CHAPTER 2

LITERATURE REVIEW

INTRODUCTION

No research study is complete and justified unless it is focused around certain

theories, hypothetical ideas and empirical findings. So also this research study started

with a review of the conceptual theories and empirical evidences for a detailed

understanding of employee loyalty as a research topic of interest.

A comprehensive review the literature on employee loyalty offered very few

studies linked specifically to the keyword employee loyalty. Most of these methods,

concepts, theories, approaches and findings closely overlap with the concept of

organizational commitment as they sometimes considered as synonyms in the field of

management, psychology, organizational behavior and business ethics. Loyalty is a

term most widely used in the field of organizational Behavior, business administration

and management, whereas the commitment is most commonly used in the field of

Psychology. Hence, for this research study literature on both loyalty and commitment

is referenced carefully and cautiously.

2.1 THE CONCEPT OF EMPLOYEE LOYATY

Traditionally, employee loyalty implied ability to remain in the organization

for a long term or all through ones work tenure. Loyalty was a thought that would

prompt an employee to remain focused and committed to the organizations for what

its vision and values are. These loyal and dependable employees always chose the

organization's interests and were willing to make personal sacrifices to a certain

extent.There are various definitions for employee loyalty and each of them address

loyalty in a different manner.

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 Mowday, Porter & Steers (1982) defined loyalty as productivity that exceeds

normal expectations, i.e., goes past the call of duty.

Solomon (1992) defined employee loyalty as A willingness to remain with

the organization.

(Silvestro, 2002) defined employee loyalty as a measure of the amount of time

one works for the company.

J. Meyer and N. Allen (1997) stated organizational loyalty as a conditional

drive for personal identification and involvement in a particular organization. These

loyal employees tend to decline the job offers, and accept that their relationship with

the organization is the best alternative they have chosen.This way loyal employees

are indispensable assets to the organization as their loyalty to the organization helps

in better interaction with external and internal customers and they are able to deliver

better services to maximize the profits of their organization (Michlitsch, et al, 2000).

From the above definitions, it can be presumed that employee loyalty is the

psychological attachment of employees to their employer. This kind of loyalty is

evident from the sentiments, disposition, positive conduct and actions of employees.

In the past, trustworthiness and loyalty of the employees were expected as an

exchange of the long term benefits like job security, annuity, retirement and lifetime

employment. But in recent times, the scenario is not the same due to drastic changes

in the economy as well as organizational dynamics and employee loyalty cannot be

best understood only with reference to the tenure with the employer. This is best

justified in the research outcome of Payscale discussed in the first chapter of this

thesis. According to Phaneuf (2013), employee loyalty cannot be simply measured by

the amount of time, but also on a lot of other factors that an employee commits while

26
on the job. It is the extent to which employees recognize themselves with the

organizations work ethics, objectives of the organization and contribute to the

corporate performance. Thus the definition and the concept of employee loyalty has

undergone a major shift in the theory and practice of employee management in

todays business environment.

From the modern organization perspective, employee loyalty can be defined as

long-lasting, dependable, trustworthy relationship that an employee holds by acting as

brand ambassador of the organization while working with it.

2.2. IMPORTANCE OF EMPLOYEE LOYALTY

The famous quote by Napoleon Hill (1883 -1970) in his book Think and

Grow Rich published in 1937 says Lack of loyalty is one of the major causes of

failure in every walk of life. This is true and could be applied to businesses and even

more to organizations of today largely driven by employees. The absence or little

loyalty on either side of employer and employee can result in critical failure of the

systems and processes within the organization resulting in an exodus of talent thereby

crippling the operational efficiency of businesses.

Renowned Loyalty experts Keiningham, Aksoy( 2009) assert that the long

term success of the company is largely dependent on the quality and loyalty of its

employees.They give an insight on the statistics related to steady decline in the

employee loyalty levels based on a comprehensive global examination.On an average,

an organization looses fifty percent of its workforce within four years and loses fifty

percent of its customers within five years.The traditional conviction of life time

employment does not apply to the current generation of employees and this way job

hopping has become a norm.

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 Organizations in their golden reign and good times of growth may not give

careful consideration on aspects of employee loyalty. Then again, when the business

environment gets testing and when employees perceive unfavorable work conditions

within the system and their intentions to quit gets stronger. This is the time employees

venture out in search of opportunities resulting in voluntary turnover. This triggers an

alarm to organizations and they try to address the issues at the onset of a problem.

An effort of this kind may not be as fruitful in changing the magnitude of the problem

in the loyalty levels. These problems have been identified by researchers in the

academic fields to pursue research studies related to employee loyalty and

commitment in the different regions of the globe. The subsequent sections of this

chapter discuss the various theories and empirical findings that have the most

significance for a developing an appropriate theoretical framework for this study.

2.3. REFERENCE THEORIES LINKED TO EMPLOYEE LOYALTY AND

ITS CONSTRUCTS

A review of literature traced many management theories spinning around

loyalty, yet for the current study those theories that best supports this research study

has been considered relevant and has been incorporated. Much of the empirical

findings concerning to employee loyalty are intensely influenced by Allen and

Meyers Three Component Model of organizational commitment and job

Characteristics theory

2.3.1 Three Component Model of Organizational Commitment

The three-component model developed Allen and Meyer (1990). According to

this model, commitment is of three types.

a. Affective Commitment: It is the emotional attachment to the organization.

