Human Resources in Sri Lanka's IT Sector
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For an organization to survive and expand in the rapidly competitive environment dominated by several players, it is paramount for an organization to perform. The organization performance would be measure according to several variables such profitability, sales, production quality and market share, however, few organizations give prominence for the most important factors which is human resources performance. According to HRM commentator's retention and development of the organization employees are pivotal for organization performance.
The overall purpose of human resource management is to ensure that the organization is able to achieve their success through people. Ulrich and Lake (1990) states that: ‘HRM systems can be the source of organizational capabilities that allow firms to learn and capitalize on new opportunities'. But in the other hand HRM has an ethical dimension as well, which means it should also concern the rights and needs of people in an organization.
With the increased competition, globalization, boundless technological advances, -companies are forced to think about the factors like HRM, environment…etc to run the extra mile ahead of the others. Therefore nowadays employers consider investments on the HRM functions are very significant and effective, rather than seeing it as just a cost.
As it shown above, HRM should be incorporated with each and every function with in an organization. Starting from the recruitment process to the training and development, performance appraisal, performance incentives, promotion system , design of work and working environment…etc should aligned with effective HRM practices as it will reduce the direct & indirect employee grievances which results in a highly motivated and pleased workforce, which in turn influences on the overall organization performances.
When considering the structure of the Human resource management, there are two categories;
1. Managerial Functions
2. Operative functions
Functions of HRM
Managerial Functions Operative Functions
Organising Human Resource
Recent trend in HRM
1. Managerial functions - It include Planning, organizing, directing and controlling.
· Planning is the main activity that a manager has to consider. The management has to decide what to do and how to do to achieve the objective of the organization. Management uses this process to plan the future of the company, decide what actions they are going to make to avoid difficult problems etc. (Bateman, Snell, 2007).
· Organizing is established in the internal structure of the organization. It mainly concerns the flow of information within the company, division and coordination. Manager has to know what the subordinates can do and what kind of training they need. To achieve the objectives set in the planning process there should be a proper organization of work. In here the management set the tasks, responsibilities and authorities to the employees. The manager has to discuss the tasks with the employees and has to clarify what to do, how to do and make them understand about the job (Allen, G, 1998). Then it is easy to achieve the objective.
· Directing is the next stage after completing planning and organizing. This is to execution of the plan. It influences the people to achieve the objectives in a correct way through motivation, communication, and leadership. The proper direction of employees will affect the achievement of the objectives. The manager has to have a proper relationship with the employees in the company, and then they can easily direct the employees to achieve the target.
· Controlling involves checking, verifying and comparing of the actual with the plan that the company set. Actions and operations are adjusted to identified plans and standards through control. The training programs, conducting interviews, analyzing labor turnover details are some of the controlling functions that a manager can work out. Controlling allows setting the performance standards within the groups and to do the proper communication.
2. Operative functions - These activities are related to specific activities such as, employment, human resources development, compensation, human relations and recent trends in human resource management.
· Employment - This means securing and employing the people with the relevant qualifications to achieve the organizational objectives. The functions include in employment are, Job analysis, human resource planning, recruitment, selection, placement and induction.
· Human resource development - This is the process of improving skills, knowledge, attitudes, aptitudes, commitment etc. depending on the organizational requirements. The functions include in human resource development are; Performance appraisal, training, management development, career planning and development, promotion, demotion and change and organization development.
· Compensation - This is the process of providing sufficient, equal and fair reward to all employees. The functions include in compensation are; Job evaluation, incentives, wage and salary, bonus, fringe benefits, social security and measures.
· Human Relations - It is the process of interaction between people. The management can practice different human resource policies to interact with the people. Good relationship will motivate people to do a better job In the organization. The functions in human relations include; Motivating the employees, developing the communication skills, developing leadership skills, providing comfortable work environment to the people, improving quality of work life of employees and boosting employee morale.
· Recent trend in human resource management - This area is always developing. It is advancing at a fast rate. The recent trends in human resource management is; Quality of work life, recent techniques of Human resource management and total quality in human resources.
In 1989 David Guest describes a human resource model according to what he thought. . This model consists of four elements;
- Human resource policies and practices
- Human resource outcomes
- Organizational outcomes
1. Human resource policies and practices - when an organization is introduced there are many policies available in a company. They are;
- Organization and job design
- Management of change
- Recruitment, selection and socialisation
- Appraisal, training and development
- Reward systems
According to this model human resource policies are design to achieve the four key human resource outcomes which explains as the second element of this model.
2. Human resource outcomes - The model include followings;
- Strategic integration
Quality is not only concern about the quality of manufacturing product or the services provided by the company, it includes the quality of the workforce, the management of the workforce and the human resource policies used in the company. Flexibility is the facility to change the jobs people are doing, working arrangement such as number of hours they are working and the nature of employees' contract. Strategic integration is the link between human resource strategy and business strategy. Guest explains that integration requires an organizational culture where managers work or share. The commitments have a direct relationship with valued business consequences. He says that commitment is confused and that the relationship between commitment and the performance is difficult to establish. When an employee commitment is higher means that employee is satisfied about the facilities and the way the company treat to employees. When they are satisfied performance will be automatically higher in the organization.
3. Organizational outcomes - The organizational outcomes include following;
- High job performance
- High problem solving
- High innovation
- Low turnover, absence
- High cost - effectiveness
4. Leadership - Leadership is the most important element to make all these outcomes success.
With the understanding of importance of the involvement of HRM for the betterment of an organization, this paper is about the effect of HRM development to the IFS business success.
