ijcrb.webs.com INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS An Empirical study on talent retention strategy by BPO s in India

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1 An Empirical study on talent retention strategy by BPO s in India Saravana Praveen Kumar. P MA, MBA, M Phil, EGMP (IIMB), Ph D Manager, Human Resources, Siemens Ltd Author is a Research Scholar pursuing Ph D from Bharathiyar University, Coimbatore Dr. V. Dhamodharan Head of Department, Business Administration Government Arts College, Nandanam, Chennai Abstract Employee s attitude and behavior (including performance) reflect their perceptions and expectations, reciprocating the treatment that they receive from their organizations. Several theoreticians have argued that the human resources of the company are potentially the only source of sustainable competitive edge for organizations. The present study aims at developing insight on how employee retention is relevant in present business context. Primary data was collected by the researcher with the help of structured questionnaire administered to the middle level employees in two leading BPO companies in Chennai. 212 middle level employees from those organizations constitute the sample size. Simple random sampling using lottery method was adopted to select the respondents for this study. Using Statistical Package for Social Sciences(SPSS)the following test were administered 1)Multiple Regression and 2)Factor Analysis. The major dimensions (Organizational Fit, Remuneration & Recognition, Career Development, Challenging Opportunities, Leadership, Team relationship, Organizational policies, Communication, Working Environment, Organizational Commitment) are taken to measure their influence in employee retention. Due to various reasons the companies name is not being disclosed in the study. Some of the relevant findings were derived that will be significant to present Indian scenario. Key Words: Retention, Attrition, Attitude, Strategy COPY RIGHT 2013 Institute of Interdisciplinary Business Research 207

2 Introduction Organizations today constantly wrestle with revolutionary trends, accelerating product and technological changes and global competition, and demographic changes. It has been observed that employee turnover, especially amongst Business Process Outsourcing organizations, is becoming a problem which costs a lot of money, efforts and energy. This problem might be a major obstacle for HR professionals in formulation of their HR policies. Employee retention is one of the major challenges facing many business organizations today. For many organizations, strategic staffing has become a concern because the ability to hold on to a highly talented core employees can be crucial for future survival. Society has now become knowledge based where clearly human capital is considered as a key resource and indispensable to the survival of the businesses. Now a days companies recognize that an important element in business management practices is the need to successfully motivate and retain high talent employees. If an employer lost an employee with a great amount of experience, it would take lots of time and money to retain a new employee for positive production. Experience is an intangible that is relied up heavily. Every workers carries with him or her at least three basics types of experience. Every worker possesses a certain amount of industry, company and position specific experiences. Employees leave for a variety of reasons including poor supervision, unchallenging position, limited advancement opportunities, lack of recognition,limited control over work, perceived pay in equity and perception of more favorable opportunities in other companies. High employee turnover is one greatest causes of declining productivity and decreased morale in corporate. While morale decreases, recruiting and training cost increases and an organization can find itself in a vicious cycle. In this empirical study the researcher identified some of the HR strategies to retain the employee s in the BPO organization. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 208

