Addressing the challenge of employee attrition and its impact on client relationships: the examples of Indian Born-Global Firms
Kumar, Nishant PhD Candidate, School of Business, Stockholm University, Sweden
Email: [email protected] Abstract Faced with a small and undeveloped domestic market, Indian knowledge intensive service firms focused primarily on the international markets and within few years of their inception, they become globally active. But they are also suffering from high employee attrition, threatening their strategic efforts to service their clients globally. Given the importance of maintaining long-term relationships with customers, a high attrition rate would disrupt the course of projects jointly conducted with clients resulting in delay, customer dissatisfaction, and deterioration in customer relationship. Personnel attrition creates risk and uncertainty for the customers. Hence the question: What are Indian Born-Global firms doing to confront this adversity? The present study aims to explore the strategies deployed by Indian Born-Global firms in order to address the challenges of employee attrition, reaffirming their ability to accomplish their commitment and client projects satisfactorily. In so doing we suggest a strategy based on relationship transparency as a way of minimizing customers’ concern about attrition. Relationship transparency is assumed to be a crucial factor for sustaining long-term relationships with customers. In illustrating our theoretical assumption, we draw on material derived from five case studies of Indian Born-Global firms, which are crippled by personnel attrition. The results are expected to contribute to the literature on HR management, in general, and employee attrition management, in particular. Key words: Employee attrition management, client relationships management, Born- global, Indian firm’s internationalization,
Proceedings of the 28th Annual Euro-Asia Management Studies Association Conference
“The Changing Competitive Landscape in Euro-Asia Business Relations” School of Business, Economics and Law, University of Gothenburg
Gothenburg, Sweden 23rd - 26th November, 2011
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1. Introduction
The rise of the global Indian knowledge intensive service (KIS) firms has recently attracted
the attention of several researchers. Faced with a small and undeveloped domestic
knowledge based services market, Indian KIS firms focused primarily on the international
market; and within few years of their inception, they become globally active. But this growth
has not been free from challenges. According to a study undertaken by Assocham Business
Barometer (ABB) entitled ‘Attrition Problem in a Growing Economy’ covering 137 leading
human resource (HR) heads, Indian service sector is facing the problem of high attrition. In
the first half of 2010 about 30% of Indian employees churned to other employers. Average
attrition rate in the service sector has edged up to 35 per cent, while in IT and IT services
sector the attrition rate amounts to 24 per cent. About 65 per cent of the respondents in this
survey said that this high attrition rate affects the morale of remaining employees, disrupting
long-term planning and customer projects. Indian Born-Global firms (Kim et al. 2010; Oviatt
& MacDougall, 1994; Knight and Cavusgil, 2004) are also suffering from employee attrition,
threatening their strategic efforts to service their clients globally. While an extensive body of
research has examined several issues related to various human resource (HR) practices
(Budhwar & Bhatnagar, 2009; Budhwar, Luthar, et al., 2006), such as employee exit
(Mellahi, Budhwar, & Li, 2010), changing work values (Mellahi & Guermat, 2004), and
employee’s intention to quit (Krishnana & singh, 2010) in Indian companies, little research
has paid attention to the strategies these firms are adopting in an effort to deal with this
alarming attrition rate1 (Nasscom, 2010; Tymon Jr., et al 2010). Little is known about how
Born-Global Indian firms are overcoming these difficulties, which is a pre-requisite for their
continued growth and expansion. Given the importance of maintaining long-term
relationships with customers (Kim and et al. 2010), a high attrition rate would disrupt the
1 Attrition rates can be calculated using a simple formula:
Attrition =(No. of employees who left in the year / average employees in the year) x 100
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course of projects jointly conducted with clients resulting in delay, customer dissatisfaction,
and a deterioration in customer relationship (Krishnan & Singh, 2010). Personnel attrition
creates risk and uncertainty for the customers. Hence the question: What are Indian Born-
Global firms doing to confront this adversity? This study aims to provide the beginning of
answer to this question by focusing on five Indian Born-Global firms, examining the various
strategies they are adopting in order to deal with the problem of personnel attrition.
The present study aims to explore the strategies deployed by Indian Born-Global firms in
order to address the challenges of employee attrition, reaffirming their ability to accomplish
their commitment and client projects satisfactorily. In so doing we suggest a strategy based
on relationship transparency as a way of minimizing customers’ concern about attrition.
Relationship transparency is assumed to be a crucial factor for sustaining long-term
relationships with customers. In illustrating our theoretical assumption, we draw on material
derived from five case studies of Indian Born-Global firms, which are crippled by personnel
attrition. The results are expected to contribute to the literature on talent management, in
general, and employee attrition management, in particular.
The remainder of the study is organized as follows. In the next section, a literature
review on the attrition problem is presented. In particular, we concentrate on how it affects
the Born-Global firm’s relationships with their clients and jeopardize their survival and
growth. Based on extant theoretical understandings a conceptual framework is developed.
Next, in Section 3, we present our methodology, followed by a host of the empirical insights
of the study. Finally, a discussion of the findings is provided along with our conclusions,
implications and limitations of the study.
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2. Background
As prominent businesses expand their operations globally to satisfy investors’ desires for
growth and superior performance, the demand for support services in these operations, such
as enterprise resource planning (ERP), decision support system (DSS) development, IT and
business process alignment, research and analysis of business data, increases (Hitt, et al.
