Free Essay

Attrition Analysis

In: Business and Management

Submitted By HRmaniac
Words 3838
Pages 16
Attrition Analysis

(2014-15)

[pic]

June 2015

Prepared By:

Anushree Panicker (SIES College of Management Studies)

Sugandhi Murali (SIES College of Management Studies)

Surabhi Nair (Institute of Management and Computer Studies)

Table of Contents

| | | |
|Sr No. |Particulars |Page No |
|1. |Executive Summary |3 |
|2. |Objectives |4 |
|3. |Scope |5 |
|4. |Methodology |6 |
|5. |Introduction |8 |
|6. |Steel Manufacturing Sector |9 |
|7. |About Mukand Limited |10 |
|8. |Attrition |11 |
|9. |How to Calculate Employee Attrition |12 |
|10. |Analysis |13 |
|11. |Attrition Rates |15 |
|12. |Benchmarking |17 |
|13. |Why employees call it quits? |21 |
|14. |Exit Analysis |22 |
|15. |Recommendations |24 |
|16. |Conclusion |25 |
|17. |Bibliography |26 |

Executive Summary

The study was conducted to understand the attrition trends across various industries in India, in particular, Manufacturing and Engineering Industry and to compare the same with Mukand’s attrition rate. The comparative findings of the study will help the company to benchmark its attrition rate across different parameters.

The study was conducted by analyzing various surveys pertaining to compensation trends and attrition rates. The survey contained reports/research articles published by different independent organizations in the country, such as Deloitte Human Capital Consulting: Compensation Trend Survey 2015-16 and Team Lease Employment Outlook Report 2014-15.

The attrition rate of the Indian Industry, as a whole has been compared with Mukand Ltd. This helps the company to know its relative position with respect to the Indian Market and set a benchmark. ITeS and Hi-Tech continue to report the highest employee churn with average voluntary attrition rates of 21.9 percent and 19.9 per cent respectively, whereas Energy and Natural resources (10.5 per cent) and Chemicals (10.7 per cent) report the lowest average attrition rates across industries in 2014-15.

Across industries, the highest attrition rates are observed at clerical and junior management levels as compared to the other management cadres. According to Deloitte, better pay, better career prospects are the most widely reported reasons for attrition along with other personal reasons such as health, marriage or pursuing higher education etc

Across industries, a performance driven variable plan, long term incentives and cash / non-cash recognitions or awards are the primary levers used for talent retention. To attract skilled talent from the market, organizations across industries use sign-on bonuses, attractive benefits offerings along with practices of partially guaranteeing or assuring variable pay for a brief- initial period from joining as primary tools for talent attraction.

Objectives

1. To understand the trend for attrition rates across all sectors and compare it with that of Mukand Ltd.

2. To understand the trend for attrition rate in the Manufacturing sector in India and compare with that of Mukand Ltd.

3. To compare the attrition rate at different levels of other manufacturing companies with that of Mukand Ltd.

4. To understand the factors causing attrition at Mukand Ltd.

5. To give a set of recommendations for reducing the attrition rate at Mukand Ltd.

Scope

1. The attrition rate of Mukand Ltd. was compared and contrasted with the Indian Industry to get a fair picture as to where the company stands in the Indian business when it came to employee turnover.

2. Mukand Ltd’s attrition rate was also compared with the attrition rate prevailing in the Indian Manufacturing and Engineering sector. This comparison helped us to know where the company stands in that domain.

3. Level wise comparison of attrition rate with other manufacturing companies was carried out with that of Mukand Ltd.

4. Exit analysis for the year was carried out to know the major reason why employees left the company.

Methodology

Data Collection

Descriptive Research was undertaken so as to understand the reasons why employees leave the organization and comparing the company with the set parameters (Benchmarking)

Data was collected through two modes:

1. Primary Data: Primary research consists of a collection of original primary data collected by the researcher. It is often undertaken after the researcher has gained some insight into the issue by reviewing secondary research or by analyzing previously collected primary data.

In this report, the exit interview forms maintained by the company were used for finding out the major reason why employees left the company. Attrition rates calculated and maintained by the company for the past three years were used for the benchmarking exercise.

