EMPLOYEE TURNOVER AND RETENTION STRATEGIES OF SMALL AND MEDIUM ENTERPRISE SERVICE BUSINESSES IN HANOI

viii 4.2 Qualifications of the Respondents 44 4.3 Expected Turnover and Retention Rate in SMEs Service 4.5 Cross-Tabulation of Expected Employees Turnover and 4.8 Cross-Tabulation of Val

i

BUSINESSES IN HANOI

_

A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines

in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam

ii

The Dissertation of

NGO THI MAI

entitled

EMPLOYEE TURNOVER AND RETENTION STRATEGIES OF SMALL AND

MEDIUM ENTERPRISE IN SERVICE BUSINESSES IN HANOI

Submitted in Partial Fulfilment of the Requirements for the Degree

DOCTOR OF BUSINESS ADMINISTRATION

A program offered by Southern Luzon State University,

Republic of the Philippines in collaboration with

Thai Nguyen University, Socialist Republic of Vietnam

has been approved by Oral Examination Committee

WALBERTO A MACARAAN, EdD JOANNA PAULA A ELLAGA, DBA

CECILIA N GASCON, PhD

Chairman Endorsed by: Recommended by:

CONRADO L ABRAHAM, PhD APOLONIA A ESPINOSA, PhD

Accepted in Partial Fulfilment of the Requirements for the Degree

Doctor of Business Administration

_ WALBERTO A MACARAAN, EdD

Date Vice President for Academic Affairs

iii

iv

I would like to express my sincerest gratitude to the Management Board of the Southern Luzon State University, Thai Nguyen University, and to the teachers who taught me all the academic competencies necessary for me complete this study

I would like to express my gratitude to Professor Conrado L Abraham,

my enthusiastic teacher, for the encouragement, and for the time he spent guiding me in the conduct of this research

I would like to express my sincere thanks to the Department of Employment - Ministry of Labor, Invalids and Social Affairs, Department of Labor, Invalids and Social Affairs Hanoi, and to the SMEs service business in Hanoi that helped me collect the data for the study

I sincerely appreciate the Board of the University of Labor and Social Affair (ULSA), my colleagues in ULSA, and my classmates in DBA1 for helping me accomplish this study

Finally, I would like to give thanks to my family who shared with me their enthusiasm and who encouraged me to complete my dissertation

Ngo Thi Mai

v

To my family and friends This piece of work is for you

NTM

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PAGE

TITLE PAGE ……… i

APPROVAL SHEET ……… ii

CERTIFICATE OF ORIGINALITY ……… iii

ACKNOWLEDGEMENT ……… iv

DEDICATION ……… v

TABLE OF CONTENTS ……… vi

LIST OF TABLES ……… viii

LIST OF FIGURES ……… ix

LIST OF APPENDICES ……… x

ABSTRACT ……… xi

CHAPTER I INTRODUCTION ……… 1

Background of the Study ……… 1

Statement of the Problem ……… 2

Objectives of the Study ……… 3

Significance of the Study ……… 4

Scope and Limitations of the Study ……… 5

Definition of Terms ……… 5

II REVIEW OF LITERATURE ……… 7

Theoretical Framework ……….… 37

Conceptual Framework ……….… 39

III METHODOLOGY ……… 40

Locale of the Study ……… 40

Research Design ……… 40

Population, Sample and Sampling Technique ………… 40

Research Instrument ……… 41

Data Gathering Procedure ……… 41

Statistical Treatment ……… …….…… 42

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IV RESULTS AND DISCUSSIONS ……… 43

4.1 Profile of SME Respondents ……… 43

4.2 Evaluation of Expected Turnover and Retention in Enterprise in Hanoi 44 4.3 The Relationship Evaluation of Expected Turnover and Retention with Personal Factors ……… 46

4.4 Analysis of Factors Affecting the Expected Turnover and Retention ……… 59

V SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Summary of Findings ……… 61