1.1 Aims and objectives of the study
During the recent years IT sector began to bloom and many leading IT professionals fortified the future of their companies by investing in Sri Lanka. Within few years it begins to expand and now a days it has become a major business sector which support the economy and which provides enormous career opportunities to the younger generation.
Latest s show that, over 175 software developments companies are actively operating in Sri Lanka, which are originated from both national and international grounds and they are providing services for both the export and domestic markets. Some of these companies and their products are already well recognized and performing extremely well in the IT sector by competing with other foreign markets. Among these, companies like,Millennium Information Technologies- who not only turned the Colombo stock exchange in Sri Lanka into the world's first ever "event-driven" exchange but with their versatile automated trading system have powered the Boston stock exchange among several other clients in the United States, as well as exchanges in Europe, Asia Pacific and Africa;Virtusa Corporation- one of the fastest growing software services firms in the US with seven years of consecutive growth and the largest technology center based in Sri Lanka and; Informatics- a local company whose telecom product is in operation at the regional sites of some of the world's leading telecom operators, such as Cable & Wireless of UK and Millicom of Luxembourg, are leading the way, marking the name of Sri Lanka in the world. Furthermore international names likeIFSfrom Sweden have set up their research and development center employing over 700 people and recently MicrosoftandOraclehave also opened offices in Sri Lanka.
This is an effort to find out the involvement of human resource to the success of Sri Lankan IT sector and how well they are managed for them to get ready to face the future challenges in ever changing world. Taking the IFS Sri Lanka Ltd as the Reference point, the research will focus on interpreting the influence of Human Resource Management on the company's success.
Research as a whole, is a process to find an answer to a specific question. The initial objectives of this study are to formalize the necessary procedures and questions to be answered, in order to gather the intended information, which will be desirable in finding an answer to the core research question.
To achieve the above objectives, following are the outline of the information that will try to gather, to be used in developing proper evaluations & conclusions.
- Actions taken to motivate the employees.
- Established procedures on providing job satisfaction to the employees.
- The process of developing employee skill and how the company utilize it.
- How strong is the employee-employer relationship
- Level of performance of the company and how the employees contribute its' success.
1.2 Company Background
IFS, is one of the world's leading providers of component-based business software developed using open standards. Since 1983, IFS has been a provider of business applications focused on meeting the needs of selected industries. Basically, IFS operates in two areas: lifecycle management, where asset and product lifecycle management are critical issues, and mid market ERP (Enterprise resource planning), which covers distribution and manufacturing in midsize companies. Mainly company operates in Europe, the US, the UK, Australia and Asia with the head office situated in Linkoping, Sweden and having the employs about 2,723.
Today, IFS is a global software company that helps leading enterprises improve efficiency, cut costs, react swiftly to market conditions, and take advantage of new business opportunities. IFS Applications, IFS' suite of more than 60 web-based components, is the only true component-based business solution on the market, allowing deploying the software step by step as company's needs and budget dictate. Using open standards, IFS makes it easier to stay up-to-date with technology and integrate with legacy systems. And only IFS offers total lifecycle management, enabling their customers to maximize profitability over the lifecycles of your products, customers, and assets. IFS' superior technology, functionality, and Industry focus have won praise from some of the world's leading analyst firms. Gartner recognizes IFS as either a visionary or a leader in all four of its ERP and asset management Magic Quadrants. Most important, IFS' legendary commitment to customer service has never wavered. Today, IFS has an impressive roster of satisfied customers, ranging from mid-size companies to global industry leaders such as PepsiCo, General Electric, Lockheed Martin, General Dynamics, DuPont, Volvo, BMW, Deere & Co., and Rockwell Automation.
Since the day, IFS was founded, they have given a greater importance for the customer service. Therefore today, IFS has become the only enterprise software provider that offers a global product for the mid-market together with local support. IFS has support centres in each country in which it operates, ensuring that you will receive the best customer support anywhere in the world. IFS keep track of your unique component configuration; patch levels, and customizations, ensuring that the information is available globally to all IFS support centres. Therefore it has become the huge network of all the information required to solve the customer issues without any unnecessary delays.
Within the huge IFS network, office in Sri Lanka has a major importance, as it is one of the two IFS R & D centres in world and major part of software development is done there, with having more than 700 employees in two local country offices. The focus group for the study is mainly taken from Sri Lankan offices and depending on the opportunities employees from the other locations were involved in the study.
1.2.1 Financial Highlights
Based on the IFS Annual report 2008, it illustrate that the company is having growth in every section. Mid 2008, IFS has announced long-term financial targets entailing that, in the next five years, product revenue will double through organic growth and acquisitions, the operating margin will increase to15 percent, the dividend will rise to 50 percent of earnings after tax and surplus liquidity will be used to repurchase shares. Furthermore, report says that IFS has signed 10 largest license agreements during the year had an aggregate value of SKr 141 million where as the corresponding for 2007 was SKr 103 million. A total of 20 license agreements valued at more than US$ 0.5 million each were signed. And In all, 215 (177 in 2007) new customers were added, and 760 (778 in 2007) customers either upgraded or expanded their existing solutions.
