February 1, 2011

What is the Turnover Rate and How Does the Outsourcer Retain Employees?

Attrition is one of the biggest enemies of engaged partnerships and long term outsourcing success. If your outsourcing partner is losing 30% of their employees annually, then all the effort you spent building your outsourced team is in jeopardy. Low turnover is definitely a critical metric for outsourcing success and you should investigate attrition rates before making a commitment to a new outsourcing relationship. Your partner’s attrition rate should be low, though zero is not realistic and you should probably be skeptical of anyone who tells you their rate is zero. A low single digit number is what any competent software outsourcer will shoot for. How is this achieved? Consider the following hiring practices and employee retention activities:


University contacts. Maintaining good contacts with local universities can greatly help recruitment and the search for top talent.

Teaching. Teaching is a great way to expose yourself to students and find top-rated students.

Contests. Running a contest can be an excellent way to find strong candidates.

Referrals. Referrals generated internal to the outsourcer are a great way to bring in new people.

Hiring great people at any time. Your outsourcer should be able to take advantage of the opportunity to hire top people when they are available, even when the outsourcer does not have an immediate need for the candidate.


Pay. Everyone wants to be paid well. Your outsourcer should be aware of the compensation packages and compensation strategies necessary to attract and maintain a staff of excellent people. Long-term compensation planning is important, evaluating local and regional economies and examining changes to government regulations that could negatively effect compensation.

Interesting projects. Your outsourcer should have interesting projects to work on. Software developers everywhere enjoy working on cutting edge deliverables that will be used by lots of people.

Management. Good management is very critical to employee retention. Management should be engaged, supportive and decisive.

Career management. The direction of individual contributors careers is also a critical management issue. Planning out a career path is important, especially so in certain cultures.

Work load. No one wants to be subjected to continual work overload. Sometimes extra effort is required, but it should not be the normal course of business.

Project fit. Making sure your outsourcer has assigned resources to projects based on interest, technical fit and interpersonal communication abilities will go a long way to keeping attrition low.

Project rotation. Occasional rotation of staff to new projects is a good way to keep things interesting and provide new challenges and opportunities. Rotation needs to be done in a way to maintain your investment in the skill level of the outsourced partner’s team.

Training. Outsourcers must provide training opportunities to keep staff sharp and up to date with technology developments, process improvements, etc.

Quality of customers. Working with great customers is a good way to keep attrition low.

Community Participation. Getting involved and making a difference in staff’s community interests is a great way to make employees feel supported and build links to the community. Definitely a plus for employee retention.

Finally, team-building activities, engaging off-sites, organizational coaching, and travel abroad to work with partners are all part of a good employee retention plan.