The Challenge of Off-shoring:

Managing Employee Retention and Performance

Feedback Report Submitted to:

University of Illinois
Center for Human Resource Management

Prepared by
Sandy J. Wayne, Ph.D.
Anjali Chaudhry, Ph.D.
Morgan Wilson

Questions/comments about this report can be directed to:

Sandy J. Wayne
University of Illinois at Chicago
Department of Managerial Studies (M/C 243)
601 S. Morgan Street
Chicago, IL 60607-7122
(312) 996-2799
sjwayne@uic.edu

June 2009

Off-shoring: Employee Retention and Performance

Table of Contents
Executive Summary ..

Introduction and Purpose of Study

Study Procedures and Description of Sample...............

4-5

Turnover Intentions

6-18

Turnover Behavior.

19-24

Job Performance.

25-27

Comparison of Locations...

28

Summary of Findings and Recommendations...

29-33

Off-shoring: Employee Retention and Performance

Executive Summary
As an alternative to outsourcing, many U.S. companies have implemented off-shoring as
a cost-effective strategy for effectively completing transactional work. China and India, in
particular, have served as popular off-shoring locations for call centers and software
development divisions due to the high-quality, lower-cost workforce available in these countries.
Despite the potential advantages of off-shoring, retaining and managing the performance of these
employees is a challenge for many U.S. companies.
The purpose of this study was to assess the drivers of employee turnover and
performance in off-shore locations. A firm that has a significant number of employees in India
participated in this study. One of the researchers visited two locations in India in order to
administer surveys to employees and their direct managers. Surveys were completed on-site,
during work hours by employees and their managers during the Spring of 2008.
The results indicated that the quality of the employee-leader relationship had the
strongest relationship with both employee retention and performance. In terms of employee
retention, a key way in which turnover could be reduced is by improving the employee-leader
relationship. That is, employees who had high-quality relationships with their managers were
significantly less likely to leave the company than those with lower-quality relationships. The
employee-leader relationship was also the variable most strongly related to employee job
performance. Thus, improving the quality of the employee-leader relationship is an important
way to increase employee performance. In sum, the relationship that has the potential to tie an
employee to the organization and to enhance performance is the one that develops between the
employee and his/her direct manager. A high-quality employee-leader relationship is based on
mutual liking, contribution, loyalty, and professional respect.
A number of additional work-related variables were significantly related to turnover
intentions, turnover behavior, and/or performance. These are summarized and discussed on
pages 29-33.

Off-shoring: Employee Retention and Performance

Introduction and Purpose of Study

It is widely believed that the workplace in the U.S. is in a state of transition. In response
to globalization and a more competitive environment, U.S. companies are making significant
changes such as downsizing, restructuring, outsourcing, and off-shoring as a way to stay
competitive. Although there has been substantial research on downsizing and restructuring,
fewer studies have focused on outsourcing and off-shoring.
Outsourcing is where activities that previously were performed by employees within a
company are handled by an outside vendor or organization. These activities typically are
transactional or non-strategic activities and are contracted for a specific period of time. Offshoring, in contrast, is where a company opens offices off shore or outside of the home country.
An example is a U.S. company that opens a call center in India. Similar to outsourcing, offshoring offices typically handle transactional activities. China and India, in particular, have
served as popular off-shoring locations for call centers and software development divisions due
to the high-quality, lower-cost workforce available in these countries.
Despite the potential advantages of off-shoring, retaining and managing the performance
of these employees is a challenge for many U.S. companies. As more and more U.S. companies
open new offices in China and India, the labor market has become more competitive. Thus,
retention is a major challenge. In addressing this challenge, this study aims to provide insights
on how U.S. companies can more effectively manage their off-shore employees by
understanding the drivers of employee turnover and performance.

Study Procedures and Description of Sample

Two surveys were developed to understand the drivers of employee turnover and
performance in an off-shore location (India). One survey was completed by the employees and
the other was completed by their direct managers. We administered these surveys to employees
and their managers of a firm located at two off-shore facilities in India. A total of 290
employees responded to the survey, for a response rate of 41.8%. 39 managers completed a
survey, for a response rate of 35.5%.
For many of the questions, employees and managers indicated their agreement with
questions to assess their feelings and attitudes. The response scale was:

Strongly
Disagree
1

Disagree
2

Slightly
Disagree
3

Neutral
4

Slightly
Agree
5

Agree
6

Strongly
Agree
7

Off-shoring: Employee Retention and Performance

The tables below provide background information regarding the employees and managers
who participated in this study.
Characteristics of Participating Employees

