Research-in-Progress

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1 Research-in-Progress Determinants and Consequences of IT Service Management Professionals Compensation: Role of Demographic, Human Capital, and Organizational Factors ISIS Conference 2013 Akshay Bhagwatwar Hillol Bala Department of Operations and Decision Technologies Kelley School of Business Indiana University Ramesh Venkataraman Abstract With the recent focus on information technology service management (ITSM) practices and the emergence of IT professionals that provide these services, it has become imperative for organizations to understand the factors influencing the work life of these professionals. For researchers and practitioners alike, the question of what determines ITSM professionals compensations and how these compensations influence important job attitudes job satisfaction and outcomes turnover intention is of significant interest. Organizations are likely to focus on these determinants and consequences of ITSM professionals compensations to uphold ITSM professionals motivation to provide high quality services, help develop a competitive edge, and keep in pace with the most recent ITSM standards. In this paper, we focus on three different categories of factors demographic, human capital and organizational--as determinants of ITSM professionals compensation. We also examine the influence of ITSM professionals compensations on job satisfaction and their turnover intention. We contribute to the literature on IT labor market in general and ITSM professionals in particular by focusing on the factors that influence ITSM professionals compensation and job outcomes. 1. Introduction The quality and efficiency of IT Service Management (ITSM) practices are highly valued by organizations (Levina and Xin, 2007; Cater-Steel et al., 2011). IT has become a service with increasing commoditization and standardization. ITSM professionals are viewed in organizations as an emerging group of IT professionals who are different from traditional IT professionals such as analysts, programmers, database administrators, and networking experts because of their unique skill sets and job requirements. The rapid innovations in IT and ITSM practices, the rise of Internet-based collaboration technologies, and the dispersed nature of today s organizations create formidable challenges for organizations that strive to recruit and retain skilled IT professionals (Ang and Slaughter, 2000; Ang et al., 2008). Demand for IT professionals, especially those with specialized IT-related certifications has been stronger for more than a decade now (Ang et al., 2008). ITSM professionals represent a specialized subset of IT professionals that have different certifications, industry associations, and professional identity. Organizations typically find it challenging to find and retain high quality ITSM professioansl who can help organizations derive value from IT investments. Consequently, it is important to understand the factors that determine the compensation of ITSM professionals and the influence of their compensation on important job outcomes. Prior research on IT professionals compensation has focused on factors such as the educational background and IT work experience as influences of employee compensation (Ang et al, 2002; Levina and Xin, 2007). The research has also looked at factors such as gender as influencers of IT employee 1

2 compensation in different countries (Levina and Xin, 2007). Apart from the set of individual-level factors, the models predicting employee salaries have also considered a multitude of organizational factors such as organization s size, the information use intensity of organization, and the profit motives. While this rich stream of research studies an exhaustive list of individual and organizational factors that influence compensation, there is a lack of research focusing on factors influencing the compensation and job outcomes of ITSM professionals. For organizations that are focused on implementing ITSM standards and hiring skilled ITSM professionals to manage the execution and maintenance of ITSM practices, it is important to understand the factors that influence the job outcomes variables of these professionals. Organizations need to understand the key determinants of ITSM employee compensation since an understanding of these factors could help them design policy structures that can help hire and retain these skilled professionals. The research presented in this paper diverges from the prior literature by specifically focusing on ITSM professionals, their skill-level based on the type of ITSM certification they have, and the influence of these variables on job-related variables such as compensation, job satisfaction, and turnover intention. We posit that apart from the known human capital endowment factors (Ang et al., 2002), ITSM certifications will play a role in determining employee compensation. Further, we examined organizational factors such as size and IT intensity. We also study the influence of compensation on job outcome variables job satisfaction and turnover intention. We conducted an empirical study covering a variety of ITSM professionals from a diverse set of organizations in the United States. The results of the study support the research model. 2. Prior Research - IT Service Management, IT Compensation, and ITSM Certifications An increasing number of organizations have started recognizing information as the most important strategic resource they have to manage (Levina and Xin, 2007). In addition to producing, collecting, distributing, and analyzing information within the organizational departments, a crucial challenge for an organization is to ensure the high quality of the IT services provided to the business and customers (Cartlidge et al., 2007). IT services are viewed as critical assets that need to be managed by providing resources that can support and deliver the services efficiently to the various organizational units. However, a large number of organizations are either unable to address the need for efficient IT services either due to this aspect being overlooked or being superficially addressed (Gacenga et al., 2010). IT service managers face many key issues related to the IT services such as alignment of IT and business goals, measuring IT organization effectiveness and efficiency, demonstrating the business value of IT, and leveraging IT services as a competitive advantage (Marwaha and Willmot, 2006). To improve this situation, organizations have started investing in IT Service Management (ITSM) frameworks such as IT Infrastructure Library (ITIL), ISO/IEC 20000, HP IT Service Management Reference Model, and COBIT. IT service management (ITSM) is defined by Conger et al. (2008) as focusing on defining, managing, and delivering IT services to support business goals and customer needs, usually in IT Operations (p. 1). ITSM has gained importance as information systems play an essential role in both public and private sector organizations (Marrone, & Kolbe, 2011). The need for achieving efficient ITSM goes beyond just service delivery. The ITSM view is to consider each organizational business process, service or infrastructural component as an artifact with a lifecycle. This lifecycle encapsulates the various phases of that artifact from adoption strategy to design and customization to actual implementation and continual improvement (Cartlidge et al., 2007). ITSM frameworks require major financial investment for organizations with expected implementation costs ranging from a few thousand dollars to as much as half a million dollar (Deare, 2006). Effectiveness of an ITSM framework in an organization largely depends on the skills and knowledge of the ITSM professionals who manage the implementation and the smooth execution of the frameworks. Consequently, it has become crucial for organizations to hire and retain ITSM professionals 2

