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CASE STUDY

The pangs of
employee attrition
Employee retention is a top priority for organizations globally. In this highly
competitive world, the cost of employee turnover turns out to be not only very steep,
it also reflects strongly on the fact that organizations are probably not investing
adequately in their people
- by Dr. Poornima Gupta
Dear Sir,
Please accept this letter as notice of my resignation from
the position of assistant manager Production at FCMC.
As per the terms of my employment contract, I will continue
to work for the company for the next one month.
I have enjoyed being a part of the team and am thankful
for the opportunities you have given me during my time
here.
I hope that I can rely on you for a positive reference in
future.
Yours sincerely,
Rajeev Mehra

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September 2015

h no, not another one" thought Sushil


Chanda, the Head of Human
Resource, as he read the letter. This
was the third resignation since he
came on board six months earlier after the
departure of the previous human resource
manager.
He had a meeting with the Executive Director
of the company in a few minutes, and he knew
he would have to mention this to her.
He thought back to his expectations when he
joined the company six months ago.
Sushil Chanda brought with him 16 years of
work experience in organizations such as Fibre
Optics, automobile and woven sacks. He is a
qualified person and holds a degree in Industrial

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CASE STUDY
Relations and Personnel
Management from a reputed
University. He had met most of
the top management before
coming on board and was
impressed with the close knit
family atmosphere and
commitment to quality.

FCMC: The organization


"Excellence at all levies of
activities, leading to continuous
improvement in product, process
system, cost effectiveness and
productivity for total customer
satisfaction".
This quality assurance
statement is the essence of all
round commitment to quality at
Fort Caps Manufacturing
Company (FCMC) which had been
rated in the top three-quality
capsule manufacturing
organization in pharma industry.
In today's industrialized society
quality is the food of love. Both
organizations and customers are
concerned about quality. It is this
concern that high lights the quality
policy of FCMC, which believes
that quality does not happen by
chance. It has to be assured.
FCMC started way back in 1996
in Bhopal to manufacture gelatin
capsule shells for pharmaceutical
industry. Bhopal was chosen for a
variety of reasons. Foremost
amongst them was the easy
availability of raw material, special
loan scheme for gas rehabilitation
program, being the native place of
the owner and ready availability of
infrastructure. The factory was
housed in a pre-existing building,
which used to be in garment
export. The establishment of FCMC
came as a blessing in disguise. The
owners who are also in the
business of manufacturing capsule
making machines could not find
market for some of the machines,
hence they started themselves the
capsule making business and FCMC
came into being.
The plant is managed by the
Executive Director, Stuti Shah, the
Late President's daughter, who
graduated from the top
management school in India. She

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had worked at other plants to


understand the systems and
workings, and had taken over the
management of FCMC after her
father died in late 2014.
Initially, four machines were
installed. By September 2013, two
more machines were added and
by end of 2014 FCMC had 8
machines. Initially, since the
machines were partially utilized
the turnover was Rs 135 Lakhs. By
2010 full machine capacity
utilization was achieved and the
turnover increased to Rs 18
crores. By the end of 2014 the
turnover reached the level of 30
crores. The company has for its
marketing in India a prominent
structure of dealer and distributors
all over India, although major
buyers are situated in Mumbai. A
large part of the produce is
exported through merchant
exporters to many countries
including USA, African and Latin
American Countries. FCMC is now
working to receive WHO GMP
certification to be able to get to
the European Market.
It produces five kinds of
capsules. They are called as 0,1,2,3
and 4 of which 0 is the biggest
size and four is the smallest.
Following are the approximate
values of different sized capsules:
0 size

1 lakh

10 kg

1 size

1 lakh

7.8 kg

2 size

1 lakh

6.2 kg

3 size

1 lakh

5.8 kg

4 size

1 lakh

4.0 kg

As of June 2015, the company


employed 62 full time employees
of whom 33 were staff, and 29
operators. In addition, it also
Year