2006; Miles, 2005). Also known as Knowledge-intensive services (KIS), they encompass a
wide range of sectors, such as computer services, research and development (R&D) services,
legal, accountancy and management services, architectural, engineering and technical
services, advertising and market research (Miles, 2005). They often follow their clients into
international markets to cater for their growing needs (Hitt et al. 2006; Bell, 1995). In this
way knowledge intensive service firms, especially IT service firms, differ from industrial
firms in the sense that their services are not merely technical products but also are highly
customized and focused on meeting the business goal of the clients (Buckley et al. 1992;
Eriksson, Johanson, Majkgård, and Sharma, 1997; Ethiraj, Kale, Krishnan, & Singh, 2005).
By providing them with specialized services, they are playing a crucial role in the growth of
their client firms, which often consist of multinational enterprises (MNEs).
In order to service and meet the needs of their clients in the international market
place, knowledge intensive service firms must have the appropriate resources (Hitt et al.
2009). In particular, skilled human resources in knowledge services, such as software
developers, have been emphasized in the literature (Gopal et al. 2002; Ethiraj et al. 2007; Hitt
et al. 2009). On this count, knowledge intensive firms create value through their selection,
development, and use of human capital (Hitt et al. 2001; Lepak & Snell, 1999). If firms move
to international markets without adequate human capital, they may not be able to provide the
level of service that their clients expect (Hitt et al. 2009), which is their raison d’être in the
international market (Lowendahl, 2000; Hitt et al. 2009). This is also because clients choose
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firms with the strongest human capital to service their needs, especially the complex needs
that they have in international markets (Hitt et al. 209).
Apart from nurturing a reliable human capital, building an effective working
relationship with clients is one of the most important requirements of KIS firms (Copper et al.
2000). Not only do KIS firms use their international expertise to satisfy their client’s needs,
but they need to build long term relationships. The continuity of a relationship reflects the
quality of the relationships between client and the service provider (Saparito, et al. 2004). As
the parties to a relationship interact over time, they build understanding of each other through
the sharing of information, thereby creating shared meanings, values and trust-based
relationship (Dyer and Singh, 1998). Such type of relational capability is generally assumed
to be composed of three components, trust, information sharing, and joint problem solving
(Uzzi, 1997). These three components are interrelated in that trust often leads to significant
information sharing, which in turn produces knowledge about a partner, leading to more joint
problem solving (Yli-Renko, Autio, & Tontti, 2002). The trust and information sharing
components are usually affected by the volume of exchanges and the length of time a
relationship has existed between parties (Dyer and Singh, 1998). Hence the success of firms
in an international market hinges on these two skills: human capital and relational capital.
Human capital and relational capital are independent constructs, but they also have
complementary qualities (Hitt et al. 2009). Intimate relationships with customers enhance the
value of human capital for international expansion in that human capital allows firms to
exploit their relational capital more effectively (Burt, 1997). As human capital grows with the
knowledge acquired from the client relationships, the firm builds capabilities for expanding
its existing international operations and entering other international markets successfully (Hitt
et al. 2009). Furthermore, relationships with large corporate clients can provide legitimacy to
the expertise embodied in a firm’s human capital (Bapuji & Crossan, 2005). Such legitimacy
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helps firms obtain new clients in the international markets they are serving. But relationships
with clients can be at risk if the human capital is continuously depleting. Gopal, et al. (2003)
posit that unavailability of trained personnel to work is a risk that adversely affects task
uncertainty, and thus may have negative impact on the relationship with the clients (Krishnan
and Singh, 2010). For instance, clients may be concerned about the project getting delayed
due to the untimely quitting of key employees. Other concerns may be related to the loss of
knowledge departing employees. For the service firm the concerns may be of selection and
training of new employees, project cost escalation, knowledge loss, and the loss of client.
Client and service firms are risk-adverse; and, therefore, each party would prefer an
arrangement that would shield each party from the risks inherent in the contractual
agreement.
Why knowledge service employees quit jobs has been a subject of research for quite
some time. Longenecker and Scazzero (2003) conducted a study (see table) on 211 IT
managers and found a number of factors most likely to cause attrition among IT managers
(See the table 1).
Factors most likely to cause IT Managers to
quit their job
Impacts when turnover is high among IT
Managers
Lack of resources/staff
Greater difficulty in achieving performance
goals
A better job opportunity/salary Communication breakdowns
A bad boss Loss of IT focus and direction
Too much stress/unrealistic performance
expectations
An increase in unresolved problems
Lack of advancement opportunities Morale/motivational problems among staff
A negative organizational culture/feeling
unappreciated
Increased workload for others/stress
Lack of teamwork and cooperation Loss of teamwork and cooperation
Professional stagnation/lack of development Additional turnover among staff
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An inability to take time off/get away from
work
Chaos/disorganization
Politics and infighting
Table 1: Source: Longenecker and Scazzero (2003) survey of 211 IT managers
Studies on Indian IT firms show that three factors account for high employee turnover:
escalation of salaries, gap between demand and supply of talent, and change in attitudes
towards traditional career structures. First, in an effort to retain talented staff, Indian IT firms
have increased their employees’ salaries by as much as 30 percent a year. This increases the
cost to suppliers and ultimately has an impact on prices that clients have to pay (Mitchell et
al., 2004). Second, a key structural factor contributing to high turnover rates is the significant
gap between demand and supply for IT sector employees (Budhwar, Luthar, et al., 2006). In
such a context firms start a war for talent and talent poaching becomes common practice
(Collings & Mellahi, 2009). Third, scholars have recently reported that the current excessive,
predominantly professional, employee turnover in India is due, at least in part, to the change
in attitudes towards careers among the professional class in India (Lacity, Iyer, &
Rudramuniyaiah, 2007; Rasquinha & Hussain, 2007). In the past, in order to plan for the
future, Indian workers were willing to devote themselves to a career even if it meant less
financial rewards or little job satisfaction. However, the current attitude in the labor market is
short-term oriented which leads to job hopping behaviors and high rates of job mobility
(Budhwar, Varma, et al., 2006; Malhotra, Budhwar, & Prowse, 2007).
