While overall attrition moved up just 1% compared to the previous quarter, there was a big spike in voluntary attrition – employees leaving for better opportunities or education. This rose to 16% from 10%. In the last two years, a whopping 1.2 lakh employees have left Cognizant that is unusually high in the IT sector even as the firm has backfilled many roles. The company had about 289,500 employees in the December quarter, up from 283,100 in September.
“The market for skilled digital talent is intensely competitive, creating demand supply imbalances for certain skills. This, coupled with other factors, including our more rigorous approach to merit-based promotions and salary adjustments, has led to meaningful sequential increases in voluntary attrition,” CEO Brian Humphries said in a conference call with analysts, cautioning that the number may rise further.
For TCS, Infosys, Wipro and HCL, annualised voluntary attrition was 7.6%, 10%, 11% and 10.2% respectively. Humphries has been undertaking a major restructuring since he took charge in April 2019 with the objective of flattening the organisation and getting more digital deals rather than the go after traditional IT contracts.
Last year, Humphries had announced that the company would be parting with some 13,000 employees in the following months, including about 6,000 from the content moderation business that Cognizant does for Facebook. Some 800 employees of healthcare company Trizetto which Cognizant acquired some four years back for $2.7 billion were let go off.
Another factor contributing to exits is that under the previous leadership, many of these individuals accumulated significant stock positions. “As this stock vests, employees feel free to move on and cash out of their stock. This combined with the moral issues created by the abrupt leadership changes is creating the conditions that competitors are taking advantage of by targeting Cognizant talent,” Peter Bendor-Samuel, CEO of US-based IT advisory Everest Group, said.
What has also led to high attrition is the pace of change that Humphries has embarked on, which has been disconcerting to the rank and file. “Humphries has embarked on a wholesale leadership change that refocuses the global delivery model across its major client locations with less dependence on traditional Indian outsourcing delivery. 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,” said Phil Fersht, CEO of US-based HFS Research.
James Friedman of Susquehanna Financial Group (SFG) said Cognizant is acquiring new skill sets and in the CEO’s words, trying to increase their “relevance.” “But it’s true they don’t seem to have big deals to show for it and don’t have clean and consistent disclosures on bookings. They needed to refresh their offering, like Infosys had the “new and renew” a few years back,” he said.