LWP
Absenteeism
Employees
%

2009

451

2.57

2010

630

3.64

2011

305

1.69

2012

397

2.12

2013

739

3.97

2014

1203

6.41

Dr. Poornima Gupta


Associate Professor, Great Lakes
Institute of Management
Poornima Gupta is an Assistant
Professor in the field of Organizational
Behaviour and HRM at Great Lakes
Institute of Management, Gurgaon. She
has more than sixteen years of
experience in industry and academia.
She has worked as faculty at National
Institute of Information Technology
(NIIT), Lucknow and organizations
like Himalaya Exports Delhi, Permo
Marketers, Lucknow and Ask
Consultancy Pvt. Ltd., Vadodara. She is
Post Graduate in Management and BSc
in statistics from Lucknow University.

employed 98 casual workers for


sorting and/or substituting
operators. Typical requirement for
a shift consist of 2 operators per
machine and one reliever. The
turnover of employees had
decreased over the years, but
leave without pay and absenteeism
had started increasing as seen in
the table below:
The average cost of production
is Rs 16,780 per hour. The average
sale price as of now is Rs. 1400
per 1000 capsules. Average
turnover is Rs 3 crores per month
and average cost is Rs. 2.7 crores
per month. The total machine
downtime for the year 2013 was
4.59 hours per day per machine. It
jumped to 13.81 hours in 2014.
However it seems to have
stabilized in recent period. During
2013 downtime per machine per
day was 7.56 hours, for the month

September 2015

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CASE STUDY
of May 2014 the comparable
figure was 7.29 hours per machine
per day.

Human resource policies at


FCMC
As mentioned earlier, FCMC
employs 160 employees out of
which 98 are contract employees.
The contract employees are hired
for 180 days on a stretch and then
reemployed after a few days'
break. As a policy, FCMC does not
take contract employees on a
permanent basis because of
objections raised by those contract
employees not regularized. While
the FCMC does not have a clearly
defined HR Policy as the turnover
is negligible, however, on the
machines two operators and one
reliever must be maintained.
Whenever the need for extra
employees arises, FCMC uses two
models. First is raiding where it
attracts employees from similar
industry by making them better
offers. In the second case, local
consultants are hired who
advertise and shortlist candidates
and handover the short listed
candidates to be interviewed by
management. If found suitable,
they are hired, however, it also
depended on the need.

i. Training and
development
Training and development activities
are limited to induction
(orientation) training for contract
workers. It consists of three day
on the job training after which the
supervisor submits a report.
Depending on the report either
the employee is absorbed or is
asked to leave if found
unsatisfactory. More recently some
ad-hoc training for ISO
certification purposes has been
provided to the employees.

ii. Review and promotion


The Performance Appraisal system
consists of such aspects as job
knowledge and application, safety,
equipment awareness, personality,
attitude and behaviour,
management skills etc. These

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September 2015

attributes are rated on a six point


scale from excellent (5) to very
poor (0). In addition it also seeks
information on strengths and
weaknesses and training plan.
Supervisors and subordinates both
fill out the form making it 180
degrees appraisal system. While
there is no formal policy on
promotions, by and large
promotions are based on the
contribution of employees as
reported by the supervisor. There
have been cases where employees
have been promoted within a year
of service and some employees
have waited for 10 years before
getting a promotion. There have
also been cases where some
operators have refused promotion
because that would have meant
loss in income (inclusive
overtime).

iii. Salary & Wages


Salary structures are clearly
identified. Salary components
consists of Basic, DA, HRA(40% of
Basic), Conveyance(fixed at Rs 250
for operators and 10% of Basic
+HRA for officers), PF(12% of
Basic), washing(Rs 145 for
operators and Rs 160 for staff ),
attendance bonus(Rs 250), ESIC
(4.75% of Basic) and children
education allowance (Rs 300 per
child for operators and Rs 600 per
child for staff, upto two children).
Officers are also provided a lump
sum for academic research.
Because of recent revision of
salary structure, the recently hired
employees are better paid than
those employed some time ago.
Contract employees are paid
according to the going minimum
wage in the region which works
out to be Rs 30 per hour.