Firms pay a significant price when talented employees voluntarily leave (Krishnan &
Singh, 2010). This talent drain results in costly sourcing and development of new talent, but
often hurts more in terms of productivity losses and inability to grow. Companies facing the
problem of attrition may lose knowledge or expertise, experience a decrease in customer
service, and suffer poor communication and coordination. Replacements need to be recruited,
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selected, trained and become socially integrated before they make substantial contributions.
In the context of Indian knowledge Born-Global firms, employee attrition poses a significant
threat because their survival and growth heavily depend on strong human capital and building
intimate relationship with customers (Nasscom, 2010; Kim et al. 2010). In other terms, their
front line employees (site engineers, account managers) play a central role in service delivery
and building relationship with clients, such as in customer requirement analysis, establishing
relationship routines for day to day interactions, identifying the key personnel who will be
contributing in the different project development phases, and so forth. When these personnel
leave the organization, they depart with critical knowledge of business processes and systems
that are essential to maintaining a competitive advantage (Parker, & Skitmore, 2005). In this
way, attrition of employees, particularly of those employed on client side projects may reduce
trust, commitment and satisfaction level of the relationships with the customer, resulting in
disruption and eventually the end of the relationships with the customers.
In such a scenario, failure to systematically address retention issues is likely to have a
negative long-term impact on firm’s performance. However, there is no simple solution for
the problem, as research findings seem to show that merely improving salaries and benefits
will not solve the severe problems of attrition (Demirbag et al., 2011). In these terms, it is
important to know that what firms can do in order to minimize or moderate the impact of
employee attrition.
In what follows, we adopt and integrate ideas from prior research on global HRM,
talent management, and motivation theories (for reviews see Ambrose & Kulik, 1999;
Mowday, Porter, & Steers, 1982; Pinder, 1998; Steers, Mowday, & Shapiro, 2004), on the
one hand, and on customer relationship management, on the other. Our main claim is that
firms need to adopt a ‘relationship transparency’ approach toward both their employees and
their clients.
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3. Conceptual framework
The concept of ‘transparency’ is a relatively new and underexplored concept in organization
science and management studies. ‘Relationship transparency’ can be defined as an
individual’s subjective perception of being informed about the relevant actions and properties
of the other party in the interaction (Eggert & Helm, 2003). In this case, transparency
involves open exchange of information and knowledge with the parties concerned. The
function of transparency is to decrease the degree of perceived uncertainty through exchange
of information (Cox D., 1967; Eggert, & Hel, 2003). Given the limited information
processing and storing abilities of individuals, gaining in transparency will be a matter of
information quality rather than quantity. In this way, relationship transparency is a potential
source of customer-perceived value and satisfaction in business markets (Eggert, Helm,
2003). Within a transparent business relationship, customers feel well informed about the actions
of their partners, strengthening the bounds of trust between them, and reducing that partner’s degree
of uncertainty. For instance, sharing with one’s partner information about the difficulty of recruiting
the right skilful personnel may foster transparency, increase both partners’ awareness of the problem
and the risks associated with it. In a sense, both partners come to share the problem jointly. The
problem is not anymore one party’s problem, but both are implicated.
Not only do firms aim for transparency vis-à-vis customers, but also vis-a-vis their
employees. With increasing demands for talent and because of shortage of individuals, this is
becoming more critical for organizations to understand and take into account in their strategic
planning and utilization of human capital (Beechler & Woodward, 2009). Employees
preferences for and expectations from work evolve over time. When the organization
succeeds, the individual should also feel that he or she has succeeded. An organization that
fails to recognize and to meet those changing needs over time will underutilize its talents. So,
if employees are aware of their current situation and can get a sense of their future situation
in the organization, they will have less anxiety towards their career as they can make the
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appropriate decision. Such a kind of employee engagement can be achieved through
communication with employees. Kress (2005) suggests that clear, consistent and honest
communication is an important management tool for employee engagement. Thoughtful
communication strategies that encourage employee engagement by keeping the workforce
energized, focused and productive, are critical to long-term organizational success. In
addition, strategic and continuous communication lends credibility to the organization’s
leadership; by contrast, lack of communication or poorly communicated information can lead
to distrust, dissatisfaction, skepticism, cynicism and unwanted turnover. To revitalize
employee morale and support of the organization’s objectives, HR can foster an environment
for engagement by developing a targeted, proactive strategic communication plan (Kress,
2005). The communication strategy can provide focus on organizational goals and determine
methods of communication and information points for different audiences (e.g., employees
versus media). Key points for HR to consider are: 1) communicate from the top down to
build employee confidence and buy-in; 2) involve employees whenever possible, such as
through focus groups; 3) communicate and explain all aspects of change, negative and
positive; 4) personalize communications to address the question “what’s in it for me?”; and 5)
track results and set milestones to evaluate the objectives of the communication plan.
