International Accounting Business Conference (IABC) 2013
Linking Talent Management Practices to Employees’ Engagement and Retention: A Case of Malaysian Information and Technology (IT) Organizations in Selangor Norzanah Mat Nor1 Nurul Ezaili Alias Roshidi Hassan Universiti ersiti Teknologi MARA, Shah Alam Alam, Malaysia
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Abstract
Purpose – The purpose of this conceptual paper is to illuminate the effectiveness of talent management practices in engaging and retaining employees in the IT organization in Selangor, Malaysia. Design/Methodology/Approach – Since 1990s, organizations in the IT industry, globally, have been characterizedd by a high rate of employee turnover. Talent management has recently been the target of increasing interest and is considered to be a strategy by which organizations can engage and retain their potential employee and talents. Previous studies have often focused f on the management of talent, but the issue of what exactly should be managed in talent management hence engage and retain employee has generally been neglected. In this paper, the authors focus on discussing the dimension of talent management practice and as an initiative to engage and retain employees in the IT industry. Findings – Based on review of existing literature, managerial support, employee career development, reward and recognition are the initiatives of talent management that could be significance gnificance to employee engagement and retention. Practical Implications – Due to critical phenomenon of employee turnover in IT industries, globally and locally, the engagement and retention of IT employees are crucial to the practical implication of talent ent management practices. Originality/Value – This paper provides values to IT employers and researchers on the other dimension and the importance of talent management due to its ability to engage and retain this scarcity IT employee talents and provides an original and useful initiatives for developing effective talent management in IT organizations particularly in Selangor, Malaysia. Malaysia Keywords - Talent Management, Information Technology, Employee Engagement, Employee Retention Paper type - Conceptual paper
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International Accounting Business Conference (IABC) 2013
Introduction In the 21st century, talent management has become as one of the primary organization tools for managing employees due to the significant resource for business success in this century is no longer land, capital, and other tangible assets but the human capital (people) (Ashraf and Joarder, 2009; Cappelli, 2008).. Talent management has emerged in the 1990s and continues to be adopted as more organizations realize th that at their employees’ talents and skills could drive their business to success through the establishment of talent management departments and programs (Bethke-Langenegger Langenegger et al., 2010; Talent Management at GLC’s, 2009). There are various aspects of talent management, nagement, such as recruitment and selection, coaching and mentoring, career development, leadership development, performance management, recognition and rewards and etc (Romans and Lardner, 2006; Forman, 2005). “Talent management is fast gaining top prior priority ity for organizations across countries” (Bhatnagar, 2008, p.19). As workforces around the world become larger, more educated and more mobile, stiff competitions in attracting and retaining the top employee talent have risen and therefore the issue of employee yee turnover in organizations cannot be ignored (Brewster ( et al., 2011). Consequently,, it will incur to financial burden, negative impact on employee morale and adverse impact to quality of services and products and be a costly problem for the organizations organization (Borgohain, 2010; Perez,, 2008) 2008). Thus, its practices have become a medium and strategy for organizations to engage and retain the potential employees in order to gain competitive advantage (Hughes Hughes and Rog, 2008; Bhatnagar, 2007; Mustafa Kamil et al., 2011; BethkeBethke Langenegger et al., 2010). This is justified as the evolutions of talent management practices in organizations have brought about m many changes in the way employee talents are engaged and retained (Westlund and Hannon,, 2008) 2008). 2
International Accounting Business Conference (IABC) 2013
In this technological age, where the IT sector is booming and drive our 21st century digital economy (Westlund and Hannon, 2008; Bailey and Stefaniak, 2006), organizations have to confront various issues. One of them is attrition (Tham et al., 2008).. The problem is extremely acute in the IT industry, with the scenario of employees joining and quitting in short periods. Further, since 1990s, organizations in the IT industry, globally, have been characterized by a high rate of employee turnover. Employee turnover leads to loss of skilled man power, loss in productivity, loss in market share and profitability ((Tham et al., 2008). Stiff tiff competition and the lack of availability of highly talented and skilled employees make finding and retaining these talented people ass major priorities for organizations nowadays (Fegley, 2006). Therefore engaging and retaining employees has become an issue that needs a lot of focus. This is why talent management in the role of employee engagement and retention cannot be seen in isolation isolati (Tanton, 2007). As IT becomes a key competitive advantage to organizations, the demand for quality IT employees are increasing dayy by day (Suh (Suhaimi et al., 2012). Talent lent management practice is often viewed as a critical strategic management function where it has three important strategies: managerial support,, employee career development and rewards and recognitions. recognitions The ability of organizations to properly implement such talent management str strategies ategies may help to select, engage and retain potential employees in order to support the organizational strategy and goals. Although the nature of this relationship is interesting, the effectiveness of talent management and its added value have been empha emphasized sized in the organizational talent management research literature. Therefore, after extent review of the workplace talent research literature, the authors set out to design a testable hypothesized model linking talent management practices to
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employees’ engagement agement and retention retention. Further, the relationships between variables are elaborated in this paper.