Employee survey
Chanda was trying to review some
of the existing policies as well as
develop others.
During the informal discussions
with the workers, Chanda got the
impression that the employees at
FORT CAPS have mixed feelings
towards management. To get a
clear picture a number of

supervisors and workers were


interviewed in small groups on
various aspects of human relations
and were also asked to fill up a
simple questionnaire which was
given to them both in English and
Hindi.
The results showed that the
general feeling which appeared to
be common across all levels was
that the "management neither has
time to listen to the employees
nor is interested in employee's
problems. One of the employees
verbalized this feeling when he
said "management does not care
about us. They are only concerned
with the production". The
employee said that the instructions
are not always clear. Some
complained of too many bosses
giving different instructions
causing confusion and creating
delays in production. The
organizational vision is not very
clear to the employees. While the
permanent and contract operators
have a cordial relationship and
help each other whenever
required, the same feelings do not
extend to the management. Some
of the employees were not even
sure what their designation was in
the organization. Many employees
commented that there is no
"Team Work". Every department is
working as a separate entity and
not as an integrated part of the
organization. They felt a lack of
"leadership" in the organization.
Of the senior employees in
management, there are only one
manager and three supervisors
who have been with FCMC for
more than four years. Rest was
only a few months old in the
organization and neither are they
aware of the general environment
nor are they willing to take
decisions.
Employees felt that no
incentive or recognition is given to
high performers, (around 10%)
irrespective of the level of
performance. Not only this, the
new operators in some cases are
paid more than the older
operators in the organization. The
founder President had introduced

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CASE STUDY
a number of incentive schemes
which were suddenly withdrawn
without given any reason
immediately after his death in late
2014. The only benefit that
continues to be offered is the
reimbursement of the children's
education at the rate of Rs
300 per child upto two
children for workers
and Rs 600 per child
up to two children for
staff. This scheme has
been found to be
extremely beneficial to
all the employees.
The contract
workers are not made permanent
even though they had given
satisfactory output for more than
two years. This had caused most
of the trained operators to leave
just as a new opportunities came
along. If an employee leaves, no
questions are asked and no
attempt is made to retain trained
employees. While the provision of
overtime exists, and it is equally
distributed, payment of overtime
is not done in time or along with
the monthly salary. For example,
the overtime for the last six
months has not yet been paid.
By and large employees
seemed to be quite satisfied with
the working conditions. they raised
some issues related to working in

the shifts. In case some operators


remain absent from the work
without informing in advance,
some of the workers have to work

on double shift. While the


payment was same as that for the
normal hours, the workers faced
administrative problems in doing
double shift specially the third one
(late night). At that time, the
administrative office being closed,
there is no one having authority
to release funds in case of
emergency which often affects the
production process. There was
also no provision for canteen
because of which the workers who
had to stay for the night shift,
have to go without any food as
the dhabas are closed by then and
food that they brought from
home is finished.
The supervisors felt that their
problems are not communicated

to the top management by the


mangers. If a worker performed
well, it was not reported to the
higher management. Sometimes
wrong information is passed on to
the top. This caused them to
comment that if you want to be
praised by the management, you
should be in the good books of
the managers. There was no
feedback on the performance
appraisal which is filled by each
employee and his supervisor.
The top management hardly
visited the shop floor. This gave
rise to the feeling that they
were unaware of the problems
of the employees. They felt that
there is no one to listen to them.
They also felt a sense of
helplessness as there was no one
to fight their cause and there is
no effective union.
While this would be helpful in
defining new policies, he is at a
loss how to handle the recent
spate resignations not only from
the officers to the workers.
He blames a new factory
recently opened in the
neighborhood for the
cannibalization of his workforce,
but he dreads reporting to Shah
that another officer has resigned.
He is sure Shah would want
explanations and he fails to come
up with any concrete reason.