Another important part of the transparency mechanism is the codification of
knowledge. Zolla and winter (2002) contemplate that codification of knowledge is an
important and relatively underemphasized element in the organization capability building.
The literature on knowledge management emphasize on codification and posits that
codification facilitates the diffusion of existing knowledge (Zander and Kogut, 1995;
Nonaka, 1994) as well as the coordination and implementation of complex activities. In
knowledge intensive service firm, such as IT services, individuals (eg. Software engineers,
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system analysts, programmers) codify their understanding of the problem such as client’s
requirements, software codes or client’s process models, and store in the organizations
knowledge repositories. Codification therefore is potentially important as a supporting
mechanism for the entire knowledge evolution process not just for the transfer of knowledge
within and between organizations, but also for eliminating the risk of knowledge loss arising
from the attrition of employees. In these terms, we assume that codification of knowledge
will prevent the loss of knowledge resulting from the attrition of employees and encourage
transparency between the client firm and the service firm. This will also have positive
influence on the risk perception of the client resulting from the attrition of employees of the
service firm.
A conceptual model of the employee and customer engagement based on transparency
is proposed in figure 1. It is assumed that this will have positive impact on the retention of
customers, employee engagement, and retention of customer knowledge
Transparency
towards
Clients
Transparancy
towards
Employees
Born-Global
firm’s
strategy
Retention of
Customer,
Employee,
Knowledge,
Employee’s continuation
on the project
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4. Research method
4.1 Research design
The nature of our research objective provides a ground to opt for a case study research
approach. We chose a multiple case study approach (Eisenhardt, 1989; Yin, 1994) consistent
with the exploratory and interpretive nature of analyses. We studied five knowledge intensive
service firms from India. The selection of case firms was done from the Nasscom2’s list of
high performing IT and IT based service firms in India. An overview of the selected firms is
presented below at the end of this section. The research focuses on how these firms have been
able to develop and sustain relationships with their clients over the period of time in spite of
the fact that the IT industry is suffering from the problem high attrition. These companies
were established in different segment of the knowledge intensive service industry. Choosing
firms that were from the same industry and suffering from the same level of impact of
attrition made it possible to go deeper in elaborating the causes, and the responsive strategies
of these firms. However they were also different in many ways, such as difference of clients,
client relationships durations, total number of employees and yearly revenue generation. Such
types of variations in the case studies are encouraged and are supposed to be useful in good
theory generation (Eisenhardt, 1989).
4.2 Date collection and analysis
When we started our analyses, we had already collected an extensive amount of pre-study
material on the five knowledge intensive service firms. We had access to internal analyses
reports project reports, and customer feedbacks, generated during their different phases of
evolution. In order to collect the primary evidence, we carried out multiple rounds of
interviews. The first round was conducted in June/July 2009. At that stage, we interviewed
2 www.nasscon.in
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senior level managers, allowing them to tell his firm's story freely. These interviews lasted
between four and one hours. Later on we expanded the interviews to comprise a total of 38
individuals who had been involved as project managers, human resource managers,
employees (engineers) and customers (who were the core of concern) among the five
companies. We had the opportunity to interview engineers at offshore (Bengaluru,
Hyderabad,) and onshore (Stockholm, Brussels) sites. In the first round of interviews, notes
were taken which were used to draft interview reports. These reports were then further sent
back to the interviewees of the respective case companies, allowing them to comment on the
correctness of my interpretations. The second round of interviews was carried out in
January/March 2010. These interviews were semi-structured and done over the telephone and
Skype. The interviewees received a set of open-ended questions that probed the underlying
reasoning in the different stages of their firm's evolution, challenging them to elaborate on the
reasons for the high attrition and their significance to the firm’s international operations. At
this follow-up stage our own interpretations were confirmed by the follow-up interviews in
June 2011, we relied on the publicly available material and insights gained in the interviews
with the management teams of the other firms. At this stage, we also complemented our
interviews with a more structured text-based analysis of the customer experience cases
reported by the five case firms in order to provide further validation of our interpretations.
An overview of the people interviewed in each of the four case firms is presented in table-II.
Firm 1: People involved in interview
Location of interview (Bangalore,
Stockholm, Brussels)
Country manager (1), service delivery head
(1), HR manager (1), team leader (1),
software engineer (3), customer (2), total 9
people
Firm 2: People involved in interview
Location of interview (Bangalore)
Country manager (1), service delivery head
(1), HR manager (1), team leader (1),
software engineer (3), customer (2), total 9
people
Firm 3: People involved in interview Country manager (1), service delivery head
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Location of interview (Bangalore)
(1), HR manager (1), team leader (1),
software engineer (3), customer (2), total 9
people
Firm 4: People involved in interview
Location of interview (Bangalore,
Stockholm)
Country manager (1), service delivery head
(1), HR manager (1), team leader (1),
software engineer (3), customer (2), total 9
people
Firm 5: People involved in interview
Location of interview (Bangalore)
HR manager (1), Engineer (1), total 2 people
First we analyzed the data by developing case histories (Brown and Eisenhardt, 1997).
On the basis of the data collected through interviews, and feature articles about the five firms,
we wrote case histories of each firm, describing their attrition handling strategies and
techniques over time. In the next stage, we analyzed the various reports appeared in the press
releases and website updates. These included news about wage increase, new recruitment
drives, new business alliances, sales successes, organizational restructuring, acquisitions, and
divestments. Altogether, we selected 33 press releases covering the most active parts of the
firms' histories. We coded these press releases according to management's reasoning provided
in the press releases and the operational capability areas.