Conclusions ……… 66

Recommendations ……… 68

BIBLIOGRAPHY …….……… ……… 70

APPENDICES ……… 74

CURRICULUM VITAE ……… 78

viii

4.2 Qualifications of the Respondents 44 4.3 Expected Turnover and Retention Rate in SMEs Service

4.5 Cross-Tabulation of Expected Employees Turnover and

4.8 Cross-Tabulation of Valuation of Job Title and the

4.9 Cross-Tabulation of Work Satisfaction and Gender 50 4.10 Cross-tabulation of Work Satisfaction and Age 51 4.11 Cross-Tabulation of Work Satisfaction and Education 52 4.12 Cross-Tabulation of Emotional Attachment and Gender 53 4.13 Cross-Tabulation of Emotional Attachment and Age 54 4.14 Cross-Tabulation of Emotional Attachment and Education 55 4.15 Cross-Tabulation of Valuation of Job Title and Gender 56 4.16 Cross-Tabulation of Valuation of Job Title and Age 57 4.17 Cross-Tabulation of Valuation of Job Title and Education 58 4.18 Result of the Logistic Regression 60

ix

2.2 Summary of Indirect Expenses Related to Employee

2.4 Conceptual Framework Showing the Factors Influencing the

Expected Turnover of Employees in SMEs Service

x

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Title of Research : EMPLOYEE TURNOVER AND RETENTION

STRATEGIES OF SMALL AND MEDIUM ENTERPRISE SERVICE BUSINESSES IN HANOI

Researcher : NGO THI MAI (SUSAN)

Degree Conferred : DOCTOR OF BUSINESS ADMINISTRATION

Name and Address

of Institution

: Southern Luzon State University Lucban, Quezon, Philippines and Thai Nguyen University, Socialist Republic of Vietnam

Adviser : Dr Conrado L Abraham

Year Written : 2013

This study sought to determine the relationship between employee turnover and personal characters in SMEs service businesses in Hanoi It also sought to (i) determine the profile of the respondents in SMEs service businesses in Hanoi, (ii) analyze the expected turnover and retention rates in SMEs service businesses in Hanoi, (ii) ascertain the relationship between the expected turnover and retention rates in SMEs service businesses in Hanoi, (iv) determine the factor that will affect the expected turnover of the respondents, and (v) recommend workable retention strategies for SMEs

service businesses in Hanoi The study is also after providing answers to the

following research questions, (i) what is the profile of employee-respondents

in different service oriented SMEs in Hanoi; (ii) what is the expected turnover rate and retention rate in service-oriented SMEs in Hanoi?; (iii) what are the relation between expected employee turnover and retention strategies with personal factors?; and (iv) what are the factor that will affect the expected turnover of the respondents?

xii

researcher used statistical model and logistic regression to analyze the data The result showed that the model of relation between expected turnover, retention and related personal character is workable and consistent with variable of SAT (Work satisfaction), EA (Emotional attachment) and VAL (Valuation of job title) Base on the result, it is recommended to develop workable strategies to increase employee retention rate

Chapter I INTRODUCTION

An important issue being faced by the small and medium scale enterprises (SMEs) service business is minimizing turnover rate In the context of globalization, SMEs are losing a large number of employees, especially excellent managers, to large multinational companies SMEs have

no other options but to train and re-train new employees to be able to sustain their business operations However, this entails a sizeable amount of investment in human resource development which, eventually, will go into waste if trained employees will leave the organization

Data from the 2012 Towers Watsson: Vietnam Labor Market Overview Trends reveals that in that year, employee turnover rate accounted for some 13% with production sector posting the highest turnover at 17% Although, over the years, from 2007 to 2012, voluntary employee turnover slowly went down, the fact remains that there is a need to look into the reasons for the loss

of people and investments in an organization

Background of the Study

Employee turnover is permanent withdrawal from an organization whether voluntary or involuntary Straightforward ways to explain it are "how long employees tend to stay" or "the rate of traffic through the revolving door" Turnover is measured for individual companies and for their service as a whole If an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average

tenure than those of other companies in the same service” (2012 Towers Watsson). High turnover can be harmful to the company's productivity if skilled workers often leave the labor population and contains a high percentage of new employees Therefore, the company has a deep interest in the turnover rate of their employees, because workers can replace a portion of the cost of business operations When a company replaces a worker, it incurs costs directly and indirectly Tasks that must be performed all cost money, time, or both Additionally, there may be a loss of productivity during the period after the employee leaves the former and new staff has been fully trained For some companies, employees can be difficult to replace because

in order to retain customers or clients, rapport should be established with a customer by the employee that he had worked with Often, managers view the company as a success or just a stepping stone to climb to the prestigious multinational companies SMEs are left as these managers are being raised in power Indeed, managing employee turnover is a challenge for the managers

of SMEs Those with solid understanding of the human behavior and the reasons behind employee’s abandonment of the workplace will have bigger chances of becoming successful at handling cases involving recycling of people outside the organization Hence, this research study sought to determine the relationship between employee turnover and personal characters in SME’s service businesses in Hanoi