Employees infer satisfaction from their work, their peers, and their work

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 surroundings are strong of that fulfillment. Employees who have a high affective

commitment are those who will go past the obligation at hand for the benefit of

the organization. Likewise affective commitment is alluded in the recent

literature to as engagement and it is this type of commitment that is measured

most often by organizations.

b. Continuance Commitment: It is the cost associated with leaving the

organization.

c. Normative Commitment: It is the moral obligation of an employee to remain in

the organization. Employees see the organization to be on their side and inspires

a feeling of shared commitment in which both the organization and the employee

feel an awareness of other's expectations of one another. Employees believe they

are involved in a reasonable financial exchange in which they benefit from the

relationship. These act as temptations to enter and stay in the organization.

Based on the three component model of organizational commitment, employee

loyalty can be best understood as a function of affective commitment.

2.3.2 Job Characteristics Theory: This is the most widely studied for its relevance

to job characteristics. According to Hackman and Oldhams (1975) job

characteristics theory, there are five important factors that keep employees' job more

satisfying. They are skill variety, task significance, task identity, autonomy and

feedback. According to this theory, job or the task itself is the key to employee

motivation. Thus, by offering challenges and variety in the tasks, an employees

motivation levels can enhance and adds more meaningfulness to the work. It is

therefore important to note that in a job design phase, these factors need to form a

right amalgam to receive increased performance.

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2.4. EMPIRICAL STUDIES ON EMPLOYEE LOYALTY

In the present research, employee loyalty is viewed as employees being

committed to the organization and have a positive feeling about the job. This means

to say that even if they have not put long years of service with their current

organization, they are dedicated to adding value and enhancing the image of the

organization through positive work behaviors and actions. However, in the course of

time, even if employees choose to quit the organizations due personal emergencies,

they still continue to endorse the same positive feeling of the organization. Chen et

al., (2002) & Alvesson (2000) argued that loyal employees willingly put the needs

and interest of their employer to a level higher than giving priority to their desires and

interests. Loyal employees are not attracted to any sort of financial motivators

(Reichheld, 1996) that prompts them to quit the company. They likewise uphold the

image of the company and are less likely to complain or resist changes in the

organization (Walz and Niehoff, 2000).

Raju and Srivastava (1994) elaborated that organizational commitment as a

factor that promotes the attachment of the individual to the organization. Employees

are said to be committed to their organizations if they enthusiastically continue their

association with the organization and exhibit significant exertion in achieving

organizational objectives. The authors argue that these elevated levels of effort

exerted by employees increase organizational commitment. This will prompt higher

levels of performance and viability of both the individual and the organizational

levels.

Jai Prakash Sharma and Naval Bajpai (2010) did a comparative study in public

and private sector companies in India of 250 employees in the limit of managerial

and non-managerial ranks. Their results revealed that employees in public sector

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organization have more prominent levels of organizational commitment compared to

private sector organizations. Furthermore, the job satisfaction increases or decreases

when there is an increment or diminishing organizational commitment. This possible

finding was important in light of the fact that most of the Indian employees have an

alternate social presentation to the occupation status and holding work out in the

public is seen to be more secure in terms of professional stability.

Ramanathan and Senthil (2013) conducted a study to investigate the role of

employee loyalty and to examine crucial factors influencing quality service in the

business units of equipment rentals. The study was undertaken on a sample size of

100 across the South Indian cities. The results revealed that organizational culture is

the leading contributing factor to employee loyalty followed by superior leadership

style.On the negative side, stringent HR policies, discrepancies in pay, lack of

rewards and recognition, severity in the work loads, conflicts due to contract nature

of the business and personal problems resulted in lower levels of employee loyalty

hampering the development of the company.However, when viewed totally, most of

the respondents agreed that employee loyalty is important for the success of the

company.

A research study was conducted by Tymon et al., (2009) to examine the

talent management practices of twenty eight companies in India. A sample of 4, 811

employees was surveyed to understand employees attitudes towards their employer.

They identified four important factors within the control of employer can drive

employee attitude to stay in the company. These four important factors are

professional development practices, performance management practices, the quality

of supervision and the companys socially responsible posture. The research

confirmed that these result in higher levels of satisfaction and pride with the

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organization and employees will be more attached to the organization and are more

likely to stay.

According to the findings based on a survey Employee Engagement Insights

of India and in an interview with Economic Times, Brad Adams, Head of HR

Research in Asia, Corporate Executive Board said that Indian workforces exhibited

lowest employee loyalty in Asia of the 28 major economies surveyed. This survey

also revealed interesting needs of employees working in Asia. They were work-life

balance, location preference, career development opportunities, upward mobility, the

growth of the company, stable career and earning potential were more important than

just an attractive compensation (Economic times, 2014).

According to Ipsos Reid (2009) study it was found that 22 per cent of 1,128

Canadian employees were less loyal to their employers. In organizations where

employees experienced layoffs, 36 percent reported that their loyalty decreased and

when their salaries were freezed, it was 31 percent.

A survey conducted by Spherion Corp. (2007) found that employees remain

committed to their organizations when there is long term job security. Employees are

also less loyal when they feel ignored and not valued by their employers. Decreased

face to face interactions by relying too much on teleconferencing, video conferencing

and email exchanges lead to the to the erosion of social relationships and thereby

decline in the loyalty levels within the organization.

Yee, Yeung, Edwin (2010) carried out an empirical study of 210 high contact

service shops in Hong Kong to assess the influence of employee loyalty on service

quality, customer satisfaction, customer loyalty and business performance. They

tested this relationship using structural equation modeling and results of this study

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uncovered that employee loyalty has a significant influence in extending the

profitability of the firm through increased customer satisfaction and customer

loyalty.

