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ER
29,6

Talent management strategy of


employee engagement in Indian
ITES employees: key to retention

640

Jyotsna Bhatnagar
Human Resource Management Area, Management Development Institute,
Sukhrali, Gurgaon, India
Abstract
Purpose With talent management becoming an area of growing concern in the literature, the
purpose of this paper is to investigate talent management and its relationship to levels of employee
engagement using a mixed method research design.
Design/methodology/approach The first phase was a survey on a sample of 272 BPO/ITES
employees, using Gallup q12 or Gallup Workplace Audit. Focus group interview discussion was
based on reasons for attrition and the unique problems of employee engagement. In the second
phase, one of the BPO organizations from the phase I sample was chosen at random and exit
interview data was analyzed using factor analysis and content analysis.
Findings The results were in the expected direction and fulfilled the research aims of the current
study. In the first phase low factor loadings indicated low engagement scores at the beginning of the
career and at completion of 16 months with the organization. High factor loadings at intermediate
stages of employment were indicative of high engagement levels, but the interview data reflected that
this may mean high loyalty, but only for a limited time. In the second phase factor loadings indicated
three distinct factors of organizational culture, career planning along with incentives and
organizational support. The first two were indicative of high attrition.
Research limitations/implications A limitation of the research design was a sample size of 272
respondents. Some of the Cronbachs alpha scores of the subscales of Gallup q12 were low. The
strength of the study lies in data triangulation, which was obtained through a mixed method approach,
a survey and unstructured focus group interviews. There are theoretical implications for the construct
of employee engagement. There seems to be a construct contamination from the fields of employee
satisfaction, employee commitment and employee involvement, which is beyond the scope of this
paper. Future studies in India may look into this area and construct an independent scale of employee
engagement, focusing on the antecedent variables and testing them for theoretical underpinnings.
Originality/value The present study indicated that a good level of engagement may lead to high
retention, but only for a limited time in the ITES sector. The need for a more rigorous employee
engagement construct is indicated by the study. Practical implications for retention in the BPO/ITES
sector are referred to.
Keywords Human resources management, Retention, India, Employees
Paper type Research paper

Employee Relations
Vol. 29 No. 6, 2007
pp. 640-663
q Emerald Group Publishing Limited
0142-5455
DOI 10.1108/01425450710826122

Introduction
Talent management is fast gaining a top priority for organizations across the world.
Trends for talent management, talent wars, talent raids and talent shortage, talent
metrics retention and concerns for talent strategy are expressed in the literature, across
various countries like the USA, the UK, Australia, Japan, China, India, and across Asia
(see Yeung, 2006; Ruppe, 2006; Dunn, 2006; Chugh and Bhatnagar, 2006; Lewis and
Heckman, 2006; Lewis, 2005; Branham, 2005; Bennett and Bell, 2004). Talent

management was initially designed to improve the process for recruiting and
developing people with the required skills and aptitude to meet current organizational
needs. The various aspects of talent management are recruitment, selection,
on-boarding, mentoring, performance management, career development, leadership
development, replacement planning, career planning, recognition and reward (Romans
and Lardner, 2006; Heinen and ONeill, 2004; Scheweyer, 2004). Competition and the
lack of availability of highly talented and skilled employees make finding and
retaining talented employees major priorities for organizations (Fegley, 2006). In order
to attract and retain the best talent anywhere in the world, an organization must have a
strong and positive employer brand (Brewster et al., 2005). Employer brand
interventions in recent research indicates talent management as a key driver for this
strategy, and is on the agenda for HR executives in 2007 and beyond (HR Focus, 2006,
Focus, 2007). Talent has become the key differentiator for human capital management
and for leveraging competitive advantage. Grounded within strategic HRM (Gratton,
2000; Becker et al., 2001), the management of talent seems to be one of the key functions
that HRM is playing strategically in organizations (Bhatnagar, 2004). Recent research
indicates that the war for talent is intense due to labour market shortages (Branham,
2005; Brewster et al., 2005; Lawler, 2005; Boudreau and Ramstad, 2005; Cappelli, 2000;
Nybo, 2004; Sparrow, 2004), yet very little research attention has been aimed at
competitive talent management strategies. Further, Pfeffer and Sutton (2006) reflect
that the typical HRM/talent mindset, which looks at performance results as an
opportunity for an assessment of ability, leads to lower performance and unhappy
staff who do not fulfill their potential and thus would reflect low talent engagement.
In fact, talent engagement (Fombrum, 2006) is an area which needs a special
research focus. It raises questions such as:
.
What is the engagement score?
.
At what level are various talent segments and departments engaged?
.
Are engagement levels increasing over time?
These questions need to be addressed through research.
Companies with highly engaged employees articulate their values and attributes through
signature experiences visible, distinctive elements of the work environment that send
powerful messages about the organizations aspirations and about the skills, stamina, and
commitment employees will need in order to succeed in these organizations (Erickson and
Gratton, 2007, p. 1).

Employee engagement as a key to the retention of talent (one-of-a-kind hire in 100


employees; Glen, 2006) is an area in which the lead has been taken by practitioners
(Parsley, 2006; Baumruk et al., 2006; Woodruffe, 2005; Gallup Management Journal,
2006; Bennett and Bell, 2004; Hay Group, 2002). It is an area where rigorous academic
research is required (Cartwright and Holmes, 2006; Joo and Mclean, 2006; Luthans and
Peterson, 2002). Employee engagement (Rothbard, 2001; Cartwright and Holmes, 2006;
Joo and Mclean, 2006), is an important outcome variable which research studies in
India have not investigated. In fact, Fegley (2006) indicated trends in the Western
world that the Indian HR community needs to look into. Given the relevance of the
dynamic work environment post-liberalization, this study becomes important.

