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29,6 Talent management strategy of
employee engagement in Indian
ITES employees: key to retention
640
Jyotsna Bhatnagar
Human Resource Management Area, Management Development Institute,
Sukhrali, Gurgaon, India
Abstract
Purpose – With talent management becoming an area of growing concern in the literature, the
purpose of this paper is to investigate talent management and its relationship to levels of employee
engagement using a mixed method research design.
Design/methodology/approach – The first phase was a survey on a sample of 272 BPO/ITES
employees, using Gallup q12 or Gallup Workplace Audit. Focus group interview discussion was
based on reasons for attrition and the unique problems of employee engagement. In the second
phase, one of the BPO organizations from the phase I sample was chosen at random and exit
interview data was analyzed using factor analysis and content analysis.
Findings – The results were in the expected direction and fulfilled the research aims of the current
study. In the first phase low factor loadings indicated low engagement scores at the beginning of the
career and at completion of 16 months with the organization. High factor loadings at intermediate
stages of employment were indicative of high engagement levels, but the interview data reflected that
this may mean high loyalty, but only for a limited time. In the second phase factor loadings indicated
three distinct factors of organizational culture, career planning along with incentives and
organizational support. The first two were indicative of high attrition.
Research limitations/implications – A limitation of the research design was a sample size of 272
respondents. Some of the Cronbach’s alpha scores of the subscales of Gallup q12 were low. The
strength of the study lies in data triangulation, which was obtained through a mixed method approach,
a survey and unstructured focus group interviews. There are theoretical implications for the construct
of employee engagement. There seems to be a construct contamination from the fields of employee
satisfaction, employee commitment and employee involvement, which is beyond the scope of this
paper. Future studies in India may look into this area and construct an independent scale of employee
engagement, focusing on the antecedent variables and testing them for theoretical underpinnings.
Originality/value – The present study indicated that a good level of engagement may lead to high
retention, but only for a limited time in the ITES sector. The need for a more rigorous employee
engagement construct is indicated by the study. Practical implications for retention in the BPO/ITES
sector are referred to.
Keywords Human resources management, Retention, India, Employees
Paper type Research paper
Introduction
Talent management is fast gaining a top priority for organizations across the world.
Trends for talent management, talent wars, talent raids and talent shortage, talent
Employee Relations metrics retention and concerns for talent strategy are expressed in the literature, across
Vol. 29 No. 6, 2007
pp. 640-663 various countries like the USA, the UK, Australia, Japan, China, India, and across Asia
q Emerald Group Publishing Limited
0142-5455
(see Yeung, 2006; Ruppe, 2006; Dunn, 2006; Chugh and Bhatnagar, 2006; Lewis and
DOI 10.1108/01425450710826122 Heckman, 2006; Lewis, 2005; Branham, 2005; Bennett and Bell, 2004). Talent
management was initially designed to improve the process for recruiting and Talent
developing people with the required skills and aptitude to meet current organizational management
needs. The various aspects of talent management are recruitment, selection,
on-boarding, mentoring, performance management, career development, leadership strategy
development, replacement planning, career planning, recognition and reward (Romans
and Lardner, 2006; Heinen and O’Neill, 2004; Scheweyer, 2004). Competition and the
lack of availability of highly talented and skilled employees make finding and 641
retaining talented employees major priorities for organizations (Fegley, 2006). In order
to attract and retain the best talent anywhere in the world, an organization must have a
strong and positive employer brand (Brewster et al., 2005). Employer brand
interventions in recent research indicates talent management as a key driver for this
strategy, and is on the agenda for HR executives in 2007 and beyond (HR Focus, 2006,
Focus, 2007). Talent has become the key differentiator for human capital management
and for leveraging competitive advantage. Grounded within strategic HRM (Gratton,
2000; Becker et al., 2001), the management of talent seems to be one of the key functions
that HRM is playing strategically in organizations (Bhatnagar, 2004). Recent research
indicates that the war for talent is intense due to labour market shortages (Branham,
2005; Brewster et al., 2005; Lawler, 2005; Boudreau and Ramstad, 2005; Cappelli, 2000;
Nybo, 2004; Sparrow, 2004), yet very little research attention has been aimed at
competitive talent management strategies. Further, Pfeffer and Sutton (2006) reflect
that the typical HRM/talent mindset, which looks at performance results as an
opportunity for an “assessment” of ability, leads to lower performance and unhappy
staff who do not fulfill their potential and thus would reflect low talent engagement.
