Volume 2, Number 4, October December 2013

ISSN (P):2319-9032, (O):2319-9040

IMPACT OF JOB SATISFACTION AND ORGANIZATIONAL COMMITMENT ON

EMPLOYEE TALENT RETENTION IN ITES ORGANIZATIONS OF CHENNAI
Dr. V. Dhamodharan1 K. Elayaraja2
ABSTRACT
The impact of organizational commitment on employee retention, increasedproductivity, reducing absenteeism, has been
documented by many studies suchas those of Steers (1977); Porter et al. (1974); Reiches (1985) and Tett and Meyer (1993).
Toretain the employees,organizations develop HR practices that enhance job satisfaction among employeesand make them
stay with the firm for a longer time.This shows that it is not just employee talent retention butalso retention of valuable skills
(Acton et al., 2003). When employees are satisfied in their jobs, it leads to increased commitment to the organization and the
organization can retain its employees. This study aims to determine the impact of job satisfaction and organizational
commitment on employee talent retention with specific reference to ITES companies in Chennai.
KEYWORDS
Job Satisfaction, Organizational Commitment, Employee Talent Retention, Temporary Workers, Automobile
Industry, Contract, Labour Laws etc.
INTRODUCTION
In todays competitive world, the biggest challenge which organizations face is toretain talented employees. Job satisfaction is
important to promote functional employeebehaviors in the organization. From the organizations perspective, job satisfaction of
its workers means awork force that is motivated and committed to high quality performance. Job satisfaction canbe an important
indicator of how employees feel about their jobs and a predictor of workbehaviors such as absenteeismand turnover. Further,
jobsatisfaction can partially mediate deviant workbehaviors. One common research finding is that job satisfaction is correlated
with lifesatisfaction.
Securing organizational commitment and retaining good employees are very important to achieve stabilityand reduce costly
turnover. Organizational commitmentinfluences many behaviors, such as decreased turn over, higher motivation and
organizational support. An employee whois affectively committed strongly identifies with the goals of the organization and
desires toremain a part of the organization. This employee commits to the organization because he/she"wants to". Organizational
commitment is recognized as a key factor in the employmentrelationship. Similarly, it also is widely accepted that one way to
reduce voluntary turnover isby strengthening employee commitment to the organization.
Industry Overview
Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities
of specific business functions (or processes) to a third-party service provider. Often the business processes are information
technology-based, and are referred to as ITES-BPO, where ITES stands for Information Technology Enabled Service. Indian BPO
companies offer varied services, such as, customer support, technical support, telemarketing, insurance processing, data
processing, forms processing, bookkeeping and internet / online / web research. The IT-BPO sector in India aggregated revenue of
US$ 100 billion in FY 2012, where export and domestic revenue stood at US$ 69.1 billion and US $31.7 billion respectively.
Though 2013 has left the US$ 108 billion IT and ITES sector of India standing at the crossroads, Software Services Industry Body
NASSCOM is absolutely positive about the growth of Indias IT sector. According to NASSCOM, newer geographies are set
to double their contribution to India to 20% by 2020. As per the estimation of NASSCOM purely domestic and export services
of the Indian IT sector is expected to generate US$ 225 billion by 2020.
Why Do ITES Employees Quit?
In the ITES industry, work can often be monotonous and opportunities for career growth are minimal. So when opportunities
beckon, employees leave the organization for greener pastures. However, there are some common reasons that especially cause
people to leave. Surveys have listed the following as few major reasons for attrition:

Night shifts and rotational shifts,

For higher education,

Assistant Professor and Head, Department of Business Administration, Government Arts College, Tamil Nadu, India,
vee_dhamu@yahoo.co.in
2
Research Scholar, Bharathiyar University, Tamil Nadu, India, elayarajak@yahoo.com
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Inability to handle various types of stress,

Monotonous work,
Company policies are not conducive,
Lack of career growth,
Problems with those in senior positions or peer managers,
For higher salary and better designation,
No time for personal life,
Misguidance by the company,
Grievances,
Dissatisfied by appraisal system,
Dissatisfied by internal job posting (IJP), etc.

