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How being profitable helps IT companies sail ahead of attrition

IT industry’s tussle with attrition is not new. Retaining talent has always been a tough job. While the problem exists for a long time, over the years, there are strong signals of it getting aggravated. As per data collected by LinkedIn from half a billion professionals, the attrition rates are highest in the IT industry at 13.2%. While these are averaged figures, the actual numbers vary widely for different organizations. In India, as per Business Standard, the attrition rate in the IT industry exceeded 25% for FY22. The problem is expected to get complicated further in the future. There are multiple factors that contribute to attrition.

If you look at surveys and data churned out by researchers, they will blame it on factors like lack of growth opportunities, toxic work culture, work overload, availability of plenty of better paying opportunities etc. I feel all these factors are actually an outcome of a single underlying factor - declining profitability. Well, that might sound like a very bold statement but if we scratch a bit and look under the surface, it makes complete sense.

To begin with, let us make a list of all the commonly accepted factors contributing to attrition. The list will look somewhat like this :

  1. Work overload

  2. Higher paying opportunities

  3. Lack of a clear growth path

  4. Lack of healthy work culture

  5. Lack of training and learning

While these factors are very different and appear disconnected at the surface, almost each of them can be eased out if the company can make some extra profit. Let’s go point by point.

1. Work overload: Probably work load is the attrition factor that is very closely linked with the profitability. When a company is less profitable, hiring enough resources is always a challenge. This leads to limited resources being utilized on multiple projects. If a company is profitable, it can always hire the required talent to ensure that the projects teams are not burdened with excess of work.

2. Higher paying opportunities: The IT services industry if growing constantly at a high rate. While the number of colleges offering IT related skills has gone up, finding talented human resource is a challenge. This leads to more profitable or cash rich companies offering more lucrative figures to the talent. This in a way highlights the very close connection between being profitable and being able to retain the best talent. As the demand for talent becomes even more fierce, IT companies will have to find ways to remain profitable so that they can afford the best talent.

3. Lack of clear growth path: A large number of young and talented individuals are choosing IT as their career path because they see enormous growth potential in this industry. When a resource in unsure about its growth path in the organization, he or she will start looking for another employer who will offer that clarity and opportunity. Hiring talent is one part of the game but ensuring that everyone gets to grow as per their ambitions is even more challenging. This also indicated that fast growing organizations are better at retaining talent. It is not just a coincidence that most of the fast-growing companies are also the most profitable companies. To grow, companies have to experiment a lot. They have to try out new product ideas and venture on paths lesser known. Only profit rich companies can manage to grow at such a pace in the competitive industry.

4. Lack of a healthy work culture: Culture is of no use when it’s only on the paper. Even though each and every company has a culture written, following it in day-to-day functioning is something very few manage to do. Even though work culture and profitability seem like to unrelated parameters, there is some interconnection. First and foremost, resource crunch always leads to poor work culture. It pushes people into a mode of panic which leads to unrealistic expectations from other team members.

When a company is profitable, it can invest a good amount of money in deploying various mechanisms to foster the organizational culture. One more point - culture always has to be followed from the top. CEO, various department leaders are usually the drivers of the culture. They can take out time to ensure that culture is being followed only when their core challenges - profitability, optimum team performance etc. are taken care of.

5. Lack of learning and training opportunities: Young talent looks at investment in their talent as investment in their future and growth. They always look forward to work opportunities that allow them to grow in their core or allied skills.

There are two factors that hinder their learning opportunities: work overload and lack of investment of resources from the company’s side. As we saw earlier, work overload is directly linked to the low profitability of the company. For a company to invest in the learnings or their employees, it has to have a decent learning and training budgets which is again possible only for profitable companies.

The more connect the dots, the more it becomes clear that being profitable can be the best solution to tackle the increasing attrition. At Instazen, we have a solution that directly impacts your profitability. Get in touch with me to know more.

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