Gupta and Aityan ( 2012) conducted a survey on employee loyalty in the bay

area , San Francisco on random sample of 151 participants across multiple industries

like healthcare, hi-tech,finance, retail, services, manufacturing and few others.The

objective of the study was to evaluate the trust employees hold towards their

managers furthermore to know how the organizations believe their employees.The

results of the study demonstrated that larger part of the non-managerial employees felt

that organizations were not loyal and neglected to perceive employees interests

.However, this was not true for managerial employees and they positively assessed

the situation.

2.5. JOB SATISFACTION AND EMPLOYEE LOYALTY

A review of the literature shows that job satisfaction is the most widely

studied construct in the literature related to loyalty, commitment, turnover, attrition

and in anticipating other related behavioral as well as attitudinal outcomes of a job.

Job satisfaction itself, then again, is the consequence of numerous variables and thus,

job satisfaction in this study examines in detail by isolating it into six sub-

components as supervisory support, coworker support, intellectual stimulation, career

development and growth, rewards and recognition and pay. Literature with reference

to each of the sub-component with respect to employee loyalty is reviewed and

introduced under six different headings in this chapter. Before, each of these sub-

dimensions of job satisfaction is discussed, an overview on job satisfaction is

presented.

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 The term job satisfaction is not a new concept and it is as old as the origin of

employment itself.But the way it is viewed today is not the same as viewed in the

past. Traditional definitions of job satisfaction spin around the monetary or extrinsic

factors as key motivators for increased job satisfaction. The concept of job

satisfaction was first developed by Landsberger in 1958 with the Hawthorne effect.

Although, job satisfaction as a segment was not specified in his study. However, he

did distinguish that workers work for a bundle of reasons other than just pay. A

standout amongst the most prevalent study identified with job satisfaction could be

linked to Motivation hygiene theory developed by psychologist Frederick Herzberg

in 1968. He found that there are out and out two separate factors that impact job

satisfaction. One, the elements leading to job satisfaction were termed as

Motivators and these were the nature of the work itself, including the needs of

accomplishment, competency, status, individual worth, and self-realization which

subsequently make employee blissful and satisfied on the job. Second, elements

leading to job dissatisfaction were called hygiene factors and these consist of

company policies, supervision, technical problems, pay, interpersonal relations at

work, and working conditions. Basically, hygiene factors are required to guarantee an

employee that he is not dissatisfied with the job. Motivation factors are needed to

spur an employee to higher performance.

One of the most widely used definitions of job satisfaction in organizational

research is that of Locke (1976), who defines job satisfaction as "a pleasurable or

positive emotional state resulting from the appraisal of one's job or job experiences".

A more recent definition of the concept of job satisfaction is from Hulin and

Judge (2003), who have distinguished job satisfaction as multidimensional

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psychological responses to an individual's job, and that these personal responses have

cognitive (evaluative), affective (or emotional), and behavioral components.

Job satisfaction can be understood in terms of its relationships with other key

factors, such as general well-being, stress at work, control at work, homework

interface, and working conditions. It is assessed at both the global levels or at the

facet levels (whether or not the individual is satisfied with different aspects of the

job. Spector (1997) listed fourteen common facets of job satisfaction: Appreciation,

Communication, Coworkers, Fringe benefits, Job conditions, Nature of the work,

Organization, Personal growth, Policies and procedures, Promotion opportunities,

Recognition, Security, and Supervision).

A study titled "Analysis of factors affecting job satisfaction of the employees

in public and private sector"(Geeta and Pandey, 2011) in India concluded that Indian

employees tend to love their job if they get what they believe as an important attribute

of a good job. The study also showed that most of the employees in Indian industry

are not satisfied with their job except for a few males in commerce sector and females

in the education sector. Total job satisfaction levels of males were found to be higher

than that of women. Total job satisfaction levels in the manufacturing sector are

found to be very low.

The research conducted by Bajpai & Srivastava (2002) uncovered that a safe

and great welfare approaches expand the levels of job satisfaction while the risk of

layoff, quick turnover, insufficient welfare plans, and less scope for vertical

development increase the levels of job dissatisfaction. If the organization invests in

employees well-being it results in higher satisfaction in employees. In case if

organizations invest resources into employees's prosperity, it brings about higher

satisfaction among employees. Along these lines, job satisfaction predominantly

35
concentrates on the attitude of employees to the job while employee loyalty

dependability centers to a more extensive framework i.e. the employees attitude of

the organization.

According to Hackman and Oldhams (1975) job characteristics theory, there

are five important factors that keep employees job more satisfying.They are skill

variety, task significance, task identity, autonomy and feedback. According to this

theory, job or the task itself is the key to employee motivation. Thus, by offering

challenges and variety in the tasks, an employees motivation levels can enhance and

adds more meaningfulness to the work. It is therefore important to note that in a job

design phase, these factors need to form a right amalgam to receive increased

performance.

In view of the above empirical findings, job satisfaction is inferred as an

imperative component for its relationship with employee loyalty and analyzed in

detail. for the ebb and flow of this study.

2.6. Supervisor Support and Employee Loyalty

Past researchers have identified that employees do not quit their jobs but their

bosses. The reason may be a weak rapport, failure on the manager part to understand

employee needs, lack of communication, faith & trust, failure to recognize

contributions and so on. All this friction can weaken the bond between the manager

and employee. The resultant effect results in low morale, disturbed attitude and

behavior among the employees. This will in turn affect organizations health and

loyalty. If, unresolved by the management, employee's intention to quit the job

becomes even more and more evident. This is the point where an organization can

lose critical employees to its competitors. Thus, a strong support from the supervisor

36
helps to reduce burnout, employees intention to quit the job and turnover rate

(Kalliah & Beck 2003). An important element in creating the desired culture is

through the leader or a manager. The leader can create a culture by the questions

he/she asks, the decisions he/she makes and the way they act. The actions of the

leader and the culture he/she creates will also help with employee retention. The

supervisor or leader is the person who focuses the employee on what is important.