Talent Management Concept
Talent management has become a central component of corporate HR strategies and has recently gained increasing interest in the area of HRM/HRD research (Burbach and Royle, 2010; Capelli, 2008). Talent management is not a new concept (see, e.g. Patton, 1967), but talent management research is scarce (Burbach and Royle, 2010, Collings and Mellahi, 2009). The term talent management first emerged in the late 1990s and was popularized when a study completed by researchers within McKinsey and Company and revealed that it was not “best” practices that distinguished high performing companies but it was a pervasive talent management mindset (Michaels et al.,, 2001). There are numerous articles and literatures primarily in the popular and practitioner press directed towards the field of talent management, however, there is a lack of clarity regarding the definition, scope and overall goals of talen talentt management and it is rarely addressed in the academic journals (Lewis and Heckman, 2006). This is the gap to bridge the practitioner and academic worlds. Talent management is defined as both a philosophy and a practice ((Piansoongnern, Piansoongnern, et al., 2011). It is a multi-faceted faceted concept that is championed by HR practitioners and built based on the foundations of strategic human resource management (Hughes and Rog, 2008). It is both an espoused and enacted commitment – shared at the highest levels and throughout the t organization by all those in managerial and supervisory positions – to implementing an integrated, strategic and technology enabled approach to HRM, with a particular focus on human resource planning, including employee recruitment, retention, developme development nt and succession practices, ideally for all
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employees especially for those identified as having high potential or in key positions (Piansoongnern et al., 2011; Hughes and Rog, 2008 2008). The concept of talent management has different meaning to different people peo and it is a strategy implemented in the workplace (Piansoongnern et al., 2011).. The term of talent management as ‘management of talented employees’, brings the HR managers identified talent management as the strategy in managing talented employees (Mustafa tafa Kamil et al., 2011). 2011) Further, the he talent management concept is holistic and encompasses translating corporate goals into workforce needs, linking people to profit and effectively managing talent to improving business performance (Farley, 2005). In order to sustain business results in a global economy, organizations will have to rethink their approaches to talent management and how it affects employee engagement (Sweem, 2009). Generally, managing aging talent has become more important to a wider range and more strategically planned of organizations. The future of talent management may be about embracing and leveraging “connectedness” or engagement of employee (Frank and Taylor, 2004). Further, organizations nowadays appear ready and have started to embr embrace ace this concept (Oakes, 2006). Talent management is a part of the overall strategy for organizations to engage and retain their employee talents. Most importantly, talent management can be explained as engagement and retention strategy for organization ((Piansoongnern et al., 2011; Sweem, 2009; Hughes and Rog, 2008; Bhatnagar, 2007; Glen, 2006; Morton, 2005). Furthermore, talent management is such a trend in terms of how organizations can compete with the best resources (best factors influencing employee eengagement) ngagement) available for the highest organizational effectiveness. According to Morton (2005, p. 11) “Talent management is integral to engaging employees in the organization”. Therefore, in n order to contributing to an
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effective talent management practices practices, an organization’s talent management strategy should able to engage and retain employee.
Talent Management Perspectives
Lewis and Heckman (2006) have reviewed and conceptualized talent management in 3 primary perspectives: (1)
a collection of typical human resource department practices or functions;
(2)
talent pools or flows of employees into jobs in an organization;; or
(3)
a generic perspective on talent that focuses on either high high-performing performing and highpotential employees or ttalent in general.