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After liberalization of the Indian economy, the impact of restructuring, economic


transition to an open market, and increased competition from internal and external
sources has put pressure on all functions of organizations (Bhatnagar, 2007; Budhwar
et al., 2006). There has been evidence of a general need among the managerial cadre to
build capabilities, resources, competencies, strategies, and macro as well as micro HRM
activities (Budhwar et al., 2006; Bhatnagar and Sharma, 2005). Some leading Indian
organizations have brought out newer issues in the strategic management of their HR
function. An attempt has been made in this paper to fill this gap, and to investigate the
emerging talent management, attrition and employee engagement issues in the
BPO/ITES sector.
The BPO/ITES SECTOR is a heterogeneous and rapidly growing offshore market with
a projected annual growth rate of 60 per cent (Tapper, 2004). Brown and Stone (2004)
reported that BPO accounted for 34 per cent of the global outsourcing contract value in
2004 and projected that BPO services would grow from $1.3 billion in 2002 to $4.3 billion in
2007 (Mehta et al., 2006; Budhwar et al., 2006). According to a recent survey carried out by
A.T. Kerney (2007), an unbeatable mix of low costs, deep technical and language skills,
mature vendors and supportive government policies have taken India to the top among
global destinations for offshoring services. This is despite all the concerns indicated about
overheating, wage inflation and service levels, as reported in a recent survey (India
Business, 2007).
Further, the Indian IT-ITES industry is on a high momentum path. Rampant
growth, however, has come with its own set of challenges. Chief among them relates to
skilled manpower resources. Not only does India need to sustain its vast pool of
specialised IT-ITES talent, but it also has to ensure that it remains industry-relevant
and rightly skilled (Simhan, 2006).
It is apparent from the research to date that call centres (or BPOs) are not all
managed in the same way and that employers make specific choices about the types
of employment practices that they wish to utilise within these operations (Halliden
and Monks, 2005). In fact, Budhwar et al. (2006) reported HRM systems and their
current state in the Indian BPO/ITES sector. Yet the study did not look at talent
management and talent engagement strategies. More recently, the National
Association of Software and Services Companies (NASSCOM) HR Summit 2006
looked closely at the evolving profile of HR and the transformational role it can play
within the IT-ITES industries, to make employees and their organizations more
globally competitive (Simhan, 2006).
In the background of the above, the first objective of the study is to focus at the
BPO/ITES sector and discuss the literature in the area of employee engagement. The
second objective investigates the quality of employee engagement in the ITES sector. This
is based on primary data and probes for linkages between employee engagement and
talent retention.
The paper is organized as follows: the first section sets the context of the need to
study employee engagement in the BPO/ITES sector in India. The next section
examines the literature on employee engagement and its linkage to talent management
and retention; the third section encapsulates the lacunae in research and the conceptual
framework. This is followed by the research methodology, results and implications for
further research.

The ITES sector in India


The Indian BPO/ITES sector has been the focus of some research studies in the West
recently (for a detailed analysis of this sector, see McMillan (2006); Budhwar et al.,
2006; Mehta et al., 2006; Singh and Pandey, 2005; Venkatraman, 2004).
Indias competitive advantage as compared to other countries has made it a target
destination of multinationals for their back-end operations. To begin with, the
abundant skilled manpower gives the country an edge in BPO. About 100,000
engineers graduate from India every year. Many of these engineers are employed with
call centres (BPO/ITES SECTOR) for trouble shooting and providing technical support
(A.T. Kerney, 2007). India has the largest English-speaking talent pool in the world
with 4.40 lakh (1 lakh 100; 000) engineering diploma holders, about 23 lakh
graduates in other disciplines and 3 lakh post graduates. Three-fifths of the Indian
technical workforce has more than four years of experience (Pandeya and Bali, 2006,
p. 20). Global Services Location Index (2007) cited in an A.T. Kerney Report (2007)
claims that in the overall ranking of BPOs, dominated by developing countries from
Asia, India is followed by China, Malaysia, Thailand and Brazil. To arrive at the final
ranking, A.T. Kearney surveyed over 50 countries for different aspects related to
offshoring services, like people skills, financial attractiveness and business
environment. India maintains a wide, albeit slightly shrinking, lead over China,
confirming what industry surveys and visiting executives have found. While
compensation costs in India have increased because of recent high economic growth,
these cost escalations have been matched by corresponding increases in skill supply
and quality indicators, the global consultancy said. Although India ranks high
overall, mainly because of its skilled and technically superior pool of manpower, it
suffers on the other two parameters financial attractiveness and business
environment rankings. In terms of people skills India ranks second, behind the US (tier
II cities) but ahead of China and Germany. As for business environment rankings,
India is placed a distant 34th. When it comes to the question of cost effectiveness,
Vietnam, with one of the lowest telecom costs in the world, comes out on top while
India is ranked sixth. Meanwhile McMillan (2006, p. 240) reported that the US accounts
for 59 per cent of total global investment in the Indian ITES-BPO industry, targeting
legal, logistics and customer care segments. Europe is the second largest market at 22
per cent, targeting HR, purchasing, finance, and accounting. Finally, the Asia/Pacific
region follows at 15 per cent, with the fastest growing areas including HR, engineering,
finance, accounting, and purchasing. While the NASSCOM (National Association of
Software and Services Companies, 2006) Report states that the IT-ITES sector
contributed 4.8 per cent of GDP in 2006 and is to achieve the targeted $60 billion in
exports by 2010. On the other hand, it was reported by ICRA, an associate of Moodys
Investors Service, reported that the Indian BPO/ITES industry is benefiting from the
continued trend of outsourcing by global corporations of their business processes
service to developing countries, and the domestic ITES sector is set to reach the $10
billion mark by 2006-2007 from $7.2 billion in 2005-2006, a growth of almost 39 per cent
(PTI, 2006). The report also pointed out that in line with the growth of the sector,
manpower demand is also expected to surge to around 1.4 million by 2010. Sustaining
this high growth in the ITES sector would require the industry to attract an additional
0.5 million employees over the estimated figures, it said. Dispelling the fears of
outsourcing backlash from developed countries, the study stated that over the long

