Various Types Of It Organisations

Published Date: 02 Nov 2017

Literature Review

There are various types of IT organisations in Sri Lanka. But at the moment most of the organization are involved on the outsource software development projects mostly from western countries. There can be seen various job categories in these organisations such as Business Annalist, Project Mangers, Technical specialist, Software engineers, Software QA engineers and Support engineers. All of these job categories are falling under knowledge workers. The difference between the knowledge worker and the manual worker is that manual workers more like programed employees and knowledge workers should always think out of the box.

What is knowledge worker attrition?

Who is Knowledge Worker?

Increasing of productivity of the knowledge workers are the biggest challenge for the management.(Peter Drucker, 1991). Unlike manual workers the knowledge workers defined their own task. When there is work they think themselves, what is the task and how to approach it and what should be done accomplish the task. According to Drucker asking these questions really make these employees productivity double or treble. One of the key requirements of the knowledge workers is continues learning phase. (Peter Drucker, 1991). Some people identify the these knowledge workers by the profession such as Doctor, Lawyer, Programmers, Software Architects (Bender 1998; Halal 1998) and some other people identify them by the characteristics of the person such as the analytical skills, problem solving ability and the third way of the of identifying the knowledge workers by the education, computer literacy and portable skills (Munk 1998). With these knowledge workers, the technology is developed to replace most of the manual work (work with human interaction) with the automated process. Therefore, with the development of the technology, things can be accomplish much more faster than before. Knowledge workers actually use their knowledge to build a innovative product or make valuable process (Miller 1998). Brand name, Intellectual property and any source of knowledge adds up to the 80% of the assets in an organization (Halal, 1998). According to Dariusz Jemielniak, the knowledge workers are defined as professionals and professional roles are formulated by Institutional, Social and Professional group dimensions. For an example, a very much knowledgeable plumber is still known as a manual worker but a dentist who is not updated with the current system is still regarded as knowledge worker. Professional roles have an important aspect to identify the employees. (Jemielniak, 2012). So according to the above literature the engineers comes under the knowledge workers. Knowledge workers use the knowledge to practice or they distribute it as teaches or share it with experts. Rather than produce, manage tangible products or services knowledge workers are paid to collect, develop, process and apply information (Amar, 2002). Please site this in references

However some researches have proven that there are specific characteristics in knowledge workers which differentiate from the traditional workers. According to L.Wang and K Ahmed following table shows the difference characteristics identified in knowledge workers are manual workers

Seeking employability and career self-reliance

Employee Orientation

Seeking lifelong employment and job security

External to the organization via education and experience

Career formation

Internal to the organization via training and development

Associated with professions, networks and peers

Expertise and associations

Associated to the organization and it’s career system

Seeking continues learning to strengthen the professional competencies

Learning Orientation

Require training relevant to better job performance

Specialize and deep with defuse peripheral focuses

Skills and knowledge

Narrow and functional knowledge and skills

Creativity, Complexity, variety and challenging

Nature of work

Routine, well define, repetitive and simplified task

More in to intrinsic rewards, recognition

Reward & Motivation

In to extrinsic rewards, financial incentive.

Long term contributions

Performance outcomes

Small contribution over a short term

Traditional workers

Criteria

Knowledge workers

What is employee attrition?

When employees leave the organization irrespective of the reason, it is call employee attrition. If employees are fired or there is a layoff it is not considered as attrition. Therefore the biggest challenge is that the employer has no direct control over the attrition as it is entirely the employee’s discretion to leave the organization.

What does attrition mean to the organization?

This could leave the organization in a potentially vulnerable situation if a large number of employees leave the company within a short span of time as the cost of re-hiring and then training them may be very high. The difficulty of maintaining the same service level agreements with a new talent force who are not yet up to speed would result in breach of contracts and company’s may end up paying millions to their investors. Therefore not only the cost of hiring and training but the cost of compensating investors needs to be considered as well.

There is also the risk of exposure of trade secrets when the employees leave dissatisfied. They would join rival companies and divulge all trade secrets to the new company and more importantly they may take the existing clients to the new company which may result in company going into insolvency.

