Southern Cross UniversityePublications@SCU

Theses

2010

The retention of software development employeesin the IT industry in TaiwanChin-Yao TsengSouthern Cross University

ePublications@SCU is an electronic repository administered by Southern Cross University Library. Its goal is to capture and preserve the intellectualoutput of Southern Cross University authors and researchers, and to increase visibility and impact through open access to researchers around theworld. For further information please contact epubs@scu.edu.au.

Publication detailsTseng, CY 2010, 'The retention of software development employees in the IT industry in Taiwan', DBA thesis, Southern CrossUniversity, Lismore, NSW.Copyright CY Tseng 2010

i

The Retention of Software Development Employees in the IT Industry in Taiwan

August 2010

Chin-Yao Tseng Master of Business Administration (Griffith University, Australia) Bachelor of Business Management (Griffith University, Australia)

Submitted to The Graduate College of Management Southern Cross University, Australia

In Fulfilment of the Requirements for the Degree of Doctor of Business Administration

ii

DECLARATION OF ORIGINALITY

I, Chin-Yao Tseng, certify that the work presented in this thesis is, to the best of my

knowledge and belief, in whole or in part, has not been presented for a Degree at this or

any other University. I also certify that, to the best of my knowledge, any help received in

preparing this thesis and all sources used have been acknowledged in this thesis.

Signed

Chin-Yao Tseng

Date: August 2010

iii

ACKNOWLEDGEMENT

Upon the completion of my study journey, there are many people I want to acknowledge in appreciation for your support all the way. Without your ongoing assistance and patience, I

would have not accomplished my study within my estimated time period.

First of all, I would like to acknowledge my supervisor, Associate Professor Michelle

Wallace at Southern Cross University in Australia. Because of your richness in knowledge,

experience, mentoring, support and understanding of the learning curve, I have gained

expertise in the HR field, particularly in the retention area. Thank you so much for all the

effort you put in to my knowledge development.

Secondly, I would like to express my appreciation to Associate Professor Don McMurray

who supported me for the methodology part of the thesis. He always leads me to think

outside of the box and makes things easy. In particular, he always encourages me to

triangulate the argument from different aspects.

Thirdly, I would like to say thank you to the DBA staff of the Graduate College of

Management, including Professor Philip Neck, Associate Professor Peter Miller, Sue

White, Susan Riordan and Ashley Cooper, who always offered excellent service and

administrative support whenever I needed it. I would also like to say thank you to Di

Clarke who spared her precious time to refine my English grammar and language usage for

this thesis.

iv

Fourthly, I would like to say thank you to my friends and previous colleagues, who

supported me in completing the pilot survey and in introducing possible companies which

might want to participate in the survey. I would also like to say thank you to the Human

Resource Bank in Taiwan for conducting the survey when I encountered difficulties in the

field arrangement.

Last but not least, I would also like to say thank you to my parents, my father (Rong-Zone

Tseng) and my mother (Shuei-Lian Huang), who supported me in every aspect of my study,

activities and careers. They always dedicate their best to their children for a prosperous

future. My accomplishment definitely makes them proud of themselves.

v

ABSTRACT

This thesis is about retention of software development employees in the IT industry in

Taiwan. Retention involves the management of voluntary staff turnover so that effective

staff are encouraged to remain in the employ of the organization. The core concept of this

thesis is to manage voluntary turnover of these software development employees and

provide a tentative set of retention guidelines appropriate to IT companies in Taiwan.

The rationale for this research is that the loss of software development employees not only

involves the costs of a departing employee, but also involves loss of knowledge, social

capital and company memory which may cause IT companies to fail. This is because IT

companies tacit knowledge gained from experience and know-how may not be passed on

from senior workers to junior workers. Consequently, the competitive advantages of IT companies may not be sustained and they could be forced to leave the business.

In addition, there are two research background problems identified for this study, which

are a decreasing core workforce resulting from the aging population, and insufficient

software development employees resulting from Taiwans education system. Both factors

make the study significant, as software development employees are a key source of profit,

skill and sustainable competitive advantage for IT companies. Therefore, the aim of this

thesis is to identify what retention factors are important in retaining software development

employees in the IT industry in Taiwan.

A quantitative approach was used for this study and an empirical retention model has been

established involving six retention factors. These six retention factors were identified as

vi

independent variables and their relationships with the dependent variable, which was the

software development employees decision to stay, were examined. These six retention

factors are: job appreciation, fair remuneration, freedom in decision making, new challenging work, development, and workplace flexibility.

The target population of this study was full-time software development employees who

work in the R&D departments of HsinChu Science Park (HCSP) in Taiwan. There were

three different types of software development employees identified for this study, namely

software engineers, project leaders and assistant managers. A web-based online survey was used.

The findings of this study indicate that two unique and four common retention factors

could be related to software engineers and assistant managers decisions to stay. One

unique and five common retention factors could be related to project leaders decisions to stay. In addition, these three different types of software development employees are in

different career stages. Therefore, tentative guidelines for retention policy and practice in

IT companies could be developed based on a mixture of the career stages and unique

retention factors of each different type of software development employee.

The recommendations of this study suggest that most software engineers and some junior project leaders could be in the career stage of Exploration, in which they could seek a comparable salary and could need technical skills development. Most project leaders and some senior software engineers could be in the career stage of Establishment, in which

they could seek to pursue dual career development. This stage may activate job-hopping attitudes. Finally, assistant managers could also be in the career stage of Establishment, in

which they could seek for more freedom in decision making and different pay level and

vii

pay content.

Keywords: IT, Retention, Software Development Employees, Taiwan.

viii

A double-blind, peer-referred paper relating to the research in this thesis has been accepted

and was presented at the following conference.

Tseng, C. Y. & Wallace, M. (2009). The retention of software development employees in

the IT industry in Taiwan. Paper presented to the 23rd Annual Australian and New Zealand

Academy of Management, Melbourne, 1-4 December.

ix

TABLE OF CONTENTS

Declaration of Originality.ii

Acknowledgements...iii

Abstract.............................v

Table of Contents..iv

List of Figures..xv

List of Tables......xvi

Abbreviations...xviii

Chapter 1: Introduction 1.1 Introduction.1

1.2 Background to the Research..2

1.3 Research Problem, Hypotheses, Objectives, and Contributions4 1.4 Justification for the Research8 1.5 Methodology...11

1.6 Outline of this Thesis.14

1.7 Definitions...15

1.8 Delimitations of Scope and Key Assumptions.17

1.9 Conclusion..18

x

Chapter 2: Literature Review 2.1 Introduction20

2.1.1 Overview of the Taiwanese IT industry..21

2.2 Labour Market...25

2.2.1 Workforce Crisis...28

2.2.2 Software Development Employees .32

2.3 Retention.35

2.3.1 Job Embeddedness Theory..36 2.3.2 Unfolding Model...40

2.3.3 Motivation Theory41

2.4 Career Satisfaction and Actualization..44

2.5 Retention and Career Actualisation in the IT Industry in Taiwan50

2.6 Research Problem...61

2.6.1 The Problem of a Decreasing Core Workforce...62

2.6.2 The Problem of Insufficient Software Development

Employees...62

2.7 Research Question..64 2.8 Theoretical Framework..65

2.9 Conclusion...67

Chapter 3: Methodology 3.1 Introduction69

3.2 Justification for the Research Paradigms....70

xi

3.2.1 Justification for the Positivist Research.75 3.2.2 The Process of Quantitative Methodology.77

3.3 Research Design.79

3.3.1 Methods of Data Collection.79

3.3.1.1 Sample of Target Population.85

3.3.1.2 Sampling Frame.85

3.3.1.3 Sampling Plan.87

3.3.1.4 Risk Management...89

3.3.1.4.1 Pre-risk management89

3.3.1.4.2 Post-risk management..91

3.3.1.5 Sample Size.94

3.3.1.6 Probability and Non-Probability sampling..95

3.3.2 Questionnaire Design.97 3.3.2.1 Development of the Measurement Scale...99

3.3.2.2 Development of the Questionnaire Items101 3.4 Validity and Reliability Measurement.104

3.5 Statistical Methods for Data Analysis..106

3.6 Steps in the Data Collection Process....108

3.6.1 Step 1: Pilot Study...109

3.6.2 Step 2: Main Study..110

3.7 Ethical Considerations..111

3.8 Limitations.112

3.9 Conclusion..113

xii

Chapter 4: Data Analysis and Results 4.1 Introduction...115

4.1.1 Overview of Research Focus and Survey Response.116

4.2 Data Analysis Procedure.......116

4.3 Data Evaluation and Testing118

4.3.1 Respondents and Their Demographics......118

4.3.2 Descriptive Data Analysis...121

4.3.3 Principal Components Analysis (PCA).124 4.3.4 Multiple Linear Regression (MLR)...131 4.3.5 Post-Hoc Analysis....143

