IT major, Cognizant has described some surprising statistics in its annual report. It revealed that the annual attrition rate of the company in the last quarter of 2020 touched 19%.
One may think that the unemployment caused because of the pandemic might have reflected on Cognizant’s attrition rate. However, what’s surprising is that it is not entirely true. Though we can’t ignore the effect of the pandemic, the major reason behind this increase in churn rate is voluntary attrition.
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What Is The Reason Behind Cognizant’s High Attrition Rate?
Attrition rate commonly known as churn rate is the number of individuals that move out of a company because of whatever reason in a specific period of time. With Cognizant reporting a churn rate of 19%, it is one of the highest showcased by any IT company.
While many of the companies experienced an attrition rate of more than 10% as a result of the negative impact of the pandemic, the case with Cognizant is different. The major contributor to the high churn rate of Cognizant is the increase in voluntary attrition. The number of employees leaving the company in search of better opportunities or to pursue higher education increased from 10% to 16%.
What Is The Number Of Employees Who Left Cognizant?
As compared to the previous quarter, the attrition rate in the December quarter increased by 1%. However, the number of employees working in December quarter was more than that of September quarter. In the last to last quarter of 2020, Cognizant had 2,83,100 employees which increased to 2,89,500 employees in the December quarter.
Looking at the number of the past two years, Cognizant saw a total of as high as 1.2 lakh employees leaving the company. Nevertheless, the company refilled many of the roles soon after.
Will Churn Rate Rise Further?
In a conference call with analysts, the CEO of Cognizant Brian Humphries warned about the imbalance in the demand-supply for some specific skills as the market is getting more competitive in terms of digitally skilled talent. Besides, other factors like promotions strictly on the basis of merit and adjustments in salaries are contributing to the increase in voluntary attrition.
In this way, Humphries has given a hint that the churn rate might follow the upward track even in the future. As of last year, he had stated the company’s plans to lose 13,000 employees in the next month out of which 6,000 were involved in the content moderation business that Cognizant provides to Facebook. It also included 3000 employees working for Cognizant acquired healthcare company, Trizetto.
What Does The Industry Think About Humphries?
Sharing his thoughts about the increasing attrition rate, CEO of IT advisory Everest Group, Peter Bendor-Samuel said that the rivals are exploiting the moral issues that accompany the change in leadership. He added that the freedom employees have got by acquiring significant stock positions is giving them the freedom to move in and out.
Brain Humphries took over Cognizant as a CEO in April 2019 with a vision of getting more digital deals than traditional IT contracts.
On the other hand, CEO of HFS Research, Phil Fersht blamed the rise in attrition on Humphries’ plan of shifting the focus to delivering globally located clients instead of traditional Indian outsourcing. “This is a process that could take years, but Cognizant is already ahead of its traditional competitors in addressing its post-pandemic IT services that are far more digital-centric than location-centric,” he said.
The rivals like TCS have recorded a churn rate of 7.6%, Infosys 10%, Wipro 11%, and HCL has reported an attrition rate of 10.2% in the last year.
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