In fact, talent engagement (Fombrum, 2006) is an area which needs a special
research focus. It raises questions such as:
.
What is the engagement score?
.
At what level are various talent segments and departments engaged?
.
Are engagement levels increasing over time?
Employee engagement
The literature on employee engagement has a practitioner influence, and research
studies (barring a few like Rothbard, 2001; May et al., 2004; Schaufeli and Bakker, 2004)
are sparse in this area. This paper examines both the aspects in the literature. We first
deal with practitioner-oriented definitions and then move to academic research.
According to CEO Speak in the Hewitt Best Employers Survey (2004), among the many
key people challenges one is to build a fierce employer brand equity (Fitz-enz, 2003),
and one way to do that is to retain employees. This would be possible if organizations
provide them with a passion to work, and an engrossing environment which
maximizes their performance and gives a continuous work experience that is difficult
for competitors to replicate. Managers are an important key in this equation (Baumruk
et al., 2006; Lockwood, 2006). Further, an employer of choice recruits and engages
talent through practices that address both tangibles and intangibles, with a focus on
the long-term as well as the short term, and are tailored to the organization (Branham,
2005). A recent survey of HR professionals in Western countries reflects that the most Talent
important issue anticipated in 2006 involved retaining and developing key employees management
(75 percent of responses); the next issue was of employee engagement and enhanced
productivity (60.7 percent of responses cited this issue), followed by leadership training strategy
and development (59.8 percent respondents cited this issue; HR Focus, 2006). Effective
talent management policies and practices demonstrate commitment to human capital,
resulting in more engaged employees and lower turnover. Consequently, employee 645
engagement has a substantial impact on employee productivity and talent retention.
Employee engagement, in fact, can make or break the bottom line (Lockwood, 2006).
Martel (2003, pp. 30, 42) is of the opinion that, “in order to obtain high performance in
postindustrial, intangible work that demands innovation, flexibility, and speed,
employers need to engage their employees [. . .] Engaging employees – especially by
giving them participation, freedom, and trust – is the most comprehensive response to
the ascendant postindustrial values of self-realization and self-actualization”. The
performance data of the best companies in the USA show that in all the practice areas
discussed previously, objectives are more easily met when employees are engaged and
more likely to fall short when they are not. In order to maintain an employer brand, we
see an emergence of a series of studies on employer of choice, which also measure
engagement index and financial performance (Coleman, 2005). A recent SHRM
Conference (2006) reported the result of a new global employee engagement study
showing a dramatic difference in bottom-line results in organizations with highly
engaged employees when compared to organizations whose employees had low
engagement scores. The study, gathered from surveys of over 664,000 employees from
around the world, analyzed three traditional financial performance measures over a
12-month period, including operating income, net income and earnings per share (EPS).
Most dramatic among its findings was the almost 52 percent gap in the one-year
performance improvement in operating income between organizations with highly
engaged employees versus organizations whose employees have low engagement
scores. Employee engagement surveys are designed to gauge the employee
engagement based on employees’ perceptions of the work environment, which is
part of the above surveys. Furthermore, when done well, practices that support talent
management also support employee engagement (e.g. work-life balance programs –
flexitime, telecommuting, compressed workweeks, reward programs, performance
management systems) according to the Corporate Leadership Council (2004) and
Martel (2003). Employee engagement begins with an on-boarding program and is
essentially a part of the human capital pipeline or talent pipeline, as some researchers
have determined (e.g. Romans and Lardner, 2005). In India, although many
multinational organizations have carried out the engagement index survey, yet no
attempt has been made to study the same and link it to talent management strategy.
The current study attempts to map the engagement index across the ITES sector due
to the high attrition rates mentioned previously.
These questions were derived through thousands of focus groups conducted over 2,500
business, healthcare and education units. The questions were factor-analyzed and were
subjected to confirmatory factor analyses. However linking the empirical evidence to
an established theory in the management research seems desirable as such. A
theoretical framework can aid in further validation, understanding and testing of
Gallup’s conceptualization of engagement (Luthans and Peterson, 2002, p. 377).
Luthans and Peterson (2002, p. 378) state that by conceptually comparing the Gallup
Workplace Audit (Buckingham and Coffman, 1999) with Kahn’s (1990) theoretically
derived dimensions of engagement, there seems to be a conceptual fit, and thus
establishes theoretical grounding for better understanding of employee engagement
and a way to operationalize and measure it through the Gallup Workplace Audit.