2. Secondary Data :

a. The annual Deloitte Compensation Trends Survey (2014-15 & 2015-16). The Deloitte Compensation Trends Survey is an annual study conducted by Deloitte Human Capital Consulting. The aim of the survey is to understand key compensation trends across sectors in the Indian market. This survey also contains the annual attrition trends across different sectors in India.

b. A quarterly survey by Synovate India Private Limited - “Teamlease Employment Outlook Survey”: This is a half yearly survey covering companies in India's organized sector. It provides adequate representation across various verticals of Manufacturing & Engineering, Financial Services, Hi-Tech, ITES, Infrastructure, Retail, Media & Advertising, Healthcare & Pharma. The survey covers approximately 80 manufacturing & engineering companies across India.

c. Articles regarding benchmarking and employee turnover.

d. Research Paper :

Attrition in India – Causes and Remedies (Savneet Kaur – International Journal of Emerging Research in Management and Technology, 2013)

Introduction

Manufacturing industry refers to those industries which involve in the manufacturing and processing of items and indulge in either creation of new commodities or in value addition. The manufacturing industry accounts for a significant share of the industrial sector in developed countries. The final products can either serve as a finished good for sale to customers or as intermediate goods used in the production process.

Manufacturing industries are important for an economy as they employ a huge share of the labor force and produce materials required by sectors of strategic importance such as national infrastructure and defense.

According to a study by global management consulting firm McKinsey and Company, India’s manufacturing industry could touch US$ 1 trillion by 2025. It further substantiates; the rising demand in the country and the penchant for establishing low-cost plants in India by multinational companies (MNCs) are two reasons for this possible development. Up to 90 million domestic jobs could be generated by that time, with the sector producing about 25–30 per cent of India’s gross domestic product (GDP). The country’s rapidly expanding economy gives both domestic entrepreneurs and international players, opportunities to invest and grow.

The GDP of India as per The World Bank data (2014-15) is 5.7%, to which the Indian Manufacturing Sector contributes to an extent of 14%. Deloitte’s global index 2013, for 83 nations has ranked India as the 4th most competitive nation, behind China, The US and Germany. The main industries in the Indian Manufacturing sector are:

1. Textile Industries

2. Chemical industries

3. Steel Industries

4. Food processing

5. Cement Industries

6. Mining Industries

9. Machinery Building

Steel Manufacturing Sector

Introduction

India Brand Equity Foundation in its Sectoral Report for Steel Industry 2015 states that, India has become the second best in terms of growth amongst the top ten steel producing countries in the world. The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore is also available in abundant quantities. This provides major cost advantage to the domestic steel industry.

The Indian steel industry is very modern with state-of-the-art steel mills. It has always strived for continuous modernization and up-gradation of older plants and higher energy efficiency levels.
The steel sector in India contributes nearly two per cent of the country’s gross domestic product (GDP) and employs over 600,000 people.

Market Size

Steel production capacity of the country expanded from about 75 million tonnes per annum (MTPA) in 2009-10 to about 101.02 million tonnes (MT) in 2014-15, when output was 81.7 MT.

India produced 7.07 MT of steel in January 2015 reporting the fourth highest production level globally which was 1.7 per cent higher than the country's steel production in the same month last year.

India is expected to become the world's second largest producer of crude steel in 2015-16, moving up from the fourth position, as its capacity is projected to increase from 100 MT to about 112.5 MT in 2016. Also, India has set an output target of 300 MT of steel by 2025.

The major players in India are;

1. TATA Steel

2. JSW Steels

3. Jindal Steels

4. SAIL (Steel Authority of India Ltd.)

5. Mukand Ltd.

6. Bhushan Steel

About Mukand Limited

Mukand Limited is an Indian based manufacturer of stainless steel, alloy steel, stainless steel billets and exporter of hot rolled bars to the United States of America, Germany, Italy, the Netherlands, Switzerland, United Arab Emirates, Japan, Korea, Hong Kong, Taiwan, Vietnam, to mention a few.

It was established in 1937 in Mumbai. It was renamed to Mukand Ltd from Mukand Iron & Steel Works Limited on March 23, 1989. The Steel Plant at Kalwe commenced operations in 1965. A structural shop, later re-christened ‘Machine Building Division' was also set up at Kalwe by the same year. The Company established its leadership in the two businesses, steel and machine building, fairly quickly. The history of Mukand Ltd is the history of its resilience, continual renewal and resurgence.

The company is engaged in general engineering work and manufactures iron & steel products, steel castings, steel structurals, EOT and other cranes, and various types of industrial machinery. Mukand Ltd is part of the Bajaj Group of companies. It has India’s largest designed and manufactured gantry crane of 80-tonne capacity and 60-metre span, with monobox girder and underslung trolley.