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term, outsourcing by developed nations may lead to the creation of new jobs in
occupations that require higher levels of skill, increase real wages, and yield significant
economic gain. According to the NASSCOM strategic review (National Association of
Software and Services Companies, 2006), for India to fully capitalise on the opportunity
and sustain a disproportionate lead in the global IT-ITES space, it needs to focus on
enhancing the talent pool advantage focus on skill development to better leverage
the worlds largest working population, among others. According to Budhwar et al.
(2006), with India expected to achieve revenues of $148 billion by 2012, the industry
requires direct recruitment of over 3.7 million personnel. With recruitment becoming a
source of concern, attrition within the sector is creating problems of employee
engagement within this sector. While India does have a large talent pool, not all are
industry-ready or equipped with the necessary skill sets to become useful to
companies. This means that while there is plenty of supply at the entry level (voice
processes), there are huge gaps in the middle management and senior management
levels. This has resulted in increased levels of poaching and attrition cases. Presently,
the average attrition rate faced by this industry is somewhere around 30-35 per cent
(Phukan, 2007). Attrition has actually stabilised in the IT and ITES sector, if one takes
the three-to-four year time frame. For BPOs/ITES centred around Bangalore (Southern
India), it could be around 35-40 per cent (Sen, 2007).
Over the last few years, a number of studies related to the management of human
resources in outsourcing centres have been conducted. The existing literature
highlights that most of these studies have been conducted in the developed countries
(see for example, special issues of HRMJ, 2002, European Journal of Work and
Organizational Psychology, 2003; Holtgreve et al., 2002; Butler, 2004; Deery and Kinnie,
2004). They provide the theoretical basis for analysing employee engagement studies
in the HR practices context. A framework for employee engagement in the BPO sector
can provide interesting leading points for practitioners and academicians to plan
training interventions to arrest disengagement and hence quitting behaviour in the
workforce and leverage the quality of the engagement index as a competitive
advantage. Hence there is an immense need to study employee engagement in this
sector. The next section focuses on the conceptual framework of employee engagement
and the literature review in this area. This fulfils the first aim of the current study.
Employee engagement
The literature on employee engagement has a practitioner influence, and research
studies (barring a few like Rothbard, 2001; May et al., 2004; Schaufeli and Bakker, 2004)
are sparse in this area. This paper examines both the aspects in the literature. We first
deal with practitioner-oriented definitions and then move to academic research.
According to CEO Speak in the Hewitt Best Employers Survey (2004), among the many
key people challenges one is to build a fierce employer brand equity (Fitz-enz, 2003),
and one way to do that is to retain employees. This would be possible if organizations
provide them with a passion to work, and an engrossing environment which
maximizes their performance and gives a continuous work experience that is difficult
for competitors to replicate. Managers are an important key in this equation (Baumruk
et al., 2006; Lockwood, 2006). Further, an employer of choice recruits and engages
talent through practices that address both tangibles and intangibles, with a focus on
the long-term as well as the short term, and are tailored to the organization (Branham,

2005). A recent survey of HR professionals in Western countries reflects that the most
important issue anticipated in 2006 involved retaining and developing key employees
(75 percent of responses); the next issue was of employee engagement and enhanced
productivity (60.7 percent of responses cited this issue), followed by leadership training
and development (59.8 percent respondents cited this issue; HR Focus, 2006). Effective
talent management policies and practices demonstrate commitment to human capital,
resulting in more engaged employees and lower turnover. Consequently, employee
engagement has a substantial impact on employee productivity and talent retention.
Employee engagement, in fact, can make or break the bottom line (Lockwood, 2006).
Martel (2003, pp. 30, 42) is of the opinion that, in order to obtain high performance in
postindustrial, intangible work that demands innovation, flexibility, and speed,
employers need to engage their employees [. . .] Engaging employees especially by
giving them participation, freedom, and trust is the most comprehensive response to
the ascendant postindustrial values of self-realization and self-actualization. The
performance data of the best companies in the USA show that in all the practice areas
discussed previously, objectives are more easily met when employees are engaged and
more likely to fall short when they are not. In order to maintain an employer brand, we
see an emergence of a series of studies on employer of choice, which also measure
engagement index and financial performance (Coleman, 2005). A recent SHRM
Conference (2006) reported the result of a new global employee engagement study
showing a dramatic difference in bottom-line results in organizations with highly
engaged employees when compared to organizations whose employees had low
engagement scores. The study, gathered from surveys of over 664,000 employees from
around the world, analyzed three traditional financial performance measures over a
12-month period, including operating income, net income and earnings per share (EPS).
Most dramatic among its findings was the almost 52 percent gap in the one-year
performance improvement in operating income between organizations with highly
engaged employees versus organizations whose employees have low engagement
scores. Employee engagement surveys are designed to gauge the employee
engagement based on employees perceptions of the work environment, which is
part of the above surveys. Furthermore, when done well, practices that support talent
management also support employee engagement (e.g. work-life balance programs
flexitime, telecommuting, compressed workweeks, reward programs, performance
management systems) according to the Corporate Leadership Council (2004) and
Martel (2003). Employee engagement begins with an on-boarding program and is
essentially a part of the human capital pipeline or talent pipeline, as some researchers
have determined (e.g. Romans and Lardner, 2005). In India, although many
multinational organizations have carried out the engagement index survey, yet no
attempt has been made to study the same and link it to talent management strategy.
The current study attempts to map the engagement index across the ITES sector due
to the high attrition rates mentioned previously.
Conceptual framework of employee engagement
Engaged employees within an organization provide a competitive advantage to
organizations, as explained by the resource-based view (RBV) of the firm (Joo and
Mclean, 2006), and hence there is a need to continuously engage employees. The
resource-based view posits that human and organizational resources, more than