4.3.5.1 T- Tests....144

4.3.6 ANOVA Tests.147

4.4 Summary of Data Analysis...149

4.4.1 Summary of the Empirical Research Hypotheses....149

4.4.2 Summary of the Research Question..152 4.5 Conclusion.154

Chapter 5: Conclusion and Implications 5.1 Introduction...156

5.2 Conclusions about the Empirical Research Hypotheses160

5.3 Conclusions about the Research Question..171 5.3.1 Conclusions for Correlation Tests.172

5.3.2 Conclusions for Standard MLR Tests..173

xiii

5.3.3 Conclusions for T-Tests.179

5.3.4 Conclusions for ANOVA Test181

5.4 Conclusions about the Research Problem..182

5.5 Contributions for Theory.189

5.6 Contributions for Policy and Practice191

5.7 Limitations of this Research194

5.8 Implications for Further Research.195

5.9 Conclusion.196

REFERENCES...198

xiv

APPENDICES

Appendix A: Information Sheet for HR Managers....218

Appendix B: Informed Consent Form for HR Managers..220

Appendix C: Research Questionnaire .....221 Appendix D: Survey Email ...227

Appendix E: Human Research Ethics Committee (HREC) Notification...228

Appendix F: Measurement Scale Information....229

Appendix G: KMO and Bartletts Test.231

Appendix H: Communality Test........232

Appendix I: Scree Plot Test..234

Appendix J: Eigenvalues of Total Variance235 Appendix K: Factor Components.237

Appendix L: Validity and Reliability Test...239

Appendix M: Normality Test.249

Appendix N: Transformation Test251

Appendix O: Linearity and Homoscedasticity of Residuals...255

Appendix P: Correlation Dada Analysis for Multicolinearity...257

Appendix Q: T-Tests..262 Appendix R: ANOVA Tests...267

xv

LIST OF FIGURES Figure 1.1: Structure of Chapter 1...1

Figure 1.2: Empirical retention model of software development

employees.6

Figure 1.3: Block diagram for the research justification...10 Figure 1.4: Structure of this Thesis......14

Figure 2.1: Structure of Chapter 2...21

Figure 3.1: Structure of Chapter 3...70

Figure 3.2: Flow of Deductive process.79

Figure 3.3: Criteria of scale measurement for data analysis...111

Figure 4.1: Structure of Chapter 4.115

Figure 4.2: Data analysis procedure..118

Figure 5.1: Structure of Chapter 5....160

Figure 5.2: Correlation results for the retention of all aggregated

employees..167

Figure 5.3: Correlation results for the retention of software

engineers...168

Figure 5.4: Correlation results for the retention of project leaders...169

Figure 5.5: Correlation results for the retention of assistant

managers...170

xvi

LIST OF TABLES Table 3.1: Summary of research paradigms.75

Table 3.2: Advantages and Disadvantages of the four surveys..80

Table 3.3: Summary of advantages and disadvantages of sampling

designs96

Table 3.4: Questionnaire structure with measurement scale....101 Table 3.5: The purposes of pilot survey...109

Table 4.1: Survey respondents by demographics (n=415)............119 Table 4.2: Summary of Gender in comparison to Age...121

Table 4.3: Summary of Gender in comparison to Salary..122

Table 4.4: Summary of Gender in comparison to Academic

Qualification.122 Table 4.5: Summary of Gender in comparison to Working Period in

Current Company123

Table 4.6: Summary of Gender in comparison to Working Period in

IT industry124

Table 4.7: Correlation results for software development

employees.135

Table 4.8: Summary of R and ANOVA for all aggregated

employees..136

Table 4.9: Regression coefficients for all aggregated employees..137

Table 4.10: Summary of R and ANOVA for software engineers....138

Table 4.11: Regression coefficients for software engineers.139

Table 4.12: Summary of R and ANOVA for project leaders......140 Table 4.13: Regression coefficients for project leaders...141

xvii

Table 4.14: Summary of R and ANOVA for assistant managers...142

Table 4.15: Regression coefficients for assistant managers....143

Table 4.16: Summary of the t-tests for two age groups

comparison..146

Table 4.17: Summary of the ANOVA test for three groups...149

Table 4.18: Conclusions of the results relating to the hypotheses for

four groups..150

Table 5.1: Correlation results for four groups of software

development employees.172

Table 5.2: Standard MLR results for four groups of software

development employees.174

Table 5.3: Summary of t-tests results for age groups...180

Table 5.4: Summary of ANOVA results.181

Table 5.5: Summary of retention factors of software development

employees.185

Table 5.6: Summary of career stages and generations for software

development employees..192

xviii

ABBREVIATIONS

ACS Australian Computer Society

B2B Business to Business

CEDEFOP European Centre for the Development of Vocational Training

CEPD Council for Economic Planning and Development

DBA Doctor of Business Administration

DEV Development

DF Degree of Freedom

DGBAS Directorate-General Budget, Accounting and Statistics

ECN Engineering Change Notification

EU European Union

FA Factor Analysis

FDM Freedom in Decision Making

FR Fair Remuneration

GDP Gross Domestic Product

HCSP HsinChu Science Park

HR Human Resource

HREC Human Resource Ethical Committee

HRM Human Resource Management

HTML Hyper Text Markup Language

ICT Information and Communications Technology

IT Information Technology

JA Job Appreciation

KMO Kaiser-Meyer-Olkin

xix

MLR Multiple Linear Regressions

MOEA Ministry of Economic Affairs

NCHA New Challenging Work

OECD Organisation for Economic Cooperation Development

PC Personal Computer

PCA Principle Component Analysis

R&D Research and Development

STEM Scientific, Technical, Engineering and Mathematic

SCU Southern Cross University

SPSS Statistical Package for Social Science

WLB Work-Life Balance

WF Workplace Flexibility

1

Chapter 1: Introduction 1.1 Introduction

This thesis is about retention of software development employees in the IT industry in

Taiwan. This chapter presents an outline of this thesis and begins with an overview of the

background problems of a decreasing core workforce and insufficient software

development employees in the IT industry in Taiwan. Both factors are obstacles to

sustaining a competitive advantage for IT companies in Taiwan and signal a research

problem that needs to be addressed. This chapter also discusses research hypotheses,

objectives, contributions, justification for the research focus, related methodology, outline of this thesis, definitions, delimitations of scope and key assumptions, and finally a

conclusion is included. Figure 1.1 outlines the structure of this chapter.

Figure 1.1: Structure of Chapter 1 1.1 Introduction

1.2 Background to the Research

1.3 Research Problem, Hypotheses, Objectives, and Contributions

1.4 Justification for the Research

1.5 Methodology

1.6 Outline of this Thesis

1.7 Definitions

1.8 Delimitations of Scope and Key Assumptions

1.9 Conclusion Source: Developed for this study.

2

1.2 Background to the Research

The global shortage of highly skilled workers, who can be regarded as software

development employees in the post-industrial economy, has created a serious economic

issue, that is somewhat separate from the recent global financial downturn (Korane, 2009;

Vavra, 2009). It is expected that the current skills gap will enlarge, and global competition

for talent will become more severe under a continuous revolution of information and

communications technology (ICT) (Drucker, 2007; Gordon, 2009; Walker & LaRocco,

2002; Zheng, Soosay, & Hyland, 2008). This is because global demographic trends show

that the pool of new highly skilled workers is dropping drastically, especially for the

scientific, technical, engineering and mathematically based jobs (STEM) (Dychtwald, Erickson, & Morison, 2006; Gordon, 2009). This indicates that software development

employees are in high demand in todays knowledge-based economy and tight labour

market, as business growth for IT companies relies heavily on their productivity (Brandel,

2007; Drucker, 1999, 2007). Although training is a prominent approach to resolving the

shortage of software development employees, retention of existing talent becomes more

essential and critical (Doh, Stumpf, Tymon, & Haid, 2008; Horwitz, Heng, & Quazi, 2003;

Mayfield & Mayfield, 2008; Punia & Sharma, 2008).