Company brand name is affected if employees leave dissatisfied they are more than likely to tell their experience to industry colleagues which would result in difficulty in attracting talent to the organization. When the company has a good brand name it will not only help to attract the customers but will also play a major role in attracting talented individuals (Chiaravalle and Schenck).

If a particular employee has a good relationship with the client and if he or she leaves that will have an impact on the continuation of the ongoing projects and this will also affect getting new projects with the existing client as well. This will affect not only when the employees with good relationship leave the organization but when the client see new faces everyday due to high attrition this can destroy the customer loyalty (Cossey, 2011).

Therefore it is extremely vital to find the factors leading to attrition and address it to protect the company from potential risk of losing knowledgeable workers.

Sometimes the factors affecting employee attrition is totally depend on the industry or it depend on the government or non-government organizations. For an example, the reason for teacher to leave the schools is different from the reasons why IT employees leave organizations. According to Erling and H. Cook the some of the reasons for teachers attrition are such as Personal and family considerations, Poor health, School staffing actions and retirement but the public school teachers leave their job for some other reasons.

Development of attrition models – An overview

Turnover models before 1985

According to March and Simon (1958) the factors that influence an employee to leave an organization are traditional attitudes and perceived alternatives. They further stated that individual differences such as age, gender are key factors influencing ease of movement while organizational size and job satisfaction contribute to the desirability of movement.

Porter and Steers (1973) introduced a model where the key factor of an employee leaving a company rested in employee meeting expectation.

Mobley (1977) introduced a more comprehensive model showing the steps an employee go through before leaving a company. His model proposed a set of behaviors such as thoughts of leaving the current employment and job search behaviors that linked job dissatisfaction to an employee actually leaving the job.

Turnover Models from 1985 – 1995

As mentioned in the above paragraph it is clear that the earlier turnover models were mainly based on employee’s individual attitudes, characteristics and nature of the job. The models from 1985 – 1995 were significantly focusing on the organization culture and supervisor support. In this period, large organizations were developed and it moved towards team structure, cohesive groups and rewarding systems. In this period there were researches not only mention about variables such as organizational culture and pay related factors, but also the factors with regard to employee relationship with the leadership. Some of these variables named as organization fit, mentoring new employees and importance of the network.

If the employee values and the company values are not match that will lead to employee attrition (O’Reilly, 1991). If the employee is having a good relationship with the company social network is hardly resign from the organization (McPherson, Drobnic, Popielarz, 1992). Jackson, Schwab & Schuler (1986) had proven the positive relationship with the emotional exhaustion and job security. New theory aslo was adopted during this period call unfolding model of turnover by Lee and Mitchell’s.

Turnover Model after 1995

Cost of employee attrition

As discussed earlier when employees leave the company there is cost involved. The Bureau of Labor Statistics states that the average cost to replace an employee is $13,996 (O’Connell, 2007). According to article by "Man power" this cost can be mainly divided in to two categories such as direct cost and indirect cost. Some of the direct costs can be mentioned as

Job agency cost for new hires

Cost New hire processing

Cost of training

Testing the new hires

Relocation cost

Some of the in-direct cost can be listed as

Cost of the loss productivity until the new employee is up to speed

Cost of assessing and correcting errors throughout the learning curve

Morale impact

Disruption of business functions

The organizations can measure the employee attrition suing the following formula.

100

*

Number of terminations per year

Average active employees

same yearTurnover rate =

Selecting process also help to reduce this employee attrition cost in an organization. It is easy to reduce the attrition cost by including a risk index in the hiring process (O’Connell, 2007)

Types of employee attrition

According to R. Raman there are two types of attrition. When the employer initiates the termination of employment it is called "Drive attrition". The other kind is initiated by the employee and that is named as "Drag attrition" (February, 2006).

R.Mayhew breaks it down to 2 categories, namely; involuntary and voluntary. When the employer makes the decision to terminate the employment it is known as involuntary attrition and if the employee decides to leave the organization this is known as voluntary attrition.