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physical, technical or financial resources, can provide a firm with sustained


competitive advantage because they are particularly difficult to emulate (Lado and
Wilson, 1994; Wright and McMahan, 1992). The RBV points out that firms can develop
sustained competitive advantage only by creating value in a way that is rare and
difficult for competitors to imitate (e.g. Barney, 1991, 1995; Grant, 1991; Peteraf, 1993;
Paauwe, 1994; Teece et al., 1997; Foss, 1997). This approach requires that a firm be seen
not through its activities in the product market, but as a unique bundle of resources
that are complex, intangible and dynamic (De Saa-Perez and Garca-Falcon, 2002). Joo
and Mclean (2006) state that engaged employees are strong organizational assets for
sustained competitive advantage and a strategic asset. Amit and Shoemaker (1993)
define a strategic asset as the set of difficult-to-trade-and-imitate, scarce, appropriable
and specialized resources and capabilities that bestow a firms competitive advantage.
These engaged employees are difficult to imitate and are unique to an organization,
thus lending credence to the resource-based perspective of the firm. This then leads us
to the definition of employee engagement, where we analyze the types of employee
engagement and the nesting of the concept in the theoretical framework. Donahue
(2001) emphasized in a talent management strategy the credo of heads, hands and
hearts. It is hearts (passion a persons intrinsic motivation) that are the essence of
employee engagement. Further, there is confusion in the literature about employee
engagement. We see overlapping constructs of organizational commitment, intrinsic
motivation, and employee involvement, passion and dedication to work. According to
Kahn (1990) employee engagement is different from other role constructs such as job
involvement (Lawler and Hall, 1970; Lodahl and Kejner, 1965), commitment to
organizations (Mowday et al., 1982) or intrinsic motivation (Deci, 1975). Employee
engagement is a multidimensional construct. Employees can be emotionally,
cognitively or physically engaged. Luthans and Peterson (2002) proposed Kahns
(1990, 1992) work on personal engagement, which provides a convergent theory for
Gallups empirically derived employee engagement. To be emotionally engaged is to
form meaningful connections to others (peers, co-workers) and to experience empathy
and concern for others feelings. In contrast, being cognitively engaged refers to those
who are acutely aware of their mission and role in their work environment. According
to Kahn (1990) employees can be engaged on one dimension and not the other.
However, the more engaged the employee is on each dimension, the higher his or her
overall personal engagement. On the other hand, Rothbard (2001, p. 655) states that
engagement may look at depletion or enrichment in multiple roles. The theory behind
role conflict is visited to prove the point. This study also draws on the basic study of
Kahn (1990, 1992), as does the research study by May et al. (2004, p. 13), which bases its
work on meaningfulness in Kahns (1990, 1992) basic work. The study quotes the
research study of Britt et al. (2001), which found that engagement in meaningful work
can lead to perceived benefits from the work.
On the other hand, Schaufeli et al. (2002, p. 74) define engagement as a positive,
fulfilling, work-related state of mind that is characterized by vigor, dedication, and
absorption. They further state that engagement is not a momentary and specific state,
but rather it is a more persistent and pervasive affective-cognitive state that is not
focused on any particular object, event, individual, or behavior (Schaufeli et al. (2002, p.
74)).Yet engagement is different from satisfaction as Gubman (2004, p. 43) states that
engagement means a heightened emotional connection to a job and organization that

goes beyond satisfaction that enables people to perform well, and makes want to stay
with their employers and say good things about them. In short, there is a psychic income
at work that makes people feel socially accepted and respected:
Engagement is the state of emotional and intellectual commitment to an organization or
group. An engaged employee is a person who is fully involved in, and enthusiastic about, his
or her work (Falcone, 2006).

In fact, Luthans and Peterson (2002, p. 377) state that Gallup has empirically
determined employee engagement to be a significant predictor of desirable
organizational outcomes such as customer satisfaction, retention, productivity and
profitability (see Buckingham and Coffman, 1999). This employee engagement is
measured by the Gallup Workplace Audit, consisting of 12 questions such as:
.
Do I know what is expected of me at work?
.
At work do I have opportunity to do what I do best every day? (see Buckingham
and Coffman, 1999).
These questions were derived through thousands of focus groups conducted over 2,500
business, healthcare and education units. The questions were factor-analyzed and were
subjected to confirmatory factor analyses. However linking the empirical evidence to
an established theory in the management research seems desirable as such. A
theoretical framework can aid in further validation, understanding and testing of
Gallups conceptualization of engagement (Luthans and Peterson, 2002, p. 377).
Luthans and Peterson (2002, p. 378) state that by conceptually comparing the Gallup
Workplace Audit (Buckingham and Coffman, 1999) with Kahns (1990) theoretically
derived dimensions of engagement, there seems to be a conceptual fit, and thus
establishes theoretical grounding for better understanding of employee engagement
and a way to operationalize and measure it through the Gallup Workplace Audit.
Further, involvement is important, as Baumruk (2006), states:
This is the feeling employees have about being in the loop. Employees who feel out of the
loop suffer in terms of engagement. This is about a managers ability to involve employees in
decision making, execution and day-to-day change initiatives.

Kahn (1990) suggests that employees experience dimensions of personal engagement or


disengagement during daily task performance. Yet Kahn (1990) notes that disengagement
is dependant on social and cognitive withdrawal and reflects incomplete role
performance. More recently, Seijts and Crim (2006) reported the findings of the 2005
Towers Perrin (Seijts and Crim, 2006) engagement study, which demonstrates alarming
findings of the disengagement rate in the US workforce, and does the Gallup Management
Journal (2006), which quotes alarming engagement indices for the US workforce. A recent
meta-analysis of over 7,939 business units in 38 companies explored the relationship at
the business-unit level between employee satisfaction-engagement and the business-unit
outcomes of customer satisfaction, productivity, profit, employee turnover, and accidents
(Nowack, 2006). This was conducted in a Western context. However, no such studies have
been replicated in India.
Looking at the above lacunae it also becomes vital to measure employee
engagement in India, especially in the ITES sector. It becomes important to determine
the disengagement areas, so as to plug the gaps and strengthen the engagement areas