- Annual Net Revenue
- Annual Earnings Before Interest & Tax (EBIT) Value
- Net Debt
In order to summarize the success I have extracted the above three from the report which explains the key factors of company's growth. Net revenue (: 7) amounted to SKr 2,518 million (2,356 in 2007), an increase of 7 percent, which is the highest revenue the company achieved per year for the last 4 years. EBIT (Earnings before Interest & Tax) value turns out to be Skr, million 154, which is a great turn over compared to the value, SKr million -128 in 2004. Furthermore, as the : 9 shows, IFS have succeeded in diminishing their debts. They have being able to reduce the debts from Skr, million 363 to Skr, million 3, which is a sole evidence for the success of the company.
- Variation of Total Assets
- Number of employees
While concerned of their financial growth, IFS seems dedicated to the expansion of the company. From 2004 to 2008, their asset, as well as number of employees has increased continuously in a similar rate.
1.3 Significance of the research
Success and development of any company is depends on the level of human resource involvement. Therefore it is most important to maintain motivated and satisfied workforce to obtain the very best results of its investment. Skill development, employer - employee relationship, grade & pay structure & employee benefits are some of the key factor which directly related with the motivation of the work force.
Purpose of study is to find out how well the importances of above factors are absorbed in the Sri Lankan IT sector; within IFS Sri Lanka Ltd. The research will try to extract the information related to the specific factors and analyze them with the every aspect of the company's performances.
1.4 Structure of the Research work
With having the text divided in to the several sections, the dissertation starts with an introduction, which provides the basic understanding of HRM and its functions. It concludes with an overview of the whole thesis including the information helpful for the reader to understand the topic and related facts, we are going to discuss about. The next section is the literature review, which explains relevant theories that will help to support the topic and it is followed by the research methodology which explains the research approach, and how the aims and objectives are planned to achieved. Moreover it, clearly explain the methods that used to collect the relevant data and explained the reasons why there are chosen. The result section provides the actual results I have obtained, carrying out the research, and within the analysis section, it exploits the information gathered, and structured a comprehensive analysis. Conclusion and Recommendation sections conclude the research with interpreting the gathered data and results obtained in Analysis section, along with the aims and objectives discussed at the beginning and provide the necessary recommendations based on the live facts and exhibit the virtue of the research.
1.5 Limitations of research
The main limitation of this research is getting the access to the employees within the selected company. The results would be much meaningful if the researcher is succeeded in involving many individuals as possible. Therefore it would be a greater challenge to formalize an easy and simple method to acquire the relevant information from the employees, to make sure that they don't feel it as an extra burden. Time can be considered as the other major issue since I have to formalize the whole process with in a very short time period and to make sure it has grasp many individuals as possible.
Job satisfaction is one of the most important aspects related to the employee management as it is directly related to the performance of an organization. Because of humans tends to listen to the feelings deep in their thoughts, it's not enough to full fill every other things, if the employee is not satisfied with what he/she does.
Job satisfaction is not same as the motivation but it linked. Job design is aimed to enhance job satisfaction and performance by using different design methods such as Job rotation, job enlargement, job enrichment etc. Job satisfaction can be viewed as “a pleasurable or positive emotional state resulting from the appraisal of one's job experience” (Lock 1976). When someone is satisfied with his/her job that is job satisfaction, or when any job is fulfilled one's expectation that is job satisfaction. Job satisfaction mainly considers the attitudes and feelings that people have about the work. The Guion (1958) defines morale as ‘the extent to which an individual's needs are satisfied and the extent to which the individual perceives that satisfaction as stemming from his total work situation'. However there are some features of job satisfaction identified by Paul Spectors (1985) such as, Pay- amount and fairness or equity of salary, Promotion-opportunities and fairness of promotion, Supervision-fairness and competence at managerial tasks by ones supervisor, Benefits- insurance, vacation, and fringe benefits, Contingent procedures-sense of respect, recognition and appreciation.
According to While Luthan (1998) there are three important views to job satisfaction;
- Job satisfaction is an emotional thing related to a job that cannot measure.
- It is determined by how well outcome is achieved or exceeds expectations
- It shows some attitudes which can be used to identify how employees think about their job and how they achieve their targets.
The factors that affect the job satisfaction of an employee can be divided in to three main areas;
- Internal factors
- External factors
- Individual factors
Internal, external and individual factors which affect to the job satisfaction are listed in the table. Internal factors are the factors that linked to work but those are not the only factors affecting job satisfaction. External factors are related to work or to the working environment and individual factors mainly consider a person and the person's family and network of friends.
Job satisfaction factors
· Job variety
Number of skills and depth of knowledge required to do the job
The freedom that the employee get to control their own work
· Goal determination
The freedom that the employees get to set their own targets and the criteria to achieve those targets
· Feedback and recognition
The private and public comments that they achieve for their performance
The person's success on their job. The trainings, improved equipments, proper education may be the way to increase the achievement and the job satisfaction.
· Role ambiguity and role conflicts
Knowing the position of the work place, responsibilities and agreement between roles. Clarifying the tasks in the job, and the position in the organization. When reduce role ambiguity it lead to job satisfaction
The opportunities with the current and the other employers. If employees feel they have fewer opportunities in the current position, then job satisfaction decrease.
· Job security
The assurance that employees get to their job
· Social interaction
The way they deal with the others. The quality and the quantity of the interaction.
Herzberg explain this as a hygiene factor. The quality of management is affect to the job satisfaction. If the quality is lower, worker can become dissatisfied.
· Organizational culture
Culture and management style can increase/decrease job satisfaction.
