Talent Retention – Why is so big a Challenge for CEOs?

Unmesh Abhyankar

Joint President CEO Office

Adani Ports & Special Economic Zone


Talented workforce a want, Retention a need “Talent Retention” means keeping your employee(s) on board rather than just letting them drift off to some other company. This task may sound easy but one must understand that retention rates largely depend upon the world economy and many other work related realities. Job hopping tends to shoot up when the industry is on an upswing and economy is on a growth path. Retention of employees with volatile markets around has become an uphill battle. The days of retiring after 30 years with a long time achievement award and gold watch are long gone. Now, on a given day, 76% workforce is seeking other employment opportunities. With sharp rise in social media and professional networking websites, employees have ready access to information about new job opportunities, and that ease of access provides the perfect opportunity to scout around easily.

Talking about retention becomes very crucial with opportunities galore and competitors continuously ready to pay the price for a right candidate with the relevant experience. Selecting the right employees at the beginning can help any business cut down their turnover rate.

As said by Mr. Richard Branson “The first thing that has to be recognized is that one cannot train someone to be passionate it’s either in their DNA or it’s not”. Hiring such professionals mitigates the risk of retention at the joining stage itself.

Global Scenario

The average total turnover rate reported across industries is relatively flat at 16.4 percent, which has increased from 15.7 percent in the previous year1. Average employee turnover rates over the next five years are predicted to rise from 20.6 to 23.4 per cent.

Further, the average employee tenure was a little over nine months. Presently only top 10% firm from the list of Fortune 500 companies have employees of 10 years or more. An inference from above is that employee tenure associated with an organisation is reducing and the same employee will seek opportunity elsewhere. This marks a sense of concern and a caution sign that organisation must be prepared because at some point the employee will sign off with the current organisation and they must be ready with a counter.

It is also seen that entry/graduate/junior experience highest percentage of turnover accounting to 53.76 percent followed by middle management at 21 percent and top executives stay at an even 4 percent. This clearly stands as a robust task for any organisation that stands in India since it has more than 50% of its population below the age of 25 and more than 65% below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years2. This is a ‘boon or bane’ situation and can only be experimented by an organization and their competencies will lie on how well they utilize the same.

Looking at the other side of the coin a whopping 46 percent of employees choose to stay with the organisation because they have a good relationship with colleagues followed by 35 percent staying because of job satisfaction. This clearly indicates that managers are one of the key players in an organisation and they top the list of employees whom organisations never want to lose. Another aspect to be noted is the Organization cannot go on increasing Salaries as they will price themselves out of the market and at a later date when the Industry is on the down turn cost reduction is an extremely painful exercise. There is no magic medicine, but employee satisfaction is a great deterrent for change and this can easily be achieved with the right connect. What we have practiced and firmly believe is the often used phrase

1 According to Compdata Surveys’ national survey, BenchmarkPro surveying 28,000 organisations. 2 Basu, Kaushik (25 July 2007). “India’s demographic dividend”. BBC News. Retrieved 2011-09-24.

“we cannot treat every employee equally but we will treat them fairly” and when this is actually practiced the results can be seen.

Cost Implication

The cost of turnover in a company is huge and can be categorised as direct cost and indirect cost. Direct cost majorly consists of advertisement, interview cost, time cost of the recruiter, background checks and pre-employment assessment test. Indirect cost on the other end relate to training and development, less productivity for the new employee, cost of rework for increased errors by the new person, lost productivity due to vacancy, increased stress on rest of the team and moreover the impact on employee morale. Globally the hiring cost of top management may reflect from 30% to 150% of the employee’s remuneration package. According to Eric Koester of “MyHighTechStart-Up”, “estimates range from 1.5x to 3x of salary for the ‘fully baked’ cost of an employee – the cost including things like benefits, taxes, rent, training & development, etc.” With all these hiring investment, hopefully; to bring in increased profitability but, it takes a while for the cost to get covered and companies to see a return on investment. According to the Studer Group, “A survey of 610 CEOs by Harvard Business School estimates that typical mid-level managers require 6.2 months to reach their break-even point.” But, Indian corporates where the entire organisation is paving its path towards standardisation and better organisational structuring attaining break-even point may require a year or more. Thus, calculation of the total expense relating to turnover can stimulate action plan within an organization to improve the work environment and reduce turnover.

Know the Cause

Result of high turnover often means that employees are dis-satisfied with their job and switching to a new one which may not seem difficult when the economy does well. Often it is the desired city, lucrative salary, comfortable timings, better ambience, growth prospects, and lack of commitment towards the same are some of the factors which prompt an employee to look for a change. According to American Management Association, 50 percent of the typical employee’s job satisfaction is determined by the quality of his or her relationship with the Manager. This reason can only be highlighted by a Root Cause Analysis which becomes a must practise to be followed for an in depth knowledge of why one has decided to quit. Therefore it is better to continuously take the feedback during the tenure rather than follow an exit interview when the person is ready to leave. At times this retention diagnostic is a rapid benchmarking process that identifies the costs and can help uncover what affects employee loyalty, performance and engagement.

The Bottom Line

Another important aspect that most of the Organizations miss out is the willingness to have patience in today’s fast paced life. As the common saying goes we tend to be living from One Quarter to the Next Quarter and continuously gauging our performance from the stock market price.

We should have more faith in our own staff than hiring from outside as this sends out a very strong message of the Organizations belief in its own employees. If as an individual we were to ask ourselves to identify the positive and negative traits in our staff we can easily identify the latter but have to seriously start to think on the former and this leads us to hire from outside, hoping that what we are missing out can easily be acquired from outside. This may be true in some cases but one should not forget the time taken to adapt to the Company culture takes a long time and many a times does not succeed.

People will drift and that is reality, but if the culture of the Organization is such that the staff can quote “if I were to be asked which is the best place to work it would be this Organization” when this gets quoted often from the talent that has left it deters people from drifting as the experience / work culture of other Organizations get shared very easily thank to the technological interventions available today and only after leaving does one start seeing the good points which were always there but could not be easily seen.

Is there any sure shot methodology of ensuring higher retention the answer is NO, but if we are genuinely able to make the work experience more enjoyable the urge to leave will diminish and will result in the attrition levels going down.

Related posts

Leave a Comment