3 Literature review The reason of turnover vary from external environmental factors such as economy and its impact on turnover such as employment level, inflation (Pettman, 1975; Mobley, 1982) to the organizational variables such as type of industry, occupational category, organization size, payment, supervisory level, location, selection process, work environment, work assignments, benefits, promotions, and growth (Mobley, 1982; Arthur, 2001) The other turnover factors are related to the individual work variables such as demographic variables, integrative variables like job satisfaction, pay, promotion and working condition (Pettman 1975; Mobley, 1982; Arthur, 2001). The last perspective is the individual nonworking variables such as family variables (Pettman, 1975; Mobley, 1982). The most important studied demographic variables are age, tenure and education. It was found, for example, that there is a consistent negative relationship between age and turnover. Younger employees have a higher probability of leaving (Porter and Steers, 1973; Price, 1977; Horner et al., 1979; Muchinsky and Tuttle, 1979). Younger employees have more chances, low family responsibility, and no lost chances in the existing organization. Similar to age, length of service is contributing to turnover decision. It was found that, the shorter the period of service, the higher is the turnover. Mangione (1973), in a multivariate study, found that length of service is one of the best predictors of turnover. However, there is no relationship between turnover and education as highlighted by Horner et al. (1979) and Price (1977) Boxalletal (2003) found that the main reason by far for people leaving their employer was for more interesting work elsewhere. It is accepted that the effect of the job satisfaction on turnover less than that of organization commitment. Dahlgaard and Eskildsen (2000) studies showed that employees who are satisfied with their jobs on more productive, creative and be more likely to be retained by the company.elangovan (2001) noted that the notion of job satisfaction and organizational commitment being casually related has not been incorporated in most turnover COPY RIGHT 2013 Institute of Interdisciplinary Business Research 209

4 models. His study indicated there were strong casual links between stress and satisfaction(higher stress leads to lower satisfaction) and between satisfaction and commitment(lower satisfaction leads to lower commitment) He further noted a reciprocal relationship between commitment and turnover intensions(lower commitment leads to greater intentions to quit,which in turn further lowers commitment).in summary, only commitment directly affected turnover intentions.griffeth et al(2000)examined that pay and pay related variables have a modest effect on turnover. Their analysis also included studies that examined the relationship between pay a person s performance and turnover. They concluded that when high performers are insufficiently rewarded, they leave. Hammer(2000);Marini(2000);Denton (2000) examined that employees who are satisfied with their jobs are more dedicated to doing a good job and taking care of customers that sustain the operation. Hence the job satisfaction is something that working people seek and a key element of employee retention.nussler and Eskildsen (2000) suggested that employers are fighting to get talented employees in order to maintain a prosperous business. Research Questions To identify the various HR factors that influences the employee s towards retention in BPO To examine the impact of employee recognition and challenging assignment towards retention. HYPOTHESIS 1) There is relationship among the factors that influences the employee s towards retention in BPO Organizations 2) Challenging Assignments and Recognition can predict the retention of employees. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 210

5 METHODOLOGY The present study aims at developing insight on how employee retention is relevant in present business context. Primary data was collected by the researcher with the help of structured questionnaire administered to the middle level employees in two leading BPO companies in Chennai. 212 middle level employees from those organizations constitute the sample size. Simple random sampling using lottery method was adopted to select the respondents for this study. Using Statistical Package for Social Sciences(SPSS)the following test were administered 1)Multiple Regression and 2)Factor Analysis. The major dimensions (Organizational Fit, Remuneration & Recognition, Career Development, Challenging Opportunities, Leadership, Team relationship, Organizational policies, Communication, Working Environment, Organizational Commitment) are taken to measure their influence in employee retention. Due to various reasons the companies name is not being disclosed in the study. Table 1: Cronbach s Alpha Cronbach's Alpha N of Items An examination had been made from the reliability of the data to check whether random error causing inconsistency and in turn lower reliability is at a manageable level or not, by running reliability test. From table 1 it is clear that values of Coefficient alpha (Cronbach s Alpha) have been obtained, the minimum value of Coefficient alpha obtained was.788.this shows data has satisfactory internal consistency reliability. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 211

6 FACTOR ANALYSIS KMO and Bartlett's Test The individual statements of a study on the factors that influence the employee retention in BPO Companies was examined using factor analysis based on 20 individual statements and the reliability of the samples collected was tested for internal consistency of the grouping of the items. Table 2: KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy..764 Bartlett's Test of Approx. Chi-Square Sphericity df 190 Sig..000 KMO measure of sampling adequacy is an index to examine the appropriateness of factor analysis. High values between 0.5 and 1.0 indicate factor analysis is appropriate. Values below 0.5 imply that factor analysis may not be appropriate. From the above table it is seen that Kaiser Meyer Olkin measure of sampling adequacy index is and hence the factor analysis is appropriate for the given data set. Bartlett s Test of Sphericity is used to examine the hypothesis that the variables are uncorrelated. It is based on chi- Square transformation of the determinant of correlation matrix. A large value of the test statistic will favor the rejection of the null hypothesis. In turn this would indicate that factor analysis is appropriate. Bartlett s test of Sphericity Chi-square statistics is , that shows the 20 statements are correlated and hence as inferred in KMO, factor analysis is appropriate for the given data set. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 212