· Work schedules
Match between work schedule and the employee's schedule. Flexitime may increase the job satisfaction by allowing employee to interface between work life and personal life
The time duration that a person has held a position. When people are respect to the seniority, it will increase job satisfaction
The rewards and the role of money
This is the dedication that a person is doing to his/her job. If the actions of researching, selecting and the way he/she doing the job is visible to friends and others, then the person is satisfied.
Every person has some expectation. Basically what people expect in return for work.
· Job involvement
How important a job in someone's life. More the person involved more satisfaction.
· Effort / reward ratio
This is the balance between the amount they worked and rewards received
How a person can rate the job with someone else jobs. If a person has a good job compared to others they are satisfied.
How old someone, the people who old have more work experience, they understand what are the best thing to do, but sometimes they cannot satisfy with their job. Younger people have no previous experience which to compare with the current job. So they are satisfied.
There are two main theories of job satisfaction, Variance theory and the model of job characteristics. According to Hackman and Oldham (1975) the variance theory explains that if you want X from your work then you are satisfied to the extent that it provides you with X. The second model explains the causes of job satisfaction are objective characteristics. When the employees are satisfied with their work they tend to work more, they are become more committed to the organization, and they are more productive than previous, they try to achieve their targets in a better way. (Bravendam Research Incorporated, 2002). However job satisfaction association with organizational commitment that was not mentioned in most of the studies was noted by Elangovan (2001). A negative association between the job satisfaction, stress and commitment was indicated in his study. According to his study, higher stress leads to lower job satisfaction and this in turn results in lower commitment. Petty et al, (1984) explains that there are three possible links between performance and job satisfaction.
1. Satisfaction generates performance
2. Performance generates satisfaction
3. Satisfaction and performance link indirectly
1. Satisfaction generates performance
When designing the job it should aim to produce job satisfaction. Then it will optimize worker performance.
2. Performance generates satisfaction
When a person perform well that achievement generates job satisfaction. He/ she feel to do more for their job. So the effort should be made to improve performance then it will increase job satisfaction.
3. Satisfaction and performance link indirectly
These two are linked but under certain conditions.
Apart from the above theories, there are successful studies proving the importance and impact of maintaining a satisfied workforce. The analysis by Vroom (1964) covered 20 studies, in each of which one or measures of job satisfaction or employee attitudes were correlated with one or more criteria of performance.
Low salaries, lack of status and social security affect the motivation. When the motivation is low, job satisfaction is low. Lack of job satisfaction is a sign of turnover in an organization. The salaries and benefits which employees can achieve are related to job satisfaction.
“Management is nothing more than motivating other people”, is one of the most popular & proven principle followed within any kind of organization.
Motivation is concerned with the strength and direction of behaviour and the factors that influence individuals to behave in certain ways. Individuals are motivated to perform in a specific method based on their perception of the situation. Motivation primarily concerned with what energizes human behaviour, what direct or channels such behaviour, how this behaviour is maintained.
Motivation concerns energy, persistence and direction. According to Arnold et al (1991) there are three components of motivation,
1. Direction -what a person is trying to do
2. Effort - how hard a person is trying
3. Persistence - how long a person keeps on trying
According to the diagram felt need creates tension for people. Tensions motivate people to avoid it. The environment will influence to shape people needs and expectations influence the effort. Management can influence employee's expectations in a different ways, by offering incentives and setting them specific goals. The person's effort and results can influence the level of performance. The rewards / outcomes are the results achieved. Outcome can come from internal / external environment. Outcomes are always not positive; it can be negative as well. If it is negative, they tend to result in employee dissatisfaction / de motivation.
There are number of motivation theories which are complementary to one another. The content models in motivation mainly focus on the needs that individuals are trying to satisfy in a situation. The process models focus on how managers can change the situation in a better way to tie satisfaction to performance. Reinforcement theory is as developed by Hull (1951) suggests that successes, in achieving goals and rewards act as positive incentives and reinforce the successful behaviour, which is repeated the next time a similar need emerges which is coincided with the theory by Taylor (1911), who wrote: “It is impossible, through any longer period of time, to get workmen to work much harder than the average men around them unless they are assured a large and permanent increase in their pay”. In this theory there are four principal techniques available,
1. Positive reinforcement - If someone encourages the people when they done something they are utilising positive reinforcement.
2. Escape/avoidance reinforcement (Negative Reinforcement) - This is a form of a reinforcement. It increases the behaviour of a person by taking away something bad. The negative reinforcement is not same as punishment. It is not a form of a punishment.
3. Extinction (repeated non reinforcement) - Elimination of behaviour
4. Punishment - Most of the people are not expected to take this kind of an experience. The main idea of punishment is to withhold rewards.
Motivation is only likely when a clearly perceived and usable relationship exists between performance and outcome, and the outcome is seen as a means of satisfying needs. This theory was developed by Porter and Lawler (1968) in to a model that follows Vroom's ideas by suggesting that there are two factors determining the effort people put in to their jobs. First the value of the rewards to individuals that they satisfy their needs for security, social esteem, autonomy and self actualization, and the second is that rewards depend on effort, as perceived by individuals.
According to Latham and Locke (1979) motivation and performance are higher when individuals are set specific goals, when goals are difficult but accepted, and when there is feedback on performance. Abraham Maslow developed the Hierarchy of needs model in 1940's and still it valid today to understand motivation, management training and personal development. This model explains the responsibility of employers to provide the work place environment which is encourages employees to fulfill their requirements.
