It could well be called the war of attrition as a desperate industry struggles to hold back its resources from jumping ship. Comparing this to a war is no overstatement - after all in which other industry do CEOs and top management of mid to small size companies end up, quite regularly, cajoling employees to stay on? One such CEO is known to have actually dumped a call with a prospective VC in favour of spending quality time with a key employee jumping ship – he reckoned that retaining the employee was crucial to the business, and therefore eventually to raising money!

Like all wars, this one too is linked to economic imbalances - that of demand for manpower outstripping supply. When the demand for the asset in question is human resources, the dynamics of the problem can be trickier than it appears on the surface. The scale of the problem is another major issue - NASSCOM predicts that the industry will need 1.1 million jobs to be filled in 2008 and the supply gap for qualified engineers is yawning wide.

Hit harder when smaller

Attrition hits smaller companies hard as they tend to be dependent on individual employees – lack of "de-skilling" means that the departure of a few people can create significant impact on the business. According to the Head, HR dept of a small medical software solutions company that employs 45 people, attrition over the past few years has created tremendous business issues: "That we have managed to hold on for four years is miracle." For these companies, the US recession, business slowdown and hence loosening of the job market is not necessarily a good thing. Fearing retrenchment, employees, unsure about how their small company will weather the crisis, begin to move out. A preemptive move by one person leads others to follow suit, leading to a mass exodus.

Larger companies weather the storm through in built redundancies typically created from less expensive fresh graduates. But is building a large stable of newly minted graduates a good strategy for smaller companies? While the economics may make sense, smaller companies often ignore that first time employees need tremendous amounts of structured training and that the replacement – "on the job" training that places these people into live projects very quickly - is not very effective. Plus as the Attrition pyramid (see Figure 1) illustrates, these employees are the most susceptible to being lured away.

Are smaller companies well served by lateral hires? For one, recruitment of experienced resources is more challenging and cost economics may come in the way. Successful companies have adopted a middle path combining experience with new blood, but ensuring that there is a rigorous induction and training process to make such employees "employable." At HyTech Professionals, which ranked No 3 in NASSCOM's Exciting Emerging Companies to Work for survey, and which also enjoys a low attrition rate of 12%, a lot of emphasis is placed on weaning the wheat from the chaff: "Like other companies our goal too is ---recruitment, retention and development (of talent). But we also have an evaluative assessment process. If the recruit does not perform for six months he / she is served notice", says Mitu Sachdev, Head HR, HyTech Professionals.

Money is not always the reason

In a slowing economy, job security, not money may be the reason for employees leaving smaller companies. But where a smaller company is able to demonstrate business stability, non-monetary benefits - such as technology expertise, entrepreneurial culture and long term monetary benefits such as ownership (significant ownership vs ESOPs) and profit sharing could be held out for highly desirable employees. Provided hygiene factors are met, smaller companies may find that skilled employees in the mid stage of their careers are willing to trade a state of the art gym for the chance to work on something cutting edge.

The David factor (vs. Goliath)

Some of the companies that ranked high on the above mentioned NASSCOM survey all followed one core practice – they acted like big companies when it came to implementing best in class HR practices - be it career planning, competency mapping or 360° feedback. In doing so, size became an advantage - as the new practices were often implemented with high intensity. In such situations, the management of the company develops personal relationships with employees, which really helps long term stickiness. As one employee at Corbus (which topped the NASSCOM survey), put it : "I am recognized here - I am a somebody rather than a nobody. My recommendations, feedback, are heard and accepted even directly by the Directors. This makes me feel good about coming to work here."

Higher HR spending (on the right things) also helps). Hi-tech Professionals - which employs 98 people has a high HR spend, which has gone a long way to stem the tide of attrition. According to Mitu Srivastav, "We make every effort to make our employees to realize their full potential. Starting from an in-depth screening during the selection process it self. Our Right Fit test helps us and the interviewee to locate the right domain he or she could fit in."

In conclusion, the question of whether size matters is clearly not a YES/NO type of issue. What's clear though is that, just as larger players use size and economies of scale to their advantage, smaller companies should certainly look to identify and exploit their "size-advantage."

A man does not live by the loaf of bread alone, he may need, after a hard days work a jug of wine for that feel good factor. Self-actualization that an employee experiences in a smaller organization is the wine that peppers his ego.