The "drive" or "involuntary" attrition occurs when the employer requires that a certain individual should leave the company for organizational purposes and this is done in the best interest of the company. This is predictable and controlled and often planned therefore it is not detrimental to the organization as stated above. Therefore we will concentrate on "drag" or "voluntary" attrition as this is what the organization has no control over and results in unnecessary costs.

It is stated that the voluntary attrition has become a major problem especially in Asia. It is the opinion of HR professionals that job hopping has almost become a culture in Asian countries such as Singapore, Hong Kong and Malaysia. (Asia Paci® c Management News, 1997). This issue was even addressed in the parliament in Singapore thus showing the extent of this problem and the concern on how this would adversely affect the competitive edge these countries tries to maintain (Chang, 1996; The Strai ts Ti m e s, 1996). It is stated that foreign investors are concerned about how frequently workers change jobs in Singapore and other Asian countries (Asian Finance,1988; The Straits Ti m e s, 1996) raising national level concerns over voluntary attrition.

From the above it can be seen that there is widespread acceptance that the voluntary or drag attrition is detrimental to an organization’s growth and affects its place in the global market. This affects not only the organization but as shown above the country’s growth depends largely on how efficiently an organization addresses and finds solutions to attrition. Therefore if no proper measures are taken to address this issue not only the organization but the country would suffer the consequences as foreign investors will take their investment elsewhere.

Overview of why employees leave organizations

Employee leaves organizations for various reasons. Wagar. T.H (1977) in research has grouped the reasons for attrition such as HR policies, economic environment and characteristics of the organization. To employees to decide whether to stay in the organization or leave can be determine by three dimensions such as the relationship with peers and the management dimension, personal growth dimension and system maintenance dimension. (Riley, K, 2009). According to previous studies below is a list of factors leading to employees leaving an organization.

Lack of career progression

Migration Overseas Opportunities

Job satisfaction

Poor remuneration

Relationship with the peers, supervisor or management

Lack of Management support

Higher education

Lack of recognition and rewards

Work assignments and Work- Life Balance

Correct tools, technology and training needs are not provided

This list is not exhaustive and the factors are interconnected. For example lack of career progression can lead to lack of faith in management. However for the purpose of the study we will look at each factor individually based on previous study and ascertain how each factor contribute to voluntary attrition of an organization.

Lack of career progression

The employer should define a good career path for its employees which would help them to grow with the company. Every employee need to know that there is a well-defined career path for him so that he can set up a goal and work towards that goal. Most of the young employees like to have Entrepreneurship opportunities. These young employees dream is to start up their own company and they need exposure and the training for that. If the company provide necessary leadership skills it is a good opportunity for them (Isha, 2012). Sometimes if they don’t have the expected rewards or any career advancement, the employees tend to move out of the company.

Relationship with the peers, supervisor or management

It is often said that employees don’t leave organizations, but people. They lose faith in their managers often due to lack of communication. One of the reasons for employee attrition is it is uneasy relationship with the managers (Yadav. R, 2011). If the employee does not have a good supervisor support and does not have a good relationship with the peers that employee will definitely is not have a job satisfaction and that will lead to attrition (Riley, K, 2009). If the management can make the employees to take part in the management decisions, that will specially have a positive impact on retaining the knowledge workers in company (Jain, 2011). If the employee have a frustrating encounter with the immediate manager or the supervisor that has shown as a reason in the exit interviews to leave the organization (Hammond, 2008).

