Human Resource Management Challenges Software Industry Business Essay


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The main focus of the article is to study the challenges and issues governing the management of human resource in the software industry in India that is brought about by the trends in technology as well as global economy. Due to the dynamic nature of human resources in software industry, increasing annual growth and lack of any set rules and regulations, it is obvious that the managers of Human resources in Indian software industry face new challenges. Organizations continue to grow and diversify their business prospects, which lead to additional human chain. The increasing pressure of clients, cost limits, productivity issues etc. demands high levels of talent in managing the manpower. In addition, Indian companies that have workforce globally present and compensation benefits that are varying across industries leading to High attrition levels. This paper explains some of the challenges in motivation, delegation of authority, work culture, training , pay compensation and attrition faced by HR managers and addresses certain solutions in facing such challenges though every industry has a unique structure.

Key words: Delegation, Work culture, Attrition, Pay compensation and Training.



In India, beginning 1980, the software industry has become the driving force of the economy. The government formulated the computer software policy in 1986. The economists began to analyze the potential of the Indian software industry. Today it is one of the fastest growing sectors of the economy and provides high quality employment for young people. Further, it earns significant revenue from exports and it is a highly desirable industry and has no undesirable environmental side effects.

The Software Industry is defined as the part of computer programming activity that is traded between software-producing organizations and corporate or individual software consumers. Just as coal and steel were the essential ingredients in the Industrial revolution, Software industries are the ingredients of is Information Technology revolution. Software industry has become a tool in our daily life as it finds its applications in telecommunications, air traffic control, computer controlled traffic lights and train reservation, banking and financial services, business administration, education, health care, entertainment, etc.

Over the past years a number of trends have emerged in the software industry in India as well as worldwide. IBM has been the market leader in the software industry. However, Microsoft is the leading operating system supplier for the personal computers. Other companies namely, Sun Microsystems, the developer of the Java platform, Oracle , HP, Novell , Red Hat and Symantec had substantial presence in the software industry. In the internet era, Google is by far the fastest growing software company and it is also expanding its activities beyond internet search. However, in terms of revenues coming from software sales, the software industry is clearly dominated by Microsoft. India has been one of the their major presence in the operations of the above industries..

Based on the revenue and number of employee population software companies in India are significantly classified as Tier -1 , Tier -2 and Tier - 3 Companies. Companies usually have a revenue more than US dollar 1 billion comes under tier-1 companies with more than 50000 employees. Global companies such as Accenture, HP Enterprise Services, IBM fall into the category of tier -1 software industries which have large number of India-based employees and show a strong presence in India. Companies with revenue over 100 million US dollar comes under tier 2 companies with approximately less than 50,000 and above 10,000 employees such as TCS, Tech Mahindra Limited, Infosys Technologies Limited, Patni Computer Systems Limited, Wipro Technologies Limited, Mahindra Satyam Computer Services Limited, HCL Technologies Limited and Larsen & Toubro InfoTech Limited fall into the category of tier -1 software industries which also have large number of India-based employees and show a strong presence in India.. Companies having revenue less than tier 2 companies are classified as tier 3.


Motivation: One aspect of maximizing work performance will involve motivation. According to Peter Drucker,(2004) " The good ones among managers do not talk about their problems, but they know how to make subordinates talk about their problems". The managers should make their employees to speak about their issues and motivate them accordingly. As per Morley Steltner ,(2006) "Good managers should avoid criticism and give feed back by inviting employees to evaluate their feedback and ask follow up questions."

Delegation: Morley Steltner,(2006) says "Delegation should not be confused with assigning routine work to employees that falls within their normal jobs. True delegation involves giving someone the responsibility and authority to do something that is part of Manager's job." Empowerment of employees plays a major role in retention by an employee in an organization. Employees should be delegated with adequate powers to carry out the works. Even for petty works, when there is dependency it will make the employees to get annoyed. Malone (1997), says 'Empowerment of employees could help to enhance the continuity of employees in organizations'. Prof Bruce L Katcher,(2007) says 'Employees are not happy when they aren't free to make their own decisions. They hate management for lack in trust '. Keller,(1995), says 'Superiors empowering subordinates by delegating responsibilities leads to subordinates satisfaction with their leaders and this makes employees to be committed to the organization and chances of quitting are minimal'. Therefore it is to be understood that when an employee is free to make a decision, he will be more satisfied and committed towards the job and chances of turnover will get minimized.

