[m8002?]

Originally Posted by sreerknair

Yes, you are right that there is a rational to NOT counter offer when an employee resigns for monetary benefits. Main reason is - the trust between Employee and Employer is broken the moment one decides to leave. If the Employer provides a counter offer, then it simply re-emphasize the Employee's belief that he/she was under-paid in the organization. In such case, either the Employee will not accept the counter offer or will accept the counter offer and then leave in a year or so (that way he/she can command much higher salary in the next hop).

Another reason is - a counter offer will cause a flood of resignations in the organization. If you come to know that the current organization offered a 50% hike to your colleague when he/she resigned, then what will you do as a rational being? You will also resign and demand HR to increase your pay.

If someone resigns for purposes other than monetary benefits, say hostile managers, un-exciting work, lack of flexibility etc., then in such instances a counter offer servers no purposes.

And trust me, Indian IT organizations have mastered the art of retaining talent. Some of these firms are very successful in retaining brilliant employees even after paying them less than 50% of what they will get outside.

The moment an organization (whose business model is mainly based on "cost arbitrage" & volume) shows that they are willing to negotiate on salary, then almost all their employees will make use of it. If we ignore the non- monetary benefits then just from salary perspective - it is the fear of resigning, and joining a new organization is what keeps most of us in our organizations.

You answered most of the followup questions/justification after an employee resigns. But not the first question.

If you are fine with giving a counter offer or also fine with hiring from the market at a higher pay, why not give a higher pay to the existing good/loyal performers in the first place? Somehow budgets become sacrosanct during appraisals but not during hiring in between.

Services companies, for a long time, used to dangle the onsite options and kept the salaries low. But that has reduced lately and fully gone since the pandemic.

[sreerknair]

Originally Posted by m8002?

You answered most of the followup questions/justification after an employee resigns. But not the first question.

If you are fine with giving a counter offer or also fine with hiring from the market at a higher pay, why not give a higher pay to the existing good/loyal performers in the first place?

One being, the short-sighted goals for each of the stakeholders. Once the organisation grows, a central HR or Talent Management team can't handle the entire workforce. Resources will be spread among small Units with each Unit given a goal aligned to the central team. But this will let these small Units pass the ball between to meet their immediate goal. Which in most cases is lower cost and higher profits. So if there is chance of a good/loyal employee resigning due to lower wages then it is not a loss for that small Unit, it is just a loss for the Organisation. In such case why would I, being the decision maker for that small Unit, recommend a higher pay for that employee ? I could use a not so good employee or a junior associate to fill the position and run the show.

Second being, the defenition of Good/Loyal differs based on who is talking. All Employees feel they are Good and Loyal. When it comes to wages, no Employee will tell that I am not Good or Loyal. For an Employer, identifying the Good/Loyal employees becomes a tough task considering that these employees are in multiple silos. Employer has to base the judgement over his/her current role and taking feedback from the silo he/she is in. In most cases these Good employees are not utilized to their full potential in those small Units.

Also from an Employer's perspective why fix something if it is not broken ? The Good/Loyal employee has not yet resigned right? If the Business model is based on Cost Arbitrage then organization has to do everything in its arsenal to keep the wages low. So let's see if the Employee resigns and then we will adress that.

Even with the higher attrition you see in IT services, they will manage to keep the overall wages low by hiring freshers/junior associates. See the hiring targets from each of these firms. Some has targets to even add more than 300 employees per day over next one year.

[hserus]

Originally Posted by sreerknair

Even with the higher attrition you see in IT services, they will manage to keep the overall wages low by hiring freshers/junior associates. See the hiring targets from each of these firms. Some has targets to even add more than 300 employees per day over next one year.

Some of the desperate offering of high salaries is because of the high attrition so that one person finds himself doing the work of 3-4 other colleagues who quit and haven't been backfilled. I have a friend who works in one of the large IT outsourcers, his team (a senior one) lost some 40%++ of its strength so the poor fellow barely gets 3-4 hours sleep a night, spends the rest of the time doing his work as well as the work of other colleagues who have left. And nobody is accepting offers even at the sky high salaries offered.

[m8002?]