Statement of the Problem

This research intended to examine the reasons why employees leave their jobs at the SME service businesses in Hanoi Consequently, it also

attempted to determine the reasons of employees’ desire to stay in their respective organizations Specifically, this research sought to answer the following questions:

1 What is the profile of employee-respondents in different service oriented SMEs in Hanoi in terms of:

Objectives of the Study

This research was designed to attain the following objectives:

1 To determine the profile of the respondents in SMEs service businesses in Hanoi in terms of:

2 To analyze the expected turnover and retention rates in SMEs service businesses in Hanoi

3 To ascertain the relationship between the expected turnover and retention rates in SMEs service businesses in Hanoi

4 To determine the factors that affect the expected turnover of the respondents

5 To recommend workable retention strategies for SMEs service

businesses in Hanoi

Significance of the Study

This research work will be significant to the following individuals and organizations:

Small and Medium Enterprises (SMEs) SMEs will benefit from the

knowledge of the study since it will help them devise ways to retain qualified and high-performing employees who ensure customer satisfaction This study shall offer additional value to the SMEs because managers will be able to educate themselves on the benefits of managing employee turnover more effectively

Individual Employee When employees are properly managed by

managers with solid grounding on employee turnover management, there is a greater chance for them to be more satisfied in the workplace There is also a bigger chance for the employee to weigh the advantages and disadvantages

of leaving or staying in the company based on informed decision

Researchers This study will help the researcher improve the skill in

conducting scientific study This is also an opportunity to apply DBA

knowledge into practice The study shall become a rich source of reference for future researchers

Scope and Limitations of the Study

This study aims to determine the applicability of three new employee retention strategies in service businesses of the SMEs in Hanoi This will help the SMEs service businesses to retain the right employees

This study was concentrated on the urban service area in Hanoi Workers in other areas might have different job preferences Therefore, the applications of these studies are limited in Hanoi City only

Definition of Terms

For the purpose of achieving optimum understanding of this research work, the following terms were defined based on how they were used in this study

Small and Medium Enterprises (SMEs) The author adopts the Vietnamese

government’s definition of SMEs based on Decree 56/2009/ND-CP Accordingly, small and medium-sized enterprises are business establishments that have registered their business according to the law and are divided into three levels: very small, small and medium according to the sizes of their total capital (equivalent to the total assets identified in an enterprise’s accounting balance sheet) or the average annual number of laborers (total capital is the priority criterion)

Employee turnover This refers to the ratio of the number of employees that

leave the SME through attrition, dismissal, or resignation during

a period to the number of employees on payroll during the same period

It also refers to the number or percentage of workers who leave an organization and are replaced by new employees

Employee Retention This refers to the effort by an SME to maintain a

working environment which supports current staff in remaining with the organization

Retention Strategy This refers to the method or plan chosen to bring about

a desired improvement in retaining the employees such as achievement of a goal or solution to a problem

Chapter II REVIEW OF LITERATURE

The purpose of this study is to determine any relationships among employee turnover and employee retention in an organization This chapter reviews literature related to the factors and the relationships among them The literature reviewed includes the following areas: (1) employee turnover and employee retention theories, (2) research and findings on employee turnover, (3) relationship between employee turnover and retention

Employee Turnover

Since the employee turnover has been discussed, its nature, reasons, advantages and drawbacks were the major issues to be considered (Morrell, Loan-Clarke and Wilkinson, 2004; Hong, Wei and Chen, 2007; Massingham, 2008) Bowden (1952) suggested that in some situations personnel turnover can be a positive change within an organization He claimed that the employee turnover is needed due to reasons such as a company growth or a market demand, which requires an internal organizational change Nevertheless, personnel changes are more often seen to have negative impacts on a company rather than positive effects (Parker and Skitmore, 2005; Massingham, 2008) Such changes are known to be inevitable Therefore there is a necessity to better understand the staff turnover reasons

in order to be capable to tackle their damaging consequences

Types of Staff Turnover

Many literature sources refer to staff turnover as to employee's

“movements across organizational boundaries” (Hong, Wei and Chen, 2007,

p.808) However, this term can also be used in case of movements within an organization The current section presents types of employee turnover in both these contexts referred to as external and internal employee turnover, accordingly