The first perspective of talent management is comprised of “a collection of typical human resource department practices, such as recruiting, selection, development and career care and succession management” (Lewis and Heckman, 2006, p.140). Fr From om this perspective, Lewis and Heckman (2006) argued that talent management may be little more than a trendy term or a euphemism for human resource management (HRM). Talent alent management has also been associated with a shift from the department department-specific focus of HRM activities to an organizationorganiz wide engagement at all levels in terms of recruiting, retaining, and developing talent. Talent management is considered to be an important way of ensuring that HRM becomes a central component of a business’s strategy aand nd is integrated into the everyday processes throughout an organization, ation, from the practices of the HR department and line managers to those of senior management (Lewis and Heckman, 2006). Second perspective is “focuses primarily on the concept of talent pools” po (Lewis and Heckman, 2006, p.140). From this perspective, talent management is considered more or less
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synonymous with human resource or workforce planning, particularly if automated and connected with other organizations databases and systems (Lewis and nd Heckman, 2006). 2006) Moreover, it is also important to identify the specific needs in an organization by, for example, constructing needs assessments and conducting detailed job and talent gap analyses as foundations for training and development (Nilsson and Ellström, 2012). Lewis and Heckman (2006) criticized the first perspective is “superfluous” or little more than the “rebranding” of human resource management (HRM) and the second perspective as “it provides no incremental understanding to the hhuman uman resource planning function, therefore unnecessary” (Lewis and Heckman, 2006, p.141). The final perspective is “talent management focuses on talent generically” (p.141). From this perspective, talent management is focused on sourcing, developing and rrewarding ewarding employee talent. Many HRM practitioner publications advocate the differential treatment of employees identified as having ng exceptional employee talent (Lewis and Heckman, 2006). Further, talent is primarily associated with individuals who demonstrate te high potential or high performance and are sought, recruited, and differentially rewarded without regard to their specific roles in an organization (Nilsson Nilsson and Ellström, 2012) 2012). Lewis and Heckman (2006) criticized the third perspective as the most problematic ematic (i.e. employer has to focus on acquiring and retaining few employee talent versus all employees, hence engaging them). Nowadays, the success of any organization relies on strategy ((Sweem Sweem, 2009). Talent management is a strategy and employee engagement reflects the degree to which company leaders show their commitment to talent management. Even down to line management, employee engagement is vital to ensure strategy is carried out with specific practices oriented towards talent management implementation ementation (Sweem, 2009; Ready & Conger, 2007). Although a review
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of literatures show that talent management is a growing field, the effectiveness of talent management and its added value have not been investigated in great depth. Moreover, research exploring ing relationship between talent management strategies and companies performance is still lacking and the question on the right strategy for the right impact on companies performance has not yet been answered (Lawler, 2008) (see Syed Abd Nasir et al., 2012). However, talent management practices on employee engagement and retention are still at infancy stage in the scientific research field in the Malaysian context (Syed Abd Nasir et al., 2012; Mustafa Kamil et al., 2011; Baharin and Abdullah, 2011 2011). This is why talent management in the role of employee engagement and retention cannot be seen in isolation (Tanton, 2007).
Employee Retention Issue in IT Industry
Retention of skilled IT employees is a major issue for employers and recruiters (Carayon ( et al., 2006). Further, issue in engaging among IT employees have also received important responses due to the nationwide high attrition and turnover rate among IT workers companies. Although tech-savvy savvy employees are recognized as vital assets, many firms still struggle and some yet to engage and retain them (Westlund and Hannon, 2008). Since the 1990s, organizations have struggled to retain and engage qualified IT workers (Acton and Golden, 2002; Naggiar, 2001; Gooley, 2001)) and also globally, as ssuch in India, United States, Singapore, Taiwan and Switzerland (Deepa and Stella, 2012 2012; Bhatnagar, 2007; Westlund and Hannon, 2008; Tham et al.,,, 2008; Tseng, 2010; Perez, 2008). “In today’s highly competitive labour market, there is extensive evidence that organizations, regardless of size, technological advances, market focus and other factors, are ar facing retention challenges” (Ramlall, 2004, p.52). Hence, this shows retention and engagement
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of IT employees have become a major issue to organization from pre previous vious times. This can be due to several reasons. Allen (2008) states people in certain jobs that require constant updating of skills (i.e. IT skill talent) might leave their organizations if they have no options and opportunities for strengthening those sk skills. ills. Moreover, employees possessing technological skills in high demand IT areas have shown more loyalty to their own careers and personal development than to their organizations (Gooley, 2001). Markedly, over ver the past 30 years the wage discrepancy between high and low skilled employees has increased in the USA and, to a lesser extent, in Europe (Mahony et al., 2008). Hence, this factor has led to the conclusion that the demand for skilled IT workforce has increased ncreased faster than the supply of a skilled workforce. This is because the more skills the IT worker, the more salary they demand for ((Suhaimi, et al., 2012). In n other words, as IT employees become more knowledgeable and experienced, they will be more dem demand and and selective in selecting and servicing an organization, as most of the IT organizations are more depending on skilled and knowledgeable employees to attain competitive advantage advantage. In addition, according to Suhaimi et al. (2012), the scenario of IT workforce wor employability in the context of Malaysia is quite similar to Australia and India, means it is clear that the demand for IT workforce will be very high in the coming years. From the Malaysian perspective, IT or computer-related related work opportunities hav havee increased rapidly, even though there was a worldwide economic downturn in 2009 (Suhaimi et al., 2012). Indeed, the demand for IT workforce in Malaysia has increased in the recent years, but not the supply. This is due to all IT fresh graduates who are unemployed employed nowadays are those who do not meet industry requirements (PIKOM, n.d.) (see Suhaimi et al., 2012). Therefore, same goes to Malaysia, there are actually lot of graduates in IT field who are unemployed due to industries out there are more seeking for fo
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highly skilled and top talent IT workers. Consequently, these highly skilled IT workforces are becoming more demand and selective in selecting the most potential employers and organizations that able to provide more opportunities for them. Generally, there here are many reasons contribut contribute to employee turnover, decision to stay and results in job-hopping hopping proclivities in the IT industry (Deepa and Stella, 2012; Tseng, 2010; Cho and McLean, 2009; Bhatnagar, 2007). As such, lack of managerial or immediate superior superi support during the working hours, no or lack of opportunities on career development provided in the organization and mostly factor that could influence IT employees leave an organization is because of unattractive remuneration package ((Tseng, 2010; Tham et al.,2008; Westlund and Hannon, 2008; Bhatnagar, 2007)).