The bosss values, actions and words determine how well the employee

performs and if the job is accomplished. It is the immediate supervisor or managers

responsibility to create job satisfaction for the employee to develop challenging jobs

and rewarding experiences. Sometimes the supervisor or manager needs to be trained

on how to satisfy quality performers and build loyalty in their people (Emmerich,

2001).

A lone wolf (Johnson, R.,n.d) leader who stays in his or her office and

delegates, issue deadlines and monitors goals is no longer effective in an open system

organization. Todays leaders need to have a high level of energy, enthusiasm and a

high desire to achieve to inspire others. The leader of the future needs to have a

relationship with his/her subordinates. It is recommended that a manager

acknowledges the employee when he/she sees their subordinates and makes an effort

to interact with them.

Satava (2003) conducted surveys of CPA firms in order to find out why

people were leaving. He found that management style made a difference. The survey

indicated that managements relationship with their employees had a significant

influence on how long the employee stayed on the job. Satava found that the better

management treated their people, the longer the employees would stay with the

company. It was also suggested that the supervisor or manager should talk to each

37
employee at least twice a week. Some of the topics they chat about could be personal

things like family or sports or anything apart from work.

A study by Gallup Organization (2003) based on queries from two million

workers at 700 companies, found that poor supervisor behavior was one of the main

reasons people quit companies. The results of that study were also supported by

Pekalas (2001) finding that the relation between the supervisor and his/her

employees affected how long the employee would stay with the company.

Past research on perceived organizational support, indicates that supportive

and caring treatment shown by the supervisor has a positive effect on employee

commitment (Eisenberger et al., 1986). Gerstner and Day (1997) reported that high

quality relationships between supervisors and their subordinates has a positive

influence on work performance, work satisfaction, role clarity and organizational

commitment. This reveals that care for employees can promote organizational

commitment and build loyalty. Thus, helping subordinates to grow and succeed, has a

positive influence on improving and nurturing employee loyalty (Liden et al.,

2008).An empirical research on full-time sales staff concluded that servant leadership

behavior improves an employees adaptation to the organization, thereby enhancing

his organizational commitment, and thus reducing their turnover intention (Jaramillo

et al., 2009).

Mulki et al., (2006) in their studies on sales staff revealed that employees tend

to quit when they are dissatisfied with their leaders and sense that their leaders cannot

be trusted. This supports that those leaders who established a harmonious relationship

with their subordinates by involving and promoting in shaping their career

development will result in improved organizational commitment and loyalty

(Brashear et al., 2006).

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 A research study to analyze the relationship of servant leadership and

employee loyalty with employee satisfaction as a mediating role was studied in China.

The results showed that, in order to improve employee loyalty, the managers in

addition to developing their servant leadership style should also give due

consideration to the employee needs to increase their psychological satisfaction(Ding

et al., 2012).

Employees view their supervisor as an anchor to their emotional and on-the

job needs. They view him as a mentor or coach who can shape the future direction of

their career and growth within the organization. Supervisors need to care for the

employees more than just being a career tutor. This itself is an intangible incentive in

motivating employees (Moses, 2000). Thus, taking a honest interest in employees can

build loyalty in the organization.

2.7. Coworker Support of Job Satisfaction and Employee Loyalty

In the technology industry, most individuals work in teams and the quality of

time they spend with each other has important implications on the employees

experiences on the job. The outcome behavior as a result of this experience decides

their loyalty to the organization. It is a well known fact that technology professionals

work in teams of varying size across geographical locations. However, coworker

support as a construct has not received much attention in research studies linked to

employee loyalty .

Scott, et al., (1999) evaluated the quality of the peer relationship on

employee turnover. They found that improved communications among the peers had

a negative impact with employee turnover. In the presence of such close interactions

39
and cooperations among the peers, they denied to leave their peers and chose to

remain in the organization.

Zhou, et al., (2001, 2003) explain coworker support as the encouragement

and assistance extended to one another in accomplishing the tasks by sharing the

expertise and knowledge. Such adjustment among the coworkers can bring about

behavioral results both at the individual levels, group levels and organizational levels.

The behavioral outcomes at the individual levels are job satisfaction, stress,

commitment and at group levels, it can better the interpersonal relationships and help

in forming a cohesive team with a group performance. The organizational level

outcomes are reflected in the culture, loyalty and reduced attrition rates.

Kleinbeck, et al., (1990) found that the components of job satisfaction such as

job scope, significant backing from supervisor, synergy between the teams were

associated with organizational commitment that in turn affected the employees

intent to stay. Thus, positive experiences on the job empowers employees to remain

committed and work towards the success of the organization.

In the light of the above findings, coworker support is included as an

important construct of study for the present research study.

2.8. Intellectual Stimulation and Employee Loyalty

Today, science and technology have overtaken functions of finance, sales,

administrative and marketing. This technology industry is driven by scientists,

engineering and IT experts working under a diverse set of desires and expectations

of the job. They tend to quit the jobs when they experience monotony, less autonomy

and absence of challenging assignments (Kochanski & Ledford, 2001).

40
 According to McEachern (2001), high technology employees will leave the

organization if their skills are underutilised.The loss of such critical employees can

affect the continuity of innovation in the products and services of the businesses

which could prove fatal to the profitability and growth of the company in the midst of

its competitors. Research has shown that the design of high technology professionals

work content influences their stability (Amabile, Conti, Coon, Lazenby & Herron,

1996).

