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Talent retention remains a top concern around the world, with the LinkedIn 2023 Workplace Learning report finding 93% of companies are worried about employee turnover. And the growing rate of attrition—which measures the percentage of employees you lose, including new hires—should also be a concern.
In 2022, attrition rates averaged 19.6% in Singapore and 21.2% in India—where the average employment tenure is only 1.5 years compared with 12 years in Japan.
And that is costing employers. As well as the costs of recruiting, onboarding, and training, research suggests employee disengagement and attrition could cost a median-size S&P 500 company at least $228 million a year in lost productivity.
Plus, there’s the risk to team morale with additional workload and potential damage to employer brands if you are perceived to be a ‘high turnover’ organization.
That’s why the role of talent acquisition is not just to hire the right people, but to hire people who will stay.
“You would imagine my KPIs would be around speed to hire, but actually my number one KPI is retention in the first year,” one talent acquisition leader told Korn Ferry Senior Client Partner Nishith Mohanty at a recent round table in India.
“This shift is very real,” observes Mohanty. “Talent leaders are now tracked not on how they close positions, but how they retain them over time.”
Korn Ferry Senior Client Partner Navraj Singh Makkar says both multinationals and Indian organizations are struggling with retention—but they tend to attract quite different types of talent. He finds multinational recruiters want only the best talent from top schools, while locally owned companies might be more focused on people who are entrepreneurial and willing to learn.
“I recently spoke with one of the largest conglomerates in India. They asked us to figure out why these attrition rates were happening. They needed help finding employees who will stick with them and who are culturally aligned to the way they want to work.”
Attrition includes both voluntary and involuntary turnover. But it is the rate of voluntary resignations that has employers worried.
During a recent leadership session with a global bank tech support center, Makkar says one attendee raised another issue with high rates of attrition.
“He told us, ‘our attrition rate is between 20% to 25%, which means if we don’t all return to the office, within two years half our staff will not have met any of their colleagues.’”
Our industry survey data, along with feedback from thousands of candidates globally, suggests many of the reasons people quit within the first 12 months comes down to a misalignment between workplace expectations and reality. They don’t receive the promised learning opportunities, or enough attention from managers and co-workers. Or they feel out of sync with the company purpose, culture, or the value of their role.
This makes it clear that attrition is both a talent acquisition and talent management problem.
In India, research suggests lack of career growth and advancement, along with perceived pay inequities, are the primary drivers of voluntary attrition. Another local driver is the high rate of post-graduate study.
“Doing your Masters or MBA is the norm in India, rather than an exception,” observes Makkar. “So if you hire the best graduates, you’re likely to lose them after two to three years to a further degree.” That’s why some companies may choose to invest in supporting these employees with tuition and time off to study, in the hopes that talent will return.
Here are three other ways HR leaders and talent acquisition teams can reduce the rising tide of attrition.
As well as being measured on retention, talent teams in India have KPIs around diversity, equity and inclusion. And in this market, that means looking beyond the Tier One cities to the enormous talent pool in smaller cities.
“Many organizations we speak to, who have upwards of 40,000 employees, are recruiting in Tier Two, Three and Four cities,” notes Mohanty. “They’re also looking at women returning from maternity leave and people with disabilities. This is a significant shift in India.”
His advice is to “be more realistic with your requirements. We are seeing job descriptions move away from expectations of a ‘superhero persona.’ Make a conscious choice about what is mission-critical, and what can you live without.”
It’s also a good idea to share realistic expectations for that job description upfront, including a percentage breakdown of time spent on key tasks.
As well as assessing new hires for skills, you also need to identify if they will thrive in your company culture. Asking questions around motivation, purpose, values and working style can also help you build trust and connection during the recruitment process.
“People will stay with a brand they feel aligned with, and with an employer they feel cares about them,” says Mohanty. “That can be a real differentiator. Especially if you are attracting talent from other cities—the organization becomes their family if they have left their hometown.”
Ultimately, the employee value proposition should be the compelling reason people join your organization—and stay. So how genuine, relevant and up to date is your employer brand?
Part of your promise to employees will include rewards and at the graduate level, salary is a factor driving attrition. “We see entry level people jump ship for what seems like a small amount, but proportionately for them it is big,” says Makkar.
However, career progression is another lever with a lower payroll budget impact.
“One of our clients, a professional service consultancy, was struggling with the cost of attrition—a major competitor was luring their top talent away,” explains Mohanty.
They were particularly worried about losing the ‘top 300’—the 300 potential future leaders, who were receiving differentiated rewards and career paths.
However, they hadn’t told that group they were in that group. That difference wasn’t visible.
“So, we created the Talent Magnet Program, which empowers the managers of the top 300 to give them a sense of purpose and meaning, provide career development and mentoring,” Mohanty says.
As Talent Magnets, those managers are now the glue that binds the top talent to the organization.
Mohanty believes we may need to learn to live with a world of high attrition, just as we are coming to terms with living in a higher inflationary environment. “It’s not uncommon to see attrition rates of 35% in knowledge processing outsourcing companies, or even higher in hospitality and service industries,” he says.
India may believe it has a population advantage with an abundant prospective talent pool for employers, but Mohanty says the big challenge is in job-readiness of that talent.
“There is still a much smaller pool of people capable of taking on global roles. People who can deal with ambiguity. Those who are not just order takers, but self-starters.”
Those are the people you need to take care of and retain. It all begins with setting the right expectations during the interview and onboarding process, and making sure you deliver on those expectations from day one.
Learn more about how to reduce the risks of talent attrition in this insight paper.
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