Number of Participants
Average Age
Gender
Education Level

Average Position Tenure

Average Company
Tenure

Site 1
61
29.8 Years
72.1% Male

Site 2
229
29.9 Years
77.7% Male

8.2% High School

45.9% Some College or
Associates Degree

1.3% High School

44.1% Some College or
Associates Degree

44.3% Bachelors Degree

1.6% did not respond
1.8 years

54.1% Bachelors Degree

0.5% did not respond
1.9 years

2.2 years

2.0 years

Characteristics of Participating Managers

Number of Participants

Average Position Tenure

Average Company
Tenure
Average Supervisory
Experience
Number of Employee
Reports

Site 1
12
0% Some College or
Associates Degree
71.4% Bachelors Degree
28.6% Masters Degree or
Higher
4.8 years

Site 2
27
5.3% Some College or
Associates Degree
41.4% Bachelors Degree
53.3% Masters Degree or
Higher
1.7 years

6.0 years

3.1 years

6.9 years
Average=12.1 reports
Min=2, Max=24

6.3 years
Average=9 reports
Min=2, Max=35

Off-shoring: Employee Retention and Performance

Turnover Intentions
This study aimed to shed light on how to effectively manage employees in off-shoring
locations. Employee turnover is an especially important area of concern, as a company
employing an off-shoring strategy can struggle to retain employees. To address this, our survey
measured employee turnover intentions, or an employees intention to leave the organization.
This is a perceptual measure that has been significantly linked to turnover behavior in
prior research. We also assess the predictors of turnover behavior (see page 19).
Turnover intentions (TI) were assessed using three items:
I will probably look for a new job in the near future.
I am thinking about quitting my job at the present time.
I intend to quit my job.
Employees responded to these three items on a 7-point scale ranging from 1=strongly disagree to
7=strongly agree. For each respondent, his/her responses on the three items were summed and
divided by three to create a mean response. The graph below shows the percentage of employees
with very low mean scores (1.0-1.5) to very high mean scores (6.6-7.0).

This chart shows that 53.9% of employees had low (scores ranging from 1.0-2.5)
turnover intentions scores and 26.9% (scores ranging from 2.6-3.5) of employees had fairly low
turnover intentions scores. Those employees who fell between 3.6-4.5 were considered neutral
and accounted for 26.5% of employees. At the other end, 8.1% of employees had fairly high
(scores ranging from 4.6-5.5) turnover intentions scores while 4.7% of employees had high
(scores ranging from 5.6-7.0) turnover intentions scores. For the employee sample, the average
turnover intentions score was 3.0.

Off-shoring: Employee Retention and Performance

Predictors of Employee Turnover Intentions

It is important to understand what factors are impacting employees turnover intentions.
Employee turnover intentions were significantly correlated with several variables assessed by
our survey. These variables were: work experience, the quality of the employee-leader
relationship (the quality of the employees relationship with his/her direct manager), the quality
of the employees relationship with team members (employee-team relationship), external
marketability, employee-organization fit, empowerment, career satisfaction, career development
support, career development opportunity, organizational commitment, and manager
effectiveness.
The graph below shows the average score for all of the variables listed above that were
measured on a 7-point scale. These and all other variables will be discussed individually below.

Off-shoring: Employee Retention and Performance

Work Experience was measured by asking employees how many years they have worked fulltime. The average amount of work experience was 10.53 years. Work experience was
significantly and negatively correlated with turnover intentions (r = -.112), indicating that the
more years of experience an employee had, the less likely that employee was considering leaving
the company.
The graph below shows employees work experience measured in years.

In terms of work experience, 7% of employees had one year or less of full-time work
experience. Those employees who had two to five years of experience accounted for 43.1% of
employees. 35.1% of employees had six to nine years of experience and 14.7% of employees
had ten or more years of experience.

Off-shoring: Employee Retention and Performance

Quality of the Employee-Leader Relationship refers to the employees perceptions of the

quality of his/her relationship with his/her direct manager, measured on each of four dimensions:
liking, contribution, loyalty, and professional respect. An example item for each dimension is:
My manager likes me very much as a person (liking), My manager does work for me that
goes beyond what is normally required (contribution), My manager would defend me to
others in the organization if I made an honest mistake (loyalty), and My manager admires my
professional skills (professional respect). Ratings for these items were made on a 7-point scale
ranging from 1=strongly disagree to 7=strongly agree. The average quality employee-leader
relationship score was 4.70. Quality of the employee-leader relationship was significantly and
negatively correlated with turnover intentions (r = -.328), meaning that those employees who had
a better relationship with their manager were less likely to consider leaving the company.

