There exists a fallacy even among well-informed and well-meaning business leaders. They either play a panic-and-blame game around attrition, or indulge in a fantasy that we can incisively understand, predict and manage attrition.
I am afraid, in my experience, when you cannot even predict whether you yourself will stay or leave your current employer, to do it reliably for thousands is a fantasy at best. If you are mindful as an immediate boss, you perhaps could get some clues of an impending exit. But only sometimes and for some people.
This business of running analytics to predict who will exit and when, is like a jyotish (astrologer) predicting who will die and when! Yet, many of us have greater trust in the jyotish, instead of taking proactive measures for our longevity. Businesses and leaders are no different. They either despair or are delirious. Some believe in magical abilities and want to control the uncontrollable and then despair—instead of accepting the realities and finding alternative approaches to achieve the core objective of running the business, without being disrupted by attrition.
Let me anchor this conversation in a real-life experience.
In December 2004, my boss and then joint managing director at ICICI Bank, Kalpana Morparia, called me and asked me to take on a performance target on attrition levels for the next year. She told me that Chanda Kochhar, Nachiket Mor and other business leaders wanted HR to be responsible for containment of attrition. I did not argue with her. I convened a meeting of the HR Council, where I was the convener with my business heads as members. All HR policies were formulated by this council. This council also advised HR on the appropriateness of our HR processes and any initiative. The council also identified and managed the leadership talent pipeline.
My stance was not to be defensive. I wanted to work this out with the people who are impacted by attrition. I asked them what their ideas were on how HR could contain and manage attrition.
We first wanted to identify the causal factors for attrition. Because without that, all policies, processes and actions would be ill-directed and pointless. I had a set of seniors and colleagues in our business leadership team, who were well-meaning, and not the kind that palm off blame on others. This bit is important.
Sometimes, business leadership teams use attrition to cover up their performance gaps or use it to score a brownie point and to fix HR leadership. That makes no difference whatsoever in solving the problem of attrition.
In my book, poor leaders such as these are a liability for the organisation because they destroy trust and are interested only in power games. In fact, if these leaders direct their thoughts inwards, they will know why there is attrition in their team.
It is precisely this viciousness and an inability to build a performance-enabling, and not a blame-fixing culture, that could be the cause of attrition in their teams. This kind of behaviour prevents them from taking any real accountability.
Identifying the macro and company-specific factors
Let me get back to the conversation that ensued with my well-meaning colleagues from the business leadership teams.
We first explored what were the macro-environmental pull factors and what were company-specific push factors.
We identified seven major pull factors:
1. The rate of growth of the economy, the flow of capital and access to low-cost debt: This is the investment fuel for multiple sectors in the economy. In this environment, all talent becomes fungible across all industries and yet there is huge net shortage of supply. China, India, Thailand, Brazil, Russia, South Korea, and South Africa went through a similar phase between 2002 and 2010. In fact, India, South Korea and China still grapple with the same talent shortage issue, and are likely to do so even in the next decade.
2. The level of wage premiums offered by lazy competitors to simply rely on a buy strategy, rather than a build strategy: This is possible only where the Board and the CEO are unmindful of productivity per rupee spent. These organisations are like cuckoos which use others’ nests. But unlike the cuckoo, these organisations pay a price for this. The “make talent” strategy uses it as the glue for retention. But this is hard work. It requires a culture of nurturing and patience to wait for people to flower. In the period from 1998 to 2008, barring very few organisations like Asian Paints, HUL, ICICI Bank, P&G, and Infosys, almost everyone else who had not invested in building talent were this lazy, high-premium-paying poachers. The standard wage premium was as high as 20% on the salary of the previous employer. Multinational banks, rattled by ICICI Bank and HDFC Bank, broke the bank to acquire or retain.
3. The number of new players who are coming into an industry, and who use mature companies as their recruitment pool: They offer all possible ways to lure away talent, such as role preference, level premium, location premium and wage premium. This is often a life stage compulsion for these newbie firms. They also have the luxury of a five-year honeymoon during which they don’t need to bother about the expense line.
4. Demand outstripping supply in the market because certain sectors or roles are growing way too fast: This also pushes up the wage premium available to even mediocre people in the supply pool in established organisations. Often, this means internal leaders whom you wouldn’t find good enough to promote, could end up getting plum roles at rival organisations. Many of these exits are avoidable because they take away the tacit knowledge that gets built up over time in the system.
5. International postings offered by competition do wean away talent, especially when similar opportunities in your own organisation are limited and restricted to leaders at very senior levels: Juxtapose ICICI Bank in the 2000 to 2006 period with a multinational bank or the then ICI India Pvt Ltd with Asian Paints.
6. Better wealth creation options that some organisations offer, especially in a booming capital market: By late 1990, many Indian organisations discovered the value of stock options. Infosys showed the way. Banks like ICICI Bank and even a firm like HUL used subsidised home loans which were of a healthy size as an effective retention tool at junior levels.
7. Charismatic CEOs who make it aspirational for people to queue up to join certain organisations: For us at ICICI Bank, KV Kamath was an asset for both acquisition and retention. Jack Welch was an asset for GE worldwide.