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by supportive OD interventions in the BPO/ITES sector. This sector has high levels of
attrition, as indicated by an Indian BPO, Infosys, where attrition is treated as a
business problem and not just an HR problem, and receives attention at a combined
leadership level (Sen, 2007; Saxena and Bharadwaj, 2007; Budhwar et al., 2006).
Methodology
Given the exploratory nature of the research, a mixed method approach was followed for
investigation, which included self-completed questionnaires, focus group interviews, and
possible secondary sources (exit interview data in this research study). The research was
conducted in 2005 and 2006, in the four BPO/ITES organizations falling in the National
Capital Region of India (NCR). In the first phase of the research there were 350 employees
who were approached to fill the questionnaires. The respondents were approached
personally for their responses and interviews. The researcher received 272 sets of
completed questionnaires making a response rate of 78 percent. The sample comprised 42
percent females and 58 percent males. The average age was 24 years and the minimum
qualification was an undergraduate degree. Focus group interviews were carried out for
about one and a half hours in one of the BPO/ITES organizations. The interview schedule
was unstructured and was based on the Gallup q12 questions (see Table I) and reasons for
attrition (open-ended question) about all levels of employees, with special reference to the
entry level. The group comprised of 30 male team managers/project heads/technical
heads at a management institute, where these members participated in a management
development program. Their level is middle management in the BPO/ITES sector. In the
second phase of research in 2006, one of the BPO/ITES organizations was selected
randomly. In this organization 72 completed exit interview forms were analyzed for
reasons of attrition at the team member/technical member and team developer levels.
These are the first two entry-level positions at this BPO. Employees at these levels are
typically fresh graduates (from varied streams) with a few engineers as well.
Measures
In the first phase of the research, Gallup q12, known as the Gallup Work Place Audit (see
Buckingham and Coffman, 1999) was taken up as a measure of employee engagement, as
it is established as a suitable instrument to measure employee engagement (Luthans and
Peterson, 2002). These 12 questions can be pictured as a psychological mountain climb
that employees make from the moment they assume a new role to the moment they get
fully engaged in that role. The stages on the climb can be described as follows:
(1) Base camp: What do I get? When an employee starts a new role, he wants to
know what is expected out of him and what does he get from this role. This then
leads to Camp 1.
(2) Camp 1: What do I give? At this stage the employee is focused on the
individual contributions and other peoples perception of it (i.e. whether others
value employees performance or not).
(3) Camp 2: Do I belong here? At this stage of the mountain climb the employee
wants to know whether he fits here or not.
(4) Camp 3: How can we all grow? This is the most advanced stage of the climb.
Here the employee wants to make things better, to learn, to grow, to innovate.

Base camp: What do I get?


I know what is expected of me at work (BASE 1)
I have the materials and equipment I need to do my
work right (BASE 2)
Camp 1: What do I give?
At work, I have the opportunity to do what I do best
every day (Camp 1.1)
In the last seven days, I have received recognition or
praise for doing good work (Camp 1.2)
My supervisor, or someone at work, seems to care
about me as a person (Camp 1.3)
There is someone at work who encourages my
development (Camp 1.4)
Camp 2: Do I belong here?
At work, my opinions seem to count (Camp 2.1)
The mission or purpose of my organization makes
me feel my job is important (Camp 2.2)
My associates or fellow employees are committed to
doing quality work (Camp 2.3)
I have a best friend at work (Camp 2.4)
Camp 3: How can we all grow?
In the last six months, someone at work has talked
to me about my progress (Camp 3.1)
This last year, I have had opportunities at work to
learn and grow (Camp 3.2)
Total scale Cronbachs a

Construct items (items measured)

3.37
43.94

0.457
0.80

3.59

0.517

3.64
3.78

0.494
0.230
0.42

3.95

0.721

3.66

0.699
3.38

3.61

0.677

0.684

3.22

0.649

0.53

3.54

0.712

4.00
0.75

0.412

1.18
6.66

0.951

0.889
1.14

0.92

0.87

1.06

0.83

1.15

1.01

0.941

0.8574

44.47 (p , 0:000)

Mean for the scale SD for the scale Variance for the scale
4.13

0.50

Cronbachs
a

0.496

Average factor loading

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Table I.
Cronbachs a, factor
loadings, mean, SD and
variance of the scale

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The sample items and results regarding reliability statistics (Cronbachs a) are
provided in Table I. Reliability statistics indicate that the reliability values obtained for
the scale were satisfactory (. 0.70). However, the subscales of the GWA show low
scores, which is a limitation in this study. The items along with their factor loadings
and Cronbachs a values are reported in Table I.
In the second phase the exit interview questionnaire was divided into two parts. The
first part consisted of 13 objective questions on a five-point Likert scale with an
additional sixth point factored in for the response as Not applicable. The second part
was a set of 14 open-ended subjective questions. Based on this data, analysis was
performed in two ways. The first was a quantitative analysis of the objective questions
based on the factor analysis approach. The second was a qualitative analysis of the
subjective questions, using content analysis. Both the phases fulfilled the second aim of
the current study.
Results
When we refer to Table II, we find that the mean for Base camp: What do I get? is
further towards the lower end than the other variables (M 8:14, SD 1:47), and this
is further supported by lowest factor loading reported in Table III.
The factor loadings are lowest for Base camp (0.601), indicating that employees of
the BPO/ITES organization find this juncture disengaging and are more likely to leave
in the first three months. The findings of the study find credence, as one of the team
managers reported in a focus group interview to the researcher:
IBPO/ITES employees highest attrition rate is recorded as soon as they join in. Completing
the training is a strenuous process and they usually leave as soon as the process is over.
Retaining them for the first six months is a challenge to the Team manager and the HR
department. Reward and recognition work only for the first three months and after that it
becomes a hygiene factor.