Some of the major customers of Mukand are :

1. Motor Industries Company Limited

2. Maruti Udyog Limited

3. Bajaj Auto Limited

4. Honda Motor Cycle and Scooter India Private Limited

5. Delphi Automotive Systems Limited

Attrition

Attrition refers to the gradual reduction of the size of a workforce by not replacing personnel lost through retirement or resignation. Attrition occurs when an employee retires or when the company eliminates his job.

This type of reduction in staff is one way a company can decrease labor costs: the company simply waits for its employees to leave and freezes hiring. Such a method contrasts the more severe labor-reduction techniques, such as mass layoffs. Waiting for attrition is usually better for company morale.

In some contexts attrition rate is also referred as churn rate or employee turnover rate.

Analyzing the attrition rate allows a company to determine how many employees left the company versus the industry average. Companies with high attrition rates can then use this information to determine why employees leave the company and work toward developing strategies to reduce attrition within the organization.

Attrition is broadly categorized into two categories:

Involuntary Attrition: Involuntary termination is the employee’s departure at the hands of the employer. There are two basic types of involuntary termination, known often as being “fired” and “laid off.” To be fired, as opposed to being laid off, is generally thought of to be the employee’s fault, and therefore is considered in most cases to be dishonorable and a sign of failure.
Voluntary Attrition: Voluntary attrition is the employee’s departure on his own. This happens when an employee resigns from an organization for personal or professional reasons. Voluntary attrition is one of the major points for companies in growing economies. In India – voluntary attrition of 20-40% is fairly common in IT/ITES/Retail/Hospitality industries.

How to Calculate Employee Attrition

Calculating your company's employee attrition rate allows you to determine the percentage of employees that left your business over a specified period of time, usually one year.

Step 1
Calculate the average number of employees who worked at the company during the year. To calculate a simple average, add the number of employees who began the year with the company to the number of employees remaining at the end of the year and divide this sum by two.

Step 2
Determine the number of employees who left the company during the year by examining the past year's employment records. If your company does not keep a running tally of employee attrition, physically count the number of employees who left the company over the year.

Step 3
Divide the number of employees who left the company during the year by the average number of employees employed by the company during the year to arrive at an employee attrition rate.

Analysis

Sector wise growth rates:

As per the Deloitte’s compensation trend survey 2015-16 there have been fluctuations in the average increments given to employees in the Indian business scenario. Engineering and Manufacturing sector saw a decrease in the year 2014-15 at 10.4%, as compared to that of 2013-14, at 11.2%.

ITeS sector saw a decrease in the year 2014-15 at 10.6%, as compared to that of 2013-14, at 11.7%.

The detailed growth in percentage is as below:

Table: Sector wise growth percentages (Source: Deloitte’s compensation trend survey 2015-16)

|Sector |Average Increments in % (FY: 2014-15, |Average Increments in % (FY:2015-16, |
| |Actual) |Projected) |
|Consumer Business |10.9 |10.8 |
|Manufacturing |10.4 |10.6 |
|Infrastructure & Real Estate |10.2 |12 |
|Pharma & HealthCare |12 |12.1 |
|BFSI |9.7 |10 |
|Hi-Tech |10.6 |10.9 |
|ITeS |10.6 |10.8 |
|Media & Advertising |10 |10.9 |
|Energy & Resources |10.1 |10.3 |
|Retail |9.5 |9.4 |
|Logistics |9.6 |9.8 |
|Overall Industry |10.3 |10.7 |

Chart: Sector wise growth percentages

[pic]

Interpretation:

The overall annual increment median for this year is projected at 10.3%. Highest increment for this year is expected in the Pharmaceuticals industry at 12.1%. The sectors where increments are expected to be higher than the last year are Infrastructure & Real Estate, Retail, Logistics, Media & Advertising and Chemical.

The Consumer Business sector shows conservative projections towards increments along with an increased focus towards variable pay.