At the same time he explains needs are interrelated with some other needs that are less understood. Those are, Knowledge needs, understanding needs and aesthetic needs.
The relationship of Maslow's other needs
The need for knowledge is defined as the desire to build up facts and s. The need for understanding is an extension of the need for knowledge. This involves search for the relationships between things and what they know and it includes the search for meaning. The aesthetic needs are the beautiful things need to be surrounded.
According to Maslow all these needs are work together to form a complete picture. The Maslow's need mix basically applies to people who are in lower level than normal people because their needs for food and shelter are satisfied in a very poor way. On the other hand large portion of population can be characterized by the diamond Maslow needs mix. In this group strongest needs are to be social, with esteem, self realization and safety. Basic physical needs are the least important.
Charles Handy describe a model called motivation calculus and it is an extension of Maslow's hierarchy of needs. This model explains cognitive and external reference points. He describe that peoples' motivation is focused on series of needs than needs alone.
In 1959, Herzberg explains that satisfaction and dissatisfaction at work can be different and can be made up of different factors because the way individuals believe is different. And he says that the factors which motivate employees at the work place can be different and need not to be the opposite of the factors to make them dissatisfaction for their work. He developed motivation - hygiene theory to explain the outcomes. Herzberg explains that there are two different human needs;
- Physiological needs - which can be fulfilled by having money.
- Psychological needs - to achieve and grow. These are fulfilled by activities.
Herzberg describes the two - factor theory to explain this concept. He explains two factors that influence the behavior of employees in the organization.
1. Hygiene factors - These are the facets of the work environment that should be available in order to do the job. He believes money is a hygiene factor. This means money does not motivate people and that money does not give job satisfaction. He says that money only produces movement, not motivation. Because according to Herzberg the hygiene factors are;
- Quality of supervision
- Rules and policies
- Salary and certain types of employee benefits
- Working conditions
- Job security
- Relationship with supervisors, subordinates and peers
2. Motivator factors - These are facets that actually give a reason for the people to grow in their work. He state motivational factors as,
- Job itself
- Growth and advancement possibilities
Achievement means that employees achieve their objective, so this is very important for employees. Job itself is a motivating factor, because the way they doing their job, what they have to do to achieve their objectives and the things they learn during their working time. Growth and advancement is like carrot and stick philosophy. Recognition is appreciated by many employees. They like to have recognition for themselves within the organization. Employees are motivated easily when they are allocated for a responsible work. They try to do their work better than other people. Herzberg believes that ideal form of feedback is inherent to the job. The person does not have to be told that he/she has done a job, it is known automatically.
In 1960 Douglas McGregor proposed the X - Y theory. This theory is still commonly used in the field of management and motivation and remains a valid basic principle from which to develop positive management style and techniques. McGregor's X-Y theory is a salutary and simple reminder of the natural rules for managing people, which under the pressure of day-to-day business are all too easily forgotten. McGregor maintained that there are two fundamental approaches to managing people. Many managers tend towards theory x, and generally get poor results. Enlightened managers use theory y, which produces better performance and results, and allows people to grow and develop.
However unlike Maslow and Herzberg, Vroom is not concern on needs, but focus on outcome. Vroom's expectancy theory states that people choose their behaviours and the level of effort that they can provide, after considering whether their behaviours and effort will improve their performance and whether there are anything to achieve through it. (Rewards, recognition… etc). Vroom, hypothesizes that in order for a person to be motivated that effort, performance and motivation must be linked.
He proposes three variables to account for this, which are;
In 1963 John Stacey Adams explains his equity theory on job motivation. This theory is mainly deals with expectations and the concept of fairness. It considers what people expect to get from their jobs. The employee's expectations are not gather means they are not satisfied with their job. It will effect to motivation and the performance of the company. When the people feel that they are treated well in the organization they are more likely to be motivated, otherwise they are dissatisfied or de motivated. When people are working in an organization they all expect equity. It considers not only the pay, but the facilities such as vacations, trainings, work assignments and recognition. Adam explains effort and rewards issues at work respectively as ‘inputs' and ‘outputs'. Inputs are logically what we give or put into our work. Outputs are everything we take out in return. The equity state, occurs when a person's work inputs (I) equal to their work output (O); thus I=O. If a person feel that they doing more to job he/she will receive rewards (I>O), if a person feel that they are doing less and getting more from their jobs (I<O), they feel guilty and increase their effort. Adams used the term'referent' othersto describethe reference points or people with whom we compare our own situation, which is thepivotal part of the theory. This comparative aspect of Equity Theory provides a far more fluid and dynamic appreciation of motivation than typically arises in motivational theories and models based on individual circumstance alone. It also explains how it effect to others if the company provide a promotion or a pay rise for another person. The equity theory of motivation assumes of balance of employee inputs and outputs to others. The following diagram shows how it works.
The Equity Theory pivotal comparative aspect that helps managers and policy-makers to appreciate that while improving one person's terms and conditions can resolve that individual's demands (for a while), if the change is perceived by other people to upset the Equity of their own situations then the solution can easily generate far more problems than it attempted to fix.
Equity Theory reminds us that people see themselves and crucially the way they are treated in terms of their surrounding environment, team, system, etc - not in isolation - and so they must be managed and treated accordingly.
In 1999 Stoke explains Motivation is a human psychological characteristic that contribute to a person's degree of commitment. He explains there are some assumptions that a manager has to consider when dealing with the employees. Those are;
- First assume motivation as a good thing.
