Employee retention is related to a number of factors. One of the most important factors is job satisfaction. It is the most reliable factor in predicting employee turnover (Cotton & Tuttle, 1986). Job satisfaction again is dependent on a number of factors which can be classified as extrinsic or intrinsic.
Job Satisfaction in the Light of Needs
We start from the basics and look at Maslow’s theory of hierarchy of needs to understand job satisfaction. Job satisfaction can be linked to most of the levels of Maslow’s hierarchy (Wikipedia). People need jobs to fulfil their everyday physical needs like food, clothing, accommodation and healthcare etc. For most people, job is a primary source of financial security; the better paying and more secure the job is, the more financially secure the individual feels. A job can also provide a sense of association and belonging. Most of the people associate themselves with the nature and place of their work. The nature of job and the organization where the employee works form dominant parts of a person’s identity and status in society. For majority of the people job provides a potential means for the goals they want to achieve in life and the contribution they aspire to make to the society. When applied to the organizational model, meeting the self-actualization and esteem needs of an employee tend to correlate to better retention. Physiological, safety, and social needs are important as well, however, and must be addressed to improve the work environment.
Intrinsic Factors of Job Satisfaction
Herzberg (Herzberg, HBR), a psychologist argued that employees are less likely to be motivated by extrinsic incentives such as perks, plush offices or even promotions or pay. Rather, employees are most often motivated by intrinsic rewards which include interesting, challenging work and opportunities to grow and achieve greater responsibility. He believed in empowering the employees by giving them more responsibility, making information directly available to employees rather than channeling it through supervisors, assigning new and difficult tasks to individuals and giving them opportunity to perform specialized tasks that enable them to become experts. He proposed a theory about the factors that motivate employees. He uncovered two aspects of job satisfaction. One of the aspects is the motivators itself i.e. the elements which are primarily responsible for job satisfaction. Motivators may include achievement, recognition, nature of the work, responsibility and career progression. He called another aspect the hygiene factors. The presence of hygiene factors do not contribute to job satisfaction but their absence negatively affect the job satisfaction. The hygiene factors include company policy, supervision, interpersonal relations, working conditions, and salary.
Employee Self-Efficacy and Job Satisfaction
The Job Characteristics Model (Hackman & Oldham, 1976) suggests job characteristics that contribute to job satisfaction. These include skill variety, task identity, task significance, autonomy and feedback. The impacts on the psychological states of an individual as a result of core job characteristics are the “experienced meaningfulness, experienced responsibility for outcomes and knowledge of actual results”. The Dispositional Theory (Jackson, 2007 as cited by Wikipedia) is general theory that suggests that individuals have the inbuilt tendencies towards job satisfaction regardless of job role. The Core Self-evaluations Model (Judge as cited in Wikipedia) which grew out of the Dispositional Theory mentions four elements related to job satisfaction. These are self-esteem, general self-efficacy, locus of control and neuroticism. The model proposes that the more self-confident an individual is about his job and his ability to perform the more satisfied he is with the job.
Seeing Employees as Customers of a Business
An interesting model relating to employee turnover and which also deal with employee satisfaction has been presented by Cardy & Lengnick-Hall (2011). To understand employee satisfaction, they should be viewed as customers of a business. This analogy will help businesses underline factors that contribute to job satisfaction and make employees stick to their organizations in the same way as satisfied customers are loyal to a business. Like customer equity which is concerned with the long term and future value of a customer rather than the immediate profitability of products or services, employee life time value depends not only on the immediate value or quality of contribution of the employee to the business but also on the length of relationship between the employee and the organization. Thus an employee who has highly valued contribution to the business but stays with the business for a short time may have lower life time value as compared to an employee whose contribution is of substantially lower quality for the same period but who stays with the business for a longer period of time. Employee equity in turn depends on the total discounted life time value of an employee.
Employee equity has three dimensions. First is the value equity which is an assessment made by an employee for an effort the employee has to make in return for the benefits. This is analogous to cost to benefit ratio analysis done by a customer. Thus an employee may look for another employment if the pay and compensation provided by the organization is not commensurate with the effort and not at par with the compensation offered by other organizations. Second dimension of employee equity is the brand equity which is a member’s subjective or emotional beliefs regarding an organization. Organizational branding may also provide incremental preferences for an organization’s desirability as a place to work beyond job and organizational attributes. Retention equity describes the tendency of an employee to feel connected to and stay with an organization. This dimension requires the organization to build value for an employee as an individual rather than solely focusing on its goals and targets.