Work Culture: Certainly, the mismanagement of growth has contributed to the demise of most companies mushroomed since last few years. There are many issues involved but the fact that most managers come from a technological background is significant as is the difficulty of growing and mastering a company beyond its entrepreneurial phase. Both of these are exacerbated by the reluctance of software companies to buy in general management talent and use non-executive directors. It is evident that the software companies are more susceptible to stagnation and at an earlier stage than companies in other industries. This may be due to a gradual decrease of dynamic qualities, loss of competitive edge, inability to adapt new technologies, losing technical competence due to a promotion into managerial position etc. Couger, (1988) says "Workers who have a greater variety of tasks stay in the job and task chacteristics have been found to be potential determinants of employees stay in the industry". Reiji Ohtaki Hugh Bucknall,(2005), says "The executive who is willing to move has become far more attractive. Organizations need the flexibility to move talented people quickly to take on positions where they needed.

Training and development: W.David Rees and Christine porter ,(2008) says "Training and development has become even more important as a result of recent developments such as the accelerating rate of change and increased competitive pressures brought about by factors such as globalization and increasing development and application of information technology. Training and Development has always been an issue that organizations have to take seriously and if organized effectively should be viewed as an essential investment and not an avoidable cost. The return on investment involved should be such that as a result of training employees reach an acceptable stand and of performance more quickly than would otherwise have been the case." Snell,(2007) says "The organization is responsible for supplying information about its mission, policies and plans for providing support for employee self assessment training and development."

Retention and Attrition: Employee retention has been a major concern for software industry in the present scenario. Many researchers have analyzed cause of employee attrition. The managers should read employees mind power with interest and offer new challenges. B.B Mahapatro , (2010) said "One of the toughest challenges for the HR managers in the software industry is to deal with HR audit the prevalent high attrition levels. Though there is an adequate supply of resource staff at entry level, there are huge gaps in the middle and senior level management in the industry. Further, the salary growth plan for each employee is not well defined. This situation has resulted in increased levels of poaching and attrition between organizations. The industry average attrition rate is 30-35 per cent and could range up to 60 per cent."

Pay & Rewards: The HAY Group - Thomas P. Flannery ,(1996), says Senior leadership which often remains focused on cutting costs and increasing profits . They look at pay as anything more than a margin in terms of reducing expense. And HR compensation professionals often see pay purely in terms of attracting and retaining talent. Monetary satisfaction is the one way of retaining the employees. Griffeth,(2000), says 'Pay and pay-related variables have a modest effect on turn over. There is relationship between pay, a person's performance and turnover.' Actually the pay and pay related issues are indirectly proportional to employee turnover. More the employee paid, less the rate of attrition. Hence it is the responsibility of an organization to make employee satisfaction towards pay and perks to reduce attrition rate. Christian M.Ellis,(2002), says 'Measurement is the key to the success of incentive plans because it communicates the importance of established organization goals. What gets measured and rewarded gets attention'. Employee will be interested in job and committed to work if rewards based on performance are given. It will be appreciated by the employee if their performance is noticed and rewarded by top management.

Stress: Firth,(2007), says 'The experience of job related stress, the range factors that lead to the same , lack of commitment in the industry play a major role for an employee to quit' . Hudson says 'Employees who experience increased stress due to work/life conflict and decreased perceptions of control over their work and non-work demands are less productive, less committed to, and satisfied with, their organization and more likely to be absent or leave the organization'. The managers of software organizations should be able to recognize the symptoms stress and place successful techniques in managing stress. J.A.Fuller,(2003), says 'A constant diet of even low-level stressful events has the potential to cause workers to experience gradually increasing levels of strain over time'. Such increasing levels of negative emotions will impact in work. HR focus implies 'Over achievers can experience burnout when unrealistic work goals are unattainable'.


Current trends in Indian Market

The Indian economy facing challenges in managing growth and containing inflation a backdrop of an uncertain global environment. Due to the recent, global economic issues such as Euro zone crisis and rising commodity prices, during this fiscal year 2011 -2012 Indian economy show slow down. Domestic growth rate was impacted by tightening of the monetary policy by RBI. The budget pegged Gross Domestic Product (GDP) for the year 2011-12 to have grown at 6.9% primarily due to deceleration in industrial growth. The estimated GDP growth in 2012-13 is at 7.6% . The Wholesale Price Index (WPI) inflation for all commodities for the period of March 2011 to January 2012 moderated to 6.6 per cent.(Source : Economic survey 2011 -12). The key challenges for the software industry are:

Economic Slowdown in the west as software industry has its revenue linked to the western markets

Attrition and retention of talented personnel

The gap between supply and demand of quality trained people

Motivation: The most widely reported motivator of software professionals is the ability to identify with the task. This means that the task should have clear goals, be interesting to the individual, be clearly defined and be linked into the wider set of activities .Some of the other factors that can motivate the employees in software industry are

