A

SUMMER INTERNSHIP PROJECT REPORT

ON

“A STUDY ON EMPLOYEE RETENTION STRATEGIES AT RATNAAFIN”

PREPARED BY

VIRAL MAKWANA

ENROLLMENT NUMBER: 20MBA23022

UNIVERSITY EAM NUMNER: 542020

MBA BATCH 2021-22

UNDER THE GUIDANCE OF

PROF. SUSHIL MOHANTHY

ASSISTANT PROFESSOR

S.V INSTITUTE OF MANAGEMENT, KADI,

SUBMITTED TO

S.V INSTITUTE OF MANAGEMENT, KADI

IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR

THE DEGREE OF

MASTERS OF BUSINESS ADMINISTATION (REGULAR)

IN

KADI SARVA VISHWAVIDHYALAYA, GANDHINAGAR

S.V. INSTITUTE OF MANAGEMENT 1

 DECLARATION
I hereby declare that this summer internship project report entitled “Employee Retention
Strategies” is done by me is an authentic work carried out for the partial fulfilment of the
requirements for the award of the degree Masters of Business Administration. I also declare
that this project is the outcome of my own effort.

Place: Viral Makwana

Date:

S.V. INSTITUTE OF MANAGEMENT 2

 INSTITUTE CERTIFICATE
It is to certify that this summer internship project title “A study on employee retention
strategies” is the bonafide work of Viral Makwana, who carried out the research under my
supervision. I also certify further, that to the best of my knowledge the work reported herein
does not form part of any other project report or dissertation on the basis of which a degree or
award was conferred on an earlier occasion on this or any other candidate.

Dr. Bhavin Pandya,

Professor & Dean

S.V institute of management-Kadi

Prof. Sushil Mohanthy,

Project guide

Assistant professor

S.V institute of management- Kadi

S.V. INSTITUTE OF MANAGEMENT 3

 ACKNOWLEDGEMENT
I would like to extend my gratitude towards Kadi Sarva Vishwavidyalaya University and S.V.
Institute of Management, Kadi which had provided me to gain knowledge from all the angles.

A project report is the result of not only hard work of the student but also a symbol of guidance,
encouragement and help given by many people. This is actually a teamwork done by many people
including research guide, friend and my sister. So before presenting the work I would like to serve my
sincere regards and thanks to these people.

I would like to give special thanks to Mr. Sushil Mohanty (Assistant Professor-SVIM), Mr. Ashok
Gayakwad (DVP-HR at Ratnaafin) And Mansi Shah (DM-HR at Ratnaafin) for constant
guidance and encouragement throughout.

With special regards I sincerely submit my heartiest devotion to people who provided me with the
time, support and inspiration which are very much needed to prepare the report.

-Viral Makwana

S.V. INSTITUTE OF MANAGEMENT 4

 PREFACE
Employee retention is a process in which the employees are encouraged to remain with the
organization for the maximum period of time or until the completion of the project.
Employee retention is beneficial for the organization as well as the employee. Employees
today are different. They are not the ones who don’t have good opportunities in hand. As
soon as they feel dissatisfied with the current employer or the job, they switch over to the
next job. It is the responsibility of the employer to retain their best employees. If they don’t,
they would be left with no good employees. A good employer should know how to attract
and retain its employees.

Most employees feel that they are worth more than they are actually paid. There is a natural
disparity between what people think they should be paid and what organizations spend in
compensation. When the difference becomes too great and another opportunity occurs,
turnover can result. Pay is defined as the wages, salary, or compensation given to an
employee in exchange for services the employee performs for the organization. Pay is more
than "dollars and cents;" it also acknowledges the worth and value of the human contribution.
What people are paid has been shown to have a clear, reliable impact on turnover in
numerous studies.

Employees comprise the most vital assets of the company. In a work place where employees
are not able to use their full potential and not heard and valued, they are likely to leave
because of stress and frustration. In a transparent environment while employees get a sense of
achievement and belongingness from a healthy work environment, the company is benefited
with a stronger, reliable work-force harbouring bright new ideas for its growth Blog Online
and Earn Money.

S.V. INSTITUTE OF MANAGEMENT 5

 EXECUTIVE SUMMARY
As a Masters of Business Administration (MBA) it is well evident that work experience is an
indispensable part of every professional course. In the similar manner, practical training is
must for every student who is undergoing management course.

Without the practical exposure, one cannot consider himself or herself as a qualified and
capable manager. During the project period, student can learn through his/her experience, the
real situation of market and corporate world and to put his/her theoretical knowledge into
practice. The purpose of training is basically to bridge the gap between job requirement and
present competency of an employee.

I have conducted study on comprehensive study of employee retention strategies. The issue
of retention is stressful for most managers managing high-performing employees can also be
stressful at times. Combine the two and consider the issue of retaining employees and have a
recipe for mega-stress.

After visualizing the shot, a golfer rejects all but the appropriate club to achieve the result
visualized: a driver for a tee shot, a putter for the green, a sand wedge for getting out of
bunkers, and so on. Likewise, to retain employees, you must choose the right tools to achieve
your goals. The possibilities are numerous - compensation schemes, crèches, pension plans,
cars, bonuses, fresh paint, coaching, 360 degree assessments etc.

Each day, the competition is out to steal your most talented employees. The best defense is to
create a total work experience so attractive that your brightest star would never consider
leaving

The best managers understand that the contributions of excellent employees are what make
the difference between success and failure and they take actions to retain those people.
Nothing feels better than having a productive and happy workforce which is collectively
focused on the organization's success.

The retention work should not only serve the company but also satisfy the employee.

S.V. INSTITUTE OF MANAGEMENT 6

 TABLE OF CONTENTS
PAGE
CHAPTER NO. TOPIC NO.

Preface 5

Acknowledgement 4

Executive Summery 6

1 INTRODUCTION 11

1.1 Introduction Of NBFC Sector 12

1.2 What is NBFC 12

1.3 Evolution Of NBFC 13

1.3.1. Brief History of NBFC 13

1.4 Functions Of NBFC 16

1.5 Roles & Objectives of NBFC 17

1.6 Types of NBFC 18

1.7 Structure of NBFC 21

1.8 SWOT of NBFC in the Global Scenario 29

1.9 Future of NBFC in India 30

2 COMPANY PROFILE 31

2.1 About Ratnaafin 32

2.2 Vision & Mission Statement of Ratnaafin 32

S.V. INSTITUTE OF MANAGEMENT 7

 2.3 Core values of Ratnaafin 33

2.4 Products offered by Ratnaafin 34

2.5 Team of Ratnaafin 35

2.6 Events at Ratnaafin 38

3 Literature Review 40

Literature Gap 45

4 Human Resource Management 46

5 Employee Retention 49

3.1 What is Employee Retention 50

3.2 What Employee Retention used to mean 51

3.3 What Employees Retention Means Now 51

3.4 Talented Men Leave, Dead wood Doesn’t 51

3.5 The Rise of Employee Retention As a Management Tool 52

3.6 Understand the reasons of Mobility 52

3.7 Myths About Employee morale prevent companies from

achieving retention success 53

3.8 Ten Factors that affects Employee Retention 57

3.9 Importance of Employee Retention 59

3.10 Ten Ways to Retain Employee 60

3.11 The 3R’s Of Retention 62

S.V. INSTITUTE OF MANAGEMENT 8

 3.12 Join, Stay, Leave Model 63

3.13 Retention Programs 64

3.14 Solution To The Problem 65

3.15 Employee Retention Strategies 67

3.16 Challenges for an HR Professional in NBFC Industry 72

3.17 Why People prefer to join NBFC 74

3.18 Why People Leave NBFC 75

NBFC for HR Practices 75

6 RESEARCH METHODOLOGY 76

Objective of the project 77

Methodology 77

Research Design 77

Sources of data 77

Population Definition 78

Limitations of study 79

PERCENTAGE ANALYSIS 78

Recommendations 79

7 DATA ANALYSIS AND INTERPRETATION 80

Interpretation of Survey’s responses 81

S.V. INSTITUTE OF MANAGEMENT 9

 89
FINDING
90
CONCLUSION
90
BIBLIOGRAPHY
92
ANNEXURE

S.V. INSTITUTE OF MANAGEMENT 10

 CHAPTER 1
INTRODUCTION

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1.1 NBFC Sector

1.2 What is Non-Banking Financial Company?

A Non-Banking Financial Company (NBFC) is a company registered under the Companies
Act, 1956 engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities issued by Government or local authority or other
marketable securities of a like nature, leasing, hire-purchase, insurance business, chit
business but does not include any institution whose principal business is that of agriculture
activity, industrial activity, purchase or sale of any goods (other than securities) or providing
any services and sale/purchase/construction of immovable property. A non-banking
institution which is a company and has principal business of receiving deposits under any
scheme or arrangement in one lump sum or in instalments by way of contributions or in any
other manner, is also a non-banking financial company (Residuary non-banking company).

 Nonbank financial companies (NBFCs), also known as nonbank financial institutions

(NBFIs) are entities that provide certain bank-like and financial services but do not
hold a banking license.

 NBFCs are not subject to the banking regulations and oversight by federal and state
authorities adhered to by traditional banks.

 Investment banks, mortgage lenders, money market funds, insurance companies,

hedge funds, private equity funds, and P2P lenders are all examples of NBFCs.

 Since the Great Recession, NBFCs have proliferated in number and type, playing a
key role in meeting the credit demand unmet by traditional banks.

S.V. INSTITUTE OF MANAGEMENT 12

The incidence of high employee attrition rates in organizations across different industries in
India has been the subject of substantial number of studies. However, not much of research
seems to have been focused on identifying the causes of employee attrition in Non-Banking
Finance Companies (NBFCs), more so NBFCs engaged in gold financing business. NBFCs
play a critical role in the development of the country’s economy by providing financial aid to
customers normally not catered to by banks. This paper attempts to throw light on employee
attrition and Non-Banking Finance Companies in general. The deficiency of research in this
area of employee attrition in gold financing NBFCs needs to be addressed by a study on the
real causes of employee attrition in these organizations and also by reviewing how effective
are the employee retention strategies followed by them.

S.V. INSTITUTE OF MANAGEMENT 13

1.3 Evolution of NBFC in India
1.3.1 A brief history of NBFC
 NBFCs started humbly in India in the 1960s as an alternative for savers and investors
whose financial needs were not sufficiently met by the existing banking system. The
NBFCs initially operated on a limited scale without making much impact on the
financial industry. They invited fixed deposits from investors and worked out leasing
deals for big industrial firms.

 On the basis of recommendations of James S. Raj Study Group formed in 1975,

RBI accepted and implemented regulations that allowed financial companies the
freedom gearing oftentimes. According to the salient features of the Directions, the
purchase and leasing companies were allowed to accept deposits to the limit of their
net owned funds. The Directions also prescribed the need for Companies to maintain
liquid assets in the form of unencumbered approved government securities.

 In the first stages of development, the Companies Act regulated financing. However,
the unique and complex nature of operations and with financial companies acting as
financial intermediaries, there was a call for a separate regulatory mechanism.

 Hence, Chapter III B was included in the Reserve Bank of India Act, 1934, which
assigned the Bank with limited authorities to regulate deposit-taking companies. Since
then the RBI has initiated measures to regulate the NBFC sector.

 The RBI accepted and implemented that hire purchase and leasing companies could
accept deposits to the extent of their net owned funds, as per the key
recommendations of James S. Raj Study Group formed in 1975. The Companies were
also required to maintain liquid assets in the form of unencumbered approved
government securities.

 Between the 1980s and 1990s, NBFCs, with their customer-friendly reputation, began
to attract a huge number of investors. The number of NBFCs rose swiftly from a mere
7000 in 1981 to around 30000 in 1992, which made the RBI feel the need to regulate
the industry. In 1992, the RBI formed a Committee headed by the former Chairman of
Bank of Baroda, Mr. A. C. Shah, to suggest measures for effective regulation of the
industry. The Shah Committee's recommendations included most things from
compulsory registration to prudential norms.

S.V. INSTITUTE OF MANAGEMENT 14

  In January 1997 there were huge changes in the RBI Act, 1934, especially the
Chapters III-B, III-C, and V of the Act seeking to put in place a complete regulatory
and supervisory structure, which would protect the interests and also ensure the
smooth functioning of NBFCs.

 After the amendment of the Act in 1997, the NBFCs have grown significantly in
terms of operations, range of instruments and market products, technological
advancement, among others.

 In the last 20 years, the NBFCs have gained prominence and added depth to the
financial sector. In August 2016, the union cabinet gave the go-ahead for foreign
direct investment (FDI) under the automatic route in regulated NBFCs.

 Muthoot Finance Ltd is India's first NBFC tracing its history back to 1888 when it
began as a small lender from a village in Kerala. Muthoot Finance Ltd sanctions loans
only against pledge of gold ornaments.

S.V. INSTITUTE OF MANAGEMENT 15

1.4 Functions of NBFC

1. Retail Financing: Entities that offer short-term funds for loans against gold, shares,
property, majorly for consumption purposes.

2. Infrastructural Funding: This is the most significant section where foremost Non-
Banking Financial Companies deal in. A lot part of this segment alone makes up a
significant portion of funds lent amongst the different segments. This mainstream
comprises Railways or Metros, Real Estate, Ports, Flyovers, Airports, etc.

3. Hire Purchase Services: It’s a way through which the seller provides the products or
goods to the buyer without transferring the goods’ ownership. The payment of the
goods is made in instalments. Once the buyer pays all the instalments of the goods or
products, the ownership of the good is automatically transferred to the buyer.

4. Trade Finance: Entities dealing in distributor or dealer finance so that they can for
vendor finance, working capital requirements, & other business loans.

5. Asset Management Companies: Asset Management Companies (AMCs) are those

companies that include fund managers (who invest inequity shares to gain good gains)
who invest the funds pooled by small investors & actively manage it.

6. Venture Capital Services: The entities that invest in small businesses are at their
starting stage, but their accomplishment rate is high and is capable enough for
adequate return in the coming time.

S.V. INSTITUTE OF MANAGEMENT 16

 7. Leasing Services: The entities that deal in leasing or for a good understanding of this
word we can recognise it in such a way that the way we rent a property or flat for
living similarly these entities offer the property to small businesses or sometimes even
larger ones who cannot afford it for whatsoever reason. The only difference between
leasing & renting is that leasing contracts are made for a fixed period of time.

1.5 Role and Objectives of NBFC

Roles of NBFCs

1. NBFCs play an important role in promoting inclusive growth in the country as it provides
tailor made solutions to diverse customer needs.

2. NBFC plays a significant role in building financial strength as it provides credits to Micro,
Small, and Medium Enterprises.

3. NBFCs are a major source of funding for new businesses.

4. NBFCs play a pivotal role in the overall development of the country which includes –
generation of employment, transport development, wealth creation opportunities, etc.

Objectives of NBFCs
1. NBFCs thrive to create more job opportunities in the country by lending loans to private
industries, which increase the demand for manpower, eventually creating employment
opportunities.

2. NBFCs help in mobilizing funds by the distribution of money which leads to income
regulation, thereby shaping economic development of the country.