Why do people leave?
Then, we went on to identify the push factors. Let me categorise it under the impulsive first thoughts and the thoughts that we shortlisted after a mature discussion.
Impulsive first thoughts
1. Poor HR policies, mainly promotion norms, salary policies, favouritism, etc.
2. Poor recruitment-quality and promptness
3. Fear of the bell curve and a whimsical performance management system
4. Poor HR connect with employees
5. Insensitive and inaccessible HR folks
6. Unclear career path
7. Poor HR response to competition’s superior HR practices and policies
When these issues came up, I did not attempt to dispute any of them. After all, all these issues could well be true and might need attention and fixing. But the question we needed to answer was: Is there more to these issues than what meets the eye?
That’s when we went on to ask a series of in-depth questions:
1. What changes in promotion and salary polices do my colleagues propose to alter the current attrition-inducing policies? How do we bring in fairness and equity, and remove favouritism and whimsical people decisions? More importantly, how do we convince our employees in a credible way about our intent?
2. How do my colleagues propose that we handle the supply-side issues of getting in quality people in the right numbers without us upsetting the issue of fairness and equity—which arise because of wage and other premiums, and which we are forced to offer new recruits? Also, how do we handle the resulting attrition of loyal people, who get upset with new people coming in at higher wages, at higher levels and in better roles?
3. Should we scrap the bell curve? If yes, what do we replace it with? How do we handle the charge that performance targets were way too unrealistic, even unattainable and whimsical? How do we manage the bulging wage bill, when more people are rated at the higher end and almost no one at the lower end?
4. What gaps do my colleagues see in HR’s connect with employees?
5. Would my business colleagues be willing to offer me a few good customer service and relations people from their teams to coach the HR team on being accessible and sensitive to employees—in much the same way that they do it for our organisation’s customers? Also, what service-oriented processes, practices and service metrics should we adopt? This wasn’t a rhetorical question. This was asked earnestly and with an intent to seek support.
6. Could our leadership talent council take charge of charting out career paths with the HR teams facilitating the conversations? Could our business leaders take on the role of career counsellors to their own teams, with HR partnering them? Could our business leaders handle the aftermath of these conversations and not palm them off to HR?
7. Could we in the HR team do a gap analysis every quarter, based on a structured study, and decide on the changes that need to be incorporated, based on the changing HR competitive landscape?
Asking the tough questions
It took us about three hours to deliberate these questions and distil our insights. After which, I posed a set of provocative questions:
1. Why are young people in India reluctant to join frontline sales, especially in retail, in almost all organisations? Do we have contra evidence to this?
2. Why is the attrition in frontline sales in almost all organisations almost 150% to 200% a year, assuming that the data is not being cleverly massaged?
3. Who is better placed to retain an employee: someone who works with him every day or someone who has intermittent and episodic connect despite the best intent? Should we find a credible way to fix causality of every attrition? Are exit interviews credible? How do we make them credible? If exit interviews suggest we need HR policy changes or point to an immediate or skip-level boss as trigger, are we open to incurring the cost and accepting the unintended consequences these may have on those who are loyal?
4. Who decides the budget, performance metrics, and performance support? And, hence, who could have the best opportunity to address issues around these which have an impact on attrition? If it is these issues, should we hold the CEO accountable for attrition or will we ignore this as irrational rants from underachievers whom we wrongly recruited?
5. Does the culture and specifically, the everyday behaviour of the immediate boss and colleagues, have any impact on people leaving or staying? Does the presence or absence of nurturing and performance support have any impact on attrition?
6. Is it possible that we may be over-specifying for a role without any understanding of the supply side? I jokingly remarked that these days, ready talent like Dhrishtadyumna and Draupadi do not come out of the yagna kunda (ceremonial fire) and people do not know putrakameshti yagna (a yagna to obtain offspring through the blessing of gods). Interestingly, most bosses ask for readymade talent because they are poor at nurturing and supporting performance.
7. Is it possible that the senior people are being set up by their juniors? And could it be that these smart juniors use attrition as an excuse for many of their own inadequacies? Often, more headcount and attrition are used as target negotiating counterweights that juniors use with seniors.
8. Do people want to go to semi-urban and rural areas and work there for two or three years without wanting to get to urban locations? Is there enough supply in semi-urban and rural areas to recruit children of the soil? Are we acceptable to recruiting children of the soil? The flip question is, will the children of the soil be willing to move out?
9. Is the overall aspiration and growth of our organisation and specific businesses providing sufficient growth opportunities? How siloed is the growth opportunity in our organisation?
10. Are we seen as an organisation that nurtures new hires and is friendly towards them? Or are we viewed by new recruits as instant-productivity-seeking, and as a hire-and-fire organisation? Is there constant fear and anxiety of loss of job in our culture? Is there a bullying culture in the name of driving performance? What impact does this kind of behaviour have on our share in the supply side? Does this make those who stay back nervous and keen to exit at the first opportunity?
11. Is it possible that our juniors may be using and squeezing employees as an instrument of performance and are unmindful of their other needs like weekly offs, vacations, calling people up and harassing them after office hours? No one actually rubbished my question. Because they knew that while I personally demanded high performance, I didn’t believe in squeezing out people.