Table II.
Descriptive statistics for
the four engagement
levels with the
demographic variables of
age, gender and
educational qualifications
in call centre employees

Table III.
Component matrix and
factor loadings

Variables

Mean

SD

Age

Gender

Education

Base camp
Camp 1
Camp 2
Camp 3

8.14 *
14.05
14.77
6.97 *

1.47 *
3.0719
2.4576
1.71 *

20.012
0.012
0.020
20.026

0.004
20.032
20.015
0.015

2 0.048
2 0.087
2 0.035
2 0.004

Notes: *Correlation is significant at the 0.01 level (two-tailed); (n 272)

Variables

Component 1

Base camp
Camp 1
Camp 2
Camp 3

0.601
0.845
0.822
0.670

Notes: Extraction method: principal component analysis; A: 1 component extracted; (n 272)

This finding is supported by the fact that 60 percent of the people joining the industry
leave within six months. This stage usually is about the expectation level of the
employees, and this is found to be weak in BPO/ITES employees, implying that the
on-boarding (Reese, 2005) of the employees itself is a weak stage for the BPO/ITES sector.
On-boarding is different from orientation, in that it is more that induction training, and
more like actual handholding by mentors within organizations. The peer buddy concept
(Bhatnagar, 2004) can be institutionalized here. In fact, this idea is linked to the job
embededness construct (Mitchell et al., 2001, p. 1). It includes, among other measures, an
individuals links to other people, teams, and groups, which have a direct impact on
employee turnover. For example, many companies use teams to induce attachments
(Cohen and Bailey, 1997). Reichers (1985) labeled these attachments constituent
commitments and they reflect attachment to unions, teams, and other work-related
groups. Intel has institutionalized this system (Bhatnagar, 2004) and uses work teams,
virtual teams and peer teams to manage talent. This finding further supports the recent
research study of Ross (2005), which states that the retention war starts at the hiring
stage, with companies recruiting employees whose talents and interests fit with both the
short- and long-term needs of the organization. And once the employees are in the door,
the battle to keep them should commence immediately. This should begin with an
intensive focus on getting employees off to a fast and meaningful start: Keep direct
reports engaged by working with them to expand their skill sets and empowering them to
do more (Ross, 2005, p. 3).
Similarly, an alarming trend is found in Camp 3, where the reported mean is lowest
(M 6:97, SD 1:71). The corresponding factor loading is found to be 0.670, as
indicated in Table III.
Camp 3 is typical of the growth camp, and indicates issues of the actual involvement
of an employee in terms of putting career roots down in the organization. The study
found this stage to be weak, and it is at this juncture where the engagement level
among the BPO/ITES employees is lowest and attrition seems to rise. This finding is
supported by an interview with one of the team managers:
Attrition in the teams is highest after an employee is 12 to 16 months old. We do indicate
future growth areas for the employees, but somehow we are not able to hold them at this point
in time.

This result supports the retention literature, as studies (Ross, 2005) point out the need
to provide room to grow to new employees and continuously enrich their (employment)
experience. This further supports the study of Lockwood (2006), which states that
employees who are most committed perform 20 percent better and are 87 percent less
likely to resign. In addition, the foundation for an engaged workforce is established by
the quality, depth and authenticity of communication by HR and senior management to
employees, as well as the quality of supervision.
Further, employee engagement at the two intermediary levels was stronger than the
outliers (factor loadings of 0.845 and 0.822, respectively). When interviewed about
these two levels, the focus group was of the following opinion:
Only a critical few make it to these levels, and once here we know we can leverage on a
stronger relationship. Yet when the employees grow older and cross the year barrier the same
problem of retention recurs.

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This does not support the remarks made in the Western world by Baumruk (CEO of
Hewitt Associates, which is involved in global outsourcing and consulting). Baumruk
(2006, pp. 24-7) states that:
. . . organizations with higher engagement levels have lower employee turnover, higher
productivity and better results. Managers are in a critical position to increase or decrease
engagement because they touch key drivers such as accountability, work processes,
compensation, recognition and career opportunities. Employees are more engaged when
their managers are clear about expectations, get agreement about those expectations and
provide consequences for meeting or not meeting expectations. Managers need to
understand what they are expected to do more of, less of, and what they need to do
differently. Managers need to be assessed and rewarded for the development and
performance levels of their employees.

The findings for the first phase are further strengthened by the results for phase 2,
where 72 targeted exit interviews were factor-analyzed. To conduct the factor analysis,
the 13 questions (objective type), were labelled as per the attribute being checked by
them. For example, the question I was provided adequate and timely infrastructure to
perform my role effectively was named Infrastructure support. Once this
nomenclature was done, the KMO and Bartletts tests were administered to establish
reliability. The standard cut-off for KMO was between 0.5 and 1.0. This value for the
data is within acceptable limits. The KMO reading was 0.794, which is a very good
score, establishing reliability as being on the higher side (see Table IV).
Next, a principal component analysis was conducted. This revealed three main
components/factors that could explain a majority of variance in the responses (up to
69.11 percent). This can be seen in Table V, where only the first three factors have
eigenvalues greater than 1. The variance explained by each of them is 43.15 percent,
17.05 percent and 8.91 percent, respectively. In order to find the various variables
within each of the three factors, Varimax rotation with Kaiser normalization was
performed (see Tables V and VI).
The variables were classified into a particular factor based on their loading on that
factor being greater than 0.6. The variable policy clarity was dropped as it did not
load significantly on any one factor (0.549 only). This yielded the following groupings:
.
Factor 1: internal communication, customer centricity; work culture This was
named Organizational culture. It explained 43.15 percent of the variation in
responses and was therefore the most important cause of attrition.
.
Factor 2: recognition, growth opportunities, career development, compensation
and promotion This factor was named Career planning and incentives. It
explained 17.05 percent of the variation in responses and was therefore the
second most important cause of attrition.

