The challenge of retaining new hires

Shipra Arora / New Delhi

The job of recruiting a new candidate does not just end by signing on the dotted line. The real effort actually begins after that. What is today bringing many companies to become aware of this oft ignored and overlooked fact is the growing realisation that employees quit within the first two-three months of their recruitment, which is often termed as “honeymoon period” in corporate circles. The failure of an employee to stick around can damage the company in many ways. More energy is spent in damage control and motivate rest of the employees. These three to four months translate into the salary of an employee who has left. With the cost of recruitment on the rise and the cost of replacement even higher, smartly managing employees during their early tenure has become a key to retention strategy of IT companies.

Some companies have now even gone a step further. They have started looking at managing these first 90-100 days as the most critical period from a long-term retention perspective. They are becoming sensitive to the knowledge that the first few months can make all the difference between an employee who has long-term commitment and the one who could soon explore other options. But even more importantly, this period can be the most critical one in determining the comfort level of these employees with the company, the quality of relationship between both and the time it takes for the new recruit to start becoming productive. According to Sanjay Aggarwal, managing director of HR Minds Consulting, it is vital to ensure that the initial couple of months are comfortable and smooth. S M Arif, vice president of HR with HCL Comnet, further adds that companies spend a lot of money to hire new employees. “It is very important to put as much effort to help workers acclimatise and become productive at the earliest,” he says.

As a result, HR departments are designing more programme to help employees acclimatise and become comfortable. It is not only looked as a retention effort but also as an effort to accelerate the break-even point, the point at which the new employee stops costing the firm money and instead starts making some.

Early retention

One of the reasons why companies are now putting more effort in acclimatising the new employees is to save on the costs of losing an employee early, thereby reducing the replacement cost. Experts point out that though the actual attrition rate during the early period may not be high but the vulnerability is certainly high and therefore it needs to be taken care of during this time. According to Aggarwal, the first six weeks are the most critical for SMEs of the “non-brand” company type. Some of the major factors for “non-brand” companies losing new employees, especially in the first six weeks are:

• New employee’s bonding is still not strong enough to resist joining a “brand” company;
• Status of old interviews given during the same time as to your company starts getting declared and then money may become the prime motivator;
• The negative energies may overcome the positive strokes i.e. the new employee hears more negative stories from peers and is unable to distinguish between rumours and actuality.

However, even strong companies like HCL Comnet, Emerson Network Power, Aircom, 24/7 Customer, Infinite Computer, Blue Star Infotech and Kale Consultants rate early retention high on their priorities and as part of their core retention strategy. “The cost of going through the recruitment process is duplicated, besides the additional cost in terms of training and orientation of a new inductee,” explains Sanjay Mandlik, corporate champion—HR and TQM with Emerson Network Power India.

Typically, in hiring a new employee companies have to bear the recruitment cost, which is a direct cost, ranging between 10 percent to 30 percent of the gross salary. The indirect cost for the company will depend on the level of the employee. As it is assumed that the employee will not be productive from day one, the company has to bear the hidden cost, which would be on salary, training, induction, acclimatisation, etc.

Aggarwal points out, “On an average, between three to four months salary of the new employee is the cost of hiring. This includes direct costs as attributed to salaries of interviewers, overheads, fees to consultants, subscription to e-jobsites, etc.” This is exclusive of productivity, time loss, costs attributed to client interviews, etc.

After recruitment, the approximate cost involved during the first two-three months is approximately 1.5 months salary of the employee, including direct costs on activities like induction, project orientation, processes, team bonding, personal development plans, skill upgradation, etc. The level of position and skill sets determines this amount, which varies from case to case.

The failure of an employee to stay on during this initial period puts the entire process in the same loop. According to Milind Jadhav, vice president of HR with Patni, another significant loss is of knowledge that the employee takes along with the loss of the company’s brand equity, both within and outside the organisation. Manish Goel, president—India Technology Operations, Bangalore Technology Centre, Network Appliance, further adds that the costs are primarily in the lost effort and the time it takes to reinitiate the process and find another employee to replace the first.

Long-term retention and productivity

More than anything else, companies are now being driven towards successfully managing early recruits by the need to take care of the risk of “disengagement.” According to Vinayak Kamath, vice president—HR of Kale Consultants, “If not addressed well, the feeling of ‘Where have I landed?’ may creep in. Once you start on that note, the chance of building back employee engagement is low.”

