Employee satisfaction and Employee retention

Introduction

Human resource is a key component of organisation as people are the heart of the organisation and play a critical role in determining the performance of the organisation. Companies that are careful and meticulous in recruiting the appropriate people with the required skills and knowledge that will be useful in the organisation are likely to fare significantly better than organisations that are lax in their process of staff recruitment. Human capital is an important source of competitive advantage and provides the organisation with a competitive edge over their competitors (insert reference abt human capital being a competitive advantage). Careful selection and recruitment of people is hence an important process of human resourcing. Once an organisation has successfully recruited suitable and competent people into the organisation, the next step will be retaining this group of competent staff in the organisation as they, with their knowledge and skills are very much an invaluable asset to the organisation.

2.2 Business Reasons

Employee retention is very much a challenge faced by organisations today (insert references), especially the retention of highly capable employees, who are essential in the organisation in this dynamic 21st century business environment where organisations that wish to survive and be successful have to be highly versatile with the ability to respond swiftly and effectively and thus adapt well to the ever-changing business environment. Therefore, it is crucial for organisations to ensure that they are able to retain the best of their people, who are likely to contribute much to the survival and the success of the company.

Organisations have long tried to tackle the problem of employee retention and limit turnover of skilled employees (insert references), however it is almost impossible to eradicate such incidences.

It is a widely known fact that employee satisfaction is closely related to employee retention and numerous studies have been conducted to support the above statement (insert references). However, it is also likely that there are reasons other than employee satisfaction that might play a crucial role in employee retention (insert references). Organisations will need to look into other areas that impacts employee retention to have a better understanding of it and hence be better equipped in the management of retaining skilled employees.

Personal reasons

With reference to my prior work experience, where employee turnover was very high in the organisation I worked in, even though employers try to compromise with those employees (planning to leave) and retain them by increasing their salary and offering them more benefits (increasing their job satisfaction), it is not enough to keep them from leaving the organisation. As such, I am highly interested as to what other factors that could lead to people’s intention to leave an organisation even though there is an increase in job satisfaction. It would be certainly be very helpful to gain some insights about people’s intention to leave an organisation and what should be done to prevent them from doing so, should I acquire a managerial career after entering the workforce.

Preliminary Review of the Literature

Lambert, Hogan & Barton (2001) measures the impact on turnover intent based on five factors. They are demographic characteristics (eg. age, gender, education), work environment measures (eg. role conflict, autonomy, co-worker relations), job satisfaction, turnover intent, and alternative employment opportunities.

Turnover intent is largely affected by availability of alternative job opportunities, job satisfaction, work environment (financial rewards) and demographic characteristics (age and tenure) with job satisfaction having the greatest effect. Work environment and demographic characteristics generally have an indirect effect on turnover intent as both factors affects job satisfaction. Nonetheless, work environment was found to have a greater effect on job satisfaction than demographic characteristics. Meanwhile, job satisfaction had the greatest effect on turnover intent.

Lambert, Hogan & Barton (2001) suggested that managers emphasise on creating a favourable work environment to increase job satisfaction, which in turn lowers turnover intent.

Besides job satisfaction, an individual’s “social identification with one’s organisation” (Moura et. al. 2009) also plays a role in predicting his/her intention to stay or leave the organisation. When employees identify with their organisations, they are prone to be more supportive and loyal to the organisation and desire to be part of a member of the organisation (Ashforth and Mael 1989, cited in Moura et. al. 2009).

Results of a study done by Moura and colleagues (Moura et. al. 2009) found that social Identity has proven to be an important aspect people take into consideration when deciding to stay or leave the organisation.

As organizational identification (ie. social organisation) largely impacts on employees’ intentions to turnover, organisations should concentrate on improving employees’ identification with the organisation.

Nonetheless, job satisfaction should not be ignored as is still undoubtedly one of the most vital factors that affect turnover intent.

However, as characteristics of each individual varies, it is thus necessary to take into consideration the different factors and levels of job satisfaction as perceived by an individual when analysing job satisfaction (Franek and Vecera 2008 cited from Lee and Way 2010). The impact of individual characteristics on job satisfaction and turnover intention should not be ignored.

Factors of job satisfaction can be categorized into, ‘Work Environment factor’ and ‘Work Itself factor’.