Attrition Rates

Attrition rates across the sectors have slightly increased which is a matter of concern. Highest attrition rate recorded is in the ITeS sector (21.5%). Attrition rate for manufacturing sector is 10.9% for 2014-15. Sector wise average attrition rate for 2014-15 are as follows:

Table: Sector wise average Attrition rates (Source : Deloitte’s Compensation Trends Survey 2015-16)

|Sector |Average Attrition Rate |
| |(In %) |
|Consumer Business |18.5 |
|Manufacturing |10.4 |
|Infrastructure & Real Estate |17.6 |
|Pharma and HealthCare |18.4 |
|BFSI |18.8 |
|Hi-Tech |19.6 |
|ITeS |21.7 |
|Media and Advertising |17.4 |
|Energy & Resources |11 |
|Retail |19.2 |
|Logistics |16.7 |

Chart: Sector wise average Attrition rates (Source: Deloitte’s Compensation Trends Survey 2015-16)

[pic]

*Red indicates attrition rate is highest in the ITeS sector

Interpretation:

ITeS sector faces the highest overall attrition rates (21.7%), closely followed by Hi-Tech, BFSI and Consumer Business. The most prevalent reason for leaving according to the study is better career prospects – entry into the market of many foreign players across sectors has increased the job opportunities especially at Junior Management level, allowing easy movement of the workforce.

Benchmarking

Benchmarking is the process of comparing one's business processes and performance metrics to industry bests or best practices from other companies. Benchmarking is a technique that uses quantitative or qualitative data to make comparisons between different organizations or different sections of organizations. Benchmarking is usually treated as a continuous process in which organizations periodically measure, challenge, and improve their practices.

In the process of best practices benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compares the results and processes of those studied to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful.

Benchmarking based on the Indian Industry:

➢ Attrition trend - Mukand Ltd. v/s Indian Industry:

| |Mukand |Industry |
|2012-13 |8.73 |14 |
|2013-14 |4.41 |14 |
|2014-15 |4.04 |16.3 |

➢ Attrition trend - Mukand Ltd v/s Indian Industry:

[pic]

Interpretation:

The average attrition rate for the Indian Industry is 16.3% for the year 2014-15. It shows an increase in the attrition rate from the previous year i.e. 2013-14 of 14%.

Mukand, in comparison, shows a downward trend, with 4.04% as the attrition rate for the year 2014-15 which is lower than the previous year 2013-14.

Benchmarking Based on Indian Manufacturing Industry:

Attrition Trend - Mukand Ltd. v/s Indian Manufacturing Industry:

| |Mukand Ltd |Manufacturing Industry |
|2012-13 |8.73% |10.96% | |
|2013-14 |4.41% |10.89% |
|2014-15 |4.04% |10.40% |

Attrition Trend - Mukand Ltd. V/s Indian Manufacturing Industry:

[pic]

Interpretation:

The attrition rate in the Indian Manufacturing Sector stood at 10.40% as compared to the previous year 2013-14 which was 10.89%. Mukand shows a very positive trend as the attrition rate has gone down to 4.04% in the year 2014-15, as compared to 4.41% in 2013-14.

Attrition Trend: Comparison of level-wise attrition rate across other manufacturing companies & Mukand Ltd.

| |Executive Level|Staff |
| | |Level |
|Mukand Ltd |5.8% |3.4% |
|Other Manufacturing | | |
|Companies |9.3% |14.3% |

[pic]

Interpretation:

Compared to other manufacturing companies, it is observed that the attrition rate in Mukand Ltd is lower at both; the Executive level and the Staff level.

At the Executive level, the attrition rate at Mukand Ltd is 5.80% as compared to other manufacturing companies which is at 9.30%Similarly, at the Staff level, attrition rate at Mukand Ltd is 3.40% while in other manufacturing companies it is 14.30%.

WHY EMPLOYEES CALL IT QUITS ?

Based on an employee survey (Sample Size - 1500) across sectors and cities, five factors were identified as the most critical determinants of employee attrition and dissatisfaction- (Source: Teamlease Employee Outlook Survey 2014-15).

Role-Expectation Mismatch:
Job reality substantially different from the employees' perception of role prior to joining.

Career Instability / Lack of growth:
A sense of insecurity in what may, usually, be an uncertain work environment; or when the job lacks clarity.

Lack of Autonomy:
Employees do not made to feel independent to choose a working style / make routine task-related decisions.

Employer Brand:
The stature of the company and how it is positioned in the minds of the employees' peers.

Absence of Recognition / Rewards:
No formal mechanisms to measure performance, identify, recognize and reward employees’ contribution to the company.