Motivation is a mental process that gives an individual the desire to perform an action or exhibit a desired behavior. Thus if it said that an organization motivates its employees well then it means the former is creating in the latter a desire to perform some action or to behave in a desired manner. The various ways by which employees can be motivated have been studied widely and a number of resulting theories have been put forth to explain the subject.
Expectancy Theory and Employee Motivation
Unlike the Maslow’s theory of hierarchy of needs which is focused on needs and explains an individual’s actions and behaviour on the basis of the needs the individual strives to fulfil, another theory, called the Expectancy theory deals with outcomes (pdfcast.org Blog). This theory explains a person’s behaviour in terms of the outcome or the goals an individual wants to achieve. The individual then makes choices or seeks alternatives to get that outcome. The outcome should be attractive enough to cause an individual to start working for it. The goal should also be achievable. Expectancy theory links effort, performance and outcome. The employee should have the belief that the more the effort, the better the performance and the better performance the higher will be the reward. The reward has to be fascinate the person to motivate him to work for it i.e. there should be a positive co-relationship between an individual’s effort in performing a job and a desirable outcome for the individual which he values. This theory further asserts that the more the want of an extrinsic or intrinsic reward, the more determined the employee to get the outcome. The employee must associate an emotional value with the outcome. This emotional value has been called valence. If the valence is positive the employee would prefer to achieve the outcome rather than not achieving it.
Another variable related to Expectancy Theory is expectancy which refers to the individual’s belief that the outcome can be achieved. Increasing expectancy in an organization can be done by training employees and thereby making them more confident in their abilities. The third variable in the expectancy theory is the instrumentality which is the means or actions required to get the outcome. To be motivated to do the work, the employee must trust that if the outcome is achieved, the person will get the reward. This in other words translates to an employee’s personal outcome which is the reward i.e. if the employee takes certain steps he will be able to achieve the outcome which will result in the getting promised reward. Instrumentality requires establishing a relationship between the performance and the reward i.e. the employee should know what level of performance will bring what reward. The employee also needs to have trust in fairness of the system i.e. belief that the system will accurately determine the performance and then give the reward accordingly. The expectancy theory is also sometimes called the valence-instrumentality-expectancy theory.
Equity Theory and Employee Motivation
Another factor of motivation lies in the equity theory (Wikipedia) that relates to the perception of fairness of distribution of benefits from similar contributions into group tasks and personal relationships. The contributions are inputs an individual makes to an endeavor and the benefits are the outcomes from the successful execution of the activity. Most individuals prefer the outcome to be relatively commensurate with their inputs, especially when compared with outcomes gained from similar inputs provided by a colleague or another individual they are in a relationship with. Individuals seek equity by distorting the input or outcomes in their own minds or by physically taking actions to alter the inputs or outcomes. These physical actions can involve the quitting the job with the group or organization where they experience the inequity.
The motivation implication in the equity and expectancy theories was confirmed by an experiment (Taylor & Taylor, 2011) which attempted to explain the need for a balance in efficiency and wages in the public services sector. In their article, they stated that public service motivation theory (PSM) was most often associated with increased wages. Variants of this theory mention the gift exchange model and the labour turnover model in which a higher than market wage rate is paid to elicit feelings of gratitude and prevent a shifting to alternative jobs respectively.
Factors Attributed to Employee Turnover and Retention
Having discussed job satisfaction and motivation as the primary factors responsible for employee turnover, other factors that may contribute to the turnover are explored in the following subsections. Employee turnover has several underpinning theories attempting to explain the phenomenon. Major findings include job satisfaction as one major determinants of employee turnover. However, job satisfaction alone does not significantly account for all the reasons why an employee would stay on his job. Herzberg et al. (1959) developed the two-factor theory proposing that the factors that cased an employee to stay at post were not opposite to the factors that drove the same employee out of the job. They intimated that the factors were different in nature and could not be used to determine employee turnover as well as in developing strategies for employee retention.
Job market and the economic condition prevailing in a country also affect a person’s decision to stay in or leave an organization. Cotton and Tuttle (1986) concluded in their study that that all things being equal, the better the local economic conditions, the more likely an employee will quit, confident that they will be able to find another job. Blau and Kahn (1981) propose that the more the time an employee spends with an organization and the older he gets, the lesser the likelihood that the employee will leave his job.