- Second is motivation has an impact on employees performance such as resources, ability etc.
- Third is manager has to think motivation is in short supply and need a periodic replenishment.
- Fourth is motivation is a tool which managers can use in the organization.
David C. McClelland has done a study of achievement needs and in this study he suggests that strength of the achievement need is dependent on three factors in any situation;
- The expectation of success
- The value of the outcome to the person (rewards and incentives)
- The feeling of personal responsibility for the achievement
He explains that some people have strong bias to their motivational needs and this will affect their behavior and the working style. At the same time he suggests some characteristics and attitudes to motivate people are;
- Feedback is essential to motivate an employee. Because it provide a measurement of success. Feedback must be consistent and accurate.
- Achievement motivates people to improve their working style.
- Financial benefits or rewards considered as the success factors
- Achieving the objectives means gain a personal satisfaction than receiving recognition
Strategies of motivating employees -
Salary, wages and conditions of service - In 2000 Akintoye describe that money is the most important motivation strategy and F. Taylor explains money as the most important factor to motivate employees to achieve the goals. Katz, in, Sinclair, et al. (2005) state that power of motivation through the process of job choice. He describe that money has the power to attract the employees, retain and to motivate. However Banjoko in 1996 state that many employers use money to reward or punish the employees.
Staff Training - This is one of the strategies that managers use to motivate employees.
Hence motivation is a characteristic which is proportional to the benefits the employee gets. The more they receive, the more they motivated. But it should be a function of Human Resource Management to build a relationship between them and decide on the level of benefits which should be given whilst the employee is motivated at its best level.
There is a psychological relationship between employee and employer in an organization. Guest (2007) explains psychological contract is concerned with “The perception of both parties to the employment relationship, organization and individual, of the reciprocal promises and obligations implied in that relationship”. Katz and khan (1966) explain that every people have some behavioral expectations with them and they are trying to achieve those things. But these expectations are not mentioned in the employment contract those are implicit. All employees expect to be treated equal within the company, to do a job that relate to their abilities and skills, to be rewarded according to their commitment, proper feedback for what they done and how to improve themselves, opportunities for future growth etc. In contrast, misunderstanding and less treatment may cause stress, poor performance or to a termination of the job.
The following model developed by Guest describe, that most of the employees expect security, rewards, incentives etc, and the core of the job contract can be measured by fairness of treatment, trust etc.
In an organization employees expect that management will provide the opportunities for them to move through the ladder of the company. These advancement opportunities would be related with age and the career stage. Mainly employees expect that the company will provide these things for them, but it always not happen. To achieve these things the company is monitor whether employees are loyal to the organization, whether are they following the rules and regulations of the organization, are they try to learn something new etc.
Effective communication is important to successful running of an organization. Communication is not a simple process; it is a very complex process operating at all levels within the organization. Then employees can communicate with the upper levels of the management about their requirements, working conditions, pay and other terms of employment, health and safety etc. For an efficient running of an organization managers and employees suggest that there should be a proper communication system within the organization. Then employees can contribute their participation for the company decision making process. Eeffective communication is important for any change management program; it generates trust as organization takes the trouble to explain what they are doing and why. Communication in organizations mostly takes place in a downward direction. The purpose is to provide information to employees about what is going on in the company or to provide previously taken decisions. For example downward communication include in - house journals and company news letters, e- mail circulation and briefing sessions with group of employees. Downward communication has its own limitations, for example, it does not receive the knowledge and opinions from the receiving end of the communication. Because of that many organizations also use upward communication. These not only accessing useful information for management, but they can give the impression to the employees that their knowledge and ideas are valuable to the organization. For example, surveys of employee attitudes, customer care programmes, suggestion schemes etc. The achievement of good communication is a complex and difficult managerial task and it is the major determinant of the supervisor - subordinate relationship as well as it is the primary management task. (Shell 2003)
According to studies there are seven rules for effective communication. The first rule states that effective communication behaviours, processes, and systems must be considered as strategic imperatives. The second rule states that effective communication is everyone's responsibility and will become a highly critical performance criterion. The third rule states that effective communication requires continual learning and development. The fourth rule states that diversity both challenges and enriches communication practices. The fifth rule mentions that network organizations provide the most efficacious communication environment (Shell 2003). The sixth rule mentions that organizational cultures exert a powerful impact on the effectiveness of communication behaviours, processes, and systems. The last rule states that continual networking will be the preferred mode for highly effective communicators.
Communication is one of the main aspects which have a huge impact on the work environment of an organization. Therefore it is a challenge for managers to construct a fast and efficient communication process where information can move effectively, which will affect on strengthening the employer-employee relationship, which is ultimately influence the success of the company.
Skills Development and Training
The training is more important to seek ways to improve employee knowledge, skills and advance their career prospects. Dale S. Beach explains the training as the organized procedure by which people learn knowledge and/ or skills for a definite purpose. Training should be seen as a complement to, rather than a substitute for, careful recruitment. This is a specialized function and one of the fundamental functions for human resource management. Trained employees would be valuable assets to an organization. According to Perkins and Shortland (2006), “training may be viewed as a relatively short-term intervention concerned with skills transfer, development implies a longer- term initiative” (Perkins and Shortland, 2006 : 122).