The chart above shows the frequency of responses for the quality of the employee-leader
relationship. It shows that 3.6% of employees had low quality employee-leader relationship
scores (1.0-2.5) and 7.4% of employees had fairly low scores (2.6-3.5). Those employees who
fell between 3.6-4.5 were considered neutral and accounted for 28.6% of employees. At the
other end, 43.8% of employees had fairly high quality (4.6-5.5) employee-leader relationship
scores while 16.6% of employees had high quality employee-leader relationship scores (5.6-7.0).

Off-shoring: Employee Retention and Performance 10

Quality of the Employees Relationship with Team Members (Employee-Team
Relationship) refers to the quality of the employees relationship with team members. Example
items are: My co-workers have asked for my advice in solving a job-related problem of theirs
and My co-workers create an atmosphere conducive to accomplishing my work. Ratings for
these items were made on a 7-point scale ranging from 1=strongly disagree to 7=strongly agree.
Employee-team relationship was significantly and negatively correlated with turnover intentions
(r = -.199), meaning that those employees who had a better quality relationship with their team
members were less likely to consider leaving the company.

The chart above shows the responses for employee-team relationship and shows that no
employees had low (1.0-2.5) employee-team relationship scores while 0.7% of employees had
fairly low scores (2.6-3.5). Those employees who fell between 3.6-4.5 were considered neutral
and accounted for 5.3% of employees. Employees who had fairly high quality (4.6-5.5)
employee-team relationship scores accounted for 25.3% of employees and 68.7% of employees
had high employee-team scores (5.6-7.0).

Off-shoring: Employee Retention and Performance 11

External Marketability refers to the employees perceptions of his/her own marketability
outside of the company. An example item for external marketability is I could easily obtain a
comparable job with another employer. Ratings for these items were also made on a 7-point
scale ranging from 1=strongly disagree to 7=strongly agree. External marketability was
significantly and positively correlated with turnover intentions (r = .253), showing that the more
employees felt they were marketable outside of the company, the more likely they were to
consider leaving the company.

Employees who reported low (1.0-2.5) external marketability scores accounted for 0.4%
of employees and 3.6% of employees reported fairly low (2.6-3.5) external marketability scores.
Those employees who fell between 3.6-4.5 were considered neutral and accounted for 12.2% of
employees. Employees reporting fairly high (4.6-5.5) external marketability scores accounted
for 30.8% of employees and 53% of employees reported high (5.6-7.0) external marketability
scores.

Off-shoring: Employee Retention and Performance 12

Employee-Organization Fit (E-O Fit) measures how much an employee perceives his/her own
values, needs, and interests to be aligned with the companys values, needs and interests. An
example item is: My personal values match my companys values and culture. Ratings for
these items were made on a 7-point scale ranging from 1=strongly disagree to 7=strongly agree.
E-O fit was significantly and negatively correlated with turnover intentions (r = -.376), meaning
that the more employees felt a fit between themselves and the organization, the less likely they
were to consider leaving the company.

The chart above shows that employees who reported low E-O fit scores (1.0-2.5)
represented 2.5% of employees and those that reported fairly low E-O fit scores (2.6-3.5)
represented 2.1% of employees. Those employees who fell between 3.6-4.5 were considered
neutral and accounted for 17.8% of employees. Employees who reported fairly high E-O fit
scores (4.6-5.5) represented 30.6% of employees and those that reported high E-O fit scores (5.67.0) represented 47% of employees.

Off-shoring: Employee Retention and Performance 13

Empowerment measures the extent to which an employee feels empowered on four dimensions:
meaning, competence, self-determination, and impact. Example items are: The work I do is
very important to me (meaning), I have mastered the skills necessary for my job
(competence), I can decide on my own how to go about doing my work (self-determination),
and My impact on what happens in my department is large (impact). Ratings for these items
were made on a 7-point scale ranging from 1=strongly disagree to 7=strongly agree.
Empowerment was significantly and negatively correlated with turnover intentions (r = -.289),
meaning that the more employees felt empowered, the less likely they were to consider leaving
the company.