Employee turnover is frequently considered to be involuntary or anticipated, and voluntary or unanticipated, in its nature (Morrell, Loan-Clarke and Wilkinson, 2004; Hong, Wei and Chen, 2007) Involuntary turnover is mainly initiated by an organization In this case employees do not have much influence on the decision about their movement Voluntary staff rotation, on the other hand, takes place when an employee himself decides to change a job within a company or to leave the organization

Figure 2.1 Types of Employee Turnover

External involuntary employee turnover can take place because of a company's strategy or policy, or a need to downsize its personnel (Hong, Wei and Chen, 2007) It was claimed to be of a lesser interest for organization as it

is known in advance and its extent and consequences are easily defined (Hong, Wei and Chen, 2007) However, consequences of extensive downsizing related to the financial crisis in 2008 proved to be problematic to companies (Datta et.al., 2010; Schmitt, Borzillo and Probst, 2011)

Thus, an interest in the causes of external involuntary staff rotation has lately increased significantly and the issue is now being explored more thoroughly (Datta et.al., 2010)

External voluntary staff turnover takes places when, e.g., one prefers to

be employed by another company (Morrell, Loan-Clarke and Wilkinson, 2004) Unlike involuntary employee changes, it is considered to be challenging and is thus explored more extensively Hong, Wei and Chen (2007) clarify that challenges are explained by difficulties in predicting when and under which circumstances voluntary turnover will occur, what the scale

of the change will be and which outcomes an organization will face due to it

Internal involuntary employee turnover occurs when a company requires a person to occupy another position within its structure As Schmitt, Borzillo and Probst (2011) explain, this can be caused by downsizing and thus, lack of employees needed to execute some particular operations However, it may be also required that an employee does not change his position but is requested to perform the same

Reasons for Employee Turnover

There is extensive research of the causes that lead to people changing jobs within organizations or across organizational boundaries Generally, the causes can be divided into two categories – inevitable and avoidable reasons (Bowden, 1952; Hong, Wei and Chen, 2007)

External involuntary staff turnover with its reasons such as company downsizing, employee's parental leave, permanent illness, retirement, or death, can be seen as inevitable staff rotation Inevitable reasons are perceived as an element of organization’s normal life (Bowden, 1952), and therefore, their existence emphasize that it is impractical to consider organization’s personnel as an unchangeable environment while planning resource allocation and managing the company in general

However, many reasons for staff turnover are claimed to be manageable and thus avoidable Several employee turnover prediction models were developed to assist identifying controllable reasons and successfully manage them Mobley (1977, cited in Hong, Wei and Chen, 2007) developed first model explaining employee turnover

The model claimed that decision to quit a company starts with job dissatisfaction, which then triggers thoughts of changing a job and causes making endeavors to find a new placement It can be argued that job dissatisfaction is not an original cause of turnover, but an intermediary phase

of a process that results in staff rotation This is due to various reasons why

an employee can be dissatisfied with his current work Laser (1980) argues the most widely spread misconception about an employee's motive to leave is salary discontent This opinion is widespread due to employees' stating salary

dissatisfaction as a reason to leave a company This reason is often used because of its neutrality, comparing to other causes such as conflicts with management or colleagues (Laser, 1980)

Among reasons that cause employees to be dissatisfied with their work, Laser (1980) mentions an inappropriate employment process, improper employee expectations set during the employment, lack of formal training, and tensions between the employee and his direct management It is essential for

an organization to "find the right men for the right jobs" (Bowden, 1952, p.73)

If it fails to do so, both company and a new employee are facing the pitfalls of the improper employment process – the company does not receive required help from the newcomer, whilst the newcomer has a lack of motivation due to his mismatching to the position held (Bowden, 1952) Situation like this leads

to staff turnover that can be voluntary or involuntary, external or internal To avoid employees leaving due to this reason, an organization should appreciate their selection process more and invest sufficient time and resources in investigating who is a suitable person to be employed (Laser, 1980)

