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FACTORS AFFECTING THE RETENTION OF IT PROFESSIONALS IN VIETNAM SOFTWARE INDUSTRY

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FACTORS AFFECTING THE RETENTION OF IT PROFESSIONALS IN VIETNAM SOFTWARE INDUSTRY
MANAGING CULTURAL DIVERSITY
Assignment –HCMC Vietnam April 2013

FACTORS AFFECTING THE RETENTION OF IT PROFESSIONALS IN VIETNAM SOFTWARE INDUSTRY
Introduction/short description/background
When the economy is gradually recovering from the downturn in the beginning of the year 2013, the IT businesses face a massive turnover in their human resource.
More than two years immersed in the economic crisis has forced many IT companies to implement the tight policy to eliminate operation costs as layoffs, narrowing incentive program, involuntary turnover. .. Increasingly heavy workload, pressure, and stress rest on the shoulder of the retained staffs. The one who stay also believe that they are being mistreated and underestimate what they have contributed to the company.
When the economy is gradually recovering in line with the global market movement, companies in IT sector began to expand its operations. Giant software companies in Vietnam such as FPT, TMA Solutions, CSC, GCS, GHP Far East, ISB, and Capgemini Vietnam have all reported high growth. The quick recovery of the domestic software sector has resulted in the huge need for IT professionals.
In this context, the opportunity for "job hopping" increasing, bringing a new wave of "Changing Company" in best employee in the company. The concentration on retention program is now a priority tasks for HR managers. They will have to pay more attention to prevent a shortage of manpower, brain drain and must be retained by the employee of his best. This will be a challenging task because in the past, the layoffs, pay cuts that so many people feel they have been abused and it is time to seek out new and better opportunities.
There is a "tsunami" going to land in the IT sector as the most talented employees will depart quietly since they are offered aggressively from other companies.
Significance – why important
Turnover is distinguished between voluntary and involuntary turnover. Voluntary turnover is when employees choose to leave the organization for better job, satisfaction or whatever reason. Involuntary is defined as employer decision caused by layoffs (P-E Corporate Services, 2001). Haig R. Nalbantian & Anne Szostak (2004) discussed the relationship between 2 types of turnover as “The increase in involuntary turnover then provoked higher levels of voluntary turnover, perhaps because the remaining employees began to worry about their own job security.” This thesis is only deal with voluntary turnover.
There are two types of turnover consequences, functional and dysfunctional turnover. Functional turnover is referred when the talented employee stay within the organization while the poor ones decide to leave. This results in a change, renewal, a kind of revolution coming up with new ideal, new opportunity for the retainers. On contrast, dysfunctional turnover is when the highly- performed employees depart, causing the huge loss and negative impact on the organization.
The literature mainly discussed the dysfunctional turnover and through this, highlighting the significance of employee retention tasks in human resource management as well as the organization strategy. Fitz-enz and Phillips (1998:107) argue that “… retention of key employees is probably the biggest challenge in human asset management today”. The IT employee retention is necessary for business success (MacDonald et al., 2000). One of sources of competitive advantage for organization is the attempts to retain experienced and talented employees (Cheng and Brown, 1998). The companies which losing their highly-skilled employees have to face the understaffed and limit their ability to remain competitive advantage (Rappaport, Bancroft, & Okum, 2003). The employee retention in organization provides the opportunity for continuous improvement on quality standards (Motwani et al., 1994). Hiring and retaining qualified IT professionals for the organization are the most difficult tasks for IT managers but it is more important to retain due to the huge cost spending on orientation and training for new comers. According to Muhammad Irshad (2011), organizations not only fail to retain the employees themselves, but also the clients being loyal to them, their knowledge and projects. Organizations often underestimate turnover costs because its hidden nature such as loss of organizational memory conceals its true magnitude (Corporate Leadership Council, 1998a). It is difficult to estimate and measure the total impact of employee turnover in term of finance, especially as the loss of intellectual capital (Fitz-enz & Phillips, 1998). Companies tend to invest in mechanisms to keep experienced IT staffs longer rather than carry the high cost of replacing them (Moore, 2000).
Problem statement
In first attempts to keep the best performers, leading software companies review their incentive program and focus on increasing job satisfaction. However, there is no luck. The turnover rate maintains at the high level. IT professionals in literature research are considered as a kind of “knowledge workers” – a term first used by Drucker (1974). Knowledge workers are defined as employees who have a deep background in education and experience and who "think for a living."
