Why This Paper
Employee turnover in the IT industry continues to be a hot topic discussed not only in top management circles, but also in project management meetings. Given that the rate of employee turnover hovers in the 20% to 25% range, this is no surprise. If we consider the term “employee turnover” to represent one side of a coin, the other side of the same coin is “loyalty.”The former term has a negative connotation, while the latter has a positive slant to it. It is widely accepted that loyal employees don’t leave their employers, and employees leaving an organization are termed as lacking “loyalty.” Does the loyalty of an employee change over time? Can loyalty be quantified and measured, or is it just a warm-and-fuzzy concept that is not measurable in the fast-paced IT world? This paper examines the concept of loyalty in the IT consulting environment, and presents a hypothesis for quantifying and measuring the loyalty of employees who work as IT consultants at various client locations.
Some Definitions and Baselines
This paper focuses on the IT consulting industry.Consulting can mean different things to different people. In this paper I use this term is to represent the services that IT companies provide to their clients by having “consultants”work at the client location in order to achieve a specific goal or complete a specific project. In various contexts, consultants are also referred to as “contractors,”“ third-party vendors,” and so forth.But for purposes of this paper, all such terms mean the same thing—an IT-related resource that a client hires from an outside company and who has a specific role to play in a fixed amount of time for a certain dollar amount.
Also, I use the term IT (Information Technology) to denote any type of Information Systems service that a technology company seeks to provide its clients. This could include software development and deployment, hardware deployment and maintenance, outsourcing deals, project management services, programming services, etc.
The American Heritage College Dictionary defines loyalty as a “Feeling of devoted attachment and affection” and as the state of being “faithful to a duty.”Generally speaking, employers will accept that they want their employees to be loyal. The reason for that is the notion that loyal employees will not leave the organization for greener pastures outside.But in the IT world, especially the IT consulting environment, can an organization measure how it is doing in terms of gaining loyalty of the employees, so that they will remain with the organization? The hypothesis presented in this paper in the following pages proposes a theory using which loyalty of an employee in the IT consulting world can be quantified and measured.
The “3L Theory” of Loyalty
Loyalty in the IT consulting environment can be defined and quantified as a measurable entity. Even though the term loyalty represents a “feeling” that is not intrinsically measurable, the presence or absence of loyalty has certain well-defined outcomes that can be measured. Such outcomes are based upon circumstances that IT consultants find themselves in, while working at a client location on a project. The reaction of consultants to these circumstances finally determines the outcome and hence drives the measurable value of loyalty.
Loyalty in the workplace context is equivalent to commitment that employees have toward fulfilling their defined roles. In the IT consulting situation, this translates to the commitment that consultants have to completing their projects and assignments based on what was agreed upon between the client and the consulting company.
The Three L’s
Loyalty in an IT consulting environment is dependent on three factors—the employer, the project, and the client. Hence, the overall loyalty of an employee is a combination of these three independent loyalty factors:
• Le—Loyalty to the Employer, which is a measure of the commitment that consultants have toward their employer.
• Lp—Loyalty to the Project, which is a measure of the commitment that consultants have toward the project to which they are assigned.
• Lc—Loyalty to the Client, which is a measure of the commitment that consultants have toward the client for whom they are consulting.
Each of these factors is independent of each other. For example, a consultant might feel loyal to the project for various reasons (resulting in a feeling that they have to complete it on time and deliver it with top-notch quality etc.), but at the same time dislike working for that particular client for various reasons (resulting in a feeling of alienation from the client team).
Each of these factors has two aspects:
1. The intrinsic drivers for the factor—These are parameters that drive the value of that factor up or down. For example, one of the obvious intrinsic drivers for the Loyalty to the Employer (Le) is salary and compensation. If the salary of an employee is very low, it will drive the value of Le down. Similarly, one of the possible intrinsic drivers for the Loyalty to the Project (Lp) is the technology being used. If the technology being used in a project is the perfect fit for a consultant, it will drive up the value of Lp. Refer to Exhibit 1.
