CHAPTER 2 REVIEW OF LITERATURE

 

The review of
literature gives an overview of situation that is pertaining in the IT/ITES
industry as far as India and Globe is concerned. It gives a complete picture on
the various aspects such as strengths, weakness, opportunities, threats etc.
Along with the same, the same throws the light on employee attrition, retention
and employee satisfaction impact along with various factors associated with it.

 

2.1 IT/ITES Industry:: Employee Attrition & Retention:-

 

The IT/ITES industry operations in India have
been the pioneer of outsourcing in the global business scenario. Foreign
companies have been dependent on the Indian IT/ITES industry due to its English
capabilities & quality work carried out at low cost. In the past two decades,
this industry has evolved into a formidable force with successful operations
conducted in various domains (Steve 2016).

 

Propensity of leaving the job in this sector
is very high & chances to climb up the corporate ladder is bleak. Only a
few very get promoted to the cadre of team leader & as soon as promotions
are announced the many of frustrated employees quit.(Shelly Singh & Mitu
Jyashankar, 2002).

 

Philosophically, employee retention is
important; in almost all cases, it is senseless to allow good people to leave
your organization. When they leave, they take with them intellectual property,
relationships, investments (in both time & money), an occasional employee
or two, & a chunk of your future. Employee Retention Strategies helps organizations
provide effective employee communication to improve commitment & enhance
workforce support for key corporate initiatives.

 

 

 

Effective employee retention is a systematic
effort by employers to create & foster an environment that encourages
current employees to remain employed by having policies & practices in
place that address their diverse needs. A strong retention strategy becomes a
powerful recruitment tool. Retention of key employees is critical to the
long-term health & success of any organization. It is a known fact that
retaining your best employees ensures customer satisfaction, increased product
sales, satisfied colleagues & reporting staff, effective succession
planning & deeply imbedded organizational knowledge & learning.

 

Employee retention matters as organizational
issues such as training time & investment; lost knowledge; insecure
employees & a costly candidate search are involved. Hence failing to retain
a key employee is a costly proposition for an organization. Various estimates suggest
that losing a middle manager in most organizations costs up to five times of
his salary.

 

Intelligent employers always realize the
importance of retaining the best talent. Retaining talent has never been so
important in the Indian scenario; however, things have changed in recent years.
In prominent Indian metros at least, there is no dearth of opportunities for
the best in the business, or even for the second or the third best. Retention
of key employees & treating attrition troubles has never been so important
to companies. In an intensely competitive environment, where HR managers are
poaching from each other, organizations can either hold on to their employees
tight or lose them to competition. For gone are the days, when employees would
stick to an employer for years for want of a better choice. Now, opportunities
abound.

 

It is a fact that, retention of key employees
is critical to the long-term health & success of any organisation/s. The
performance of employees is often linked directly to quality work, customer
satisfaction, & increased productivity & even to the goodwill of a
company.

 

Whereas the same is often indirectly linked
to, satisfied colleagues & reporting staff, effective succession planning
& deeply embedded organisational knowledge & learning. Employee
retention matters, as, organisational issues such as training time &
investment, costly candidate search etc., are involved. Hence, failing to
retain a key employee is a costly proposition for any organisation. Various
estimates suggest that losing a middle manager in most organisations,
translates to a loss of up to five times his salary. This might be worse for
BPO companies where fresh talent is intensively trained & inducted &
then further groomed to the successive stages. In this scenario, the loss of a
middle manager can often prove dear.

 

Verma, Anju. & Pooja, Garg (2011), after doing a comparative study of work life
balance among male & female employees working in IT/BPO companies,
contended that causes of attrition are different in relation to the gender.
Results shows that female employees’ feels more stressed because of work life
imbalances & leaves job at the early stage of their career. Ramiya. Bhas
(2008) advocated that the top reason for talent attrition is “External
Equity of Compensation”, He also stated that 27 percent of the employees in
their exit interviews mentioned compensation as primary reason whereas Limited
career opportunities & Role Stagnation are stated as another two reasons
for low retention.

 

Jeswani, Saket. & Souren, Sarkar. (2008), mentioned that Talent Engagement is
necessary to retain an employee as disengaged employee disturbs the system
& multiply the dissatisfaction levels in organisation which results in
decreased motivation, high talent turnover & diminished performance. They
mentioned that raising & maintaining employee engagement is in the hands of
an organisation & requires a perfect blend of time, effort, commitment
& investment to craft a successful endeavour.

 

D.Raina, Anupama (2006) by means of series of surveys, observations
& interviews ascertained that employees’ attrition in higher between the
age group of 20-25 years & within three months of joining, young
professional’s leaves the job because of slow career growth, poor relations
with seniors/ colleagues, health problems, work-life imbalance & for higher
studies.