Avolio (1999) reported that when an organization is practicing intellectual

stimulation and when boundary-less discussions become the norm. It is amid this

methodology that an organization understands its imaginative & creative potential.

Dockel (2003) indicated that chances to solve challenging assignments, to work with

best individuals, flexibility, freedom, adaptability will increment the retention of

employees with feelings of expanded completeness and meaningfulness to work

which results in increased development of organizational commitment.

Ferreira, et al.,(2010) observed a significant relationship between affective

commitment and creative skills and suggested that employees who see themselves as

having the skills to plan, execute and manage their professional objectives in creative

ways tend to feel emotionally anchored to the organization.

A psychoanalytic research survey was conducted by Cangrade( 2013) on a

sample of 584 employed from a variety of jobs in America to understand how happy

they were in their lives and how satisfied they were in their jobs.The findings

revealed that among the different job characteristics measured, intellectual stimulation

was the number one motivating factor for employees happiness and job

satisfaction.The other motivating factors in the order of priority were achievement and

prestige, power and influence, security, work-life balance, affiliation and money.This

41
study reveals that employees are happier and more satisfied when their jobs provide

intellectual stimulation and task variety through autonomy , power, and

opportunities to gain prestige and recognition.

A research was carried out by Ghulam Yasin et al., (2014) in 50 Small and

Medium scale enterprises in Paksitan to investigate the relationship between

intellectual stimulation, innovations and organizational performance.The outcome of

the study revealed that there was a significant positive relationship between all the

three factors studied. The study also supported that intellectual stimulation promotes

organizational innovations.

Dornstein and Matalon (1998) derived eight variables that seem to be of

relevance to organizational commitment. These are interesting work, organizational

dependency, coworkers attitude towards their organization, age, educational

qualification, job choices, attitude of family and friends.

According to the research conducted by global management consultancy, Hay

Group (2013) revealed that one in every three employees in India lacks confidence to

achieve their career objectives with their current employers. This is quite an alarming

number and it is likely to place India with No.1 position in the global attrition chart

with an anticipated turnover rate of 27.5% in 2014.This calls companies in India to

give a serious thought to what drives employee commitment comments Mohinish

Sinha. A number of the organizations are additionally looking to generate more

sustainable careers to employees so that they specialize themselves in more than one

expertise than just cling to their domain expertise to increase the job commitment

(CXOtoday News Desk Feb 27, 2014).

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2.9. Career Development and Growth Opportunities and Employee Loyalty

A review of literature indicates that training is an important criteria for

satisfying the technical skills for effective completion of tasks. Since organizations

operating in an open system need to make decisions quickly and also need more

information for those decisions, the organizations structures is getting flatter. The

flatter structures limit the number of advancement opportunities. A good alternative

for career enhancement in the absence of promotion opportunities is to develop the

skills of the employee to make them more marketable.

A career survey was conducted by New-york based AG Barrington Inc., a

financial technology career management firm on sample size of 200 technology

vendors who had intentions to switch their companies.The respondents of this survey

had their experience ranging from two years to thirty six years among which 157 were

men and 43 were women.The results of the study distinguished three principle reasons

that augumented the thought of quitting.These were limited career growth,

underutilization of skills and uncertainty emerging out of organizational

restructuring, mergers or acquisitions. A feeling of stagnation to their long term career

progression acted as the main culprit than money in deciding their mobility out of the

company (McEachern, 2001).

Likewise Baruch ( 2004) discoveries uncovered that employees' psychological

commitment is dependent on how they perceive the organizations adherence to career

oriented practices like training, promotions, development opportunities and the

security of the job.Their commitment is higher when the organizations treat them as

valuable resources who could be developed instead of simply considering them as

entities or commodities of business.Investing on employees gives a promising

43
message to the employees that they are valued and they reciprocate with commitment

to the organization.

David Finegold (1999) from the University of Southern California states with

career advancement high on the agenda, continuous learning is a crucial part of any

retention program. The research showed that many leading firms are pursuing

innovative approaches to develop employees skills, such as e-learning, on-line

simulations, project-based learning using new electronic tools and the creation of

online corporate universities.

According to Igbaria et al., (1991), employees whose job is well-matched

with their professional goals ought to experience positive positive feelings about their

work life and ought to bond to their organization.Employees who perceive training as

important and the expenses incurred by the company to train them, may develop a

feeling of commitment referred to as Normative commitment .This way employees

develop an ethical commitment and morally focus on the organization and make that

training spending meaningful and worthwhile (McElroy, 2001).

2.10. Rewards , Recognition and Employee Loyalty

Rewards and recognition is used as a motivational tool in formulating

strategies to retain employees at the workplace. It has a great significance in the work

life of an employee. It elevates and gives a sense of satisfaction on the job taking the

form of enhanced self confidence, emotional well-being, self esteem and love for

the job increases promoting an affective bond with the organization. However, in the

absence of such rewards and recognition programs, an employee fails to develop a

positive attitude towards the work and such attitudes weakens the bond with the

organization and eventually lead to alienation from work.This has prompted many

44
organizations to implement effective rewards and recognition programs as a

recognition for employees outstanding capabilities.This has helped in in creating a

healthy relationship between employer and its employees. Within the context of

organizational Psychology, rewards and recognition are often considered synonymous

with slight demarcation in understanding these two terms.Rewards have a monetary

aspect linked to it and few examples to this are employee stock options, incentives,

cash rewards, bonus .Recognition refers to non-monetary ways of acknowledging the

efforts by verbally honouring the commitment, sharing success stories of the

employees on a common platform, giving much challenging roles and so on.