The chart above shows that no employees reported low empowerment scores (1.0-2.5)
and 0.7% of employees reported fairly low empowerment scores (2.6-3.5). Those employees
who fell between 3.6-4.5 were considered neutral and accounted for 6.1% of employees.
Employees who reported fairly high empowerment scores (4.6-5.5) represented 40.3% of
employees and those that reported high empowerment scores (5.6-7.0) represented 52.9% of
employees.

Off-shoring: Employee Retention and Performance 14

Career Satisfaction measures an employees satisfaction with his/her career. An example item
is: I am satisfied with the success I have achieved in my career. Ratings for these items were
made on a 7-point scale ranging from 1=strongly disagree to 7=strongly agree. Career
satisfaction was significantly and negatively correlated with turnover intentions (r = -.340),
meaning that the more an employee was satisfied with his/her career, the less likely he/she was
to consider leaving the company.

Employees reporting low career satisfaction scores (1.0-2.5) represented 4.9% of

employees while 13.6% of employees reported fairly low career satisfaction scores (2.6-3.5).
Those employees who fell between 3.6-4.5 were considered neutral and accounted for 18.5% of
employees. Employees reporting fairly high (4.6-5.5) career satisfaction scores represented
38.3% of employees while 24.7% of employees reported high (5.6-7.0) career satisfaction scores.

Off-shoring: Employee Retention and Performance 15

Career Development Support refers to the employees perception that the organization
provides programs and practices that help to develop his/her technical/functional and managerial
capabilities. An example item is: My organization provides opportunities for employees to
develop their managerial skills. Ratings for these items were made on a 7-point scale ranging
from 1=strongly disagree to 7=strongly agree. Career development support was significantly and
negatively correlated with turnover intentions (r = -.315), showing that the more employees felt
the company supported their career development, the less likely they were to consider leaving
the company.

Low career development support scores (1.0-2.5) were reported by 8.8% of employees
while 15.5% of employees reported fairly low career development support scores (2.6-3.5).
Those employees who fell between 3.6-4.5 were considered neutral and accounted for 28.5% of
employees. Employees reporting fairly high (4.6-5.5) career development support scores
represented 26.4% of employees while 20.8% of employees reported high career development
support scores (5.6-7.0).

Off-shoring: Employee Retention and Performance 16

Career Development Opportunity refers to the employees perception of the degree to which
work assignments and job opportunities that match his or her career interests, needs, and goals
are available within the company. An example item is: There are job opportunities available
within the company that are of interest to me. Ratings for these items were made on a 7-point
scale ranging from 1=strongly disagree to 7=strongly agree. Career development opportunity
was significantly and negatively correlated with turnover intentions (r = -.330), meaning that the
more employees felt there were career development opportunities that matched their career
interests, needs, and goals, the less likely employees were to consider leaving the company.

Low career development opportunity scores (1.0-2.5) were reported by 3.2% of

employees while 7.7% of employees reported fairly low (2.6-3.5) career development
opportunity scores. Those employees who fell between 3.6-4.5 were considered neutral and
accounted for 26.3% of employees. Employees reporting fairly high career development
opportunity scores (4.6-5.5) represented 27% of employees while 35.8% of employees reported
high career development opportunity scores (5.6-7.0).

Off-shoring: Employee Retention and Performance 17

Organizational Commitment measures an employees commitment to the company. An
example item is: I would be very happy to spend the rest of my career with this company.
Ratings for these items were made on a 7-point scale ranging from 1=strongly disagree to
7=strongly agree. Organizational commitment was significantly and negatively correlated with
turnover intentions (r = -.538), meaning that the more an employee was committed to the
company, the less likely they were to consider leaving the company.

The chart above shows that low organizational commitment scores (1.0-2.5) were
reported by 4.5% of employees while 5.9% of employees reported fairly low organizational
commitment scores (2.6-3.5). Those employees who fell between 3.6-4.5 were considered
neutral and accounted for 19.6% of employees. Employees reporting fairly high organizational
commitment scores (4.6-5.5) represented 31.8% of employees while 38.1% of employees
reported high organizational commitment scores (5.6-7.0).

Off-shoring: Employee Retention and Performance 18

Manager Effectiveness refers to the extent to which expectations of the focal managers role
behaviors are fulfilled. This is a subjective evaluation by the managers employees. An example
item is To what extent has your manager met your own expectations in his/her managerial roles
and responsibilities? Ratings for these items were made on a 5-point scale ranging from 1=not at
all to 5=entirely. Manager effectiveness was significantly and negatively correlated with turnover
intentions (r = -.351), meaning that the more effective the employee perceived the manager to be,
the less likely the employee was to consider leaving the company.