Based on the aspects of global demographic change, the workforce population is expected

to be mainly filled by Generation X (those aged between 33 to 44 years) and Millennials

(Generation Y and Net Generation, those aged below 32 years) (Dychtwald, et al., 2006;

Gordon, 2009). However, the core workforce population is decreasing because the speed

of core workers leaving exceeds the speed of young workers entering the workforce

(Dychtwald, et al., 2006; Gordon, 2009b). This problem of a decreasing core workforce

has also created serious concerns and challenges for the IT industry in Taiwan. Therefore,

it is suggested that retention of existing software development employees can sustain a

3

competitive advantage for IT companies as companies knowledge and know-how can be

passed on from senior workers to junior workers (Anonymous, 2007; Clarke, 2009).

From the point of view of software development employees, their productivity has offered

a sustainable competitive advantage for IT companies by continual innovation of products

and services that contain optimum output of quality (Davila, Epstein, & Shelton, 2006;

Drucker, 2007; Huang & Lin, 2006). As innovation is the heart of the knowledge-based

economy (Walker, 2007), it differentiates between companies retaining market leadership

and barely surviving (Davila, et al., 2006). However, Taiwans education system has failed

to supply enough software development employees for the IT industry, which has

undergone an economic transformation with a shift from quantity to quality (Chen & Liu,

2003). This is because rote memorization in Mandarin is emphasized in Taiwans

education system, and the English language is dominant on the Internet, so this confines

the learning process (Masuyama & Vandenbrink, 2003). Therefore, retention of existing

software development employees has become critical for the success of IT companies in

Taiwan as their value determines the future of the organization (Abell & Oxbrow, 2001;

Drucker, 2007).

In order to resolve the background problems of a decreasing core workforce and

insufficient software development employees in the IT industry in Taiwan, this research

explores the relationship between retention factors and software development employees

decisions to stay. This research also provides a set of tentative retention factors as a guide;

informed by research results, appropriate to IT companies, and effective in retaining

software development employees in the IT industry in Taiwan.

4

1.3 Research Problem, Hypotheses, Objectives, and Contributions Based on the discussion of scholarly evidence above, the core workforce in Taiwan is

expected to decrease by the aging population (CEPD, 2008). In addition, Taiwans

education system has not supplied enough software development employees for the IT

industry in Taiwan (CEPD, 2006; Masuyama & Vandenbrink, 2003). Both factors have

caused the shortage of software development employees in the IT industry in Taiwan.

Therefore, the research problem addressed in this research is:

What retention factors are important in retaining software development employees in

the IT industry in Taiwan?

Essentially, I argue that retention of existing software development employees could make

a difference for IT companies in Taiwan as they represent a sustainable competitive

advantage. From the findings, I also argue that a diverse set of tentative retention factors

should be tailored to meet the needs of different types of software development employees

according to their career stages and generational characteristics. It is deemed that retention

of these software development employees can be effectively achieved when each of them

is satisfied with their career achievement.

Informed by scholarly evidence on financial compensation (Dychtwald, et al., 2006),

training and development (Hager, 2004), promotion (Chen, Chang, & Yeh, 2006),

recognition (Messmer, 2006), challenging work (Lock, 2003), innovation and creativity

(Jaskyte & Kisieliene, 2006), leadership style (McShane & Travaglione, 2007), autonomy

(Davenport, 2005), work-life balance (Hytter, 2007), and job satisfaction (De Cieri & Kramar, 2005), a theoretical framework of retention model has been established from the

literature and discussed in Chapter 2. In addition, six retention factors were summarised

5

from the Principal Component Analysis (PCA) in Chapter 4 and used to answer the

research problem. They were renamed as job appreciation, fair remuneration, freedom in decision making, new challenging work, development, and workplace flexibility. These six

retention factors were identified as the independent variables and their relationships with

the dependent variable which was the software development employees decisions to stay,

was examined.

The reason for choosing software development employees was because they are a key

source of profit, skill, and sustainable competitive advantage (Drucker, 1993), executing

daily operations of programming for the projects of customers. In addition, it is hard to recruit for this group of software development employees in todays labour market

(Gordon, 2009; Hoffman, 2009). Hoch, Roeding, Purkert, and Linder (2000, p.68) stress

that The scarcity of software professionals is the major barrier to growth in the software industry and one of the key challenges of software leaders. Thus, this group of employees

is a highly appropriate focus. Figure 1.2 provides an empirical retention model of software

development employees for this research.

6

In summary, in order to answer the research problem, and to examine the empirical

retention model of software development employees, six empirical research hypotheses

have been constructed as follows:

Empirical Hypothesis 1: Job appreciation is positively related to the software

development employees decisions to stay in the IT industry in Taiwan.

Empirical Hypothesis 2: Fair remuneration is positively related to the software

development employees decisions to stay in the IT industry in Taiwan.

Empirical Hypothesis 3: Freedom in decision making is positively related to the

software development employees decisions to stay in the IT industry in Taiwan.

Empirical Hypothesis 4: New challenging work is positively related to the software

development employees decisions to stay in the IT industry in Taiwan.

Source: Developed for this research.

Figure 1.2: Empirical retention model of software development employees

H1: Job Appreciation

Decision to stay

H2: Fair Remuneration

H3: Freedom in Decision Making

H4: New Challenging Work

H5: Development

H6: Workplace Flexibility

7

Empirical Hypothesis 5: Development is positively related to the software

development employees decisions to stay in the IT industry in Taiwan.

Empirical Hypothesis 6: Workplace flexibility is positively related to the software

development employees decisions to stay in the IT industry in Taiwan.

Based on the shortage of software development employees in the IT industry in Taiwan,

retention of existing software development employees is one solution proposed in this

study. This research examined the relationship between six retention factors and software

development employees decisions to stay. In addition, this research also provided a set of

tentative retention factors for each different type of software development employees for

effective human resource management. Therefore, the purpose of this research has been to

achieve the following two objectives.

1. To identify what retention factors are important in retaining software

development employees in the IT industry in Taiwan.

2. To develop a set of tentative retention factors as a guideline; informed by the

research results, and appropriate to the IT companies in Taiwan, in order for

them to effectively retain their software development employees.

The contributions of this research will be presented at Chapter 5, Section 5.5 and 5.6. In

summary, Section 5.5 makes four theoretical contributions to new knowledge: a software

development employees retention model, the importance of retention factors to each

different type of software development employees, and their comparisons between two age

groups, and the closure of a knowledge gap about retention. Section 5.6 makes three sets

of contributions to policy and practice as each of the three sets of tentative retention

guidelines is tailored to meet the needs of different types of software development

8

employees according to their career stages and generational characteristics.

1.4 Justification for the Research As stated above, a war for talent will continue to hit the growth of IT companies through

the impact of the decreasing core workforce and insufficient software development

employees. This indicates that IT companies in Taiwan need to find ways to sustain their

growth as well as their competitive advantage. In addition, attracting, motivating and

retaining software development employees have become more critical under todays global

competition and fast pace of technological revolution (Horwitz, et al., 2003; Schulz, Camp,

& Waltman, 2008). This is because the success of IT companies relies heavily on the

human capital of software development employees, who can match the use of advanced

technologies to the companies needs (Mata, Fuerst, & Barney, 1995; Ross, Beath, &

Goodhue, 1996; Schulz, et al., 2008). Therefore, although a training approach is important

to close the skills gap, retention of existing software development employees is also

important and is the focus of this research.

Work content which involves long working hours and an inflexible working life, results in

job-hopping proclivities in the IT industry and thus a high level of voluntary turnover (Khatri, Chong, & Budhwar, 2001; Schulz, et al., 2008). This is regarded as an unfriendly

workplace in the IT industry, one which could influence software development employees

to leave an organization despite an attractive salary and stock bonus (Chen & Huang,

2006). Although fair remuneration is a popular tool to attract software development

employees, other retention factors, such as career appreciation and development, are strong

determinants in their decisions to stay or leave (Agarwal & Ferratt, 2001; Eyring, 2008;

Foote, 1998; Schulz, et al., 2008; Thapanachai, 2006).