It seems that there is, generally, an obvious link between employee satisfaction and their intention to leave. Lam et al. (2001) proved that low job satisfaction can lead to employees departing the organization. However, the link is complex in case of knowledge worker. Some exploratory researches showed that the IT workers leaving their organization while they are still satisfactory with their current job. This can be explained that they have particular features which are relatively different from other workers in industry sectors. Their career is developed through self-oriented learning or further education instead of internal career. According to Despres and Hilltrop (1995), they maintain and succeed their own competency primarily based on the ability to learn and more likely to be loyal to fellow professionals, contact networks and peers, rather than to their employers. The weak link between employee satisfaction and intention to leave was also mentioned by Corporate Leadership Council (1999). The council explained this phenomenon is due to: the increasing perfection of job market or the decrease in switching cost.
The mobility of knowledge workers is one of their key characteristics. Its consequences cause the major concern in organization. They have a set of skills offering to a range of clients and have portfolio careers (Templer and Cawsey, 1999). In “the war for talent” (Tulgan, 2001), the job mobility of knowledge worker is increasing (Chambers et al., 1998). According to Armstrong & Murlis (1998), the long term commitment to an organization is not expected any more by both sides. The mobility and the shift in their loyalty are blamed for the wave of IT professional’s departure. But is it a true answer? Why does the turnover rate still stand at high level in the sector? How is correlation between the job satisfaction, organizational commitment and IT worker’s intention to leave? Is it possible to predict their proposed length of service from job satisfaction, job search activity or how committed they are to the organization? What is the underlying factors affecting the retention?
Research Objective
As mentioned above, employee retention is not a new topic. There is much research over fifty years in the world conducted on what the key determinants of employee retention are. However, most studies are extremely focused on knowledge worker retention in general and carried out in developed countries where the transition of the new economy-knowledge economy is obvious. The application of these research models in Vietnam context is relatively restricted. It is still a niche while the topic is extremely important for IT sectors in Vietnam in term of application.
Thus, the aim of this research is to
1. Examine the relationship between Job Satisfaction/Organizational Commitment/Job search Activity and Turnover Intention of IT professional.
2. Determine what the main retention factors are that are particularly important to IT professionals in Vietnam where starts revealing some first signs of a progress shifting to a knowledge economy.
Theoretical framework
1. Intention to leave:
Instead of the real turnover rate, this research will use the “intention to leave” variable to measure the employee retention. According to Corporate Leadership Council (1999) there is a strong correlation between intention to depart and actual turnover rate.
2. Job satisfaction:
Job satisfaction is defined as:
[...] the feelings or a general attitude of the employees in relation with their jobs and the job components such as the working environment, working conditions, equitable rewards, and communication with the colleagues. (Kim et al., 2005)
Spector (1997) defined job satisfaction as “the extent to which people like (satisfaction) or dislike (dissatisfaction) their jobs”. According to Locke (1969) , “ job satisfaction is the pleasurable emotional state resulting from the appraisal of one’s job as achieving or facilitating one’s job values” and job dissatisfaction is “the unpleasurable emotional state resulting from the appraisal of one’s job as frustrating or blocking the attainment of one’s values”.
The well-known two factors theory from Herzberg (1959) classified two types of human needs In workplace: dissatisfiers hygiene (company policy, supervision, relationship with boss, work conditions, salary, relationship with peers …) and satisfiers motivation (achievement, recognition, advancement, growth …). The theory stated that the hygiene factors are necessary for employee not to be dissatisfied while the motivation factors are needed to motivate them for better performance.
In this research, Job satisfaction measures were adapted from Schriecheim and Tsui (1980). It uses six item form an index that describes overall job satisfaction. The scale includes single questions to assess the degree of satisfaction with the nature of work, supervision, peers, total pay, promotional opportunities, and the job in general. Each of the items was measured on a on a 5-point Liked- scale where I = strongly disagree and 5 = strongly agree.
1. How satisfied are you with the nature of the work you perform?
2. How satisfied are you with the person who supervises you—your organizational superior?
3. How satisfied arc you with your relations with others in the organization with whom you work—your co-workers or peers?
4. How satisfied are you with the pay you receive for your job?
5. How satisfied are you with the opportunities which exist in this organization for advancement or promotion?
6. Considering everything, how satisfied are you with your current job situation?
Corporate Leadership Council (1999) showed that there are increasingly satisfied employees leaving their current organization better opportunity.
From this view, the following hypothesis is developed:
H1. There is a positive relationship between job satisfaction and intention to leave of IT professionals in Vietnam.
3. Job search activity
This variable is used to determine whether and how often they are looking for a new job. Lee at al. (1999) showed that intention to quit is highly correlated to job search activity and employee turnover.
From this view, the following hypothesis is developed:
H2. There is a positive relationship between job search activity and intention to leave of IT professionals in Vietnam.
4. Committed to organization
This variable is to measure how committed an IT professional is to he or she current organization. Cappelli (2000) showed an important characteristic of knowledge worker which is their mobility. They are only committed to the current work, not a long term loyalty to the organization. Even though they are totally committed to the organization, this doesn’t mean they will stay much longer.