The third stage of our analysis focused on uncovering the interrelationships between
attrition and relationships with clients. As the different interviewees explained their views of
the company's policies and mechanisms, it was possible to start drawing inferences between
the reasoning by management, the subsequent actions of the firm, and the resulting
relationship capabilities. The timeline and sequence of events helped the interviewees
pinpoint the time at which a certain event had occurred, making it easier for them to explain
how and why the company had acted. The information provided in the first round of
interviews enabled me to develop understanding on how management's emphasis shifted
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from one issue to another, depending on the area which was perceived as the next most
important or the next bottleneck.
5. Highlights of the five cases
Case 1: Firm 1 is an international IT consulting and implementation company that delivers
business solutions through global software development. It was started in 1999 by 10 industry
professionals who came from three different nations and had already had a successful career
behind. The firm is structured into two business units that focus on software development –
R&D Services and IT Services. By 2010 the company had revenue of $ 272.3 million USD
and strength of 9012 employees. Firm 1’s regional headquarters (co-headquarters) are in
Bangalore, London, and Warren (New Jersey), has three development centers in India, and 15
offices spread across Asia, Europe and the United States, in New Delhi, San Jose, Texas,
Washington, Schaumburg, McLean, Denver, Mumbai, Chennai, Frankfurt, Cologne,
Singapore, Tokyo, Sharjah, Miami, Sydney and Sweden.
Case 2: Firm 2 is a leading global provider of IT and BPO services, focusing on delivering
business results from technology solutions and specializing in Business Intelligence, Business
Analytics, Enterprise Applications, HR-IT and Legacy Modernization. Founded in 1990,
today firm 2 maintains seven developments centers - four in India and one each in Germany,
USA and Mexico, and offices in North America, Europe and Asia Pacific, and employs
around 5200 workers globally. By 2010 firm 1’s revenue had reached US$ 52.12 million.
Case 3: Firm 3 is a leading software services exporter, was founded in 1987. Today the firm
has more than 52,000 employees and it competes with local global players such as IBM and
Accenture for knowledge outsourcing deals. Case firm 3’s global clients include General
Electric, Nestle, Qantas Airways, and Fujitsu. It specializes in business software, and offers
back-office outsourcing and consulting services. It’s network spans in 55 countries, across 6
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continents, has development centers in India, USA, UK, UAE, Canada, Hungary, Singapore,
Malaysia, China, Japan and Australia and serve over 558 global companies, including over
163 Fortune 500 corporations.
Case 4: Firm 4 was formed in the year 1981, by seven engineers, and registered in India, with
an initial capital of Rs. 10,000 (approx. US$ 250 in current market value). Today it is a
NASDAQ listed global consulting and IT Services Company with more than 104,000
employees. From a capital of US$ 250, it has grown to become a US$ 4 billion company with
a market capitalization of approximately US$ 14 billion. It has offices in 22 countries and
development centers in India, China, Australia, UK, Canada and Japan.
Case 5: Firm 5 was founded in 2001 as an Engineering Design Services company. It began
its operations by initially offering enterprise solutions for Engineering Design Services and
since then has grown into an IT services organization. The firm’s quality and service
standards have established a regular client base over the years. In 2004, it diversified into
offshore Information Technology Consultancy Services and has expanded its IT services to
the clients based in the US and Europe. In 2006, it was recognized by the Software
Technology Park of India (STPI) with an award for Fastest Growing SME in Karnataka.
Subsequently it received the award for the Fastest Growing SME by the Government of
Karnataka's STPI and Department of IT & BT in 2009. Firm also received the prestigious
STPI Award for the third time for "High Growth" in 2009-2010.
6. Managing talent and customer relationship in Indian global Knowledge-intensive
service firms
Among all the case firms there is general acceptance that skilled professionals don’t have a
very long association period and leave organization early, not necessarily for the financial
and private reasons, but also due to some non-financial reasons. This was articulated by the
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HR manager of a case firm as followed: “We have understood that skilled professional would
not want to work in the same project or in the same role for a very long time, that’s around
18 to 24 months, roughly around this time they want a change,”. The reasons why employees
want to leave the project or the firm has been identified by these firms and these are common
reasons across all the case firms.
(i) Change in the project: for instance a person is working on a project or a particular
application for an extended period, and then he wants to move on to do something else. If
the organization fails to recognize this urge for change then the employee starts
searching for something else, as he does not feel himself much satisfied with his current
state.
(ii) Change in the role: lot of time it happens that people feel they are stuck in a situation
and nobody is telling them when they can leave, so only way to get out of the situation is
to leave the company. This is again a non-financial motive for leaving the organization
and this only depicts the lack of clarity from the organization side about the future
progression of the employee. Employees want to be updated about the future scenario.
(iii) Desire for career growth: Like any other professional technologically skilled
professionals also have desire for growth in their career. For instance, one respondent
who is working as a software developer for the case firm beta explains it as follows “I
am a developer, and I want to be a senior developer, want to grow eventually become a
project manager, if I am working on the same thing over a long period, I will not have
the chance to grow and become that. So after a while if I don’t see this career
progression happening I would definitely consider moving to another organization
where I can get the chance to work in a higher position. And this is a common feeling
across all the developers”.