Originally Posted by sreerknair

Yes, you are right that there is a rational to NOT counter offer when an employee resigns for monetary benefits. Main reason is - the trust between Employee and Employer is broken the moment one decides to leave. If the Employer provides a counter offer, then it simply re-emphasize the Employee's belief that he/she was under-paid in the organization. In such case, either the Employee will not accept the counter offer or will accept the counter offer and then leave in a year or so (that way he/she can command much higher salary in the next hop).

Another reason is - a counter offer will cause a flood of resignations in the organization. If you come to know that the current organization offered a 50% hike to your colleague when he/she resigned, then what will you do as a rational being? You will also resign and demand HR to increase your pay.

If someone resigns for purposes other than monetary benefits, say hostile managers, un-exciting work, lack of flexibility etc., then in such instances a counter offer servers no purposes.

Originally Posted by sreerknair

Also from an Employer's perspective why fix something if it is not broken ? The Good/Loyal employee has not yet resigned right? If the Business model is based on Cost Arbitrage then organization has to do everything in its arsenal to keep the wages low. So let's see if the Employee resigns and then we will adress that.

Arent you contradicting yourself in the two posts? In one you tell, why fix if its not broken. In the other, you are telling, its anyway broken..so why bother to fix it.

Again, I dont have an issue when people leave after 3 to 5 years. My concern is with people switching jobs every 6-12 months and companies happily taking them in thinking they are the greatest places to work and this job hopper will somehow magically stay and contribute in that company.

[sreerknair]

Originally Posted by m8002?

Arent you contradicting yourself in the two posts? In one you tell, why fix if its not broken. In the other, you are telling, its anyway broken..so why bother to fix it.

Again, I dont have an issue when people leave after 3 to 5 years. My concern is with people switching jobs every 6-12 months and companies happily taking them in thinking they are the greatest places to work and this job hopper will somehow magically stay and contribute in that company.

Yes I am contradicting. It is not my thinking, but what I know most of these organisations think. Also if you look at it, they are contradicting only in hindsight right ? At any certain point in time, the stakeholders involved were not contradicting, especially when the stakeholders are different at each stage.

And regarding organisations recruiting frequent job hoppers, when a large deal is at stake, all they need is a team to sign or kick start the deal, and then later they will cross skill or hire junior associates or make the new hire work 24*7 to take it forward. So I don't think they expect these new hires to stay for ever. If they stay then within few years they will normalise the salary to those of others.

[NetfreakBombay]

Originally Posted by hserus

his team (a senior one) lost some 40%++ of its strength so the poor fellow barely gets 3-4 hours sleep a night, spends the rest of the time doing his work as well ......

What could be the incentive for such employees to stay in the team ? Not the pay in most cases (given that outsourcing business model is based on cost).

By spending 2 - 3 months in interview prep, they should be able to get 1.5 - 2x pay and better work life balance as well.

[am1m]

Some really interesting and revealing insights into how this whole system works. Tallies well with almost everything I've seen at play in different companies. Sadly the one overarching conclusion seems to be that most Indian IT companies are still in the 'cost arbitrage' game, despite all the hype about 'skills', 'next-level work' and such. As such the individual, however talented, is less of a factor than the overall costs to achieve a minimum viable product/service/offering. This is not just for the services companies which would be expected, but even the 'captive offshore' units of brand-name tech product companies that are usually known for their cutting-edge work. Perhaps that will change with all the India-based startups focused on Indian customers.

Got me thinking if game theory can be applied to such situations and sure enough, with a bit of googling:

https://blogs.cornell.edu/info2040/2...e-your-salary/
https://williamspaniel.com/2014/09/2...g-a-pay-raise/



(Most of it is pretty intuitive, but still interesting to see it put in those terms.)

[hothatchaway]

This has already been stated by another member, there is no longer anything called ''company/employee loyalty', this is a term still employed by HR/clueless or disingenuous managers when they are on the losing side of an argument. This was there in India until maybe twenty years back when certain consumer behemoths offered not just pay but also housing, unlimited medical benefits and other ''soft perks'' which cannot be quantified but definitely makes a difference to how the employee perceives an organization. But these were available not necessarily out of kindness, but because in pre liberalized India, salaries were capped and this is how companies made up for the difference.