3 who are trained in ITSM practices through various certifications. ITSM is a relatively new research area in the IS discipline so it comes as no surprise that there has been limited academic literature on ITSM practices in general or ITSM certifications in particular (Cater-Steel et al., 2011). Prior research in the domains such as law, accounting, medicine, and engineering have focused on the importance of appropriate certifications as a strict requirement for entry into a profession (Hunsinger & Smith, 2009). The rising importance of certifications in the IT domain has made it imperative for IT professionals to consider appropriate certification as an essential component of their career path and an opportunity for higher wages (Hunsinger and Smith, 2009; Cater-Steel et al., 2011). Employees with appropriate certifications are considered to be more employable and can be expected to demand higher salaries (Schlichting and Mason, 2004; Conger et al., 2009). In addition, obtaining specific ITSM skills certifications also help IT employees cure any shortcomings in their prior education or training related to the domain (White, 2007). 3. Model and Hypotheses Education H1 Gender IT Experience H2 H3 Compensation H7 Job Satisfaction H8 Turnover Intention H4 ITSM Certifications H5 H6 Organization Size IT Intensity Figure 1: Research Model Figure 1 resents our research model. It posits that the compensation of ITSM professionals would be influenced by ITSM professional s education (H1), gender (H2), IT experience (H3), and ITSM certification (H4). In addition, hypotheses H5 and H6 hypothesize organization size and IT intensity as the moderators for the relationships hypothesized in hypotheses H3, and H4. For example, the relationship between IT experience of the ITSM professional and compensation is moderated by organization size such as for large organizations, the relationship would be stronger. Another example of the hypothesis is the relationship between ITSM certifications and compensation is moderated by IT intensity, such that the relationship is stronger for organizations with a greater IT intensity. The term IT intensity here refers to the sophistication and advanced nature of the IT infrastructure that an organization has. Hypothesis 7 (H7) predicts a positive relationship between compensation and job satisfaction implying that higher compensation leads to higher level of job satisfaction. Hypothesis 8 (H8) predicts a negative relationship between job satisfaction and employee s turnover intention such that employees with higher level of job satisfaction will have lesser turnover intention. 4. Methodology and Results We conducted a field study of ITSM professionals from different industries to test our research model. A request to participate in the study was sent to about 6,000 active members of itsmf USA, a 3