The organization's main idea of providing training is to develop the skills of their employees and not only for the local staff but for the international aspects as well. According to Caligiuri et al (2005) the training is more about the dealing with the individual performance. Some companies are providing the training in different methods. For example, they provide the training long time before they are starting their work, or some provide the training during the work and the same time long run development plans provide more balanced type of training and education for their employees.
Development is mainly future oriented approach and it help employees to prepare for the future for example, development can refer to job experience they achieve, relationships and assessment of personality and abilities. Development helps people to improve their skills which are relevant to other positions in the company or in other places. But training is helping people to perform in their current job. Training and development can be used to improve the knowledge and skills that employees need to perform well in their jobs and the same time it can be used to add values to employer's career, which affect on making him feel comfortable & confidence about his abilities.
Three main areas of training activity is determination of training needs and priorities, design and delivery of training programmes, and evaluation of training effectiveness. Training needs should be identified in a methodical and a systematic fashion. Training needs can be identified at three distinct levels; the organizational level, work role level and individual level. Training is an essential feature of most employee development programmes and the training is a key element in employee development. Other than the training organizations can use some other methods to facilitate the development process. Some of them are, Development centres, self - development, learning contract, planned work experience, action learning, coaching and mentoring etc.
Training is most important tool in Human resource management because it helps in motivating employees, archiving there professional and personal goals, increasing the level of job satisfaction. Training is a transforming process it requires input and produce output in the form of Knowledge, Skills and Attitudes (KSA). There are different methods of training which can be divided in to cognitive method, behavioral and management development method.
Cognitive Method -
This is basically giving theoretical training to the employees. This demonstrates relationships among concepts, rules for how to do something, written or verbal information etc. Different approaches are available in cognitive method:
- Virtual reality
Behavioral method -
This is giving practical training to the employees. These methods are useful for skill development. Different approaches are available in this method as well;
- Case studies
- Equipment simulators
- Role plays
- In- basket techniques
Management development Method -
This is concerned with future oriented and education of the employees. This method further divided in to two groups;
- On the job training
- Off the job training
On the job training -
This is the most common method of conducting training. The employee is placed on the job and manager shows how to do the job. To do it successfully there should be a proper plan for example, proper task lists, job breakdowns and performance standards etc.
They are using four techniques for on the job training -
- Job rotation
The main advantages of on - the - job training are;
- This is relatively inexpensive
- Easy to conduct the training
- Trainees learn while they are doing their job
- They get the feedback quickly
Off the job training -
This can involve both theory and practical training and may include assessment and examinations. There are some methods that they used in off the job training;
1. Simulation exercises
2. Straight lectures
Roll of training
The main objective of employee development is to make the individual more employable outside of the organization. Development for employability attempts to motivate individuals by providing them with transferable skills, then they are ready to advance their careers.
Research methodologies are formalized methods used to gather the relevant data to answer the research questions stated to achieve the objective of the research.
The research onion of Saunders m, Lewis P and Thornhill A, (2007), guide the researcher to come up with the most suitable approaches and strategies. Basically study is designed as a Quantitative research to understand degree of importance of the each key factor towards researchers' buying decision making. The research can be identified as a descriptive study that will use to determine the significance of each factor and facilitates to investigate the nature and status of the situation.
The research onion layers
Positivism, Interpretivism (or phenomenology), realism
Experiment, survey, case study, grounded theory, ethnography, action research
Cross sectional, longitudinal
Data collection methods
Sampling, secondary data, observation, interviews, questionnaires
Basically, the practical methods of research include questionnaires & interviews. These can be adapted according to the research objectives and what the researcher intended to achieve through it. It is important to state that, this chapter will not provide depth knowledge on overall research methods and methodologies and how they are using in a research. However it will give an idea about the research methodologies I have adopted in this research.
3.1 An overview of the research methods
Basically research methods fall in to 3 types; and it will select depending on the purpose for which they required. The types are considered as;
- Quantitative Research
- Qualitative research
- Multi method approach
The main difference between quantitative and qualitative is the method that they analysed the data. Michael, et al in 2000 says “quantitative techniques depend on the skills of the researcher as an Interviewer in gathering data.
This research generates numerical data or data that can be converted in to numbers. Quantitative research comes later in a research project, once the scope of the project is well understood. The ratio analysis would be ideal example for quantitative analysis. In this research mainly quantitative method will be used because almost all of the information is available through internet and libraries. Diamantopoulos and Schlegelmilch further divided the quantitative analysis in to two categories such as categorical data and quantifiable data. In which case categorical data set are meant to be difficult to calculate in the form of numbers. However that data set could be categorized on a specified basis. Subsequently they emphasized those quantifiable data sets which could be easily express in terms of numbers. (Diamantopoulos, et al 1997, p 267)
This research is used to explore and understand people's beliefs, behaviour, interaction, attitude etc. It generates non - numerical data, for example, employee motivation, satisfaction etc. This research is a much more subjective form of research in which the research allows to make there own bias to build up a complete picture. Qualitative research is necessary in situations where the researcher is unclear about outcome he/ she is looking for in a study, so that the researcher should have the ability to extract only the important data for his/ her study. On the other hand quantitative research generally identifies the exact outcome of the research before it begins, in qualitative research the focus of the study may become more visible as time progresses.
Qualitative Data Analysis Process
Multi method approach
Analyse the topic using more than one method may improve understanding of that topic in depth. This kind of a research is considered as Multi method approach.