Employee Turnover in Malaysia’s IT Industry
As a matter of fact,, Malaysian IT industry is also facing the same issue in retaining and engaging their employees. This is supported by the data obtained from the Retrenchment Unit, Department of Labour Peninsular Malaysia on employee turnover rate within Kuala Lumpur and Selangor area that. hat. It reveals that between Kuala Lumpur and Selangor area, Selangor is facing the highest voluntary turnover rate in 2012. Further, within Selangor area, it reveals that IT sector is placed sixth with highest annual average of voluntary turnover rate in 2012 (see Figure 1 below). Hence, this shown that the IT sector in Malaysia, particularly in Selangor area is also facing the same issue in retaining and engaging their employee talents. Thus, this study is limited to the IT organization within Selangor ar area. Figure 1 - Voluntary Turnover Rate in Malaysia’s Main Sectors (2012) in Selangor
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ANNUAL AVERAGE OF VOLUNTARY TURNOVER (2012)
Source: Retrenchment Unit, Department of Labour Peninsular Malaysia, Ministry of Human Resource, 2011 – 2012 Talent Management and Employee Eng Engagement
Talent management practices and policies that demonstrate commitment to HR result in more engaged employees and lower turnover rate ((Corporate Corporate Leadership Cpuncil, Cpuncil 2004). In contributing to the effective retention of employees, an organization’s talent management strategy should contribute to employee engagement. Further, organizations rganizations that can more fully engage their employees through an effective talent managemen managementt strategy will clearly have a competitive advantage (Lockwood, Lockwood, 2006; Hughes and Rog, 2008). Notably, Notably employee engagement has a substantial impact on employee retention (Sweem, 2009; Bhatnagar, 2007). As a matter of fact,, a talent management strategy canno cannott be sustained without employee engagement. The process of building employee engagement is ongoing and the effective implementation fosters an environment of stimulation, such as provide development and learning, support, contribution and recognition (Lock (Lockwood, wood, 2006). Hence, to sustain high-level high of organizational buy-in,, organizations have to reinvent their approaches to talent tale management 11
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(Lockwood, 2006) and rethink their approaches to talent management and how it affects employee engagement (Grossman, 22007). Further, the he notion of talent management finds its roots and surrogacy in the concept of employee engagement and already has a strong practitioner influence and therefore, sparse academic studies exist in this area (Bhatnagar, 2007; Ngozwana and Rugimbana, 2011). Thus, a framework for employee engagement and employee retention in the Malaysia’s IT industries can provide interesting leading points for practitioners and researchers to plan an effective talent management practices to arrest disengagement and hence avoid quitting behaviour in the workforce. Therefore, there is an immense need to study talent management practices and employee engagement engagement, especially in this IT industry and particularly in Malaysia.