From this view, the following hypothesis is developed:
H3. There is a strong relationship between organizational commitment and intention to leave of IT professionals in Vietnam.
5. Level of mobility
This variable is used to measure how easy an IT professional can find an equivalent/better opportunity in job market. This is an indicator for their perceived level of mobility, adaptability and confidence. According to Pearson (1991), knowledge workers are “opportunists” who change employer offering better opportunity without plan.
From this view, the following hypothesis is developed:
H4. There is a positive correlation between perceive level of mobility with turnover.
6. Factors affecting retention
Retention is considered as the organizational ability to retain its talented employees. Due to the massive loss of turnover, retention is increasingly becoming a HR strategy in organization rather than a statistics numbers.
Some factors/variables affecting the worker retention emerge from past research are: EMPLOYEE PERSONAL VALUE MATCH WITH JOB (Lofquist and Dawis, 1969; Edward, 1999), COMPENSATION (Willis, 2000; Williams and Dreher, 1992), REWARDS (Watson Wyatt, 1999; Tower Perrin, 2003; Mercer, 2003), TRAINING AND CAREER DEVELOPMENT (Tulgan, 2001; Lauri, Benson & Cheney, 1996); PROMOTION OPPORTUNITIES (Greller, 2006); SUPERVISOR SUPPORT (Greenhaus, 1994); WORK ENVIRONMENT (Zeytinoglu & Denton, 2005; Ramlall,2003); FAMILY SUPPORT AND FLEX TIME WORK CULTURE (Gaan, 2008; Allen, 2001); ORGANIZATIONAL JUSTICE (Mowday and Colwell, 2003) DISTRIBUTIVE JUSTICE (Adams, 1965); PROCEDURAL JUSTICE (Lind & Tyler, 1988).
These variables from literature review, coupled with the ones explored through pilot study conducting in this thesis are used to ask interviewee rate how significant each one was that they consider to their intention to depart or stay with their current organization.
Research questions
To achieve the research objective, the major research questions should be answered:
Research Question 1: To what extent is the Job Satisfaction correlated to Turnover Intention?
Research Question 2: To what extent is Organizational Commitment correlated to Turnover Intention?
Research Question 3: To what extent is the Perceived Level of Mobility correlated to Turnover Intention?
Research Question 4: To what extent is the Job Satisfaction, Organizational Commitment, Perceived Level of Mobility correlated to Turnover Intention?
Research Question 5: What are the factors affecting the retention of IT employee in Vietnam?
Research design
1. Methodology
The first stage of the research is a pilot study. A qualitative interview will be used to generate the independent variable in the second stage. 15-30 IT professionals who have recently changed their employer will be asked for reasons why they departed and whether any attempt from organization could retain them. The interview would be unstructured and flexible in order to explore new information.
The result from this stage will be used to modify/adjust the number of variables from literature review.
The second stage is a quantitative study in which data will be collected in a structured questionnaire.
2. Questionnaire construction
Section 1 of the questionnaire includes demographic questions about respondents such as ages, gender; job title … Section 2 which focuses on the intention to leave asks for how long they are in current firm and how long they think they will stay in. The next Section contains the Job Satisfaction Index while the section 4 including questions asked for organization commitment, Job mobility and job search activity. The final section is to ask set of retention variables from first study to discover how important each item they are regarded when deciding to leave the organization.
3. Population & Sampling
The population in this research is defined as IT workers in South of Vietnam.
The exploratory sample is based on judgment method which is commonly used in academic research. In quantitative study, a sample of over 300 respondents will be collected with the random method. The sample size may have to be adjusted in official research if there are more variables added to the models from exploratory study.
Assumptions
The basis assumption in the thesis is that the intention to leave is correlated to the actual turnover rate. If this assumption is not hold, the conclusion in the thesis would be biased.
Limitations
This thesis has following limitations:
- The sample would be collected in several leading IT companies which consuming large human resource in Quang Trung Software City and estimated for Ho Chi Minh City population.
- Due to the budget and time restrictions, convince sampling (nonstatistical) would be used as the sampling method, which would reduce the reliability.

