Talent Management – A Key to Retention in ITES Sector

The statement “people are our greatest asset", though a cliché that is often heard in corporate boardrooms is, nevertheless, true in most industries. Human resources are not only the drivers and principal value-creators of the output of this industry; they are also the intellectual capital or the ‘investment’. Therefore, attracting, training, retaining and motivating employees are the critical success-determinants. The IT software and services industry has grown rapidly over the last decade. It now encompasses about 650,000 employees. Over the next five years, this number is expected to triple, to over 2 million persons, so as to meet the target of $75 billion in revenues, including exports of over $50 billion. Information Technology Enabled Services (ITES) industry which is on its peak brings in a lot of rewarding career, monetary benefits and the growth potential for young India. Due to a major share of foreign direct investment, the marching of national and international ITES players in ITES landscape is inevitable. The Indian ITES sector is going through a transformation and this emerging market is witnessing a significant change in its growth and investment pattern. ITES is a sector which is experiencing a severe shortage of talented professionals and is invariably facing the scarcity; leading to high rates of brain drain and the organization suffers from talent leak and major crunch of intellectual capital.


Information Technology Enabled Services (ITES) industry which is on its peak brings in a lot of rewarding career, monetary benefits and the growth potential for young India. Due to a major share of foreign direct investments, the marching of national and international ITES players in ITES landscape is inevitable. The Indian ITES sector is going through a transformation and this emerging market is witnessing a significant change in its growth and investment pattern. Both existing and new players are experimenting with new ITES formats. Employee dynamics in India is changing and the employers need to take note of this and formulate their strategies and tactics to deliver value to the end users. To successfully execute the business processes and achieve the objectives, alignment of the business goals to the key performance areas is expected. Hence, not only the individuals needs to be identified, acquired, but they need to be developed and retained accordingly.

The growth in an IT sector leads to an increase in the need for talented human capital. ITES is a sector which is experiencing a severe shortage of talented professionals and is invariably facing the scarcity; leading to high rates of brain drain and the organization suffers from talent leak and major crunch of intellectual capital. Successful organizations today work from a platitude, where most of them believe “Our Workforce is our greatest asset”.

Today as India stands high on investment horizons, competing many global players, the significance of Talent Management is almost immediate. Though till yesteryears, talent acquisition in itself was a great challenge but today talent management becomes an eminent apprehension.

This paper will focus on references that are analyzed through a primary research data of a leading BPO in Pune, and shall suggest a human capital retention framework for organized ITES industry as it is the biggest employment vehicle.

The significance of this framework lies in the fact that the development of human capital in IT sector which directly adds to the Service Sector in the GDP of our country will provide appropriate return on investment so as to sustain in the dynamic environment by fostering committed, dedicated and loyal employees who prove to be an invaluable asset to the organization.

Importance of Human Resources:

Fundamental decisions with long lasting impact can be made not only by the state-of-the-art infrastructure but by the choice of people who standby to deliver the set goals.  Many Organizations must have tried a dozen or more combinations before they discovered that the most decisive factor for growth and sustainability is not only capital but human capital.  The essential ingredient of an outstanding business success depends on the crucial aspect that differentiates exceptional organizations is its software - the people.
The two major contributing sectors to the world economy are Manufacturing and Services.  Till yesteryears, we knew business houses especially manufacturing units because of their machineries and products produced as chief contributors to economic growth but the services industries is known as people intensive.  It makes a difference to the bottom line where lies innovation, productivity and the multiplier effect of generating more business in other sectors of the economy.

ITES Landscape:

Services Sector Growth Rate in India with reference to GDP:
The growth rate of Services Sector in India has been very rapid in the last few years. It contributes the most to the Indian GDP and has risen due to several reasons which has given a major boost to the Indian economy.

Services Sector in India
India ranks fifteenth in the services output and it provides employment to around 23% of the total workforce in the country. The various sectors under the Services Sector in India are construction, trade, hotels, transport, restaurant, communication and storage, social and personal services, community, insurance, financing, business services, and real estate.