Linking Talent Management Practices and Employee Engagement
Talent management is a strategy, not only a HR initiative or a one-time time occurrence or communication. Talent management supports all strategic and cultural objectives and embodies an emotional commitment by management that is reflected iin n their actions and decisions (Ready and Conger, 2007). This allows organizations to develop and retain key employees to meet evolving business needs. Employee engagement is driving employer brand equity. As can be seen, the employer brand interventions iin n recent research indicate talent management as a key driver for this strategy (HR Focus, 2006). This would be possible if organizations provide them with a passion to work, and an engrossing environment which maximizes their performance and gives a continuous uous work experience that is difficult for competitors to replicate (Branham, 2005). Moreover, there is actually plenty of evidence now, such as Gallup’s study of 80,000 managers, to support the conclusion that the greatest drivers of employee engagement and a retention are
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intangible (i.e. work-life life benefits, hiring practices and new hire engagement) - mostly related to the way a manager treats employees ((see Branham, 2005). The talent management must include effective initiatives or practices that able to engage e and retain talented employees in order for organization organizations to success and sustain. Having the right and high potential employees and able to retaining and engaging them is a way to ensure a constant organizational succeed (Mustafa Kamil et al., 2011). Some ome organizations create ways of measuring their own progress toward becoming employers of choice choice,, by implementing track year-over-year year improvements by creating their own dashboards of talent management indicators. Therefore, in order to becoming employer employer-of-choice choice is to track measures of the four things every organization must do with talent: attract, select, engage, and retain (Branham, 2005). 2005) Further, in order to attract and retain employee talent anywhere in the world, an organization has to ensure the effectiveness of the implemented talent management. management This is through ensuring the talent management practices contribute to employee engagement or not. Employee engagement refers to a heightened emotional and intellectual connection that an employee has for his/her job, organization, manager, or co co-workers workers that in turn influences him/her to apply additional discretionary eff effort to his/her work (Hughes Hughes and Rog, 2008; Gibbons, 2006). Moreover, organizations rganizations that can fully engage their employees through an effective talent management strategy will clearly have a competitive advantage. So, with w the proper talent management strate strategy, human capital or key employees can be attached and affirmed as the number one strategic resource in an organization (Sweem, 2009). Based on the review of these various interpretations, it is proposed that the concept of talent management may need to take a more holistic approach. As mentioned above, talent management practice is actually defined by combining many of the attributes into a “whole”
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model and viewed as a strategy to employee engagement. In order to leverage employee engagement through talent ent management, it must contain with the strategies or initiatives. In this study, there are three initiatives in talent management practice was identified relevant for analyzing the level of employee engagement and retention in organization and it will be further discussed.
Managerial support
According to Kahn’s (1990) concept of engagement, psychological safety of managerial support involves a sense of being able to show and employ the self without negative consequences. In fact, Kahn (1990) found that supportive and trusting interpersonal relationships with the superiors promoted psychological safety in the work environment, i.e. employee em engagement. Managers or immediate superiors are an important key in practicing effective talent management (Baumruk et al., 2006; Lockwood, 2006). The role of the manager is a key component. Support from manager enables employee commitment to the job jo and the organization. Further, effective ffective talent management requires strong participatory leadership and bring organization to achieve organizational buy buy-in in and employee engagement (Lockwood, 2006). Without ithout commitment from top management among line manage managers, talent management will fail and the passion to engage employee talents effectively must start at the top and be infused into the working culture (Ready and Conger, 2007). Furthermore, fostering ostering commitment by manager must begin once employee’s hired and continues throughout a career of an employee. Therefore, engagement reflects the degree to which company leaders or managers show their commitment to management of talent (Ready and Conger, 2007).
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Moreover, managers anagers should strive to create an environment which induces passion among the employees about their works and leads to the behaviour in driving the organizations to better results. Through managerial support strategy, employee engagement can ca be secured, therefore,, a managerial support to employees able to attract and attach the employee talents in the organization (Piansoongnern Piansoongnern et al., 2011). In addition, the ability of managerial level to demonstrate genuine interest in employees is the top engagement driver globally. Tools such as ‘motivating’, ‘supporting supporting them in executing effective work’, ‘appreciative inquiry’ and ‘coaching’ help sustaining employee engagement throughout the year rather than a one-time one intervention (Doh et al., 2011). Therefore, managerial support is a key variable / predictor of in talent management practices in engaging and retaining employee talent (Tymon et al., 2010). As can be seen, organizations ganizations that view talent management as strategic human resource will find higher levels of success and sustain in the future. People especially key skills employees are an expensive, critical resource in any organization, and can be a powerful source of sustained advantage (Mustafa Mustafa Kamil et al., 2011) 2011). Thus, effective talent management through managerial support is the strategy to engage the potential employees. Therefore, it is hypothesized that; H1a
Talent Management Strategy (Manager Support) has a significant relationship to Employee Engagement.