[pic]

Exit Analysis

|Reasons |No of Employees |
|Personal reasons |2 |
|Better Prospects |30 |
|Medical Reasons |2 |
|Going Abroad |2 |
|Higher Education |4 |

Chart representation of Exit Analysis:

[pic]

Interpretation:

The study analyzed the reasons cited by the employees while resigning from the company. The company conducted exit interviews to know the reason behind the employees’ resignations. For arriving at the best conclusion, we studied only people who voluntarily resigned from the company. The study does not include retirement, death of the employee, termination, end of the contract, employees asked to go or employees absconding etc. as it would not give a clear image of the company’s attrition scenario.

The analysis showed that, majority of the employees resigned from the company for better prospects elsewhere.

Further, employees left the company for reasons such as Going Abroad, Personal Reasons, Higher Education and Medical Reasons.

Recommendations

← Skills Development

Employees can be trained in new skills after certain periods of time and/or reaching a certain performance level. If communicated correctly, this gives employees a sense of achievement and creates variety in a job. This can be achieved without the need for financial reward, therefore providing motivated staff, who will stay with the business longer as they move along the skill path, whilst meeting the business need for efficiency.

← Communication

Communication is the key to any successful business in contact centres. There is a need for everyone to understand the goals of the business. It is important that employees feel part of the brand, and understand what the business is striving for and the part that they have to play in making it happen. For example, targets need to be aligned and communicated effectively. Results need to be reported and discussed.

← Higher Education

It was observed that employees are leaving Mukand Limited for various reasons like higher education. The company can make arrangements for higher education of an employee and that can be considered as a benefit which can also act as a retention factor. The interested employee’s expenses can be taken care of; he/she may be given study leaves etc.

← Job Rotation

It can be done if a particular employee shows disinterest towards his work or his actual inclination lies elsewhere other than the job assigned to him.

Conclusion

Key findings from the study conducted are as follows:

1. It was observed that, sector wise, Pharmaceutical sector has showed the highest growth (12%) in the year 2014-15, whereas, manufacturing sector has seen a drop of 0.8%.

2. Attrition rate of manufacturing sector for the year 2014-15 was 10.4%. Highest attrition was seen in the ITeS sector during the year.

3. Mukand Steel’s attrition rate has been lower than the industry average over the last three years (2011-14), and this year specially compared with other two years (4.04%).

4. Manufacturing Industry stood at 10.4% when it came to attrition rate. Mukand has a lower attrition rate of 4.04% comparatively.

5. Mukand Steel has a significantly lower attrition rate at different levels (Executive & Staff Level) as compared to the attrition rates of other companies.

6. Most of the employees leave the company for better prospects. Other reasons are going abroad, some personal reasons, higher education and medical reasons.

Bibliography

1. Surveys:

• Teamlease Employment Outlook Survey, conducted by Synovate India Private Ltd 2015

• Deloitte Compensation and Benefits Trends Survey – 2014-15 & 2015-16

2. Internet Sources of Information:

1. http://data.worldbank.org/indicator/NV.IND.MANF.ZS

2. http://www.ibef.org/industry/steel.aspx

3. http://steel.nic.in/overview.htm

4. http://en.wikipedia.org/wiki/Economy_of_India

5. http://en.wikipedia.org/wiki/Category:Steel_companies_of_India

6. http://www.deloitte.com/view/en_IN/in/services/consulting/human-capital-advisory-services/bc30cd09c073e310VgnVCM1000003256f70aRCRD.htm

7. http://www.bureaucracytoday.com/mustread_coverstory.aspx?id=10

8. http://www.business-standard.com/article/companies/high-attrition-haunts-manufacturing-too-108022301026_1.html

9. http://articles.economictimes.indiatimes.com/2015-02-08/news/58928662_1_attrition-level-sectors-psu-jobs

10. http://content.timesjobs.com/attrition-rates-likely-to-go-up-in-manufacturing-it-and-retail/

11. http://businesstoday.intoday.in/story/india-job-market-high-attrition-likely-in-2015-upbeat-economy/1/217393.html

12. http://info.shine.com/article/india-inc-brace-yourself-for-the-massive-attrition-in-2015/8833.html 13. http://articles.economictimes.indiatimes.com/2012-05-01/news/31528217_1_attrition-salary-hikes-cent

14. http://www.business-standard.com/article/companies/high-attrition-haunts-manufacturing-too-108022301026_1.html

15. http://articles.economictimes.indiatimes.com/2015-02-08/news/58928662_1_attrition-level- sectors-psu-jobs[pic]

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