Table IV.
Reliability analysis of
exit interviews: KMO and
Bartletts test

Kaiser-Meyer Olkin measure of sampling adequacy


Bartletts test of sphericity approximate x 2
df
Significance

0.794
426.603
78
0.000

5.609
2.216
1.159
0.763
0.708
0.566
0.509
0.410
0.347
0.238
0.214
0.154
0.106

43.150
17.045
8.917
5.865
5.443
4.357
3.917
3.157
2.666
1.832
1.648
1.183
0.819

43.150
60.195
69.112
74.997
80.421
84.778
88.695
91.852
94.518
96.350
97.998
99.181
100.00

Note: Extraction method: principal component analysis

1
2
3
4
5
6
7
8
9
10
11
12
13

Eigenvalues
Initial
Percentage of
Cumulative
Component total variance explained percentage
5.609
2.216
1.159

43.150
17.045
8.917

43.150
60.195
69.112

Sums of squared loadings


Extraction
Percentage of
Cumulative
total
variance explained percentage
3.320
2.897
2.768

25.535
22.287
21.289

25.535
47.823
69.112

Sums of squared loadings


Rotation
Percentage of
Cumulative
total
variance explained percentage

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Table V.
Eigenvalues of the factors
and the variance

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Table VI.
Rotated component
matrixa

Role clarity
Infrastructure
Adequate training
Recognition
Growth opportunities
Career development
Policy clarity
Compensation
Promotion
Vision alignment
Internal communication
Customer centricity
Work culture

Component 1

Component 2

Component 3

1.198
0.482
0.357
21.12
0.411
0.130
0.549
4.706
21.72
0.457
0.851
0.904
0.850

0.109
0.307
0.248
0.724
0.707
0.738
0.326
0.596
0.773
0.306
7.887
2 1.36
2 3.59

0.892
0.605
0.793
0.413
26.78
0.448
0.208
0.354
2.331
0.617
0.159
0.158
8.011

Notes: Extraction method: rotated component analysis; rotation method: Varimax with Kaiser
normalization; rotation converged in five iterations

Factor 3: role clarity, infrastructure support, adequate training and vision


alignment We named this factor Organizational support. It explained 8.917
percent of the variation in responses and was therefore only a minor issue.

The disengagement trend in Base camp and Camp 3 (refer to Tables I and II for low
factor loadings) and exit interview analysis point to two major reasons for employee
attrition:
(1) The present work environment and organizational culture is a problem area.
This has emerged as the single largest concern from the exit interview data, as
well as from focus group interviews and survey of engagement scores.
Although this factor was explored only in the quantitative analysis, it emerged
as the strongest reason for turnover in BPO/ITES employees. The primary
issues raised were related to the extent and clarity of communication within the
organization, and the overall work culture. The kind of problems that are
associated with the internal job posting process are also symptomatic of a less
than healthy climate as there is widespread mistrust and suspicion.
(2) Dissatisfaction with the kind of career path available for the employees is a
problem. Further, the companys motivational/incentive schemes seem to have
little positive effect on employees. This finding is further supported by the
interview statements of team managers, etc., who stated that reward and
recognition served as a hygiene factor after the first three years.
In the next step, qualitative analysis of the exit interview was conducted utilizing
content analysis. This section contains an identification of the factors causing
employee attrition at this BPO/ITES organization. It is based on the responses to the
subjective, open-ended questions in the exit interview questionnaire.
.
Internal job posting (IJP) Dissatisfaction with the current IJP system is very
evident. While some employees have explicitly mentioned IJP as a source of
dissatisfaction, many others have referred to it indirectly as the system of

promotions or opportunities for growth. There is a perception that the IJP


system is not transparent. We may draw an inference that employees are not
clear about the process, or do not trust the system. This finding supports the
study of Budhwar et al. (2006).
Work profile This is the area that is causing maximum dissatisfaction among
the employees. The issue is either directly referred to or is expressed as a need to
work in a challenging domain, a shift to technical work. This seems to be a
particular problem with employees from a science or an engineering background.
Peer/societal pressures are evident in the references to family and status in
the interviews. Working as a BPO/ITES employee is considered to be lower
down the social order in the Indian context.
Personal causes These factors are not controllable. However, taking note of
these factors at the time of recruitment might help reduce the rate of attrition.
The leading cause seems to be marriage or relocation. An interesting fact here is
that employees are actually seeking relocation within this BPO/ITES. There are
a few who have mentioned that they would like to relocate to other Indian offices
of this BPO/ITES organization. This might be a possible means of retaining key
talent within the organization.
Better career opportunities/compensation A large number of employees have
shifted to other BPO firms in the NCR region due to these reasons. Typically,
these firms have offered a pay hike of at least Rs50,000 per month over the
current compensation offered by this BPO/ITES organization.

The findings support a recent study conducted in 2005, which reported global trends in
employee engagement, job satisfaction, retention and stress. The top five retention
factors included:
(1) exciting work/challenge (48.4 percent);
(2) career growth/learning (42.6 percent);
(3) relationships/working with great people (41.8 percent);
(4) fair pay (31.8 percent); and
(5) supportive management/great boss (25.1 percent).
These findings suggest that engagement (Nowack, 2006) can be enhanced in
organizations that emphasize development, leadership effectiveness and relational
creativity (Butler and Waldrop, 2004) as a context.
The implications for these findings may lie in the kind of BPO/ITES organizations that
we have in India. Batt (2001), in a study of 354 service and sales centers in the
telecommunications industry in the USA, differentiated between BPO/ITES organizations
competing primarily on cost and those competing on quality. She found that those
competing on cost were likely to create work systems that maximize call volume and
minimize costs (Bath, 2001, p. 430). In contrast, those BPO/ITES organizations
competing on quality and customization were likely to use HR systems similar to those
defined as high involvement work systems (Bath, 2001, p. 431; cited in Halliden and
Monks, 2005). If the Indian BPO/ITES sector transforms itself to quality and
customization centres, then there is the likelihood of witnessing more high involvement

