CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION

Organizations are competing in the global market. They are experiencing difficulties and
challenges in managing human resources. To survive in the competitive world, organizations
need to focus on the strength of their employees to achieve competitive advantage. Nowadays,
many organizations are facing the problem to keep their employees actively engaged for long
time. Various factors affect employee engagement, namely: employee attitudes, employee
retention, personality dispositions, and organizational culture [1] [2] [3]. Some researchers have
demonstrated links between engagement with productivity and organizational performance [4]
[5]. The present study focuses upon employee engagement and retention in software
professionals in India. Further, it presents the validation of a model of employee engagement that
integrates four constructs i.e. job satisfaction, employee retention, organizational culture, and
core self-evaluations.

In todays scenario, managing human resources are important for all organizations. Searching the
right candidate, training, and preparing them are a big challenge. A knowledgeable and skilled
employee is the asset for the organization that improves creativity and organizational innovation.
Therefore, HR professionals are working to develop innovative HR practices for engaging
employees, motivating, and retaining them. The result of these practices increases organizational
performance and productivity.

The information technology sector has grown considerably after 1990s. NASSCOM (1995-
2015) annual reports have shared the problems and prospects that have emerged over the years.
The report highlights the human resource management challenges in terms of demand for skills
required in present and future. This sector has been experiencing growth and is facing problems

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in managing attrition (Kamalanabhan, Sai and Mayuri, 2009) [6]. This may prove to be the major
reason in studying the factors related to employee engagement and retention in IT sector in India.

Growth of Information Technology Sector

In the economy of India, the service domain is the prominent segment and has contributed 56.6
percent of gross domestic product in 2012-2013 [7] . Indian informational technology (IT) sector
has done considerable work in the international market. This sector includes software
development and solutions, IT-enabled Services (ITES) and hardware segment. India being a low
cost destination for IT service outsourcing [8], IT services and software development is the most
important contributor to IT sectors revenue. The share of ITES in GDP increased from 4.0
percent in 1997-98 to 5.2 percent in 2006-07. The Indian information technology spending
forecasted to increase 9.4% from $67.1 billion in 2014 to $73.3 billion in 2015. According to
The IT-BPM Sector in India: Strategic Review 2013 reported by NASSCOM that historically,
this sector has grown 2000 percent from 1998 to 2012. This sector is estimated to have the
aggregate revenue of $108 billion in financial year (FY) 2013 with the export touching $75.8
billion [9]. The pace at which the IT sector is expanding in India, it will be the third- largest IT
market in the Asia-Pacific by 2016, and second largest by 2018 [10]. The Indian software
companies such as Infosys Ltd, HCL Technologies Ltd, Wipro Ltd and Tech Mahindra Ltd have
improved their revenue growth, and are key players in North America and Europe, together
accounts for 85% of their IT business [10]. Across the globe, many companies have outsourced
the software management to Indian professionals who provide quality service at comparatively
lower cost. These professionals provide sophisticated services in software development and its
maintenance. The contributions of these professionals displayed the availability of special talent
in India. They provide their services to more than 60 countries and have 50 percent share of the
worlds fortune 500 companies [11].

At present, direct employment is expected to reach nearly three million. An indirect job creation
is estimated to be at 9.5 million with an addition of 188,300 employees. This phenomenal growth
in India has its implications in managing people. One such challenge is employee retention,
where they are losing 20% trained employees every year [9]. This challenge is due to high
attrition rate in software professionals. However, there are a number of reasons for leaving the

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organization, interventions to control attrition rate is becoming difficult. Another challenge is to
increase active engagement of employees so that they remain with the organization. Active
engagement determines the growth and productivity of organization [12]. Thus, it became
important to address the problem of retention, and examine the factors that cause employee
engagement.

Job satisfaction, employee engagement, organizational culture, and personality of an individual

are various important factors that can play a vital role to retain an employee in organizations.
The fact that each individual differs from one another, some are introverts and others extrovert,
and some intrinsically motivated, while others extrinsically motivated. The outcome of these
differences leads to unique behavior of every individual. To explain these differences between
individuals, description of personality is meaningful. It gives us a way to compare others.
Therefore, personality may affect employee engagement, job satisfaction, and retention in the
organizations. [13] [14] [15].