3. NBFCs aim to strengthen the financial markets as it provides funds to the SMEs.

S.V. INSTITUTE OF MANAGEMENT 17

1.6 Types of NBFC
Under the broad categories of Deposit Accepting and Non-Accepting NBFCs, they may be
further divided into below 8 categories:

1. Investment & Credit Company

ICC-NBFC is any financial institution carrying on as its principal business – asset finance,
the provision of finance whether by making loans or advances or otherwise, for any activity
other than its own, and the acquisition of securities. And is not included in any other types of
NBFC as defined by RBI in any of its Directives.

(a) Asset Finance Company: An AFC is a financial institution which carries on the financing
of various assets for individuals and the businesses supporting productive/economic activity,
as its principal business. For example, automobiles, tractors, machinery, heavy industrial
equipment, large power generator sets, lathe machines, earthmoving & material handling
equipment, production & farming equipment, moving on own power, and general-purpose
industrial machines.

The income arising from these should not less be than 60% of its total assets.

(b) Investment Company: The financial institution whose principal business is the acquisition
of securities. That is it takes money from the public which is invested in various securities
and financial products.

Then the company deducts its operational cost from the earned profit and the balance is
distributed to its shareholders.

Bajaj Alliance General Insurance Company, IDFC, HDFC mutual fund are examples of some
Investment company.

(c) Loan Company: NBFC – LC is a financial institution that offers a loan for various
purposes except for AFC. The loan is offered not for assets but for other purposes such as
working capital finance etc. But includes the Housing Finance Firms.

LIC Finance Ltd, PNB Housing Finance Firm, HDFC are some examples of the NBFC – LC.

2. Infrastructure Finance Company

S.V. INSTITUTE OF MANAGEMENT 18

It is an NBFC which deploys 3/4th of its total assets in infrastructure loans has a minimum
Net Owned Fund of Rs. 300 crores has been ranked at least “A” in its credit rating or similar
CRAR of at least 15% .Some examples are GMR infrastructure ltd, Hindustan Construction
Company, etc.

3. Systematically Important Core Investment Company

An NBFC which holds at least 90% of its total assets in the form of investment in shares,
stocks, debt, or loan Group Company. Out of 90%, 60% should be invested in equity shares
or those which compulsorily convert later in equity shares, within a period not exceeding 10
years from the date of issue.

Does not trade in its investments in shares, debt, or loans in group companies except through
block sale for the purpose of dilution or disinvestment.

It is not involved in any activity referred to in section 45(c) or 45(f) of RBI act 1934.

The asset size is Rs. 100 crore or more. That accepts public funds.

4. Infrastructure Debt Fund in Types of NBFC

IDFs raise resources through bonds for long-term infrastructure projects. The bonds are
issued in multiple currencies with a minimum 5–year maturity for investors. It facilitates the
flow of long term debt into infrastructure projects. Only IFC-NBFCs can sponsor IDF-
NBFCs.

5. Microfinance Institution
NBFC-MFI is an ND-NBFC (Non-Deposit Accepting NBFC) with not less than 85% of its
assets in the nature of qualifying assets that satisfy the following criteria:

loan disbursed by it to a borrower having a rural household annual income not exceeding Rs.
60,000 or urban and semi-urban household income not exceeding Rs. 1,20,000,

The loan amount is not more than Rs. 35,000 in the first cycle and Rs. 50,000 in subsequent
cycles, the total indebtedness of the borrower is not more than Rs. 50,000, d. duration of the
loan not to be less than 24 months for loan amount in excess of Rs. 15,000 with prepayment
without penalty, e. loan to be extended without any security, the aggregate amount of loans,
given for income generation, is not less than 75% of the total loans given by the MFIs, the
loan is repayable on weekly, fortnightly, or monthly instalments at the option of the
borrower.

Bandhan Financial Service Ltd, Ujjivan Financial service are some examples.

6. Factors as Types of NBFC

S.V. INSTITUTE OF MANAGEMENT 19
In India, this type of NBFC is rarely found. Such companies normally buy loans or advances
at a much-discounted rate from lenders and after that, they adjust the repayment table of the
debtor to ensure facile settlement adding small profit.

It does not include normal lending by a bank against the security of receivables, etc.

An NBFC-Factoring company should have a minimum NOF of Rs. 5 Crore. And its financial
assets in the factoring business should compose of at least 75% of its total assets. And its
income received from factoring business should not be less than 75% of its gross income.

7. Mortgage Company in Types of NBFC

NBFC-MGCs are FI for which:

At least 90% of the business turnover is of mortgage guarantee, Or At least 90% of the gross
income is from the mortgage guarantee business, and Or NOF is Rs. 100 crores.

8. Non- operative Financial Holding Company

It is a separate category of NBFCs, set-up of a new bank opened by the promoters. It is a
wholly-owned Non-operative financial holding company. Permitted by the RBI under
applicable regulatory prescription. To set up or hold the bank as well as another financial
service.

S.V. INSTITUTE OF MANAGEMENT 20

1.7 Structure of NBFC
Regulatory framework of NBFCs shall be based on a four layered structure Base Layer (NBFC-BL), Middle
Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer. Proposed regulatory framework for these layers is
enumerated below. It may be noted that the regulatory framework envisages a progressive increase in the
intensity of regulation. As has been discussed above, the extant regulatory framework for NBFC-NDs will now
be applicable to Base Layer NBFCs while the extant regulatory framework applicable for NBFC-NDSI will be
applicable to Middle Layer NBFCs. NBFCs residing in the Upper Layer will constitute a new category. The
discussion paper is not a compilation of entire set of regulations applicable across different categories of
NBFCs. In the following paras, only the revision proposed in the regulatory framework has been discussed. It
may be important to note that the revisions applicable to lower layers of NBFCs will automatically be
applicable to NBFCs residing in higher layers, unless there is a conflict or otherwise stated.

4. Structure and Regulatory Framework for NBFCs in Base Layer

4.1.1 Structure - The Base Layer will consist of NBFCs currently classified as non-
systemically important NBFCs (NBFC-ND) besides Type I NBFCs, NOFHC NBFC-P2P and
NBFC-AA. The current threshold for systemic importance is ₹ 500 crore. This threshold
needs recalibration, taking into account increase in general price levels as well as increase in
real GDP since 2014. Accordingly, the threshold is proposed to be revised to ₹1000 crore.
Out of 9425 non-deposit taking NBFCs, 9133 NBFCs have asset size of less than ₹500 crore.
If the current threshold of systemic significance is raised to ₹1000 crore, the number of
NBFCs in this layer would go up by 76 to 9209. NBFCs featuring in this layer will be known
as NBFC-Base Layer (NBFC-BL).

4.2.1 Raising the NOF – The minimum stipulated NOF for NBFCs was fixed at ₹2 crore
by the Reserve Bank in April 1999. There has been a general increase in price levels and real
GDP. Additionally, the risk perception in the sector has increased over the years. There is
also a need to make necessary investments on IT enabled processes to ensure against risks of
non-compliance with AML/KYC regulations and to address cyber security risks.

Low entry point norms raise the chances of failure arising from poor governance of non-
serious players. The ability of NBFCs to perform their role effectively and efficiently requires
them to be adequately capitalised, financially resilient, and well-regulated so that they retain
the confidence of their stakeholders including their lenders and borrowers. Reserve Bank’s
regulatory architecture has been consistent with these objectives and it is now felt that there is
a need for stronger entry point norms in the NBFC sector. Based on increase in prices, real
GDP and regulatory judgement, the entry point norms will be revised from ₹2 crore to ₹20
crore. In order to ensure non-disruptive transition, a well-defined timeline will be prescribed

S.V. INSTITUTE OF MANAGEMENT 21

for existing NBFCs, spanning over a period of, say, five years. For new registrations, the
higher NOF norms will get implemented immediately on issue of instructions.

4.2.2 Regulatory Framework – NBFC-BL shall largely continue to be subjected to

regulation as is currently applicable for NBFC-ND. However, as the threshold is being
increased to ₹1000 crore, the regulatory framework can be supplemented by enhanced
governance and disclosure standards. The specific changes in regulation will be:

a) The extant NPA classification norm of 180 days will be harmonized to 90 days. It is
usually argued that business cycle aspects of NBFC-clients often demand relaxed norms as
their cash flows are uniquely different and often longer in frequency. However, such unique
cash flow aspects of business should be factored by the NBFCs while fixing the due date for
a customer. The NPA norm of 90 days overdue status would, therefore, not interfere with the
business of the NBFC clientele.

b) The overall role and responsibilities of the Risk Management Committee will be
prescribed for these NBFCs. The decision on composition for the committee as a Board-level
committee or executive-level committee will be left to be decided by the Board of the NBFC.

c) It is proposed to prescribe that the Board will have adequate mix of experience and
educational qualification among its members. At least one of the directors shall have
experience in retail lending in a bank/ NBFC. The idea behind such changes is that less
rigorous regulation should be supplemented by improved governance standards.

d) Disclosure requirements will be widened by including disclosures on types of exposure,

related party transactions, customer complaints, etc.

4.3 Structure and Regulatory Framework for NBFCs in Middle Layer

4.3.1 Broad Structure - The Middle Layer shall consist of all non-deposit taking NBFCs
classified currently as NBFC-ND-SI and all deposit taking NBFCs. This layer will exclude
NBFCs which have been identified to be included in the Upper Layer. Further, NBFC-HFCs,
IFCs, IDFs, SPDs and CICs, irrespective of their asset size, will be populated in this layer.
NBFCs featuring in the Middle Layer will be known as NBFC-Middle Layer (NBFC-ML).

NBFC-ML shall broadly be subjected to regulatory structure as applicable for NBFC-ND-SI

and NBFC-D at present. However, adverse regulatory arbitrage posing systemic risk need to
be addressed. These are discussed below. Further, regulations applicable to NBFC-BL will
also become applicable to NBFC-ML, unless there is a conflict or otherwise stated.

4.3.2 Prudential Arbitrage

S.V. INSTITUTE OF MANAGEMENT 22

4.3.2.1 Capital Requirement – At present, NBFCs are on a Basel I type framework (i.e.
uniform risk weights for counterparties, no capital for market risk or operational risk) and are
required to maintain a minimum capital to risk weighted assets ratio (CRAR) of 15 per cent
with minimum Tier I of 10 per cent (12 per cent for NBFCs lending predominantly against
gold). For now, no changes are proposed in capital requirements for NBFC-ML.

4.3.2.2 Credit Concentration norms - At present, separate (but identical) limits are
specified for lending and investment exposures on any single borrower (SBL) and a group of
connected borrowers (GBL) linked to Owned Funds. In the case of banks, under the Large
Exposure Framework (LEF), the limits are linked to Tier 1 capital. A comparison between the
limits for NBFCs and banks is given in the table below:

Banks
NBFC
(as a percentage of the Capital
(as a percentage of Owned Funds)*
Base i.e. Tier I Capital)
Lending Investment Total Exposure
Single borrower/
15 15 25 Single Counterparty 20#
counterparty
Groups of connected
Group of borrowers/ counterparties (using control and
25 25 40 25
parties economic interdependence
criteria)
* NBFC may exceed the concentration of credit / investment norms, by 5 per cent for any
single party and by 10 per cent for a single group of parties, if the additional exposure is on
account of infrastructure loan and / or investment. Further, concentration of credit /
investment norms do not apply to NBFCs that do not issue guarantees and do not directly/
indirectly access public funds in India.

#In exceptional cases, Board of banks may allow an additional 5 percent exposure of the
bank’s available eligible capital base.

The extant credit concentration limits prescribed for NBFCs for their lending and investment
can be merged into a single exposure limit of 25% for single borrower and 40% for group of
borrowers anchored to the NBFC’s Tier 1 capital. In other words, exposure ceilings will
apply to the overall exposure, whether lending or investment. Further, the denominator is
proposed to be changed from Owned Funds to Tier I capital, as is currently applicable for
banks.

4.3.2.3 Introduction of Internal Capital Adequacy Assessment Process

(ICAAP) - As in banks, NBFCs shall be subject to the requirement of having a Board

S.V. INSTITUTE OF MANAGEMENT 23

approved policy on Internal Capital Adequacy Assessment Process (ICAAP). Internal capital
can be assessed based on it by factoring credit, market, operational, and all other residual
risks. The objective of ICAAP is to ensure availability of adequate capital to support all risks
in the business as also to encourage NBFC to develop and use better risk management
techniques for monitoring and managing their risks. This will also include an active dialogue
between the Reserve Bank and the NBFCs, wherein the supervisor will have the freedom to
review and evaluate the NBFCs’ internal capital adequacy assessments and strategies, as well
as their ability to monitor and ensure compliance with the regulatory capital ratios.
Supervisors can take appropriate supervisory action if they are not satisfied with the result of
this process, which may include prescription of additional capital to be maintained. This
would be of significance as NBFCs have different business models and hence one-size-fits-all
approach may not be feasible, and, here, supervisory judgment will play an important role.

4.3.3 Governance Arbitrage

4.3.3.1 Rotation of Auditors - A uniform tenure of three consecutive years (subject to

the firms satisfying the eligibility norms each year can be made applicable for statutory
auditors (SA) of the NBFC. The SA/firm after completion of continuous audit tenure of three
years shall not be eligible for re-appointment as SA of the same NBFC for a period of six
years (two tenures).

4.3.3.2 Chief Compliance Officer - Compliance culture is one of the key elements in
the NBFC’s corporate governance structure. The compliance function has to be adequately
enabled and made sufficiently independent so that it can ensure strict observance of all
statutory and regulatory provisions. As such, to ensure an effective compliance culture,
independent corporate compliance function and a strong compliance risk management
programme, a functionally independent Chief Compliance Officer should be appointed, who
should be sufficiently senior in the organization hierarchy.

The CCO shall have direct reporting lines to the MD & CEO and/or Board/Board Committee
(ACB) of the NBFC. In case the CCO reports to the MD & CEO, the Audit Committee of the
Board shall meet the CCO quarterly on one-to-one basis, without the presence of the senior
management including MD & CEO. The CCO shall not have any reporting relationship with
the business verticals of the NBFC and shall not be given any business targets. Further, the
performance appraisal of the CCO shall be reviewed by the Board/ACB.

4.3.3.3 Compensation Guidelines – Compensation Guidelines for NBFCs along the

lines of banks can be considered to address issues arising out of excessive risk taking caused
by misaligned compensation packages. Further, the compensation policy may also give due
consideration to the financial soundness and performance of the NBFC. The guidelines may
be suitably calibrated for NBFCs in the Middle Layer by prescribing, at the minimum, a)
constitution of a Remuneration Committee, b) principles for fixed/ variable pay structures,

S.V. INSTITUTE OF MANAGEMENT 24

and c) malus/ claw back requirements. The Nomination and Remuneration Committee will
ensure that there is no conflict of interest in appointment of directors and their independence
is not subject to potential threats.

4.3.3.4 Key Managerial Personnel - Key managerial personnel (whole time employee
in the nature of CEO, CFO, CS and WTD) will not hold any office (including directorships)
in any other NBFC-ML or NBFC-UL. In order to ensure that there is no conflict arising out
of independent directors being on the Board of various NBFCs at the same time, including
those of competing NBFCs, it is proposed that an independent director shall not be on the
board of more than two NBFCs (NBFC-ML and NBFC-UL) in total. The onus of ensuring
that there is no conflict will lie with the Board of the NBFC.

