Chapter – I – Introduction

CHAPTER - I

INTRODUCTION

This introductory chapter deals with the basic concept of employee engagement &

Retention in general followed by the significance of Retention in IT/ITES industry. It

also includes scope of research, study, Rationale & significance of the study and other

details.

1.1 MOTIVATION AND BACKGROUND OF THE STUDY

The challenge today is not just retaining talented people, but fully engaging them,

capturing their minds and hearts at each stage of their work lives. Employee

engagement is a buzzword nowadays. Organizational success to a great extent is

dependent on employee engagement. Not Employee engagement leads to retention,

higher productivity and loyalty among employees and it is a key link to customer

satisfaction, company reputation and overall stakeholder value. Thus, to gain a

competitive edge, organizations are looking to adopt practices to improve employee

engagement and commitment. Employee engagement is the emotional attachment of

an employee with his/her organization, how hard they work and how long they stay as a

result of that attachment.

While this investigation was in advance, two men at the centre point of India Inc.,

Cyrus Mistry and Vishal Sikka made sudden ways out prompting automatic responses

in the corporate circles. Such was the effect of Vishal Sikka's leave that it prompted a

dissolution of around Rs.22, 000 crore of investors' money in a day. Vulnerability and

uncertainty has not recently not only seen at the top; thousands at the bottom and

middle level in the IT business have been given the pink slip. This investigation

endeavours to comprehend the process of such uncertainties in the middle of

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discussions about leadership, commitment and loyalty towards the organization. Rather

than participating in "hypothetical" examination, this investigation endeavour at ground

level sensible appraisal of worker commitment rehearses at selected IT and ITES

organizations. What engages an employee? Is it Mr. Narayan Murthy? Or then again is

it Vishal Sikka? Will it be dangerous if the representatives are excessively engaged?

What shall be the idea of commitment factors? What really affects the employee

engagement? and so on, these are points covered in this study.

The numbers speak for themselves. They are not at the mercy of language for their

expression. Have a look at the recent highly expressive numbers of the top 4 IT

companies-

Table 1.1 – Attrition rates and profits of top IT companies for last 5 years

WIPRO TCS Cognizant HCL

Year
AR Profits AR Profits AR Profits AR Profits
2012-13 14% 66,696 11% 14076 11% 1,051 18% 732
2013-14 15% 78,405 11% 19332 15% 1,229 17% 1,037
2014-15 17% 87,059 15% 20060 15% 1,439 21% 1,164
2015-16 16% 89,567 16% 24338 19% 1,624 23% 840
2016-17 16% 85,143 11% 26357 16% 1,553 23% 1,262
Correlation 0.96 0.26 0.90 0.36

AR = Attrition rates. Profit figures are consistently expressed in the same currency,

either Rs. or in USD.

All the companies have shown a consistent rise in the attrition rates. And surprisingly,

all the companies at the same time have shown a consistent rise in profits as well! The

numbers are not for a year or two. Neither are numbers for a company or two. Four

companies over the last 5 years have shown a positive correlation (two of them as high

as 90% or more) between attrition rates and profits!

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So, on one hand the theory – that is absolutely pleasing to the ears in terms of the nicely

coined terms – 100% employee engagement, employee engagement is a strategic

initiative to check attrition. Practice on the other hand is something drastically different.

CEO of a company in the morning delivers a lecture to a full house HR conference

gathering and sings marvellous songs, spelling out the glory of the human capital, its

immense value, the need for its meaningful engagement, etc. In the afternoon, the same

CEO approves of a job-cut in his organization that would render some thousand jobless.

No, this is not a fictional story. Tanya Jain (2017) writing for Data Quest has given the

following numbers – “Recently, in the sheath of thorough assessment and appraisal

process, Wipro has churned out over 500 employees. An official has claimed it as a

process to sack non-performers from the organization. Concurrently, Tech Mahindra

due to its own share of challenges and business propels may sack around 1500-2000 of

its employees. On this, Tech Mahindra spokesperson quoted the action as an annual

process and started this year to be no-different. Other major IT organizations, including

Infosys, Capgemini and Cognizant are also said to walk the same path like their fellow

competitors. Cognizant Technology Solutions is said to bring down its employability

graph by 5%, i.e. a dash of thousands of employees this year. As reported earlier by

Dataquest, the Aspiring Minds’ ‘Automata National Programming Report’ stated that

2/3rd of the IT professionals cannot write code and so, 95% engineers are not

employable.”