A survey was conducted in 2013 by Accelir, a strategic advisory and Research

for HCM to understand the current, future and ideal state of rewards and recognition

practices in the workplace. Human Resource professionals and corporate leaders from

400 companies participated in this study. The results revealed that rewards and

recognition need not be always expensive or linked with high monetary value.This

was supported by 57 % of the companies surveyed and they agreed to have only spent

less than 0.5 % of the total payroll while another 11% of companies had spent

slightly higher about 2% of the total payroll on the rewards and recognition programs.

The results also found that only 42% of the companies had a formal recognition

practice or program in place to reward outstanding employees.

Jamie Hale and George Bailey (1998) authors of the article titled Seven

dimensions of successful reward plans clarify that employees are ready to invest

their intelligence, talent and creativity in support of the company strategy in the event

that they can expect a reasonable return. The management theory that supports this

dimension of study is the organizational equilibrium theory). According to this

theory, the most vital resource of an organization is its people. Barnard (1938)

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emphasized that the most important function of the management is to motivate

employees to contribute continuously to the survival of the organization. Employees

continue in the organizations as long as the inducements they receive exceeds the

contributions made by them.

The significance of rewards and recognition in the form of service rewards in

determining employee longevity and loyalty has been well explained by Susan M

Heathfield. Service awards are given to employees as a recognition for their efforts

and long tenure with the organization. It is a thankfulness and affirmation given to

the workers. The recipients of such service awards usually recommend their employer

as an incredible place to work, they infuse positive culture and greater commitment

and continuity in the organization.

Based on the analysis of Raytheon Co.talent retention efforts, Helpert (2006 )

concluded that rewards and recognition are critical for having loyal employees.

Anil Kumar V (1995) studied human resource management in the

electrochemical industries located in Travncore. He reported that in order to motivate

employees and increase their efficiency, the management should adopt measures to

evaluate the merit of the employees and have a feel in them that the merit is well

recognized and appreciated by the management.

In order to embed loyalty in the workplace, companies should give careful

consideration in implementing, improving and innovating the rewards and recognition

program. This motivates a positive, cheerful attitude towards work with increased

performance, reduced intentions to quit and increased trust towards the employer

improving employee morale and loyalty within the organization.

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2.11 .Compensation and Employee Loyalty

Pay is still considered as the powerful incentive in attracting and holding high

technology workers. Money in the form of base salary alone might not be may not be

effective in luring the technology professionals. Instead, they are exceptionally

responsive to different benefits accruing from employee stock options, profit sharing,

bonus together can influence their intention to stay.

Higginbotham (1997 ) findings indicated the superlative term high salary is

not the essential determinant in retaining employees. Even a good and fair salary

that is competitive has a strong correlation on intention to stay.

Kochanski and Ledford (2001) further emphasized that more than pay, the

system involved in administering the pay hikes and the emotions of equity and

reasonableness is significantly more essential.

Schaubroeck et al., (1994) showed that affective commitment is positively

linked to the apparent reasonableness in remuneration.

A survey was created by Prof Biju Varkkey, faculty of Indian Institute of

Management, Ahmedabad (IIM-A) and Rupa Korde, faculty of Foundation for Liberal

and Management Education, Pune to receive online feedback from private sector

employees on pay rates, job security, employee welfare and contract terms

somewhere around 2009 and 2013. Results indicated that disappointment levels

among workers of India have gone up since 2009 when the financial log jam set in,

says this review on occupation fulfillment by Paycheck India, an exploration activity

at IIM-A. Across levels, around 44% respondents out of 13,205 staff members

10,996 males and 2,209 females say they are paid less all through the four years

beginning 2009. More seasoned and older staffers were more satisfied than

47
youngsters. Juniors are more disappointed on the job. Only 42% of workers in 2013

felt sheltered and secured in their employment.

A cross-sectional study was conducted to explore the relationship between the

job satisfaction and orgnaizational commitment in the province of KwaZulu-Natal,

South Africa on a convenience sample of 86 employees working in head offices of

four IT companies. The racial composition of the sample had 26% of Indians, 68% of

whites and 6 % Africans. The participants, representing staff levels were 59% and the

remaining 41% at the supervisory level. The results of the study recommend that

employees are encouraged to stay in their organizations when the work environment

provides challenging and meaningful jobs, positive coworker supervisory support and

the managers effort in evaluating the current pay strategies to fair and equitable pay (

Lumley et al., 2011).

2.12. Work Culture and Employee Loyalty

Work culture as a research issue has caught the interest of researchers in the

academic fields like organizational behavior, Management, Business administration,

psychology, anthropology to list a few. There is evidence from past research studies

that signifies the purpose of workplace culture in determining as to what binds

employees to maintain and keep their membership with the organization. A culture

well managed is commitment well managed. Organizational culture can be used as a

powerful organizational development tool for improving business performance

(Brown 1995, 1998).

A detailed review of the literature shows that organizational culture has an

impact on the employees' commitment to the organization. The nature of

organizational culture is important for understanding the levels of commitment in an

organization. Considerable number of studies across the globe can be traced to the

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role of work culture on employee loyalty, but there are also limited studies

researched in India and that too particular to the IT industry that is highly dynamic

and knowledge driven.This prompted to incorporate work culture as important

construct for this research study.

Lok and Crawford (1999) have extensively explored the relationship between

organisatinal culture, sub culture and commitment .The results of a quantitative

study done in hospital settings revealed that both organization culture and sub culture

were correlated with commitment. When further analyzed, they found sub-culture had

a deeper and stronger relationship with commitment.Among the three constructs of

culture identified, innovative and supportive culture had the strongest correlation with

commitment while bureaucratic culture declined the commitment levels(Lok and

Crawford, 1999).