 

Smith (2001), argued that “money gets employees in the
door, but it does not keep them there.” Writing from the employer’s perspective,
Dibble (1999) included money

in her discussion of financial incentive but
she had also argued that money is not always a fitting reward. In a survey that
she had conducted, about one fourth of the respondents said thatthey changed
their current jobs because they did not feel cherished or appreciated in their
current organization.

 

Les Mckeown’s defined employee retention as, ‘A systematic
effort by employers to create & maintain an environment that encourages
current employees to remain employed by having policies & practices in
place that addresses their driver needs.’ 
As noted by Weinberg  “…an
employee survey covering topics such as compensation, benefits, safety, work
rules, manager behavior, & teamwork” can have a dramatic effect in
minimizing employee attrition. These types of surveys provide employees an
outlet for concerns & serve as a means for employers to identify areas in
need of change before they become a problem of greater proportions. He notes
that exit interviews given to employees upon resignation can also give
companies insight into the concerns of workers.

 

Even a simple acknowledgement of an
employee’s good work can be quite a motivator. Clarke highlights that “a
pat on the back or a word of praise after they have worked hard to deliver for
the company goes a long way toward building individual & group morale”. Paris
(2002) agrees, stating that “ incentives provide the ‘golden handcuffs’
that keep from getting away”

 

According to Sengupta, S. & Gupta, A. (2012), the IT/ITES/BPO industry in
India is having the unparalleled velocity. The reason behind the same was the
higher attrition rate along with the higher growth of the industry. However, in
the same study the various factors were studied which put emphasis on the
various factors leading towards attrition and comparison of the same along with
the various demographic variables.

 

Also, Deepa
(2012) noted that the IT/ITES/BPO employees’ reason for attrition is mainly
due to working conditions, lack of job satisfaction, stress and safety
measures. To arrive at the same conclusion, the researcher took the interviews
of 250 respondents of the industry and various tools like Chi square, ANOVA
etc. were used to interpret the data.

 

Vibha Gupta (2013) stated that the IT/ITES/BPO industry is bearing heavy loss in terms of
cost because of the employee turnover which happens every year, and to prevent
and reduce the same, only Human Resource Department can make the difference by
making and implementing various strategies on recruitment and retention.x`

 

Aravinda Tulasi, Venkata Ravi Kumar (April 2014) gave the opinion that open communication,
strengthen career development and career progression program, proper
recruitment and hiring process etc. can help to reduce the attrition in a
proper manner.

 

N. Bharathi, P. Paramashivaiah (Feb 2015) suggested that employee integration,
employee maintenance and employee satisfaction play a major role in retaining
the employee into the organization especially into BPOs and ITES Industry. According
to the Anantharaja,2011 the
companies and corporates are now a days more and more dependent upon the human
resources and assets. According to the study conducted, the organization are
emphasizing more and more on their employees and top performers. Attrition is a continuous phenomenon, which prevails in the ITES
Industry today .Attrition rate is a burning issue for HR department because an organization
faces problems like losing the talents and knowledge, cost related to training, recruitment etc.

 

It is an inevitable fact that employee attrition and retention are
dependent on certain factors and also the same has a considerable impact to
employee satisfaction rate as well. Following are the reasons which are
identified for attrition in organization that can be derived from the
literature review.

 

1. Organizational Factors:-

Ø 
Monotonous work

Ø 
Lack of variety of work

Ø  Non interest in the nature of work

Ø  Less interaction with end users.

 

2. System Related Factors:-

Ø  Policies and regulations of the company

Ø  Lack of opportunity

Ø  Lack of career advancement

Ø  Unfair appraisal system

Ø  Unfair promotional policies

Ø  Lack of job security

 

3. Personal Factors:-

Ø  Relocation

Ø  Better opportunity

Ø  Peer Pressure

Ø  Changing the field

 

 

 

 

 

 

 

 

 

 

2.2 IT/ITES SCENE IN INDIA

 

India has become the most promising
destination for the various companies that wants to outsource its business
process. The IT/ITES/BPO Industry has started emphasizing on the strategic
choices to increase the profits by implementing the various quality improvement
techniques, cost reduction techniques, increasing shareholder’s value etc. (Shah and Sharma, 2007).

 

According to Neale (2004), In 2003 India accounted for 75% of the offshore
delivery value which was expected to rise by 55% in the next five years. The
Indian IT/BPO industry had recorded the overall growth of 28% in the year 2006-07.
According to the NAASCOM, the
revenues coming from the IT/ITES/BPO segment shot up from $ 39.6 Billion
(2006-07) to $52 Billion (2007-08).

SWOT Analysis:: Indian IT/ITES Industry

 

The SWOT analysis will be helpful to us to
know the strengths, weakness, opportunity and threats prevailing in the IT/ITES
industry.