Low manager effectiveness scores (1.0-2.5) were reported by 6% of employees. Those

employees who fell between 2.6-3.5 found their manager to be only somewhat effective and
accounted for 57.7% of employees. Employees reporting high manager effectiveness scores
(3.6-5.0) represented 36.3% of employees.

Off-shoring: Employee Retention and Performance 19

Turnover Behavior
Approximately one year after the surveys were administered, we obtained turnover data
(turnover behavior) for both sites from the company. During the one year period 11.4% (33 out
of 290) of the employees who had completed surveys, had left the company voluntarily.
Turnover behavior was significantly correlated with turnover intentions (r = .229), showing that
the turnover intentions measure was a fairly good indicator of employees actually leaving the
company within a year. However, it is only moderately correlated with turnover behavior
because some individuals who are thinking about leaving may be constrained from actually
leaving and/or individuals may take longer than a year to find and accept a position with another
firm. Thus, it is important to monitor both turnover intentions and turnover behavior.
Turnover behavior was significantly correlated with the following variables measured by
our survey: quality of the employee-leader relationship (r = -.200), empowerment (r = -.112),
organizational commitment (r = -.104), and manager effectiveness (r = -.109). For example,
employees who reported high-quality relationships with their leader (direct manager), were less
likely to leave the company. These same variables were significantly correlated with turnover
intentions as well.
Turnover behavior was also significantly correlated with employee position tenure (r = .098), manager-rated quality of the employee-leader relationship (r = -.179), manager-rated
employee job performance (r = -.132), and manager-rated teamwork ability (r = -.177). The
chart below shows the average scores for the variables rated on a 5-point scale.

Off-shoring: Employee Retention and Performance 20

Position Tenure was measured by asking employees how long they had worked in their current
position. The average position tenure was 1.84 years. Position tenure was significantly and
negatively correlated with turnover behavior (r = -.098), meaning that those employees who had
greater position tenure were also less likely to leave the company. The graph below shows the
frequency of employees position tenure measured in years.

Employees who had been in their position for one year or less represented 29.9% of
employees, 37.8% of employees had been in their position for one to two years, 16% of
employees had been in their position for two to three years, 14.2% had been in their position for
three to four years, and 2.1% of employees had been in their position for five or more years.

Off-shoring: Employee Retention and Performance 21

Quality of the Employee-Leader Relationship refers to the quality of the employee-leader
relationship measured on each of four dimensions: affect, contribution, loyalty, and professional
respect and has been discussed previously (see previous quality of the employee-leader
relationship chart). The quality of the employee-leader relationship was significantly and
negatively correlated with turnover behavior (r = -.200), meaning that those employees who had
a better relationship with their supervisors were also less likely to leave the company.
Organizational Commitment measures an employees commitment to the company (see
previous organizational commitment chart). Organizational commitment was significantly and
negatively correlated with turnover behavior (r = -.104), meaning that the more an employee was
committed to the company, the less likely the employee was to leave the company.
Manager Effectiveness refers to the extent to which expectations of the focal managers role
behaviors are fulfilled and has been discussed previously (see previous manager effectiveness
chart). Manager effectiveness was significantly and negatively correlated with turnover behavior
(r = -.109), meaning that the more effective a manager was, the less likely their employee was to
leave the company.

Off-shoring: Employee Retention and Performance 22

Manager-Rated Variables
Manager-Rated Quality of the Employee-Leader Relationship refers to the managers
perceptions of the quality of the manager-employee relationship on each of four dimensions:
affect, contribution, loyalty, and professional respect. Example items are: This employee likes
me very much as a person, This employee does work for me that goes beyond what is specified
in his/her job description, This employee would defend me to others in the organization if I
made an honest mistake, and This employee admires my professional skills. Ratings for these
items were made on a 7-point scale ranging from 1=strongly disagree to 7=strongly agree.
Manager-rated quality of the employee-leader relationship was significantly and negatively
correlated with actual turnover (r = -.179), meaning that the higher a manager rated the
relationship, the less likely the employee was to leave the company.

The chart above shows a comparison of manager-rated quality of the employee-leader

relationship and employee-rated quality of the employee-leader relationship, highlighting the fact
that managers rated the quality of the relationship higher than employees did. None of the
managers reported low employee-leader relationship scores (1.0-2.5). Fairly low employeeleader relationship scores (2.6-3.5) were reported by 0.5% of managers. Those managers who
fell between 2.6-3.5 were considered neutral and accounted for 6.7% of employees. Managers
reporting fairly high employee-leader relationship scores (4.6-5.5) represented 37.6% and
managers reporting high employee-leader relationship scores (5.6-7.0) represented 55.2% of
managers.