Another reason for employee dissatisfaction mentioned by Laser (1980) is setting inappropriate expectations upon the job It is a mistake made

by management during the employment process to highlight only advantages

of a person's future job and thus, let him see position in "brighter light" and get uninspired soon after taking over his new responsibilities One more setback that causes job dissatisfaction is providing insufficient training for a new employee (Laser, 1980) Training is important for an employee's successful work inception as it introduces him or her to the organization’s structure and

operations, provides knowledge about the ways of communication, and helps

to start developing a useful working network Failing to supply a new employee with knowledge and network encourages upcoming challenges and problems which can again give rise to job dissatisfaction

Lastly, Laser (1980) mentions tensions between employees and management as a reason for staff turnover It can be especially crucial to manage employees accurately during an organizational change (Morrell, Loan-Clarke and Wilkinson, 2004) In case the reasons for change are not suitably explained to the staff, employees do not receive sufficient help from management during the change implementation; it can lead to people's decision to leave organization

The abovementioned reasons of turnover and other causes identified

by diverse researchers (see Morrell, Loan-Clarke and Wilkinson, 2004, for a summary) can be a ground for both types of voluntary staff turnover Thus, an employee can be willing to change a job within an organization, i.e internal voluntary staff rotation, or he or she can decide to make a cross-organizational movement, i.e external voluntary employee turnover

Voluntary staff turnover can also be caused by an employees' eagerness to self-develop and have career growth opportunities (Bowden, 1952; Morrell, Loan-Clarke and Wilkinson, 2004) Since the beginning of industrial growth, which provided larger amount of job opportunities in a wider variety of industries and geographical locations (O’Connell and Kung, 2007), employees' willingness of changes became more urgent This caused an amendment of people's work attitudes and therefore, a more dynamic organizational environment Nowadays, being aware of prospects, employees

tend to be more ambitious and consequently more motivated to perform better

to receive additional development and promotion In case the current position does not encourage career growth, an employee's job satisfaction can deteriorate, which can prompt the intention to search for new work or affect performance at the present one (Hong, Wei and Chen, 2007)

However, there is no general agreement upon the relationship between

an employee's performance and staff turnover (Hong, Wei and Chen, 2007) There are four general opinions regarding the issue The opinions claim that the staff's performance and employee turnover are found to have (Hong, Wei and Chen, 2007): (1) A positive relationship; (2) A negative relationship; (3)

No relationship; and (4) A non-linear relationship

Hong, Wei and Chen (2007) claim that high performers tend to leave

an organization more often than others Other sources suggest that employees with poor performance switch jobs more often However, Birnbaum and Somers (1993, cited in Hong, Wei and Chen, 2007) asserted that there is no relationship between an employee's performance and his or her intention to leave a company or change a position Lastly, some studies have shown that both poor and high performers are in risk of changing jobs often, whilst employees with medium performance tend to stay within an organization

According to Hong, Wei and Chen (2007), the negative correlation was proved to be accurate in more studies than others, meaning that employees with poor performance are more probable to leave organization This raised the discussion on whether companies should strive to reduce turnover of such employees (Bowden, 1952) It is argued that keeping non-performers is

economically and morally unhealthy for an organization Therefore, reducing avoidable staff turnover is not always the best solution for a company

This section discussed possible causes for employees to leave an organization or change a position within its structure It is also important to understand what consequences staff turnover leads to, which is a matter of debate in the following section

Consequences of Employee Turnover

Due to its importance to organizations, employee turnover is being studied thoroughly, its consequences being one of the main study directions Staff rotation is widely seen as a harmful phenomenon and thus, its disadvantages are usually considered (Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004; O’Connell and Kung, 2007; Massingham, 2008) It is argued that employee turnover incurs financial expenses to an organization and therefore, the disadvantages are often presented as direct and indirect costs (Morrell, Loan-Clarke and Wilkinson, 2004)

Each employee who leaves his position in particular or organization in general causes the organization inevitable additional expenses (Laser, 1980) Those are costs of recruiting a new employee (O’Connell and Kung, 2007), higher unemployment taxes (Laser, 1980), temporary replacement staff (Morrell, Loan-Clarke and Wilkinson, 2004), which all result in decreased company profitability (Schmitt, Borzillo and Probst, 2011)

Voluntary staff turnover rates have been recently increasing, showing approximately 24 per cent of employees who initiated a change of their occupation during 2004 (O’Connell and Kung, 2007) Considering that direct costs related to a change of one employee are estimated to be between $13