4 chapter of itsmf International, an independent professional organization for ITSM professionals. We received a total of 319 usable responses. Participants were primarily senior ITSM professionals (78 percent), such as ITSM architects, directors, process owners and managers. The participants had an average of years of work experience in IT (S.D. = 8.92) and their average organizational tenure was 8 years (S.D. = 7.53). We operationalized the constructs using pre-validated items from prior research. A combination of regression and logistics regression was used to test our model. Table 1 below shows the results of the study. The relationship between education and compensation was not significant implying that education has no influence on ITSM professionals compensation. Hypothesis 2 was supported indicating that gender has a positive influence on compensation. In other words, male ITSM professionals were found to have higher compensation than females. Hypothesis 3 was supported implying that IT experience has a positive influence on compensation. Hypothesis 4 was supported implying that ITSM certification has a positive influence on employee compensation. Hypothesis 5a, which suggests a moderating effect of IT experience and organizational size on compensation was supported. This implies that, for example, with increase in the size of organization, the relationship between IT experience and compensation would be stronger. Hypothesis 5b, which suggests a moderating effect of IT experience and IT intensity was not supported. Hypothesis 6a, which suggests a moderating effect of ITSM certification and organizational size on compensation was not supported. Hypothesis 6b, which suggests a moderating effect of ITSM certification and IT intensity on compensation was supported. This implies that, for example, with increase in IT intensity, the influence of ITSM certification on compensation becomes stronger. Hypothesis 7 was supported implying that compensation has a positive influence on job satisfaction. Hypothesis 8 was supported implying that job satisfaction has a negative influence on turnover intention. Control Variables Age Organizational Tenure Independent Variables Education Gender IT Experience ITSM Certification Moderators Organization Size IT Intensity IT Experience X Organization Size IT Experience X IT Intensity ITSM Certification X Organization Size ITSM Certification X IT Intensity Dependent Variables Compensation Job Satisfaction Compensation Model 1 Model * * 0.16* 0.19** Table 1: Results (* p < 0.05, ** p < 0.01, *** p < 0.001) Note: Turnover intention was analyzed using logistic regression * * * -0.16* 0.17* * Job Satisfaction ** Turnover Intention *** R

5 5. Expected Contributions This research-in-progress paper is expected to contribute to the existing ITSM and IT compensation literature in two ways. First, apart from considering the traditional individual-level factors such as education or IT experience and organizational level factors such as organization size, we focused on ITSM certification as a key independent variable influencing compensation. Second, we also study the influence of ITSM professionals compensation on a key job outcome variable - job satisfaction and its eventual influence on turnover intention. The focus on ITSM certification is of crucial importance here for today s organizations that are planning to or have adopted ITSM standards and practices. Such organizations aim at hiring skilled ITSM professionals and retaining them long term. As a result, it is important for such organizations to offer competitive compensation packages to such employees to ensure that they are satisfied with their job and have less turnover intention. To our knowledge, this was one of the first studies that examined the determinants and consequences of compensations of ITSM professionals, an emerging and important subset of IT professionals. Our findings will help ITSM professionals develop important professional human capital skills (e.g., certifications) and IT managers develop strategies to recruit and retain high quality ITSM professionals. 6. References Ang, S., Slaughter, S.A., and Ng, K.Y. (2002). Human capital and institutional determinants of information technology compensation: Modeling multilevel and cross-level interactions. Management Science, 48(11), Ang, S., and Slaughter, S.A. (2000). The missing context of IT personnel research. Robert Zmud, ed. Framing the Domains of IT Management Research: Glimpsing the Future Through the Past. Pinnaflex Educational Resources, Cincinnati, OH, Cartlidge, Alison et al. (2007). An Introductory Overview of ITIL V3. The UK Section of the itsmf. Conger, S., Venkataraman, R., Hernandez, A., and Probst, J. (2009). Market potential for ITSM graduates: A survey. Information Systems Management, 26(2), Conger, S., Winniford, M. A., and Erickson-Harris, L. (2008). Service Management in Operations. Paper presented at the Fourteenth Americas Conference on Information Systems, Toronto, ON, Canada Gacenga, F., Cater-Steel, A. and Toleman, M. (2010), An international analysis of IT service management benefits and performance measurement, Journal of Global Information Technology Management, 13(4), Hunsinger, D. S., and Smith, M. A. (2009). IT Certification Use by Hiring Personnel. Journal of Computer Information Systems, 50(2), Levina, N., and Xin, M. (2007). Comparing IT Workers Compensation Across Country Contexts: Demographic, Human Capital, and Institutional Factors. Information Systems Research, 18(2), Marrone, M. and Kolbe, L.M. (2010). ITIL and the Creation of Benefits: An Empirical study on Benefits, Challenges and Processes. In European Conference on Information Systems Proceedings. Pretoria, South Africa. Marrone, M., and Kolbe, L. M. (2011). Impact of IT Service Management Frameworks on the IT Organization. Business & Information Systems Engineering, 3(1),

6 Marwaha, S., and Willmot, P. (2006). Managing IT for scale, speed, and innovation. McKinsey Quarterly, 3, 1 8. Schlichting, C., and Mason, J. (2004). Certification Training and the Academy. Journal of Computing Sciences in Colleges, 20(4), White, L. (2007). Integrating IT Industry Certification into Irish Institutes of technology: A Stakeholder Perspective. Unpublished Master of Science, Waterford Institute of Technology, Waterford, Ireland. 6