4.3.3.5 Corporate Governance and Disclosure Requirements - Banks are on

Basel III framework that envisages market discipline through disclosures under Pillar III. In
contrast, NBFCs are under Basel I like norms. However, with NBFCs transitioning to Indian
Accounting Standards (Ind AS), disclosure requirements are expected to improve with
detailed disclosures prescribed on Financial Instruments, Fair Value Measurement, Operating
Segments, etc. These disclosures are more comprehensive than those under the previous
Generally Accepted Accounting Principles (GAAP).

Over and above the current disclosure requirements prescribed for NBFC-ND-SI, there are
certain disclosures prescribed for banks, which would be equally relevant for NBFCs in this
Layer. Making some of these disclosure requirements applicable to NBFCs would bring
greater transparency and at the same time provide a better understanding of the entity to the
stakeholders. Additional disclosures which are proposed to be made applicable to NBFC-ML
are:

i. Corporate Governance report like composition and category of directors, relationship

between directors, shareholding of non-executive directors, etc.

ii. Disclosure on modified (i.e. non-clean) opinion expressed by auditors, its impact on
various financial items and views of management on audit qualifications.

iii. Items of income and expenditure of exceptional nature.

iv. Breach in terms of covenants, incidence/s of default

v. Divergence in asset classification and provisioning based on inspection findings

Further, Governance requirements which are proposed to be made applicable to NBFC-ML

are:

S.V. INSTITUTE OF MANAGEMENT 25

 i. Compliance certificates by Chief Executive Officer and Chief Financial Officer
covering various aspects including financial statements, absence of fraudulent/ illegal
transactions, submissions to auditors, etc.

ii. Requirements for Secretarial Audit.

iii. Obligations of independent directors, senior management, key management

personnel, directors and promoters

iv. Limits on directorships/ membership of committees of listed entities

v. Role of various committees (Audit Committee, Nomination and Remuneration

Committee, Stakeholder’s relationship, Risk Management) and review of information
by Audit Committee

vi. Vigil mechanism and requirements pertaining to related party transactions.

vii. Corporate Governance requirements for subsidiaries of listed entities.

4.4 Structure and Regulatory Framework for NBFCs in Upper Layer

4.4.1 Structure - The Upper Layer of the scale based regulatory framework shall
consist of only those NBFCs which are specifically identified as systemically
significant among NBFCs, based on a set of parameters. Number for NBFCs which
will reside in this layer would be dependent upon the composite score thrown by the
parametric analysis. It may, however, be recalled that the top ten NBFCs (in terms of
their asset size) will anyway reside in this layer, irrespective of any other factor. It is
expected that a total of not more than 25 to 30 NBFCs will occupy this layer. The
nomenclature of NBFCs identified in this layer shall be termed as NBFC-Upper
Layer (NBFC-UL).

4.4.2 Regulatory Framework - In addition to the regulations

applicable to NBFC-ML, a set of additional regulations will apply to
NBFC-UL. In view of their large systemic significance and scale of operations, the
regulation of NBFC-UL will be tuned on similar lines as those for banks, though
providing for the unique business model of the NBFCs as also preserving flexibility
of their operations. The suggested additional regulatory tools are mentioned below.

4.4.2.1 Capital Regulation

i. Capital Requirements: Scheduled commercial banks are on a Basel III

framework which provides for minimum requirements for Common Equity Tier 1
(CET 1) capital. It is felt that CET 1 could be introduced for NBFC-UL to enhance

S.V. INSTITUTE OF MANAGEMENT 26

 the quality of regulatory capital. It is proposed that CET 1 may be prescribed at 9%
within the Tier I capital.

ii. Leverage: In addition to the CRAR requirements, NBFCs will also be subjected to a
leverage requirement to ensure that the growth of the NBFC is supported by adequate
capital. A suitable ceiling for leverage will be prescribed for these entities, which
would act as a backstop for further growth of the NBFCs to a desired level.

iii. Standard asset provisioning: Systemically important NBFCs are currently

subject to a flat rate of 0.40% as standard asset provision whereas, banks are subjected
to differential rate of standard asset provisioning. (For example: farm credit and
SME@ 0.25%, CRE @ 1.00%, CRE-RH @ 0.75%, and all other loans 0.40 %). In
order to tune the regulatory framework for NBFC-UL to greater sensitivity, it is
suggested that NBFCs falling in Upper Layer are prescribed differential standard asset
provisioning on lines of banks. These NBFCs are already under In AS and the
accounting standards demand allowances based on 12-month expected credit losses in
place of standard asset provisioning. However, NBFCs must reckon differential
standard asset provisioning to arrive at the prudential floor envisaged under regulatory
guidelines for implementation of Indian accounting Standards.

4.4.2.2 Credit concentration norms and applicability of Large

Exposure Framework - As per the extant norms, banks are permitted to take a
single counterparty exposure to the extent of 20% of eligible capital base while the
Board may allow additional 5%, whereas a limit of 25% is applicable for a group of
connected counterparties, subject to the LEF framework. In case of NBFCs, there are
separate limits for lending, investment and for both lending and investment put
together. As suggested for NBFC-ML, the proposal is to merge the two limits while
retaining the overall ceiling.

Further, in view of the higher systemic risk posed by NBFC-UL, the LEF as
applicable to banks, can be extended with suitable adaptation (to take care of
heterogeneity and flexibility of operations of the NBFCs) along with a transition time
for implementation.

4.4.2.3 Listing and Corporate Governance- NBFCs deemed to pose higher

systemic risk need to maintain highest corporate governance standards and a diffused
ownership structure to minimise the possibility of abuse of dominance. Since NBFCs
lying in the Upper Layer have ability to cause adverse systemic risks, the regulatory
tools can be calibrated on the lines of the private banks; that is, such NBFCs should
be subject to mandatory listing requirement and should follow the consequent Listing
Obligations and Disclosures Requirements. It may however be noted that the

S.V. INSTITUTE OF MANAGEMENT 27

 disclosure requirements have to be put in place before the actual listing of the NBFC,
as per the provisions of the board approved implementation plan. Additionally,
following governance regulations are also suggested for these NBFCs-

i. Qualification of Board members – Board members shall be qualified for their

positions. They should understand their oversight and corporate governance role and
be able to exercise sound, objective judgment about the affairs of the NBFC. The
composition of the Board should ensure mix of educational qualification and
experience within the Board. Specific expertise of Board members will be a
prerequisite depending on the type of business pursued by the NBFC.

ii. Removal of Independent Directors before completion of their normal tenure will be
subject to approval by the supervisors.

iii. Group Structure – It will be ensured that the group structure is not complex and
opaque. The same may be based on the supervisory judgement and based on factors
indicated in the qualitative parametric analysis proposed. NBFCs will provide detailed
disclosure on group companies including consolidated financial position and details of
related party transactions.

iv. Remuneration policies - Guidelines on compensation for Whole Time Directors /

Chief Executive Officers / Other Risk Takers will be framed on the lines as applicable
to Private Sector Banks. The Remuneration Committee will be vested with greater
responsibility in this regard.

4.4.2.4 Other Areas of Arbitrage

Sectoral Exposure - The extant regulatory framework for banks specifies limits on
capital market exposure linked to net worth as at March 31 of the previous year.
While no limits are in place for real estate, there is a requirement for a Board-
approved policy coupled with disclosure requirements and differential risk weights. In
comparison, there are no specific sectoral restrictions for NBFCs’ exposures to capital
market or real estate sector.

NBFC-UL, on account of their large size and interconnectedness, may be particularly

vulnerable to concentration risks arising from Sensitive Sector Exposures (SSEs).
NBFCs may fix SSE ceilings based on internal board approved policy.

HFCs will continue to be guided by the extant prescriptions applicable to them as far
as CRE is concerned. Apart from proposed framework for SSE suggested for NBFCs
in this Layer, the question considered is whether limits should be placed also on
exposure to other specific sectors of the economy. Considering the unique nature of
NBFCs, it will be incumbent upon the Board of NBFCs to determine internal

S.V. INSTITUTE OF MANAGEMENT 28

 exposure limits on other important sectors. Further, these NBFCs shall also have an
internal Board approved limit for exposure to the NBFC sector.

4.5 Structure and Regulatory Framework for NBFCs in Top Layer -

The Top Layer is supposed to remain empty. The layer can get populated in case the
Reserve Bank takes a view that there has been unsustainable increase in the systemic
risk spill-overs from specific NBFCs in the Upper Layer. Such NBFCs judged to be
extreme in supervisory risk perception would be pushed to the Top Layer from the
Upper Layer. NBFCs in this Layer will be subject to higher capital charge, including
Capital Conservation Buffers. There will be enhanced and more intensive supervisory
engagement with these NBFCs. This will offer a framework for any NBFC to grow in
size and complexity, provided it is able to build up capital commensurate with the
additional risks and subject itself to intense supervisory scrutiny.

4.6 Structural Arbitrage – Given the fact that legislative foundation of regulation
of NBFCs is established on a different footing compared with banks the resultant
structural arbitrage will continue to exist. The proposed scale-based approach to
regulation is not based on any recommended legislative change. However, going
forward, a comprehensive legislative solution would be required to address the issue
of resolution of failing NBFCs to take care of the unique nature of resolution of
financial institutions including the need to protect depositors’ interest, avoiding moral
hazard, ensuring continuity of critical financial services, etc.

1.8 SWOT OF NBFCs IN THE GLOBAL SCENARIO

R. Radhakrishnan* and S. Kothai**

* Reader, Department of Statistics, PSG College of Arts and Science,
Coimbatore, India.
** Lecturer in Commerce, Dr. G.R.D College of Science, Coimbatore,
India.

In a vast country like India, with diversified economic structure, multi-agency approach is
adopted in the financial sector. Both commercial banks and Non-Banking Financial
Companies have come into play in shaping the economy of the country. NBFCs have an
undeniable role in the Indian economy. Almost every sector of the economy has utilized HP
and leasing as its source capital from NBFCs. During the last decade, NBFCs have undergone
wide volatility and change as an industry and have been witnessing considerable business
upheaval over the last decade because of market dynamics, public sentiments and regulatory
environment. Under these circumstances, it is essential to take stock of NBFCs by SWOT

S.V. INSTITUTE OF MANAGEMENT 29

analysis. The paper deals with SWOT matrix developed on SWOT profile to develop
strategies for NBFCs. The future is not gloomy for those NBFCs who plan their strategy on
the lines suggested in this paper.
1.9 Future of NBFCs in India
In the Indian economy, NBFC is playing a phenomenal role by providing excellent sources of
funding. NBFC has gone through extraordinary progress over the past few years. In India,
NBFC majorly covers those sections that are not covered by the banks, i.e. Infrastructure,
micro, small and medium enterprises. NBFCs are often used by the borrower as compares to
the banks as they are quite efficient in meeting financial requirements. In the article, we will
discuss the Future of NBFCs in India, how technologies are uplifting the growth of NBFCs,
and how the Government is taking measures to uplift the growth of NBFCs.

For uplifting the Future of NBFCs, NBFCs are learning to evaluate the overall market
scenario and by approaching the new strategies to lend to different segments. To compete
with the issues and loopholes, the Government shall consider the relaxing and easy NBFC
compliances. The future of NBFC calls for a reinvention of the business model of NBFCs,
which will definitely result in better business processes, better execution, and underwriting.

S.V. INSTITUTE OF MANAGEMENT 30

 CHAPTER 2
COMPANY PROFILE

S.V. INSTITUTE OF MANAGEMENT 31

2.1 About Ratnaafin Group

Ratnaafin Capital Private Limited is a Private incorporated on 22 November 2018. It is

classified as Non-govt. Company and is registered at Registrar of Companies, Ahmedabad. It
is involved in other financial intermediation.

Ratnaafin Management Services LLP is a Limited Liability Partnership firm incorporated

on 24 August 2018.

Ratnaafin Holdings Private Limited is a Private incorporated on 18 June 2018. It is

classified as Non-govt. Company and is registered at Registrar of Companies, Ahmedabad it
is involved in Business activities.

Ratnaafin Insurance Broking Private Limited is a private limited company based in

Ahmedabad, India. The company is registered at Registrar of Companies, Ahmedabad (RoC-
Ahmedabad) and is classified as the Non-govt. company.

Ratnaafin has been established to create an efficient and valuable platform for financial and
lending purposes. A Financial Advisory firm that is committed to make strong clientele every
day and provide smart solutions to the right people, Ratnaafin has grown and expanded itself
in these years. In just a span of 3 years, Ratnaafin has established 4 branches with a base of
more than 1500 clients. The company has a committed and specialised team that helps you in
availing all kinds of loan services hassle free.

Ratnaafin is a complete financial advisory firm that has been set up with the target of creating
the largest and most significant platform to provide growth and value to individuals,
corporates, small enterprises and financial institutions that need proficient access to financial
services. With right contacts and strong network they are a one-step solution that customises
and designs a suitable plan that fulfils our clients’ debt and funding requirements at their
fingertips. Ratnaafin stands as an epitome of expertise that provides its clients a world class
service for which they trust us the most. With due diligence, thorough market research and
analytical skills of our dedicated professionals, our expertise has deepened to embrace
financial services. Ratnaafin is a registered NBFC with Reserve Bank of India (RBI)
specially focused on providing secure and unsecure lending to MSME & Individuals.

Mission Statement
Our mission is to build an A-class team that delivers unrivalled services and a whole new
hassle-free experience in the field of financial services to our Clients.

Vision Statement

S.V. INSTITUTE OF MANAGEMENT 32

Our Vision is to globally attain best standards and become a world-class financial services
enterprise- guided by its purpose to move towards a greater degree of refinement.

2.3 Core values of Ratnaafin

Client Clinic

Ethical Empathy

Core
Integrity
Values Equality

Transparency Ownership

Ratnaafin places significant emphasis on cultivating values and sustaining a long term
relationship with their clients, employees, partners and communities that are the pillars of
their organization. They believe that infusing their corporate strategies with great values is
crucial for ensuring effective solutions for the unique requirements of their diverse clientele.
It is their core values that has helped us transform into a dynamic financial advisory
company.

S.V. INSTITUTE OF MANAGEMENT 33

2.4 Products offered by Ratnaafin

Advisory Products Insurance Products NBFC Products

• Construction of • Health Insurance • Machinery equipment

hospitals • Travel Insurance loan for MSME
• Construction of • Motor Insurance • Business Loan for
hospitals • Marine Insurance MSME
• Equipment Finance • Home Insurance • Working capital loan
• Working Capital for MSME
• Property/commercial
• Term Loan Insurance • Channel Finance for
• Unsecured Business MSME
• Liability Insurance
Loan • Loan against property
• Miscellaneous
• Construction Finance for MSME
Insurance
• Agriculture Finance • Project Insurance
• Project Finance
• Government Subsidy
• Home Loan
• Loan against Property
• Private equity &
venture capital
• Merger Acquisition

S.V. INSTITUTE OF MANAGEMENT 34

2.5 Team of Ratnaafin
Dhaval Patel- Director

Mr. Dhaval Patel started his career in the MSME manufacturing industry since 2002 and
presently is a promoter and director of the Aerolam group. The said group is into the
manufacturing of bubble insula@on XLPE FIBC / PP sheet / CPP film etc. Over all group
strength is of more of 200 employees and they are having more than 25% market share of
India for roof insula@on. His prolonged experience of growing the MSME industry from the
stretch and make it scalable will assist the Ratnaafin’s growth plan.