the machine that produce the


capsules (and therefore having
forward integrated) is an
advantage to any industry that
flourishes on mass production.
However, the high impact that
all the above ingredients bring to
the table is watered down by the
lack of 'credible leadership'.
Since the issues faced by
FCMC are many, I have tried to
simplify it in the form of a big
picture (given below).
A cumulative outcome of all
the above challenges is Low
Productivity, High Machine
downtime, slow-down in rate of

growth, toxic work environment


and therefore an unsustainable
business model.
What can Chanda and Stuti
Shah do? Well, the first step is to
address the root of the problem "Building Credible Leadership".
As the Executive Director, Stuti
Shah needs to roll up her sleeves
and become the visible face of
Leadership at FCMC. She needs
to set a clear vision and voice
from the top that provides a clear,
measurable direction to the
company. Every function and
therefore every employee should
be working to achieve 'One Goal'.

Analysis by Anjali Byce

eing a die-hard optimist, I


have to start on a positive
note. The situation faced
by FCMC is at rock bottom, and
can only get better!! Sushil
Chanda has a golden opportunity
to transform the organization. This
is the best it gets for any leader
desiring to build a legacy.
Let's start from the beginning FCMC has all the right ingredients
of becoming a successful company
- the manufacturing facility,
availability of raw material, special
loan scheme for gas rehabilitation,
and strong quality policy to name
a few. Being the manufacturers of

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September 2015

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CASE STUDY

Having set the vision (what needs


to be done), she needs to build
the right enablers (how to get it
done). There is no better way to
build team work and get success
than to engage every member in
the organization in strategy
building. She can use the process
of large scale integration process
to empower employees to have a
voice in strategy building, creating

Anjali Byce
Director Human Resources
SKF India
Anjali Byce is the Director Human
Resources at SKF India. She has made
significant contributions including
multiple Business Partnership
programs, implementation of a
culture based HR Strategy, capability
building, Six Sigma and diversity
initiatives. She has also championed
multiple change management
programs. She has worked with Tata
Motors, Allianz Bajaj Life Insurance
Co, Cummins and Thermax.

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September 2015

tactical steps and most


importantly driving ownership and
empowerment while listening to
the voice of every employee. This
will help them row in unison in
the same direction.
Stuti also needs to integrate
her distributors / dealers/
business partners in the value
chain as a part of the process of
creating winning teams.
Yet another approach that Stuti
could explore over time is to
create a professional executive
committee to run the company as
against her running it as an owner
driven company.
Chanda, on the other hand,
has a very critical role to play as a
strategic business partner.
I would recommend Chanda to
start from the business goals and
vision set by Shah to build the
enablers. The first step is to build
a Performance Oriented Culture.
How does one do that?
What works best in my
experience is to consider the
Business Goals and ask the
question "What will make it
happen?" Here I don't refer to
'skills' but instead to 'Behaviour'.
As a strong business partner,
Chanda needs to drive behavioral
change.
Organization structure - Build
a structure with clear
accountabilities and
empowerment. This will not only
help in a flawless and consistent
cascade of the organization goals
and vision, but will also increase
decision making, reduce
production delays, provide a
common voice of leadership.

Focus on productivity- What


gets measured gets done!! Chanda
needs to address every lever that
drives improved productivity Headcount (both staff and
operators) to be revisited. Are
such high number of staff and
workers (permanent and contract)
required? Starting with a zero
base budget would be a critical
step. Chanda should evaluate the
possibility of stopping Overtime
and instead look at creatively
working on optimized shift
operations.
Reward for performance Build compensation, reward and
recognition around achievement of
company goals. Build an incentive
scheme that drives the 'behaviour'
of high quality, lower machine
downtime, higher cycle times,
reduced absenteeism, higher
turnover, and therefore greater
value add and productivity.
Additionally the silos between
functions can be broken by linking
the incentive payout to a common
organizational result. This will very
quickly drive a desirable 'new way
of working'.
The compensation structure is
archaic and needs a complete
revamp. A balance is essential
between components that drive
employee welfare and those that
drive business performance. For
instance, overtime cannot be seen
as a 'way of increasing take home
salary' by workers. Likewise
providing a compensation for
academic research with no clear
deliverables does not make
business sense.
A quick one time exercise to