Organizational policies and its environment also have a bearing on a person’s decision to stay or quit. Some argue that providing promotion and career advancement opportunities to individuals can make them stick to the organization (Kellough and Osuna, 1995).
Career development often involves training and mentoring the employee. Some organizations have looked positively at providing training and development opportunities to the employee as a means to increase retention. However, others argue that training and development can have a negative impact on retention as it may open opportunities for the individual outside the organization. A study conducted in the United States and which relates to organizational environment is about the factors which contribute to nurses leaving their jobs. The study uncovered a number of factors. Firstly, the workplace was perceived to be unfriendly. The reasons attributed to unfriendly environment included incidents of belittling confrontations, sexual harassment, or gender abuse with co-workers. Another factor related to the nature of the job itself i.e. the emotional distress associated with patient care. Nurses not only felt heavily for sufferings of the patients but also about the inappropriate use of the advancing technologies. These issues caused negative thinking in nurses about their roles and their profession as they questioned whether the jobs they were doing were the ones they had aspired to do in their lives. Another factor mentioned for leaving the job was fatigue and exhaustion. The emotional and mental exhaustion coupled with physical fatigue seemed to be a compelling reason for nurses to leave (MacKusick & Minick, 2010).
The role of social networks has also been highlighted as a factor in employee turnover. Being a member of a society, an individual working in an organization is part of network not only internal to the organization but also belongs to networks outside. Moynihan and Pandey (2007) proposed that intra-organizational and inter-organizational networks have a marked impact on employee turnover. They argue that self-interested employees will build those networks for their own benefits. Given the rational and self-interested assumptions about individual behavior, we might expect that those workers who generate strong social relations are more likely to leave, since they are motivated to create such relations for purposes of individual gains. Employees invest time and effort to build networks. Leaving the organization for a higher salary and better conditions can be tempting but the potential loss of social capital they have built over time can be a hindering element for job exit. Intra-organizational networks can be sticky webs that keep employees with the same organization. Intra-organizational networks have four attributes. These are network centrality, coworker support, felt obligations towards coworkers, and interpersonal citizenship behavior. On the contrary, inter-organizational networks can have a negative effect on employee retention. External social networks provide opportunities for job searches. These networks facilitate ready access to job postings. An employee can learn about better job offers that provide more benefits and better conditions. The employee need not have to go through cumbersome process of job searching. External networks supply ease of movement to the employee and provides stimulus for leaving the job. Moynihan & Pandey (2007) conclude that intra-organizational social networks reduce turnover by making it less desirable, whereas an employee’s membership of external networks facilitates turnover by making it easier to find a new job.
Another proposition about retention is that the quality of colleagues has an effect on a person’s desire to stay in the organization. Most of the jobs require a team work and performance of one individual depends on the performance of others. Groysberg and Lee (2010) in their research assert that knowledge-intensive firms such as law and accounting firms, management consulting, computer and engineering consulting, research and development organizations, etc., employ highly educated workers who are tasked with intellectual work. In these organizations, knowledge constitutes the key input and since this resource is held by the employees, the quality of colleagues forms an important factor in getting the job done. In such organizations knowledge has got higher value than financial and other inputs. Groysberg and Lee (2010) further argue that since much of the work spans across many areas of the organization, therefore high-quality colleagues in different parts of the firm, not only those working intimately with a given individual, provide valuable support and a strong influence on turnover.
Person-organization fit (P-O fit) also affects employee turnover. P-O fit has two aspects. One of the aspects has been discussed by Moynihan and Pandey (2007). They assert that employees want more than financial rewards or desirability of specific tasks. Employees may feel an attachment to the organization because of the opportunity to carry out work that holds intrinsic value to them. The missions and goals of the organization may attract the individual itself. P-O fit relates to the compatibility of the organization and the individual in terms of values. It represents value congruence between an individual and an organization. The more the P-O fit, the less the likelihood of turnover. P-O fit has another dimension as well. It has a closer relationship with the employee selection process as well. In this respect, P-O fit is concerned more with suitability of the candidate for the job in terms of the skill set, abilities and attributes. For example some executives may leave the job because they fail (Gilmore & Turner, 2010). Stybel and Peabody (2007) proposed that search consultants while choosing a candidate for a leadership role, should provide information about strategic goals of the company which the candidate has to advance. This will help employ the most desirable candidate.