Nilesh Sanghvi- Director

Mr. Nilesh Sanghvi holds degree of BE in Manufacturing Engineering and Management from
NoSngham University. He is the son of the Managing Director of M/s Ratnamani Metals and
Tubes Limited and also holds the positon in India’s Largest Stainless-steel pipes and tubes
manufacturing listed company having market cap of over Rs. 5000 Cr and turnover of Rs.
2500 Cr. He looks over the new projects, new large orders along with the manufacturing and
engineering strategies. His experience of handling large team, large client base and large
organizations would help Ratnaafin to scale its operations to next level while lending to
manufacturing sector.

Malav Desai- Director

Mr. Malav Desai is a Chartered Accountant by profession and is into the fields of project
finance and debt syndication for more than 10 years. He has executed several projects
relating to private equity syndication, loan syndication, debt syndication in form of working
capital loans, term loans, construction finance, structured finance, trade finance, loan against
shares, letter of credit, asset-based funding, bank guarantee etc. Over and above this he has
also gained experience in the retail funding like housing loan, LAP to SME, machinery
finance to SME etc. His experience will help Ratnaafin in beter financial assessments and
evaluations.

Nishad Shah- Director

Mr Nishad has over 16 years of experience in banking who had started his career in the year
2001 with IDBI and worked at senior positions at various banks such as Ci@ Bank, Barclays
Bank, SBI (UK) and his last assignment was with Axis Bank working as business head in
Gujarat and Rajasthan for small business banking. He also possesses international

S.V. INSTITUTE OF MANAGEMENT 35

qualification in banking and finance with an overall 10 years of experience of working in the
UK (finance market). He has extensive experience in marketing and sales of a wide range of
financial products. Nishad has consistently exceeded the present growth and revenue targets.
Looking at his experience, he would be the key strength to Ratnaafin in Risk assessment and
handling large teams.

Mihir Dave- Sr.Credit Advisor

CA Mihir Dave is having more than 6 years of experience in the field of debt & equity
syndication and guided corporates for ETE solutions and also has rich experience arranging
low cost and need based finance to real estate developers and MSMEs.

Sheetal Thadani- Process Head

Sheetal Thadani Having a versatile and multiple industry experience related to Hospitality,
Administrative and Finance with over 10 years’ experience in Managing a mid-size team.
Worked with Multinational Companies like Emirates Airlines, Gardner Denver, and Dubai.

Devanshi Karia- Sr.Credit Advisor

CA Devanshi Karia is having more than 5 years of experience in arranging low cost,
structured and need based finance for MSME, infrastructure and real estate developers. She
has carried out various concurrent and statutory audits of Nationalized Banks in the past.

Tejas Sanghvi- Deputy Business Head

CA Tejas Sanghvi has more than 15 yrs. hard core expertise in Finance. He started his career
with G K Choksi and Co. Chartered Accountants, gaining proficiency in Critical Financial
Analysis and Tax Planning. His association with Groups like Adani, Shalby, Columbia Asia,
Indira IVF, etc developed skills like Liaoning, Business Development and Managing Client
Relationship. Being a Seasoned Professional he is always eager to deal in Healthcare and
Finance.

Kunal Patel- Partner-Retail

Kunal Patel is leading retail division for ratnaafin group. He is having over 18 years of
experience in sales & marketing and started his career with Nishad investment and finance co
ltd. He is having wide experience at various levels working for home loan /LAP/LRD.
Developed dedicated team for providing good services for Retail division.

Parth Patel- Business Head

Parth Patel started his career as a sales executive with TATA AIG Insurance in 2006. Since
then he has wide experience at various levels working with SBI General Insurance, HDFC
Ergo Insurance etc. Before joining Ratnaafin group he was a territorial head of Gujarat for

S.V. INSTITUTE OF MANAGEMENT 36

Liberty Insurance. He would be handing sales and distribution for Ratnaafin Insurance
Broking.

Manisha Patel- Principal Officer

Manisha Patel started her journey as a Unit Manager with Birla Sun Life Insurance Company
Limited in the year 2004. She has 15 years of extensive experience in marketing and sales of
wide range of Insurance products in the field of Life and General Insurance with a number of
organizations.

S.V. INSTITUTE OF MANAGEMENT 37

2.6 Events at Ratnaafin
Sports Day

S.V. INSTITUTE OF MANAGEMENT 38

 Annual Meet

S.V. INSTITUTE OF MANAGEMENT 39

 CHAPTER 3
LITERATURE REVIEW

S.V. INSTITUTE OF MANAGEMENT 40

 Literature Review on Employee Retention
Hom and Griffeth (1995) described in a study that the process of encouraging employees to
stay for a long period or till the project completion is termed as retention. Wysocki, B (1997)
pointed out the view of “The Society of Human Resource Management” that retention of
employee is the hottest topic in the current scenario. Drucker (1999) explained that
employees voluntarily quits their job is a potential retention issue. Trip, R, while discussing
turnover stated that for many organizations, voluntary turnover is a big challenge. Turnover
may be i. voluntary or involuntary and ii. Functional or dysfunctional. Voluntary turnovers
refer to leaving of an employee in an organization voluntarily i.e. the employee himself
decides to leave/resign from the organization. In involuntary turnover, the employer expels
the employee i.e. the employee leaves the organization unwillingly. It could be due to low
performance, conflict or due to employment-at-will. When a low performer leaves the
organization, it is referred as functional turnover. When a high performer leaves, it is referred
as dysfunctional turnover which incurs cost to an organization. Terence et al., (2001) stated
that there are so many reasons for an employee to leave voluntarily. Some may be personal
and some may be influenced by organizational factors. Personal reasons such as family
situation, career growth and attractive job offers etc. Organization factors includes lack of
promotional opportunities, unfair treatment among employees and mismatch between
personal values and organizational values etc., Overall turnover is a great problem for both
organization and individual. Further it is clearly discussed that occurrence of shock which is
expected or unexpected leads to serious thoughts (i.e. intention) to leave. Shocks may be
positive, negative or neutral. Positive such as alternative job offers, pregnancy etc., Negative
such as leaving of friends, poor performance appraisal etc. and neutral such as relocation of
spouse, changes in administration etc. Maqsood Haider et al. (2005) undergone a research in
Telecom sector and conversed that the competition to hunt and retain talents is tougher all the
time and discussed that employees effective human resource practices show a positive and
direct relationship in retaining employees. Further, it is analysed that culture and
compensation have a positive impact; training & development has a negative impact over
employee retention.

Exploring the Relationship between Employer Branding and Employee

Retention Karnica Tanwar & Asha Prasad
Global Business Review (2016) DOI: 10.1177/0972150916631214

The employment environment, nowadays, is becoming increasingly competitive. In such

competitive environment, employer branding is fast emerging as a long-term human resource
(HR) strategy to attract and retain talented workforce. The purpose of this article is to
determine the antecedents of employer branding from the perspective of current employees.
Most studies are dedicated to the examination of employer branding as a talent attraction

S.V. INSTITUTE OF MANAGEMENT 41

technique among potential employees. However, the present research examines the impact of
employer branding on retention of existing workforce. The research develops a conceptual
framework of antecedents and outcomes of employer branding. Using qualitative data from a
pilot study of an IT giant, it provides insights as to how the predicted outcomes of employer
branding can lead to increased retention among employees. The research also analyses the
role of employer branding in building brand advocates who spread positive word of mouth
about the organization. Results of the qualitative interviews show positive relationship
between outcomes of employer branding (job satisfaction and psychological contract) and
employee retention. In addition, a positive relationship is found between employer branding
and organizational commitment which in turn contributes towards development of brand
advocacy. Academic and managerial implications are also discussed. The study accentuates
the importance of employer branding construct and its potential to alleviate the imminent
problem of employee attrition.

Study on factors influencing employee retention in companies how to create a

winning employee retention strategy
Shivani Semwal

~ 26 ~ International Journal of Research in Human Resource Management (2019)

In this article I would love to share the possible outcome in retention or we can retain the
employee for the longer period of time. Effective employee retention is a systematic effort by
employers to create and foster an environment that encourages current employees to remain
employed by having policies and practices in place that address their diverse needs. A strong
retention strategy becomes a powerful recruitment tool. The truth is that employee retention
processes must focus on what the employee gets out of the job. The process must be a
benefits-based approach that helps employees answer the question, "What's in it for me?" The
retention processes must be ongoing and integrated into the daily culture of the company. The
best way to keep your employees is to treat them like customers. Customer service works for
external customers. We treat them nicely. We work to satisfy them. We help them achieve
their goals. Why not do the same for our employees? If positive customer service policies and
practices can satisfy and keep external customers, why not adapt these policies and practices
for employees? And, there is a service/satisfaction link between employee retention and
higher levels of customer satisfaction. Customers prefer dealing with the same employees
over and over again. Employee turnover destroys a customer's confidence in the company.
Just like a customer does not want to have to "train and educate" a new provider, they do not
want to do the same for your "revolving door" employees. So, the key is to keep employees
so they in turn will help you keep your customers. Because the techniques of this process
mirror the activities of customer service and customer relationship management, I call the
combined process C/ERM for customer/employee relationship management. Both activities
must be going on simultaneously to create a loyalty link that ensures customer satisfaction

S.V. INSTITUTE OF MANAGEMENT 42

and retention through employee service, satisfaction and retention. Introduction "Retention is
the best step to improve the level of growth and career perceptive of an organization".
Retention strategies are policies and plans that organisations follow to reduce employee
turnover and attrition and ensure employees are engaged and productive long-term. The key
challenge for businesses is ensuring a retention strategy aligns with business goals to ensure
maximum return on investment. Good human relations cannot be either window dressing or
deliberate manipulation. Unemployment is at record low levels. Great news for employees,
but rough water for employers trying to hang onto a steady workforce. Every month, about 3
million Americans quit their job in search of something better. 31% of employees quit before
making it to the half-year mark! This kind of turnover is extremely expensive. By some
estimates, it can cost an employer double an employee's salary to replace them when they
quit. That cost varies across different industries, but for some employers, it can be even
higher. Consider the employees you have working for you who have mission-critical skills
that your business relies on, employees who have reinvented their job or who are such a
linchpin that the thought of them leaving terrifies you. 25% of all employees are of this
nature, what you might consider "high risk" when it comes to retention. A recent Glassdoor
survey of people in recruitment, HR, and hiring managers found that for 45% of employees
who quit, the top reason is salary. This reason was followed by career advancement
opportunities, better benefits, and location. Is it always about the money? According to a
collection of recent surveys on employee retention, only 24% of "Generation X" employees
say that financial stability motivates them to stay in a job. Yet 56% of employees say that
health care and insurance concerns keeps them in their job. Benefits that are actually
beneficial matter. Money matters. What you offer your employees in this area must be
comparable to other businesses in your industry in your region.

1. nanda Kumar
2. Balaji Mathimaran
(Global Journal of Management and Business Research 2017)
Human resources are the livelihood of all types of an organization. Even though all types of
the organizations are now a days, found to be technology driven, yet human resources are
required to run the technology. With all round development in each and every area of the
economy, there is stiff competition in the market. With this development and competition,
there are lots and lots of avenues and opportunities available in the hands of the human
resources. The biggest challenge that organizations are facing today is not only managing
these resources but also retaining them. Securing and retaining skilled employees plays an
important role in any organization, because employees’ knowledge and skills are central to
companies’ ability to be economically competitive. Besides, continuously satisfying the
employees is another challenge that the employers are facing today. Keeping into account the
importance and sensitivity of the issue of retention to any organization, the present study tries
to review the various available literature and research work on employee retention and the
factors affecting employee retention and job satisfaction among the employees.

S.V. INSTITUTE OF MANAGEMENT 43

 1. Shivani Semwal
~ 26 ~ International Journal of Research in Human Resource
Management (2019)
Bidisha Lahkar Das1, Dr. Mukulesh Baruah2 1(Research Scholar, KKHSOU Guwahati, Assam, India.)
2(Principal, GIMT, Guwahati, Assam, India)

In this article I would love to share the possible outcome in retention or we can retain the
employee for the longer period of time. Effective employee retention is a systematic effort by
employers to create and foster an environment that encourages current employees to remain
employed by having policies and practices in place that address their diverse needs. A strong
retention strategy becomes a powerful recruitment tool. The truth is that employee retention
processes must focus on what the employee gets out of the job. The process must be a
benefits-based approach that helps employees answer the question, "What's in it for me?" The
retention processes must be ongoing and integrated into the daily culture of the company. The
best way to keep your employees is to treat them like customers. Customer service works for
external customers. We treat them nicely. We work to satisfy them. We help them achieve
their goals. Why not do the same for our employees? If positive customer service policies and
practices can satisfy and keep external customers, why not adapt these policies and practices
for employees? And, there is a service/satisfaction link between employee retention and
higher levels of customer satisfaction. Customers prefer dealing with the same employees
over and over again. Employee turnover destroys a customer's confidence in the company.
Just like a customer does not want to have to "train and educate" a new provider, they do not
want to do the same for your "revolving door" employees. So, the key is to keep employees
so they in turn will help you keep your customers. Because the techniques of this process
mirror the activities of customer service and customer relationship management, I call the
combined process C/ERM for customer/employee relationship management. Both activities
must be going on simultaneously to create a loyalty link that ensures customer satisfaction
and retention through employee service, satisfaction and retention. Introduction "Retention is
the best step to improve the level of growth and career perceptive of an organization".
Retention strategies are policies and plans that organisations follow to reduce employee
turnover and attrition and ensure employees are engaged and productive long-term. The key
challenge for businesses is ensuring a retention strategy aligns with business goals to ensure
maximum return on investment. Good human relations cannot be either window dressing or
deliberate manipulation. Unemployment is at record low levels. Great news for employees,
but rough water for employers trying to hang onto a steady workforce. Every month, about 3
million Americans quit their job in search of something better. 31% of employees quit before
making it to the half-year mark! This kind of turnover is extremely expensive. By some
estimates, it can cost an employer double an employee's salary to replace them when they
quit. That cost varies across different industries, but for some employers, it can be even

S.V. INSTITUTE OF MANAGEMENT 44

higher. Consider the employees you have working for you who have mission-critical skills
that your business relies on, employees who have reinvented their job or who are such a
linchpin that the thought of them leaving terrifies you. 25% of all employees are of this
nature, what you might consider "high risk" when it comes to retention. A recent Glassdoor
survey of people in recruitment, HR, and hiring managers found that for 45% of employees
who quit, the top reason is salary. This reason was followed by career advancement
opportunities, better benefits, and location. Is it always about the money? According to a
collection of recent surveys on employee retention, only 24% of "Generation X" employees
say that financial stability motivates them to stay in a job. Yet 56% of employees say that
health care and insurance concerns keeps them in their job. Benefits that are actually
beneficial matter. Money matters. What you offer your employees in this area must be
comparable to other businesses in your industry in your region.

