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Impact of Employee Retention on Performance of a Company

Literature Review

Impact of Employee Retention on Performance of a Company explains that Employee retention have two different aspects one is that when employee feel retain in the company for long time then he didn’t do work properly and feel free from duty, didn’t do work and also involve in other different time wasting activities so employee retention also is a bad aspect and in the other hand employee retention is a good thing when one employee retain in the firm and got different benefits from the company and also got the bonuses, old age benefits from the company then employee is doing everything for the company. Employee retention is important for building a productive, healthy and committed workforce. Retention practices help save costs associated with recruitment, business productivity or poor customer service. The objective of the Employee Retention Strategy is to increase the awareness, tools and information available to employers to assist them in employee retention. Retention starts at the top. Sourcing, hiring and retaining motivated employees is the responsibility of the company’s governing board and Leadership Team. Getting and keeping good staff demands focused, formal and informal policies and procedures that make retention a prime management outcome. Managers need to appreciate staff every day and constantly work to keep them on board. The HR department alone cannot reduce turnover. For significant, positive change, company leaders must establish distinct retention processes and programs within all levels of an organization. After finding the right people, it is management’s primary role to take responsibility for the success of their employees including leading people towards performance goals and targets. Employee retention has emerged as one of the dominant themes in management studies during past decade. The major contribution of this study is the examination of determinants of Employee Retention of Pakistan. Our research results show the relationship and also the intensity level of the determinants through which they impact on the employee retention. Employee retention refers to policies and practices companies use to prevent valuable employees from leaving their job. It involves taking measures to encourage employees to remain in the organization for the maximum period of time. Hiring knowledgeable people for the job is essential for an employer. But retention is even more important than hiring. This is true as many employers have underestimated costs associated with turnover of key staffs (Ahlrichs, 2000). Turnover costs can incurred with issues such as reference checks, security clearance, temporary worker costs, relocation costs, formal training costs and induction expenses (Kotzé and Roodt, 2005). Other invincible costs and hidden costs such as missed deadlines, loss of organizational knowledge, lower morale, and client’s negative perception of company image may also take place. This is why retaining top talent has become a primary concern for many organizations today. Managers have to exert a lot of effort in ensuring the employee’s turnover are always low, as they are gaining increasing awareness of which, Meaghan et al. (2002), employees are critical to organization since their values to the organization are not easily replicated. Many critical analysis are conducted to minimize the possible occurrence of shortage of highlyskilled employees who posses specific knowledge to perform at high levels, as such event will lead to unfavorable condition to many organizations who failed to retain these high performers. They would be left with an understaffed, less qualified workforce that will directly reduce their competitiveness in that particular industry. (Rappaport, Bancroft, & Okum,2003). Most researchers (Bluedorn, 1982; Kalliath and Beck, 2001) have attempted to answer the question of what determines people’s intention to quit, unfortunately to date, there has been little consistency in findings. Therefore, there are several reasons why people quit their current job and switch for other organization. The extend of the job stress, low commitment in the organization; and job dissatisfaction usually result in resignation of employees, (Firth 2007). Abundant studies have also certified the relation between satisfaction and behavioral intentions such as employee’s retention and spread the word of mouth (Anderson and Sullivan, 1993).

Also Study: Impact of HR Motivation on Employee Performance Analysis Summary

Also study this article about TALENT MANAGEMENT in which best talent management practices has been discussed to hire and retain the best talent.