Organizations are changing and these changes influence their working style and performance.
Culture lends support to this initiative. Organizational culture is comprised of characteristics
perceived by the employees, which serve as a major force in influencing their behavior.
Employees should be compatible with organizational culture and perform their duties,
responsibilities, working hour and autonomy in the workplace, etc (Schneider, 1987) [16]. The
role of HR professionals is to ensure that the employees remain motivated to meet the
organizational objectives and maximize effectiveness. Therefore, HR professionals need to
improve employee engagement by treating the employee at workplace carefully.

1.2 EMPLOYEE ENGAGEMENT AND RETENTION

Optimal performance has gained attention in management of human resource as a novel way to
look at evaluation of workplace in twenty-first century. The traditional approach to performance
management and its measures is good for stable jobs in which work processes are easily
observable and predictable. However, today work is often complex, rapidly changing and hard to
measure [17]. There has been increased attention shown in the phenomena of job engagement
and employee engagement, and its role in increasing employee performance [18]. Therefore, for

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understanding work, organizations should utilize human resource initiatives and available
psychological capital in the workplace for development and enhancement of employee
engagement.

Employee engagement has been defined as an employees cognitive, emotional and behavioral
state directed towards positive organizational outcomes [19]. Engagement also refers to strong
positive feeling about job and organization. Employees also speak good about the organization
(Schemerhorn, 2004) cf [20]. It indicates that employee is willing and ready to help others, and
adopts innovative ideas to improve organizational performance. Another view of employee
engagement is the level of commitment and involvement an employee has towards his/her
organization. An engaged employee is aware of the business context and works with colleagues
to improve performance and productivity for the benefit of the organization [5] [21]. This view
shows that engagement occurs where an employee is committed to his/her work in the
organization. According to Chartered Institute of Personnel Development (CIPD) observation,
engagement has become an umbrella concept for practitioners to capture various means by
which an employee can put additional or discretionary effort a shift to willingness on the part
of employees to work beyond the contract [22]. This extra-work beyond contract is also referred
as organizational citizenship behaviour.

Another major challenge for organization is to retain people. The concern for employee retention
has increased due to ample job opportunities available in the IT sector. The high attrition rate is a
difficult proposition for organizations to remain competitive. In order to control this turnover,
organizations are making effort to attract and retain talent. The retention management practices
comprise of introducing human resource management practices, providing career opportunities,
recognition and work-life balance so that employees perceive the organizational efforts
favourably and decide to remain with the organization.

The present study emphasizes on identifying the antecedents of engagement in the form of
organizational and individual factors namely culture and personality, and examines retention as
an outcome of employee engagement and job satisfaction in the organization. Subsequently, test
the model prepared based on the gaps in the existing literature.

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1.3 RATIONALE OF THE STUDY

In the present scenario, organizations especially IT sector are going through rapid changes.
These changes are due to economic reforms, global competition, low cost manufacturing, forcing
organizations to search actively engaged employees to accomplish the organizational growth
and development. Engaged employee is passionate to work and is a key player in the business
development of the organization. So far, limited research is available on employee engagement
and retention that together relates to core-self evaluations, organizational culture, and job
satisfaction in a model.

1.4 OBJECTIVES OF THE RESEARCH

The objectives of the research are as follows:

To identify the factors of employee engagement, organizational culture, job satisfaction

and employee retention.

To adapt scales for employee engagement, job satisfaction, organizational culture,

and employee retention constructs.

Evaluate validity and reliability for each of the construct scales.

To examine the relationship between core self evaluations and organizational culture on
employee engagement, job satisfaction and employee retention.

To test the model,

To evaluate direct and indirect effect of employee engagement between

organizational culture and job satisfaction.