000 and $14 000, such turnover rates result in significant annual expenses for

a company (O’Connell and Kung, 2007) However, many researchers agree that indirect costs associated with staff turnover are much higher and thus, more problematic for organizations (Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004)

Indirect costs of staff turnover proved to be less tangible and therefore difficult to quantify (O’Connell and Kung, 2007) These indirect expenses are associated with: (1) costs of training of new staff (Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004); (2) decreased morale within organization (Bowden, 1952; Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004; O’Connell and Kung, 2007); (3) emotional pressure on remaining staff (Morrell, Loan-Clarke and Wilkinson, 2004); (4) additional workload for remaining staff during employment and training of new personnel (O’Connell and Kung, 2007; Massingham, 2008); (5) decreased productivity during a new employee adaptation period (O’Connell and Kung, 2007; Massingham, 2008); (6) deteriorated product or service quality (Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004; O’Connell and Kung, 2007; Massingham, 2008; Schmitt, Borzillo and Probst, 2011); (7) lost social capital (Morrell, Loan-Clarke and Wilkinson, 2004; Massingham, 2008); (8) lost human capital (Massingham, 2008); (9) lost structural capital (Morrell, Loan-Clarke and Wilkinson, 2004; Massingham, 2008)

Although they are considered to be complicated to calculate, indirect costs are seen to be of high significance to companies As can be seen from the listing above, employee turnover affects many stakeholders – remaining

staff, employees involved in recruitment process, people who temporarily occupy vacant position and newcomers employed for holding it permanently

Figure 2.2 Summary of Indirect Expenses Related to Employee Turnover

When staff turnover occurs, be it voluntary or involuntary, colleagues of

a person leaving are affected Losing a team member is seen to have a negative impact on the team spirit and its development (Tuckman and Jensen, 1977) Moreover, work, for which a leaving person is responsible, still has to be done and this is often the responsibility of the remaining staff during the process of recruiting and training a new employee (Massingham, 2008) Thus, the workload of other team members may increase in short term, which causes more emotional tensions and decreased quality of work done (O’Connell and Kung, 2007) as well as increasing job dissatisfaction of the remaining staff

Massingham (2008) asserts that another essential outcome of employee turnover is loss of a company's social and structural capital, or loss

of organizational memory and deteriorated learning ability, accordingly When

an employee leaves company, he or she takes organizational knowledge with him or her Nowadays, as it has been discussed earlier, organizational knowledge is seen as crucial success factor for businesses (Massingham, 2008) Therefore, they strive to prevent knowledge loss by making it less dependent on people who carry it and by striving to keep key knowledge holders within the company

Bowden (1952, p.73) claims that in case external involuntary staff turnover is caused by downsizing, it negatively affects remaining employees

as they "contemplate what is happening to their fellow workers" Schmitt, Borzillo and Probst (2011) support this opinion stating that downsizing reduces staff productivity However, it can be suggested that remaining employees can be observed to work harder in case they perceive good performance as the only way not to become a downsizing statistics as well

He added that there exists no research that considers employee turnover as a positive phenomenon No academic research, which attempted

to prove this point of view, was found during the literature review Only occasional mentioning of cases when staff turnover can be advantageous were found in studied literature Hence, Schmitt, Borzillo and Probst (2011, p.56) mentioned that downsizing is sometimes perceived to provide

"sustainable performance improvement" Bowden (1952) states, that a degree

of employee turnover is needed for the healthy being of organizations Therefore, it can be claimed that unavoidable staff rotation is better for a

company than endeavors to keep personnel static and thus, fail to meet new market requirements and adapt to dynamic contexts in which a company operates

Similar conclusions were drawn by Arvidsson (2009) who said it was noteworthy that there is not much research on positive outcomes of tensions within matrix organizations Thus, he suggested further research to concentrate on possibilities provided by tensions, which were identified during his study

Unlike academic publications, industry-focused business publications include some endeavors to perceive employee turnover from its positive side Lau and Albright (2011) propose that companies should analyze whether each case of staff rotation affects them in an advantageous or disadvantageous manner They also claim that occasionally employee turnover can serve an organization in a positive way granting growth opportunities for current talented staff, allowing a company to employ new people with greater potential, and diversifying abilities and background of staff (Lau and Albright, 2011) Employee rotation can encourage a company to improve their staff development program and other undertakings that motivate remaining employees to develop themselves and their working capabilities (Lau and Albright, 2011)

