELSON JOHNY

With inputs from DQC team