Literature Gap:
Human resources are complex and not easy to understand. These are the assets which can
make as well as break an organization. Retaining them will help in the long-term growth of
an organization and will also add to their goodwill. But the most difficult task faced by an
organization today is retaining as well as satisfying these resources. Although the research
paper tried its level best to reveal the various research works done and the contributions
forwarded by various researchers in the area of employee retention and job satisfaction, but
still much scope remains for more exploration in the field of employee retention and it by
taking into consideration the factors like compensation practices, leadership and supervision,
career planning and development, alternative work schedule, working conditions, flexible
working hours etc. Needless to say that these efforts should be conducted by HR
professionals.

S.V. INSTITUTE OF MANAGEMENT 45

 CHAPTER 4
HUMAN RESOURCE
MANAGEMENT

S.V. INSTITUTE OF MANAGEMENT 46

Human Resource Management
Human Resource Management (HRM) is the strategic and coherent approach to the
management of an organization's most valued assets the people working there, who
individually and collectively contribute to the achievement of the objectives of the business.
The terms "human resource management" and "human resources (HR) have largely replaced
the term "personnel management" as a description of the processes involved in managing
people in organizations. Human Resource Management is evolving rapidly. Human Resource
Management is both an academic theory and a business practice that addresses the theoretical
and practical techniques of managing a workforce.

The Human Resources Management (HRM) function includes a variety of activities and key
among them is deciding what staffing needs exist and whether to use independent contractors
or hire employees to fulfil these needs; recruit and train the best employees, ensure they are
high performers; dealing with performance issues; and ensuring the personnel and
management practices conform to various regulations Activities also include managing the
approach to employee benefits and compensation, employee records and personnel policies.
Usually, small businesses (for profit or non-profit) have to carry out these activities
themselves because they cannot yet afford part or full-time help. However, they should
always ensure that employees have and are aware of personnel policies which conform to
current regulations. These policies are often in the form of employee manuals which all
employees must have.

The HRM function and HRD profession have undergone tremendous change over the past 20
to 30 years. Many years ago, large organizations looked to the "Personnel Department"
mostly to manage the paperwork around hiring and paying people. More recently,
organizations have begun to consider the "HR Department" as playing a major role in
staffing, training, and helping manage people so that the people and the organization are
performing at maximum capability in a highly fulfilling manner.

Effective employee retention is a systematic effort by employers to environment that

encourages current employees to remain employed. Create and foster by having policies and
practices in place that address their diverse needs. A strong retention strategy, therefore,
becomes a powerful recruitment tool.

Retention of key employees is critical to the long-term health and success of any
organization. It is a known fact that retaining the best employees ensures customer
satisfaction, increased product sales, satisfied colleagues and reporting staff, effective
succession planning, and deeply embedded organizational knowledge and learning.
Employee retention matters as organizational issues such as training time and investment, lost
knowledge, insecure employees, and costly candidate search are involved. Hence, failing to

S.V. INSTITUTE OF MANAGEMENT 47

retain a key employee is a costly proposition for an organization. Various estimates suggest
that losing a middle manager in most organizations costs up to five times his salary.

Intelligent employers always realize the importance of retaining the best talent Retaining
talent has never been so important in the Indian scenario; however, things have changed in
recent years. In prominent Indian metros at least, there is no dearth of opportunities for the
best in the business, or even for the second or third best. Retention of key employees and
treating attrition troubles has never been so important to companies.

S.V. INSTITUTE OF MANAGEMENT 48

 CHAPTER 5
EMPLOYEE RETENTION

S.V. INSTITUTE OF MANAGEMENT 49

3.1 What is employee retention??
There is no secret code or formula that precisely defines “employee retention.” Ask 10
managers what they mean by the term and you’ll receive 10 (sometimes very) different
answers. Answers like these:

• “Employee retention? You mean stopping people from leaving this organization?”

• “Employee retention is all about keeping good people.”

• “Getting our compensation and benefits into line with the marketplace.”

• “Stock options, crèche facilities, and other perks.”

• “It’s got to do with our culture and how we treat people.”

• “Staunching the high employee turnover we have in department x or job function y.”

• “Presenting a consistent, effective employer proposition across the entire employee life
cycle, thus ensuring we source, hire, manage, and develop employees who partner with us in
achieving our organizational goals.”

As you can see, managers’ perceptions of the meaning of employee retention can vary from
the mechanical (“Reduce this employee turnover figure to an acceptable level”) to the
abstract (“It’s about our culture and values”).

Definitions can be couched in curt, wholly objective phrases or in flowery, vague “corporate
speak.” Some managers view employee retention as a distinct, controllable element of labour
management (“It’s a matter of compensation and benefits”) and others consider it a cross-
functional, pervasive, and seemingly all-encompassing set of values or methodologies (“It’s
about our culture and how we treat people”). Which of all these “flavours and colours” of
employee retention is right? Is employee retention any single one of the definitions cited
above? Is it a specific combination of two or more of those definitions? Is it something else
entirely that we haven’t mentioned? Well, the answer to all those questions is ... “Yes.”
Employee retention is each of the definitions cited above. It can also be a specific
combination of two or more of those definitions. And it is some other things that we haven’t
even mentioned yet.

S.V. INSTITUTE OF MANAGEMENT 50

3.2 What “Employee Retention” Used to Mean
Let’s start by getting our definitions and vocabulary right. This entails understanding just a
little history. The term “employee retention” first began to appear with regularity on the
business scene in the 1970s and early ’80s. Until then, during the early and mid-1900s, the
essence of the relationship between employer and employee had been (by and large) a
statement of the status quo:

You come work for me, do a good job, and, so long as economic conditions allow, I will
continue to employ you. It was not unusual for people who entered the job market as late as
the 1950s and ’60s to remain with one employer for a very long time—sometimes for the
duration of their working life. If they changed jobs, it was usually a major career and life
decision, and someone who made many and frequent job changes was seen as somewhat out
of the ordinary. As a natural result of this “status quo” employer-employee relationship, an
employee leaving his or her job voluntarily was seen as an aberration, something that
shouldn’t really have happened. After all, the essence of “status quo” is just that little or
nothing should change in the relationship—and leaving was a pretty big change! So, in the
1970s and later, as job mobility and voluntary job changes began to increase dramatically, the
“status quo” model began to fray substantially at the edges. Employers found themselves with
a new phenomenon to consider: employee turnover.

3.3 What “Employee Retention” Means Now

By the time we reached the late ’80s, organizations had made most of the one-time
realignments of compensation and benefits possible. Although the issue of compensation and
benefits would continue to form part of every organization’s employee retention toolkit, there
was a growing realization on the part of both employers and employees that there was more
to employee retention than hygiene factors. Most important to the development of the now
fully fledged employee retention industry was the realization that if employee retention was
to be effective and sustainable if it was to work in the long run and not just produce a single,
temporary dip in employee turnover there was a need for a holistic approach to the individual
employee that would go beyond simply adjusting the employee’s compensation and benefits.

3.4 Talented men leave, dead wood doesn't.

Philosophically, employee retention is important. In almost all cases, it is senseless to allow
good people to leave your organization. When they leave, they take with them intellectual
property, relationships, investments (in both time and money), an occasional employee or
two, and a chunk of your future.

Employee retention strategies help organizations provide effective employee communication

improve commitment and enhance workforce support for key corporate initiatives. These
strategies also provide full support to the marketing communication efforts by helping the

S.V. INSTITUTE OF MANAGEMENT 51

organization build customer loyalty by distinguishing and positioning the organization's
unique products and services in today's crowded marketplace.

3.5 The Rise of Employee Retention as a Management Tool

As organizations began to feel the impact of the rise of voluntary employee turnover, so a
matching management tool began to be developed employee retention. In this earliest,
simplest form, employee retention was the aspirin for the headache a straightforward
response to the rise in employee turnover: how can we stop people voluntarily leaving this
organization at the rate they are doing? However, as we’ve already seen, the root cause of
voluntary employee turnover increased job mobility was a complex amalgam of trends and
events (see sidebar on mobility), not any single, simple thing. Because of the complexity of
the changes happening in the industrial and commercial environment, it took some time for
employers to understand that, in essence, the power in the employer-employee relationship
was shifting from the employer to the employee. Eventually, it became clear that trying to
maintain the old, paternalistic “status quo” employer-employee relationship was not going to
reduce the growing rate of employee turnover from which many organizations were
suffering. Employers had to do something to staunch the flow.

3.6 Understand the Reasons for Job Mobility

The increase in voluntary employee turnover is in large part the result of an increase in job
mobility in essence a reduction of the friction involved in switching jobs and is caused by a
number of factors coming together, primarily:

• More information about job openings elsewhere, through TV, radio, newspapers,
magazines, and the Web

• Dramatic reductions in the cost of travel and relocation.

• A shift in personal values as the global economy moved out of post-war austerity.

• An increase in skills development opportunities and cross-training, making people more

“employable.”

• The decline of the industrial conglomerate, breaking up old hiring practices.

• The globalization of manufacturing competition, requiring more mobility of skills.

• Large-scale layoffs, reducing the loyalty employees felt toward their employers.

• The rise of small and medium-sized businesses as competitive employers, providing viable
employment opportunities in most urban areas.

S.V. INSTITUTE OF MANAGEMENT 52

3.7 Myths about Employee Morale Prevent Companies from Achieving
Retention Success
Despite years of research that point to far different solutions, many companies use the wrong
tactics when trying to improve employee morale, satisfaction and retention. These myths
prevail, in part, because businesses have used these methods, however wrong, for a very long
time and have become used to trying the same ideas.

Myth 1: People most often leave a company for more pay.

Exit interviews, conducted to learn why people leave an organization; contain some of
America's greatest fiction. People frequently say they're leaving for more money because it's
the easiest reason to give. More often the causes leading to departure are related to issues that
were unsatisfying in the job or the company.

Typical issues that cause dissatisfaction are company policies and procedures, quality of
supervision, working conditions, relationship with the immediate supervisor and salary. Yes,
pay does matter. While research shows most people don't actually leave a job for more
money, there are two important facts: Very-low-income workers will leave for more money
because it's a survival issue. For the rest of workers, the issue of money actually is about
fairness People become dissatisfied with pay when they feel it is unfair within the company,
within the industry or when pay doesn't seem to match the amount or type of work required.

To increase employee satisfaction and retention, companies make more gains by working to
improve whether people feel a sense of achievement, recognition, competence and growth,
whether there are choices about how work gets done and whether employees feel respected
by management..

Myth 2: Incentive programs produce long-term profits and improve

productivity and morale.
So, who doesn't like free stuff? However, incentives such as gifts and cash bonuses for
meeting speed and volume goals don't affect employee commitment. They're really a
throwback to outdated management beliefs that workers must be coerced in order to work
hard. All the extras don't add up to the real glue that creates employee commitment the
chance to learn and grow, meaningful work good supervisors and respect and appreciation a
job well done.

Incentives have been over-used particularly in the past decade, as management books touted
the importance of improving recognition of excellent work. Yet, studies show that carrot-and-
stick motivation actually does not pay off in long-term company profitability or employee
satisfaction or retention. To the contrary, incentives can harm quality when employees aim
for speed or other goals rather than quality.

S.V. INSTITUTE OF MANAGEMENT 53

Myth 3: People don't want more responsibility.
They don't want more work if they're already overloaded due to lean staffing: but people
indeed want the opportunity to grow and develop their skills, advance their careers and have
the opportunity for greater variety. Keep in mind what the research confirms People do want
to try new things, to feel skilful and to experience the personal satisfaction of higher levels of
achievement.

People don't need a job promotion in order to gain more responsibility. The same job can be
broadened to include more variety, more contact with different parts of the organization and
greater control over decisions on accomplishing work tasks.

Myth 4: Loyalty is dead.

Not at all, though it is ailing in many organizations. People are seeking greater work-life
balance than in the past, and employers have made great strides in providing more flexible
hours and dress codes. Still, people seek to make a contribution, and organizations that
provide healthy doses of the main satisfiers enjoy significantly lower turnover and higher
morale. Profits are higher, too, according to recent research studies. Things have changed,
indeed. Today's workers will, in fact, change careers and jobs much more often. When the
economy is good, people have more at ease in changing companies, are more likely to
acquire new skills and move to companies that offer greater chance to use more of their
knowledge and more willing to take the risks of starting anew another organization.

What has emerged in current management studies are that the same qualities that hold
employees are the ones that best serve the customers: Employees who can make quick
decisions on behalf of the customer and the company; employees who have a broader scope
of responsibility that allows them some freedom and leverage to solve customer problems;
learning opportunities that give employees the skilfulness to address customer issues; and
supportive management and supervisors who use any mistakes that occur as teaching
opportunities.

Myth 5: Improving employee satisfaction is expensive.

Research tells us the true satisfiers can't even be bought career growth, meaningful work,
respect and appreciation and being able to influence how work gets done. In these leaner
times employers have the same opportunity to gain true loyalty despite lowered budgets.

The trinkets and prizes given in recognition and rewards programs aren't necessary
ingredients for developing an engaged workforce. The "glue that holds people is made of
much different stuff: Management that listens and responds to employees' ideas about
improving service, supervisors who support people's growth and initiative, training in how to

S.V. INSTITUTE OF MANAGEMENT 54

do the job successfully, good relationships with co-workers and genuine appreciation for a
job done well. There are no costs incurred to build or enhance these motivators.

Myth 6: Employee satisfaction is "fluff."

Does having engaged workers make a difference in the bottom-line? Studies now show that
lower turnover and greater levels of employee satisfaction have a definite positive impact on
customer satisfaction and profitability, which are the key factors in company growth and
sustainability. Consider facts

A strong link was found in a study by PricewaterhouseCoopers between employee retention

and the quality of service as rated by company’s customers.

According to the American Society of Training & Development, organizations that invested
the most in training had higher gross margins and income per employee

The cost of replacing an employee who leaves has been estimated by various studies to be
between 70 and 200 percent of that worker's annual salary.

The Council on Competitiveness found that a 10-percent increase in education has a more
positive impact on productivity than a 10-percent increase in work hours.

The bottom line on the bottom-line? Investing in people and using the most effective
management practices increases profits

Myth 7: Supervisors are the problem.

Many senior leaders express dismay about the quality and actions of their middle managers
and front-line supervisors. The "blame game" is old, yet the solutions are strikingly similar to
those required to build an engaged workforce.

In most organizations today, supervisors have more people reporting to them than in the past,
more demanding customers than ever and greater amounts of change-all occur at the same
time. Yet, the amount of training provided to managers and supervisors in many
organizations is minimal. More importantly, the amount of time that senior managers spend
in dialogue with middle and line managers also is minimal.

Middle managers and supervisors can appear resistant to improvement efforts. However, the
true failure exists in our understanding support they need in order to be successful. Their
world, the challenges they face and the

Successful organizations seek to build teamwork between senior leaders and middle
managers and line supervisors (which is a key ingredient in creating teamwork throughout the
company).

S.V. INSTITUTE OF MANAGEMENT 55

Myth 8: My company/industry/people are different.
Yes, every company is unique, and every industry has its own set of unusual challenges.
However, a very costly mistake is made when we believe information from other sectors
doesn't apply to us or our organization.