Both factors, though mutually exclusive, were found to have a large impact on job satisfaction. The ‘Work Itself factor’ not only evaluates job satisfaction but turnover intentions as well.

Although job satisfaction increases motivation and productivity of employees, it does not mean that level of employee retention is at its most efficient. Job satisfaction factors are not necessarily the same as employee retention factors because not all job satisfaction factors will affect employee retention (Lee and Way 2010).

Udechukwu and Mujtaba (2007) states that the reasons for employees’ to stay or leave an organisation can be divided into three main categories, that is, social affiliates, employee and employer, contrary to previous studies that only took employer and social affiliation factors into consideration.

Social affiliation (eg. family, social club, religious group) affects employee voluntary turnover as it is something that an employee identifies with or is associated to, that has no connections to the organisation. The needs of an individual and their social affiliations are often in line with each other. Therefore, it is highly likely that an individual’s social affiliation will affect his/her decision to stay or leave the organisation.

Employers are now providing their staff with more benefits, such as flexi-work hours, to ensure that their needs are met, hence increasing job satisfaction and lowering probability of employee turnover (Udechukwu and Mujtaba 2007).

Meanwhile, for employees, it is crucial to them that their needs can be satisfied as the inability to do so will have a negative impact on their performance and productivity (Senguder 2000 cited in Udechukwu and Mujtaba 2007), which could then lead to higher probability of turnover.

Deery (2008) examined the reasons for employee turnover by dividing them under three categories as well. The first category is job attitudes (eg. job satisfaction, organisational commitment). The second category is the employees’ personal attributes of job burnout and exhaustion. The third category addresses employees’ work-life balance.

Previous research emphasised on the role played by job satisfaction and organisational commitment on employee retention but focused less on job burnout, stress and exhaustion

A recent contribution to the research on employee retention is the effect caused by work-life balance on employees’ decision to stay or leave the organisation. A poor balance between work and life (eg. family time) could lead to family conflicts and lower job satisfaction, hence increasing the possibility of employee turnover. Thus, to improve employee retention, it is recommended that employees be given the opportunity to find a balance between work and life.

Deery’s (2008) emphasis on the importance of a balanced work-life is supported by Griffeth and Hom’s (2001) (cited in Udechukwu and Mujtaba 2007) research findings that employees who face family-life conflicts have a higher probability of quitting their jobs than those who do not.

Previous researchers have also assumed that determinants of employee turnover and employee retention are the same, that is, employee turnover and employee retention are “two sides of the same coin” (Johnston 1995 cited in Cho, Johanson and Guchait 2009) and when a factor negatively affects employee turnover, it will have a positive effect on employee retention.

Cho, Johanson and Guchait (2009) decide to test the assumptions by researching on employee turnover intentions focusing on whether the determinants of measuring the possibility of an individual leaving the organisation are just as useful in measuring the possibility of an individual remaining in the organisation.

Three main factors that have been repeatedly found to have a considerably large effect on employee turnover will be used in this study to find if they have the same level of effect on employee retention. The three factors used will be “Perceived Organisational Support (POS), Perceived Supervisor Support (PSS), and Organisational Commitment (OC)”.

Findings of the study have proven that the assumption is not necessarily right.

POS does have an effect on both employee turnover and employee retention. However, the degree of effect varies, with POS having a larger impact on employee retention than employee turnover.

Although PSS was found not to have any effect on employee retention, it does have an effect on employee turnover.

OC reduces employee turnover, but does not necessarily have a positive impact on employee retention.

As organisations today seek to retain their skilled staff, Cho, Johanson and Guchait (2009) suggested there should be more focused research on factors that lead to employee retention than on employee turnover.

A research by Harris, Wheeler and Kacmar (2009) based on the LMX (leader-member exchange) theory which studies the quality of the leader-member (ie. supervisor-subordinate) relationship and assesses the effect that empowerment has on employees in terms of their job satisfaction, turnover intentions.

Importance of LMX relationship is relative to the subordinates perceived level of empowerment. When a subordinate’s perceived level of empowerment is high, the work itself becomes a form of motivator and it is not necessary for them to have a high quality LMX relationship as a motivator. Hence, importance of LMX relationship is relatively low for highly empowered subordinates.

However, when subordinates’ perceived level of empowerment is low, a high quality LMX relationship (eg. providing support and encouragement) will be crucial in making up for the loss of work motivation which could lead to high turnover intent.