9

In addition, as the values of each generation are different, their needs should be tailored to

the diversities of their career stage (Craig & Hall, 2005; Nankervis, Compton, & Baird,

2005; Tapscott, 2009; Trower, 2008). It is suggested that employees whose career anchors

are compatible with their jobs have higher career satisfaction levels and lower intentions to leave an organization than those who have incompatible career anchors with their jobs (DeLong, 1982; Igbaria, Greenhaus, & Parasuraman, 1991; Quesenberry, 2006; Schein,

1978).

Furthermore, retention of existing software development employees is the most

cost-effective approach to offset the loss of knowledge, skills and competencies of IT

companies (Anonymous, 2001; Schulz, et al., 2008; Somaya & Williamson, 2008).

Therefore, it is suggested that IT companies can establish a friendly workplace with a

cost-effective retention model to sustain a long-term relationship with their software

development employees. This is because a different set of tentative retention factors has

been developed based on the career satisfaction of each different type of software

development employees. Figure 1.3 below provides a block diagram for the research

justification.

10

Source: developed for this research.

Figure 1.3: Block diagram for the research justification

Core workers decreasing

Mature workers increasing

Lack of encouraging creativity within education system

Workforce Supply Qualified Workers Supply

Lack of Internet access with English capability

Importance of Retention Factors - Job Appreciation - Fair Remuneration - Freedom in Decision Making - New Challenging Work - Development - Workplace Flexibility

Gap of Retention Influence

Unfriendly Workplace in the Taiwanese IT Industry

Job-hopping proclivities increased & voluntary turnover rate increased

Friendly Workplace in the Taiwanese IT Industry

Career Satisfaction & Stay Longer in the Organization

Minimized Gap of Retention Influence

The Shortage of Qualified Workers

1. Long working hours 2. Inflexible working life

11

1.5 Methodology

As the research approach is dependent upon a researchers paradigm, a quantitative

approach was used for this research. It is deemed that a positivist paradigm is the suitable

approach to answer the research question because the theoretical framework was deduced

from the existing theories (Guba & Lincoln, 1991). In addition, the research examined the

relationship between the retention factors and software development employees decisions

to stay, which existed externally and objectively (Easterby, Thorpe, & Lowe, 1991). Finally, the researcher alone collected the data and analysed it.

A web-based online survey was adopted for this research for the following reasons. Firstly,

it offers the cheapest cost and fastest speed from the options of survey methods (Zikmund,

2003). Secondly, it involves higher anonymity of participants so they can feel free to

answer all questions (Sue & Ritter, 2007). Thirdly, there is no interviewer bias during the

survey (Sue & Ritter, 2007). Finally, it is an appropriate method for software development

employees because they are computer literate (Neuman, 2006).

Selection of the target population was focused on full-time software development

employees who work at research and development (R&D) departments located in HsinChu

Science Park (HCSP) which is the oldest and largest science park in Taiwan. The sampling

plan was designed to approach the selected IT companies and invite them to participate in

the survey. However, the Human Resource Bank was authorized to conduct the survey

because some difficulties occurred in the field work. These difficulties are discussed in the

section of risk management.

Questionnaire design involved the requirements of accuracy and relevance of information

(Zikmund, 2003). A five-point Likert-type interval scale was used to measure how strongly

12

instruments agreed or disagreed with the responses from participants (Cavana, Delahaye,

& Sekaran, 2001). Finally, the research complied with voluntary participation, anonymity,

and confidentiality throughout the entire process of data collection. This is a code of

ethical conduct for social research supervised by the Human Research Ethics Committee

(HREC) at Southern Cross University (SCU).

The data collection process involved two steps including a pilot study and a main study. A

pilot study is a pre-test study using a small sample to test out all aspects of the survey in

which comments made could help revise the instrument used in the main study (Gorard,

2003). It is suggested that a small scale trial run of a large survey be conducted for several

purposes, such as testing questionnaire wording, layout, sequencing, and completion time

(Veal, 2005).

As a disproportionate subsample size (software engineers: 313; project leaders: 72; and assistant managers: 30) was collected, the results for the comparisons between three

groups will be interpreted in more tentative terms throughout the entire thesis. De Vaus

(2004, p. 176) stresses that A strong correlation in a small sample may be statistically

non-significant, while a much weaker correlation in a large sample may be statistically

significant.

The choice of data analysis techniques is determined based on the research objectives that answer the research question. The research question was to assess the retention factors

associated with software development employees decision to stay. Tabachnick and Fidell

(2001, p. 17) stress that If the major purpose of analysis is to assess the associations among two or more variables, some form of correlation/ regression or chi square is

appropriate. Hair, Black, Babin, and Anderson (2010, p. 23) also stress that With the

13

objective and conceptual model specified, the researcher has only to choose the appropriate multivariate technique based on the measurement characteristics of the

dependent and independent variables. Thus, regression will be used to examine the

retention factors in association with software development employees decision to stay as

both variables were measured with interval scale and satisfied assumption of normality

(Manning & Munro, 2007). In addition, the moderate value between those retention factors

achieved p < 0.05 (Manning & Munro, 2007).

Other statistical techniques such as t-test and ANOVA were further used to answer

demographic questions. T-tests were used to answer the difference between age groups

(referring especially to the two age groups of 20 to 29 years and 30 to 44 years as they are

the majority of respondents). The justification for this is the suggested retention factors linked to age group, which is measured with dichotomous nominal scale and interval scale

and to satisfy assumption of normality (Manning & Munro, 2007). This is because the

research was interested post hoc in identifying the retention factors of software

development employees in relation to their career stage of exploration and establishment.

ANOVA was used to explore post hoc the difference between three groups of software

development employees. The justification for this is because the research was interested in identifying the differences in retention factors between different types of software

development employees.

The findings for this thesis indicate that a set of tentative retention factors could be

developed based on two unique retention factors of software engineers. A set of tentative

retention factors could be developed based on one unique retention factor of project leaders. Finally, a set of tentative retention factors could be developed based on two unique

14

retention factors of assistant managers.

1.6 Outline of this Thesis

This thesis is constructed of five chapters. Figure 1.4 outlines the structure of this thesis.

Figure 1.4: Structure of this Thesis Chapter 1: Introduction

Chapter 2: Literature Review

Chapter 3: Methodology

Chapter 4: Data Analysis

Chapter 5: Conclusion and Implications Source: Developed for this study.

Chapter One: Introduction provides an overview of the background to this research,

research problem, research hypotheses, research objectives, research contributions, justification for the research, methodology, and scope of this research.

Chapter Two: Literature Review provides scholarly evidence of knowledge that reviews

the concept of retention from the broad aspect of a tight labour market to the importance of

retention theory, and follows on with personal career satisfaction. The conceptual model of

software development employees retention is then established, and the theoretical

framework with five main hypotheses is developed for this study.

Chapter Three: Methodology discusses the justification of the research paradigm, the choice of survey method, target population, sampling frame, sampling plan, risk

15

management, questionnaire design and its measurement scale, and steps in the data

collection process. It also introduces the Statistical Package for Social Science (SPSS) test

for data analysis.

Chapter Four: Data Analysis provides descriptive data analysis and followed by Principal

Component Analysis (PCA), and normality test. The results of statistical analysis include

standard Multiple Linear Regression (MLR), t-tests, and ANOVA test.

Chapter Five: Discussion and Conclusion provides the conclusions for the empirical

research hypotheses, research question, and research problem. The implications /

contributions for theory, policy, and practice are also included, as well as the limitations of

this research and implications for further research.

1.7 Definitions

The key definitions of words or terms used for this research are provided below.

Assistant Managers: refers to software development managers who account for the

success of customers projects and supervision of project leaders and software engineers.

Baby Boomer: people who were born between January 1946 and December 1964 (19

years); aged between 45 to 63 years old; TV generation (Tapscott, 2009).

Career Achievement: refers to an individuals career satisfaction level.

Career Anchor: refers to self-perceptions that influence an individuals career choice and

career decisions (Schein, 1978).

16

Career Stage: refers to age related career development that involves an individuals

response to occupational opportunities and life-role participation (Super, 1990).

Core Workforce in Taiwan: workforce aged between 14 to 44 years old (CEPD, 2008).

Generation X: people who were born between January 1965 and December 1976 (12

years); aged between 33 to 44 years old; computer generation (Tapscott, 2009).

Job-Hopping Proclivities: refers to the capability of software development employees to

keep seeking opportunities for better financial compensation and higher levels of

promotion.