Given this scenario, the situation demands that we study some unstudied dimensions of

employee engagement. So far, researchers have primarily focused only on one aspect –

What engages an employee? The time has come to ask a few more questions – Who

should decide on employee engagement and How much should an employee be really

engaged?

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A vital sign of this sector has been as the tremendous size of working individuals. After

so many years, this sector is always being a generator of employment– as around

230,000 employees are added in FY2012, hence giving direct work assignment to

around 2.8 million jobs seekers, and in indirectly included around 8.9 million jobs. It is

surprising to take note of that roughly 75%of the IT workforce are under the age 45.

Numerous directors in the IT Industries are now in their 20's and 30's in this way it is

making very hard to keep them and retain them

1.2 EMPLOYEE ENGAGEMENT & RETENTION

It has been proved time and again that enthusiastic and committed employees add value

to their organization not just in terms of productivity, but also customer satisfaction,

retention, profitability etc., thus employee engagement is the buzz word nowadays in

any organization.

Engagement at work was conceptualized by Kahn (1990) as the “harnessing of

organizational members” selves to their work roles. In engagement people employ and

express themselves physically, cognitively and emotionally during role performances.

Employee Engagement essentially depicts our connection to our work, our

organization, our customers, our efforts and to results.

Definitions of Employee engagement

Employee engagement is a multidimensional concept and different studies reveal

different definitions of employee engagement, but because it is beyond the scope of the

research to explain all those definitions only few are explained in the following section:

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William. A. Kahn (1990) was the first to conceptualize employee engagement. He

explained employee engagement as the “harnessing of organizational member’s selves

to their work roles”

Harter et al. (2002) from the Gallup organization defined employee engagement as

“an individual’s involvement and satisfaction with as well as enthusiasm for work”

Schmidt et al. (1993) described employee engagement as an “an employee’s

involvement with, commitment to and satisfaction with work.”

Hewitt Associates (2004) define employee engagement is the energy, passion, ‘fire in

the belly’ employees have for their employees, so as they ‘stay’ (desire to be a member

of the organization), ‘say’ (speak positively about the organization) and ‘strive’ (go

beyond what is minimally required).

Towers Perrin (2003) defines employee engagement is that “which involves both

emotional and rational factors relating to work and the overall work experience. The

emotional factors tie to people’s personal satisfaction and the sense of inspiration and

affirmation they get from their work and from being part of their organization.”

Development Dimensions International Inc., (DDI) (2005) head-quartered at

Pittsburgh, define employee engagement as “the extent to which people enjoy and

believe in what they do and feel valued for doing it.” There are three key aspects of this

definition: enjoyment i.e, people enjoy what they do as a part of their job or otherwise

in the organization; belief, that in doing, so, they are making meaningful contributions

to the organization; and value i.e., they are being recognized for making such efforts.

Buckingham & Coffman (1999) says that feeling of engagement depends on the

strength of the workplace not necessarily on corporate leadership

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According to William H. Macey and Benjamin Schneider (2008), employee

engagement refers to “positive feelings on the part of employees about their jobs and

also the motivation and efforts put by them into their work. Engagement leads to

positive employee behaviours’ which in turn lead to organizational success.”

Employee Retention

Employees are assets of any organization and organization always try to avoid losing

the key performers. Employee retention refers to various practices of the organization

which lead to employees stick to organization for long. It is a systematic effort by the

employers which lead to create a favourable environment for the employees to work

which in turn encourages them to remain with the organization.

Employee retention is important because in the twenty first century the only sustainable

source of competitive advantage for any company is its “Human Resources”. To

maintain stable workforce employers must deliberately engage in retention activities.

An organization’s ability to retain the kind of employees it requires has a direct impact

on its profitability and effectiveness.