Therefore it is recommended that supervisors should give more attention on increasing subordinates’ level of empowerment. If the nature of the job or work environment does not permit high levels of job empowerment, supervisors should then build a high quality LMX relationship with those subordinates to make up for their low level of job empowerment.

There appears to be limited business literature regarding job satisfaction and its effects on employee retention, specifically in the public and private sectors in the UK. As work environment and conditions vary between UK public and private organizations, factors and level of job satisfaction likely differs, so does its impact on employee retention. Apart from that, other possible factors that might possibly contribute to employee retention particularly in UK public and private organizations will also need to be explored. The findings from this research will give UK public and private sectors an idea on what would make their staff stay in the organisation. There is also little attention on recommendations that UK public and private organisations can undertake to retain their skilled staff. This is also essential as it gives UK firms, be it public or private, an idea of what they can do to best retain their skilled employees.

Research Questions and Objectives

4.1 Research Questions

Taking into consideration individual characteristics and differences in background and culture, what are the various perceptions on job satisfaction?

What are the factors that could influence job satisfaction?

How do these factors lead to employee retention? Do they have a direct or indirect impact on employee retention?

How does job satisfaction differ between employees in public and private sectors in the UK?

What is the consequent effect on employee retention between public and private sectors in the UK?

What are the other possible factors that could lead to employee retention in the UK public and private sectors?

What can be done to increase rate of employee retention in both public and private sectors in the UK?

4.2 Research Objectives

To critically appraise the significance of employee satisfaction on employee retention

To compare and contrast the impact of employee satisfaction on employee retention between the public and private sectors in the UK

To critically evaluate other factors contributing to employee retention in UK’s public and private sectors

To recommend possible course of action to enhance rate of employee retention in both public and private sectors in the UK

Research Plan

5.1 Research Perspective

The research will be done taking into consideration the realistic working environment in UK organizations today. Most of the information required for the research will be obtained from secondary data (slightly more qualitative than quantitative data), primarily from theoretical and empirical journal articles. As such, both deductive and inductive reasoning will be required for the research.

5.2 Research Design

This research uses a comparative design as my area of focus is on two broad categories and a comparative designed research will clearly highlight the differences between the two categories. However, one possible limitation of this is that there might be more similarities than differences between the two categories, hence defeating the purpose of using the comparative research design.

5.3 Data Collection Methods

Secondary Data:

The sources of secondary data for the research will mostly be textbooks, journal articles, Databases such as EBSCO, Emerald and Science Direct.

Textbooks on Human Resource Management (HRM) which can be sourced from Coventry University’s Lanchester Library will be used to gain some theoretical knowledge about the main subject of research, ’employee satisfaction’ and ’employee retention’. Textbooks written in the UK will be particularly useful as the subject and areas of research will be written within the context of the UK, and may even include case studies based in the UK. This will help in answering Research Objectives 1 and 4.

Some of the textbooks that may be used are ‘People Planning and Talent Planning: HRM in Practice’ by Stephen Pilbeam & Marjorie Corbridge AND ‘Human Resource Management at Work: People Management and Development’ by Mick Marchington and Adrian Wilkinson.

Journal Articles relative to the area of research will be the primary source of secondary data for this research. They can be sourced either from print journals available from Coventry University’s Lanchester Library or from journals available through Web Databases such as EBSCO, Emerald and Science Direct. Both theoretical and empirical journal articles will be used as they will be very useful in providing insights as well as the latest and up-to-date findings regarding my area of interest in my research. Journal articles written in the UK context will be particularly useful, especially empirical journal articles that include data collected from surveys conducted in the UK. Moreover, there seem to be a lot of journal articles available via the databases on the topic of my research. I may probably get the bulk of my information needed for the research from journal articles. Therefore, Journal Articles and Web Databases will be used to answer all my Research Objectives, especially for Research Objectives 2 and 3.

I will source the journal articles from journals such as the ‘European Journal of Social Psychology’, ‘Human Resource Development Review’, and ‘Personnel Review’.

Websites may also be used, such as the UK Government Website which contains some statistics which may be used in the research. One such website would be the ‘Office for National Statistics’ (ONS) at http://www.statistics.gov.uk/default.asp . Government Websites

Peer-reviewed

Valid-as I can get up-to-date articles regarding my area of research.