Retention research studies cross all industries, all types of work settings and in varied
economic conditions. Still, the same results come up time and again. We build employee
loyalty- and, indirectly, customer loyalty-through providing people with growth and learning
opportunities, minimizing red tape, allowing people to think and make good choices,
supporting middle managers and front-line supervisors and appreciating the efforts that
people give to help our customers.

It's downright dangerous to ignore these findings risky to the bottom-line and the
organization's future.

S.V. INSTITUTE OF MANAGEMENT 56

3.8 Ten Factors that Affect Employee Retention
Most managers understand the importance of employee retention and its impact on the
overall health and vitality of an organization. The importance of retaining top organizational
talent will only increase over the coming years as the massive cohort of baby boomers begin
to reach retirement age making it easy for younger employees to find work.

Earlier, we identified some useful tips to help improve employee retention in an organization.
Given the importance of employee retention, here is another list of 10 important factors that
can affect employee retention in any organization.

1. Shorten the feedback loop.

Do not wait for an annual performance evaluation to come due to give feedback on how an
employee is performing. Most team members enjoy frequent feedback about how they are
performing. Shortening the feedback loop will help to keep performance levels high and will
reinforce positive behaviour. Feedback does not necessarily need to be scheduled or highly
stucnired; simply stopping by a team member's desk and letting them know they are doing a
good job on a current project can do wonders for morale and help to increase retention.

2. Offer a competitive compensation package.

Any team member wants to feel that he or she is being paid appropriately and fairly for the
work he or she does. Be sure to research what other companies and organizations are offering
in terms of salary and benefits. It is also important to research what the regional and national
compensation averages are for that particular position. You can be sure that if your
compensation package is not competitive. Team members will find this out and look for
employers who are willing to offer more competitive compensation packages.

3. Balance work and personal life.

Family is incredibly important to team members. When work begins to put a significant strain
on one's family no amount of money will keep an employee around. Stress the importance of
balancing work and one's personal life. Small gestures such as allowing a team member to
take an extended lunch once a week to watch his son's baseball game will likely be repaid
with loyalty and extended employment with an organization.

4. Beware of burnout.
Staff adequately to reduce the amount of unwanted overtime a team member must work.
Some employees enjoy the extra money that accompanies overtime hours, while others would
rather spend their time with their families or doing other activities they enjoy. Burnout can be
a leading cause of turnover. Recognize the warning signs and give employees a break when

S.V. INSTITUTE OF MANAGEMENT 57

they need it. 5. Provide opportunities for growth and development. Offer opportunities for
team members acquire new skills and knowledge useful to the organization. If an employee
appears to be bored burned out in a current position offer to train this individual in another
facer of the organization where he or she would be a good fit. Nobody wants to feel stuck in
their position will no possibility for advancement or new opportunities.

6. The ability to provide input and be taken seriously.

Everybody has opinions and ideas, some are better than others. However every team member
wants to feel that their input is welcome and will be taken seriously without ridicule or
condescension. Some of the greatest ideas can come from the most unlikely of places and
people. Creating a culture where input welcome from all level of the organizational chart will
help your organization grow and encourage employee retention.

7. Management must take the time to get to know team members.

It's not a big surprise that one of the greatest complaints that employees express in exit
interviews is a feeling that management didn't know they existed. Nobody wants to feel like
just another spoke in a big wheel. Managers are very busy - everybody is busy, but it is
crucial that managers and supervisors take the time get to know the team members who work
under them. Learn and remember a team member's name, what skills and talents they bring to
the table, and what their business interests are the time spent by management getting to know
team members well invested and can eliminate the headaches caused by having to continually
hire and re-train new employees.

8. Provide the tools and training an employee needs to succeed.

Nothing can be more frustrating to an employee than a lack of training or the proper tools to
successfully complete his or her duties. You wouldn't try to build a house without a hammer,
so why should an office job be any different? Providing a team member with the tools and
training she needs to be successful shows a commitment and investment in that employee and
will encourage the team member to stay with the organization.

9. Make use of a team member's talents, skills, and abilities.

All team members have knowledge, skills, and abilities that aren't directly related to their job
description, but are still useful to an organization. Unlizing a team member's talents in areas
other than their current position will indicate to an employee that management appreciates
and recognizes all that an employee has to offer to the organization. This can also provide
work variety and helps to break up the everyday grind I work.

10. Never threaten a team member's job or income.

S.V. INSTITUTE OF MANAGEMENT 58

While threatening an employee with termination or demotion might seem like a sure-fire way
to get the results needed from him or her, doing so will likely cause the employee to leave the
organization. Put yourself in the employee's shoes, what is the first thing you would do if
your job was threatened? Odds are you would probably update your resume and start
checking for open job postings expecting the worst. If a team member's performance is not
what you had hoped it would be, work with that team member on ways to improve his
performance, saving termination only as a last resort

Take some time and seriously evaluate what your organization is doing to encourage a high
retention workforce. Having a seasoned and well trained workforce can deliver a competitive
advantage that is difficult to replicate. The best part is most of your efforts to retain your
employees come free or with little charge and offer huge returns on a manger's investment in
time and resources.

3.9 The Importance of Retaining Employees

The challenge of keeping employees, its changing face has stumped managers and business
owners alike. How do you manage this challenge? How do you build a workplace that
employees want to remain with and outsiders want to be hired into? Successful managers and
business owners ask them these and other questions because, simply put, employee retention
matters.

High turnover often leaves customers and employees in the lurch; departing employees take a
great deal of knowledge with them. This lack of continuity makes it hard for the
organizations to meet their goals and serve customers well.

Replacing employee costs money. The cost of replacing an s estimated at up to twice the
individual's annual salary (higher for positions employee based on their level within the inter-
organizational hierarchy, such as middle management) and this does not even include the cost
of lost knowledge.

Recruiting employees consumes a great deal of time and effort, much of it futile. There is not
just one organization out there vying for qualified employees, and job searchers make
decisions based on more than the sum of salary and benefits.

Bringing employees up to speed takes even more time and when an organization is short-
staffed, they often need to put in extra time to get the work done.

S.V. INSTITUTE OF MANAGEMENT 59

3.10 Ten Ways to Retain Your Employee
Retaining key personnel is critical to long-term success of any organization. A sound
retention strategy thus becomes essential for any organization to be productive over time and
should be treated as an important part of their hiring strategy by attracting the best candidates
who know of their track record for caring for employees. In fact, some companies do not
have to recruit because they receive so many qualified unsolicited submissions due to their
history of excellence in employee retention. It’s impossible to build a sustainable, effective
employee retention strategy on the basis of competitive compensation and benefits alone.

“Ensuring that your compensation and benefits are competitive is just the entry fee to playing
the “employee retention strategy game.”

How do you get your employees to "fall in love with the organization and let them "stay in
love with the organization? This is a great question. Some recently conducted research lists
these top ten strategies:

1. Treat your employees like you treat your most valuable clients.
It is cheaper to keep your good employees than it is to hire and train new ones. Your
top 20-25% should be courted as you would court and then service your top
customers.
2. Get your employees to "fall in love with your organization.
Communicate your vision in a compelling way. Show everyone the role they have to
contribute to this vision. Create opportunities for people to connect with each other
for support and to improve communication in work teams.

Capture the hearts of your workforce with compelling vision/balance/celebration-fun.

Open Communication: Internal listening is a priority, multiple lines of communication

(various channels). This is essential for managing change in a positive way with less
sabotage, anger, resistance, and fear.

Create partnerships: Squash status barriers/open the books/pay for performance (not
titles), share the "bad" times the "good" times.

Drive Learning: "Guarantee Employability," Encourage Life Long Learning (Train

outside of job description). Loyalty comes from trusting your employees to develop their
skills for the good of the company and for their needs for personal growth and satisfaction .

Emancipate Action: Freedom to Fail, reduce bureaucracy, and challenge the "status quo,"
Breathe life into your organization. Do not let your employees stagnate.

3. Strong retention strategies become strong recruiting advantages.

S.V. INSTITUTE OF MANAGEMENT 60

4. Retention is much more effective when you put the right person into the
right job. Know the job. Know the employee and their motivations.
Half of the Fortune 500 companies are now using assessments to more fully understand each
job and the soft skills that are required for top production within their specific company
culture. These benchmarked skills are then compared against qualified applicants to help
determine who will be successful in the position and fit well within their company's culture.
These assessments are also as a powerful professional development tool to enhance the
training of continuous lifelong learning (which is another powerful retention strategy). As an
example, Advanced Fibre Communication is beginning to use this assessment process in
hiring.

5. Money is important but it is not the only reason people stay with an
organization.
If your compensation plan is in the top 20-30% of your industry, then money will often not be
the reason why people leave.

6. Employee committees to help develop retention strategies are a very

effective strategy.
Get their input. Ask, "What do people like about working here? What would you like
changed to make your company a better place to work?

7. Leadership must be deeply invested in retention.

Management must be skilful communicating company policies in a way that creates "buy-in"
from their staff and be open to employee input. Help create "ownership in your employees.

The companies with the best retention percentages are the same companies that are actively
committed to retention. They know that is costs less to keep good people than to continuously
have to replace unsatisfied employees and managers.

8. Recognition, in various forms, is a powerful retention strategy.

It does not have to cost a lot. Research shows 46% of people leave their jobs because they
feel unappreciated.

9. Remember, the "fun factor" is very important to many employees .

Greg Peters, Past President and CEO of Mahi Networks in Petaluma, is one of many
executives who reported that retention often related to interpersonal connections and amount
of "fun" in work teams. The FUN Factor is part of the generation workers that use activities

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as stress management in highly charged production environments where long hours are
required. Greg has encouraged Ping-Pong tournaments and basketball leagues for
interpersonal interaction, fun, and stress management. Though not everyone can participate in
physical activities, this sets the tone in a culture based on competition, health/well-being, and
interactions that are inclusive beyond work.

10. Know the trends in benefit packages.

Do your best to offer the ones your employees need? Consider offering the best of the rest.

3.11 The 3 R's of Employee Retention

To keep employees and keep their satisfaction levels high, any organization needs to
implement each of the three R's of employee retention: respect, recognition, and rewards.

RESPECT

RECOGNITION

REWARD

Respect is esteem, special regard, or particular consideration given to people. As the pyramid
shows, respect is the foundation of keeping your employees.

Recognition and rewards will have little effect if you do not respect employees. Recognition
is defined as "special notice or attention" and "the act of perceiving clearly. Many problems
with retention and morale occur because management is not paying attention to people's
needs and reactions. Rewards are the extra perks you offer beyond the basics of respect and
recognition that make it worth people's while to work hard, to care, to go beyond the call of
duty. While rewards represent the smallest portion of the retention equation, they are still an
important one.

You determine the precise methods you choose to implement the three R's, but in general,
respect should be the largest component of your efforts. Without it, recognition and rewards
seem hollow and have little effect or they have negative effects. The magic truly is in the mix
of the three.

When implemented, the 3 R's approach yields reduced turnover and the following benefits:

Increased productivity

Reduced absenteeism,

Amore pleasant work management/employer).

Improved profits.

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Furthermore, an employer who implements the three R's will create a hard-to-leave
workplace, one known as having more to offer employees than other employers. It becomes a
hard-to-leave workplace one with a waiting list of applicants for any position that becomes
available-purposefully, one day at a time.

3.12 Join, stay, leave model

For organizations and employers, understanding the environment is the first step to
developing a long-term retention strategy. Organizations should understand why employees
join, why they stay and why they leave an organization. This join, stay, leave model is akin to
a three-legged stool, meaning that without data on all three, organizations will be
unsuccessful in implementing a proper retention strategy.
Why employees join – The attractiveness of the position is usually what entices employees to
join an organization. However, recruiting candidates is only half the problem while retaining
employees is another. Understanding what your employees are looking for in the job while
simultaneously making sure your expectations are correct are both important factors to
address in the hiring process. High performing employees are more likely to be retained when
they are given realistic job previews. Organizations that attempt to oversell the position or
company are only contributing to their own detriment when employees experience a discord
between the position and what they were initially told. To assess and maintain retention,
employers should mitigate any immediate conflicts of misunderstanding in order to prolong
the employee's longevity with the organization. New-hire surveys can help to identify the
breakdowns in trust that occur early on when employees decide that the job was not
necessarily what they envisioned.
Why employees stay – Understanding why employees stay with an organization is equally as
important to understanding why employees choose to leave. Recent studies have suggested
that as employees participate in their professional and community life, they develop a web of
connections and relationships. These relationships prompt employees to become more
embedded in their jobs and by leaving a job; this would sever or rearrange these social
networks. The more embedded employees are in an organization, the more they are likely to
stay. Additionally, the extent to which employees experience fit between themselves at their
job, the lesser chance they will search elsewhere. Organizations can ascertain why employees
stay by conducting stay interviews with top performers. A stay survey can help to take the
pulse of an organization's current work environment and its impact on their high performing
employees. Employers that are concerned with over-using stay interviews can achieve the
same result by favouring an ongoing dialogue with employees and asking them critical
questions pertaining to why they stay and what their goals are.
Why employees leave – By understanding the reasons behind why employees leave,
organizations can better cater to their existing workforce and influence these decisions in the
future. Oftentimes, it is low satisfaction and commitment that initiates the withdrawal
process, which includes thoughts of quitting in search of more attractive alternatives. If
administered correctly, exit interviews can provide a great resource to why employees leave.
Typically, employees are stock in their responses because they fear being reprimanded or
jeopardizing any potential future reference. The most common reasons for why employees
leave are better pay, better hours and better opportunity. These typical answers for leaving

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often signal a much deeper issue that employers should investigate further into. By asking
relevant questions and perhaps utilizing a neutral third party provider to conduct the
interview, employers can obtain more accurate and quantifiable data. Contrary to what most
organizations believe, employees often leave due to relationships with manager and/or
treatment of employees and not compensation, as this is often a response that employees are
uncomfortable expressing to their organization directly. Retention Diagnostic is a rapid
benchmarking process that identifies the costs and can help uncover what affects employee
loyalty, performance and engagement.

3.13 Retention Programs

It is important to first pinpoint the root cause of the retention issue before implementing a
program to address it. Once identified, a program can be tailored to meet the unique needs of
the organization. A variety of programs exist to help increase employee retention.
Career Development – It is important for employees to understand their career path
within an organization to motivate them to remain in the organization to achieve their
personal career goals. Through surveys, discussion and classroom instruction, employees can
better understand their goals for personal development. With these developmental goals in
mind, organizations can – and should – offer tailored career development opportunities to
their employees.
Executive Coaching – Executive coaching can be used to build competencies in leaders
within an organization. Coaching can be useful in times of organizational change, to increase
a leader's effectiveness or to encourage managers to implement coaching techniques with
peers and direct reports. The coaching process begins with an assessment of the individual's
strengths and opportunities for improvement. The issues are then prioritized and interventions
are delivered to target key weaknesses.
Motivating Across Generations – Today's workforce includes a diverse population of
employees from multiple generations. As each generation holds different expectations for the
workplace, it is important to understand the differences between these generations regarding
motivation and engagement. Managers, especially, must understand how to handle the
differences among their direct reports.
Orientation and On boarding – An employee's perception of an organization takes
shape during the first several days on the job and continues throughout their first six months,
with 90% of employees still deciding whether or not to stay at the organization during this
time. It is in the best interest of both the employee and the organization to impart knowledge
about the company quickly and effectively to integrate the new employee into the workforce.
In addition, providing continual reinforced learning through extended on boarding over the
first year can increase new hire retention by 25%. By implementing an effective on boarding process, new hire
turnover rates will decrease and productivity will increase.