2. The extrinsic behaviors for the factor—These are visible outcomes displayed by a consultant based on the value of a factor. For example, if the Loyalty to the Client (Lc) is low, one of the possible extrinsic behaviors is that the consultant will not form informal networks within the client organization. Similarly, if the Loyalty to the Employer (Le) is high, one possible extrinsic behavior is that the consultant will undertake additional responsibilities to further the cause of the company. Refer to Exhibit 1.
Following is a detailed discussion on the three Loyalty factors.
Loyalty to the Employer (Le)
Loyalty to the Employer (Le) is probably the most researched factor amongst the three loyalty factors. Loyalty to the Employer is the measure that represents the commitment of consultants toward their employer. Traditionally, in any regular employeeemployer relationship, this factor represents a feeling of liking and belonging that an employee has for the employer organization. Obviously, the more affection and liking employees have for their organization, the more loyalty (commitment) they will have toward the employer.And higher loyalty automatically reduces the chances of an employee leaving the organization.
Some of the extrinsic behaviors associated with high Loyalty to the Employer (Le) are:
• High employee satisfaction and hence less likelihood of leaving the employer
• Positive word-of-mouth usually resulting in the portrayal of a positive image of the employer
• Enhancement of the employer’s brand
• Consultant might take on extra work and responsibilities to further the cause of the employer—usually for little or no return expectation
• Increased employee referrals—talent scouting on behalf of the employer
• Stewardship—make things better at the home office by coaching, knowledge dissemination, etc.
All the above behaviors are typical from an employee with a high Loyalty to the Employer (Le) factor—irrespective of whether in a traditional set up or an IT consulting environment. The difference is in the intrinsic drivers that drive the value of the factor. In most IT consulting scenarios the business environment is more complex because the consultant is usually not working at the employer’s office most of the time.
Most of the intrinsic drivers for the value of Le are common drivers that influence any employee’s loyalty to the employer, whether in a traditional employee-employer relation or in an IT consulting environment. These common intrinsic drivers are fairly well known (usually the basis of HR policies and functions):
• Salary, compensation, and benefits
• Office environment (office space, desk area, facilities, etc.)
• Opportunity for career growth within the employer organization
• Respect and trust within the organization
• Work environment—relationships with supervisors, peers, and subordinates
• Recognition for good work
• Opportunity for innovation and individual contribution
• Employer’s business strategy and long-term vision.
However, in the IT consulting environment, in addition to the above parameters there is one other parameter that critically influences the value of Le. This parameter is applicable especially to the IT consulting environment, even though it might be relevant to a general employee-employer relationship in a more restricted way. The parameter is the extent to which an employer maintains a connection to its consultants.
This is a very important parameter for IT consultants’ Loyalty to the Employer. Employees need to feel belonged to the parent employer organization—and the responsibility for this rests with the employer. The employer has to create an environment where the employees are always tied into the mother ship. This can be achieved through various means—frequent and open communication (so employees don’t feel the office is hiding things or feel left out), celebrations on important occasions, general get-togethers, back-to-the-office type of training, information exchange seminars, common interest communities, invitation to participate in non-client and non-project activities, etc. There are many ways of accomplishing this and not all of these ways are easy to implement.However, the fact remains that continued formal and informal interaction between the consultant and employer will strengthen the bond between the two and increase the value of Le. This factor is often overlooked and results in the alienation of the employee, who probably develops a closer relationship with the client at the expense of the employer.
For example, let’s take a typical case where a consultant gets a project at a client location for a period of six months extendable to one year, and she will be traveling away from the home base (employer’s office).While on the project, the consultant might not have direct access to the company email from office, and might have access only through a low speed dial-up connection in her hotel room. Given this scenario, if the employer at the home office doesn’t try to keep in touch with the consultant, then the consultant will get alienated from the employer and the value of Le will be reduced. In such a situation, some of the things that the employer can do to strengthen and build the bond between the company and the consultant are check if the office email can be rerouted to her internet account, or ensure that there are team or group activities at the home office that the consultant can plan on attending, or get her involved in non-project activities that will require her to connect with other consultants.