In today's scenario, I see nothing wrong with employees trying to make hay while the sun shines. It is true that many of these serial job hoppers are unlikely to contribute anything meaningful in their brief stints, but why blame them when the leaders are themselves ok with such mercenary tactics?

It is shortsighted of the companies to not make counter offers when a ''productive'' employee is leaving. Unfortunately Indian managers and HR are immature and ignore the fact that human beings are rational animals and the only rational choice for many, especially tech workers, is to take a higher paying job. What else are they supposed to do when technologies have a brief shelf life and many people have better things to do in life than to ''continuously learn & improve'?

[sridhar-v]

This shortsightedness is common across industries and sectors. As a consultants mechanical design Engineer I have had a lot of my project quotations rejected. Reason being there was a quote from other "experts" (who had reputations for incompetence)that were 50k to 100k cheaper. And every time the company then went on to spend 1500k to 25000k extra to salvage the failed project or eventually scrap it.

[Mustang Sammy]

Originally Posted by sreerknair

Yes, you are right that there is a rational to NOT counter offer when an employee resigns for monetary benefits. Main reason is - the trust between Employee and Employer is broken the moment one decides to leave. If the Employer provides a counter offer, then it simply re-emphasize the Employee's belief that he/she was under-paid in the organization. In such case, either the Employee will not accept the counter offer or will accept the counter offer and then leave in a year or so (that way he/she can command much higher salary in the next hop).

Another reason is - a counter offer will cause a flood of resignations in the organization. If you come to know that the current organization offered a 50% hike to your colleague when he/she resigned, then what will you do as a rational being? You will also resign and demand HR to increase your pay.

If someone resigns for purposes other than monetary benefits, say hostile managers, un-exciting work, lack of flexibility etc., then in such instances a counter offer servers no purposes.

IMHO the right thing to do is to pay your employees fairly and give them hikes proactively instead of them having to ask. That generates a ton of goodwill, believe me.
Once you are in the counter-offer phase it is a losing battle.

[neeravnaik]

Here is how things work from company perspective. On an average Revenues are growing in range of 5-10% for large IT companies. Unless you are a niche hot sector this would translate to a average hike budget of 10-15%. This is also possible because attrition is replaced by freshens so you can give an average 10-15% to your existing employees.

So, in a team of 10, managers will make sure that 2-3 high performers will get good hikes - 25-30% and in some cases higher with promotions. Rest will be much lower.

In market demand for the high performers can get them 50-70% hikes in other companies and company will try to offer them something to retain them but they cannot stretch the budget. This will be the case in all the teams so all managers will want more than their share of pie. Each manager will make a case that his resource is like absolute gem and without her the project will fail. So negotiations go up and down the management chain but company as a whole can budge only a little as margins cannot be eroded and billing rates have not gone up in many years.

In the end few managers only will be able to retain Star performers while rest will leave. Right now anyway everyone is getting big hikes.

So unless your company has really innovated and created something new to be able to grow fast or charge premium to clients their hands are tied and this is the situation most of the industry is in.

[guru_max]

Originally Posted by ishan12

I would not say they are doing anything evil or wrong. But from my short 8 years of being in the industry, I would say that they are not being fair either.
IT industry has for long exploited the freshers or near freshers (less than 4-5 years work ex) employees with low salary.
If they were being fair, then one would not see up to 4x difference in salaries of people who switched vs the people who stuck to the same company. Rewarding loyalty!! what is that?

Recent example from the company I just moved out from in April. It is one of the top Indian IT companies. I joined the company in Nov 2018, so as per policy I was not eligible for 2019 appraisals (Stupid policy). Then came 2020 and Covid hit.

The companies revenue and profits grew every quarter even during Covid. Stock prices almost doubled. They went on a acquisition spree. CXXs salary grew in double digit percentages. They tried to act smart and employee appraisals were suspended citing Covid reasons. To their credit, they did give good variable in all quarters during covid.

So I waited till Oct 2020, but no salary revisions in sight, got fed up of the same salary for 2 years. Job market was hot and by March 21 when my notice period was to come to an end, I had 5 offers to choose from. Switched to another IT giant with 70% hike. Did I loose anything? Nop. Did the company loose one of the good performers in the team? Absolutely.