Knowledge-Based Economy: refers to IT companies sustainable competitive advantage

that relies on human intellectual capital (Abell & Oxbrow, 2001).

Mature Workers: workforce aged over 55 years old (Dychtwald, et al., 2006).

Mid-Career Workers: workforce aged between 36 to 54 years old (Dychtwald, et al.,

2006).

Millennial (Generation Y or Net Generation): people who were born between January

1977 and December 1997 (21 years); aged between 12 to 32 years old; Internet generation

(Tapscott, 2009).

Project Leaders: refers to software development employees who are responsible for the

management of projects and supervision of software engineers.

17

Retention: refers to the act of retaining valuable software development employees that an

organization wants to keep.

Software Engineers: refers to bottom-line software development employees who perform firmware or software programming for the projects of customers.

Voluntary Turnover: refers to the choice of a software development employee to either

stay or leave an organization.

Young Workers: workforce aged under 35 years old (Dychtwald, et al., 2006).

1.8 Delimitations of Scope and Key Assumptions

The target geographic location for this study focuses on HsinChu Science Park which

delimits the scope of knowledge about retention of the entire software development

employees in Taiwan because Taiwan has many industrial science parks. As will be for the

discussed in Chapter 5 this could be a platform for further research, and more importantly,

the geographic location could expand considerably to not only focus on Taiwan, but also

focus on China. This is because many IT companies in Taiwan have established their

offices or factories in China for better global competition as multinational companies

(MNCs). This group of software development employees is diversified and has a broader

view about career achievement than those who prefer to work locally.

The research methodology used a quantitative approach, which also delimits the scope of

knowledge as the findings were limited to the relationships between the identified

variables. More importantly, the findings about significant factors were unable to

understand more deeply the reasons behind these workers intentions to stay within the

18

organization as well as for not significant factors. Therefore, a qualitative approach could

be undertaken for further research and findings could be explained more deeply by

interpreting the investigations that are literal creation in the inquiry process.

The focus on software development employees delimits the scale of knowledge about

retention from a broad aspect of sustainable competitive advantage for IT companies as a

whole. This is because the success of some IT companies in Taiwan is achieved by other

key employees such as hardware employees and sales and marketing people. The focus of

key employees can be reconsidered according to the needs of research in the future.

In addition, the IT industrys culture is more open to western practices than Taiwanese

national culture in this case. Bae and Lawler (2000) in Korea and Wu (2004) in Taiwan

discuss that there are changes from traditional culture that impact on work culture and

countries like Taiwan now accepts strategic HRM approaches including those relating to

retention. Therefore, Taiwan as a culture was not included as a moderating effect.

1.9 Conclusion

This chapter is a roadmap for this thesis and begins with a background to the research,

followed by research problem, research hypotheses, research objectives, and a summary of contributions for theory, policy, and practice. Justification for this research is to minimize

the gap of retention influence by satisfying different types of software development

employees career achievements. A quantitative approach was used for this research and

the outline of this thesis is provided as well as the definitions of words and terms used in

this thesis.

19

Based on the provision of this roadmap, this thesis can proceed, and begins by reviewing

the literature in Chapter 2 which justifies the need for IT companies in Taiwan to retain software development employees.

20

Chapter 2: Literature Review 2.1 Introduction

Chapter 1 focused on a summary of the research background, problem, hypotheses,

objectives, contributions, justification for the research, methodology, definitions and delimitations of scope, key assumptions for this study, and provided an outline of this

thesis. This chapter reviews the scholarly evidence and develops a theoretical retention

framework for this study.

This chapter consists of nine sections and begins by reviewing the background of the

Taiwanese IT industry. Section Two analyses the labour market by discussing global

demographic trends and the importance of software development employees. Section

Three analyses the concept of retention by discussing the theories of job embeddedness, unfolding model and motivation. Section Four explains career satisfaction and

actualization by addressing the compatibility of a persons career anchor and job setting options within the organisation over time at different career stages. Section Five explains

retention and career actualization in the IT industry in Taiwan by addressing financial

compensation, career development, self-achievement, job satisfaction, and the environmental factors that will determine the employees decision to stay in the

organisation. Section Six identifies the research problem by discussing the two research

background problems of a decreasing core workforce and insufficient software

development employees. Section Seven provides research question developed from the

scholarly evidence. Section Eight provides the theoretical framework, which includes five

main research hypotheses with ten variables. Finally, a conclusion is provided in Section

Nine. Figure 2.1 outlines the structure of this chapter.

21

Figure 2.1: Structure of Chapter 2 2.1 Introduction

2.2 Labour Market

2.3 Retention

2.4 Career Satisfaction and Actualization

2.5 Retention and Career Actualization in the IT industry in Taiwan

2.6 Research Problem

2.7 Research Question

2.8 Theoretical Framework

2.9 Conclusion Source: Developed for this study.

2.1.1 Overview of the Taiwanese IT industry

According to the Ministry of Economic Affairs (MOEA) in Taiwan, Taiwans economy has

succeeded in the growth of the foreign trade surplus (MOEA, 2008). In the projection of the Directorate General of Budget, Accounting and Statistics (DGBAS) under Executive

Yuan, Taiwans economy will rebound more strongly than many advanced countries after

the recent global financial downturn (DGBAS, 2009). It is projected that Taiwans GDP will reach 3.92% in 2010 (DGBAS, 2009), relying mainly on its global competiveness in

outstanding technological innovation and R&D capability (MOEA, 2008). In addition,

R&D professional-related jobs are anticipated to create the large number of job vacancies in the labour market (MOEA, 2008). This indicates that IT companies in Taiwan have to

find ways to retain those valuable software development employees, in order to support the

22

growth of the organisation and thus sustain a competitive advantage in the global market.

Taiwans economic strength is rooted in its industrial base which has made a successful

paradigm shift from labour-intensive industries to capital and technology industries, and is

now in the growth of knowledge-based industries. According to notification from HsinChu

Science Park (HCSP), it began with a manufacturing boom in basic-level exported goods

and progressed to technology-intensive industries such as computers and their peripheral

components (HCSP, 2009). Taiwan today is recognized as one of the worlds largest

producers of computer-related products, and boasts an extensive and well-established

network of industrial zones (HCSP, 2009). It is also growing a number of high-technology

industry clusters which are supported by high-quality human resources and fully integrated

supply-chain networks (HCSP, 2009).

Taiwan is also recognized as having strong industrial research and development

capabilities. That is, national expenditure on R&D as a percentage of GDP rose from

2.44% in 2004 to 2.52% in 2005. Taiwan scholars have published 15,661 scientific

dissertations, the 18th highest in the world, and held 5,118 U.S. patents, the fourth largest

quantity in the world after the U.S., Japan, and Germany (HCSP, 2009). This shows that

Taiwan has gained a high competitive advantage against competitors all over the world.

Taiwan is also home to the largest venture capital industry in Asia. It has been recorded

that by the end of 2005, there were 231 venture capital firms actually operating in Taiwan,

raising a total of NT$189.3 billion (which equates to AUD$6.76 billion) for 10,295

investment projects, accounting for support of 368 listed companies (HCSP, 2009).

Furthermore, Taiwan has a highly integrated industrial base with a mature business to

business (B2B) infrastructure in which the E-commerce trade networks are able to link

23

more than 20,000 Taiwanese exporters globally (HCSP, 2009). This facilitates all

companies with a friendly working environment to effectively access all valuable

information and connections quickly and efficiently. These are all the business advantages

of Taiwan, which makes investment in the country so attractive to global companies,

resulting in transformation of the industries rapidly and effectively.

Taiwan has obviously been under pressure to transform its economic structure and to

adjust its industrial policies to respond to a fast-changing global environment (HCSP, 2009). This is because a new economic reality has quickly merged with knowledge and

innovation, which makes the global competition more severe. Therefore, in order to ensure

Taiwan has gained a sustainable competitive advantage in competing globally, more highly

specialized technical and managerial personnel are required (HSCP, 2009).

From a human resource perspective, since Taiwan has pursued an export-led technology

innovation strategy for the IT industry, software development employees have become

increasingly demanding in relation to working conditions (Hobday, 1994; Hu & Mathews,

2005; Hu, Zheng, & Lamond, 2007). These working conditions could involve long

working hours and high pressure, and consequently lead to turnover intention (Moore,

2000). Therefore, retention of software development employees is one solution proposed

in this research that helps IT companies to gain a better competitive position in the global

market.

