1.

Executive Summary

“If companies are going to grow their way out of difficult times (and excel in good times),
they need two things: (1) for their customers to stick with them, and (2) to improve their
productivity. But this only happens through an organization of committed, loyal employees”
(Askoy, n.d.)
In this era of globalization, it is no doubt that employees are the most valuable resource an
organization possesses which creates a competitive advantage for the organization.
Competent employees can take a normal business to greater heights whereas incompetent
work force can make a collapse to a great business. Therefore it is vital to maintain the
motivation & loyalty level of the employees continuously, which is in other hand a challenge
presently organizations face.
The organization is normally under pressure from the shareholders to perform well, therefore
it is difficult for the employer to provide stability in the jobs for the employees. Given this
situation organization should also focus on employee loyalty & should take proactive
measurements to increase it, since it has a positive return towards the performance of the
organization.
Therefor management should identify effective strategies in order to satisfy this motive while
allocating adequate resources to keep employees satisfied & motivated. The main purpose of
this report is to identify the challenges which Dialog Axiata PLC faces in developing &
maintaining the loyalty aspect of the employees & the needed changes & approaches which
should be adopted by the organization to overcome the identified challenges.
 2. Overview of Dialog Axiata PLC

Dialog Axapta PLC is the market leader in telecom industry in Sri Lanka and it is a
subsidiary of Axiata Group Berhad (Axiata) in Malaysia. Dialog has spearheaded the mobile
industry in Sri Lanka since the late 90’s, propelling it to a level of technology on par with the
developed world. The Company operates 2.5G, 3G and newly introduces 4G mobile services,
supporting the very latest in multimedia and mobile internet services as well as international
roaming across over 200 countries. (Dialog Annual Report, 2016).

2.2. Dialog Vision

Source: Dialog Axiata PLC Annual Report 2016

2.3. .Dialog Mission

Source: Dialog Axiata PLC Annual Report 2016

2.4. Dialog Corporate values

Source: Dialog Axiata PLC Annual Report 2016

3. The Challenges & Issues Dialog Axiata PLC Faces

Every organization will have challenges to face. Challenges may due to the changes in
external or internal environment. The challenges which Dialog Axiata PLC currently faces
can be listed down as per the below illustration by dividing in to two main categories.

EXTERNAL INTERNAL

Challenge of
Investor’s expecting same kind
Thriving
of return as last year
Competition

Increase in
Telecommunication Existing Tall Hierarchy
Tax

Maintaining the Motivational Level

Illustration I – Current challenges faced by Dialog Axiata PLC

Source: Internal Sources

3.1. Challenge of Thriving Competition

Sri Lankan telecommunications industry is a highly competitive market in the region with
five MNO operators. The operators can be identified as Dialog, Mobitel ,Etisalat ,Airtel
Hutch. The market shares & the customer base of the companies are as below.

Market Share
Hutch
10%
Airtel
8%
Etisalate
Dialog
13%
46%

Mobitel
23%

Illustration II – Market Share- Telecommunication Industry Sri Lanka

Source: Telecommunication Regulatory Commission OF Sri Lanka – Statistics Report 2017 March
 Operators Subscribers Market Share

Dialog 11.8 M 46%

Mobitel 5.8 M 23%
Etialat 3.5 M 13%
Hutch 2.6 M 10%
Airtel 2.2 M 8%

Table 1 – Customer Base- Telecommunication Industry SL

Source: Telecommunication Regulatory Commission OF SL – Statistics Report 2017 March

Despite the fact that Dialog is the market leader in the sector, the organization faces high
level of competition from the other operators. All of these players trying to capture the
market through different strategies which lead Dialog to be alert all the time to identify the
potential threats from the other companies. Constant introduction in new services, advance
technologies has made the sector more competitive where the MNO’s try to utilize the
opportunity to facilitate these innovative products & services to its existing customers & to
attract new customers. As the customer is getting high no of alternative options to evaluate
when it comes to MNOs the switching cost of the customers are also high.