Services Sector contribution to the Indian Economy
The Services Sector in India has the biggest share in the country's GDP for it accounts for around 53.8% in 2005. The Indian economy is the second fastest growing economy in the whole world with the growing rate of the GDP at 9.4% in 2006- 2007. The economy of India is the twelfth biggest in the world for it has the GDP of US$ 1.09 trillion in 2007.  

The domestic information technology (IT) and IT-enabled Services (ITeS) market, excluding exports, is expected to grow at a rate of 15 per cent in 2010 to touch a revenue of Rs 120,666 crore, according to advisory services and research firm IDC.  This is nearly three times the 5.4 per cent growth rate that the combined Indian domestic IT and ITeS market is expected to clock in 2009 to touch revenue of Rs 104,906 crore — up from the Rs 99,654 crore recorded in 2008.

The projections made by IDC (India) expects the annual growth rate of the domestic IT-ITES market to reduce from an average of 24 per cent recorded during 2003-08 (Growth Phase 1.0) to 14.6 per cent over the next five-year period of till 2013 (Growth Phase 2.0). The report noted that Growth Phase 2.0, which started in 2009, will be built on the back of innovative services and solutions sought by consumers and enterprises alike. The technology behind these services — infrastructure, applications and connectivity — will need to orchestrate and re-orient completely in order to support their mass adoption.

India’s domestic IT-ITES market size                                                                (in Rs crore)
segment    2008    2009    2010*    2013*    Growth (2009 over 2008)    Growth  (2010
over 2009*)
Software    10,147    11,454    13,064    21,065    12.90%    14.10%
Services    24,322    27,888    32,190    52,071    14.70%    15.40%
Hardware + others    58,248    55,926    62,401    94,173    -4.00%    11.60%
Total domestic IT-ITES market    99,564    1,04,906    1,20,666    1,97,205    5.40%    15.00%
Source: IDC  *Estimated

The Reasons for the growth of the Services Sector contribution to the Indian GDP:
The contribution of the Services Sector has increased very rapidly in the Indian GDP for many foreign consumers have shown interest in the country's service exports. This is due to the fact that India has a large pool of highly skilled, low cost, and educated manpower in the country. This has made sure that the services that are available in the country are of the best quality. The foreign companies seeing this have started outsourcing their work to India especially in the area of business services which includes business process outsourcing and information technology services. This has given a major boost to the Services Sector in India, which in turn has made the sector contribute more to the Indian GDP.

Challenges faced by ITES Sector:
The challenges facing the Indian ITES sector are various and these are posing challenges to the Indian ITES from reaching its full potential. Business Process Outsourcing (BPO) is a broad term referring to outsourcing in all fields. BPO is the delegation of one or more IT intensive business processes to an external provider that in turn owns, administers and manages the selected process based on defined and measurable performance criteria. The major concern for the ITES industry is the attrition rate which is about 35 – 45%.  To reduce the attrition rate companies are taking a lot of initiatives.

Talent Management – A Prime Component in Retaining Workforce

Where flags, brands, labels or statistics dominate the economic decisions, it’s the human potential that adds value to the growth of an organization. When attached to "capital" as prefixes, the terms "intellectual", "knowledge" and "human" often conceal more than their use can reveal. Thus the terms "intellectual capital", "knowledge capital" and "human capital” are considered the brand of an organization. The goal of any organization is to attract, manage, develop, measure and retain the best talent to help an organization meet its strategic goals effectively.

‘People make organizations or organizations make people’, is still considered a hot topic for debate.

 Companies are in the midst of a voyage where they define and redefine their business and strategic goals, the essence of competitive advantage, the assumptions about governance, organizational structures and hierarchies. But finally the success of any organization largely depends on the people working there who individually and collectively contribute to the achievement of the objectives of the business.
Organizations today are more concerned with the quality rather than the quantity of talent.
Talent management tops the list of strategy for radically improving the workforce to drive the employees to achieve objectives which are laid in such a fashion that once an individual tries to achieve his individual goals organizational goals are achieved in the longer end, whereby, both  the individual and he organization are mutually benefited.