When did the appraisals happen? January 2021 with revised salary effective from March 2021. The company was the last one to roll out 2020 appraisals among the big Indian tech companies.
The result- They have currently the highest attrition rate in their history of existence. Because, I was not the only one who was fed up.

My team of 13 people is down to 1 person now from the old team from the time I was there. The others now are mostly mix of freshers and 2-3 years exp guys. They are barely able to sustain the project because of resource crunch. Fed-up of all this, our delivery manager just resigned last week.

Again to their credit, they did immediately have another appraisal in May 2021 after the March appraisal. But it was too late. People took the advantage of May appraisal as well and left.

It is certainly not fair and in my opinion it is the result of the vendor constantly trying to push their margins up and the customer from the other side always trying to push costs down. This is aided by an army of graduates coming out of colleges every year so it makes a perfect recipe for disaster. Of course, often times the client does not have any clue how all this tech thing works and they are content with the quality of work. The end result of this situation is that a single person ends up doing the work of multiple people since everyone else is inexperienced. I hear that all the companies are hiring a lot more freshers from last year and this means the same thing will continue for the foreseeable future.

[Latheesh]

Originally Posted by neeravnaik

Here is how things work from company perspective. On an average Revenues are growing in range of 5-10% for large IT companies. .

I just checked operating income of major IT service companies and it is around 20-30% of their total revenue.

[swiftnfurious]

Originally Posted by am1m

...(And it's not just HR that needs to take the responsibility to retain talent, managers have a bigger share in that responsibility.)

Originally Posted by m8002?

Spot on. I think its up to the immediate manager and the higher management to come up with a way to avoid this...

I doubt a manager can do anything drastic in such cases. I am one myself and we keep analysing the salary parity every year - we have seen employees leaving this year for 70-170% hikes.

We have put a proposal to revise the salary bands of all employees and bring it up to market standards (ours was last set 5 years back) and the HR / Finance says we are upto date. When we ask how these candidates are getting such massive hikes and they have no answer.

Ours is arguably one of the best workplace culture and every single employee is happy & we had almost nil attrition for last 3 years. The work culture didn't change a bit, they all didn't want to lose the opportunity of such a massive payment (a lot of them are / were underpaid as well, with us, managers, not being able to correct the salaries much). Most of them were happy to stay back if we matched the offer, but we didn't want to set a wrong trend.

Also, now when we try to backfill, we see the expectation from external candidates are too high or much more than the employee who left.

[SLK]

I'm not from IT, but work for an accounting firm. We too have seen attrition like never before.

People here did manage 30-50% hikes on change, but that may not be very unusual too at lower and mid tier levels.

Each one of my team members who resigned had more than 2 offers in hand (some even 5+), which is unusual. The way I see it, work from home had a big role to play in this (I'm a big supporter of WFH though):

1) Everyone, including me, got time to think where is my life/ career headed and almost no one gets a satisfactory answer to that question (especially when you are hooked to team-bhp with reading ownership reviews of cars you cannot afford yet ), which encourages a person to look for change. For most who have a process driven work will get this feeling in WFH even more!

2) Everyone got time and flexibility to apply for multiple jobs, and eventually got through a handful. (see all interviews were virtual, everything is just so simple!)

When I'm approached by people for a job (tele agents/ linkedin), I generally refuse before it even comes to discussing the salary, because when I'm not looking out, I'm not. I believe this would be true for most, and hence it makes me think, people got a job because they were looking out. The trigger to that is mostly not salary (even if it is the result), it is more often the urge to change, even if they don't know the direction of it.

If all this wasn't enough, it has become impossible to hire replacements, because:
1) We need to look for people from a level below and offer them a hire designation here (due to unusual salary expectations) (for that a person has to be exceptional) - so 90% rejects.

2) Because everyone is applying for multiple jobs - read 2 or more - majority of the people back out just a day before joining (generally after about 2 months of offer rollouts), after accepting the offer.

3) As an organisation we cannot counter (2) above by rolling out more offers than the positions we have open, making it very difficult to hire.

So basically we are shrinking! and its hurting a lot. Hope we do not reach the point of collapse (which would put everyone who stayed at risk!)