3.2. Investors Expecting the Same Return as Last Year.

Dialog Axiata PLC is a part of Axiata PLC Malaysia. Axiata is the largest FDI investor
operating under the aegis of BOI Sri Lanka. The organization has invested 175 Mn USD in
Sri Lankan ICT sector with the objective of enhancing the 3rd & 4th generation high level
broadband service along with enhancing the network of fiber optic transmission.
Along with this investment Dialog manages to achieve a comprehensive net profit of 9
Billion in 2016 when compared to the achievement of 5.1 Billion in 2015.
2016 2015
Net Profit After Tax Rs. 9,026,395 Rs. 5,187,326

Table 2 – Net Profit Comparison of Dialog Axiata PLC 2016 -2017

Source: Dialog Axiata PLC Annual Report 2016

The Investors has direct DAP to achieve the same kind of return or above that for the
financial year 2017, which is a massive challenge to the company with the current economic
situation in Sri Lanka. The employees has to stretch themselves to a greater extend to achieve
this massive target which will lead to create lot of challenges & issues which will be
elaborated under the section of challenges in building employee loyalty.

3.3. Increase in Telecommunications levy.

The new government imposed VAT (15%) NBT (2.04%) on top of the telecommunication
levy which earlier was 27.55%.so the new tax rate has come to 49.75% with effect from the
1st Nov 2016.The increased in taxes has a massive negative impact on the revenue of the
company where previously the tax percentage was 27.5% now the company must pay almost
50% as the taxes apart from the corporate taxes. This will lead customers to unsubscribe from
the additional services from the network & stick to the core services which are needed mostly
such as voice, data & SMS. As elaborated in the previous point the investors are expecting
the same kind of return in the other hand while increase in tax imposed been pushing the
organization in to a really challenging situation. The impact of both these factors will directly
influence the employees of the organization.

3.4. Existing Tall Hierarchy of the Organization.

Dialog Axiata PLC employees over 3500 employees across the island, one of the biggest
employers in Sri Lanka. When you have this kind of staff employed for the organization it
will result in having a very tall hierarchy of structure creating lot of challenges & issues
specifically within the organization. Implementation of right kind of procedures & policies
are required to manage the structure so that it delivers the set of objectives by the top
management.
Dialog Axiata’ s organizational structure will look like following.
 Group Legal & HR

Group Finance &

Admin

Group Marketing

Group Service
Board of Dorectors Delivery- Customer
service experience

Chairman Group Business

Group CEO
Axiata Group Operations

Group Tele
infrastructure

Group IT and Digital

services

Group Technology

Group- Dialog
Enterprise

Illustration III – Key Functions of Dialog’s Organizational Structure

Source: Dialog Axiata PLC Annual Report 2016
The top management group includes nine individuals where they head each of these nine
capacities and their assigned portfolios are as below

Function Functional Head

Group Legal & HR Group Chief Officer

Group Finance & Admin Group Chief Financial Officer

Group Marketing Group Chief Marketing Officer

Group Service Delivery- Group Chief Customer officer

customer experience

Group Business operations Group Chief Operating Officer

Group Tele Infrastructure Chiief Executive Officer - Tele Infrastructure

Group Chief Information Officer & Cheif Digital

Group IT and Digital services Services Officer

Group Technology Group Chief Technology Officer

Group Dialog Enterprise Group Chief Officer- Dialog Enterprise

Illustration IV –Functional Heads -Dialog’s Organizational Structure

Source: Dialog Axiata PLC Annual Report 2016

All of these portfolios further expand in to 16 positions within the structure (Starting from the
GCEO level), the number of positions cascaded down displays the massiveness of DAP
structure. The levels are elaborated in the illustration in next page.
 Group CEO

Chief Co-
Ordinating Officer

Senior General
Manager

General Manager

Head

Chief Manager

Senior Manager

Manager

Unit Manager

Assistant Manager

Specialist

Senior Executive

Co-Ordinator

Executive

Officer

Clerk

Illustration V –Functional Heads -Dialog’s Organizational Structure

Source: Internal Information

Referring illustration III, IV, V it is evident that DAP currently has a massive tall structure
which creates challenges for the organization