Numerous studies showed how high employees involvement is can relate to the intention of leaving an organization (Arthur 1994). Lacking of opportunities to learn and self development in the workplace can be the key for employee dissatisfaction which leads to turnover. Other studies also indicated that employees will retain in their organization if he or she has a good relationship with the people he or she is working around with (Clarke 2001). Organizations are therefore suggested to provide team building opportunities, where interaction and discussion can be carried out not only within but outside their working hours (Johns et al 2001). This is why managers today must taken care of their employees personal feelings toward the job and satisfaction levels from their working conditions, superiors and peers, as these are the keys to ensure employee retention. The success and survivability of organizations is heavily dependent on customer evaluations (Jolliffe & Farnsworth, 2003, p. 312), whereby the organization must put effort in satisfying their employees since the relationship between customer satisfaction and employee’s satisfaction are significant. In summary, the literature defines retention as continuing relation between employees and their organization and turnover as “any permanent departure beyond organizational boundaries” (Cascio, 1995, p. 581). The benefits of retention are saving cost for further recruitment, fewer training to be conduct for new candidates, improve productivity, increase employee’s performance and thus increase profits and meet their organizational goals and objectives. Below we will discussed the relationship between each of the human resource management practices with employees retention and employees turnover, which are the Impacts from employee empowerment, employee training & development, performance appraisal and employee compensation. argues that retention of employees needs to be managed and identifies remuneration, development, career opportunity, work environment, performance management and work ,family and flex time as areas that have an effect on retention of employees. Studies have identified an array of factors that influence employee retention. Gaiduk et al (2009) observed that previous studies have found that employee intentions to remain with an organization are influenced by three major groups of variable which are: employee personal characteristics such as gender, age, position level; the nature of an employee’s current job; and adequate working arrangements including such aspects as the quality of current supervision, opportunities for promotion, available training, and quality of communication within the organization. Established that younger employees focused on remuneration, training and development, career advancement, challenging work, growth opportunities and recognition. For older employees autonomy, opportunities to mentor and job challenge were of great importance. A study of 139 academics from Jordanian University (Al- Omari et al, 2009) established that job satisfaction and organizational commitment had a significant positive effect on intention to stay among the academic staff. A study by Daly et al (2006) on turnover intention of academics in public urban universities, established that structural factors such as faculty work environment, autonomy, communication, distributive justice and workload were related to intent to stay. A study of academics in Makerere University, (Amutuhaire, 2010) established that remuneration and tenure influenced their retention. Locally, Kipkebut (2010) in a study on organizational commitment and job satisfaction of employees in universities in Kenya established that role conflict, promotional opportunities, age were some of the factors that influenced employee intention to quit the university. These findings reflect a mixture of intrinsic and extrinsic factors. Keeping the best employees helps in providing better quality to customers and achieving the goals while retention becomes more imperative for the organization when least number of talented employees on job. Success of organization is based on retention of experienced workforces. Retention starts from day first with recruitment of the employees. Organization’s priority to retain the employees has revolutionized. Competition among the organizations has increased and talented employee’s retention has become the first priority of the organization. Not only organizations confronted of furious competition of products but as well as faced problem of best employee retention. Right retentions strategy made possible for the organizations to survive and grow in the market and complementary for more profit. The extrinsic motivators comprises with diverse factors including pay, bonus and the job security of the employees and used to retain the best and talented employees. Many scholarly conduct research on impact of extrinsic benefits on employee turnover and come to know that substantial satisfaction factor is monetary reward. Prior study of claimed that substantial competition decreased the impact of financial rewards because of increase in turnover. For better performance, organizations need to motivate workforces intrinsically rather than only extrinsic motivation because open communication, discussion on new ideas and removal frustration bring satisfaction. Encourage is the most imperative element of intrinsic reward which have diverse form for example in form of certificates, appreciation words in public place, appreciation letter, and many more. Task completion in an interesting way enhance the process of creativity and learning that effect employees intrinsically therefore appreciation on completion and bringing new idea enhance the learning process as well. Organizations used extrinsic benefits as a strategy to retain the employees but having wide range of responsibilities is itself a non financial reward to bring organizational commitment. Motivation of workforce in both extrinsic and intrinsic angles required to achieve tasks and goals effectively. For better implementation, organization have to understand each worker profile before applying motivational factors because right reward for right person complementary for retention.

Workforce motivation has constructive link with environment and beneficial for both workforce and organization. For better and more outcome performance, organizations have provide time to employee to relax for example in the form of relaxation rooms, gym, entertainment or some other sport activity. Organization with an open environment in which information is shared with the employees is successful in retention. Intrinsic motivation in an organization is a social beginning that creates a supportive environment for the employees. The individual’s abilities to perform work actively, by having rhythm in work and life. The work-life-balance strategies retain the skilled worker which reduces the turnover cost and improves the productivity and efficiency of the organization. The work life balance strategies help the organizations to increase their productivity and performance of the employee with increased intention to stay in the organization. Normal working hours with flexible time has constructive impact on organizational performance. Supportive environment is more suitable than others in manufacturing industry but employees at night shifts or longer working hours must be a compulsion for the employees to join entertaining activities to perform well at work and belief makes the employees to contribute more and the supportive relationship is built. The conflict in the work and life is increasing due to increase in demand of work and decrease in time for social life. Managers in an organization have to play a key role for implementation of work life balance strategies by reducing the conflicts of employees between work and life, with the introduction of flexible timings and support at work.