Another study among the Australian and Hong Kong managers that

innovative and supportive organization culture had a positive effect on commitment

and the impact it made was higher with the Australian when compared with

Hongkong Managers (Lok and Crawford, 2004).

The culture of an organization can be built with four major factors which are

the personal and professional characteristics of the people within the organization,

organizational Ethics, rights given to the employees and the structure of the

organization. The interactions that exist among these four factors defines the culture

of the organization. The moral values and ethics also will have a influence on

organization al culture (Schein 2010).

Researchers have differentiated the work culture into a strong work culture

and weak work cultures. Strong culture is an indicator of good working environment

49
with good interpersonal interactions and coordination among the employees. The

presence of such a strong work culture increases the performance of the employees

(Andre, 2008).

Siehl and Martin (1990) argued that organizational culture has the potential to

boost job satisfaction and commitment of employees significantly. They also argued

that the link between the organizational culture and performance is a result of

increased commitment, quality, productivity and satisfaction, all of which are related

to organizational culture.

A study conducted to analyze the relationship between human resource

practices and employee retention in Sharjah and Dubai government organizations

revealed that work place culture acted as an emerging factor to job dissatisfaction and

intent to quit. A work culture that encompasses centralized leadership, poor

management style, limited growth opportunities, lack of empowerment would affect

employee retention (Waleed Alnaqbi, 2011).

Hay Group (2007), contends that the work environment should incorporate a

friendly, decently designed, safe and physical space, good equipment and effective

communication. This will enhance the productivity levels .The research study also

revealed that job autonomy also constitute a very important aspect of the work

environment. When employees have certain levels of autonomy and freedom on the

jobs they do, they feel less stress and get more inclined to stay in their respective

organizations.

A similar study was conducted to investigate the relationship between

organizational culture and organizational commitment in services sector, a call center

in Kayseri and an insurance company in Izmir, Turkey.A correlation analysis revealed

50
that there existed a positive relationship between organizational culture traits and

affective commitment levels. But however, there was negative corelation between

continuance commitment and organizational culture traits. This study also measured

the commitment with respect to five demographic variables like age, gender,

education, tenure and marital status. Except for the marital status and age, the other

three variables influenced the perceived levels\ of commitment (Asena Altin Gulova,

Ozge Demisroy, 2012)

Bergman argues that organizational cultures which have strong norms for

internalisation and identification are likely to generate high levelss of affective

commitment( Bergman 2006).

Ruppel and Harringtons (2000) conducted a study to understand the

relationship of communication, ethical work climate, and trust to commitment and

Innovation on a sample size of 111 managers. They tested if fair, just and right

(ethical) treatment influences trust either directly or indirectly via communication

and the secondly to find out if this trust influences perceptions of commitment and

innovation.The study revealed that an ethical work climate creates the perceptions of

trust and that trust is significantly related to commitment.

A study conducted to analyze the relationship between human resource

practices and employee retention in Sharjah and Dubai government organizations

revealed that work place culture acted as an emerging factor to job dissatisfaction and

intent to quit. A work culture that encompasses centralized leadership, poor

management style, limited growth opportunities, and lack of empowerment would

affect employee retention (Waleed Alnaqbi, 2011).

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 Research by Dubie (2000) revealed that loyalty of high technology

professionals was due to good work life policies like flexible work hours, favourable

leave allowances, family friendly initiatives and proximity to home.

Cooper and Burke (2002) also found that on-site and off-site child care

support, flexible work schedules, leave policies take time off from work to

concentrate on family issues plays an important role in deciding an employees'

attachment to the organization and in retaining these valuable employees. They refer

to this as Organization ss Career Culture. This means to say that for people to

commit to their organization, they need to know they are cared about.

Meyer and Allen (1997) accentuate that work practices of the organization

have a huge impact on the commitment levelss of the employees. The practices

recognized were training, decision making, empowerment, promotional

opportunities, open communication, empowerment and rewards linked to

performance.

A study was conducted to analyze the impact of organizational culture on

employees commitment in Indias IT services, offshore service providers in

Bangalore and Pune on a sample size of 291 IT executives and Managers.The findings

revealed that ingroup collectivism and performance orientation of the organizational

culture dimension had strongest impact on employee commitment.Further, the

correlation between normative and affective commitment was stronger in India when

contrasted with studies in North America.This shows that when there is a reciprocal

feeling of pride, loyalty and support between the employees and the organization,

employees commitment increases. Additionally an organizational culture that is

performance oriented by encouraging, recognizing and rewarding employees for

exceptional performance, innovative thoughts and brilliance likewise will have more

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number of of committed employees (Messner, 2013).Based on the research findings

of Messner, work culture is derived as as a vital construct for the current research , the

results of which can further add to the scarce literature on employee loyalty in India.

2.13. VOLUNTARY TURNOVER INTENTION AND EMPLOYEE LOYALTY

Turnover as a factor has contributed a lot to research data in the area of

employee loyalty and organizational commitment.The movement of highly valued

employees can cause serious dysfunction in the system and this kind of dysfunction

in higher rate can prove to be detrimental to the normal functioning of the

orgnanisation. This is true significantly all the more in the IT industry, where the

business is driven by skilled employees well-groomed on cutting-edge and hard to

replace technologies.The loss of these valued employees can result in project delays

and in the same time, intentions of quiting can likewise truly disrupt the emotional

and physical prosperity of employees and this could be dangerously contagious

prompting exits in larger numbers and loss of workforce diversity. In the current

study, an effort is made to comprehend why workers leave organizations and how

turnover can affect the loyalty of employees. This study is specific to comprehend the

voluntary turnover .Voluntary turnover could be defined as an employees intention to

quit the organization for various reasons that leads to job dissatisfaction.In voluntary

turnover, a distinction is made between avoidable and un avoidable turnover.