Loyalty to the Project (Lp)
Loyalty to the Project (Lp) is the factor that represents the commitment of consultants toward their project. In general terms, it can be described as the affinity that consultants have with the project itself—the actual work that they are doing.The more the value of the Loyalty to the Project (Lp), the more will be the dedication and commitment of the consultants to the project.
Some of the extrinsic behaviors associated with high Loyalty to the Project (Lp) are:
• High dedication to the project resulting in high productivity
• Commitment to achieving the goals of the project
• Motivation to work on the project and achieve results
• Problem-solving orientation
• Taking ownership and pride in their work
• Accepting responsibility over and above the assigned role
• Quick learning of new concepts and skills.
The intrinsic parameters that affect the value of Lp are:
• The technology of the project—This is one of the most critical parameters affecting the value of Lp. This includes all technical aspects of the project, the development environment for a software development project, the hardware and architecture, programming languages and tools, server and workstations being used, the networking architecture, etc. For consultants in the IT industry, the technology aspect of the project is one of the most critical—especially for the technical people. A mismatch between the technical expertise of a consultant and the technology being used in the project can reduce the value of Lp.
• The industry—For many consultants, the industry in which they work is as important as the technology. In many circumstances, consultants might be deployed to work on projects in an industry that is not their focus or area of specialization. This reduces the commitment that a consultant has toward the project. Younger consultants, starting out with a technology focus, may not be affected by this parameter as much as senior-level consultants who are gaining in-depth knowledge in the industry they work in, or management consultants who focus on the industry processes rather than the technology.
• Appropriate role—Consultants look for a good fit between their experience and skills, and the role that the project offers. This is usually a big contributing factor for discontent on a project, if the expected role (from a consultant point of view) and the actual role in a project do not match. This is especially true if the consultant is overqualified for the role. For example, if a project lead who wants to grow as a project manager is assigned as a team member with no supervisory role, he will lack commitment toward the project. Similarly, a DBA (database administrator) might have a problem being committed in a programmer’s role. For business reasons, it is not always possible to staff a consultant in the most appropriate role, but it is important to understand that in such a situation the consultant’s Loyalty to the Project is generally reduced.
• Possibility of project success—Consultants like any other worker, want to work on projects that have a potential for succeeding. Given that many IT projects fail, including many that are canned in mid-flight, the perceived possibility of project success plays a key role in determining a consultant’s commitment toward the project. Just like a “self-fulfilling prophecy,” if consultants perceive that the project will not succeed, their commitment to the project is reduced. On the other hand, if consultants perceive that the project will be successful, then their commitment increases.
• Opportunity for learning and growth—Consultants typically want to learn new skills and new concepts. Projects that offer the opportunity to learn and apply the learning increase the value of Lp. Also, consultants want to grow in a project, especially in longer duration projects. The growth can be in any form—from a programming role to a design role, from a team member role to a team lead role, etc.
• Opportunity for contributing as an individual—Consultants want to contribute to a project, and want to be recognized for the contributions.When working on projects that offer this opportunity, consultants are committed to the project.However, in situations where the individual contribution is lost, the commitment level is reduced. For example, in a large software testing effort involving a team of 10–20 testers, there is less opportunity for individual contribution, as compared to the design phase of the project.
• Opportunity to innovate—Commitment to a project is also affected by the opportunity offered to consultants to innovate and express new ideas. In the IT consulting environment, there are inherent difficulties in offering this to all consultants in all projects simply because of the nature of IT work. For example, developing a new software application offers opportunities to use innovative ideas during planning, requirements definition, design, and programming.However, on the other hand, for a mature software application that requires maintenance and where the change procedures are well defined, there is little room to innovate. This can reduce the commitment level that a consultant has towards the project.
• Good Leadership—While working in a project team, consultants look up to the project manager for leadership, and their commitment to the project depends on the quality of project management. Good project management provides a boost to the commitment of consultants on a project and increases the value of Lp.