Off-shoring: Employee Retention and Performance 23

Manager-Rated Job Performance refers to the managers ratings of the employees
performance on four dimensions: quantity of work output, quality of work output, accuracy of
work, and customer service provided (internal and external). This was rated on a 5-point scale
(1=needs much improvement, 2=needs some improvement, 3=satisfactory, 4=good, and
5=excellent). Job performance was significantly and negatively correlated with actual turnover
(r = -.132), meaning that the lower an employees job performance rating, the more likely the
employee was to leave the company.

4.2% of employees were rated as low performers (1.0-2.5) by their managers. 20% of
employees were rated as satisfactory performers (2.6-3.5) by their managers. 58.9% of
employees were rated as good performers (3.6-4.5) by their managers and 16.9% of employees
were rated as excellent performers (4.6-5.0).

Off-shoring: Employee Retention and Performance 24

Manager-Rated Teamwork Ability refers to the managers ratings of the employees ability to
work with a team on four dimensions: working as part of a team or work group, seeking
information from others in his/her work group, making sure his/her work group succeeds, and
responding to the needs of others in his/her work group. This was rated on a 5-point scale
(1=needs much improvement, 2=needs some improvement, 3=satisfactory, 4=good, and
5=excellent). Manager-rated teamwork ability was significantly and negatively correlated with
actual turnover (r = -.177), meaning that the lower an employees teamwork ability rating, the
more likely the employee was to leave the company.

Of employees, 2.1% were rated as needing some improvement in their teamwork ability
(1.6-2.5) by their managers. 31.4% of employees were rated as satisfactory (2.6-3.5) by their
mangers. 45.4% of employees were rated as good (3.6-4.5) by their managers and 21.1% of
employees were rated as excellent (4.6-5.0) by their managers.

Off-shoring: Employee Retention and Performance 25

Job Performance
As mentioned previously, managers rated their employees job performance on four
dimensions: quantity of work output, quality of work output, accuracy of work, and customer
service provided (internal and external). In addition to being significantly and negatively
correlated with turnover, performance was also significantly correlated with several variables
measured by our survey. These variables were: tenure with manager (r = .148), organizational
tenure (r = .171), promotions (r = .175), quality of the employee-leader relationship (r = .152),
empowerment (r = .151), career development support (r = .140), and organizational commitment
(r = .129). All of these variables and their relationship with performance will be discussed
individually below.
Tenure with Manager was measured by asking employees how many years they have reported
to their manager. The average tenure with the manager was 1.36 years. Tenure with manager
was significantly and positively correlated with performance (r = .148), showing that the longer
an employee had reported to their manager, the higher they were rated on performance.

Employees who had been reporting to their manager for one year or less represented
26.9% of employees, 13.5% of employees had been reporting to their manager for one to two
years, 5.6% of employees had been reporting to their manager for two to three years, 52.5% had
been reporting to their manager for three to four years, and 1.4% of employees had been
reporting to their manager for five or more years.

Off-shoring: Employee Retention and Performance 26

Organizational Tenure was measured by asking employees how long they had worked at the
company. The average organizational tenure was 2.2 years. Organizational tenure was
significantly and positively correlated with performance (r = .171), meaning that the longer the
employee had been working at the company the higher their performance ratings. The graph
below shows the frequency of employees organizational tenure measured in years.

Employees who had been working at the company for one year or less represented 23.4%
of employees, 32.9% of employees had been working at the company for one to two years,
13.6% of employees had been working at the company for two to three years, 17.1% had been
working at the company for three to four years, and 12.9% of employees had been working at the
company for five or more years.