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(iv) Change in customer: Some employees even want a change in the customer. They feel
less satisfied while working with a particular customer; it may happen due to some kind
of experience they got while working with that particular client. It is quite possible
because the interaction takes place between the individuals from both sides and
differences may arise. Some employees feel the customer is less cooperative and the
behavior is unreasonable, in that case his continuation is not yielding any favorable
outcome for his firm and for himself in terms of job satisfaction. In such a scenario he
expects the firm to recognize this problem and move him to another job. When the
employee does not see any change happening, then he develops the tendency to leave
the organization.
(v) Lack of interest in a domain or technological platform: Many of the skilled
professionals are always looking for something exiting in their job. Sometimes it
happens that they don’t like the domain or the technology they are working in and want
to shift to some other domain or technology. And when the firm fails to recognize this
urge for change, employee can leave the organization.
(vi) Desire to work in cutting edge technology only: Someone always wants to work on
cutting edge technology. If the application they are working on is an older platform or
version, and the new version has come to the market, then they have desire to gain
experience on that new technology. Particularly when they see that some other people
are getting experience through work on that, they also want to work on that.
(vii) Other personal reasons also exist, that firms can’t avoid, for instance money, family
reasons etc. these things can’t be avoided, and attrition due to these reasons are bound
to happen and cannot be controlled.
After identifying the reasons and analyzing those reasons, firms sensed that the first six
reasons can be addressed. One of the respondent from a service firm said “these are
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something we found we could address, i.e. longevity of a person in a particular project or
assignment or role.” But keeping the understanding limited to the firm is not beneficial for
the relationship with the customer. Customers have also concerns about this issue and the
perceived risk is high when people are leaving projects on regular basis. Thus firms have
developed a practice to keep their customers informed about the state of affair. One of the
service delivery head said “We say to our customer openly and clearly, this is the problem,
one of the things I would like to avoid”. These firms consider open and transparent
communication with their customer very important for the long term relationship. As
explained by the program director of one case firm: “what we do, we tell the customer, people
are going to leave, that is something you cannot stop, now we have to put things to minimize
the impact, we have also analyzed why people leave”. This gives a better understanding of
the situation to the customer and helps in reducing the level of uncertainty associated with the
problem of attrition. On further investigation it was found that the firms have developed a
transparent mechanism that helps them to maintain the trust level with their customer. The
respondents came forward with a number of points explaining how they tackle the situation.
One of the respondent said “I tell my customers that I would give visibility of person for a
certain period, that means, nobody is going to leave in panic, it happens few times that
people leave suddenly, so we give visibility of the people to our customers, that 18 to 24
months people will not leave”. When asked to a customer, a large auto manufacturer in
Sweden, about the problem of the attrition and the adopted practice of open communication,
the respondent answered “Yes, it is a big concern for us, no matter how much the service firm
is confident about its capabilities we have to make our own calculations about the risks, and
open discussion about the situation and sharing of the information certainly helps in
reducing the risk associated with the attrition”. Another respondent from a service delivery
firm commented as followed “We tell this to our customer, we want to be upfront and
20
transparent to both you and our people, so we will put a rotation plan, which is published”
The rotation plan was a unique feature of the transparency with the customers in case firm
alpha and it works as follows. Suppose if there are four people working on a project, each
person knows roughly during a quarter his role will change, and roughly in six moth one
person will be leaving, this way what firms try to convince the customer that people leaving
is inevitable, but here they are controlling when the person will leave, and they are also
controlling the number of people that would leave at any point of time. Even though this
rotation plan does not stop attrition but it has certainly an impact on the trust and the
uncertainty avoidance among customers. Other case firms have also adopted a similar
practice. One of the respondents from case firm alpha articulated it as follows “if there have
been four people working full time continuously for two years on a project and all of then
leave at the end of the two year, it’s a big risk for the customer as well as for us, in terms of
loss of knowledge, I can’t replace the knowledge of the four people through whatsoever
process we have, so we make sure that at any point of time only one person is leaving in
every six month, this is one thing where we have convinced our customer that it is good for
both of us, if we have planned rotation, through this we control that”. This type of open and
transparent rotation plan shared with the customer does have an impact on the perceived risk
of the customer, for instance in terms of risk of knowledge loss. This is explained by one of
the respondent as followed “say out of four people only one person is leaving in six month
and other three are already experienced and still on the project so the risk of losing
knowledge on that assignment is low, this is how we minimize the impact in an ongoing
assignment for a project”.
But transparency is not limited to the relationship with the customers but is practiced
with the employees as well. The program director of a case firm 1 explains it as follows “If
there is an agreed rotation plan, we have rarely people leaving outside rotation, we have
21
minimized the leaving… lot of people were leaving because they did not have visibility, here
they have visibility.” Another thing firms want to show their customer that they will try to
retain the person within the account to work on the some other project, or in other role within
the same account, to give them different experience. Project manager of case firm 2
commented on this issue “we find another assignment within the account, this ensures that at
least the client specific knowledge is not going outside the account, so when they get into
another project within the account, their ability to learn is even quicker because they know
the landscape, so there is no need to teach them again”. The delivery head of case firm 3
explained it as followed “What we do we publish people turnover out of the account and
compare that with the organization people turnover, we have substantially maintained that
figure lower than the overall organization”. Case firm 4 shares a similar viewpoint on the
transparency with customers on the managing attrition. The project manager of case firm 4
commented “because the customer trusts us and our work, we have mutually agreed rotation
plan and the knowledge transfer process in place, we controlled it efficiently. We all agree
that Knowledge should largely remain within the account”. To retain the employee in the
same account, case firm 4 has adopted the practice to allow its engineers to find another
project within the same account, as explained by the project leader of case firm 4 “we ask our
people, if capable you can take another role within the same assignment with the same
account, which is also one of the things they expect”. Another important feature of the
transparency in relationship with employees is that these firms keep their employees
informed about their job progression; this is to control any deviation from the plan. A
software engineer confirmed the effects of such attrition management plan and transparency
in the process by stating that “instead of being a team member if I am becoming team leader
in a couple of years I am progressing them I don’t mind working on the same application”.