Employee retention involves taking steps to promote employees to remain in the system

for the maximum point. Whereas retention management has become a major source of

competitive advantage in the modern, rapidly globalizing business world (Vaiman,

2008). Randenbush, S.W. & Bryk, A.S. (2002) indicate that the employee turnover

affects family, organization and club. It takes stress in family as relocation of a family

and employee will become necessary and financially related matters in joining with the

relocation also arise. For an establishment it may contribute to disruption of service to

customers and the dissatisfaction of employees due to the extra work load. When an

employee with vital skills to defend the order leaves the organisation, it impacts the

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society generally. With retention a growing concern for organisations, interpreting the

constituents that drive loyalty and commitment among employees is all important for

managing increasing turnover risk in the months and years ahead, (Mark Royal, Hay

Group News release, 2011). As per Corporate Leadership Council report (2008) the

highly engaged organizations have the potential to cut the staff turnover by 87%, the

disengaged are four times more likely leave organization than average employees. It

was noted that the employee retention can be improved by improving employee

involvement.

Function of HRM In Employee Engagement And Retention - Human Resources

Management (HRM) play important role in retention of employees. HR managers have

to distinguish the right retention strategies which their employees perceive to be

efficacious. Good HRM practices in the area of compensation, reward, career

development, supervisors’ support, culture and work surroundings can help to better

retention (Meyer and Allan, 1991; Solomon, 1992; Snell and Dean, 1992). Many

systems today use an extensive scope of human resources management factors that

influence employee commitment and retention (Stein, 2000; Beck, 2001; Clarke, 2001;

Parker and Wright, 2001). According to them, the factors which influence employee

retention are work environment, supervisor support, organization image, employee

value match, remuneration, reward and recognition, employees’ career development

etc. Hay Group study (2011) has identified five key factors that differentiate “stayers”

(those committed to the company more than two years) from “leavers” (those planning

to leave in two years or less). The key factors are confidence in the organization and

leadership, room for employees to grow, a fair exchange between organization and

employee, an environment for success and authority and influence. Factors influencing

engagement include work environment, rewards and recognition, career development,

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supervisor/leader, compensation/remuneration, and employee- organization value

match. Thus, the researcher delves in depth in the present study on the impact of EE on

retention of employees.

1.3 IT/ITES INDUSTRY

The Information technology industry in India has gained tremendous appreciation and

has become a brand identity as a knowledge economy due to its IT and ITES sector.

The growth story in the service sector in India has been led by the IT–ITES sector, with

significant contribution to increase in GDP, employment, and exports. The sector has

increased its contribution to India's GDP from 1.2% in FY1998 to 7.5% in FY2012.

According to NASSCOM, the IT–BPO sector in India aggregated revenues of US$100

billion in FY2012, where export and domestic revenue stood at US$69.1 billion and

US$31.7 billion respectively, growing by over 9%. (NASSCOM).

An important contribution of this sector has been in the form of huge employment

generation. Year after year the industry continues to be a net employment generator –

approximately added 230,000 jobs in FY2012, thus providing direct employment to

about 2.8 million, and indirectly employing 8.9 million people. It is worthwhile to note

that approximately 75%of the IT personnel are younger than age 45. Many managers in

the IT Industries are in their 20’s and 30’s therefore making it more difficult to manage

and retain them.

IT Industry has been one of the shining stars in the Indian Corporate history. Infosys is

credited for pioneering an entirely new kind of industry in India in the early 90s.

Skeptics had rejected the IT industry as some kind of bubble. But the industry has not

only survived, it has actually grown by leaps and bounds over for more than 3 decades

now. The industry is predominantly a service oriented one and hence role of manpower

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and HR is of a great significance. And hence, when things like record attrition rates

were reported, it obviously became a matter of curiosity, thus the researcher got

motivated to carry a systematic study of the entire thing.