Employee Career Development
Many engagement studies such as Gallup organization, Tower Perrins, Hewitt, Blessing White, the Corporate Leadership Council and the Conference Board have used different definitions of engagement and come up with 26 key drivers of engagement that managers must
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take into consideration when practicing their talent m management. It revealed that one o of the most and effective key drivers to employee engagement is employee career development and it includes having career growth and learning and development opportunities; doing exciting and challenging work and experience in working with great people (Ketter, 2008). These factors of employee career development are pressing organizations to find ways to retain their top talent and that is necessitating the need for engaged workers (Ketter, 2008). Vazirani (2007) listed two ccritical ritical drivers in employee career development lead to employee engagement. There are (i) Career development - opportunities for personal development and (ii) Career development - effective management of talent. First, Career development - opportunities for personal development are organizations with high levels of engagement provide employees with opportunities to develop their abilities, learn new skills, acquire new knowledge and realize their potential. When companies plan for the career paths of theirr employees and invest in them, in this way their people will invest in them back i.e. employees retain in organization and gain organizational bottom line.. Second, Career development - effective management of talent talent,, where career development influences engagement en for employees and retaining the most talented employees and providing more opportunities for their personal development. These ese are two effective initiatives in management of talent to engage and retain employees especially the potential ones (Vazirani, 2007). In addition, Suan (2009) found that the most significant relat relationship ionship among three predictor i.e. employee communication, rewards and recognitions and nd employee career development of employee engagement is employee career development. Most employees mployees want to keep their jobs fresh and interesting by learning new approaches and building new skills. Hence, it is important for the organizations to create engagement in their workforce by building a
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learning culture and creating individual developme development plans for every employee and also towards implementation of effective management of employee talent. With higher engaged employees will help the organization to be more focus in attracting new talents in labour market and become an employer of choice which eventually contributed to the organization competitive advantages (Suan, 2009). Moreover, Ashraf and Joarder (2009) state challenging opportunity in employee career is considered to be one of the important rea reasons sons employees would choose to leave or stay in the organization. For instance, challenging projects and their results are important for a high performance job market surroundings in which talented employees can show their abilities and achieve their personal nal goals career objectives while servicing the organization. As can be seen, an effective strategy in talent management practices to retain employee talent is firmly related to the career satisfaction of an employee whose career anchors match the job setting options of the organization over time at different career stages. In addition, a periodical review of an employee’s career development is an effective way to reduce the psychological effects because a diversity of reward systems can be applied to motivate moti them towards personal career actualization. It is believed that career development and selfself achievement will determine the employees’ decision to stay in the organization and (Tseng, 2010). Therefore, career areer and development opportunities is another dimension that the employees care in considering to be dynamic and to be competent in the job market. Hence, the more opportunities provided in practicing the talent management program, the more engaged the employee talents.. Therefore, it is hy hypothesized that; H1b
Talent Management Strategy (Employee Career Development) has a significant relationship to Employee Engagement.
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Rewards and recognitions
Kahn’s (1990) concept of engagement reported that people vary in their engagement through their perceptions erceptions of the benefits they receive from a role. A sense of return on investments can come from external rewards and recognitions,, which is in addition to meaningful work. Hence one might expect that employees’ to be more engaged at work to the extent that they perceive a greater amount of rewards and recognitions for their role performances. Further, Maslach et al. (2001) concept of engagement has suggested that while a lack of rewards and recognitions can lead to burnout, hence, appropriate recognition recognitio and rewards is important for employee engagement. The rewards and benefits practices organizations use to at attract, tract, engage, and retain new hires are different from those used with more experienced workers. Further, managers m must be challenged to be great managers agers and rewarded in meaningful ways for engaging and retaining valued workers (Branham, 2005) 2005). In addition, Vazirani (2007) states rewards and recognitions lead to employee engagement. The company should have a proper pay system so that the employees are motivated to work in the organization. In order to boost his/her engagement levels, the employees should also be provided with certain benefits and compensations. People like to be recognized for their unique contributions and excellent performance. Interestingly, nterestingly, although many organizations provide formal rewards and recognitions programs for employee ideas and contributions, many employees are hungry for more day-to-day day informal recognition. Employees who feel they are listened to, supported, and rec recognized ognized for their contributions by the organization are likely to be more engaged. The U.S. Department of Labor confirms that lack of employee appreciation and recognitions play a critical role in employees’ decisions to leave their organizations (Wellins et al., 2003). Besides that, appropriate rewards 18
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and recognitions can also help to build the psychological contract, in which employees feel valued by their employer, and the employer values the employees’ contributions. It is noted that when individuals become capable and experienced in the labour market i.e. IT talent, organizational al rewards such as promotion, pay and other benefits may be varied for them as incentive tools. This is because once individuals gain highly transferable competence, they would not be organizationally bound but instead are highly marketable (Sullivan et al., 1998). Financial compensation, including base pay and incentive pay, plays a complex role in employees’ attraction, retention, and motivation (Tseng, 2010 2010; Ram and Prabhakar, Prabhakar 2011; Glen 2006). ). In particular, pay elements are one of the most effective rewards that can motivate employees to perform well and to be more engage to adapt and master the work process. For instance, incentive pay (e.g. in the form of stock options) is an important factor to engage and retain employee talent especially IT employees (Tseng, 2010). Further, companies ompanies often provide various rewards and recognitions packages for high potential employees to stay and engage in the organization. These include sspecial pecial premiums, stock options or bonuses, incentives, profit sharing etc (Ashraf and Joarder, 2009) 2009). Recognition with considerable rewards is suggested to make these types of skilled employees feel that they have been appreciated for the efforts they hav havee put in at work (Tseng, 2010. Therefore, the reason why rewards and recognitions play an important role in engaging human, because people naturally desire to be appreciated and feel that their efforts have to be rewarded in the eyes of peers and managemen managementt (Baldoni, 2005). In contrast, lack of recognition may lead employees to think that their efforts are useless and they may consider leaving their organization (Baldoni 2005). Although Bhatnagar (2007) argues that recognition may be effective for first three ee years of employees’ tenure, it is still widely used to encourage hard work
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and reduction of turnover intention (Tseng, 2010). Thus, it can be said that the rewards and recognitions package has a strong influence on employee engagement. Therefore, it is hypothesized that; H1c
Talent Management Strategy (Rewards and recognitions)) has a significant relationship to Employee Engagement.
