In a bid to tackle its high attrition rate, Cognizant has set up a $30MN corpus in the name of a retention fund, to hold back top performers and digitally-skilled employees. The corpus is used when such employees receive offers from competitors. Cognizant, sources said, match the competitor’s offer.
The company’s annualized attrition rate in the December quarter was 19 percent, one of the highest among the large IT companies. While overall attrition moved up just one percent compared to the previous quarter, there was a big spike in voluntary attrition — employees leaving for other opportunities. This rose to 16 percent, from ten percent.
Rajesh Nambiar, Chairman, and MD of Cognizant India, about the fund, said, “As we said on our latest earnings call, the market for skilled digital talent is intensely competitive, creating demand-supply imbalances for certain skills. In key digital areas, there are more open positions than qualified persons to fill those positions. We are therefore heavily focused on maintaining a competitive and appealing employee environment where every person is inspired to achieve, driven to perform, and rewarded for their contributions.”
Nambiar said a vital aspect of this is sustained investment in underscoring their employee value proposition, engaging high-performing talent, enhancing their pay-for-performance approach, and reinforcing the career path opportunities created by the company’s growing momentum.
Hansa Iyengar, an analyst at London-based IT advisory Omdia, said a lot of the attrition stems from the restructuring that Cognizant is going through and its shift to more digital work and a diverse, dispersed workforce that is talent-centric rather than location-specific. She, however, said, “We haven’t heard of any major client issues with Cognizant’s ability to service them and both delivery time and quality have not been significantly impacted.”
Under CEO Brian Humphries, who joined in 2019, Cognizant has been undertaking a major restructuring, including getting rid of some businesses.
Moshe Katri, MD of Wedbush Securities, said when Infosys was going through management changes and turmoil, the company’s attrition rates spiked to the high 20% levels, also prompting management to adopt aggressive retention measures. “Cognizant’s case is no different, especially in certain digital ‘hot’ skills. Ultimately, a successful turnaround strategy during the next 6-12 months will be critical in bringing down attrition as well as re-rating the company’s stock price/valuation,” he said. Katri thinks high attrition rates have not impacted Cognizant’s ability to service its book.
Cognizant has increased the workday for its Indian workforce to nine hours, from eight hours. The company said this was to be in line with its peers’ practices. But analysts see it partly as a move to step up the company’s revenue growth and margins. Revenues declined for the first time ever in 2020. It has also simultaneously increased the number of paid leaves for employees to 36.
“These changes will help us level the field with our competitors in fulfilling client expectations of agile and accelerated development, while significantly improving employee work-life balance,” the company said.