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CASE STUDY
ensure 'pay for performance and
skill' will be a long-term
investment. Discrepancies on
payouts linked to experience/ skill
of employees needs to be
corrected. All of these will do
wonders in driving visibility to
principles of 'fairness and
transparency' as a critical
operating culture.
Recruit - train- evaluate promote: Chanda needs to ensure
that every element of people
management is driving the set of
behaviors that will make FCMC a
winning organization.
Having purely a 'buy' strategy
for acquiring talent is not
sustainable. Instead of getting
talent through head-hunting or
recruiting consultants, Chanda
should build a plan to get fresh
talent infused in the company
through college recruits. She can
then top it up with a 'build'
strategy that focuses on capability
building to drive business results.
Capability building of course
should not be construed as limited
to skill building, but also
leadership and people
management. Every line manager
should be trained to be a people
manager (this will have a direct

influence on retention). A
development center approach can
be used. Since most of the
managers (except four) are less
than four years in the company,
Chanda needs to focus on building
a strong leadership talent pipeline
as well.
The workers should be urged
to move towards multi-skilling as
a method that drives transparent
selection and career growth. Not
taking trained contract workers
due to a non-transparent selection
process is not the answer. The
right answer is to build a
transparent selection and
promotion process linked to skill
and consistent performance that
provides a career path to all
trained resources. A natural off
spin, is that multi-skilling will
provide growth and contribute to
business through enhanced
productivity.
A transparent and measurable
Performance management system
should be designed. This system
should measure both - an
employee contribution to overall
company goals and additionally
how these goals were achieved. A
robust feedback mechanism;
institutionalized as a part of

building people management skills


will help build trust and
transparency. It will also help to
sieve the wheat from the chaff.
Communication - Last but not
the least, Chanda should provide
multiple channels of
communication for employees opens forums by Shah, employee
surveys, frequent periodic
meetings with high performing
and potential employees, stay
interviews with critical talent and
skip level meetings across teams
will go a long way in driving an
'open and accessible leadership'. It
will also help address multiple
hygiene factors (such as canteen
and timely payouts) and business
strategic issues with equal speed,
transparency, openness and care.
I recommend Chanda should
ask the question - "What will help
retention of employees" versus
"Why do we have attrition". It's
surprising but the array of
answers could be quite different
for both questions. It's not the
mushrooming of new companies
in the vicinity that is causing
attrition, the answer lies within 'A need to build credible
leadership and an engaged
workforce!'

Analysis by Nirmala Behera Udgata

rima facie, major problem


with the organization is a
yawning gap in "leadership''
where four-fold qualities, viz
"Vision, Empowerment,
Encouragement and Human
Values" are conspicuous by their
absence. Channel of
Communication between leader
and colleagues is distinctly skewed,
devoid of transparency and clarity
in flow.
There is lack of leadership skills
and there is no on one-to-one
working or group nor is there a
range of tools in their armoury to
deal a wide range of situations.
Empowerment is nowhere seen
as a situation is more of

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command and control in a typical


hierarchical relationship. The flow
of command lacks two-way
approach and feed-back
mechanism from on-site situations
with regard to bottle-necks or
suggestions for improvement has a
mental block. The stream seems
to be flowing without defined
course or path and so as
employees, resembling a typical
proprietary style of management
Here employees do not have any
road map to travel nor their
destination defined with time span.
It is like navigating a boat in a
vast ocean without sail or oars.
Employee relations lacks
motivational approach and rather

more business-like - for regulars


"You are 'Hired' for which you are
'Paid'", while casuals are simply
"Hired & Fired", creating an
unhealthy imbalance in human
relation management. Key value of
HR ethics is no where noticeable.
Honing of communications
skills needs to be addressed
especially of vision and mission
values so that route is well laid for
productive results. Encouraging
people to speak-up, listening them
effectively and elicit information
by good questioning is not built in
communication mechanism of the
organization. Result is employee
have a traditional "Three-punch,
One-Lunch, Work and Off" routine