Off-shoring: Employee Retention and Performance 27

Promotions were measured by asking employees how many promotions they had received since
joining the company. Promotions were significantly and positively correlated with performance
(r = .175), meaning that the higher an employees job performance rating, the more promotions
they had received.
Quality of the Employee-Leader Relationship refers to the quality of the employee-leader
relationship measured on each of four dimensions: liking, contribution, loyalty, and professional
respect and has been discussed previously (see previous quality of the member-leader
relationship chart). The quality of the employee-leader relationship was significantly and
positively correlated with performance (r = .152), meaning that those employees who had a
better relationship with their managers were also rated as higher performing.
Empowerment measures the extent to which employees feel empowered on four dimensions:
meaning, competence, self-determination, and impact. Empowerment has been previously
discussed (see previous empowerment chart). Empowerment was significantly and positively
correlated with performance (r = .151), meaning that the more employees felt empowered, the
higher their managers rated them on job performance.
Career Development Support refers to the employees perception that the organization
provides programs and practices that help the employee to develop his/her technical/functional
and managerial capabilities (see previous career development support chart). Career
development support was significantly and positively correlated with performance (r = .140),
showing that the more employees felt the company supported their career development, the
higher their managers rated them on job performance.
Organizational Commitment measures an employees commitment to the company (see
previous organizational commitment chart). Organizational commitment was significantly and
positively correlated with performance (r = .129), meaning that employees who reported high
levels of commitment to the company, were rated higher on job performance by their managers.

Off-shoring: Employee Retention and Performance 28

Comparison of Locations
Employees from the two locations did differ significantly (in terms of the mean ratings)
on six of the variables. Specifically, employees at site one were significantly higher on tenure
with manager (mean=2 years versus 1.2 years). Employees at site two were significantly higher
on external marketability (mean=5.5 versus 5.1), career development opportunity (mean=5.1
versus 4.4), organizational commitment (mean=5.2 versus 4.7), manager-rated quality of the
employee-leader relationship (mean=5.7 versus 5.3), and performance (mean=4.0 versus 3.8).
There were no significant differences between the employees from the two locations with respect
to the other variables.
The chart below shows the variables (which were measured on a 7-point scale) that
differed significantly between employees at the two sites.

Off-shoring: Employee Retention and Performance 29

Summary of Findings and Recommendations

The chart below summarizes the major findings of significant correlations with the three
variables of interest.
Turnover Intentions
Work experience
Position Tenure
Tenure with Manager
Organizational Tenure
Promotions
Quality of EmployeeLeader Relationship
Manager-Rated
Quality of EmployeeLeader Relationship
Employee-Team
Relationship
External Marketability
EmployeeOrganization Fit
Empowerment
Career Satisfaction
Career Development
Support
Career Development
Opportunity
Organizational
Commitment
Manager Effectiveness
Manager-Rated
Teamwork Ability

Turnover Behaviors

Performance

X (-.112)
X (-.098)

X (-.328)

X (-.200)

X (.148)
X (.171)
X (.175)
X (.152)

X (-.179)

X (-.199)
X (.253)
X (-.376)
X (-.289)
X (-.340)
X (-.315)

X (-.112)

X (.151)
X (.140)

X (-.330)
X (-.538)

X (-.104)

X (-.351)

X (-.109)
X (-.177)

X (.129)

The X indicates that the variable was significantly correlated with the outcome
(turnover intentions, turnover behavior, or performance). The correlation is reported in
parentheses. For example, work experience was significantly correlated with turnover
intentions at r = -.112. Of all the variables listed above, three were significantly correlated with
all three outcomes (turnover intentions, turnover behavior, and performance). These were:
quality of the employee-leader relationship (rated by the employee), empowerment, and
organizational commitment. One variable, career development support, was related to both
turnover intentions and performance.