3.5. Maintaining the Motivational Level of the Employees

Dialog as the leading telecommunication service provider in Sri Lanka facilitates wide range
of perks to its employees. Following are some of the benefits provided by DAP

 Facilitating Dialog services at an economical price to the employees (Free Phones, SIMs,
Dialog TV facility etc.).
 Insurance cover facility (medical, Critical illness, Accident Cover).
 Reward & Recognition programs (Annual Outings, Sports Carnivals).
 Loan Facilities.
 Annual Bonuses & Salary increments.
 Transport Facilities.
 Re-imbursement of Examination Fee & Membership fee.
Source: Internal Information

Even though the company is providing these kinds of benefits as per the Head of HR they
still see some gaps in the motivational level of the employees which are identified as below.
 Staff with high motivation due to extrinsic factors with average ability to perform the
job.
 Organization is more focused towards extrinsic motivation than intrinsic motivation.
 Managers are not trained to motivate & inspire employees.

These points will be further explained under the changes in building employee loyalty section
4. Challenges Which Effect Building Employee Loyalty & How It effect Employee

As these are a portion of the principle challenges which DAP faces at the present we will
look how it influences the way toward building the loyalty of the employees for DAP.

4.1. Thriving Competition.

When there is high level of competition in the market top level managers put up aggressive
strategies which create aggressive & challenging targets for the operational level employees.
They have to stretch themselves & work their best out of best to achieve these targets which
will in return create negative thoughts about the company in the mindset of the employees.
In the beginning employees might try to cope up with the required high level of achievement
but when they could not achieve it they will struggle to cope up with the stress factor which
will ultimately impact their working & family life. Given this kind of a situation, it is quiet
challenging to maintain loyalty of the employees while keeping up with the competition
currently at the market.

4.2. Investors expecting higher returns & increase in telecommunications levy.

As explained under challenges this is the biggest challenge which company faces currently.
When the half of gross revenue leaking to the government as taxes it is difficult for the
organization to satisfy the investors with the expected high level of net revenue. So the
obvious option of the top management would be to introduce cost cutting approaches in each
area. The cost cutting programs might fist try to cutoff the benefits given to the employers
since it is the most effective way to achieve the outcomes with in the shorter period.
There will be lot of discussions with top management & HR on Annual bonuses, Increments,
promotions, annual get together, sports carnivals & holding the new recruitments. Since it is
very difficult to achieve the expected outcomes through the organic growth of the company
which is at 7% YOY currently. As per the internal sources, to achieve the targeted revenue
DAP should target minimum of 14% YOY
As it is evident that the organic growth is not sufficient to meet the requirements of the
mother company & therefore the HR does not has no other option than turning in to the
employee benefit cut offs. In this kind of situation, the trust level, motivation & the
organization citizenship of the employees would be at a question mark.
While the staff is stretching out to achieve the set forth aggressive targets by the management
& when employees are informed on the benefits will be based on achieving the aggressive
targets it will create loyalty issues which is impossible to control of.
4.2. Existing Tall Hierarchy of the Organization.

As DAP employees a massive no of staff throughout the country, it is inevitable to have a flat
organizational structure. Even though the tall structure is bit difficult to manage the
organization does not have any option to follow other than going for a tall structure.
The following issues have been identified as the factors which hinder building loyalty of
employees in the organization.
4.2.1. High no of management levels - In DAP, the communications with in managers &
subordinates get filtered & distorted since there is high no of management layers. So,
when the things are executed the required output was not their which was expected by
the top management. On the other hand, this disturb the decision-making process as
you have to brief the business concept to each manager level & when the approval are
given, the idea might not be in use of to time obsolete. Taking the information from
bottom line to the top line take more time since it has to go through several
operational & management layers. Despite this fact some mangers does not have an
idea on what is happening at the operational level. Therefore while communication
the managers interpret the message according to their skills, knowledge & ability
which loss its original meaning by the time it get to the top level.