7 Table 3: Total Variance Explained Compo nent Extraction Sums of Squared Rotation Sums of Squared Initial Eigen values Loadings Loadings Total % of Variance Cumulativ e % Total % of Variance Cumulativ e % Total % of Varianc e Cumulative % Extraction Method: Principal Component Analysis. Eigen Value represents the total variance explained by each factor. Percentage of the total variance attributed to each factor. One of the popular methods used in Exploratory Factor Analysis is Principal Component Analysis, Where the total variance in the data is considered to determine the minimum number of factors that will account for maximum variance of data. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 213

8 Table 4: Rotated component matrix Component This Organization has the same values as I do with regard to concern for others Organization has defined vision and mission to meet its goals I feel a sense of belonging to this organization Organizations keeps employees well informed on matters important to them Physical working conditions are very pleasant Lot of Security in my job Workers and Management get along in this organization I am proud to tell others that I am part of this organization Employees are given positive recognition when they produce high quality work I would hate to quit this job I really care about the fate of this organization Organization values individual excellence over teamwork Organization provides regular opportunities for personal and career development Organizational structure facilitates the way we do things There is little to be gained by sticking to this organization Progress towards meetings planned objectives is periodically reviewed Opportunities to learn new things Members of my team expect and maintain high standards of performance Team work is valued in this organization Turnover Intention Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 11 iterations. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 214

9 Interpretation of factors is facilitated by identifying the statements that have large loadings in the same factor. The factor can be interpreted in terms of the statement that loads high on it. The factors that hinder the employee retention in BPO sector comprises of 20 individual statements. Out of 20 factors, 6 individual factors influences the employee retention more, the factors are: 1. This Organization has the same values as I do with regard to concern for others 2. Employees are given positive recognition when they produce high quality work 3. Organization values individual excellence over teamwork 4. Organization provides regular opportunities for personal and career development 5. Opportunities to learn new things 6. Members of my team expect and maintain high standards of performance MULTIPLE REGRESSION Table 5: Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1.781(a) Predictors: (Constant), Organizational Fit, Training & Career development, Organizational Leadership, Remuneration and Recognition, Organizational Policies, Learning, Challenging Assignments and Opportunities, Job Security, Communication, Organizational Commitment, Team Relationship, Working Environment, Turnover Intention, Innovation & creativity are encouraged, Values The above model summary table shows R-square for this model is This means that 60.9 percent of the variation in overall employee retention in the company (dependent variable) can be explained from the 7 independent variables. The table also shows the adjusted R-square for the model is Anytime another independent variable is added to a multiple regression model, the R-square will increase (even if only slightly). Consequently, it becomes difficult to determine which models do the best job of explaining variation in the same dependent variable. The adjusted R-square does just what its name implies. It adjusts the R-square by the number of predictor variables in the model. This adjustment allows the easy comparison of the explanatory power of models with different numbers of predictor s variable. It also helps us to decide how many variables to include in our regression model. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 215