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Bibliography: Adams, J. S., 1965. Inequity in social exchange. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 2, pp. 267-299). New York: Academic Press. Allen TD. (2001). Family-Supportive Work Environments: The Role of Organizational Perceptions. Journal of Vocational Behavior. 58(3):414–435. Armstrong, M. & Murlis, H. (1998). Reward management. London: Biddles Ltd. Cappelli, P. (2000). A market driven approach to retaining talent. Harvard Business Review, January-February, 103-111. Cheng, A. & Brown, A. (1998). HRM strategies and labour turnover in the hotel industry: a comparative study of Australia and Singapore. International Journal of Human Resource Management, Vol. 9, pp. 136-54. Corporate Leadership Council (1998a) Crafting a “compelling offer”. Preliminary results from primary research into the career decisions of high value employees. Washington DC: The Corporate Advisory Board. Corporate Leadership Council (1999). Salient findings on career decisions of high value employees. Washington DC: The Corporate Advisory Board. Chambers, E.G., Foulon, M., Handfield-Jones, H., Hankin, S.M. & Michaels, E.G.III (1998). The war for talent. The McKinsey Quarterly, (3), 44-57. Despres, C. and Hiltrop, J.M. (1995). Human resource management in the knowledge age: current practice and perspectives on the future. Employee Relations, Vol. 17 No. 1, pp. 9-23. Drucker, P.F. (1974). Management. London: Heinemann. Fitz-enz, J. & Phillips, J.J. (1998). A new vision for human resources. Menlo Park: Crisp Management Library. Gaan N. Stress, (2008), Social Support, Job Attitudes and Job Outcome Across Gender. The Icfai University Journal of Organizational Behavior.;52:34-44. Greenhaus, J.H. & Callanan, G.A. (1994). Career Management. The Dryden Press, Fort Worth, Texas. Haig R. Nalbantian & Anne Szostak (2004). “How fleet bank fought employee flight. Harvard business review. Herzberg, F., Mausner, B. and Snyderman, B. (1959). The Motivation to Work, Wiley, New York, NY. Kim, W.G., Leong, J.K. and Lee, Y. (2005). Effect of service orientation on job satisfaction, organizational commitment, and intention of leaving in a casual dining chain restaurant. Hospitality Management, Vol. 24, pp. 171-93 Lam, T., Zhang, H Lauri, B., Benson, G and Cheney, S. (1996). The top ten trends. In training and development.11:28-42. Lee, T.W., Mitchell, T.R., Holtom, B.C., McDaniel, L.S. & Hill, J.W. (1999). The unfolding model of voluntary turnover: A replication and extension. Academy of Management Journal, 42(4), 450-462. Lind, Ellen A. and Tom R. Tyler (1988), The Social Psychology of Procedural Justice, New York, NY: Plenum. Locke, E.A. (1969). What is job satisfaction? Organizational Behavior and Human Performance, Vol. 4, pp. 309-36. Lofquist, L.H. and Dawis, R.V. (1969). Adjustment to work. John Wiley and Sons, London. pp. 85 -92. MacDonald, C.J.,Gabriel, M.A. et al. (2000), “Factors influencing adult learning in technology based firms”, The Journal of Management Development, Vol. 19 No. 3, pp. 220-40. Mak, B. & Sockel, H. (1999), “A confirmatory factor analysis of IS employee motivation and retention”, Information and Man agreement, Vol. 38, pp. 265-76. Mercer Report, (2003). Mercer study raises red flags for employer pay and benefits plans (findings of the 2002 people at work survey). In human resource department management report. pp. 8 -15. Moore, J.E. (2000), “One’ road to turnover: an examination of work exhaustion in technology professionals”, MIS Quarterly, Vol. 24 No. 1, pp. 141-68. Motwani,J.G., Frahm, Mi. et al. (1994), “Quality training: the key to quality improvement”, Training for Quality, Vol. 2 No. 2, pp. 7-12. Hulin, C.L., Roznowsi, M. & Hachiya, D. (1985). Alternative opportunities and withdrawal decisions: Empirical and theoretical discrepancies and an integration. Psychological Bulletin, 97, 233-250. Pearson, R. (1991). The human resource. Berkshire: McGraw Hill. P-E Corporate Services (2001). Human resources practitioners handbook. Johannesburg: P-E Corporate Services. Ramlall, S. (2003). Organizational Application Managing Employee Retention as a Strategy for Increasing Organizational Competitiveness, Applied H.R.M. Research, 8(2), 63 -72. Rappaport, A., Bancroft, E., & Okum, L. (2003). The aging workforce raises new talent management issues for employers. Journal of Organizational Excellence, 23, 55-66. Spector, P. (1997). Job Satisfaction, Sage Publications, Thousand Oaks, CA. Templer, A.J. & Cawsey, T.F. (1999). Rethinking career development in the era of portfolio careers. Career Development International, 4(2), 70-76. Tower Perrin, (2003). Rewards: the not-so-secret ingredient for managing talent. (Retention). HR focus.80 (1):3-10. Tulgan, B. (2001). Winning the talent wars. New York: Norton & Company. Watson, Wyatt. (1999). Work USA 2000: Employee commitment and the bottom line. Bethesda, MD: Watson Wyatt. pp: 43-58. Williams, M. and Dreher, G. (1992). Compensation systems attributes and applicant pool characteristics. In Academy of Management Journal. 435:571-95. Willis, C. (2000). Go for your goals. Working woman. pp. 6-7.

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