4.2.2. Young employees at middle management level – The other disadvantage in hand is
apart from the no of layers in the structure DAP has young professionals (between age
group 26 -35) at the first line & middle level management layer. The below
illustration will further explain this challenge.

Illustration VI –Employee Distribution by Age

Source: Internal Information

It is clearly evident that 1680 employees are in the age bracket of 26 -35, where 73%
of the first line & middle level management are present. As per the HR information in
Dialog they see very lower turnover percentage in first, middle, top level managers &
therefore, the opportunity to go up the ladder is highly difficult. This result in
 employees to get stagnated in position for a longer period which negatively impact the
motivation level & loyalty of the employees. It ultimately creates higher turnover of
executive & non-executive levels.

4.3. Maintaining the Motivational Level of the Employees

As mentioned in the challenges section the below issues were identified & further elaborated
to identify the gravity of the challenge at a depth level.
4.3.1. High motivation due to extrinsic factors with average ability to perform the
job - As elaborated in the challenges section under point no 3.5 it is evident that
Dialog does care about their employees. But does caring is enough to build the
loyalty & attain organizational objectives? The obvious answer would be “NO”.
The reason behind this is the performance is based on motivation plus the
individual’s ability to perform the job. So if the skill levels at an average level
motivation will not allow the employees to perform the job. This is one area
where DAP HR should concentrate on.

4.3.2. More focused towards extrinsic motivation than Intrinsic motivation - As

explained under point no 3.5 the organization provides variety of extrinsic
rewards to the employees It is obviously that the organization should have the
extrinsic rewards to prevent employees getting demotivated but at the same time
the organization should promote & reward intrinsic motivation as well.

4.3.3. Managers are not trained to motivate & inspire employees – Majority of the
middle level managers reflect “get the work done” attitude where they provide
only the instructions but do not provide proper guidance & input to perform the
tasks. The approach is more towards the transitional leadership which does not
motivate the employees at all. So as a result of this, employee loyalty factor will
be diminished
5. Practical Recommendations for the identified Challenge of the Organization

5.1. Summary of the Problem & the recommended practical Solution - I

Problems Recommended Practical Theories used for the

Solution recommendation
1. Thriving Competition Top down communication plan  Goal setting theory
to educate employees on current which is been
situation introduces by Edwin
2. Investors Expecting Adopt “Theory of Goal” to Locke,1960
Same kind of return achieve aggressive targets  Douglas McGregor’s
theory X & Y model
3. Increase in Management to be more focus
Telecommunication Tax on theory “Y” style
Table II–Summary of the problem, recommendation & theory adopted - I

5.2. Practical recommendation with a theoretical approach – Elaboration - I

To face the above-mentioned challenges DAP should first have a communication plan which
reach all the staff (executive & non-executive) to explain the situation organization currently
in. The message should reach the employees in the way that they feel that organization need
their support & commitment to overcome this situation. Then the management can
communicate to the employees that there will be aggressive targets to meet the requirement
of the investors as well as to face the challenge of increase in taxes & high competition. Also,
the management should inform the employees that none of the benefits will be cut off as a
solution for this current situation. The company should follow goal setting theory which is
been introduces by Edwin Locke in 1960. It’s a simple by an effective theory where the clear
& measurable yet challenging goals are set up to influence superior performance.

Illustration VII – Goal Setting Theory

Source– EDWIN A. LOCKE & MENTO, June1978)

Edwin Locke, in his 1968 article "Toward a Theory of Task Motivation and Incentives," he
showed that clear goals and appropriate feedback motivate employees. He went on to
highlight that working toward a goal is also a major source of motivation – which, in turn,
improves performance which is the requirement of DAP management to achieve superior
performance. The below features of the goal setting theory would aid DAP to achieve the
aggressive targets while improving the loyalty level of the employees.
 Clear measurable & challenging goals to influence a superior performance
 The willingness to work towards challenging goals motivates employees rather than
easy goals
 Crates room for innovations
 Goal should be accompanied by a clear deadline.
On the other hand, DAP should Influence Employees on Theory “Y”. To achieve these
aggressive targets, DAP should have employees who are in the line of “Y” management style.
Therefore, the organization can influence the employees through Douglas McGregor’s theory
X & Y model, which clearly explains two different attributes of employees in the
organization. The below illustration further explains this authors model.