Off-shoring: Employee Retention and Performance 30

Recommendations for Employee Retention

Quality of the Employee-Leader Relationship rated by both the employee and the manager
had the strongest relationship (r = -.200 and r = -.179 respectively) with turnover behavior (first
and second strongest relationship). It was also significantly correlated with turnover intentions.
This clearly indicates that the employee-leader relationship is an important way for the employee
to feel connected to the organization and desire to stay. Managers often overlook how the
relationship that they develop with their employee might impact employee turnover behavior.
Thus, it is important to communicate this result to managers. It is also noteworthy that 7.4% of
the employees reported the quality of the relationship with their manager as fairly low and 3.6%
reported it as low. These results suggest that efforts to enhance the employee-leader relationship
may be a fruitful approach to reducing employee turnover.
Manager-Rated Teamwork Ability had the second highest relationship with turnover behavior
(r = -.177). This indicates that the employees ability to work with his or her team members is
extremely important in order for employees to desire to stay with the company. Managers rated
2.1% of employees as needing some improvement in their teamwork ability and 31.4% of
employees as satisfactory, showing that 33.5% of employees teamwork ability could be
improved, thus potentially reducing the likelihood of turnover. In order to reduce employee
turnover, managers should be prompted to promote teamwork amongst their employees. This
can be done by fostering an environment that promotes the teams success, helping each other,
and seeking out information from the group members.
Empowerment was also related to turnover behavior (r = -.112) and is an important result to
communicate to managers. Empowerment was also significantly related to turnover intentions (r
= -.289), further highlighting its importance in reducing employee turnover. Only a small
percentage of employee (0.7%) reported fairly low empowerment scores and 6.1% of employees
reported neutral empowerment scores. This is a promising result as it shows that managers are
doing a good job of empowering their employees. However, only 1.1% of employees strongly
agreed (a score between 6.6-7.0 on a 7-point scale) that they were empowered showing that there
is still room for improvement in this area.
Manager Effectiveness showed the next strongest relationship with turnover behavior (r = .109) after empowerment. This should be emphasized as employee ratings of manager
effectiveness are quite low; the average score for manager effectiveness was 3.32 (on a 5-point
scale), which represented a rating of somewhat effective. In order for managers to gain a clearer
understanding of their effectiveness, the use of 360-degree feedback or some other form of
appraisal would be helpful. The use of this type of appraisal would allow a forum for employees
to voice their concerns, recommendations, etc. It would also give more accurate feedback to
managers.
Organizational Commitment had only a moderate relationship with turnover behavior (r = .104) but had the strongest relationship with turnover intentions (r = -.538), highlighting its
importance in employee retention. Low organizational commitment scores were reported by
4.5% of employees and fairly low organizational commitment scores were reported by 5.9% of

Off-shoring: Employee Retention and Performance 31

employees. These results suggest that attempts to increase employees organizational
commitment might reduce the likelihood of turnover for these employees.

Off-shoring: Employee Retention and Performance 32

Recommendations for Performance

Quality of the Employee-Leader Relationship rated by the employee was significantly related
to performance (r = .152). The quality of the employee-leader relationship was related to all
three of the variables of interest (turnover intentions, turnover behavior, and performance)
making it an extremely important aspect to report to managers and one that managers often
overlook as discussed in the previous section. This is especially important because managers
consisted rated the quality of their relationship with their employee as higher than the employee
reported. Results indicate that improving the quality of employee-leader relationships is a key
way to improve employee retention as well as employee performance.
Empowerment was also significantly related to performance (r = .151). Empowerment was one
of three variables that was significantly related to all three variables of interest (turnover
intentions, turnover, and performance), making it a great way to tackle both employee retention
and performance. As discussed in the previous section, only a small percentage of employee
(0.7%) reported fairly low empowerment scores and 6.1% of employees reported neutral
empowerment scores (no employees reported low empowerment scores). This is very promising
and it should be communicated to managers to continue to empower their employees as it leads
to more committed and higher performing employees.
Career Development Support was also related to performance (r = .140). It is interesting to
note that career development support was negatively related to turnover intentions (r = -.315),
showing that efforts to increase employees career development support will help to reduce the
likelihood of turnover as well as increase employee performance. The company should consider
creating more programs and practices that help to develop employees technical and managerial
skills. When examining the results, 8.8% of employees reported low career development support
scores and 15.5% of employees reported fairly low career development support scores. This
indicates that increasing career development support would increase performance for a fairly
significant number of employees.
Organizational Commitment had the weakest relationship (r = .129), of those variables
measured, with performance. This was also the case with turnover, but the fact that
organizational commitment was related to all three of the variables of interest (turnover
intentions, turnover behavior, and performance) makes it an important employee attitude. As
discussed in the previous section, low organizational commitment scores were reported by 4.5%
of employees and fairly low organizational commitment scores were reported by 5.9% of
employees. These results suggest that attempts to increase organizational commitment may
enhance performance for these employees.

Off-shoring: Employee Retention and Performance 33

Employee Attitudes: Opportunities for Improvement

In addition to the recommendations reported above, the results for several employee
attitudes and perceptions indicate areas in need of improvement. That is, the means (average
scores) for some of the variables were lower than others, suggesting that these may be areas that
could be the focus of improvement efforts. These included the quality of the employee-leader
relationship (mean =4.7 on a 7-point scale), career satisfaction (mean =4.67 on a 7-point scale),
career development support (mean = 4.37 on a 7-point scale), and manager effectiveness
(mean=3.32 on a 5-point scale). These were all based on employee reports/perceptions. One
way to improve several of these attitudes is to implement a mentoring program or provide
managers with workshops (training) on how to mentor and provide career advice and support to
their employees. Not only might this improve the quality of the employee-leader relationship but
it may enhance employee perceptions of career satisfaction and support.