Archive for June, 2011

Attrition Effect: Has the Time Arrived to Link Attrition to Performance?

Attrition has been a cause of worry for the Indian IT companies for quite some time now. Last financial year (FY11) saw the attrition in almost every major Indian IT company going up significantly when compared to the preceding year. With the demand for IT services going up, in absence of poaching agreements with rivals unlike Indian Telecom firms, it is becoming increasingly more and more difficult for the IT companies to retain the talent.

I happened to compile the attrition figures of Indian IT majors over the past few years. For IT biggies, the attrition has hovered mostly between 10-15% in the past few years. Here is what the figures look like:

FY11

17.0 %

14.4 %

24.7 %*

FY10

13.4 %

11.8 %

13.6 %

15.7 %

FY09

11.1 %

11.4 %

13.2 %

13.0 %

FY08

13.4 %

12.6 %

16.8 %

15.2 %

FY07

13.7 %

10.6 %

 –

FY06

11.2 %

 –
Notes: Infosys attrition figures exclude its subsidiaries; TCS attrition figures take into account both its IT services as well as BPO business but excludes its subsidiaries CMC, e-Serve & Diligenta; Wipro attrition figures include involuntary attrition and correspond to only its IT Services excluding BPO Operations, Indian IT Operations & Other Overseas subsidiaries. For FY11, Wipro has not yet released the overall attrition figures comprising of involuntary attrition, therefore, an estimated 2% involuntary attrition has been added to the voluntary attrition of 22.7% to make the figures comparable.

 

Here goes the graphical representation of the above figures. Clearly, HCL and Wipro have witnessed high attrition when compared to their rival IT majors in the past few years.

Wipro has been the worst affected with attrition amongst the top-tier Indian IT companies and it has witnessed the attrition becoming almost double when compared to preceding financial year. Attrition has become one of the major causes of worry for the IT major in the fiercely competitive marketplace. In order to overcome it, in a first of its kind initiative, Wipro has decided to add attrition as one of the key metrics to calculate the quantum of variable pay. It has gone ahead with linking 20% of the quarterly performance linked incentive to attrition for the senior and mid management.

Although many IT companies have laid many stringent norms like increasing the notice-period to 3 months and strict adherence to this in terms of not allowing anyone to leave the company before serving this mandatory period from the date of resignation. However, even these have not helped the companies to a large extent. Neither do these measures are going to help the companies in the long run.

Wipro’s initiative of linking senior and mid-level management employees’ variable pay to attrition has set the ball rolling for other IT companies to follow the suit. Only time will tell if Wipro’s model of linking attrition with performance drives the point home and if it gets replicated in the IT industry.

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Is it Right Time for Facebook to float an IPO?

Facebook, with a base of over 650 million active users, continues to be the top-notch social networking site. The term ‘active user’ in context of Facebook implies a user who has logged in to the site in the last 30 days. More than 250 million active users currently access Facebook through their mobile devices with a level of activity twice that of non-mobile users. Other social networking sites such as Twitter, LinkedIn etc. lag much behind Facebook in terms of the user base and its engagement. Twitter, for instance, has just over 200 million registered users and Linkedin just over 100 million registered users.

Let’s now take a peep into some amazing facts about Facebook (Source: Facebook):

  • About 50% of the active users of Facebook log on to the site in any given day
  • An average user on Facebook has 130 friends and is connected to 80 community pages, groups & events
  • An average user creates 90 pieces of content including links, news / updates, photo albums, notes etc. every month
  • Facebook users spend over 700 billion minutes per month on it

I happened to compile information on some of the parameters for Facebook as well as its nearest rivals viz. LinkedIn and Twitter. Here is what I could gather as a comparative analysis:

Launch Year 2004 2003 2006
Minimum Age for Registration 13 years 18 years None
Number of Users 650 million+ 100 million+ 200 million+
Employee Strength 2000+ 1000+ 550+
Available in Languages Over 75 languages including Hindi, Punjabi & many other regional langauges English, French, German, Italian, Portuguese and Spanish English, French, German, Italian, Japanese, Korean, Russian, Spanish and Turkish
Office in India Hyderabad Mumbai None
Alexa Rank 2 16 9

If we were to go by the Facebook monitoring site Inside Facebook, Facebook has lost users in the some of the regions including in the key countries like US and UK. Facebook has been quick to deny this. However, it has been widely acknowledged in many reports that the rate of growth of Facebook user base is not as good as it used to be in the year 2010. This brings us to the question if it is the right time for Facebook to go public & get listed by floating an IPO?

Last month, LinkedIn became the first major social networking company to go public and its shares began trading on the New York Stock Exchange under the symbol “LNKD”. Its huge success can be gauged from the fact that LinkedIn shares more than doubled in value on the very first day of the trading itself. It has paved the way for other social networking companies to follow the suit.

Presently, Facebook terms of registration restrict a person from using Facebook if he/she is under 13 in line with age limit dictated by the Children’s Online Privacy Protection Act which was made Federal Law in America in 1998. However, Facebook founder & CEO Mark Zuckerberg wants the social networking site to let children under the age of 13 use it and he is willing to fight to get the law changed. Probably, this is an extra mile Facebook might be willing to go when the growth is becoming sluggish. Going by these events, the day should not be far when we would also see Facebook going public.