Work assignments and Work- Life Balance

Employees could get easily bored by repetitive or boring work assignment which does not allow a healthy work-life balance. Assignment of work that does not match the skill set of the employee would also make the employee disconcerted. (Garner, 2008). According to crew today, If the employee get a job which is not suited or if the employee is over qualified for the job or under qualified they more likely will leave the job. If the employees are not have a good understanding of the duties that they should carried out and if they have a ambiguity of the job role that is a reason to leave the job (Howart. W.A). Employees are happy if the time for the task assign to them is achievable and it can be accomplished without stress. If employees can understand the work task which is assign to them and if there are issues with the task how well the supervisor explain the task is a major factor when it comes to the satisfaction of the employee and it will have a direct impact on the employee to decide whether to stay or leave the organization (Riley, K, 2009). Past research has shown that the working ours have increased for teachers and it has made them having less hours to do the paperwork. This has resulted them an overall dissatisfaction and that had leads to a high attrition in the teaching industry (Hargreaves, 2003). If the company can give flexible work hours and give some space to balance the personal life, that is good reason to reduce the employee attrition (Jain, 2011). Sun Microsystems have come up with the program to institutionalize the virtual office and flextime and this had made them increase employees job satisfaction and also saved them $255 million by reducing the employee turnover (Greengard, 2005). Most of the time when employees are does not have flexible work hours, working from home options will make them stressed out and it is difficult for them to stay in an organization. The employees who can balance their work life and family life are happy and like to stay in one organization for a long time. (Anon, 2006).

Lack of tools, technology and training

Some of the employees feel that they are not provided with the correct technology, tools or training needs to accomplish the task and this is one of the reasons to leave the organizations. Giving the employees the proper training and development also lead to improve the retaintion rate in a organization (Jain, 2011).

Lack of Management support

Employees should get the support from the management to solve any issues which they face during the working hours. The managers should give the fullest support by having mentor programs and motivate the employees to make them feel that the company supports them to accomplish the work assignments (Hampton,2000).

Lack of recognition and rewards

In some companies have very confusing reward systems. Rewards are given base on the relationship of the superior. Howart (n.d.) stated that if there is favoritism to give the bonus, that can lead to employee attrition.

Lack of recognition and rewards

If the feedback is not meaningful or the leadership is not recognize the work employees are not happy. Howart (n.d.) has written that most of the young employees knows that they are responsible for their career and they need to get the recognition from the leadership to have good progress in the career. Ingram and Media (n.d) stated that if the management have necessary process to motivate employees, that will increase the employee turnover. There should be necessary rewards systems which help employees get motivated and accomplish the task which are assigned. According to some surveys carried out in US it says that if the employees get rewards that makes then happy in the job and they most likely stay in their job ( As Fenton sited in Fox, Rachel, Casison, Jeanie,, 1999). If employee get a fair amount of compensation and rewards that will made to retain in the organization (Jain, 2011). By having a good pay, other benefit and giving pensions the Convergys group reduces the attrition by 57,813 jobs over 40 countries that saved $57 million of the new employee hire and training cost ( Mullich, 2005).

Poor remuneration

Many researches have proven that there is a correlation between the employee attrition and the salary. Employees will love their jobs if they have a good pay. These flexible compensation packages will definitely improve the employee retention in a organization (Jain, 2011).

Job satisfaction

Job satisfaction is the perception the employee has towards their job role. When Employees does not like the job role what they do, they will not stay in the organization for long time.. So job dissatisfaction is one of the main reasons among the high reasons for high employee turnover.

Job satisfaction also one of the major factors affecting the employee attrition (Adhikari, 2009). Specially knowledge workers seeking challenging work tasks and if the company unable to provide those, there is big risk that the employees leave the organization and find more challenging work in another company (Khatri and Fern, 2001). According to past researches it seems that job satisfaction is one of the major reasons for employee attrition. Job satisfaction is having a positive correlation with. 24% of the teachers leave their job because they are dissatisfied with the job (Boe. E.E, Cook. L.H, Sunderland J.R, 2008). ECM is a acronym used by William A. Howatt. One of the major factors for keeping the employees in the organization is to satisfy them (Howart. W.A). It is important to keep the employees satisfy in a organization and also job satisfaction have positive correlation with job satisfaction (Reggio, 2003). Tuttle (1997) has a summary of thirty nine studies about the relationship between job satisfaction and employee turnover (as cited in Rehman, 2012). The main reason for employees to leave the company is the dissatisfaction of the job. (Jain, 2011).