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work systems (HIWS) based on rich OD interventions, which make employee engagement
their base. As rightly pointed out by Ramchandran and Voleti (2004), Indian BPO firms
have to consistently prove their capabilities to deliver and create a near indispensable
situation for the parent to survive without them. This will not only involve increasing the
technical and domain expertise, but also refinement in systems and practices, while
keeping costs under control. The answers may lie in higher engagement and to achieve
this at the third camp may result in job sculpting or job co-creation, which may be worth
considering in the effort to optimize recruitment, retention and productivity (Hirsch, 2006).
The Towers Perrin survey (Seijts and Crim, 2006) found that 84 percent of highly engaged
employees believe they can positively impact the quality of their organizations products,
compared with only 31 percent of disengaged employees. Overall, 72 percent of highly
engaged employees believe they can positively affect customer service, versus 27 percent
of disengaged employees. A total of 68 percent of highly engaged employees believe they
can positively impact costs in their job or unit, compared with just 19 percent of
disengaged employees. Given this result it becomes imperative for the Indian ITES sector
to determine the disengagement levels and address them immediately. This would
provide a decrease in the attrition rate, if not remove it altogether. Further, the results of
the study may vary between types of BPO, as one size does not fit all. Thus, one could
have organization-specific questions that could be answered through targeted surveys
(Thornham and Chamorro-Premuzic, 2006).
While attrition rates in the Indian BPO/ITES industry are between a staggering 30
per cent and 45 per cent according to recent estimates (Sen, 2007) and BPOs/ITES
organizations and their top management need to look at this trend carefully in order to
arrest it. Though all BPOs/ITES organizations conduct exit interviews, it would be
helpful if empirical linkages could be drawn between phase 1 (engagement scores
study) and phase 2 (exit interview analysis) of the research. The current study,
however, attempts to draw conceptual linkages between the two variables, as the
employees of the BPO/ITES organizations under study were not ready to share current
data of engagement and attrition, and hence ex post facto data was analysed. This is a
limitation of the paper, as was also using only 72 exit interviews for factor analysis (the
number made available by the organization).
Theoretical implications
There are theoretical implications for the construct of employee engagement. This is a
construct that has been the focus of many practitioner-related studies but very few
academic studies. The action research perspective of organizations tends to look at
employee engagement and very few academics (Joo and Mclean, 2006) have looked into
the theoretical and operational schemata of employee engagement. At the
nomonological level, there seems to be construct contamination from the fields of
employee satisfaction, employee commitment, organizational citizenship behaviour
and employee involvement that is beyond the scope of this paper. Yet future studies in
India may look into this area and construct an independent scale of employee
engagement, focusing on and testing the antecedent variables , more rigorously for
theoretical underpinnings. It seems obvious that engaged employees are more
productive than their disengaged counterparts. For example, a recent meta-analysis
published in the Journal of Applied Psychology concluded that employee satisfaction
and engagement are related to meaningful business outcomes at a magnitude that is

important to many organizations. A compelling question is this: how much more


productive is an engaged workforce compared to a non-engaged workforce? (as cited in
Seijts and Crim, 2006).
Practical implications
Employee engagement and a better talent management and retention strategy may
imply the following HR interventions for the BPO/ITES sector in India:
.
identification of an engaged workforce at all levels which is passionate about
continuous learning and challenges, triggered through a continuous positive
employee relationship;
.
further designing HR interventions to keep them engaged;
.
a need to establish a stronger psychological contract (Rousseau, 2004) based on
relational need (which takes care of Camps 1 and 2) rather than a transactional one;
.
create peer partners and mentors who care and nurture relationships in terms of
quality rather than quantity of time together and who take care of the emotional
needs and need for involvement of employees;
.
treat employees as wealth co-creators, and see employees as partners in the
business and help them achieve the satisfaction of creating and fulfilling new
areas of business acumen.
This would take care of the growth aspects of employees. An important implication is
present for HR, which should market the company and its brand to current employees
as vigorously as to the outside talent pool (Dell and Hickey, 2002). Further high
commitment based systems with built in control systems are needed so that both fun
and surveillance are balanced (Halliden and Monks, 2005). Also, on their internal
websites organizations may blacklist employees who leave the organization within
three months. An industry collaboration along with NASSCOM to backlist and stop the
recruitment of such employees for a particular period of time, in order to moderate
attrition rates, could also help. The internal job posting (IJP) process has to be clearly
outlined and a specific system of selecting candidates has to be communicated. The
criteria for selection should be clearly arrived at and stated explicitly to employees. A
more concerted effort should be made to ensure internal job postings take place to
ascertain that employees have a growth path in the organization. Processes should be
put in place to check that the career aspirations of employees are clearly understood
and job roles are defined with as close an alignment to career aspirations as possible.
There is an evident mismatch between the expectations of employees and the roles and
profiles offered by the organization. Steps need to be taken to correct this mismatch,
probably by better communication during the selection process and by taking another
look at the potential pool of candidates that the organization has identified. This would
moderate attrition at the Base camp level. Exit questionnaires should be backed with
actual interviews of candidates before they leave to ensure that softer issues that may
not have been brought up through the questionnaire are also drawn out. The data
obtained from the questionnaire should be studied on a monthly basis to make trend
projections about the possibility of employees who might leave. This would give the
organization an early warning system that could predict attrition rates for the future,
as has been done by Cisco (as reported by Saxena and Bharadwaj, 2007).

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Limitations of the study


The reliability of certain variables was lower than the accepted threshold of 0.70, which is
a limitation of the study. This also lends credence to the need for an independent and more
robust engagement scale adapted to pan-Asian conditions. Testing this scale across
nations would be another area for future research. Also, the sample was small, and
generalizations regarding employees in the entire BPO/ITES sector are not possible.
Future studies may look into the various types of BPO/ITES organizations, BPOs, KPOS,
keeping the cost and quality of HRM systems in mind and conducting more robust
research. Future studies may also look into correlation studies of employee engagement
and exit interviews to establish empirically the association that those employees with low
engagement scores are the ones who are leaving organizations. This study could not
establish this. Further, as technology grows more complex and with the projected estimate
of BPO/ITES work in India expected to achieve revenues of $148 billion by 2012 (National
Association of Software and Services Companies, 2005), these results are of significant
importance to the Indian ITES sectors employees, top management and HR managers.
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Corresponding author
Jyotsna Bhatnagar can be contacted at: jyotsnab@mdi.ac.in

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