Loyalty to the Client (Lc)
Loyalty to the Client (Lc) is the measure of the commitment of consultants toward their client. The more the value of the Loyalty to the Client (Lc), the more will be the commitment of the consultants toward the goals of the client.
Some of the extrinsic behaviors associated with high Loyalty to the Client (Lc) are:
• Sensitivity and dedication toward the goals of the client, even beyond the current project
• Strong client relationships
• Building of informal client networks that can finally result in more business
• Actions and decisions that are right for the client, instead of being driven by parochial or selfish motives
• Working beyond the defined role and the requirements of the job
• Striving to add value to the client.
The intrinsic parameters that affect the value of the Lc are:
• Office environment—This refers to the office surroundings and facilities provided by the client to the consultants for their work. It includes, but is not limited to office desk, phone, computer and network, Internet access, etc. A lack of proper facilities or a good office environment results in reduced commitment toward the client.
• General working environment—This refers to the working environment at the client location, and is generally shaped by things like the friendliness of the client, attitude toward consultants, politics, cooperation received from various client groups for the consultant’s work, etc. As with the office environment, lack of a good working environment reduces the commitment that consultants have toward the client.
• Client location—This is a very important parameter, especially considering the fact that travel is an integral part of a consultant’s life. Many consultants travel to outside customer locations— away from their home bases. A good match between a consultant’s travel preference and the travel required for the client is key to increasing the value of Lc. For consultants who prefer to travel, staying at their home location for long is a demotivating factor, and for those that prefer to stay in one location, regular travel is a problem.
• Trust and respect—Consultants want to be trusted for the work they do and respected for the skills and experience they bring to the table. Though this parameter is similar to what any employee expects from an employer, the difference is that in this case the relationship is that of a client and a consultant. In many situations, clients don’t treat consultants with respect and use them just as a temporary add-on resource. Also, in some projects clients don’t trust the consultants to do their job. This is usually indicated by various behaviors from the client, varying from micromanaging to watching and tracking every activity of the consultant. Such client behavior reduces the commitment of the consultants to the client. If the client treats the consultants with respect and shows trust in the consultant’s ability to deliver the goods, the consultants will develop increased Loyalty to the Client.Obviously, the consultants also have to show worthiness of the client’s trust and respect.
• Recognition for good work—Recognition and rewarding is typically the responsibility of the employer.However, consultants who receive recognition from their clients, develop increased Loyalty to the Client. The recognition doesn’t need to be in a tangible form—in fact in many situations, an exchange of tangible rewards might be inappropriate or against policy. However, client appreciation can be in many other forms—kudos in a meeting, a note of thanks, an appreciative email to the consultant’s employer, etc.
• Opportunity to innovate—Commitment to a client is also affected by the opportunity offered to consultants to innovate and express new ideas. This parameter is similar to the one that affects the Loyalty to the Project, but differs in its basis and in its outcome.When working with clients who offer this opportunity, consultants show increased commitment to the client. This parameter is driven by a client’s attitude and how they perceive a consultant. In situations where the client tells the consultant exactly what to do and retains absolute control over the activities of the consultants, there is no room for a consultant to contribute as an individual or innovate. This reduces the commitment to the client, and therefore reduces the value of Lc.
Putting It All Together
Combining the Three Loyalty Factors
Each of the three factors—Le, Lc, and Lp—is independent of the other two, which really means that there is no relationship between these three factors. For example, a consultant might be committed to the project and the value of the Loyalty to the Project (Lp) might be high. At the same time, the consultant might have some issues with the client and have a low value for Loyalty to the Client (Lc). In addition, a high value of Lp and low value of Lc has no bearing on the value of the Loyalty to the Employer (Le).
However, even though the three Loyalty factors are independent of each other, they combine together for the Overall Loyalty of the consultant. The Overall Loyalty is directly proportional to each of the Loyalty factors. However, to quantify the value of Overall Loyalty, we need to introduce the concept of “The Urge to Move.”