Avoidable turnover stems from the components at the working environment like

employment disappointment, dissimilarity in pay, unhostile social communications

and lot of other organizational factors while unavoidable turnover is is seen on a

sudden onset of individual crises beyond the control of the organization. Voluntary

turnover could be detrimental to the success of the organization, as with the exit of

employees there is also threat of knowledge loss.

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 Kochanski and Ledford (2001) researched how to deal with turnover issues of

technical professionals like engineers and scientists employed in Research and

development units in Pharmaceutical, medical devices and products, electronics,

networking , computing and other related bussinesses. Five factors emerged to

influence the turnover of employees. These were Job characteristics, base salary,

work-life balance, cash component, supervisor support and career opportunities.

According to this exploration high compensations will not strengthen an employees

bond with the organization but those who received even moderate and reasonable

salaries likewise had strong intent to stay. They were more concerned with sentiments

related in acknowledging pay hikes and the certainty of transparency in choosing and

regulating these pay hikes. Technical experts are high on advancement abilities and in

the event that they are given right chances to build up their vocation, they are likely to

stay in the association.

Dockel, Basson & Coetzee (2006) conducted a study to explore specific

retention factors that induced organizational commitment in a group of 94 high

technology employees working for a telecommunication company in Gauteng

province of South Africa. They measured which of the retention factors related

significantly to the three different types of commitment. Compensation, job

characteristics, support from supervisor and work life policies had a significant

influence on the commitment of employees to the organization.

Westlund led a corelational study to evaluate the association among software

developers job satisfaction and turnover intentions.The essential point of his research

was to figure out if satisfaction with supervisor or overall job satisfaction is all the

more significant related to software developers turnover intentions in the United

States. The results indicated that the members' turnover expectations were impacted

54
more by overall job satisfaction than fulfillment with supervision. Nonetheless, the

relationship between turnover and satisfaction with supervision alone was not

significant.

Shastri (2010) examined the relationship between two major antecedents

namely charismatic leadership and job satisfaction on the commitment levels of

employees on a sample size of 147 employees of Indian Organizations in northern and

eastern region of India. From the results it was evident that the charismatic nature of

the leader plays a significant role in reducing the turnover rates and increasing the

commitment levels. A leader has to be clear on the goals of the organization and

align them with the needs and desire of the employees.

Denton (1992) in his book Recruitment, Retention and Employee Relations,

contends that the issue of turnover ought to be overseen proactively.This should be

carried out when the organization employs and distinguishes great employees. The

best way in attracting and retaining employees is to be an employer of choice by

offering employees professional opportunities, responsibility, a sense of ownership ,

job variety and training. Acknowledging and recognizing employeesefforts through

the implementation of awards program acts as incentives in retaining a pool of

satisfied talent pool.

Thus, by all the past research studies and their findings, employee loyalty

contributes to a greater competence, better business results, increased firm growth and

reduced turnover. Loyal employees also enhance in creating a positive image that the

company has to its environment and outside stakeholders (Meyer and Allen, 1997).

A review of literature on various indicators of loyalty used by researchers

shows that the most often repeated and important indicators of employee loyalty are

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job satisfaction, work culture and turnover intentions.In this study, we have focused

on these three indicators and termed them as constructss of employee loyalty.

These are job satisfaction, work culture and voluntary turnover. These three were

identified and chosen due to the fact that their relationship with employee loyalty has

been widely researched in the past in western contexts and there is evidence that there

exists a relationship among these dimensions and employee loyalty. This has

prompted the researcher to derive a conceptual framework to study the significance

and association between these dimensions and employee loyalty in the context of

Information technology industry in India.

The literature review and its concepts has been conceptualized in a visual

framework. This framework integrates the second chapter and forms the basis for

deriving hypothesis for this study.

2.14 RESEARCH GAP

A review of literature indicates that with giant progress in the IT sector ,

challenges of retaining employees has mounted to a new levels . This has put the best

of the organizations into testing phases.This has caught the attention of many

researchers across different parts of the world within the subject of employee loyalty,

commitment and retention. Nevertheless, a search carried out within the available

literature on topics related to employee loyalty in India returns with only a small

number of empirical studies. An observation into these studies revealed are usuallt

not much comprehensive and have considered only few indicators for the study and

the sector coverage is predominantly in non-IT sector. The researcher has identified

this gap within the literature and aims to scale down this gap as highlighted below

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1. The study focuses on employee loyalty in the Information technology companies

in India.The findings of this research will quantiatively add to the confined

literature available on employee loyalty.

2. Most of employee loyalty studies conducted so far have measured job satisfaction

as one whole construct and then reported the findings. However, in this research ,

the job satisfaction is studied very comprehensively with respect to each of its

sub-components : Supervisor support, coworker support, intellectual stimulation,

compensation, career development and growth and finally rewards and

recognition. This manner the researcher has caught the minute important factors

and has broadened the conceptual understanding on employee loyalty among the

knowledge workers.

3. The researcher has conceptualized a new demographic variable distance from

native location along with seven other demographic variables. This new variable

was developed keeping in view the family values of India wherein the employed

son / daughter owns up the responsibilities of their aged parents.

Thus, the present study aims at filling the gap between literature ,work related

attributes and the existing HR practices for building loyalty among IT professionals

in India.

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