In terms of cultural value, Confucianism is the cornerstone of cultural tradition in Taiwan

(Huang, 2001). The basic tenets of Confucian philosophy are harmony and consensus that

emphasizes a conflict-free, group-based system of social relations. The principle of

Confucian value promotes respect for work, discipline, thrift, protecting face, ordering

24

relationships by status, duty to family and economic egalitarianism (Huang, 2001). It is

believed that the value of Confucianism has a significant influence on peoples behaviour

and ideas that shapes the policies of human resource management across many industries

in Taiwan.

However, in the IT industry in Taiwan, many scholars have found that the influence of

traditional culture on Confucian value has moved from group contributions to individual

contributions (Chen, 1997; Farh, 1995; Huang, 2001; Wu, 2004). This results in the shift of

managerial efficiency of the Taiwanese IT industry that has adapted to Western style of

HRM practice. The new change of HRM practice encourages individual employees to be

involved in the goal-setting and decision-making process rather than encourages on

relationship and life-time employment (Wu, 2004). In addition, the Western style of HRM

practice is more significant in Taiwan when corporate business is bigger in size and

complexity (Leung, 1995).

As the IT industry in Taiwan is an export-oriented business, the challenges of HRM

practice have been significantly influenced by both internal and external business

environment within global competition. This results in a trend towards dominance of

Western style of HRM practice with little Confucian value that formed and exercised in the

IT industry in Taiwan (Wu, 2004; Yeh, 1991). There is a growing body of literature that

discusses a convergence of management styles practices in Asian contexts that move them

somewhat more towards Western styles with some regional influences (Chatterjee & Nankervis, 2007; Lui, Lau, & Ngo, 2004; Rowley, Benson, & Warner, 2004). In addition,

this study aims to identify what retention factors are important in retaining software

development employees in the IT industry in Taiwan. As a result, proposed variables may

have considered based on Western style of HRM practice as cultural factor may not be as a

25

strong moderating factor as others in this study. Therefore, the use of a Western paradigm

regarding retention is justified.

2.2 Labour Market

Although the recent financial downturn has shown that investment in the IT industry has

slowed down somewhat, a war for talent is expected to return as the global economy

recovers. This is because the IT industry is fundamental to economic growth (Anonymous,

2003; Kavanagh, 2008). According to the Organisation for Economic Cooperation and

Development (OECD), labour shortages and skills gaps are big concerns and challenges

that will continue to impact on global economies performance (OECD, 2008). This is

because IT-related services and software development projects will generally grow, along with new broadband infrastructures, as they are an essential part of spending and are partly

recession-proof (OECD, 2008). In addition, non-OECD countries such as BRICs (e.g.

Brazil, Russia, India, and China) are particularly active in sustaining the global economic

growth today and are expected to exceed the OECD countries (OECD, 2008). This

indicates that competition for software development employees affects both advanced

countries and emerging countries, as there is a large skills shortage in the global labour

market.

According to Taylor (2008), a skill shortage exists when employers are unable to attract,

recruit and retain sufficient staff with the specific skills and capabilities required at current

levels of remuneration. These conditions are based on the following supply and demand

factors. Supply factors are quality and quantity of the education and training system;

occupational professional preferences of workers; access to on-going skill development;

regional mobility; demographic trends; overall labour participation; migration;

organisational culture and employment conditions; and remuneration (Taylor, 2008, p.13).

26

Demand factors are the level of demand for the industrial products and services;

infrastructure and capital investment; technological change and innovation; industrial

relations law; and the location where the goods and services are produced (Taylor, 2008,

p.13). Apparently, the current skilled workforce is insufficient to support the demands of

business growth in the IT industry around the world.

It has been identified that scientific, technical, engineering and mathematically based jobs (STEM) are hard to fill in todays global labour market (Gordon, 2009a). In particular,

there are nine, most in demand, skilled jobs in the IT industry, namely programming / application development, help desk / technical support, project management, networking, business intelligence, security, web 2.0, and telecommunications (Hoffman, 2009).

Although the recent financial downturn has forced IT companies to cut their expenditure,

these types of skilled jobs remain in strong demand to sustain business growth in the IT industry (Antonopoulos, 2009; Arellano, 2007; Hoffman, 2009; Jowitt, 2009).

In the United States in 2009, there are still more than 3 million skilled job vacancies, and more importantly, it is expected that 12 million to 24 million skilled jobs will fall vacant from 2010 to 2020 (Gordon, 2009a). According to the European Centre for the

Development of Vocational Training report (CEDEFOP), about 7.5 million engineering

jobs will be created by 2015 in the pan-European countries (EU-25+), as the employment patterns shift towards service and knowledge-intensive jobs (CEDEFOP, 2008). For example, the recent demand for software development employees in networking security

has created an increasing number of unfilled jobs in the labour market. Similarly, according to the Australian Computer Society (ACS), an estimated 25,000 IT jobs are predicted to be vacant by 2020 in Australia if there are no immediate policy changes (ACS,

2008).

27

In the emerging countries, China is projected to reach a shortfall of 300,000 software development employees, and a shortfall of 450,000 software development employees has

been projected by India (Kavanagh, 2008). Both countries are expected to create a significant skills shortage in the global labour market because their original roles in

providing talent to the rest of the world have shifted to support the growth of their

domestic economy (Gopinath, 2007). More importantly, both countries have undertaken an

approach to buy out IT companies from advanced countries to get access to the high-level

software development employees (Gopinath, 2007). Consequently, global demand for

software development employees is believed to result in a severe war for talent, as the

future success of a business is dependent on the battle for talent (Anonymous, 2008).

According to a CIO Executive Council survey in North America, close to two-thirds of

top-tier IT executives agree that they are experiencing a skills crisis for critical project challenges and are considering going abroad to look for software development employees

(Arellano, 2007). This is because the side-effects of the skills shortage have limited an

organisations productivity, efficiency and ability to innovate (Jowitt, 2009). In addition, it

has already been shown that there is slowed growth in IT-dependent industries, increased

outsourcing overseas, and a decreased supply of technology goods and services (Nelson &

Todd, 2004). Consequently, this has significantly impacted on the key dimensions of

business success in relation to business growth, speed to market, quality of products and

services, and customer relationships (Jowitt, 2009).

As noted above, a severe competition for software development employees will not be

only between IT companies but also between countries. In addition, China has offered a

higher financial package in comparison to the rest of the world to attract this group of

software development employees (The Economist, 2007). Consequently, this results in a

28

skills shortage because of higher staff turnover and rising wage costs (The Economist,

2007). This is a big issue because work ethics could be collapsed by a competitive

financial package creating a norm in the work environment where the period of

employment becomes as short as two years or even less (The Economist, 2007). Therefore,

it has been suggested that identifying retention factors for existing software development

employees is the only way to retain a long-term employment relationship and thus sustain

a growth of business (Martin, 2008; Nelson & Todd, 2004; The Economist, 2007).

2.2.1 Workforce Crisis

Global demographic changes are the major reasons causing a large number of skills shortages, although other factors may be involved, including changing skill needs within

occupations and labour participation rates (Gordon, 2009b; Martin, 2008; Taylor, 2008).

The disproportionate size of the retiring group of the baby boomer generation, an

increasing long life expectancy, and decreasing birthrates of the young cohort are expected

to double the percentage of workers over fifty-five during the next five to ten years

(Dychtwald, Erickson, & Morison, 2006). This indicates that the trend towards an aging

population is a big challenge under a strong projection of global economic growth, as it has created difficulties in attracting and retaining staff in the IT industry (Drucker, 1999;

Martin, 2008). A low birthrate in developed countries and massive retirement has caused a

drastic reduction in the pool of new highly skilled workers (Dychtwald, et al., 2006;

Gordon, 2009a, 2009b).

Statistics indicate that by 2050, about 9% of the ICT workforce will be retiring under

current global demographic changes (Garmise, 2006). In addition, nearly 20% of the

European working population will go into retirement within the next five years (McQuade,

Sjoer, Fabian, Nascimento, & Schroeder, 2007), along with a 50% drop in the employment

29

rate of those aged 55 to 64 (Jouhette & Romans, 2006). Loomis (2006, p.47) also suggests

that by 2012, almost one in five workers will be fifty-five years old and older. In the

emerging countries, China is also facing a similar situation in that about 33% of the

workforce will be over the age of 50 within the next five to ten years (Hawser, 2008). Thus,

it is evident that an aging workforce is inevitable and the IT industry is expected to lose a

large number of experienced workers over a short period of time.