Employee Engagement and Employee Retention
Although neither Kahn (1990) nor May et al. (2004) included outcomes in their studies, Kahn (1992) proposed that engagement leads to both individual outcomes utcomes (i.e. quality of people’ss work and their own experiences of doing that work), as well as organizational-level organizational outcomes (i.e. the growth and productivity of organizations). Theree are a number of reasons to expect engagement to be related to work outcomes. The experience of engagement has been described as a fulfilling, positive work work-related related experience and state of mind (Schaufeli and Bakker 2004; Sonnentag 2003). As noted by Sch Schaufeli aufeli and Bakker (2004), engaged employees likely have a greater attachment to their organization and a lower tendency to leave their organization. Further, individuals who are more engaged are likely to be in more trusting and high-quality relationships with their employer and will, therefore, be more likely to report more positive attitudes and intentions toward the organization (Saks, 2006). The main reason behind the popularity of employee engagement is that it has positive consequences for organizations. organizatio There is a general belief that connection between employee and organization is as an individual level construct and business results results.. Consequently, employee engagement and employee commitment have emerged as important concepts when dealing with organizational ational research that
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indicates that favourable relationships with employees can result in organizational retention and performance (Clifford, 2010; Saks, 2006). Therefore there is reason to expect employee engagement to be related to individuals’ attitudes, s, intentions, and behaviours behaviours. The major reason is by using a matrix of engagement predictors, thus help the organization to engage employee and ultimately foster retention. The level of employee engagement determines whether people are productive and stay with the organization or quit or perhaps join the competitors. The extent to which employees employee and especially potential employees’ are connected to the organizational strategy and goals (i.e. talent management practices) foster high levels of engagement. Without a workplace environment and satisfied engagement predictors for employee engagement, decision employee to leave the organization will increase se and efficiency will decline thus leading to low customer loyalty and decreased stakeholder value. Ultimately, because the cost of poor employee engagement will be detrimental to organizational success, it is vital for top management to foster positive, effective management of employee talent along with workplace policies and practices that focus on employee engagement and retention (Ram and Prabhakar, 2011;; Rana and Chhabra, Chhabra 2010). Moreover, the answers may lie in higher engagement and to achieve this at the third camp (the most advanced stage of the climb where at this stage the employee wants to make things better, to learn, to grow, to innovate) may result in job sculpting or job co co-creation, creation, which may be worth considering in the effort to optimize employee retention (Bhatnagar, 2007). In addition, Becker et al., l., (2001) found a strong correlation between high high-performance HRM systems or strategic HRM practices and employee retention Similarly, employee engagement has been associated with a number of important organizational outcomes, many of which are directly related to employee talent retention (Hughes and Rog, 2008). However, research that investigates
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the degree to which employee engagement in their work might influence retention is sparse (Tymon et al., 2010). If all initiative initiatives are combined to enhance employee engagement, there may be an opportunity to improve retention and attraction of employees, while also increasing profitability and sustainability. The Therefore, the need to increase employee engagement cannot be underestimated as a factor for increasing retention, productivity, and sustainability (Thompson, 2009). The Towers Perrin survey (Bhatnagar, 2007) found that 84 percen percentt of highly engaged employees believe they can positively impact the quality of their organization’s products, compared with only 31 percent of disengaged employees. Overall, 72 percent of highly engaged employees believe they can positively affect custome customerr service, versus 27 percent of disengaged employees. A total of 68 percent of highly engaged employees believe they can positively impact costs in their job or unit, compared with just 19 percent of disengaged employees. Given this result it becomes imperative ative for the employees to determine the disengagement levels and address them immediately would provide a decrease in the attrition rate (Bhatnagar, 2007; 2007 Corporate Leadership Council, 2004) 2004)). The Tower Perrin Global Workforce Study (2007-2008, (2007 p.6) also concludes the same thing that “It is certainly true that the more engaged employees are also more likely to stay with an organization”. Therefore, it is hypothesized that; H2
Employee engagement has a significant relationship to Employee retention
