Wednesday, October 19, 2011

ICICI bank's startegy for retention and cost cutting


I came through this news. However I differ. The news says that when other company will know that ICICI employees are not getting hike, then the competitors where the ICICI's present employees will apply for interview will not offer good hike and the employee will stay back with the ICICI. I see this is one of the wrong assumption and strategy.
First, the competitors will always look for the opportunity and when ICICI offers good hike, the candidate looking for change will ask for 50% to 100 % hike in the package. From hR perspective, the competitors will offer hike between 20% to 30% and still save the money.
Second, even if the competitors offer 10% hike as the employee will think that it is better to get something than not getting anything

Have you ever seen the Chief of Human Resource coming out and crying loud on no promotion, no bonus, no increment, and no hiring policy of a company? ICICI bank is an exception and is doing this smartly. This policy is serving two purposes for ICICI bank, cutting down employee cost and employee retention. Well! The first one, that is cutting down employee cost through no increment is self explanatory and does not needs any elaboration. As the company has already announced no bonus year it will save tens of thousands of rupees on bonus and increment. You must be still thinking about the second purpose which is ‘employee retention’. Interestingly, I have my own views and I feel that this policy will help the bank to retain employee as I see the policy from the eyes of HR and not through the eyes of employees. Let’s see the arithmetic behind it.

Generally, companies tweak their HR policies either to retain employees by luring them through ESOPs, retention schemes and employee friendly policies. On the other hand, when they have to cut down on their employee force, it is again these policies which come to their rescue. No company asks their employee to leave straightforward as it is quite unethical on the part of the company to do so. Indirectly, they cut down on bonus, promotions and other amenities which send a wrong signal to the employees and they start churning out. Very often these policies are confidential and not meant for public consumption as it sends a wrong impression about the organization in the public domain. ICICI bank did this very smartly; the HR chief is holding press conferences and crying out loud regarding no bonus and no promotion. No idea, what is cooking in the minds of chiefs sitting at the top and how is it going to impact the employees??? I will share a real experience with you.

The day ICICI announces this policy, one of its employee tries his luck at some other company. As soon as the big question comes from the interviewer regarding salary hike, he replies that he is expecting a hike of 30%. Guess what the reply of interviewer is? “Even after today’s announcement by your organization you are expecting a hike of 30%. Sorry to say but we can not offer a hike more than 10%.” I hope this explains the trick played by the bank.

Seeing the losses incurred at this hour due to sub prime bug, the bank has accordingly managed to cut down it cost. More than this, it is an appreciating fact that, it will also be able to control the attrition rate as the policy is made public and other competitors would not be willing to offer a smart hike to candidates who are looking for an opportunity outside the organization. In such a scenario, employees of the bank are left with the only option to remain where they are and enjoy the no promotion and no bonus year.

So, if anyone is of the view that this policy is going to hike the attrition rate of the bank, I beg to differ from them as there are few takers for the interested candidates as this interesting policy is intentionally made public by the bank. According to me, the idea behind making the policy public is to leave little room for employee to leave the organization or else the HR chief would not have announced the policy publically considering it an internal affair of the organization.



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