As an aging workforce will increasingly result in a lesser supply of skilled workers, it was

expected to significantly affect the IT industry starting in 2008 (Dychtwald, et al., 2006).

That is, the number of young skilled workers is insufficient to fill the vacant jobs that are created by the massive retirement of the baby boomer generation employees who are now

reaching retirement age (Dychtwarld, et al., 2006; Garmise, 2006). In addition, the

workforce growth rate of the age segment 35-44, which are the primary executive

development years, is actually declining (Dychtwarld, et al., 2006). This indicates that the

skills shortage is going to impact on a wider range of employment levels, which appears to

involve the bottom up to the management level in the IT industry.

From the point of view of workforce availability, it is a crisis that there is an insufficient

number of skilled workers on a variety of employment levels and more importantly,

companies tacit knowledge gained from experience could be lost (Dychtwarld, et al., 2006;

Garmise, 2006). For example, retired people are unable to successfully pass on their

knowledge and skills to the next generation of employees who replace them (Clarke, 2009;

McQuade, et al., 2007). The loss of retired people could be mainly associated with the loss

of an expert employee with knowledge of products and processes of the company; the loss

of customer and supplier contacts, relationships and established trust; the loss of

understanding of the informal personal networks; and many other losses including

30

knowledge of competitors and their products (McQuade et al., 2007, p.763). Consequently,

the loss of companies knowledge could have serious impacts on business development

and sustainable competitive advantage for IT companies in the global market.

Since there is a trend towards an aging workforce in the IT industry, IT companies must

respond to the demographic changes with a proper employment practice for the

replacement of retired baby boomer generation employees (Schramm & Burke, 2004;

Young, 2006). In addition, a multi-generational workforce is a result of the aging

population, and management practices must appeal to, and accommodate, the expanding

variety of workers needs and preferences (Dychtwald, et al., 2006; McVey & McVey,

2005). Therefore, three career cohorts, namely mature workers, mid-career workers and

young workers, have been created to enable effective management (Dychtwald, et al.,

2006).

The mature workers cohort refers to people who are 55 years old and older in the

workforce (Dychtwald, et al., 2006). This group of people mainly comprises the generation

of the baby boomers, who are attracted to a culture that values their experiences,

knowledge, skills and capabilities (Armstrong-Stassen, 2006; Dychtwald, Erickson, &

Morison, 2004; Dychtwald, et al., 2006). In addition, 70% of mature workers are willing to

engage in full-time or part-time work, as long as there is a better balance of work and life

than they experienced in their earlier working years (Loomis, 2006). This indicates that

mature workers can be effectively managed by increasing their autonomy and involvement

under a flexible retirement work policy and a mature worker-friendly organisation (Buyens,

Van Dijk, Dewilde, & De Vos, 2009; Claes & Heymans, 2008; Dychtwald, et al., 2006).

31

The mid-career workers cohort refers to people who are aged between 36 and 54 years old

in the workforce (Dychtwald, et al., 2006). This group of people spans two generations and

mainly comprises Generation Xers, who value family life the most, followed by

workplace flexibility and speed of career progression (Trower, 2008). In addition,

Generation Xers are marked by skepticism and self-reliance in the workplace (Trower,

2008). As this cohort has been working for a long period of time, they are highly exhausted

and are generally regarded as a sandwiched worker that has been squeezed by a

commitment to children and parents (Dychtwald et al., 2006). Therefore, it is suggested

that mid-career workers can be effectively managed by offering a wide variety of work

arrangements and benefits that enable work-life balance.

The young workers cohort refers to people who are under 35 years old in the workforce

(Dychtwald, et al., 2006). This group of people mainly comprises the generation of

Millennials (Generation Y or Net Generation), who value the freedom to make decisions,

opportunities to learn and grow, teamwork and enjoyment in the workplace (Dychtwald, et al., 2006). This cohort is particularly well-educated, independent, functional and diverse,

but less loyal to the organisation, and generally change jobs in less than three years (Dychtwald, et al., 2006). This indicates that job-hopping is a major issue for the management of young workers, so a focus on job involvement can be promoted to fulfil their desire for independence, learning and rapid growth (Dychtwald, et al., 2006; Garmise,

2006).

As an aging population has created a multi-generational workforce, IT companies must

respond to todays diverse workforce with proper HR policies and practices in order to

attract, retain and develop the new generation of diverse workers for the growth of

business (Dychtwald, et al., 2006; Martin, 2008; McVey & McVey, 2005). Therefore, it is

32

important to identify retention factors for different age groups of employees, as these can

help IT companies to effectively motivate and retain their different groups of software

development employees.

2.2.2 Software Development Employees

Software development employees are one group of knowledge workers, and their

productivities are key factors to the economic success of companies (Davenport, 2005;

Drucker, 2007; Garmise, 2006). This is because todays work content largely requires new

knowledge production and innovation of human capital, which is the quality output of their

ideas and productivities (Drucker, 2000; Garmise, 2006). In addition, software

development employees own the means of production which means that they carry

incremental knowledge in their brains and thus can be highly mobile and independent

(Drucker, 1998, 2006). This indicates that the ascent of knowledge work makes software

development employees more valuable and attractive to the organisation than they need

the organisation. In this respect, there is a challenge in that IT companies must find ways

to attract, develop and retain the software development employees, in order to sustain their

competitive advantage in the global competition.

The importance of software development employees and their knowledge is being

recognized by the new economy. This is because their knowledge is the only asset of the

company which cannot be easily replicated, and is a source of profit, skill and sustainable

competitive advantage (Drucker, 1993; Jones & Miller, 2007). For example, new entrants

can easily reproduce and clone the existing market products, but cannot easily transfer tacit

knowledge which is synthesized through learning and experience in the organisation

(Drucker, 1993; Garmise, 2006). Tacit knowledge is the expertise, experience and

capability of software development employees, integrated with process and company

33

memory, so it is always contextual and skillful (Abell & Oxbrow, 2001; Jones & Miller,

2007). Through the generation, dissemination, application, and reuse of tacit knowledge,

companies can create innovative ideas for continuous new product development and thus

sustain a competitive advantage (Garmise, 2006; Kreiner, 2002; Ng & Li, 2003).

The application of incremental knowledge and information has accelerated the innovation

process, which provides opportunities for companies to operate in new markets, to change

ways of working, and to deliver different products and services (Abell & Oxbrow, 2001;

Garmise, 2006). It is believed that only a continuous process of systematic innovation and

improvement can protect companies from the pressures of global competition (Drucker,

2007; Jones & Miller, 2007). Nelson and Winter (1982) have also argued that the

transformation of incremental knowledge into the daily basis of routine work can

effectively prevent damage from the impacts of poaching staff, reverse engineering or

industrial espionage. This indicates that the only secure form of competitive advantage for

companies is to actively embody tacit knowledge into the process of continuous

incremental innovation (Hammer, Leonard, & Davenport, 2004; Jones & Miller, 2007).

Consequently, the innovative use of tacit knowledge results in profit (Jones & Miller,

2007).

Since the global economy has shifted towards knowledge-intensive jobs, software development employees are a growing category of the workforce (Drucker, 2007;

Policastro, 2007). This group of employees is regarded as the most expensive type of

workers that organisations employ because they possess the most economic value of

incremental knowledge development (Drucker, 2007; Garmise, 2006). In addition, this

group of employees is highly educated and is capable of using knowledge, theory and

concepts rather than using physical force or manual skill (Policastro, 2007). It appears that

34

the productivity of software development employees is measured by the contributions of

performance in comparison to the productivity of manual workers which is measured by

the output of manufacturing products (Drucker, 2007). Consequently, software

development employees are viewed as assets of companies which need to be developed

and grown, whereas manual workers are viewed as a cost to companies which needs to be

controlled and reduced (Drucker, 2007).

In general, software development employees have a high degree of expertise, education, or

experience, and the primary purpose of their jobs involves the creation, distribution, application and reuse of knowledge (Davenport, 2005). In addition, software development

employees are responsible for sparking innovation and growth of an organisation by

investing in new products and services (Davenport, 2005; Drucker, 2007). However,

software development employees are critical to the success of organisations, their unique

characteristics of personality present challenges that HR managers have to deal with in the

workplace. That is, a high degree of autonomy and independence are two common

attributes of software development employees (Davenport, 2005; Drucker, 2007).