Employee Engagement as a Mediating Variable
According to Baron and Kenny (1986), there are 3 conditions must be met to establish mediation. Condition 1, the independent variable (talent management strategies) must be related to the mediating variable (employee eng engagement) agement) (Hypothesis 1a, 1b and 1c). Condition 2, the
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mediating variable (employee engagement) must be related to the dependent variable (employee retention) (Hypothesis 2 and Hypothesis 3). Conditions 1 and 2 have been met as described above. Condition 3, a significant relationship between the independent variable (talent management strategies) and dependent variable (employee retention) will be reduced (partial mediation) or no longer be significant (full mediation) when controlling for the mediator (employee oyee engagement). For condition 3, the antecedents (talent management strategy) must first be related to the consequences (employee retention) that has been discussed above (see also Ram and V. Prabhakar, 2011; Rana and Chhabra Chhabra, 2010; Bhatnagar, 2007; Saks,, 2006; Schaufeli and Bakker, 2004; Sonnentag, 2003). This is consistent with the Maslach et al., (2001) model and is all the more likely given that most of the antecedents have been associated with various work outcomes. Machlach et al. (2001) treat engagement ement as a mediating variable for the relationship between the six work conditions and work outcomes. Employee engagement is taken as a mediating factor between the antecedents and the outcomes. Furthermore, previous studies also found employee engagement mediates the relationship between predictors of engagement and consequences of engagement (Ram and V. Prabhakar, 2011; Rana and Chhabra Chhabra, 2010; Bhatnagar, 2007; Saks, 2006; Schaufeli and Bakker, 2004; Sonnentag, 2003). As Tymon et al (2010) state intrinsic rewards (analogous to the conceptions of employee engagement) are an important mediating factor in the relationships of employee perceptions of their organization and its practices and three outcomes: satisfaction with the organization, career success, uccess, and intention to leave. Therefore, it is hypothesized that; H3
Employee engagement mediates the relationship between the antecedents (talent
management strategies) and outcomes (employee retention) of employee engagement.
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Research Framework
Figure 2 - The Research Framework
Conclusions and Practical Implications
Due to critical phenomenon of employee turnover in IT industries, globally and locally, the engagement and retention of IT employees is crucial to the practical implication of talent management practices. This his study facilitates IT companies to identify reasons for its increased turnover and take corrective action to the existing talent management practices: practices managerial support, employee career development and reward and recognition recognition. Therefore, the importance of this paper is linked to the significance of identifying the best talent management practices in the IT industry that effect on employee engagement and retention. The authors help to create crea awareness among Malaysian employers on the issue of high turnover and attrition rate among IT workers. Further, in order to engage and retain the best IT employee talent anywhere in the world, an organization must have a strong and effective talent mana management gement program. program This is justified as the evolution of talent management practices has brought about many changes in the 24
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way employees are engaged and retained (Allen, 2008). Furthermore, the success in talent management practices depend on how the organiza organization tion plans, designs, develops and implements the program effective and efficient. Generally, the paper conceptualizes how talent management practices can be a strategy to engage and retain employee talents and as well as suggesting the organizations that management of employee talent is important that need to be focused due to its ability to engage and retain potential employees especially this scarcity IT talents. Furthermore, the he study could provide more evidence with empirical data on the effectiveness of talent management practices to employee engagement and employee retention, particularly in the Malaysia IT organization.
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References
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Biographical notes
Full name: Norzanah Mat Nor Position: Prof Madya Dr. Affiliation: Faculty of Business Management, University of Technology MARA, 40450 Shah Alam, Selangor, Malaysia E-mail address:
[email protected] Contact details: +60163662256
Full name: Nurul Ezaili Alias Position: Full time PhD student Affiliation: Faculty of Business Management, University of Technology MARA, 40450 Shah Alam, Selangor, Malaysia E-mail address:
[email protected] Contact details: +60192361478
Full name: Roshidi Hassan Position: Prof Madya Dr. Affiliation: Faculty of Business Manag Management, ement, University of Technology MARA, 40450 Shah Alam, Selangor, Malaysia E-mail address:
[email protected] Contact details: +60133399881
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