 

 

 

 

Strengths:-

 

(A) Availability of manpower with good spoken English:-

 

In India, around 3573 listed engineering
colleges (www.indicareer.com/engineeringcolleges-in-india.html) and
342 listed MBA colleges are prevailing. Apart from that, there around more than
493 Indian Universities enter into the job market every year which produces the
highly qualified graduates and post graduates every year. This youth is quite
familiar and well versed with US and UK ascent.

 

According to Raul (2004),  India is the country which has the largest
English speaking mass next to USA. Hence, this mass is a very good pool of
potential candidates as far as the Indian IT/ITES Industry is concerned.

 

(B) Availability of manpower according to time zone differences:-

 

The IT/ITES operations in India are quite stable in
comparison with other developing countries. The recent study estimated that Indian call centers would touch a
top growth rate of around 65 percent in future against the rate of 42 percent
as in 2007. 

 

The survey reports of the Cyber Media’s Data Quest domestic call
center held in 2007-2008 also mentioned that the domestic call centers must
fetch a revenue margin of Rs 85 billions in 2008-2009, which is further
expected to grow up to 110 billion in subsequent years. The appropriate
time-zone differences of 12 hours for the USA and five hours for UK help these
companies to serve better for their Western clients in late night shifts (Babu and Jayabal, 2004).

 

(C) Availability of Low Cost
Manpower:- 

 

According to the study of NASSCOM,
the IT/ITES  industry in India saves
considerable amount of cost for the companies in terms of Manpower.According to the mentioned table, it is very
well stated that the manpower which is available in India compared to the other
countries is highly qualified, well skilled and easily available which helps
the organizations to foster the productivity in the fastest possible manner.

 

 

Country

Cost of employees p.a. (US$)

Qualification

Full time/Part Time

IT Skills (rating out of 10)

Availability of skilled labor (rating out of 10)

USA

19,000

Undergraduate and school pass outs

Part Time

8.77

8.04

Australia

17,000

Undergraduates

Part Time

8.27

7.78

Philippines

9050

Graduates and under graduates

Full Time/Part Time

7.71

8.25

India

2000 (tier II cities) to 7500 (tier I and
II cities)

Mostly graduates

Full Time

8.72

7.57

 

(A Comparative Analysis of quality and cost of manpower)

 

Source:- Raul (2004) and Princewaterhouse Cooper (2005)

 

 

(D) Employee Loyalty:-

 

The employee loyalty is very high as compared to the other
countries. (Sharma, 2004). Apart
from the same, the students who are employed at the call centers/BPO/ IT/ITES
feel comfortable to work for the night shift. The time zone which is there is
also appropriate because with USA it is 12 hours and with UK it is 5 hours. (Babu and Jayabal,2004)

 

 

Weakness:-

 

(A) Scarcity of specialized resources:- The Indian youth is yet not considering
the IT/ITES industry as the long term destination for work. There are various
reasons for the same like lack of long term career prospects, work shift
problems, mismatch of the expectations etc. (Business Standards, 2005). The youth still prefers the industries
like manufacturing, banking, pharmaceuticals, service, law, academics etc.

 

(B) Mismatch of Academics and Industry:- The semi urban and rural areas of India has
not implemented the systems which should be at par with the industry
requirement. According to Mitra (2008),
the same is happening because of the professional crunch of the faculties
prevailing in the education industry. If India, strengthens the educational
training programme then skilled professionals would be increased.

 

 

 

 

 

 

Opportunities:-

 

(A) Potential youth from smaller cities:-  
The union
government has come up with “Bharat
Nirman Project” under which in
the year 2005 the 47554 crores of rz were allocated to develop the semi urban
and rural area. The work is in progress and that is the reason most of the
IT/ITES vendors are now focusing on the rural area. (Tripathy,2005). Also, the youth from smaller cities can be
utilized more into the domestic BPO operations. The same can be helpful because
of the low salary structure, low cost of training and business development
expenses. (International Business Times,
2008)

 

(B) Allocation of fund into Higher Education:- The Indian government has taken certain steps
to uplift the education system under “Bharat Nirman” project. The government is
investing to uplift the education system from “Sarva Shiksha Abhiyan” to up
gradation of IITs, IIMs, NITs, and other state government universities.

Threats:-

 

(A) Job hopping trend:- Till 2004-05 the cost effective business model worked for IndianIT/ITES/
BPO industry. According to Raul (2004),
the availability of skilled labor with least cost has been the driving force
behind the growth of the industry. But, at the same time, there are certain
issues which are also associated with this industry as far as the threats are
concerned that is unforeseen future, health hazards, smoking, unethical issues,
etc. (Sharma 2004; Parikh 2005)

 

(B) Trade Restrictions in India:- According to Raul (2004), the
countries like China, South Africa, Malaysia, Ireland , Taiwan etc. are
most  tax friendly countries for
operations compared to India. Also, China is coming up with  a huge threat and competitor for the industry
operations of India.