12. If we are paying competitive salaries, should we check out why people are leaving for higher salaries? Or if higher salary premiums are available in the market, should we consider that we are uncompetitive? Or do we accept that there are lazy employers who unmindfully acquire people at above-par salaries and we do not want to emulate them? Will we accept the consequences of this?
Since my colleagues Bhargav (Dasgupta), Madhabi (Puri Buch), Vaidya (V Vaidyanathan), Kannan (NS Kannan) and Vishaka (Mulye) were not the vindictive, fix-the-HR type, they, along with Chanda and Nachiket, engaged on these issues wholeheartedly. Never once did they say “You are HR, so you tell us; do not ask us”.
As an aside, it is only a vindictive and vicious business head who raises attrition as an issue with the CEO. Well-intentioned business heads, like my colleagues, always guide and work with HR on all HR issues and never blame HR. Every time a business head says attrition is an HR problem, you can be fairly sure that person is either immature or the intention is suspect. Instead, well-meaning business leaders work with HR and find resolutions.
The key precepts
Based on our collective conversations, we eventually arrived at the following resolutions:
1. Track attrition, but do not obsess and blame: As long as we have created an effective refill system, do not pay premium of any kind. We should always recruit at salaries below the level of the exiting person and spend money on accelerating the capability of the new recruit. This should be the shared responsibility of business and HR. So, while HR focusses on acquiring, business takes on the task of building capability and bridging any capability gaps. Bhargav even accepted this in the international business, where we were the new kid of the block in foreign countries. Vaidya and Madhabi were exemplars in shaping the thinking of their reluctant juniors. Many of these juniors thereafter became ambassadors of this approach.
2. Attrition is in-built into an economy that’s growing at 5% and above: Sales is culturally not a preferred role. So, intervene on the supply side. Create a proprietary pipeline through partnerships with skilling organisations. This is where ICCI Manipal academy for Banking and Insurance, Institute of Finance, Banking and Insurance (IFBI), and the many skilling academies came into the picture. This is now part of industry best practice. Ninety percent of junior recruitments would eventually come through this system. This would not have been possible if my colleagues had had an agenda to fix blame. Kamath, and later Chanda, were stellar in their support.
3. Do not create a fear culture of firing new recruits too soon, especially among the frontline staff: Don’t prematurely judge their productivity; give them 12 months to learn and scale. Vaidya and Madhabi fully owned this and drove this. Later, we made it 18 months. Whenever we brought in mid-level leaders from outside, inevitably there were internal leaders who would question the quality of the hires and blame it on the talent supply chain. But my colleagues did not fall for it. This approach immediately halved our attrition rate, including in sales.
4. Defer incentives for the frontline, including sales, to their second performance cycle of 12 months: In the first cycle of 12 months, both fear of loss of job and fear of erosion of fixed salary drives attrition up. So, we used this counterintuitive approach of securing the job and offering an adequate fixed salary in the first year. It reduced attrition by half. However, in later years, some misguided leaders reversed it. And predictably, insecurity in the ranks zoomed and attrition sky-rocketed. This, in turn, confirmed the validity of the earlier approach.
5. Attrition at the middle to senior levels largely stems from misalignment of aspirations, or people plateauing out, or chemistry issues between the employee and the boss—and almost never because of salary or any maintenance-related HR issues: We believed that employee stock option was a powerful way to align and drive the employee value proposition. There was one other lever: provide leaders visibility and personal brand enhancement in the larger ecosystem. Some of the senior-level attrition in later years at the ICICI Group was because this bit was not given enough attention. Kamath was always mindful of this and encouraged senior leaders to be visible and impactful in the larger ecosystem. This was a magical retention glue. In fact, Kamath made it a point to ensure that many senior leaders could build up their brand outside. This is one important reason why we were able to increase stickiness.
6. Holding the HR leadership solely responsible and carrying the performance metrics on attrition is impractical and even perverse: We agreed that containing attrition is a shared responsibility. The domain of policy, people service processes and culture were identified as the drivers. In fact, we all agreed at least half the attrition in the organisation was due to the everyday environment which the immediate and skip-level boss created, and at best half could be tracked back to policies and HR service deficiencies.
We agreed that the performance metrics around attrition should be split between HR and businesses, all the way from senior business leaders to the first-level leader. The HR council took the accountability for policies and the HR department on service metrics. The business leaders took accountability for the culture-related metrics.
Since we all came to an understanding that attrition is a business issue and not a functional issue, we created ownership and accountability for it at three levels: HR council, business HR managers, and business leaders at every level. This removed the fear of attrition. It also eliminated the blame culture. The focus shifted to a shared approach of resolving the issues, rather than obsess about it.
Here are my final thoughts: it is best to understand and estimate what part of the attrition is determined by pull-factors from the macro environment, and therefore, not within your control, and what part is company-specific, where you may still have “some control”. Learn to accept it, set your company-specific limits based on the levers you have and those that you are willing to set up. Identify these levers. Operationalise them. Then, like most people processes, let the water find its level. It makes little sense to apportion blame or wail while beating your chest.