According to Drucker (2007), the work content of software development employees

naturally involves a high degree of autonomy, which imposes responsibility for their

productivity on their own management of personal development and growth. This

indicates that software development employees do not like work content that is highly

involved with specifying detailed steps and flow of knowledge-intensive processes

(Davenport, 2005). In fact, software development employees require a fair process in

decision-making, which can influence their commitments to the participation and

involvement of job tasks (Davenport, 2005). This is because software development employees are thinkers and they live in ways that use their cognitive ability to define

35

difficult problems and identify intelligent solutions (Bostock, 1996; Davenport, 2005;

Drucker, 1992). Indeed, software development employees are proud of their domain

knowledge and are desirous for recognition from others (Davenport, 2005).

As software development employees highly value their domain knowledge, they are

independent and reluctant to share it without rewards or guarantees of continued

employment (Davenport, 2005). This is a problem, in that IT companies could fail if

employees domain knowledge is not open to share with one another, as the success of

software development relies on the three key ingredients of domain knowledge, deadlines

and dialog (Mah, 2009). This indicates that collaboration and communication are also

essential parts of the productivity of software development employees (Bostock, 1996;

Mah, 2009). Rubens (2008) has stressed that the future economy is about knowledge and

relationships, because social networks can enable people to explore ideas, develop new

concepts and learn in ways that will be revolutionary. Therefore, the success of a business

is deemed to rely on the effective management of software development employees, in

which managers can motivate them to share their domain knowledge by giving them

autonomy of job design (Davenport, 2005; Mah, 2009).

2.3 Retention

Retention of software development employees is important to sustain a competitive

advantage for IT companies in todays global market (Drucker, 2007; Jones & Miller,

2007). Studies on the benefits of retaining software development employees have

significantly indicated that IT companies can gain a higher operating performance, higher

returns on assets and higher returns on capital employed (Cascio, 2002). In contrast, the

loss of software development employees is expensive and may thus be detrimental to IT

companies (Glebbeck & Bax, 2004; Khatri, Chong, & Budhwar, 2001; Reiche, 2009). The

36

effect of losing software development employees has significantly impacted on the

performance of IT companies from the two dimensions of tangible and intangible

perspectives (Frank, Finnegan, & Taylor, 2004; Tanova & Holtom, 2008).

The tangible perspective includes the administrative expenses of recruiting, selecting and

training and development of new staff, whereas the intangible perspective includes the loss

of employee morale, social capital and company memory (Morrell, Load-Clarke, &

Wilkinson, 2004). It is noted that the total costs of replacing an employee amounts to

150% to 175% of the salary costs of the departing IT staff (Nelson & Todd, 2004). The

intangible loss of knowledge, experience, and know-how of companies is more significant

than the tangible costs of replacing staff because it could lower productivity and

performance of companies and thus result in loss of profits (Frank, et al., 2004; Tanova &

Holtom, 2008). Therefore, IT companies must understand the serious impacts of the loss of

software development employees and find a way to retain them. This is the focus of this

study.

2.3.1 Job Embeddedness Theory Job embeddedness is a new construct of retention theory that explains why people stay in,

or leave an organisation using non-work and non-attitudinal factors (Mitchell, Holtom, &

Lee, 2001). The concept of non-work factors is related to personal and family activities off

the job, as a conflict between work life and family role could lead employees to consider leaving an organisation (Mitchell, Holtom, & Lee, 2001). The concept of non-attitudinal

factors is related to personal attachment to their co-workers, network groups and leisure

activities both on and off the job (Mitchell, Holtom, & Lee, 2001). It is noted that leaving an organisation requires sacrifice or giving up these connections and other benefits that

exist at the current organisation (Mitchell, Holtom, & Lee, 2001). Therefore, job

37

embeddedness is a broad constellation of influence on employees decisions to stay or

leave an organisation (Mitchell, Holtom, & Lee, 2001; Mitchell, Holtom, Lee, & Erez,

2001).

The importance of job embeddedness helps organisations to understand the scenario that even satisfied employees could still leave an organisation for their broad personal interests

(e.g., family role at different career stages). This theory is different from the traditional

turnover theories of work-related attitudes, which only focus on job satisfaction and organisational commitment (Holtom & Inderrieden, 2006; Holtom & O'Neill, 2004; Lee,

Mitchell, Sablynski, Burton, & Holtom, 2004). It is noted that attitudinal constructs such

as job satisfaction only play a relatively small role in employee retention and leaving (Griffeth, Hom, & Gaertner, 2000; Hom & Griffeth, 1995). Mallol, Holtom, and Lee (2007)

and Tanova and Holtom (2008) also show that job embeddedness has more influence on employees decisions to stay rather than their attitudes towards work or actual

opportunities in the labour market.

The foundation of job embeddedness theory is developed from embedded figures theories and field theory (Lewin, 1951). Embedded figures are those in which people are immersed

in their field and connected through many links within their backgrounds and environment

(Mitchell, Holtom, Lee, et al., 2001). This views an individual as a part of a complex web

of relationships and attachments (Mitchell, Holtom, Lee, et al., 2001). The more extensive

the web is, the stronger the influence the web will have on an individual who is

considering making changes. This is because that change will affect many other features of

the individuals life (Mitchell, Holtom, Lee, et al., 2001; Tanova & Holtom, 2008).

Consequently, this keeps employees from leaving an organisation as they are entrenched in

their jobs and webs and become part of the surroundings (Mitchell, Holtom, Lee, et al.,

38

2001).

According to Mitchell, et al. (2001), job embeddedness consists of three dimensions: (1) links to other people or activities, (2) self-perception of fit with the job, organisation and community, and (3) perceived sacrifices associated with changing jobs. These aspects are important both on (organisation) and off (community) the job. Thus, employees decisions to stay can be explained using six dimensions, which are links, fit, and sacrifice

associated with an individuals organisation and with his or her community. As the focus of

this study is the retention of software development employees within an organisation, the

emphasis of organisational dimension is discussed and provided.

Links to the organisation refer to relationships that an employee has with co-workers,

superiors and mentors within an organisation. Mitchell, et al. (2001) stress that many

organisations now use strategic teams to increase employees network bonds, and use a

mentor system to increase the attachment of their female employees. They further stress

that the relationships could extend to cover an employee and his or her family in social,

psychological and financial areas that embed them (Mitchell, et al., 2001). Other studies

also show that people are more likely to be loyal to fellow and network peers (Amaram,

2005; Guidice, Heames, & Wang, 2009). Thus, it is deemed that the more links between an

employee and the web, the more he or she is bound to the job and the organisation.

Fit with the organisation refers to an employees perceived compatibility or comfort with

an organisation (Holtom & Inderrieden, 2006). This involves a self-perception of fit that is

especially important during the early stages of adjustment to a job (Mitchell, et al., 2001). It is suggested that an employees values, career goals and plans for the future must fit with

the organisational culture and the demands of the immediate job (e.g., job knowledge,

39

skills and abilities) (Holtom & Inderrieden, 2006). This is because employees will

continue to assess how their work contents have matched their career goals. Some scholars

show that an organisation can retain employees by managing their career aspirations and

helping them to find a way to meet their long-term career goals (Harman, Lee, Mitchell,

Felps, & Owens, 2007; Holtom, Mitchell, & Lee, 2006). Thus, it is deemed that the better

the organisational fit with the career goal of an employee, the more likely he or she is to

stay.

Sacrifice associated with leaving the organisation refers to the perceived costs of material

or psychological benefits that may be forfeited by leaving a job (Holtom, et al., 2006). These benefits could involve profit sharing, stock options, career advancement

opportunities, flexible work arrangements, child care support, colleagues, interesting

projects or perks. Some of these benefits are significant to employees who have families, especially females with small children at home (Holtom, et al., 2006; Mitchell, et al.,

2001). Thus, the more an employee gives up when leaving, the more difficult it is to sever

employment with the organisation (Holtom & Inderrieden, 2006; Shaw, Delery, Jenkins, &

Gutpa, 1998).

Prior studies have shown that financial factors have the highest correlation with the

sacrifice dimension of job embeddedness when employees are considering quitting a job (Allen, Shore, & Griffeth, 2003; Bergiel, Nguyen, Clenney, & Taylor,