Ever since the beginning inception, the IT industry has been in the limelight for various

things, thanks to the revenues it has been generating and the employment it has created

for millions of people. Given the huge profits and lucrative market size, many small

and big players have entered into this market, and therefore a major chunk of

youngsters are making their careers in the IT sector. Alongside the major players in IT

sector like Infosys, TCS, Wipro, there are a big number of medium and small scale IT

industries in India. When there are so many IT Industries, employees obviously have an

option of hopping around quite frequently. They consider good working condition,

challenging projects, perks and a decent salary package and also expect support for

their higher studies from their employees. The moment they realize they are being

underutilized, they start looking for a new job, and most often they get the job of their

choice. In such a case, organizations face lot of problems, as a high turnover rate may

adversely impact profitability. To prevent such situations, companies have to adapt

retention and engagement strategies to make employees stay for reasonable period in

which the employee is able to contribute and perform. An important point here is which

strategy or strategies should be deployed, which works well with all the employees.

This is a difficult question, because every individual is different and is motivated by

different job and personal factors. In this scenario, this study follows a line of

investigation on the key retention and engagement strategies that can work well for

majority of the employees of IT Sector.

Significance of Employee Retention: Andrew Carnegie, famous industrialist of

19th century who is popular for having built one of the most powerful and influential

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corporations in US once commented, “Take away my factories, my plants; take

away my railroads, my ships, my transportation, take away my money; strip

me of all of these but leave me my key people, and in two or three years, I will have

them all again.”

It is well known fact that the IT/ITES industry is greatly dependent on its employees,

and therefore the employees should be given the first priority of all the factors of

production. The fact that retention is much more cost effective than hiring is now being

highlighted in research as well. According to LBW Consulting (Leadership In

Business, Worldwide), the cost of replacing an employee ranges from 29% (non-

management) to 46% (management) of the person's annual salary. Expenses are also

incurred when someone acts as a substitute in the interim, leading to a big effect on

employee cost.

The above discussion makes it amply clear that HR Retention strategy has a major role

to play particularly in the IT industry. Employee engagement is one of the important

components of HR retention strategy.

“Talented men leave, Dead wood doesn't”. 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 and money), an occasional employee or two, and a chunk of

your future. Employee Retention Strategies helps organizations to provide effective

employee communication to improve commitment and enhance workforce support for

key corporate initiatives. It also provide full support for marketing-communication

efforts by helping to build customer loyalty by distinguishing and positioning

organization’s unique products and services in today’s crowded marketplace.

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The business environment now a day is so competitive that companies should do their

best to find appropriate employees and create a good working environment so that they

can stay in business and make high profits. Managers spend a great deal of time and

money in coming up and attracting employees who are responsible, innovative,

knowledgeable and motivated to exercise. When companies discover the successive

employees, the question arises how to preserve the execution and satisfaction level. The

director must try to employ various techniques so as to retain the employees in their

competitive world.

Gurt Goffman states 71% of U.S. workers are disengaged meaning employees does not

have any worker in the organisation. The event has been described in the S. Robbins

and T. Judge “Organizational Behaviours” book (chapter 7. Motivation) explores that

feeling lack of appreciation results in a reduction in the employees’ performance.

The case has explored the complicated subject of how to establish recognition and how

to award employees for their dependable functioning. Usually, companies fail when

they have to say “Thanks” to their employees when they deserve. Research has

demonstrated that, payment bonuses are not plenty to increase worker satisfaction. The

employee should be evaluated not only for name sake, but instead to increase their team

spirit.

Exchange works for a hauling company, presents an instance of the “Presents” given to

his company Vice-Presidents. He says even though they receive expensive gifts,

luxurious Cadillac Seville automobile, and a new Rolex wrist watch, they were not

administered in a proper manner. These present’s not only didn’t please them, but also

made them feel even undervalued, which contributes to a reduction in their execution.

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Performance is believed to be a function of three factors: - ability, motivation and

opportunity to execute. The director must try to offer an opportunity to perform

conducive working environment, and free of hurdles’. If managers get in business with

all the three factors, definitely employee’s performance will improve strength. Credit is

essential to prevent employees, to feel disengaged and unappreciated and will

contribute to a reduction in their execution.

Sometimes a sincere pat on the spine is a lot more meaningful for a person than giving

sincere gifts. Employees want their workplace to be valued and are very pleased when

senior management closely observes their behaviour on the working situation. Also, pat

on the back is also not enough. Thus, sincere thank you and appropriate payment are

very important to retain employees.

