FACTORS AFFECTING JOB SATISFACTION AND THERE BY

EMPLOYEE TURNOVER IN INDIAN IT INDUSTRY

3/9/2014

Submitted by:Group 9

INTRODUCTION

Employee turnover is an important aspect that can make a significant impact on any organization in terms of performance, growth and general business outcomes as human capital is central to any organization’s goals. Employee turnover is defined as “the rate at which employees enter and leave a company in a given fiscal year”. We have chosen IT industries for our research because it of the following reasons:

IT industry is one of the largest employers of engineering graduates in India in the services sector and contributed 7.5% to the Indian GDP in FY 2012.

IT industry faces the highest employee turnover as compared to any other industries not only in India but also globally, and

Also, 2 out of 3 members of our group are ex IT professionals which added to the motivation to study the issue of high turnover rate in this industry. Some reasons why it is very important to measure the employee turnover in IT industry are:

1. Turnover is expensive:

Employee turnover can have significant cost implications to a company. These can be in terms of time, money, and other resources as mentioned below:

Managers time in trying to retain the employees as well as conducting Exit interviewsDelays in service delivery to the customersCost of hiring new employees and offering signing bonuses and relocation expensesProviding on the job training to the new employees which incurs costs as well as supervisor’s time and effort.

2. Turnover impacts business performanceEmployee turnover can impact business performance in the following ways:

Affect the morale of the workforce: If more people leave an organization then it can bring negative sentiments in the minds of other employees and they will also have a tendency to look for better options.

Effect on sales growth: If more people leave an organization then it might reduce sales growth as the client might not be satisfied with the work of the new employees as they will not have the required skills/experience and might not deliver upto their expectations.

3. Finding qualified employees is becoming more difficult: Once talented employees leave an organization it becomes difficult to replace them and also it incurs a huge amount of cost to hire them.

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IT industry employs knowledge workers and hires mostly fresh engineering graduates. Huge amount of money is spend in training them in various skills. When we consider a knowledge sector like IT, the turnover rate is expected to be in the range of 50%. It’s especially high in the 16 -24 year age bracket where a Mercer survey found that 66% of participants were thinking about leaving their jobs. Turnover costs are expected to be about 150% to 200% of base salary of replaced employee. As economic conditions around the world improve, employee turnover is expected to rise significantly.

Considering all the above reasons it becomes necessary for companies to know the reasons for employee turnover, the percentage of turnover population, costs incurred in relation to the turnover as well as policies required to reduce turnover.

REASONS FOR EMPLOYEE TURNOVER

Employee turnover is basically of four types:

• Voluntary: Voluntary turnover consists of employees exercising their free choice to leave.• Involuntary: Involuntary turnover consists of separations where an employee unwilling leaves. • Functional: Functional turnover is when low performing employees leave• Dysfunctional: Dysfunctional turnover is when high performing employees leave

Among the four types of employee turnover, what any company wants to prevent or reduce are Voluntary and Dysfunctional turnover. Prior research suggests that these are the most common reasons for turnover in the IT industry.

We have limited the scope of this study to Factors affecting job satisfaction and there by employee turnover in Indian IT industry.

The important factors identified in the earlier studies related to job satisfaction are the poor working condition, peer group behavior, routine nature of the job and the working hours. These particular findings from the majority of the researches conducted in western business environments were typically from software based industries and business operating with severe time constraints, stiff deadlines and varying work order.

METHODOLOGY

To study the stated issue, we analyzed data from both primary and secondary sources. Under secondary data analysis, we read articles relevant to the issue at hand. We looked up the best practices in HR followed in the Indian IT industry and also the reasons of such high an attrition rate in this industry in previous researches done in this area. This analysis gave us clarity on the topic and helped us to structure our research.

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For primary data analysis, we floated a questionnaire among both ex- and current IT professionals to measure their level of job satisfaction.

KEY FINDINGS

The following are the key findings after the analysis of the primary data:

Overall, about 62% of the respondents were found to be dissatisfied with their jobs in IT sector.

Overall, the respondents believed that the work environment in the organization (73.97%), work timings (72.6%), Relationship with supervisor (68.49%) were the top three reasons for lack of job satisfaction in that order.

While both male and female respondents believed these to be the top three reasons, female respondents gave Work Timings as the most important reason. This can be correlated by the fact that people in IT industry have to work long hours. Since most IT firms operating in India work for foreign (predominantly Western) clients, odd work timings are but a characteristic of an IT job. There are projects where 24X7 support is required and employees have to come in shifts. While both male and female employees would find these aspects to be unappealing, female employees face safety issues and also cultural issues if they have to work late or in night shifts.

About 49% and 41% of the respondents were found to be dissatisfied with the salary and compensation respectively. 31% were found to be dissatisfied with the salary hikes. IT companies have been a good payer in general but prospects have changed due to factors like global recession in post 2007, weakening of the rupee since the last couple of years, among others. These factors have affected the business as a whole and the salaries have since then remained comparatively stagnant because of them.

Overall 42% of the respondents were either satisfied or very satisfied with Onsite Opportunities. This has been an important factor which attracted people into the IT industry. Post the global meltdown in 2007, US began to cap on the number of H1B visas being issued. The Indian IT industry has been one of the most vehement opponents of this move and has lobbied time and time again with the Indian government to increase the cap.

Over 54% of the respondents felt that they did not have an opportunity to use their skills and abilities on the job. Also over 46% of respondents felt dissatisfied with the lack of variety in work assigned to them. Especially post 2007, most US based companies have cut down on developmental projects. So IT companies have been forced to take on more and more maintenance contracts to stabilize revenues. This has in turn increased monotony in the work and also made people feel that they are overqualified.