2.3.1 Job Satisfaction Theories

Interestingly, there are three job satisfaction theories identified in limited scopes

Discrepancy Theory

Equity Theory

Two-factor Theory

2.3.1.1 Discrepancy Theory

According to Locke (1969), satisfaction and dissatisfaction with some aspect of the job depends on the discrepancy between what a person perceives he is getting and what he desires. The "desired" amount of a job characteristic is defined as the minimum amount necessary to fulfill the person’s current needs. A person will be satisfied if there is no discrepancy between desired and actual conditions. A person will be dissatisfied if there is less than the desired amount of a job characteristic. The greater the deficiency and the more important the thing desired, the greater will be the dissatisfaction. If there is more than minimally acceptable amount of some job factor and the excess is beneficial (eg. extra pay), a person will be even more satisfied then when there is no discrepancy between the desired and actual amount. However, if the excess is perceived to be detrimental (eg. extra workload, longer hours), the person will be just as dissatisfied as when there is less than the desired amount.

Other variations of the discrepancy model of job satisfaction have been proposed. For example, Porter (1961) defined satisfaction as the difference between how much of something there "should be" and how much there "is now". This conception is basically similar to Locke’s model, but Porter’s "should be" implies more emphasis on equity considerations and less on needs as the determinant of the preferred amount of a job factor. A study by Wanous and Lawler (1972) found that employees respond differently depending on how the discrepancy is defined. They conclude that people have more than one kind of feeling about their job, and no "one best way" exists to measure job satisfaction. The appropriate way of defining and measuring satisfaction will depend on the purpose of the measurement.

2.3.1.2 Equity Theory

Equity theory specifies the conditions under which an employee will perceive the benefits and inducements in the job to be fair and reasonable. The theory was developed by Adams (1963), and it is a variation of earlier theories of social comparison processes. The principal components in equity theory are "inputs", "outcomes", "comparison person", and "equity-inequity". An input is anything of value that an employee perceives that he contributes to his job, such as education, experience, skills, amount of effort expended, number of hours worked, and personal tools, supplies, or equipment used on the job. An outcome is anything of value that the employee perceives he obtains from the job, such as pay, fringe benefits, status symbols, recognition and opportunity for achievement of self-expression.

According to the theory, an employee judges the fairness of his outcomes by comparing his outcome: input ratio to the outcome : input ration of one or more comparison persons. The comparison person may be someone in the organization, someone in a different organization, or even the person himself in a previous job. The theory does not specify how an employee selects a comparison person or how many comparison persons will be used. If an employee’s ration of outcomes to input is equal to the ratio for the comparison person (s), a state of equity is perceived to exist by the employee. If the employee perceives the ratios to be unequal, a state of inequity will usually be perceived to exist.

2.3.1.3 Two-Factor Theory

The two-factor theory states that job satisfaction is qualitatively different from job dissatisfaction (Hertzberg, 1966; Hertzberg, Mausner and Snyderman, 1959). According to the theory, job characteristics can be grouped into two categories, one called "dissatisfiers" or "hygiene factors" and the other called "satisfiers" or "motivators". The hygiene factors include such things as pay, supervision. Interpersonal relations, working conditions, job security and status. A certain amount of the hygiene factors is necessary to fulfill a person’s biological drives and basic needs such as safety and affiliation. When these needs are not fulfilled, the person will be dissatisfied, but neither will he be satisfied. Once there is a sufficient amount of the hygiene factors to fulfill these needs, a person will no longer be dissatisfied, but neither will he be satisfied. A person will only be satisfied if there is an adequate amount of the job factors called satisfiers. Satisfiers are job characteristics that are relevant to a person’s higher order needs and psychological growth, including work that is interesting and challenging, responsibility and opportunity for achievement, recognition and advancement. An insufficient amount of the satisfiers will prevent an employee from experiencing the positive satisfaction that accompanies psychological growth, but will not result in job dissatisfaction.

Figure 2.2 : Two-Factor TheoryStrong dissatisfaction

No dissatisfaction

Hygiene Factors

Strong Satisfaction

No Satisfaction

Satisfiers

Figure 2.2 : Two-Factor Theory + 0

- 0

Source : Hertzberg, Mausner and Snydeman (1959)