The above findings show that the strategies adopted by these firms are working in the terms
22
of risk minimization and customer trust; furthermore average employee engagement time has
remained stable, in spite of the attrition taking place at high rate.
7. Knowledge retention mechanism
The attrition has direct impact on the knowledge of the firm, so the firm 1 has developed
practices to control the loss of such knowledge resulting from attrition. The impact of
attrition varies from one type of work to another. Over the years firm 1 has learned that
developmental project life is generally small, as described by the delivery manager of firm 1,
“when we talk of a large project we are talking of 6 month to 1 year, typically we have lot
more people working on projects in comparison to maintenance, so the risk is low on projects
in comparison to maintenance”. The difference between project work and maintenance work
is that the development projects are aimed at developing a new application or service, while
the maintenance projects are aimed at maintaining the existing applications on daily basis to
support the smooth functioning of the organization. In the terms of risk of knowledge loss,
the impact of attrition is low in the development projects as the project life is short and also
the volume of tacit knowledge is much low in comparison to the maintenance work. As
maintenance projects run for a very long period and the amount tacit knowledge involved is
high, and that’s why importance of knowledge documentation is more important in
maintenance. If somebodies role is changing, or leaving the organization, what needs to be
done is to transfer the knowledge that is the documentation of knowledge. In the firm 1 there
is a knowledge transfer document for each assignment, it includes knowledge of the
application, the business that it related to, the technical part of the application, design coding
etc., They call it application handbook, which has all the aspect of the application assignment,
the process used in the assignment, for instance how is configuration management done, and
it is different for different assignments. And so is the tools and processes used, the functional
23
aspect of the technology, business knowledge, and technical knowledge, everything is
documented in the knowledge transfer document, it is very well stated and all these
documents are kept in common repository accessible to both customer and us, and we use this
for effective knowledge transfer. Apart from the application handbook, there is ongoing flow
of people working on the projects. The country manager of firm 1 further explained about it
“we typically have an overlap of ongoing and incoming people. That overlap period is also
different for different role, it could be anything between two to eight weeks for a system
analyst, if developer is going the period is different, similarly if the project manager is going
then the period is different”. Such overlap of people also facilitates the transfer of
knowledge. As every new member joining the project gets the briefing by the current
members before they leave the project.
In case firm 2, whatever is possible, explicit knowledge is documented, firms
understand that there will be tacit knowledge that they can’t really document, they try and do
at least part of it, and also through the overlap of ongoing and incoming person. Case firm 2
has also linked people attrition management with the knowledge management and this is
implemented through the rotation mechanism of the people on projects.
Case firm 3 is also facing the problem of high employee turnover; it has some serious
consequences on the knowledge building process of the firm. High turnover leads to
knowledge loss between onsite and remote provider sites. The firm 3 realized that, it needed
to ensure that the knowledge transferred and captured by the remote teams would be retained
even if the project member leaves the organization. The aim was to make the individual
knowledge as the organizational resource and accessible to all. The firm developed a
knowledge retention technique, which is based on succession plan that combines both the
process and the people dimensions. Project managers’ identify and select individuals who
could be their successor in case the project manager leaves the project or the organization.
24
This process ensures that the successors are trained to replace the manager and are prepared
for future role. Successors are also made knowledgeable about the clients for whom the
project manager was responsible and the ongoing projects. Therefore when they take over the
charge they require little or no time in starting working with the clients or the projects.
Case firm 4 has learned from its experience that no two clients or two projects within
the same client are alike, but most share certain characteristics. And, while no two people or
project teams approach a solution in the same way, most can benefit from the firm’s previous
experience, translated into consistent approaches that improve productivity and quality and
set the stage for successful solutions delivery. The codification of knowledge has positively
affected on this. Fir 4 also has a succession plan that ensures the continuation of the project
without causing any delay. Firm five does recognize that high attrition is a problem, but it has
not been affected that much as the other four firms has been affected. It is still in the process
of developing a formal succession plan.
The findings from the five cases are summarized in Table III. As from the table it can
be seen that all the four firms have established comprehensive and transparent attrition
management, customer relationship management and knowledge retention program.
