Attrition rates in 2009 across levels at R&D centers in India would be at an all time low

Our study on attrition levels in the MNC R&D industry in India for the year 2009 highlights that attrition as a trend is expected to be at an all time low during the year, much due to the current economic slowdown.

This declining trend in attrition started in the year 2008 and was the lowest ever then, when compared to the previous two years. While it was high in the second quarter (April to June period in case of Jan to Dec financial cycle) of the year as compared to the other quarters, it was much under control in most organizations by the last quarter of 2008 (October to December period) due to the economic condition.

This year, most organizations have frozen salary increase for 2009 and even delayed their appraisal processes in lieu of a better visibility on the economic situation. Most of them have even frozen hiring for the current year, while only a few of them are back-filling for attrition in critical positions.

The average attrition rate across product development organizations is at 5 to 8 percent and companies are expected to have a lower attrition in the coming months. When compared to 2007, product companies across India have witnessed low attrition for various levels in 2008 indicating a more positive trend. The junior level attrition that had gone up to 7 percent in 2007 dropped to 5 percent in 2008. Similarly, middle level attrition that was at 6 percent in 2007 also came down to 4 percent in 2008. Also 2008 witnessed the lowest levels of attrition when compared to the last 2 years.

Some key findings of the report:

• QA (testing) function was found to be the highest in attrition across various cities
• Attrition at the senior level was found to be relatively low
• Contributing factors for voluntary terminations – Career Opportunities, personal reasons, higher studies. Out of the three sited reasons,
attrition due to better career prospects was relatively higher when compared to the other two. Whereas, the reason which read higher
studies was relatively higher among junior and middle level employees with about 1 to 6 years of experience.
• Involuntary terminations – most organizations seemed to have taken a strong stand on the performance of employees and hence have
weed off the bottom 5 to 10 percent of low performers.
• Bangalore continues to reflect relatively high attrition when compared to Pune and Chennai

Companies might see attrition at the junior levels as engineers might choose to go for higher studies in 2010 if the downturn continues through to the next year. In addition to this, services companies might start competing for senior resources and domain experts as their revenue model/business model might switch to revenue share/fixed priced projects from the current Time and Material projects. There is bound to be an increased focus on internal capability development programs in various organizations to help breed productivity.

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Sahana Shetty
Senior Consultant

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