Employee participation/involvement/working with Others

Support from senior management support, teambuilding and communication

Opportunity for advancement, promotion prospect, career planning

Sense of belonging/supportive relationships

Scope for increased pay and benefits

Recognition for a high quality job done

Opportunity to specialize in Technically challenging work

Flexibility in work times, work location



Delegation: The work structure of the software industry show the software teams are globally distributed in software development projects. Virtual teams are an important work structure in global software development. The distributed team structure enables access to a diverse set of expertise which is often not available in one location. This distributed structure requires the best leader delegation to sub-teams and trust between sub-teams. Leader delegation related to teamwork process that improves team members' motivation and satisfaction with the leader. Cultural distance and geographical distance impair trust development between members across sub-teams is greater challenge to be tackled. Temporal distance causes conflicts related to excessive overtime and meeting scheduling. Trust in sub-teams is critical to improving motivation in a global software project There exists language differences among software team members posing additional challenge for the HR managers for evolving delegation strategies to improve team members' trust and their motivation.

Work Culture: The work culture of software industry is different from other traditional industries in many ways. The software industry follow a 'global corporate culture' where lack of bureaucracy, openness, flexibility and employee empowerments are the key ideologies. Mobility is particularly important whether the small size of single operations limit both carrier opportunities and available talent pool. Treating all operations within the region as a single executive resource pool creates economies of scale and opportunities of advancement "

Training and development: Employees form the basis of the software industry. Training & developing employees to keep them abreast thus forms a major challenge. Most of the top software companies have their own training facility wherein the training to fresh employees given for three to six months. Thus, training programs form a huge part of the cost .As software industry found to be competitive employing of skilled talent has come up as the most critical challenge as the fight for best talent is greater than ever. Further Training & Developing Potential Leaders & Engaging employees come up as the other two top concerns requiring dedicated efforts

Retention and Attrition: It is always more profitable by retaining employees than acquiring new employees. Managers have to build an effective employee retention system as shown in the Figure.1.

Figure -1.Employee retention system model.

Management has to understand 'why employees leave' and identify the high risk of attrition by accurately predicting attrition rate. Most of the employees have given better pay as the topmost reason to leave points to increasing presence of MNCs with better pay scales in the industry. Better utilization of current skills is one of the top attrition reasons. Employees also leave organizations for personal reasons like marriage, relocation etc. Before many employees leave , they become disengaged; This in turn makes the employee uncommitted, marginally productive, absenteeism and in extreme cases working against the interest of the organization. If root causes of the employee disengagement is correctly found out , the root causes can be eradicated by on-target solution which in turn increases the performance of employee in right positive direction. The following facts found to exist in the current year:

Junior management (JM) level faces highest level of attrition.

Better pay in other software companies is the foremost reason for the employee to leave the organizations.

Many employees wants to pursue further studies in India and abroad looking for improves skill sets.

Improved work - life balance is another area which is slowly but steadily gaining

momentum as employees seek to consciously decrease levels of stress at the workplace.

Pay & Rewards: According to the Economic survey 2012 -13, during the last year the overall pay increments in software sector remained relatively low. Majority of the software companies have given increments to all their employees in the range of 10-12%, across all levels - Junior, Middle, Senior & Top Management. Top Management increments across organizations have been the lowest. The reason for this low rate of increment can be attributed to the Economic slowdown in the West. The industry Median for annual Increment is 11% (50th) and it is lower when compared to the previous year. This is due to the uncertain market sentiment.

Stress: Most of the employees in the software industry work based on definite time line, which naturally induces stress. It is understood that when there is stress in the job, naturally commitment towards the work will get reduced. This arises the tendency of the employee to quit and seek comfortable job. Low spirits and short temperedness are some indicators of stress. Lesser stressful work for long period , also sometimes induces distress and make the employee to think of moving out. Whenever software industry gets downsized, work pressure will be more on remaining employees because of more work expected to be performed by them, with fewer sub-ordinates. This will lead increase trend of attrition.


This paper presents an overview of the challenges faced by the changing scenario of software industries in India. The complete dynamic nature of the business requires constant involvement of the Human resource manager to provide strategic solutions for the challenges. HR must constantly be aware of the business strategies and the opportunities and threats facing the organization. It is also of critical importance that the top management also fully involve in implementing the processes sincerely and to add value to the organization. The various strategies suggested in this paper including the retention can be better practiced by motivating the employees which the will result in increased organizational effectiveness.

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