Talent Matters

Employee retention matters, as, organizational issues such as training time and investment, costly candidate search etc., are involved. Hence, failing to retain a key employee is a costly proposition for any organization. Various estimates suggest that losing a middle manager in most organizations, translates to a loss of up to five times his salary. This might be worse for BPO companies where fresh talent is intensively trained and inducted and then further groomed to the successive stages. In this scenario, the loss of a middle manager can often prove dear.  Attracting the best talent to apply for the job in an esteemed organization is still a challenge in today’s globalizing scenario. The biggest crisis is attracting the right talent on the right job at the right time, employing on the right kind of work. The process of managing the demand and supply of talent represent the great opportunities for organizations and more importantly the journey between survive and thrive in the near future.

Talent Acquisition

The on-boarding process of top talent has become a prioritizing concern in order to improve company performance and increase retention rates.The process of hiring should not only stimulate those job candidates who are actively looking for new opportunities but also passive candidates, qualified individuals who are not seeking a new job opportunity.

Talent Management decisions shape the competencies of employees and determine the success of organizations. Talent management implies identifying a person's inherent skills, traits, personality and offering him a corresponding job where the potential of the employee is unleashed. Every person has a unique talent that suits a particular job profile and any other position will cause discomfort. It is the job of the HR Manager, to place candidates with prudently. A wrong fit will result in further hiring, re-training and leak of talent and knowledge from the organization.

A rightly managed talent turns out to be a Gold Mine, but needs to identify the right talent, needs realize its worth, extract it, polish it and utilize it to convert in to Wealth.
While finding quality talent for an organization is a arduous task, keeping them satisfied and developing their skills is a far more challenging. The only key is in an employer's best interest to help its employees' develop their skill sets to the fullest and offer them opportunities for professional growth. 

Challenges in Talent Development:
Skill Development and Competency Management: In today’s global and competitive market, it is difficult to determine the capabilities needed to survive in the retail industry. Hence, organized retail sector need to determine a competency based model which helps them to identify the skill and the competency needed for the successful performance of an individual towards the job.

Attitudinal and Knowledge development: Knowledge management refers to the process of enhancing an organization’s performance by designing and implementing tools and techniques to facilitate the process of creation and dissemination of knowledge. Important work related attitude which includes job satisfaction, commitment and job involvement towards organization will lead to knowledge development. Knowledge development with can help the organized retail sector to market quicker the innovative products and services that are designed to serve their customers, thereby also to attract and retain the best talent in the organization.
Many studies, though, find a gap between acknowledgement of the importance of retention of top performers and the talent management practices and processes in place. For instance, one study of IT workers found: Over half of employees surveyed did not feel there was sufficient scope for progression in their careers (54%) although the potential for career development when evaluating new roles was deemed important by over two thirds of respondents (67%).

Attrition levels are increasing day by day in the IT sector. There can be many reasons for increasing attrition in organizations. From organizations perspective, the major concern can be only resignations because resignations mean loss of important resource and talent from the organization but if we see from the HR perspective each and every reason of leaving is a concern as dropouts, absconding, bench carry a negative word of mouth in the market and then an prospective employee will surely think before joining the organization.  A primary research in a leading BPO in Pune was carried out in the year 2008 for middle level executives.  The following are the major reasons why employees left the organization.

Main Reasons for Leaving
Reasons for Leaving    No. of Employees    % Of Total
Absconding    7    4.70%
Absorbed by Client    6    4.03%
Better Opportunity Abroad    11    7.38%
Better Prospects    29    19.46%
Dissatisfaction with job    24    16.11%
Performance Issue    2    1.34%
Family Reasons/ Health Reasons    23    15.44%
Fraud    1    0.67%
Dropout    6    4.03%
Location    17    11.41%
Terminated    23    15.44%
Total    149    100.00%

 Development is a necessity for an organization’s effort to ensure workforce stability and act as a key towards retainment of employees. It is a biggest challenge of global competition in ITES Sector.