Mitchell et al. (2001) developed a construct that threw more light on the factors encouraging employee retention. This construct is known as Job Embeddedness (JE). The JE model found three main determinants: fit, links and sacrifice where each determinant could be considered in relation to the job (internal embeddedness) on one hand and the community or external environment (external embeddedness) on the other. The details of the determinants of JE are:
• Fit – with factors such as career goals, personal values and future plans. It can be defined as how the comfortable the employee is with workplace elements. The level of skill utilization and integration in community or work environment are also factors of the Fit component.
• Link – is a component related to the extent of integration with community and work place. Family pressures are some of the factors under this component of JE.
• Sacrifice – is the perceived cost of leaving the social and job network. This is less if employee has not formed deep links with colleagues in the work place or industry.
Each of the determinants of JE is considered as influenced by the workplace on one hand and the community where the subject lives on the other. The three determinants have since discovery been used in various studies to test generally their level of support for popular industries where turnover was a major concern. Being a young theory, studies are still ongoing across an expanding array of specialized industries and organizations.
Contribution of Job Embeddedness to Employee Retention
Quite a number of studies have been conducted to confirm the JE construct’s superiority over existing job satisfaction and organizational commitment models in attempting to explain the employee turnover problem. Reitz, Anderson and Hill (2010) stated that in measuring turnover factors, it is unclear under certain circumstances whether the employee left the job voluntarily or involuntarily. This is due to the difficulty in getting the employee’s perspective after he has left the job and also possible biased reliance on organisation’s information on the employee such as exit interviews. They made a comparison between traditional turnover research (TT) and JE asserting that voluntary and involuntary turnover were not well explained from using existing traditional turnover research design. Again they intimated that a cross-tabulation of the contributory factors of turnover against the mode of the turnover (voluntary or involuntary) could not reveal any conclusive information using the traditional turnover research design and therefore concluded that the JE construct is better overall in employee retention and turnover studies.
Mallol, Holtom and Lee (2007) conducted an experiment that tested the consistency of the JE construct across diverse cultures. They found that linkages to community were explained by the family commitment aspects of JE. They concluded that family commitment was one way by which a culture demonstrated which kind of family arrangement was dominant: whether the nuclear or the extended family system was emphasized. It has been concluded from the study that the kind of arrangement practiced generally affected the wealth of the individuals: there is a negative correspondence between the size of the family and wealth. Community related components of the JE construct will thus be higher for cultures which value the extended family system.
Many organizational commitment studies led to unexplained variances in the outcomes of their research. For instance, there is a variance between occupational withdrawal and organizational commitment. The concept of JE was introduced as a response (Adams, Webster and Buyarski, 2010) to these observations and presents a broader set of factors that have less affective components.
Table of contents :
1.2 Problem Statement
1.4 Significance of Study
1.6 Thesis Structure
2.1 Job satisfaction
2.1.1 Job Satisfaction in the Light of Needs
2.1.2 Intrinsic Factors of Job Satisfaction
2.1.3 Employee Self‐Efficacy and Job Satisfaction
2.1.4 Seeing Employees as Customers of a Business
2.2 Motivational Factors
2.2.1 Expectancy Theory and Employee Motivation
2.2.2 Equity Theory and Employee Motivation
2.3 Factors Attributed to Employee Turnover and Retention
2.3.1 Market Forces
2.3.2 Organizational Environment
2.3.3 Social Networks
2.3.4 Colleagues’ Quality
2.3.5 Person‐Organisation Fit
2.3.6 Job Embeddedness
2.3.7 Contribution of Job Embeddedness to Employee Retention
3.1 Research Typology
3.1.1 Motivation for the typology and Strategy
3.2 Survey Instrument
3.3 Study population
4. PRELIMINARY ANALYSIS AND EMPIRICAL FINDINGS
4.1 Coding of Responses
4.2 Preliminary Analysis: Descriptive Statistics and Test of Normality
4.2.1 Graphical view of the Normality Test of the Variables
4.3 Frequencies of the Observations
5. ANALYSIS OF RESULTS
5.1 The Frame of Questions and Expectation of Support for the Theories
5.2 Empirical Comparison of the Theories
5.3 Discussion of the Major Findings
6. CONCLUSIONS AND IMPLICATIONS
6.1 Main themes emerging from the results
Appendix A: Survey Instrument
Appendix B: Descriptive Statistics and Test of Normality
Appendix C: Survey Results ‐ Frequencies
Appendix D: Graphical Test of Normality of Variables