These are some of the reasons that employees highlighted when exit interviews were conducted by the ITES organizations.
Hence, we can infer that it is not only the money and career factors that propel the employees to quit jobs in ITES organizations,
but rather intention to leave is also influenced by mental,physical and emotional factors. Many students right out of college get
attracted to the ITES industry as they want to explore the corporate world and make some money, they also get attracted to hikes
and better offers from other companies and then they change companiesbecause there would be a hike in the salary by the next
hiring company. But these days, many ITES organizations have made efforts to curb attrition and have been coming up with
several innovative strategies to keep the employees in the organization. Employee retention is obviously one of the toughest tasks
in the ITES industry.
REVIEW OF LITERATURE
Job satisfaction is defined as the extent to which employees like or dislike their jobs. Jobsatisfaction covers several aspects
pertaining to the job and this includes nature of work, meaningfulness of job tasks, job characteristics, promotion, increments,
andthe job itself (SushamaKhanna 2011). This attitude about ones job is said to play a major role in influencing
turnoverintentions of the employees. Indian employees are, on average satisfied withtheir jobs overall, and with teamwork
between co-workers, however they tend to be less satisfied with their compensation and benefits and with their incentive
pay(Robbins, Judge, Vohra 2011).
Research on turnover and retention in ITES does notmuch support the claim that turnover can be independent of job satisfaction,
but rathersuggest that ITES employees seem to be quicker to change jobs than other employees when theyare dissatisfied with
their current employer (Hacker, 2003).
Organizational commitment is a psychological stabilizingor helpful force that binds individuals to courses of actionrelevant to
the organization (Carrie`re and Bourque,2009). Individuals with higher levels of organizationalcommitment have a sense of
belonging and identificationwith the organization that increases their desire to pursuethe organization's goals and activities, and
their willingnessto remain a part of the organization (Meyer andAllen, 1991). Moreover, organizationally committedindividuals
are far less likely to engage in absenteeismand turnover (Golden and Veiga, 2008).
Porter et al (1974) further describes organizational commitment as an attachment to the organization, characterized by an
intention to remain in it; an identification with the values and goals of the organization; and a willingnessto exert extra effort on
its behalf. Individuals consider the extent to which their own values and goals relate to that of the organization as part of
organizationalcommitment, therefore it is considered to be the linkage between the individual employee and the organization.
Initially theorized as a one-dimensional construct,organizational commitment is now known to bemultidimensional in nature. The
most common forms oforganizational commitment studied and reported on in theacademic literature are affective (emotional
attachment tothe organization), continuance (perceived costs associatedwith leaving the organization) and normative (feelingsof
obligation towards the organization) (Carrie`re andBourque, 2009; Rego and Cunha, 2008). Each of thesecomponents contributes
to strengthening the likelihoodthat the employee will remain in the organization, but thenature of each mindset differs from the
others.
Employees with a strong affective bond remain becausethey want to do so. Those with strong continuance commitmentstay
because they feel they have to. Normativelycommitted employees remain because they feel theyought to (Rego and Cunha, 2008;
Parish Cadwallader,Busch, 2008). These three components of commitment help to define the overall organizational commitment.
Even Meyer and Allen (1991) refer to the affectivecommitment (AC) as employees emotionalrelationship to, recognition with,
and participation in theorganization (employees stay with a firm because theywant to), continuance commitment (CC) refers to
aconsciousness of the costs connected with leaving theorganization (employees stay with a firm because theyneed to), and
normative commitment reflects a feeling ofobligation to continue employment (employees stay witha firm because they ought
to).

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Volume 2, Number 4, October December 2013

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PROBLEM OF ATTRITION IN ITES INDUSTRY

The ITES industry is the highest job provider in the IT sector employing a total of more than 8 lakh professionals.
Notwithstanding the initial glamour of this sector as a heralder of opportunities and an attractive career option, today with the vast
number of players in the arena and easy availability of lucrative software jobs, the sector is smitten with the problem of attrition.
With an attrition rate estimated at 50% and an average employment lifespan of 12-14 months per person, the ITES industry
presents one of the challenging terrains for HR professionals. During December 2010-April 2011, the attrition rate in the business
process outsourcing (BPOs) has increased to 55 per cent from about 40 per cent in the same period previous year, an Assocham
study said. Besides, the industry is facing serious challenges like shortage of skilled and educated workers, the study said.
Services offered by the IT/ITes and BPO in the domains of pharmaceuticals and financial services have registered an attrition rate
of 60 per cent; in retail and IT sectors 50 per cent; and in automobiles, FMCG and infrastructure sectors 50 per cent during period
under the review, the study said. At present, India's BPO industry is facing a stiff competition from countries like Mexico,
Philippines, Malaysia, China, Canada and Ireland.
Even big firms like Infosys and Wipro have an attrition rate of close to 20%, which is very high.As a quality workforce is crucial
for business success, employers have started taking this very seriously and a lot of initiatives are being taken to curb attrition and
retain talented employees. As Kamal Karanth of Kelly Services India puts it, The workforce is the backbone of the BPO industry
and the attrition rates have becoming alarmingly high for the industry. Most of the companies are promoting within to ensure that
talent remains.
Attrition has terrible effects on the company. The high attrition costs considerably increases the costs to the organization. They
have to deal with the amount of disruption due to unplanned exits. The more people leave an organization, the more it is a drain
on companys resources like recruitment expenses, training and orientation resources and time. The high attrition rate also affects
productivity. Hence, it is extremely critical to curb attrition not only for an individual company but also for the industry as a
whole.
One way to address issue of employee turnover is to understand the job satisfaction and commitment level of employees. A lot of
studies are conducted separately on commitment, satisfaction and motivation but very few studies are there on ITES sector linking
these three. So it is crucial to conduct a study on job satisfaction and organizational commitment in ITES industry and also to
identify the important motivating factors to retain the highly talented workforce.
HOW ITES ORGANIZATIONS ENHANCE JOB SATISFACTION IN ORDER TO RETAIN EMPLOYEES- A FEW CASES
Case1 AMEX
Apart from incentives, gifts and perks, companies are now working on "exceptional" benefits to keep their staff satisfied.
American Express's (Amex) parental care work life program "Dil Se" is the latest among such benefits. Dil Se provides
personalized concierge service, healthcare with 24/7 emergency medical helpline, transport service and mobility aid to aged
parents of employees. The initiative has been taken after an internal research by Amex that showed the average age of its
employees was 29 and 60% of them live with dependent parents.
Case2 CONVERGYS
Convergys MD HanumantTalwar said, "Our focus on employee engagement is very high. We offer free meals, festival gifts and
support in education and career development."Reimbursement of tuition fees for higher studies is also part of such benefits.
SIGNIFICANCE OF TALENT RETENTION
Now that so much is being done by ITES organizations to retain its employees, why is retention so important? Is it just to reduce
the turnover costs?Its not only the cost incurred by a company that emphasizes the need of retaining employees but also the need
to retain talented employees from getting poached.
The process of talent retention will benefit an organization in the following ways:
Turnover leads to more turnovers
When an employee terminates, the effect is felt throughout the organization. Co-workers are often required to pick up the slack.
The unspoken negativity often intensifies for the remaining staff. Whenever an employee quits the organization it is felt
throughout the organizational set up as the team members may be curious to know why that particular employee left the
organization and may influence another employee to think on quitting the job if this is going to happen certainly attrition rate of
the organization is going to be up.