Features of Quantitative and qualitative analysis can be summarized as follows;
The aim is a complete, detailed description
The aim is to classify features
Data is in the form of a words, pictures or objects
Data is in the form of numbers and statistics
Researcher may only know roughly in advance what they are looking for
Researcher knows clearly in advance what they are looking for
Analysis conducted through the use of conceptualization
Analysis conducted through the use of diagrams and statistics
(Source : www. wilderdom.com)
3.2 Data collection and Analysis
Incorporated data in any study, can be divided in to two major categories; Primary data & secondary data. Secondary data will provide the foundation and the background for the study whilst the Primary data will give the concrete evidence for the questions trying to seek through the study.
3.3 Primary Data
This is one of the major parts of the study. Data should be collected to align with the answers that should be found for the questions formalized within the study. This primary data will be collected through questionnaires, personal interview and focus group interviews.
3.4 Secondary data
Secondary data is the existing primary data that was collected by any other means. The information can be obtained from previously published materials, such as magazines, newspapers, books, company reports, files and internet. Generally secondary data set is less expensive, therefore it will enable me to access to a large volume of data which is relevant to my analysis. The time is the most critical factor in this research, because of that secondary data is mostly used for this research. The most important and relevant secondary data set is chosen and include it to the research.
Secondary data can be classified in to different sections as follows;
Types of secondary data
Documentary - This kind of data is organizational records, Internet sources, newspaper articles, communications and reports of committees etc.
Multiple sources - This means multiple sources combined, for example Documentary and survey data. Industry statistics, country reports etc.
Survey data - Government surveys and censuses, surveys by international bodies etc.
3.5 Data Analysis
Since both qualitative and quantitative data would be used, the data analysis would use both qualitative and quantitative analysis methods. For instance, spreadsheets and graphs using statistics scales would be used to analyze the quantitative data whilst, the qualitative data would be analyzed using categorization techniques where general answers would be placed in grouped categories for analysis.
3.6 Research Sample
IFS research & development Ltd in Sri Lanka will be selected for this study and the data will be taken from different level of work force. The intended sample size is nearly 100 employees and the data is willing to collect through questionnaire and personal interviews.
3.7 Sampling and research tools
Many employees as possible, at IFS, will be invited to participate in a web base questionnaire. Apart from the employees at IFS Sri Lanka, research will try to reach out the employees working for IFS in many other countries in world, including the United Kingdom.
A one of the important significance of this questionnaire is that the usage of web based research tool (Google docs).It makes very simple for the participants to provide the answers easily and also it is very easier for me to collect and process the information. And also the questionnaire included with multiple choice type questions, since I thought it will encourage the target population to participate in the survey, much more than one with an essay type questionnaire.
Within the limited resources and time period, the sample will fairly represents the total population.
Advantages of Questionnaire
· Relatively Inexpensive
· Research many people in short time
· It is relatively quick to collect information
· No prior arrangements are needed
· No interviewer bias
Disadvantages of Questionnaire
- Require time and skills to develop
- Inaccurate response or lower rate
- No opportunity to clarify
- May lead to unrealistic expectations
- Open ended questions generate large amount of data that can take a long time to process and analyse.
- Require a return deadline
- No control over who completes it
In addition to the questionnaire, randomly selected personals from different levels will be interviewed via video conferencing and telephone. The purpose of personal interviews is identifying in depth information that will not be able to discover from questionnaire. Additionally they will enhance the supplement the information gained by questionnaire.
Advantages of Interview
- Allow for clarification
- Provide relevant data
- Build involvement and support
- Can investigate motives and feelings
- Usually achieve a high response rate
Disadvantages of Interview
- Expensive in terms of time and travel cost
- Require interviewing skills
- May be difficult to analyse results
ANALYSIS AND RESULTS
Having laid down the foundation, this is the chapter which describes the outcome of the research. In this chapter, the data collected through the questionnaires, personal interviews and from the other additional external sources are subjected to a thorough analysis to show the relationship between the employee satisfaction and the performance of the company.
Primary questions of the research are categorized in to several topics and analyzed using the statistical information of IFS. In that way it is very easier to compare them against each other and for the reader to have clear understanding of the outcome.
The results of the questionnaire and the personal interviews are attached in the Appendix section.
a) Gender and Age factors
A one of the most important characteristics of the IFS is that, both male and female share almost equal portions from the employee population. Therefore its good example to show that company treat the people same way whether the employee is a female or a male. Furthermore, I have realised that, within the employees there is a strong belief that IFS is always trying to continue the particular practise as they always focus on keeping the male-female equilibrium, even when they do, new recruitments.
What is your age group?
When consider the Age factor, the data shows that IFS is driven by employees from different age groups ranging from 20s to over 50. Which in fact means that the company has to tackle very different psychological contracts, as it's a well known factor that the basic needs of humans vary with their age. For an example, young employees might satisfy with flexibility of their working hours, while older group is concerned with their job security.
According to the Information gathered, IFS substantially engaged in satisfying the above factor. Company has provided many facilities within and outside the company to support the different needs and wants related to different age groups. As an example IFS Sri Lanka has given a considerable degree of freedom to employees for their office hour which is very satisfying for all of them. Furthermore company is facilitating recreational centre, comprises of a Swimming pool, badminton court, table tennis, carom and a basket ball and also sponsors the membership fee for an external gymnasium network which most popular in the young workforce . Additionally as part of the IFS welfare, company hosts a Day care center for the children's of IFS employees which makes the
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