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Cognizant puts up $30 million for employee retention

TNN | Feb 17, 2021, 04.00 AM IST

BENGALURU/CHENNAI: In an unusual move and in a bid to tackle its high

attrition rate, Cognizant has set up a $30-million corpus, dubbed as 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, matches the competitor’s offer.

The company’s annualised attrition rate in the December quarter was 19%,
one of the highest among the large IT companies. While overall attrition
moved up just 1% compared to the previous quarter, there was a big spike
in voluntary attrition — employees leaving for other opportunities. This
rose to 16%, from 10%.

When TOI asked Rajesh Nambiar, chairman and MD of Cognizant India, about the fund, he 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.”

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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, 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.

Ray Wang, founder of Constellation Research, said, clients are starting to wonder if Cognizant can quickly staff up for new
projects. "The fund will help create a buffer. What has happened are a confluence of factors. The high attrition of long tenured
and senior executives. The pandemic has had workers rethink their priorities and some have decided to get out of consulting
and the competition for digital talent has been intense. Clients seek experts to run teams in house."

Cognizant has increased the workday for its India 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.