10 1 Model Table 6: REGRESSION ANOVA Sum of Squares Df Mean Square F Sig. Regression (a) Residual Total Predictors: (Constant), Organizational Fit, Training & Career development, Organizational Leadership, Remuneration and Recognition, Organizational Policies, Learning, Challenging Assignments and Opportunities, Job Security, Communication, Organizational Commitment, Team Relationship, Working Environment, Turnover Intention, Innovation & creativity are encouraged, Values The ANOVA table, as displayed in the above table 6 shows the F ratio for the regression model that indicates the statistical significance of the overall regression model. The larger the F ratio there will be more variance in the dependent variable that is associated with the independent variable. The F ratio= The statistical significance is the sig. So reject the null hypothesis. There is relationship between independent and dependent variable Table 7: Coefficients Model Unstandardized Coefficients Standardized Coefficients B Std. Error Beta t Sig. (Constant) Organizational Fit Training & Career development Organizational Leadership Remuneration and Recognition Organizational Policies Learning Challenging Assignments and Opportunities Values Job Security Communication Innovation & creativity are encouraged COPY RIGHT 2013 Institute of Interdisciplinary Business Research 216

11 Organizational Commitment Team Relationship Working Environment Turnover Intention Dependent Variable: Overall employee retention To determine if one or more of the independent variables are significant Predictors of overall employee retention in BPO companies, we examine the information provided in the co-efficient table. From the above 15 independent statements only two independent statements are statistically significant. The Standardized co-efficient beta column reveals that Organizational Fit has a beta co-efficient.143, which is not significant (.104). Training & Career development has a beta co-efficient -.210, which is not significant(.015). Organizational Leadership has a beta co-efficient.200, which is not significant (.006). Remuneration and Recognition has a beta co-efficient.378, which is significant (.000). Organizational Policies has a beta -.409, which is not significant (.000). Learning has a beta co-efficient.160, which is not significant (.087). Challenging Assignments and Opportunities have a beta co-efficient.307, which is significant (.000). Values has a beta co-efficient -.043, which is not significant (.631). Job Security has a beta co-efficient.218, which is not significant (.009). Communication has a beta co-efficient -.274, which is not significant (.000). Innovation & creativity are encouraged has a beta co-efficient.110, which is not significant (.163). Organizational Commitment has a beta co-efficient.174, which is not significant (.045) Team Relationship has a beta co-efficient.199 which is not significant (.014). Working Environment has a beta co-efficient.166, which is not significant (.028). Turnover Intention has a beta co-efficient.015, which is not significant (.833) COPY RIGHT 2013 Institute of Interdisciplinary Business Research 217

12 CONCLUSION In the present scenario, identification of employee retention has become a crucial element. In this study it found that most of the employees in BPO companies are retained due to the following factors such as Challenging Assignments, Remuneration & Recognition, and Opportunities to learn new things, infrastructure, potential talent and the prospective roles. If organization is going to practice these factors, the employee retention is possible. In the long run it will fetch a good result for the organizations. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 218

13 References Allen, D.G.,&Griffeth,R.W.(2001). Test of a mediated performance-turnover relationship highlighting the moderation roles of visibility and reward contingency. Journal of Applied Psychology, 86, Collins, C.J.(2007). The interactive effects of recruitment practices and product job seekers employer knowledge and application behaviors. Journal of applied psychology,92, Denton, D. Keith (1992).Recruitment, retention, and employeerelations.west Westport,CT: Quorum Griffeth, R.W., & Hom, P.W. (1995). The employee turnover process. Research in Personnel Human Resource Management, 13, Griffeth, R.W., & Hom, P.W. (2001). Retaining valued employees. Thousand Oaks, CA: Sage. Marx, Mary (1995, December). PropertyManagement, Keeping your best employees. Journal of Mendonsa, Robert (1998, January). Keeping who you want to keep: Retaining the bestpeople.supervision, Spragins, Ellen E. (1992, November). How to retain key employees.inc., 36 Steers, R. (1977). Antecedents and outcomes of organizational commitment. Administrative Science Quarterly, 22, Taylor, Susan L. & Cosenza, Robert M. (1997, December). Internal marketing can reduce employee turnover.supervision,3-5 COPY RIGHT 2013 Institute of Interdisciplinary Business Research 219