Impact of organizational culture on turnover intentions in BPO sector in India.

AuthorDwivedi, Sulakshna
PositionBusiness process outsourcing


Over the past decade, India has become a serious resource for outsourced talent for organizations all over the world. Thanks to low costs, language skills, technical education and a supportive government in India, the BPO/ITES sector has grown at a frenetic pace. BPO exports from India grew from US$2.45 billion in FY 2002-03 to over US $16 billion in 2011-12. Presently outsourcing industry in India indirectly employs 3.5 million employees and accounts for 6.4 per cent of the GDP (NASSCOM, 2012). With this exponential rise, however, have come HR difficulties. Employee retention has become a big concern in organizations all over the world, but the BPO/ITES sector in India is particularly affected by low retention rates and high staff turnover. In spite of what could be regarded as highly favorable conditions for the establishment of BPO operators, skill shortages and employee turnover have quickly become major challenges facing the burgeoning industry (Budhwar et al., 2006a; 2006b).According to a global study, Indian call centers have the highest employee turnover of 40 per cent against a global average of 20 per cent and almost 60 per cent of employees have less than one year of tenure at work (Holman et al., 2007). Attrition rate in BPO sector in the first quarter of the year 2011 was as high as 55 per cent (ASSOCHAM, 2011). It is known that the rate of attrition exceeds 100 per cent in certain companies, in certain geographical locations and for particular processes. For the purpose of this study, we have taken Organizational Culture and Organizational Commitment as key antecedents of turnover intentions. Further, an attempt has been made to test the mediating role of Organizational Commitment in Organizational culture and Turnover Intentions.

Background Literature & Hypotheses

While reviewing the literature on turnover of employees in general, one finds many antecedents of turnover such as individual perceptions about the desirability and ease of movement (March& Simon, 1958), dissatisfaction (Porter & Steers, 1973), Organizational Commitment (Mathieu & Zajac, 1990), Organizational 'shocks' (Lee & Mitchell, 1994),work and non-work demands (Hom & Kinicki, 2001), perceived organizational support (Rhoades et al., 2001), Organizational Culture (Park & Kim, 2009) etc. But exclusive studies on BPO sector revealed that the long-recognized problem of high attrition is in large part a consequence of work that is repetitive and dominated by short cycle times where call throughput is prioritized. Lack of control, extensive monitoring, the prevalence of targets and the brevity and infrequency of breaks further contribute to work being experienced by many as pressurized and frequently stressful, often leading to emotional exhaustion and withdrawal (Deery et al. 2002) and to sickness, absence and ill-health, particularly where built in environment problems exacerbate the effects of poor job design (Taylor et al. 2003). BPO favors the adoption of more routine work flows that have been standardized to a greater degree, allows less room for discretion and occasions higher levels of monitoring (Batt, 2002; Batt & Moynihan, 2002). It could be argued that this scenario results in lower levels of job commitment on the part of Indian workers and to the correspondingly higher levels of job attrition that we observe in this industry (Taylor & Bain, 2005).

Certain specific issues relating to the work environment in Indian call centers have been attributed to employee stress, burnout and turnover and these include servicing overseas customers with different cultural and economic backgrounds, adoption of pseudo-names to mask identity (Mirchandani, 2009).Research suggests that firms mostly tend to outsource non-core business processes that involve low value, low skilled, routine and standardized transactional activities (Thite, 2008). Considering that Indian customer service representatives (CSRs) are, on average, more highly educated than their counterparts in Western centers, it is possible that their skills are being under-utilized, leading to de-motivation and higher quit rates.

On the basis of literature reviewed in BPO sector, it is apparent that most of the studies which are based on interviews with BPO workers are pointing towards different aspects of organizational culture, work environment and job design etc. as antecedents of the turnover and lower level of commitment. Moreover, these studies are based on descriptive evidence (Budhwar et al., 2006; Taylor & Bain, 2005) or on managerial surveys (Batt et al., 2005). Fewer studies are found in which some statistical relationship among organizational culture, commitment and turnover intentions in this sector have been worked out. Exclusively, the existing literature highlights a strong paucity of research on the management of high attrition rate in BPOs in India especially in a Tier III city i.e. Chandigarh. Given the rapid growth in the sector, involvement of a large number of both national and multinational firms and a significant impact of Indian BPO on the global economy, it is important to highlight the organizational culture of BPOs and its impact on commitment and turnover intentions of employees.

Organizational Culture & Organizational Commitment

Different researchers (Yiing & Ahmad, 2009; Rashid et al., 2003; Shannawaz & Hazarika, 2004) had established the relationship between organizational culture and commitment of employees in different regions and different industrial sets up. While others had established the relationship between different dimensions of organizational culture and some other variables with organizational commitment (e.g.Sungmin et al., 2005) found teamwork and trust to be a significant predictor of commitment. Tilaye (2005) assessed that perceived job autonomy, procedural justice, distributive justice, organizational support and employee age are the most important predictors of organizational commitment.

Shannawaz and Hazarika (2004) assessed organizational culture on OCTAPACE Scale of Pareek (1997) in two hospitals and found dimensions of organizational culture as significant predictors of organizational commitment. Kwon and Banks (2004) showed strong relationships between organizational commitment and job meaningfulness; task identity was found to have a strong positive relationship with professional commitment while gender and organization size had a positive (negative) influence on organizational commitment. Connell et al. (2003) found perceived organizational support, procedural justice and transformational leadership as significant predictors of trust in managers which further predict turnover intent and commitment.

Hypothesis 1 (H1):Organizational culture has significant influence on organizational commitment.

Organizational Culture & Turnover Intentions

Even research conducted in the area of organizational culture and its various dimensions and their influence on turnover intentions has affirmed that perception of employees about organizational culture and its dimensions have significant influence on turnover intentions. Carmeli (2005) examined the influence of five dimensions of organizational culture (i.e. job challenge, communication, trust, innovation and social cohesiveness) on employees' withdrawal intentions and behavior and he found that an organizational culture that provides challenging jobs diminishes employees' absenteeism and withdrawal intentions from the occupation, job, and the organization. Igbariaand Siegel (1992) found that task characteristics play an important role in predicting job involvement, career...

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