There are many factors, which affect the employee’s leave in the organization. The reasons can be classified as Internal, Organizational and External Factors, which affect:

Internal Factors
Recruitment Factors
•    unrealistic job preview
•    overqualified for the position
•    expectations unfulfilled
Job Satisfaction
•    lack of variety
•    poor job design
•    too many tasks
•    lack of autonomy/responsibility
•    working hours
•    limited support/resources
Appraisal, feedback
•    lack of feedback
•    lack of recognition
•    feeling undervalued
•    poorly conducted appraisal
Career Development
•    lack of career development
•    desire to learn new skills
•    unfulfilled aspirations
•    slow career progress
•    equity and fairness of promotion
Organizational Factors can  be summarized as:
•    conflicting values
•    poor communication
•    mergers
•    culture
•    lack of a caring environment
Work-life Balance
•    limited flexibility
•    Child care
•    lack of interpersonal skills
•    unrealistic demands
•    lack of encouragement
•    poor communicators
•    increased pay   
Some of the External Reasons  are:
•    traveling time
•    change in family situation
•    moving from the area
•    entrepreneurship

Why is it necessary to improve retention climate

•    For competitive advantage
•    To avoid recruitment costs
•    To boost continuity
•    To improve productivity

Leading-edge organizations develop methodologies that bring organization’s strengths to the fore, to rekindle the dynamic potential of their organizations to meet today’s challenges and to rebuild workforce commitment to the heart of their mission statement.

The Employee Retention Strategies should be sourced from research-based, fact-driven guidance on enhancing employee retention.  Retention Strategies should be built on a solid foundation of what works (and what doesn’t) to gain the commitment of employees.

Retention Strategies - Pathway to Excellence

With the growing competition in the corporate world, the need to continually recruit employees and ensuring that they stay put for a considerably long period of time is indeed turning into a challenging feat. It is no longer money alone that motivates an employee ‘job hop’.  It is a well-known fact that employees do not leave an organization because it is bad; they leave with a hope to get a better set of people in another organization.  The employees are forced to quit for reasons like improper behavior of their immediate supervisor or colleagues, lack of recognition for the hard work put in by them and a word of appreciation, which they look forward to on a regular basis.  If there is somebody who can make the difference, it is undoubtedly the leaders, with adequate backup from the HR and the management.

Good organizations make employee retention a core element of their talent management and organizational development strategy. Those that fail to make employee retention a priority are at risk of losing their top talented people to the competition.  The following are few strategies that are based on the research and can be implemented to retain the right talent in the organization.

Employee Motivation:

Employee retention has almost become synonymous with employee motivation. A motivated employee is satisfied with his job, more productive and is more likely to stay with the organization. Therefore, a key issue to address while handling ‘employee retention’ is the ways and means of motivating them.

Irrespective of various theories of motivation followed, the outcomes of ongoing research conclude that the following factors of motivation can be considered:

•    Interesting and challenging work
•    Reasonable pay – reward and recognition
•    Chalking of individual career path

Several studies have proved that the key to employee motivation, satisfaction and retention based on strong leadership and sound management practices. If a leader can master the art of motivating and retaining his staff, an organization can be rest assured of the fact that it has indeed achieved the objective of having a happy, loyal employee force resulting in growth and profits.

Employee Engagement:

The Management should engage the employees in the organizations goals and strategies.  Employees who are valued and respected for doing their jobs well, are less likely to leave. The Managers at every level of the organization must constantly communicate to employees the goals, the reasons for the goals, the strategies in place to achieve the goals, and the valuable contribution of each employee to implementing the strategies successfully.  Communicate openly and clearly about what's expected of employees at every level - your vision, priorities, success measures, etc. 

