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Leveraging Organisational Culture to Transform Offshore IT Service Delivery Teams- Dr. Wolfgang Messner, PMP, PMI-ACP - GloBus Research
I believe high attrition rates in India' offshore service delivery centres not only put any provider's knowledge management and transfer processes to test, but they are also a common grievance of end clients often resulting in a critical stance of the entire offshore delivery model. In order to make fundamental changes in how IT service delivery teams are organised, it is critical to understand the specific antecedents to employee commitment in the services sourcing industry in India.
I feel organisations should cultivate ingroup collectivism and performance orientation. Other dimensions of organisational culture show a varying degree of positive and negative influence on employee commitment. We conducted empirical research in 2012 with 291 software engineers and managers working for two different offshore service providers in Pune and Bangalore linking employee commitment to organisational culture which reinforces the need to continuously invest in programs, processes, and systems that target organisational culture and thereby improve employee commitment.
We have published the results of this study in the Journal of Indian Business Research, Vol. 5 No. 2, where a detailed data analysis can be found; this article summarizes the findings and explains the changes proposed in managing offshore teams in order to increase employee commitment and bring down high attrition rates.
The Challenge of Attrition
Demotivation of the employee base, even if it is unintended, often leads to attrition. Attrition can be expensive potentially impacting a provider's bottom line which is especially true in an industry like India's services sourcing ('offshoring') industry where employees are the most important assets. There is a sense of urgency in the industry, which is a good starting point for a transformation activity. Yet, there has been little research for the services sourcing industry in India directly linking the constructs of organisational culture with employee commitment.
Managers were made to make connections on their own, who created very inaccurate links; empirical research is a conscious attempt to show managers in an objective way how proposed new approaches, behaviors', and attitudes can help to transform business.
Both companies participated in a larger intercultural up-skilling activity with ICCA™ (Intercultural Communication and Collaboration Appraisal, cf. Messner & Schäfer, 2012). Employees were invited by their managers to participate in this study on a voluntary basis and received a confidential assessment of their cultural predisposition, intercultural competencies, and organisational commitment fit as a tangible outcome and motivation to participate. The average age of the 291 respondents is just above 30 years and 25 per cent are female reflecting the typical demographics of India's services sourcing industry. Respondents have an average professional work experience of 7.4 years and have on average been 3.2 years in their current company; 52 per cent are executives without personnel responsibility and 37 per cent are typical offshore team managers heading teams of up to 10 people.
Construct 1: Employee Commitment
Employee commitment is a multidimensional and distinguishable construct consisting of three factors:
The affective factor describes an employee's emotional attachment, identification with, and involvement in the organisation and its goals. It results from individual and organisational value congruency.
The normative factor reflects the sense of moral obligation to remain in an organisation, an old-style value of loyalty and duty. It is expressed by the extent to which an employee feels obliged to make personal sacrifices and not criticise the organisation.
The continuity factor exhibits the individual's awareness of the costs of leaving an organisation. Close working relationships with other employees, community involvement, acquired job skills being unique to the organisation, and monetary investments, such as contributions to pension funds or stock options, can make it look too 'costly' for an employee to put in the papers and seek employment elsewhere.
Construct 2: Organisational Culture
Through references, I am certain in management circles, culture is often viewed as something which can be used to manipulate employees; 'shaping the culture' is an often cited priority in balanced scorecard projects. Just as often, culture is viewed as the humanising element of corporate business, which helps to establish expectations between an employee and the organisation the employee works for, foster trust, facilitate communications, and build organisational commitment. Organisational cultures form with or without clear intent.
On the contrary, it is much more of interest to understand what variables measure- integrated appraisal framework how organisational culture is perceived by employees.
• Power distance is the degree to which people expect and agree that power should be shared unequally through an organisation.
• Institutional collectivism is the degree to which an organisation encourages and rewards collective action and team spirit, even at the expense of individual goals, and whether being accepted by other team members is important.
• In-group collectivism is the degree to which employees have a feeling of pride and loyalty towards the superiors and the organisation they work for. And vice versa, the degree to which the organisation and its managers show loyalty towards their employees and take pride in their individual accomplishments.
• Assertiveness is the extent to which people should be assertive, aggressive, determined, confrontational, uncompromising, pushy, and tough in social relationships.
• Future orientation describes the orientation towards planning vs. muddling through and aspiring long-term future rewards by sacrificing instant gratification.
• Uncertainty avoidance is the extent to which rules and processes are established to guide people and ambiguous situations are avoided through detailed planning, even at the expense of experimentation and innovation.
• Performance orientation is the degree to which an organisation encourages and rewards its employees for performance, excellence, and innovation; this includes how employees drive themselves to improve their own performance by setting challenging goals for themselves.
• Gender egalitarianism is the extent to which gender role differences are minimised while promoting gender equality with respect to education and professional development, management positions, physically demanding tasks, and sports.
• Humane orientation describes if employees are – in general – sensitive, friendly, generous, and concerned about others.
Outcome: Impact of Organisational Culture on Employee Commitment
There are nine dimensions of organisational culture were now related to employee commitment using correlation and multiple regression analysis.
The strongest correlation can be found between in-group collectivism and affective commitment at ñ=0.628; it is also correlated to normative commitment (ñ=0.450) and continuance commitment (ñ=0.203), always at á<0.01. Performance orientation is also strongly correlated to all three employee commitment factors (affective at ñ=0.576, normative at ñ=0.375, and continuance at ñ=0.233, always at á<0.01).
Regression analysis in simple terms:
When there is a reciprocal feeling of pride, loyalty, and active support structures between employees and the organisation, employees become emotionally attached and commitment increases. The management of service providers should lead by example so that employees can look up to them the same way as they revere elders in their family circles. Active support structures comprise both provisions for employees in need as well as encouragement of team working and networking.
When employees work in an organisational environment which they perceive to encourage and reward them for performance, excellence, and innovation, their commitment to the organisation increases. Performance based pay as well as non-monetary reward systems based on group recognition of individual achievement appear to be important.
Changing an organisation's culture is one of the most difficult leadership challenges because organisational culture is a system of goals, values, processes, roles, practices, and assumptions. Single-fix changes are not likely to be successful, because the interlocking will take over and manoeuvre the attempted change inexorably back into the existing system (e.g., Denning, 2011). When employees shift from project to project, from one client assignment to the next, they practically shift between organisational subcultures; they are exposed to and need to adjust to different expectations and procedures of working. Organisational culture measures need to take this unique phenomenon of India's offshore services sourcing industry into account as otherwise the sub-cultures will write over organisational culture.
Finally our research unveils a number of implications for transforming the management and leadership practise in India's IT services sourcing industry. We realize that in academic research, the recommendations are made to sound a bit too simplistic. In reality, successful human resources transformation efforts are messy and full of
surprises. But a relative simple guiding principle is needed to steer organisations through a major change and simplicity can reduce the error rate.
Realigning the way employees are managed and work together by transforming selected dimensions of organisational commitment will help teams in India's services sourcing industry to boost employee commitment, contain attrition rates, and deliver constant quality in a rapidly changing economic and working environment.