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Lack of skill development or training activities is seen by over 60% of the respondents as a cause for dissatisfaction. This can be correlated with the fact the fact that one of the biggest fears an employee in a knowledge based industry like IT has is the fear of getting outdated by technology. They need to constantly update themselves to continue being relevant.

About 56% of respondents feel that work pressure is a cause for dissatisfaction. This again can be correlated with the nature of work in the industry where lot of work needs to be completed within tight deadlines.

About 42% of the respondents do not feel that the career advancement opportunities in terms of roles and responsibilities are good in the IT arena. Respondents do not rate an IT job well on learning opportunities too, with about 53% respondents being dissatisfied on that parameter. That may be a criteria for them to decide to drop out of job and pursue a Post-Graduation course like MBA or M-tech to acquire more skills and make themselves available for better roles

Respondents were found to be satisfied with the communication between co-workers at work place. Since IT professionals are well educated, this finding is not much surprising.

We also see high levels of similarity between response of male and female respondents to majority of the factors.

HR PRACTICES TO INCREASE JOB SATISFACTION AND REDUCE TURNOVER

Based on our research findings, most of the employees are highly dissatisfied on various parameters for which we suggest the below best practices to be followed:

1. Safe, Healthy and Happy WorkplaceCreating a safe, healthy and happy workplace will ensure that your employees feel homely and stay with your organization for a very long time. This includes proper cab facilities to be provided to all the employees, office working conditions in terms of ambience and surroundings, facilities to be provided to employees working in night shifts, proper medical facilities etc. There should be proper feedback mechanism to capture their pulse through employee surveys.2. Open Book Management StyleOrganizations should share information about contracts, sales, new clients, management objectives, company policies; employee personal data etc. which will ensure that employees are enthusiastic and motivated. Through this open book policy, organization can create a culture of participative management and ignite the creative endeavor of the work force. It involves making employees engage in strategic decisions, thus aligning them to your business

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objectives. The organization should be as much open as it can. Employee self-service portal, Manager on-line etc. are the tools available today to the management to practice this style.3. Performance linked BonusesPaying out bonuses or having any kind of variable compensation plan will highly motivate employees to perform and deliver their best to the organization. Bonus must be designed in such a way that people understand that there is no payout unless the company hits a certain level of profitability. Additional criteria could be the team's success and the individual's performance. 4. Knowledge SharingEmployees are dissatisfied with their organizations as they feel de motivated due to unavailability of technologies and they wanted to learn. Thus, organizations should adopt a systematic approach to ensure that employees as given enough opportunities to learn and share knowledge among each other. Organization can store knowledge in databases to provide greater access to information posted either by the company or the employees on the knowledge portals of the company. When an employee returns after attending any competencies or skills development program, sharing essential knowledge with others should be made mandatory. Innovative ideas (implemented at the work place) are good to be posted on these knowledge sharing platforms.5. Highlight performersMany employees are dissatisfied for their work are not appreciated or highlighted. Organizations should create profiles of top performers and make these visible though company intranet, display boards etc. It will encourage others to put in their best, thereby creating a competitive environment within the company.6. Open house discussions and feedback mechanismEmployees lack motivation to perform and remain dissatisfied with their work as there is less learning scope in their work place and also there is lack of proper feedback from senior management on their work. Open house discussions, employee-management meets, suggestion boxes and ideas capture tools such as Critical Incidents diaries are the building blocks that can help the Managers to identify & develop talent.7. Reward CeremoniesEmployees are also dissatisfied for their efforts and contributions are not recognized and rewarded. Merely recognizing talent does not work, you need to couple it with ceremonies where recognition broadcast.

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BIBLIOGRAPHY

Bhatnagar, Subhash, India's Software Industry.

S Janani, Employee Turnover : Present Scenario of Indian IT Industry, research paper published in Indian Journal of Applied Research, Vol 4, Issue 3.

Dr Tapan K Panda, Job Satisfaction of Dotcom Employees – An Indian Experiment.

Biju Varkkey & Rupa Korde, Exploring Job Satisfaction in India using Paycheck India Survey Data.

http://www.nasscom.in

Popular Financial newspapers.

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EXHIBIT – QUESTIONNAIRE

1. Rate the company you have worked for based on the following parameters? In case of multiple companies please rate the company you last worked for?

Parameters Very Satisfied

Satisfied Neither Satisfied nor Dissatisfied

Dissatisfied VeryDissatisfied

a. Salary

b. Growth prospects

c. Work pressure

d. Work timings

e. Onsite opportunities

f. Learning opportunities

2. Please indicate your level of satisfaction with the following statements pertaining to your work experience in IT organization:

StatementsVery

SatisfiedSatisfied

Neither Satisfied

nor Dissatisfied

Dissatisfied VeryDissatisfied

a. The work environment in your organization

b. Variety of work assigned to you

c. Contribution of work to organization’s business goals

d. Autonomy in decision making at your level

e. Opportunities to use skills and abilities in your job

f. Relationship with immediate supervisor

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g. Communication between co-workers

h. Career advancement opportunities in terms of roles and responsibilities

i. Management’s recognition of employee job performance

j. Work-Life Balance

k. Compensation

l. Training and skill development activities

m. Salary hikes

n. Job Flexibility

DEMOGRAPHICS Name (Optional)______________________________

1. Age (in years)❏ 19-22❏ 23-25❏ 26-28❏ 29 and more

2. Gender❏ Male❏ Female

Marital Status❏ Single❏ Married

Organization____________________________________________

Designation___________________________________________

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Work Experience (in months)❏ 0-12❏ 13-24❏ 25-36❏ 37-48❏ 49 and more

3. Annual Salary (in Rs.)

❏ 0 - 2,00,000❏ 2,00,001 - 5,00,000❏ 5,00,001 - 10,00,000❏ 10,00,001 and above

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