 

(C) Resistance of Job shifting
from developed country to India:- In the beginning
of 21st century, the British Union had started campaigns for the off
shore activities into countries life India and China (Raul, 2004). The same has affected the Indian IT/ITES industry
heavily and hence, the unemployment has started to begun with respect to the
same. The impact had risen when the white house also resisted the job shifting
to the off shore countries. (Haniffa
2003, Iqbal 2005). This has impacted India as a country the most with
respect to BPO industry as the main outsourcing destination for USA to fulfill
the need for IT and IT enabled service. (Mehra,2005)

 

(D) Political instability and
Terrorism:- There are number of political
instabilities and terrorism attacks which India has encountered like The Mumbai
Bomb Blast, Terror attack on Hotel Taj etc. Also, the political lobby has
frequent policy changes, operational strategic choices and decisions etc. These
factors impact the industry operations adversely. Hence, the MNCs hesitate to
expand their operations as far as India is concerned.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.3 IT/ITES Industry:: Employee
Satisfaction

 

According to Luthans (1998), job satisfaction or employee satisfaction is an
emotional response to a job situation which can only be concluded, often determined by how well outcomes
meet or exceed expectations. While the IT-ITES industries are similar to a
larger extent, yet there are certain intrinsic differences in the level of
people interface, the competence level and 
professional demands of the employees. The IT sector is specifically
more knowledge-oriented, may be 24X7,
flexible, and requires relatively more creative solutions to the business
issues. However On the other hands, the ITES sector is more service-oriented,
may be 24X7, rigid, stressful and relatively monotonous and repetitive.

 

According to Singh et
al., 1994; Singh, 2000; Weatherly and Tansik, 1993, The ITES
professionals majority times suffer from job burnout, or job dissatisfaction
due to various reasons. Research over the past decade has shown that the core
symptoms of burnout are emotional exhaustion and depersonalization (Bakker et al., 2002; Leiter and
Schaufeli, 1996).

Apart, there are various variables and determinants associated as
far as the employee satisfaction in this industry is concerned, which can be
explained as follows.

 

Ø 
Gender & Age:- The age and sex has its direct implication as far as the
employee satisfaction is concerned. According to Clark,1997 compared to men, women are having lower expectations
from job and hence it results into the higher job satisfaction. Also, according
to the studies, younger workers are consistently less satisfied with their jobs
than older workers (Hall, 1994; Schultz,
1973). Younger workers might have objectively poorer jobs than older
employees but they also have higher expectations for their jobs that may lead
to lower job satisfaction (Hall, 1994). The
employees of the IT/ ITES industries are having various ages and genders of
employees into the system which has a major impact on employee satisfaction.

 

Ø 
Salary:- Salary is a vital job-related
characteristic and also affects employees’ liking towards a job, their job
satisfaction level and results into their commitment to the organization (Sionget al.,2006; Grebner et al. , 2003;
Sharma and Jyoti, 2006; Kazemzadeh and Bashiri, 2005).Salary and promotions
are related to company policies, which in turn affect employees’attitude
towards work (Sharma and Jyoti, 2006).

 

Ø 
Career Succession Planning:- It is another
critical job-related characteristic which highly affects employees’
satisfaction and their willingness to stay with the organization(Siong et al., 2006; Addaeet al., 2006)

 

Ø 
Company Policies:- Policies matter
to organizations and employees in a similar way; they will shape employees’
perceptions of fairness and justice, and hence, their commitment to the
organization (Morris and Sherman, 1981).
It is also noted organizational policy and work environment increases
organizational commitment which in turn leads to employee commitment and
satisfaction (Kamal and Hanif, 2009).

 

Ø 
Rewards & Recognition:- Rewards and
Recognition often affect employee satisfaction and motivation at workplace. It
gets converted into an ingredient of self-esteem and hence affects employee
self-fulfillment (Russell and Thite,
2008; Sengupta and Gupta, 2008; Mishra, 2007; Kazemzadeh and Bashiri, 2005;
Sharma and Jyoti, 2006)

 

 

 

 

 

 

 

 

2.4 Summary

To sum up, the IT/ITEs industry is a backbone
for the economy of India and it provides a larger contribution to the global
economy as well. The Indian manpower industry is advantageous in a lot of ways
such as providing services at a low cost, efficient & round the clock
services and good communication skilled resources. At the same time, there are
certain weaknesses involved such as higher attrition rate because of variety of
reasons such as monotonous work, odd working hours, etc. The study also
enlightens us by determining certain factors that lead to employee satisfaction
such as salary, company policies, succession planning etc. The further study will
help us determine the linkage between all the variables and will show us path
that can help to enhance the employee satisfaction ratio to companies in
IT/ITES industry.