Gurt Goffman once stated “It’s appalling that we are operating at one fourth of the

capacitance in terms of managing human capital.” What complicates is the trouble of

how to distribute recognition and business properly and moderately. If the troupe holds

a large number of employees, it is indeed really difficult to observe closely all of them

and to find out who has more contribution to the company, especially when teamwork

is required. In event the worker feels that he or she is being devalued, it immediately

leads to fall in his execution.r to increase performance and satisfaction managers can

use the so called modular plans. As Expectancy theory explores, giving the same

benefits to everybody in the supposition that they are all the same is incorrect.

Managers should take on the demands of the different specific groups of the great

unwashed. Moreover, managers find it still more difficult to motivate temporary

employees. To do so, they should not let them recognise what the benefits for the

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permanent workers are, even if they are awake of them; managers should provide those

workers with the chance to become permanent company’s employee.

All the action of the employees should be subordinated to the realization of serious

response. Fundamental changes are taking position in the work force and hiring and

retaining good employees have become the main concerns of nearly every company.

Companies who attempt to realize the needs and wants, accordingly plans a strategic

decision proactively to meet their needs and will definitely get a dominant players in

their respective marketplace.

It is a fact that, retention of key employees is critical to the long term health and

success of any governing body. Retention of employees is a great concern as various

organizational matters such as preparation time and investment on candidates are

regarded.

Effective Employee Retention is a systematic attempt by employees to create and

nurture an environment that have policies and practices in place that address their

various demands. A strong retention strategy becomes a powerful recruitment tool. It is

known fact that retaining good employees ensure customer satisfaction, increased

product sales, satisfied colleagues and reporting staff.

Several estimates indicate that losing a middle manager in most organizations cost up

to five times of his remuneration. According to American Society of Training and

Development, organizations that invested the most in training had higher gross margins

and income per employees. The price of replacing an employee who leaves has been

judged by several studies to be between 70 % and 200 % of that workers annual

earnings.

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The written report will refine the various strategies and will occur to an outcome to

keep the employees along the basis of determinations.

1.4 RATIONALE & SIGNIFICANCE OF THE STUDY

In the present scenario, organizations, especially IT/ITES sectors are going through

rapid changes. These varieties are due to economic reforms, global competition, low

cost manufacturing, forcing organisations to search actively engaged employees to

achieve the organizational growth and growth. Engaged employee is passionate to work

and is a key participant in the business development of the organisation, the buzzword

is to keep these key actors. Hence far, limited research is available on employee

participation and retention, the researcher here will seek to come upward with a

conceptual example of employee engagement to keep employees in IT/ITES sector.

This inquiry is important to the sphere of understanding organizational behaviour,

human resource management and psychology. The construct used in the study are

employee engagement and employee retention. This inquiry will supply an opportunity

to add new findings to the phenomena of employee participation and retention. This

research will have implications for practitioners that would assist the organizations in

developing HR policies to align employee engagement and retention of people.

1.5 PROBLEM STATEMENT

The earlier research on retention of employees has given many solutions to the problem

of attrition, and of course some strategies have worked to some extent in retaining the

employees, but the organizations should be continuously in search of new strategies to

retain its employees. In view of the recent developments in the field of IT, some kind of

turbulence is happening as is evidenced by high attrition rates, the classic clash between

the Titans – Narayan Murthy & Vishal Sikka. The issue is to retain top talented

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employees, those who represent a valued organizational asset. When the loyalty of the

top talented employees deteriorates the tendency to switch organization increases. The

loss of just a handful of key employees who have a special expertise or who maintain

valued customer relationships can shake an organization to its roots. In this age of high

stakes and unpredictable market and organizational changes, organizations must

educate their managers and create an environment where today’s top talent can thrive.

Therefore the study the “Impact of Employee Engagement on Retention of

Employee –A Study of selected IT/ITES Companies Pune city.” is being carried out

which helps the organizations to retain its talented employees.

The researcher main thrust is on fundamental questioning of the issue of retention of

employees through employee engagement. The researcher developed a conceptual

model of employee engagement to retain employees by researching on the questions

like who should decide the employee engagement factors, how much should an

employee be really engaged, what should really engage employees are the backbone of

this study. The studies significance lies in its practical and ground-level approach.