Further, involvement is important, as Baumruk (2006), states:
This is the feeling employees have about being ‘in the loop.’ Employees who feel ‘out of the
loop’ suffer in terms of engagement. This is about a manager’s ability to involve employees in
decision making, execution and day-to-day change initiatives.
Kahn (1990) suggests that employees experience dimensions of personal engagement or
disengagement during daily task performance. Yet Kahn (1990) notes that disengagement
is dependant on social and cognitive withdrawal and reflects incomplete role
performance. More recently, Seijts and Crim (2006) reported the findings of the 2005
Towers Perrin (Seijts and Crim, 2006) engagement study, which demonstrates alarming
findings of the disengagement rate in the US workforce, and does the Gallup Management
Journal (2006), which quotes alarming engagement indices for the US workforce. A recent
meta-analysis of over 7,939 business units in 38 companies explored the relationship at
the business-unit level between employee satisfaction-engagement and the business-unit
outcomes of customer satisfaction, productivity, profit, employee turnover, and accidents
(Nowack, 2006). This was conducted in a Western context. However, no such studies have
been replicated in India.
Looking at the above lacunae it also becomes vital to measure employee
engagement in India, especially in the ITES sector. It becomes important to determine
the disengagement areas, so as to plug the gaps and strengthen the engagement areas
ER by supportive OD interventions in the BPO/ITES sector. This sector has high levels of
29,6 attrition, as indicated by an Indian BPO, Infosys, where attrition is treated as a
business problem and not just an HR problem, and receives attention at a combined
leadership level (Sen, 2007; Saxena and Bharadwaj, 2007; Budhwar et al., 2006).
Methodology
648 Given the exploratory nature of the research, a mixed method approach was followed for
investigation, which included self-completed questionnaires, focus group interviews, and
possible secondary sources (exit interview data in this research study). The research was
conducted in 2005 and 2006, in the four BPO/ITES organizations falling in the National
Capital Region of India (NCR). In the first phase of the research there were 350 employees
who were approached to fill the questionnaires. The respondents were approached
personally for their responses and interviews. The researcher received 272 sets of
completed questionnaires making a response rate of 78 percent. The sample comprised 42
percent females and 58 percent males. The average age was 24 years and the minimum
qualification was an undergraduate degree. Focus group interviews were carried out for
about one and a half hours in one of the BPO/ITES organizations. The interview schedule
was unstructured and was based on the Gallup q12 questions (see Table I) and reasons for
attrition (open-ended question) about all levels of employees, with special reference to the
entry level. The group comprised of 30 male team managers/project heads/technical
heads at a management institute, where these members participated in a management
development program. Their level is middle management in the BPO/ITES sector. In the
second phase of research in 2006, one of the BPO/ITES organizations was selected
randomly. In this organization 72 completed exit interview forms were analyzed for
reasons of attrition at the team member/technical member and team developer levels.
These are the first two entry-level positions at this BPO. Employees at these levels are
typically fresh graduates (from varied streams) with a few engineers as well.
Measures
In the first phase of the research, Gallup q12, known as the Gallup Work Place Audit (see
Buckingham and Coffman, 1999) was taken up as a measure of employee engagement, as
it is established as a suitable instrument to measure employee engagement (Luthans and
Peterson, 2002). These 12 questions can be pictured as a psychological mountain climb
that employees make from the moment they assume a new role to the moment they get
fully engaged in that role. The stages on the climb can be described as follows:
(1) Base camp: “What do I get?” – When an employee starts a new role, he wants to
know what is expected out of him and what does he get from this role. This then
leads to Camp 1.
(2) Camp 1: “What do I give?” – At this stage the employee is focused on the
individual contributions and other people’s perception of it (i.e. whether others
value employees’ performance or not).
(3) Camp 2: “Do I belong here?” – At this stage of the mountain climb the employee
wants to know whether he fits here or not.
(4) Camp 3: “How can we all grow?” – This is the most advanced stage of the climb.
Here the employee wants to make things better, to learn, to grow, to innovate.
Cronbach’s
Construct items (items measured) Average factor loading a Mean for the scale SD for the scale Variance for the scale
Cronbach’s a, factor
649
Table I.
ER The sample items and results regarding reliability statistics (Cronbach’s a) are
29,6 provided in Table I. Reliability statistics indicate that the reliability values obtained for
the scale were satisfactory (. 0.70). However, the subscales of the GWA show low
scores, which is a limitation in this study. The items along with their factor loadings
and Cronbach’s a values are reported in Table I.