Says S Nagarajan, COO and founder of 24/7 Customer, “The first three months are very critical as they determine the longevity of employees sticking around.” It is the time when the individual forms an opinion about the organisation in terms of its culture, sense of belonging, explains A P Rao, head of human capital management, Birlasoft.

The period, therefore, differentiates between the converts and the non-converts, i.e. those who believe in and are optimistic about the strengths and future of the company and those who will soon seek a way out. If the first 90-100 days in the company have been good for the employee, it is likely that he would stay on for longer period. This time is also the most important to acclimatise new recruits and helps them in understanding the organisation’s work culture and values. According to Aggarwal, this impacts employee productivity, as there is a direct co-relation between acclimatising and productivity.

Focus areas

Experts highlight the importance of understanding the significant factors that determine the failure or success of an employee during the first two-three months, in order to design the right programmes for them. Rao lists some of the top factors determining the failure or success of an employee during the first two-three months:

• Proper induction;
• Role clarity (well defined KPAs and KRAs);
• Career path;
• Compensation;
• Handholding at project /department level;
• Healthy interface between dependent support departments;
• Work culture /healthy environment;
• Recreation facility;
• Administration/finance related amenities;
• Easy life/work conditions affecting indirectly like transportation, residence, etc.

The programmes need to be designed around these factors. Proper induction i.e. the learning of the processes and ensuring adherence to these by new people is important as the cost of rework can be very high. Tarun Singhal of Aircom International (India), informs that the company’s formal programme includes walking the recruit through the company’s charter, long-term benefits and having a brief interaction with them for the projected future with the firm and the industry scenario.

Another focus area for companies is clear communication regarding responsibilities as well as defining career path for the recruits. Ashish Taneja, vice president for projects at Vertex India, says, “The focus is to ensure that the employee has a well-defined role and responsibility, long-term career plan with measures, development plan which clearly details ‘how’ and ‘when’ and match personal aspirations and organisational needs.” Sunder Rajan, general manager of human resources and administration of Infinite Computer Solutions, believes that employees need to see value adds in the form of career progression, salary, and involvement in the organisational development process areas.

Another critical factor, according to Manoj Mandav-gane, general manager of HR with ICICI Infotech, is to pay as much attention to softer issues like workstation, meals, transportation, general friendliness, as the attention paid to the training and skill set enhancement programmes. Harish Govind, vice president of HR with Blue Star Infotech adds that various events and functions are organised by the ‘Fun & Frolic Committee’ in his organisation to make the new recruits feel comfortable.

While the HR departments in most companies go all-out to do their bit, what is also required is all round support of the project team members to spend more and quality time with new employees. Just a ‘Buddy scheme’ is not enough and managers need to be more sensitive and responsive.

Trends

Some of the emerging trends tow-ards smoothening the early period are refresher process tests at regular intervals. Companies also have detailed personal de-velopment plan after 60 days for each new recruit where the basic inputs for this plan is revisiting the gaps.

Aggarwal points out that companies have also started “satisfaction surveys” by third parties. Third-party “90 days handholding” is also gaining significant acceptance given that the project teams have less time to spend.

With the adoption of these emerging trends, Indian IT companies are gradually moving towards the re-recruitment concept. A relatively new concept in India, re-recruitment is the newest weapon in a company’s arsenal. Preneet Bindra Sinha— people strategy, Sapient, explains that this is because companies are beginning to realise that it is more productive and cost effective to re-recruit people who were well integrated into the organisation in the first place. Cultural alignment, particularly in the services industry, is critical.

This entire re-recruitment approach is based on effective communication. If the employee is communicated on the feedback and action taken he/she feels that his/her opinion matters. Govind points out that in the IT industry, the awareness levels are high to ensure that during first three months there are anniversaries and there is a lot of interaction. Mandavgane however feels that the adoption of this concept is currently most prevalent in the BPO sector, but there is going to be an increasing adoption among the IT services companies in the coming years.

Many experts however feel that re-recruitment alone will not work and can be used as an early warning system in case of a problem.

Conclusion

While most employers, if not all, are aware that the early two-three months are critical and crucial, yet ‘just-in-time’ hiring, project pressures, pressure on increased billing utilisation percentage means that the focus is not there aggressively as it sho-uld be. However, the fact that companies have now started di-recting their energies on ensuring a smooth transition for an in-ductee and his/her quicker assi-milation into the new culture, is a positive indication.

shipra@expresscomputeronline.com