September 2015

65

CASE STUDY

Nirmala Behera Udgata


Head - Group HR
RSB Transmissions (I)
Nirmala Behera Udgatas has been
with RSB Group for over 16 years. In
the domain of HR, she has successfully
implemented a number of process
initiatives such as Performance
Management, Organizational
Development, Talent Management
and JD HR System amongst several
key HR policies and systems. Prior to
her leadership role in HR, Nirmala
headed the entire operations of
iVitesse Technolgies, the IT division of
the RSB Group as the Director.

without ambience of motivation.


Career planning of employees
not in the system and increments/
promotions are without scientific
and logical approach. There is no
"Rewards by Results" and
accolades for achievement is
distinctly lacking. Recognitions are
more by whims and fancies likes
and dislikes and lacks professional
approach.
Involvement of top
management in understanding
issues of employees here is more
a rarity than a rule and machinery
or mode of grievance handling is
distinctly absent. There is deep
insecure feeling amongst the
employees that "CARE"
(Colleagues Are Really Everything)
from the management is more in
a academic tone than in action,
leading to depressed scenario,
stealing the precious virtue "one-

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September 2015

ness" from a team who give bread


and butter to the organization
through sweat and toil.
No HR policies, process and
systems are defined, nor equal
rights and opportunities to the
employees of every rank and file
are provided. There is no team
work and spirit. Flow of
information and instructions is
distorted, leading to haste and
confusion in carrying out the
routine operations. Clarity in
organization structure is lacking.
All the above HR deficiencies
are reflected in inconsistent
output, increased down-time of
machines and absenteeism, leading
to narrower margins.

What can be done.


First thing, Sushil Chanda should
get into diagnostic study HR issues
within the organization, call for a
meeting with his team, request
them to roll up their socks, get
into bottom of the issues right at
the site with root cause analysis.
Once the root of cause is
known, he should adopt two-way
course, viz Corrective Measures
to restore the confidence of
employees with base touch to
Challenges, Morale, Motivation,
Team Work, Goal and Strategy,
followed Preventive Strategy to
ensure there is no chance of recourse.
Two-way course strategy
should be preceded by suggestions
from employees during one- toone speak-up sessions and
employee satisfaction mapping
through well-structured survey.
Once the bull's eye is hit, now
it's time for HR Head to present
the issues to Shah outlining
detailed approach of two-way
strategy, viz Corrective Process to
restore the morale and confidence
of work force in tangible and
intangible terms with time span.
Preventive strategy will ensure
that issues do not crop up again
and there is upward movement of
strength in morale and motivation
of employees.
Focus areas of discussion with

Shah would be:


G
Setting up of clear-cut objectives
and goals
G
Self-motivated initiatives and
responding flexibility to
changing scenario
G
Acceptance of responsibility for
mistakes/erroneous decisions at
every level.
G
Perseverance skills when
situations do not work out
G
Positive attitude and learning
from failures
G
Keep the image of organization
in the highest esteem at all
times
G
Delegation to employees with
right skillset
G
Listening, supporting and giving
constructive feed-back on gaps
G
Creating an atmosphere of
enthusiasm to make the things
to happen.
G
Team work, one-ness and
solidarity
G
Roles & responsibility well defined
G
Continuous interaction with
employees
G
Clarity in communication
G
Transparency
G
Robust HR procedures and
systems
G
Learning & development process
continually
G
Retention

Finding the way


Recommendations of strategy of
the HR Head should be
thoroughly analysed, debated and
understood for implementation.
Once the green signal is given,
effectiveness of strategy should
have a review mechanism at
planned intervals to ensure desired
results.
Shah should also think of a
radical change in her organisation
and leaderships amongst her top
management team. Her
philosophy towards people and
HR practices needs to be redefined. Connecting with
employees through mass meeting
is a MUST for Shah to reach
ground level issues and grievances.
Heart-to-heart conversations with
employees will definitely help in
understanding and retaining.
HC

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