The Urge to Move
The Urge to Move can be defined as a consultant’s mental resolution to change the status quo—typically by moving away from project, the client, or the employer. If the situation is good, consultants have no reason to look for a change; in this case the Urge to Move is low and the Overall Loyalty is high. On the contrary, if consultants are not happy in a given situation, they will try to move away from it; in this case the Urge to Move is high and the Overall Loyalty is low. The value of the Urge to Move directly drives the Overall Loyalty in an IT consulting environment. In fact, the Urge to Move is inversely proportional to the Overall Loyalty.
For example, in an IT consulting situation if all the loyalty factors (Lp, Lc, and Le) are high, then the Overall Loyalty is high and therefore the Urge to Move is low. In this situation, the consultant is committed to project, the client, and the employer—and therefore has no reason to move away from the environment. Similarly, if the values of Lp, Le, and Lc are low in a given IT consulting situation, then the Overall Loyalty is low, and the Urge to Move is high.
Quantifying Overall Loyalty
Even though we know that the value of Overall Loyalty is directly proportional to the three Loyalty factors—Lp, Lc, and Le—the method of determining the Overall Loyalty is indirectly via the Urge to Move. This is because the Urge to Move is a powerful concept that highlights the discontent and lack of commitment in consultants. By measuring the Urge to Move, an organization can assess where it stands in terms of Overall Loyalty of its consultants. The Urge to move is what finally dictates the behavior of consultants.
To quantify the Urge to Move, we need to be able to quantify the three Loyalty factors. For the sake of simplicity, we arbitrarily assign the lower and upper bounds of each factor as 0 (zero) and 1 (one) respectively.Therefore, each of the three Loyalty factors— Lp, Lc, and Le—have a value between 0 and 1. A value of 0 indicates complete absence of loyalty and 1 indicates a full loyalty. For example, if Le = 0, it means that the consultant is absolutely uncommitted to the employer. Similarly, if Lp = 1, then the consultant is completely committed to the project. These examples highlight the extremes for each of these Loyalty factors. However, in real life, the values can vary on a continuous scale. For example, if Lc = 0.2, it means that the consultant’s Loyalty to the Client is low. Similarly, if Le = 0.8, it means that the consultant’s Loyalty to the Employer is high.
Given this method to quantify the Loyalty factors, we now define the Urge to Move as:
Urge to Move (U) = 1 – [(Lp * Le) + (Lp * Lc) + (Le * Lc)] /3
Given that Lp, Le, and Lc vary in value between 0 and 1, the value of U also varies between 0 and 1.
Following are some scenarios that highlight the implication of this formula.
Scenario 1—A consultant is completely committed to the project (because it is the perfect technology, role, etc.) and the value of Lp = 1. She is also quite committed to the client (likes the work environment, opportunity, gets respect, etc.) and the value of Lc = 0.9. However, the consultant is completely alienated from the employer due to various reasons and the value of Le = 0. In this case, U = 0.7, and represents a reasonably high Urge to Move.
Scenario 2—A consultant is very committed to the client, with whom he has worked for a long time, and Lc = 0.8. The consultant is also very committed to the employer and the value of Le = 0.9. However, the latest project that the consultant has been assigned to is not a very good project and so Lp = 0.4. Hence, the value of U = 0.53, which represents only a moderate risk that the consultant is looking to move away from the current environment.
The actual reaction of a consultant to the above two scenarios is unlikely to be the same. For example, in Scenario 1, there is a good chance that the consultant will leave the employer. However, in Scenario 2, it is more likely that the consultant will try and talk to both the client and the employer to try and get assigned to a different project.
Practical Application of the Theory
This theory provides a method to quantify the Overall Loyalty and measure the Urge to Move. For any organization that provides IT consulting services, it is critical to understand the motivation of its consultants and check the pulse of the employees. The values of Lp, Lc, and Le can be measured through an employee survey, which asks consultants to rate their commitment to the Project, the Client, and the Employer. A statistical analysis of the results would indicate if there were a general problem in the company, especially if the average Urge to Move for consultants in the company is high. At any point, such a measurement would indicate if there is a problem in the consulting environment and what action needs to be taken.