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Loss of Company Knowledge

When an employee leaves, he takes with him valuable knowledge and information about the company, customers, current projects
and past history (sometimes to competitors). Often much time and money has been spent on the employee in expectation of a
future return. When the employee leaves, the investment is not realized.
The Cost of Turnover
The cost of employee turnover adds hundreds of thousands of money to a company's expenses. While it is difficult to fully
calculate the cost of turnover (including hiring costs, training costs and productivity loss), industry experts often quote 25% of the
average employee salary as a conservative estimate.
Interruption of Customer Service
Customers and clients do business with a company in part because of the people. Relationships are developed that encourage
continued sponsorship of the business. When an employee leaves, the relationships that employee built for the company are
severed, which could lead to potential customer loss.
Goodwill of the company
The goodwill of a company is maintained when the attrition rates are low. Higher retention rates motivate potential employees to
join the organization.
Regaining efficiency
If an employee resigns, then good amount of time is lost in hiring a new employee and then training him/her and this goes to the
loss of the company directly which many a times goes unnoticed. And even after this you cannot assure us of the same efficiency
from the new employee.
PROPOSED SUGGESTIONS
From the review of literature, it is clear that IT employeesseem to be quicker to change jobs than other employees when they are
dissatisfied with theircurrent employer (Hacker, 2003). So it is important to improve their job satisfactionand commitment.
Among the itemscomprising the scale for job satisfaction, the items with highest satisfaction levels are those related to the social
aspects of the job, working conditions (excluding working hours), interest(from intrinsic aspects of the job), job security,
communication, and ease of the job (as anintrinsic aspect of the job). On the other hand, ITES employees are dissatisfied because
of long working hours, bad supervision, lack of appreciation from management, and low salary.
To increase the job satisfaction and organizational commitment it is very important to identify thefactors that would motivate
employees. The most important motivational factors for ITES employees were goodwages, promotion/growth in job, job security,
interesting work, and appreciation of work.
Recognizing innovative ideas and contributions of the employees will increaseorganizational commitment and job satisfaction.
Talent should be identifiedand suitable rewards should be provided to motivate employees and increase jobsatisfaction.ITES
companies should pay moreattention in improving working hours, promoting good supervision, and appreciating employees for
the work theyare doing. They should pay more attention to the salary of the employees as it has highestcorrelation with affective
commitment. It can reduce the employee turnover and the costassociated with it. When employees feel that the organization is
providinggood supervision, positive feelings of well-beingare created. This is likely to stimulatethem to reciprocate by increasing
their sense of obligation to the organization and the beliefthat staying is the right thing to do to the organization.
CONCLUSIONS
The main issues in the ITES industry are employee turnover and attrition. Employee retention to a large extent depends on
jobsatisfaction and organizational commitment. We can infer that when employees are satisfied with their jobs, they are
committed to stay with the organization and arereluctant to exit from their current job. Increased commitmentwill also increase
their efficiency. But to increasethe job satisfaction and organizational commitment, the compensation andsupervisory support
plays critical role, as the results showthat these two are core variables in increasingcommitment in ITES industry.
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*****

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