Women's Retention Programs – Programs such as mentoring, leadership development

and networking that are geared specifically toward women can help retain top talent and
decrease turnover costs. By implementing programs to improve work/life balance, employees
can be more engaged and productive while at work.

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Employee Recognition Programs - Some of the biggest reasons for employee turnover
are results of toxic company culture and not feeling engaged or recognized for their work.
Companies have now started investing billions of dollars each year into bonus and employee
perks programs. Forbes found in 2019 that companies that scored in the top 20% for building
a ‘recognition-rich culture’ had 31% lower voluntary turnover rates.
Exit Interview and Separation Management Programs.

3.14 SOLUTION TO THE PROBLEM

Finding the Cause of Attrition

Conduct a survey among employees to find the reasons for attrition. If possible, conduct exit
interviews know the reasons for resignations. If a key employee resigns, it should be taken up
on a priority basis and the senior management should meet the employee to discuss his
reasons for leaving and evaluate whether his issues bear merit and whether they can be
resolved. Steps can be taken to avoid similar reasons from occurring in the case of others, in
similar positions.

What can be done?

At the time of Recruitment

Select the right people through competency screening

Use psychometric tests to get people who can work at night and handle the monotony.

Offer an attractive, competitive, benefits package.

Make clear of performance enhanced incentives and other benefits. Keep these promises,
later.

At the office
. An employee's work must be communicated to him clearly and thoroughly. The details of
the job, its importance, the way it should be done, maximum time that can be allotted to
complete it etc., must be made clear. If there are changes to any of these, let the employee
know at the earliest

• Give the employees necessary tools, time and training. The employee must have the tools,
time and training necessary to do their job well- or they will move to an employer who
provides them.

• Have a person to talk to each employee at regular intervals. Listen and solve employee
complaints and problems, as much as possible. Fairness and impartial treatment by seniors is

S.V. INSTITUTE OF MANAGEMENT 65

important. Help employees manage stress, both at work and if possible, off work too. Give
them special concessions, when in need. Treat the employees well & provide dignity of job

• The quality of the supervision an employee receives is critical to employee retention.

Frequent employee complaints arise on this issue.

• Provide the employees a stress free work environment. People want to enjoy their work.
Make work and work place cheerful and fun-filled as possible.

• Make sure that employees know that their work is important for the organization.

Feeling valued by their employer is key to high employee motivation and morale. Recognize
their strengths and help them to improve those they lack.

• Employees must feel rewarded, recognized and appreciated. Giving periodical raise in
salary or position helps to retain staff.

• Offer excellent career growth prospects. Encourage & groom employees to take up higher
positions/openings. If they don't get opportunity for growth within the organization, they will
look elsewhere for it. Work-life balance initiatives are important. Innovative and practical
employee policies pertaining to flexible working hours and schemes, granting compassionate
and urgency leave, providing healthcare for self, family and dependants, etc., are important
for most people. Work-life balance policies would have a positive impact on retaining skilled
employees, as well as on attracting high-calibre recruits.

• Implement competency models, which are well integrated, with HR processes like selection
& recruitments, training, performance appraisal and potential appraisal.

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3.15 EMPLOYEE RETENTION STRATEGIES

A steadfast philosophy that sets Employee Retention Strategies apart

• Use only research-based, theory-supported approaches to improving employee engagement.
Avoid gimmicks such as employee of the month, suggestion boxes; prizes or other "carrots
while commonly used, these short-term fixes fail to produce genuine employee loyalty (more
than 60 years of research tells us so).

Employ an easy-to-understand systems approach to ensure the root causes of turnover are
addressed and the potential for lasting change unleashed.

• Customize all activities to the organization's unique history, current practices and strategic
objectives. Also consider challenges unique to the industry sector. Competitive marketplace
issues and talent shortages

• Involve those responsible for implementing change in actually creating the change,
ensuring input and improved shared understanding and support of all initiatives.

• Integrate hands-on, action-oriented approaches that enable the organization to move

forward quickly and effectively

Recognize the research-proven role of no-cost strategies developing the "glue" that builds
employee loyalty and commitment.

[Bring to the organization leading-edge organization-development best practices to

effectively and quickly build a retention-rich culture.

Retention Strategies Help to Drive Revenue Growth

Employee satisfaction is essential to any effective employee retention strategy any good HR
manager knows that. However few managers think of the impact that employee satisfaction
has on their customers and ultimately company profits. Assume that happier, more productive
employee make treat customers better, and ultimately make more money for the company,
but few companies have analysed this assumption to the extent that Sears, Roebuck and
Company has. Sears has put this common assumption to the numbers test and the results are
intriguing to say the very least.

1992 was the worst year on record for Sears, losing almost 4 billion dollars on over 52 billion
dollars in retail sales. The early and mid-1990s were truly trying times for the retail giant and
tested the will and resolve of managers and employees alike. During this time the company
was in near shambles, morale was low, revenues were suffering, and the bottom line was

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haemorrhaging red ink. This was in stark contrast to nearly a century of stellar results that
Sears had comfortably enjoyed. For Sears, something needed to be done, and fast!

Sears began their turnaround by identifying three key objectives: Creating a compelling place
to work, a compelling place to shop, and lastly creating a compelling place to invest. One of
the tools used to establish these objectives was the employee-customer-profit chain. The
employee-customer-profit chain is essentially a flow chart that diagrams revenue creation
starting with employee attitudes and satisfaction, followed by its effect on customer
satisfaction, and ultimately the effect on revenue and bottom line profit generation.

One thing Sears realized it needed to do was exert a greater effort focusing on the customer.
This is often times easier said than done for many organizations. However Sears took an
innovative approach to increasing customer focus. Based on the employee-customer-profit
chain, it realized that it could not better focus on the customer without first focusing on its
employees.

For Sears 70% of its workforce was part-time status and turnover among its part-time
workforce had become alarmingly high. Sears suspected that low morale and poor employee
amities towards the company were to Sears began a rigorous process of measuring employee
attitudes and satisfaction via a 70 question employee survey. The results of this survey were
then juxtaposed to customer satisfaction surveys and ultimately compared to revenue and
profit trends for the company. The correlations drawn from the data were greater than Sears
could have ever imagined.

Undoubtedly Sears expected to see some positive correlation between employee and
customer satisfaction and ultimately revenue and profit generation; however they were
amazed to see just how great an impact employee satisfaction levels had on the bottom line.
The data revealed that for each five point improvement on the employee attitude scale, there
was a subsequent 1.3% improvement in customer satisfaction, and a 0.5% increase in revenue
growth.

A 0.5% increase in revenue might sound miniscule, however when it is based on revenues of
over 50 billion dollars it adds up quickly and significantly. For Sears this would equate to a
250 million dollar increase in revenues a year! This revenue increase does not require
investments into advertising, new facilities, or improved operations, only an investment into
the satisfaction and happiness of employees.

There are also cost savings that can be attributed to improved employee satisfaction. It should
come as no surprise that happy employees stay levels in their jobs longer than unhappy
employees. By focusing on increasing employee satisfaction Sears was able to concurrently
increase revenues and reduce the costs associated with employee turnover. Sears was also
able to determine that employees with greater levels of satisfaction and a favourable attitude

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towards the company were more likely speak positively about the company and recommend
shopping there to friends and family members.

By increasing employee satisfaction Sears was able to generate free word of mouth
advertising spread by its employees, thus in a way reducing the reliance on paid advertising
to generate revenue. Sears realized the importance of its employees and their levels of
satisfaction and made it a corporate goal to increase levels of employee satisfaction
throughout the company.

Sears feels that employee satisfaction levels are so important to the company's health and
vitality that it treats attitude and satisfaction numbers the same as "hard" financial numbers.
Sears is so committed to these numbers that it has them audited by an accounting team to
ensure validity and reliability just as it does with all of its internal financial measures.

For Sears its turnaround did not take place overnight. It took several years of hard work and
dedication from managers and employees at all levels. Improving levels of employee
satisfaction was not the sole contributing factor to Sears remarkable turnaround. However it
is fair to assume that without the focus on the employee as a base to better focus on the
customer the turnaround at Sears would not have been as quick or amazing as it was.

As business leaders we should all pay careful attention to the approach that Sears took to
improving its bottom line. The urge to drastically cut costs through outsourcing, layoffs,
reducing benefits, and streamlining operations might well be overly complex solutions to a
relatively simple problem. In lieu of cost cutting initiatives to preserve profirmargins, a
customer focused approach might be a better solution. As we can learn from sears focusing
on the employees who serve the customer. Give it a shot, your employees, your customers,
and ultimately your shareholders will thank you for it!

Employee Retention Strategies for Reducing Employee Turnover Costs

It is widely understood that time is money to any organization. Every minute of every day
that the employee retention problems persist, the organization is losing valuable time, energy,
and resources. Following are the strategies with which employee turnover costs can be
reduced to a great degree.

• Identify top performing team members and develop strategies to ensure they stay with your
organization,

• Identify the reasons why an employee leaves before they are ever hired,

• Select and hire great employees, who are well fit for the job and the organizational culture,

• Improve communication and morale two key elements that affect employee retention,

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• Determine growth opportunities for team members and develop customized training that
will improve performance.

Employee Recognition Increases Retention

It seems that now more than ever employee recognition is limited at best in many
organizations. Unfortunately, many managers don't understand the importance of recognizing
a team member's hard work and a job well done. Many might even ask why they should
recognize their employees when they are "just doing their job."

The truth is that recognizing employees for their hard work is one of the least expensive and
easiest ways to improve the level of employee retention in your organization. The return on
investment for a manager's time and limited expenses can be incredible.

Recognizing an employee's performance reinforces positive behaviour and encourages

additional positive behaviour. If a team member feels that he or she is appreciated they will
be much more likely to repeat their behaviours in the future and even put out more effort than
before. When a business leader understands the power of recognizing his or her employees
the culture of an organization reacts to this recognition and moves in a positive direction
helping to retain more employees.

Employee recognition can be as simple or as extravagant as our desire. The following is a

short list of simple ways to recognize team members for a job well done and improve
retention in your organization.

A simple "thank you" or "nice job" given in regular frequency can significantly boost team
morale. Often times a team member will greatly appreciate the time you spent to find him at
his desk and deliver the message in person.

• Send a thank you card or e-card. Also photocopy the thank you and document the reason
for the recognition in the employee's file. Let the employee know you did this-it will let her
know that her hard work will not be forgotten. • Movie tickets, gift certificates, or an
engraved gift are excellent rewards for an employee who has excelled or put in the extra
effort to make a project happen.

• Recognize the team member's contribution in front of members of management. This can
reduce the tendency for employees to feel that their supervisors take all the credit for their
hard work • Recognize loyalty and exceeding expectations. Mention the team member's hire
anniversary, large contract won, or surpassing of a sales goal in the company newsletter or at
a staff meeting.

• Know how to recognize your staff. Not all staff members want to be singled out at a
gathering of hundreds of fellow team members, while for others it would make their week.

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The approach to recognizing team members can vary greatly by generational cohort. You
might seriously embarrass a baby boomer by having them stand up in front a group of their
peers and discuss their recent success, while a Gen X-er will relish this opportunity.

Study Suggests Employees Leave Bosses, Not Jobs

Careful selection of employees and managers can have a huge impact on your employee
retention efforts and employee turnover costs at your organization.

It has been said more than once, and for good reason, that employees leave their bosses not
their jobs. A Florida State University study scheduled for full release in the fall 2007 issue of
Leadership Quarterly confirms this. The study shows that 40% of employees work for bad
bosses based on survey results. The reasons that employers’ score poorly are varied and
many:

 39% of workers said their supervisor failed to keep promises.

 37% indicated their supervisor failed to give credit when due.
 31% said their supervisor gave them the "silent treatment" during the past year.

 27% report their supervisor made negative comments about them to other employees
or managers.
 24% indicated their boss invaded their privacy.
 23% said their supervisor blamed others to cover up personal mistakes or minimize
embarrassment.

So what does this all boil down to? The effects of having bad bosses in your organization can
be devastating. High time over, poor employee morale. Employee theft, diminished customer
service, substandard employee performance, lower production, and an organizational culture
of fear and mistrust can all be blamed in part on poor bosses and managers.

The costs of having poor managers and bosses can be incredible. Consider the cost of
employee turnover, which is different for all industries and positions, but has been roughly
estimated at $15,000-$17,000 per employee in low to moderately skilled positions. Having a
manager who drives potentially valuable employees from your organization can have a huge
impact on your bottom line, and your customers.

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3.16 Challenges for an HR Professional in NBFC Industry

HR leaders were challenged by a pandemic that led to remote working on an unprecedented

scale and economic fallout that created uncertainty and increased stress for many financial
services employees. At the same time, a nationwide reckoning over race relations led
companies to focus on employee diversity. Other human capital priorities, such as the need to
reskill the workforce and compete for talent, predate the chaotic events of 2020 and are
ongoing.

NBFCs in India are facing HR challenges like employee attrition and retention, changes in
management policies, lack of interest among employees. Many employees in the sector are
switching to other safe industries. Recruitment across NBFC companies has slowed down
and hiring is practically at a standstill other than for critical roles.

CHANGING WORK SCENARIO

Today disruptive technologies such as digitization, automation and artificial

intelligence combined with demographic forces continue to transform the nature of
work, how it gets done, and by whom. Implications of competition are profound.
Firms that expect to benefit from a digital transformation or a promising new strategy
will not get very far if they lack the people to bring the plans to fruition. What might
seem like an irritating talent gap today could prove a fatal competitive liability in the
not-too-distant future. While talent shortfalls arise for many reasons, the supply-side
remedies can be summarized in just three watchwords: Should we build on our
existing skills? Should we acquire them? Or should we rent them?
The major HR challenge faced by the company is attracting talent and retaining them.

Top talent is always scarce and in demand and hiring on time and creating strong
bench strength to support the company’s large business is an ongoing challenge .
RETENTION STRATEGIES
Retention of employees and at the same time reduce attrition are key challenges for
HR officers. Attrition in the BFSI sector, especially at the field officer level, is
considerably high. The challenges are not unique and most organizations grapple with
them from time to time.
If employees do not get satisfaction, they shift to other industries. Compensation is
also a major challenge for us in view of fluctuating government rules and regulations .
MANAGEMENT & MORALE
The changes in employment laws and management affect the HR policy of the
NBFCs. Weather a company is small or big, the laws and regulations are important.
Changes in organization strategies and structure affect HR policies as the internal

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 process grows with the management and some employees face hard time to deal with
the management changes.
COMM & TECHNOLOGY
Regular communication with employees is a key aspect in addressing their concerns.
Important to keep the morale of the employees high through various business cycles.
An open communication strategy is key to solving many of the issues that employees
face. LEADERSHIP & PERFORMANCE
Capability building involves defining development plans and putting in place
initiatives for key leaders and institutionalizing the entire development process in the
company. Capability building would also involve developing an internal pipeline of
leaders, identifying and recruiting appropriate second lines of staff members through a
concerted succession planning exercise. This includes institutionalizing selection
assessments for all talent acquisition for critical and senior roles. This type of
organizational development intervention requires long term commitment. It is like
planting a tree - the seed will take time to bear fruit
REWARDS, RECOGNITION
NBFCs are increasingly adopting the competency framework to ensure that
incumbent and future leaders have an explicit understanding of the benchmarks and
standards that employees are expected to adhere in their performance. These are then
integrated into the performance and rewards management processes. Talent
acquisition clearly identifies differences between leading the business versus running
the business.
TRAINING PROGRAMS
There is a wakeup call among NBFCs to create employee-friendly policies. There is
also emphasis on forward-looking customers. And in taking care of the employees,
most of the NBFCs are now focusing on providing training to the employees on
engagement building activities, fitness and other extracurricular activities.