Firms 1 Firm 2 Firm 3 Firm 4 Firm 5
Transparency
with customer
Appointing an
account
manager
responsible for
the client or
customer
Yes Yes Yes Yes No
Sharing the list
of employees
who will be
working on the
project
Yes Yes Yes Yes Yes
25
Sharing the
information
such as skills,
experience of
the employees
to be working
on the project
Yes Yes Yes Yes Yes
Informing about
people who will
be leaving the
project in the
coming month
Yes Yes Yes Yes No
But it keep
record of
those will be
leaving
Sharing the
plan for job
replacement if
someone leaves
the firm
Yes Yes Yes Yes No
But it has
Sharing the
knowledge
retention plan
Yes Yes Yes Yes No
But it does
have
Transparency
with employees
Encouraging
employees to
take part in
skills
development
training
programs,
Yes
Yes
Yes
Yes
Yes
Allowing
employees to
upgrade their
skills,
Yes Yes Yes Yes Yes
Informing
employees the
importance of
the client for
the firms
business,
Yes Yes Yes Yes Yes
Employee
career
progression
path presented,
Yes Yes Yes Yes Yes
26
Employee
complaints
mechanism,
Yes Yes Yes Yes Yes
Opportunity to
choose different
project within
the same
account / client,
Yes Yes Yes Yes No
But
indirectly
Explicit
recognition of
the contribution
of the
employee, and
reward for that,
Yes Yes Yes Yes yes
Relocation plan
if the
employees
wants a change
in the project,
or customer,
Yes Yes Yes Yes No
But done at
individual
level
Knowledge
retention
Codification of
knowledge
Yes Yes Yes Yes
yes
Employee
succession plan
Yes Yes Yes Yes
No
Transfer of
knowledge
during the
overlap of
employee
movement
Yes Yes Yes Yes No
Implicitly
happens
Common
depository of
knowledge
Yes Yes Yes Yes No
But
customer has
access
Sharing of
knowledge,
related to the
project with
customers
Yes Yes Yes Yes Yes
Transparency in
the overall
knowledge
retention plan
with the
customer
Yes Yes Yes Yes No
But
somehow
27
8. Conclusions
The aim of this study was to explore the strategies deployed by Indian Born-Global firms in
order to address the challenges of high employee attrition, reaffirming their ability to
accomplish their commitment and client projects satisfactorily. Based on the five case
studies, it is suggested that transparency in relationships with customers and employees plays
a significant role in this process. A transparency based approach to manage relationships
leads to reduction in uncertainties associated with attrition, such as delays, loss of client
knowledge, and training of new employees. Recently the research on Born-global firms has
started gaining interest in the successful sustenance of Born-Globals and their ability to
continue growing beyond their initial internationalization phase (Kumar and Yakhlef, 2011).
In line with earlier studies (Kim et al. 2010; Knight and Servais, 2004), the findings of this
study tends to emphasize the importance of developing long-term relationships with
customers, but at the same time it sheds light on the ability to successfully manage
relationships under the volatile situation resulting from employee attrition, that puts Indian
Born-Global firms in an advantageous position (Barney, 1991). Consistent with the views of
Knight and Cavusgil, (2004), Ruokonen and Saarenketo, (2009), and Zhou et al. (2010), the
findings suggest that relationship with customers is collaborative in nature, as defined by
Prahalad and Ramaswami, (2004), and customers also play active role in developing the
intimate relationships and the transfer of intimate knowledge, based on trust and
transparency. This is mainly because of the high cost associated with the replacement of the
knowledge that the partners have developed of each other’s and the mutual trust and
commitment the partners invest in. Both parties understand this risk and cost of replacement
and thus are careful in the selection of service providers (in case of customer) and customers
(in case of service provider), and once selected and engaged in a relationship, they develop
ways to avoid any bad situation happening that might have an impact on the relationships.
28
Attrition is one such problem that has significant impact on the relationships and they have to
live with it, as it is result of the macro-economic environment changes. Therefore, firms
make sure through transparent mechanisms that trust is not eroded due to the uncertainties
arising from untimely leaving of employees.
In summary, earlier studies have indicated that intimate knowledge of customers and
good relationship are critical to market success; the findings of this study provide additional
insights into the factors underlying customer intimacy. In this sense, the current study
answers Knight and Servais’ (2004) call to understand the relationship between customer
focus and the success of Born-Globals, and how customer intimate knowledge is translated in
superior performance and the sustenance of the relationships. At the same time it reveals how
Indian firms manage the problem of attrition and control the loss of the customer knowledge.
This study sheds more light on the nature of problem resulting from attrition of knowledge
workers (engineers) and its underlying implications on the relationships with customers.
9. Limitations and managerial implications
This study like any study, suffers from some limitations. It is based on five case firms all
from single service industry with its own peculiar characteristics. However, due care has been
taken in selecting the cases, as it is selected from a list of 25 high performing IT firms from
India, and these are representative cases of the Indian IT industry, as they shares a number of
common characteristics such as early internationalization, global expansion, long client
relationships, engaged in IT based knowledge services, a major part of the revenue generating
from sales aboard and from the same clients etc. while it also differs in terms of client base,
area of expertise, number of employees, and years of existence. Thus the findings can be
generalized to a certain degree across the Indian IT services industry, but still a large scale
survey would possibly yield a better generalizable result. In spite of these and other
limitations, we believe this study provides some unique and insightful data into the problem
29
of attrition and its impact on intimate customer relationships in knowledge intensive-services
industry, and makes an attempt to uncover the micro-foundations of customer-oriented and
employee oriented strategies and how they are affected the relationships. We hope the spirit
of this paper in advocating the importance of contextually grounded studies of a Born-Global
firm’s customer orientation and employee orientation will spur further research interest along
these lines. Thus, preliminary though the findings may be, they can be taken as a springboard
for future investigation.
This study has some managerial implications as well, as managers can develop
relationships handling strategies based on the findings of this study. It is clearly evident from
this study that transparency helps controlling the unexpected movement of employees and in
reducing the shock to the clients. The codification helps in retaining the valuable customer
knowledge and thus makes it less dependent on the employees and immune to the volatility
of employees.
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