Illustration VIII – Theory X & Y Model (McGregor, 1960)

Source – MANAGEMENT AND ORGANISATIONAL BEHAVIOUR by LAURIE J. MULLINS)
Illustration IX –Maslow’s hierarchy of needs
Influencing the employees is not enough to overcome this situation. The top management
also should follow the theory “Y” management model to create an enabling & empowering
environment so that employees are able perform the task with a self-motivation.
The below illustration further explains the recommendation.
 Illustration VIII – Theory X & Y Model (McGregor, 1960)
Source – MANAGEMENT AND ORGANISATIONAL BEHAVIOUR by LAURIE J. MULLINS)
Illustration IX –Maslow’s hierarchy of needs

5.3. How this will Impact building loyalty of the DAP employees - I.

 Employees get to know the current situation of the organization & the benefits will be
not cut off due to this. This will prevent employees getting dissatisfied.
 Influencing & empowering employees on theory “Y” management style will assist the
employees to be self-motivated & work towards achieving these aggressive targets
Through this changed approach ultimately organization achieves its current aggressive
targets as well as building & maintaining the employee loyalty which satisfy both
parameters through the changed approach in order to overcome the first three critical
challenges.
5.4. Summary of the Problem & the recommended practical Solution - II

Problems Recommended Practical Theories used for the

Solution recommendation
High no of management Decentralization of decision
levels making process  Douglas McGregor’s
Young employees at first & Revamp the promotion Program theory X & Y model
middle management level
Lack of opportunity for  Maslow’s theory of
Operational level employees Enable & empower operational motivation &
to participate in the decision- level staff to take decisions Hertzberg Two
making process Factor Theory

Table III–Summary of the problem, recommendation & theory adopted - II

5.5. Practical recommendation with a theoretical approach – Elaboration – II

5.5.1. High no of management levels - As DAP operates in a highly competitive market the
decision-making process should be shorten. Therefore, the top management should empower
down the line managers & employees to make decision in their own work & to be
accountable for it. In the initial recommendation on first three problems it is stated that
management should move form theory “X” management style to theory “Y” management
style which will allow bringing changes to empower the employees take decisions. These
changes are required to act proactively & make quick decision to keep up with high
competition in the market.
5.5.2. Young employees at first & middle management level- With the given facts, Middle
& first level management is at the young age where it does not enable to down the line
employees to get promoted. Promotion is a very vital factor to keep up the motivation of the
employees.
As per Maslow’s theory of motivation it is a proven norm that when people does not get the
chance satisfy their esteem need they tend to get demotivated which heavily effect the loyalty
toward the organization. Further moving in to the theory of motivation, Hertzberg identify
this as motivational factor which lead the employees to move from satisfied level to
motivated level.
The following pictorial view will further explain this argument.
 Illustration IX –Maslow’s hierarchy of needs
Source– MANAGEMENT AND ORGANISATIONAL BEHAVIOUR by LAURIE J. MULLINS)

Illustration X -Herzberg’s Two-Factor Theory

Source – MANAGEMENT AND ORGANISATIONAL BEHAVIOUR by LAURIE J. MULLINS)

Therefore, the organization should introduce horizontal promotion program where there will
be a new grade system. As an example, when an employee is joined as an executive the
employee will be positioned as executive “Grade B” & the employees’ next level will be
executive “Grade A”. This initiative will eliminate the current challenge where down the line
employees getting stagnated at one position for many years. The following illustration further
explains the recommendation (few positions from the structure showed as an example)
 Current Structure Proposed Structure

Senior Executive – Senior Executive -

Senior Executive Grade A Grade B

Executive Executive - Grade A Executive - Grade B

Officer Officer - Grade A Officer – Grade B

Illustration XI – Current Promotional Program vs. Proposed Promotional Program

5.6. How this will Impact building loyalty of the DAP employees II.
The employee’s motivational level will be increased due to these change & they will be
transfer to the level of motivated from the satisfied frame which will ultimately result in
positive increase of employee Loyalty.
5.7. Summary of the Problem & the recommended practical Solution - III