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3.17 Why People Prefer to Join NBFC?
The Non-Banking Financial Companies have made strong roots in the Indian financial sector.
They have become a fast emerging segment of the national economic system. The NBFC
sector is not homogeneous in nature; rather it has diverse groups of institutions working on it,
which are quite different from commercial and co-operative banks. They work in a variety of
ways like giving out loans, accepting deposits, leasing and even selling via hire purchase.

The main forte of these institutions is their ability to carve out highly personalised and
customised services. These companies seek funds from the public either in a direct manner,
or an indirect manner which is eventually transferred back to the public. A very important
point to consider while choosing a career in the NBFC sector is that the industry is growing at
a very rapid pace and is being recognised as complementary to the traditional banking setup,
so considering it as a career is not a risky choice. In the digital era, the NBFC has heavily
invested in technology as its driving force. They have done it in such a manner that gigantic
banks have been reduced to just trying to play catch-up. It is a common theme that is shared
by a lot of financial institutions that primarily use technology to carve out services to improve
the efficiency of financial markets.

Careers in the NBFC Sector

If you work in this industry, your career path will be set at a pace equivalent to the rate of
growth of this industry. The good news though is that this sector is growing everywhere, be it
Africa, Asia, Europe or the Americas. According to a report churned out by Accenture, the
sector has spiked up from $4.05 billion to $12.2 billion in year 2014 and 2015. This means a
300% growth, which is just amazing. This shows that the trajectory of grown is sharp and
fast. You may join in as an analyst and climb up the ladder to an associate then a vice-
president within very little time. However, if you want to get into technical or managerial
roles, you have to make your entry accordingly. The NFBCs are seeing a great job boom in
this day and age. Experts have stated that 46,000 jobs will be added between 2014 and 2024
just in the city of London in the NFBC sector itself. This means that the sector is set to
provide stable career and great financial benefits coupled with great prospects of growth.
Another fact to consider while choosing this industry as your career is that this industry
perfectly suits the millennials. This is not only due to the industry being associated with
advanced technology, but many millennials have seen their relatives suffer from serious
financial setbacks and banks not being able to help them out.

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Why people leave NBFC?
No growth opportunity/lack of promotion

For higher salary.

For higher education.

Misguidance by the company.

Policies and procedures are not conducive.

No personal life.

Physical strains

Uneasy relationship with peers or managers.

NBFC for HR Practices

Human resource practices are evolving along with business expansion, with bigger NBFCs
having better practices while the others are trying to catch up. Most of the NBFCs are facing
higher attrition rates at field-level while the larger NBFCs are also facing attrition rates even
at supervisory and high officials’ levels. Some of the major reasons are transfer and posting
policy, lack of career progression. Finally, the absence of the best human resource practices
and job security are the biggest human resources challenges of the NBFCs in the modern era.

Barriers to Success
 Lack of support from management team.
 Inability to provide hard numbers.
 Company culture does not support change.
 Back lash from single workers.
 Failure of other programs due to low utilization.
 Managers do not view work/life initiatives as business tools that impact employee retention.

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 CHAPTER 6
RESEARCH METHODOLOGY

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 TITLE: A STUDY ON EMPLOYEE RETENTION
STRATEGIES
OBJECTIVE OF THE PROJECT
The main objective of doing this study was to understand the nature of work, employment in
Ratnaafin. To discover the retention strategies followed by the employers. To investigate the
consequences given by employers for employees and the handling of retention in current
scenario. This effort aims at identifying and exploring the shared interests to counter the pre-
existing belief that employees (the human resource) and the human resource management
bodies in both the developing and developed world are divided.

One of the biggest challenges company is facing is the attrition and retention of good
employees and top performers. The purpose of this project study was also to prove how
employee retention is essential in this day and age, and if the organizations are not awake to
the situation and immediate actions are not taken to that effect, what repercussions lay ahead
and how they would affect the organization and the industry.

METHODOLOGY
The steps in which the project was carried out was by collecting both the primary and the
secondary data. The secondary data was collected first. This collection of data was done by
means of reading various materials such as books, journals, magazines, newspaper articles,
etc.; looking for similar content online (i.e., on the Internet)., therefore, The project work was
carried out on the basis of the data collected.

RESEARCH DESIGN
In Nature the design of research is descriptive.

Questionnaire Design:
The questionnaire framed for the research study in which all the questions are
predetermined before conducting survey. The form of question is multiple
choice and open type.
Likert 5 point scale (Highly satisfied, Highly Dissatisfied, Satisfied,
Dissatisfied, Neutral)
Category scale (Multiple Items)
Ranking Type (R1, R2, R3...)
Sample Size: 40 Samples

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DATA RESOURCE
Primary source:
Primary data consist of collecting the information directly from the respondent. Primary data
is the most reliable source in any research. In my research I have directly asked question to
the employees. I have made questionnaire for gathering data from the employees.

Secondary Source:
Secondary data I have collected from published material and other reference materials have
also used research papers & some websites for my reference.

PERCENTAGE ANALYSIS
Percentage Analysis= No. of respondents/ total number of respondents*100
40/100*100= 40%

Population Definition:

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LIMITATIONS
The biggest challenge for me was the time duration, and for company’s HR too. For some
details HR rightly denied disclosing like the company's turnover, strategies, attrition rate and
reasons, and their retention policies.

RECOMMENDATIONS
To improve employee retention, one needs to understand what they value the most. Attrition
rates in NBFC's are alarmingly high, so immediate solutions need to and acted upon order to
check the high attrition rates and retain the employees.

As a suggestion, there could be a separate department for employee retention within the
realm of HR department. The constant endeavour of this “sub department should be to bring
down employee turnover rate on an ongoing basis if the company goes with this aim, they
can surely achieve the goal.

There are two things that are critical in achieving the objective of keeping the attrition rate in
check and increasing the degree of employee retention; they are:

Right people must be hired for right job, which an emphasis of following,

The right procedure and focus on their developmental needs such as, training, etc.

Right reason as to why the employees leave the organization must be found out and
addressed so as to prevent such a turnover.

Understand the employee needs, listen to them, appreciate new ideas, show support &
encourage creativity.

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 CHAPTER 7
DATA ANALYSIS AND
INTERPRETATION

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Interpretation of Survey’s responses

Interpretation of Q.1:
19 females & 21 males were the respondent of this survey questionnaire.

Interpretation of Q.2:
There were 10 respondents are from age group of 18-25.

19 respondents were from age group of 26-35.

9 respondents were from age group of 36-45.

2 respondents were from age group of 46-55.

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Interpretation of Graph 3:
The major respondents’ educational background is masters. (19 Respondents’)

Give your opinion regarding following employee retention strategies

components:

Q.6. Rewards & Recognition

Below is interpretation:

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 35
30
25
20
15
Strongly Agree
10
5 Agree

0 Disagree
performmance Good non Good monitory Company is Strongly Disagree
based incentives monitory rewards rewards are providing you
are lucrative are provided to provided like, salary according Neutral
the employees bonus, fringe to nature of your
like, certificate of benefits work
appreciation,
support from the
managers, flexible
working hours

 35% respondents are neutral about performance based incentives. (14 People)
 62.5% of total respondents are agree that performance based incentive policies are
lucrative.(25 People)
 57.5% people are neutral about non monitory rewards. (32 People)
 30% people are agreed that provided non-monetary rewards are satisfactory.(12
People)
 72.5% people are neutral about monetary rewards.
 25% people are agreed that provided monetary rewards are satisfied.
 10% people are not satisfied with non-monetary rewards.
 20% people are disagreeing for the statement “company is providing salary
according to nature of your work.”(8 people)
 45% people are neutral about salary according to nature of their work. (18 People)
 30% people are agreed about salary according to nature of their work. (12 People)
 So, ultimate interpretation of this graph is the incentives which are provided to the
employees that are lucrative, so providing lucrative incentives are found useful
strategy in the company.

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 Q.7. Working Environment

Interpretation:

35
30
25
20
Strongly Agree
15
Agree
10
Disagree
5
Strongly Disagree
0 Neutral
There are no Employee work Employees Ventilation
barriers of loads are suggestions & facilities are
communication distributed fairly grievances are maintained well
while considered
communicating
with supervisor.

Strongly Agr Disag Strongly Neut

Statement
Agree ee ree Disagree ral
There are no barriers of communication while
1 20 7 0 12
communicating with supervisor.
Employee work loads are distributed fairly 9 13 0 18
Employees suggestions & grievances are considered 5 15 0 20
Ventilation facilities are maintained well 7 32 0 0 1

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Q.8 Training & Development

Interpretation:

30

25

20

15 Strongly Agree
Agree
10 Disagree
Strongly Disagree
5
Neutral
0
Training and guidance Company provides Employees get reviewed
are provided to perform individual development on time
more effectively tools like, further
education, certification
program

Training & Development

Strongly Agr Disa Strongly Neu
statement
Agree ee gree Disagree tral
Training and guidance are provided to perform more
1 10 5 0 24
effectively
Company provides individual development tools like,
0 4 11 0 25
further education, certification program
Employees get reviewed on time 0 10 3 0 27

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Q.9. which factors influenced you to remain in the organization? (Please give
the rank) *1 means most important, 7 means least important

30

25

20

15 1
2
10
3
5
4
0 5
6
7

Rank
statement
1 2 3 4 5 6 7
Salary 26 8 2 0 0 0 0
Career Development 26 2 1 0 0 0 0
Employee friendly environment 1 7 12 2 0 0 0
Working conditions 28 8 0 0 0 0 0
Management 24 8 4 0 0 0 0
Loyalty towards company 17 14 4 0 1 0 0
Company's goodwill 20 13 1 1 0 1 0

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Q.10. which factors can influence employee to leave the organization.

Factors

Low salary

Lack of support from superior &

Management
Low career growth

Better opportunities

Interpretation of graph 10:

statement Factors
Low salary 13
Lack of support from superior &
Management 31
Low career growth 28
Better opportunities 1

This graph shows that if employees feel, the lack of support of superior, than it can be the
reason for their leaving of the job.

And when employees can not seeing their career growth in the organisation it can be also
the reason of leaving the job.

Low salary is the 3rd choice of the employees for the leaving job.

I got some responses like, if employees are not treated well by their superior or co-workers,
they leave the job.

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Interpretation of graph 11:
65% people from total respondents are satisfied with the company’s retention policies.

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FINDING
Area of the study is subjected to the employees of Ratnaafin only.

The employees who has joined this company just few months ago they have no clear idea
about the companies retention polices.

The reasons for attrition are largely attributed to competitors. Because when employees found
better opportunities they switch immediately, this shows the lack of loyalty towards
company.

If they will change their recruitment style, they could implement some action of plan, because
in this company most people are from references of each other, and sometimes this could be a
barrier while implementing actions on employees.

They need to hire on the basis of competencies.

Little focus on the development of individuals can change so many things.

I also found many of employees feel the communication gap with superior; they also need to
show their care for them.

Work appreciation motivates a lot to employees. Recognise everyone.

They have to cope with attrition by providing training, personal development. Also, reward
and Recognition are our main retention strategies.

Review and measure is the key step for reward result. The review of employees should be
done on proper time that will be help this organisation to retain the employees. Both the HR
department and the concerned Business Head are the ones who have the responsibility of
retaining the employees. There is no different sub-department within the HR department
dedicated to employee retention

The method of calculating employee turnover is number of the employees at the beginning of
year divided by the number of employees at the closing of year multiplied by 100, Le.

Employee turnover = No. of employees at beginning of year/ No. of employees at the end of
year

x 100

After study of this I found better opportunities are the major reason for the leaving of current
job.

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.CONLUSION

Retaining the employees especially your best ones require more efforts.

It requires understanding their needs which can drive satisfaction and high performance in
them, and then use their knowledge to create an intrinsically motivating work experience, by
doing this organization can become what we say in true words , Retention worthy.

Retention programs often fail because managers do not know and, therefore, do not act on the
most important areas affecting an employee's intention to leave across the company;
individual development and career advancement stand out as both frequent and critical key
drivers of any employee's intent to leave.

High Turnover + low Morale = Reduced employees emotional and cognitive investment in
company

BIBLIOGRAPHY
Websites

www.citehr.com

www.pressreader.com

vikaspedia.in

www.nelito.com

swaritadvisors.com

www.bankbazaar.com

nbfclicenseindia.com

www.rbi.org.in

www.samco.in

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 ANNEXURE
Survey Questionnaire on Employee Retention Strategies at
Ratnaafin
This questionnaire is intended to know the employee perception towards the retention
policies. This is a part of my academic project.

While answering questions you are kindly requested to express your free frank opinion.
Your choice is important.

Q1. Gender:

Male

Female

Q.2. Age Group

18-25

26-35

36-45

46-55

Above 55

Q.3. Educational Background

Higher secondary level

Bachelors

Masters

PhD

Others

Q.4. Your Department & Designation

Q.5. since how long you are working with this company?

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Give your opinion regarding following employee retention strategies components:

Q.6. Rewards & Recognition

Statement Strongly Disagree Neutral Agree Strongly

Disagree Agree
Performance
based
incentive
policies are
lucrative
Good non
monitory
rewards are
provided to
the
employees
like,
certificate of
appreciation,
support from
the
managers,
flexible
working
hours
Good
monitory
rewards are
provided
like, bonus,
fringe
benefits
Company is
providing
you salary
according to
nature of
your work

Q.7. Working Environment

Statement Strongly Disagree Neutral Agree Strongly

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 Disagree Agree
There are no
barriers of
communication
while
communicating
with
supervisor.
Employee work
loads are
distributed
fairly
Employees
suggestions &
grievances are
considered
Ventilation
facilities are
maintained
well

Q.8. Training & Development

Statement Strongly Disagree Neutral Agree Strongly

Disagree Agree
Training and
guidance are
provided to
perform
more
effectively
Company
provides
individual
development
tools like,
further

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education,
certification
program
Employees
get reviewed
on time

Q.9. which factors influenced you to remain in the organization? (Please give the rank) *1
means most important, 7 means least important

Statement Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7

Salary
Career
Development
Employee
Friendly
Environment
Working
Conditions
Management
Loyalty
towards
company
Company’s
goodwill

Q.10. which factors can influence employee to leave the organization.

Low salary

Lack support of superiors & Management

Low career growth

Others

Q.11. Are you satisfied with company’s retention policies? Give the reason.

Yes

No

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