1.5 SCOPE OF THE STUDY

The present study attempts to identify variables related to employee engagement and retention
within an organization. This research used both qualitative and quantitative research design for
software professionals. Qualitative research design helped to understand the factors (dimensions)

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 affecting organizational culture, employee engagement, job satisfaction and employee retention
and their relevance to software professionals. Quantitative research was used to collect the
primary data for analysis and model testing. From the findings of this research, organizations
may be able to understand the importance of personality attribute and organizational culture that
motivates employees to work, actively engage, and further motivate them to continue in the
organization.

1.6 PROPOSED FRAMEWORK IN THE RESEARCH

The review of literature helped in establishing the research gap to propose the following
framework, which comprises of employee engagement, core self-evaluations, organizational
culture, job satisfaction, and employee retention phenomena as major variables. The framework
will be empirically validated on the software professionals in India.

Core Self
Evaluations
Evaluation

Employee Job Employee

Engagement Satisfaction Retention

Organizational
Culture

Figure 1- Proposed Framework

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1.7 SIGNIFICANCE OF THE STUDY

This research is significant to the field of understanding organizational behavior, human resource
management, and psychology. The construct used in the study are employee engagement, job
satisfaction, core self-evaluations, organizational culture and employee retention. This research
will provide an opportunity to add new findings to the phenomena of employee engagement and
retention. This research will have implications for practitioners that would help the organizations
in formulating HR policies to align employee engagement and retention of people.

1.8 CONTRIBUTIONS OF THE STUDY

The present research contributed in two ways: firstly in context specific adaptation and
validation of the scale to measure the construct of employee engagement, job satisfaction,
organizational culture, and employee retention on software professionals. In this study, scales
were adapted through exploratory and confirmatory factor analysis. The findings indicated that
these scales are reliable and valid among software professionals in Indian context. Secondly, the
current research also contributes in explaining the significant relationship among the variables
such as core self-evaluations, employee engagement, organizational culture, job satisfaction, and
employee retention. This study incorporated five constructs and established a framework among
these variables.

1.9 THESIS PLAN

The dissertation analyzes the relationship among core self-evaluations, employee engagement,
job satisfaction, organizational culture, and employee retention. The dissertation is organized in
6 chapters as follows:

Chapter 1: Introduction

The first chapter deals with the introduction of the research. The chapter presents the
introduction of employee engagement and retention and its relevance to software industry in
India. It also discusses the rationale for selecting the software professionals, need of the study,
objectives of the study, significance, scope, and contributions of the study.

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Chapter 2: Review of Literature

The chapter 2 explains the past researches on five constructs - employee engagement, employee
retention, organizational culture, core self-evaluations, and job satisfaction. The chapter
elaborates various definitions and perspectives developed historically on employee engagement
in terms of personal engagement, work engagement and employee engagement; and employee
retention. The prominent measures with factors / dimensions required to measure the employee
engagement, job satisfaction, organizational culture, and employee retention used in previous
studies and proposed the research hypotheses. The chapter ends with proposed framework
(model) and need for development measures in the study.

Chapter 3: Research Methodology

The chapter 3 explains the research methodology used in this research. This chapter discusses
both the qualitative and quantitative research design used in the study. It describes the selection
of respondents (software professionals) from the population through sampling techniques. This
chapter further presents the scale adaptation process and statistical analysis used to standardize
the scales and establish the theoretical framework (model) developed in this research.

Chapter 4: Result

The chapter 4 provides the detailed information about the outcomes of the data analysis. Data
analysis, starts from frequency distribution on demographic variables followed by testing the
scales (measures) of employee engagement, core self-evaluations, organizational culture, job
satisfaction and employee retention tested through exploratory and confirmatory factor analysis
and also established the reliability and validity of the constructs. The chapter ends with the
testing of formulated hypotheses and the proposed framework / model using structural equation
modeling.

Chapter 5: Discussion and Conclusion

The chapter 5 describes the findings of the present research and explains it in the context of past
researches. It also explains the confirmation and rejection of hypotheses with the help of past
researches and conclusion drawn from the study.

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Chapter 6: Implications, Suggestions for Future Research and Limitation

The chapter 6 explains the implications, and suggestion for future research. This chapter
concludes with the limitation of the present research.