Instead of harping around the same old rhetoric like 100% or 200% employee

engagement, what is required is a stock taking of the ground realities. This study is a

step in this direction.

1.6 RESEARCH OBJECTIVES

1) To identify the factors of employee engagement in Information Technology &

Information Technology Enabled Services companies.

2) To analyse the factors of employee engagement that help in retention of

employees.

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3) To study the impact of Employee Engagement on Retention of the employees in

Information Technology & Information Technology Enabled Services (IT &

ITES) companies in Pune city.

4) To suggest measures to retain employees by developing a conceptual model of

Employee engagement.

1.7 RESEARCH HYPOTHESIS

1) H1 –Employee engagement factors are always decided by employers and

employees.

2) H2–Monetary factors of employee engagement are more influencing than non-

monetary factors.

3) H3 - Employee engagement has great impact on employee retention.

1.8 SCOPE OF STUDY

The study endeavours to understand and evaluate the current employee engagement

factors at the IT & ITES companies. It tries to identify the employee engagement

factors and their impact on retention with reference to the IT & ITES companies. Since

this is an industry specific research to that extent its scope is limited. Yet, the IT

industry has been one of the rising industries in the Indian economy for the past couple

of decades now and is an important source of employment generation. The scope of the

study is restricted to IT / ITES companies of Pune city. The companies whose turnover

is above 10 crores and should have been established for at least 5 years.

1.9 OPERATIONAL DEFINITIONS

1) Employee Engagement: Employee engagement make employees emotionally

bonded to their organization and tend them to become passionate about their

work and hence results in improvement of employee retention. (While the

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general and universal definition is considered more specific definition as

applicable to IT/ITES industry has been used often.)

2) IT Company of repute – Reputation of the companies based on the awareness

about the company in common close circles like the Guide, Friends and

Colleagues. The researcher has selected 30 companies (Total 574 companies

(population), MCCIA Directory) for the study by adopting the criteria that their

turnover must be above 10 crores, company must employ 500 and above

employees and must have its existence for five years so that the respondents are

aware of the concept of Employee engagement and can answer the

questionnaire easily.

1.10 LIMITATIONS OF THE STUDY

1) The time period selected for the study is approximately 5 years from 2012-13 to

2016-17. All stated and done the period of study of 5 years does impose a

restriction. Nevertheless, it is felt that 5 years is a reasonable period and is not

too short to miss important developments.

2) This subject was set to select IT/ITES Companies in Pune and the

recommendations cannot be applied in a generalized way.

3) Limitations due to sampling

 Insufficiency of the samples.

 Chances for bias.

 Problems with the accuracy of information.

 Difficulty of getting the representative sample.

1.11 ORGANISATION OF THESIS

The thesis has been divided into six chapters.

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 Chapter – I – Introduction

Chapter-I-Introduction

This introductory chapter deals with the basic concept of employee engagement &

Retention in general followed by significance of Retention in IT/ITES industry. It also

includes scope of research study, Rationale & significance of the study and other

details.

Chapter-II-Review of Literature

This chapter comprises review of research papers; articles & research thesis which are

related to the present study are outlined. The chapter also includes the highlights of the

reviewed research material followed by identification of research gap.

Chapter-III-Profile of IT/ITES companies

The chapter has details of selection of IT/ITES companies for the study, the list of

companies for the study and also describes profile of IT/ITES companies in detail -

overview of the IT/ITES sector, top players, key policy initiatives, details of exports &

imports of IT/ITES companies’ growth prospects etc.

Chapter–IV-Research Methodology

The chapter focuses on the research methodology and various components of the

methodology adopted such as the population of the study, sampling techniques, sample

size, data collection tools and methods of data Analysis.

Chapter –V-Data Analysis and Interpretation

In this chapter detail of Data Analysis and Interpretation of research study is explained

such as the profile of the respondents, statistical tools adopted for the testing of

hypothesis etc.

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Chapter–VI-Findings, Suggestions and Conclusions

This chapter presents the findings of the study, suggestions, principle conclusions,

scope for future research, contributions made to the body of knowledge on the subject

in detail.

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