Training bring positive consequences in the organization but have to manage effectively because it enhance the skill and ability of workforce. Not only enhance the skills and abilities but as well trained to deal with the challenges involved during the task and remain flexible and tolerant in the organization. For better performance and achievement of goal and objective of organization effectively, made possible by effective training. The willingness of employee to get trained in the new area is due to the flexibility and learning process. Development of employees provides the road map to the organization and employees to transfer the knowledge and experience to next generation. Employee need to grow, for growth in the career organizations invest, and develop them. According to researchers and career development is considered as an important factor of the employee retention. The increase in the experienced workforce will not only increase the profits of the organization but also the trained workforce will be available at the time of need. Development factor brings more satisfaction than that of monetary factor. The growth and advancement in the career of employees brings satisfaction, the organizations can retain the employees by positioning them according to their potentials. The development factor is more for such employees which are seen as the future of the organization.

As what the study has shown, there are significant relationships between the factors of training, compensation and appraisal on University of Y lecturer’s retention. However, the factor of empowerment is not so significantly related to employee retention as founded from this study. This reflects the major finding of this study on how different culture might have different expectation on determining their employment satisfaction and retention. Prior to the result, the study provide empirical evidence that supports all the above independent variables to be significantly affecting the employee retention. Most of the researchers agree with these statements as shown in literature review by providing all the empirical evidence from each study’s result. Hence, the formulated hypotheses are constructed according to these researchers’ fundamental findings as foundation, and awaited to be tested in later stages through this study’s result. After establishing firm and reasonable design instrument, primary data is gathered from the targeted respondent, i.e. lecturers in University of Y to implement these data into SPSS Software to process meaningful information. Eventually, empowerment as the only independent variable to not been supported by this study. To illustrate this situation, the study carried out further investigation and countered the opposing result with supporting journals. As conclusion, the whole study successfully identify that training, compensation and appraisal is a fundamental consideration for University of Y lecturers’ retention decision; while empowerment is less fundamental to lecturers’ consideration as this can be attributed to the Asian culture characteristic of higher authority conformity. So employee retention has two different aspects it can be positive and can be negative.

 Also Study: Factors Affecting Employee Performance

  1. Shoaib, Noor, Tirmizi, Basher, (2009). Determinats of employee retention in telecom sector of Pakistan, Proceedings 2nd CBRC, Lahore, Pakistan
  2. Khan, Mehmood, Ayoub, Hussain(2011) An Empirical Study of Retention Issues in Hotel Industry:A Case Study of Serena Hotel, Faisalabad, Pakistan. European Journal of Economics, Finance and Administrative Sciences ISSN 1450-2275 Issue 29 (2011)
  3. Aslam, Mahmood, Hafeez, Hussain(2011)Public services as an employer of Choice: Study of problems or challenges faced by National Bank of Pakistan with respect to recruitment and Retention. MEDITERRANEAN JOURNAL OF SOCIAL SCIENCES Vol. 2, No. 1, January 2011, ISSN 2039-2117
  4. Hong, Hao, Kumar, Ramendran, Kadlresan(2012) An Effectiveness of Human Resource Management Practices on Employee Retention in Institute of Higher learning: – ARegression Analysis. International Journal of Business Research and Management (IJBRM), Volume (3) : Issue (2) : 2012 60
  5. Muceke, E. Iravo, G.S. Namusonge(2012) Determinants of Academic Staff Retention in Public Universities in Kenya: Empirical Review. International Journal of Humanities and Social Science Vol. 2 No. 13; July 2012
  7. Eric K, M. Sutphin, W. Hass, T Lambur( july 15 2011) Influence of Human Resource Practices on Employee Intention to Quit
  8. The Labour Market Framework for Yukon(2010) Recruitment and Employee Retention Strategies
  9. Karen Shelton(2001) THE EFFECTS OF EMPLOYEE DEVELOPMENT PROGRAMS ON JOB SATISFACTION AND EMPLOYEE RETENTION. The Graduate College University of Wisconsin-Stout May 2001
  10. CHEE HONG, ZHENG HAO, CHAKTAK, YEE KIAT, YONG GUAN( August 2011) Effect of Empowerment, Training, Compensation and Appraisal on UTAR Lecturers‘ Retention

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Lebohang Thetele August 13, 2020 - 5:20 pm

Relevant, understandable, clear and very important article on employee retention

rawan October 30, 2020 - 4:44 pm

whats the name of the author?


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