The Organizations should support open door policies so that the employees feel comfortable and are able to express their doubts and feeling to their employers.  The employees should not have any fear in their mind while approaching the management but should be free in communicating their ideas.  Employees in organizations having open door policies scrupulously communicate with their peers and exchange ideas and thoughts before they are finally matured in to concepts. This creates a sense of responsibility among employees and accountability towards other peers, which gradually builds up trust and pride. Transparency in work culture discourages work-politics which often hinders company goals as employees start to advance their personal objectives at the expense of development of the company as a single entity.

Talent Orchestra:

It takes Talent to spot Talent! A tone deaf will never be able to appreciate the music of maestros.
Talent Orchestra a tool can be designed to increase employee retention and reduce the expenditure on external recruitment by employing more roles internally.  The Talent Orchestra, an interactive database management programme can be designed and linked to the ERP (Enterprise Resource Planning) system of the organization to help the employees find roles they are looking for in the organization and accordingly develop the skills and experiences and highlight what development they would need in order to be a strong internal candidate. 

The design of the Talent Orchestra should be fully flexible and customised so that it reflect the employees’ roles, competency frameworks, development options and progression routes.  As the employees develop potential career paths, Talent Orchestra identifies individual development needs for each step in their path and between roles.  This can be used at appraisal time to create focussed development plans and to highlight to managers where they need to create learning experiences for their people. 

Counseling, Mentoring and Coaching:

Mentoring a practical tool for retention should be an ongoing activity.  Mentoring programme  is an interactive process wherein a more experienced person functions as a friend, philosopher, and guide — a role model and a teacher — to a less experienced person. The Mentors should be trained on the mentoring programme to be undertaken.  The employees should be given preferences to choose their mentors and thus the mentors and mentee pairs should be made.  The mentor should provide assistance to the employee mentee in developing talents and allow the employee to grow and become more independent.  He should be a good listener and encourage the employees to resolve the problems directly with the immediate boss as this  enhance superior - subordinate relationship.

The confidentiality of the mentoring relationship should be maintained which will give the employees to share their problems freely and develop trust.  The mentoring programme will open up new channels of communication.

Value Proposition:

Make employees realize that they are the most valuable asset of the organization. When you value employees they know it. Employees know when they are being treated fairly and know when you care about them. This not only builds trust, but it inspires them to work harder on the quality of their work. Recognize their accomplishments, it shows your employees you care about them when they do a good job and you don't just see them when they are underachieving.  As a manager you should always make an extra effort just to stop by your employee's desk and compliment them and thank them for their hard work. If you value your employees in this small manner, it will not go unnoticed by them. It not only increases your employee's self-esteem, but it motivates them and they go home telling people how great their job is.  The employees should be supported and mentored in tough times of personal crisis, which gives them a sense of belongingness towards the organization.  In a work place where employees are not able to use their full potential and not heard and valued, they are likely to leave because of stress and frustration.

Health is Wealth:
The organizations should ensure that the employees are provided with a stress free working environment.  Clear guidance and deadlines help the employees organize their work more effectively. Blurred instructions can cause employee stress through confusion or lack of direction. Emphasize the need for punctuality and time management but also encourage them to wind up their work by a definite closing time. Spending extra hours in the office becomes a habit with certain employees and this actually eats into their productivity in the long run.  Provide a relax zone to the employees to unwind during breaks.  Stress in the workplace is one of the top reasons for employee dissatisfaction and subsequent drop in productivity. It is absolutely essential that steps should be taken to ensure that the employees are in a supportive and harmonious environment with as few stressors as possible.  It is absolutely counterproductive to subject employees to illogical and senseless restrictions.  Provide them with a free environment and they will work better.

Attracting, training, retaining and motivating employees are the critical success-determinants for HR Professionals.  The IT software and services industry has grown rapidly over the last decade. The IT Software and Service Industry encompasses about 650,000 employees which will become three times more in the  next five years making the number game to over 2 million persons. The Indian ITES sector is going through a transformation and this emerging market is witnessing a significant change in its growth and investment pattern. In this scenario, when ITES sector occupying the paramount position, it is  necessary to improve retention climate in order to have competitive advantage, to avoid recruitment costs, to boost continuity and finally to improve productivity.

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