Problems Recommended Practical Theories used for the

Solution recommendation
High motivation with invest More time on recruitment
average ability process  Concept of
More focused towards Enabling & creating an Intrinsic Performance =
extrinsic motivation motivation rewarding Ability * Motivation
environment
Managers are not trained to Enabling an empowering  Concept of Intrinsic
motivate & inspire environment on transformational & Extrinsic
employees leadership & Introduce training Motivation
programs on transformational
leadership  Theory of
Transformational
leadership
Table IV–Summary of the problem, recommendation & theory adopted - III

5.8. Practical recommendation with a theoretical approach – Elaboration – III

5.8.1. High motivation with average ability - DAP HR should invest more resources on
recruitment process to find the right person with right ability to perform the job. The
performance is based on the ability & motivational level of the employees.

Performance = ability X motivation

If you find the right person with the intrinsic motivation you could provide the extrinsic
motivation to expect a superior performance. Analyzing vice versa an employee with a high
level of a motivation & low level of ability will not lead to a superior performance.
Therefore, the organization must invest more time in hiring process since well-matched
professional are naturally more loyal & retaining them need less efforts. This change will
assist in managing the all the current critical challenges which is faced by the company at
present.
The above change will permit the organization to have people with intrinsic motivation.
Already available extrinsic motivation factors could assist employees to move to overall
satisfied & motivated level to perform the job responsibilities
 Psychological rewards Sense of challenge and achievement
Self-generated factors which
influence behavior Appreciation
Motivated by work itself Recognition
Intrinsic
Motivation Concerned with the quality of
working life Opportunity use one’s ability
Not created by external
incentives
Deeper long-term effect
Extrinsic Immediate powerful effect Salary and fringe benefits
Motivation short term effect Security
Tangible rewards Promotion
Contract of service
work environment
Punishment
Table V– Intrinsic & Extrinsic motivation
Source – Adopted from Ivey Business Journal - http://iveybusinessjournal.com

5.8.2. More focused towards extrinsic motivation - Above table shows the characteristics, ways
of the intrinsic & extrinsic motivation. Since DAP already provide these extrinsic
motivational factors the employees could be provided with the following features to cultivate
the intrinsic motivation within the employees.
 Challenging work
 Career Advancement
 Mentoring & Education
 Regular Feedback

5.8.3. Managers are not trained to motivate & inspire employees - On the management style,
the organization should have training programs to cultivate the transformational leadership
qualities within the manager which will help them to inspire & motivate employees. Clearly
the DAP management should move form transitional leadership style to transformation
leadership method to increase the loyalty level of the employees.
 Illustration XIII – Full Range of Leadership Model
Source – http://www.dtic.mil/dtic/tr/fulltext/u2/a522924.pdf

5.9. How this will Impact building loyalty of the DAP employees – III.

The recommended changes are in line to promote the overall motivation level of the
employees. Each & every recommendation result in increasing the loyalty level of the DAP
employees.
 6. Conclusion

This report has extensively analyzed the critical challenges that Dialog Axiata PLC facing currently in
building & maintaining employee loyalty. Several challenges are identified which exist in external
environment & internal environment through this study which directly affect the loyalty aspect of
the employees. After carefully analyzing & understanding the depth of the factors, the report has
recommended changes & approaches to overcome the situation which is at present. These
recommendations has been adopted through the relevant theories & concepts which assist the
organization to understand the behavior of the employees within the organization as well as how
these solutions result in building positive employee loyalty within Dialog Axiata PLC. Trust the
recommended solutions will assist Dialog Axiata PLC to overcome the present situation while
building the loyalty aspect of the employees which will result in achieving superior performance in
the upcoming years.

“CLIENTS do not come first, EMPLOYEES come first. If you take care of your employees, they will
take care of the clients.” (Richard Branson)