In the second phase the exit interview questionnaire was divided into two parts. The
650 first part consisted of 13 objective questions on a five-point Likert scale with an
additional sixth point factored in for the response as “Not applicable”. The second part
was a set of 14 open-ended subjective questions. Based on this data, analysis was
performed in two ways. The first was a quantitative analysis of the objective questions
based on the factor analysis approach. The second was a qualitative analysis of the
subjective questions, using content analysis. Both the phases fulfilled the second aim of
the current study.
Results
When we refer to Table II, we find that the mean for Base camp: “What do I get?” is
further towards the lower end than the other variables (M ¼ 8:14, SD ¼ 1:47), and this
is further supported by lowest factor loading reported in Table III.
The factor loadings are lowest for Base camp (0.601), indicating that employees of
the BPO/ITES organization find this juncture disengaging and are more likely to leave
in the first three months. The findings of the study find credence, as one of the team
managers reported in a focus group interview to the researcher:
IBPO/ITES employee’s highest attrition rate is recorded as soon as they join in. Completing
the training is a strenuous process and they usually leave as soon as the process is over.
Retaining them for the first six months is a challenge to the Team manager and the HR
department. Reward and recognition work only for the first three months and after that it
becomes a hygiene factor.
Variables Component 1
Table V.
Eigenvalues of the factors
653
.
Factor 3: role clarity, infrastructure support, adequate training and vision
alignment – We named this factor “Organizational support”. It explained 8.917
percent of the variation in responses and was therefore only a minor issue.
The disengagement trend in Base camp and Camp 3 (refer to Tables I and II for low
factor loadings) and exit interview analysis point to two major reasons for employee
attrition:
(1) The present work environment and organizational culture is a problem area.
This has emerged as the single largest concern from the exit interview data, as
well as from focus group interviews and survey of engagement scores.
Although this factor was explored only in the quantitative analysis, it emerged
as the strongest reason for turnover in BPO/ITES employees. The primary
issues raised were related to the extent and clarity of communication within the
organization, and the overall work culture. The kind of problems that are
associated with the internal job posting process are also symptomatic of a less
than healthy climate as there is widespread mistrust and suspicion.
(2) Dissatisfaction with the kind of career path available for the employees is a
problem. Further, the company’s motivational/incentive schemes seem to have
little positive effect on employees. This finding is further supported by the
interview statements of team managers, etc., who stated that reward and
recognition served as a hygiene factor after the first three years.
In the next step, qualitative analysis of the exit interview was conducted utilizing
content analysis. This section contains an identification of the factors causing
employee attrition at this BPO/ITES organization. It is based on the responses to the
subjective, open-ended questions in the exit interview questionnaire.
.
Internal job posting (IJP) – Dissatisfaction with the current IJP system is very
evident. While some employees have explicitly mentioned IJP as a source of
dissatisfaction, many others have referred to it indirectly as “the system of
promotions” or “opportunities for growth”. There is a perception that the IJP Talent
system is not transparent. We may draw an inference that employees are not management
clear about the process, or do not trust the system. This finding supports the
study of Budhwar et al. (2006). strategy
.
Work profile – This is the area that is causing maximum dissatisfaction among
the employees. The issue is either directly referred to or is expressed as a need to
work in a challenging domain, a shift to “technical work”. This seems to be a 655
particular problem with employees from a science or an engineering background.
Peer/societal pressures are evident in the references to “family” and “status” in
the interviews. Working as a BPO/ITES employee is considered to be lower
down the social order in the Indian context.
.
Personal causes – These factors are not controllable. However, taking note of
these factors at the time of recruitment might help reduce the rate of attrition.
The leading cause seems to be marriage or relocation. An interesting fact here is
that employees are actually seeking relocation within this BPO/ITES. There are
a few who have mentioned that they would like to relocate to other Indian offices
of this BPO/ITES organization. This might be a possible means of retaining key
talent within the organization.
.
Better career opportunities/compensation – A large number of employees have
shifted to other BPO firms in the NCR region due to these reasons. Typically,
these firms have offered a pay hike of at least Rs50,000 per month over the
current compensation offered by this BPO/ITES organization.
The findings support a recent study conducted in 2005, which reported global trends in
employee engagement, job satisfaction, retention and stress. The top five retention
factors included:
(1) exciting work/challenge (48.4 percent);
(2) career growth/learning (42.6 percent);
(3) relationships/working with great people (41.8 percent);
(4) fair pay (31.8 percent); and
(5) supportive management/great boss (25.1 percent).
Theoretical implications
There are theoretical implications for the construct of employee engagement. This is a
construct that has been the focus of many practitioner-related studies but very few
academic studies. The action research perspective of organizations tends to look at
employee engagement and very few academics (Joo and Mclean, 2006) have looked into
the theoretical and operational schemata of employee engagement. At the
nomonological level, there seems to be construct contamination from the fields of
employee satisfaction, employee commitment, organizational citizenship behaviour
and employee involvement that is beyond the scope of this paper. Yet future studies in
India may look into this area and construct an independent scale of employee
engagement, focusing on and testing the antecedent variables , more rigorously for
theoretical underpinnings. It seems obvious that engaged employees are more
productive than their disengaged counterparts. For example, a recent meta-analysis
published in the Journal of Applied Psychology concluded that “employee satisfaction
and engagement are related to meaningful business outcomes at a magnitude that is
important to many organizations”. A compelling question is this: how much more Talent
productive is an engaged workforce compared to a non-engaged workforce? (as cited in management
Seijts and Crim, 2006).
strategy
Practical implications
Employee engagement and a better talent management and retention strategy may
imply the following HR interventions for the BPO/ITES sector in India: 657
.
identification of an engaged workforce at all levels which is passionate about
continuous learning and challenges, triggered through a continuous positive
employee relationship;
.
further designing HR interventions to keep them engaged;
.
a need to establish a stronger psychological contract (Rousseau, 2004) based on
relational need (which takes care of Camps 1 and 2) rather than a transactional one;
.
create peer partners and mentors who care and nurture relationships in terms of
quality rather than quantity of time together and who take care of the emotional
needs and need for involvement of employees;
. treat employees as wealth co-creators, and see employees as partners in the
business and help them achieve the satisfaction of creating and fulfilling new
areas of business acumen.
This would take care of the growth aspects of employees. An important implication is
present for HR, which should market the company and its brand to current employees
as vigorously as to the outside talent pool (Dell and Hickey, 2002). Further high
commitment based systems with built in control systems are needed so that both fun
and surveillance are balanced (Halliden and Monks, 2005). Also, on their internal
websites organizations may blacklist employees who leave the organization within
three months. An industry collaboration along with NASSCOM to backlist and stop the
recruitment of such employees for a particular period of time, in order to moderate
attrition rates, could also help. The internal job posting (IJP) process has to be clearly
outlined and a specific system of selecting candidates has to be communicated. The
criteria for selection should be clearly arrived at and stated explicitly to employees. A
more concerted effort should be made to ensure internal job postings take place to
ascertain that employees have a growth path in the organization. Processes should be
put in place to check that the career aspirations of employees are clearly understood
and job roles are defined with as close an alignment to career aspirations as possible.
There is an evident mismatch between the expectations of employees and the roles and
profiles offered by the organization. Steps need to be taken to correct this mismatch,
probably by better communication during the selection process and by taking another
look at the potential pool of candidates that the organization has identified. This would
moderate attrition at the Base camp level. Exit questionnaires should be backed with
actual interviews of candidates before they leave to ensure that softer issues that may
not have been brought up through the questionnaire are also drawn out. The data
obtained from the questionnaire should be studied on a monthly basis to make trend
projections about the possibility of employees who might leave. This would give the
organization an early warning system that could predict attrition rates for the future,
as has been done by Cisco (as reported by Saxena and Bharadwaj, 2007).
ER Limitations of the study
29,6 The reliability of certain variables was lower than the accepted threshold of 0.70, which is
a limitation of the study. This also lends credence to the need for an independent and more
robust engagement scale adapted to pan-Asian conditions. Testing this scale across
nations would be another area for future research. Also, the sample was small, and
generalizations regarding employees in the entire BPO/ITES sector are not possible.
658 Future studies may look into the various types of BPO/ITES organizations, BPOs, KPOS,
keeping the cost and quality of HRM systems in mind and conducting more robust
research. Future studies may also look into correlation studies of employee engagement
and exit interviews to establish empirically the association that those employees with low
engagement scores are the ones who are leaving organizations. This study could not
establish this. Further, as technology grows more complex and with the projected estimate
of BPO/ITES work in India expected to achieve revenues of $148 billion by 2012 (National
Association of Software and Services Companies, 2005), these results are of significant
importance to the Indian ITES sector’s employees, top management and HR managers.
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Corresponding author
Jyotsna Bhatnagar can be contacted at: jyotsnab@mdi.ac.in