It could be suggested that employee turnover can increase a company's productivity and morale in case a poor performer is being replaced

by a more efficient person However, it is definite that firing every employee who underperforms cannot be seen as a fruitful solution In such a case it could be useful to identify the employees with poor performance with a view to

improve their work results given that some training and coaching is provided

by employer

Lau and Albright (2011) agree that turnover of employees with high performance and important knowledge is more harmful to a company than helpful However, they claim, possibilities provided by staff turnover should not be neglected

that retention is driven by several key factors, which ought to be managed congruently: organizational culture, communication, strategy, pay and benefits, flexible work schedule and career development systems (Logan, 2000) Increasing numbers of organization mergers and acquisitions have left employees feeling displeased from the companies where they work and haunted by concerns of overall job security As a result, employees are now making strategic career moves to guarantee employment that satisfy their need for security On the other hand, employers have a need to keep their stuff from leaving or going to work for other companies In fact, companies that offer employee development programs are finding success with retaining

workers (Logan, 2000) This is true because of the great expenses associated with hiring and re-training new employees The adage, good help is hard to find, is even truer these days than ever before because the job market is becoming increasingly tight (Eskildesen & Nussler, 2000) In fact, literature on employee retention shows that wooing existing employees through employee development or talent management programmers costs less than acquiring new talents, as organizations know their employees; their wants and desires; while the initial cost of attracting the new employees has already been expended (Davidow & Uttal, 1989) The literature on employee retention clearly explains that satisfied employees who are happy with their jobs are more devoted for doing a good job and look forward to improve their organizational customers’ satisfaction (Denton 2000)

Employees who are satisfied have higher intentions of persisting with their organization, which results in a decreased turnover rate (Mobley et al., 1979) Abundant studies have hypothesized and empirically validated the link between satisfaction and behavioral intentions and behaviors such as employee’s retention (Anderson & Sullivan, 1993) Further, numerous studies explain the importance of high employees’ involvement and how it could enhance their retention (Arthur 1994) In summary, the literature defines retention as continuing relation between employees and their organization

Retention Factors for all Employees

Angela, et al (2008) state the need to focus on the factors that affects retention leading to growth and success of organizations Studies suggest that retention strategies, which effectively satisfy the needs of all employees consequently enhances the ability for companies to adapt more effectively to

on-going organizational change (Gale Group, 2006) Research shows that trends redefining modern retention strategies go beyond the traditional salary and benefits package (Gale Group, 2006) and compensation (Feldman, 2000) embracing employee motivation (Thomas, 2000), as one of the key factors to cater to the diversity and long stay of the workforce in the organization Retention factors incorporating the needs and desires of employees at any age enhance levels of individual job satisfaction, loyalty, and commitment (Boomer Authority, 2009)

Cunningham (2002) states that employees rank employee recognition, flexibility and training as top priorities for prolonging individual employment, while Walker (2001) and others call for establishing a supportive learning and working climate for employee retention Further, career development (Boomer Authority 2009), organizational commitment (Patrick Owens, 2006), communication (Gopinath and Becker, 2000) and superior-subordinate relationship (Zenger, Ulrich, Smallwood, 2000) are also the factors known for prolonged stay of the employees in the organization The list of retention factors and literature review is not meant to be exhaustive of all possible theories or variables related to employee retention and turnover (Griffeth et al., 2000) Rather, the emphasis in this study is placed on testing the relative frequency with which various retention factors emerge when analyzing employees’ versions for why they stay A brief introduction and review of the

12 retention factors working towards the preservation of an organizations most valuable asset – employees (Yazinski, 2009), examined in this study are provided in the following section

i) Skill recognition: Providing skill recognition of personal job

accomplishments is an effective retention strategy for employees at any age (Yazinski, 2009) Studies indicate fulfilling peoples need for acceptance by acknowledging individual work accomplishments prolongs employment of employees (Redington, 2007) A study by Yazinski (2009) shows trends of an increased number of job applicants seeking out companies that encourage employee input, growth, education, and teamwork, beyond the traditional compensation/benefit packages offered by employers The Gale Group (2006) states organizational benefits of personal recognition are priceless, yet statistics supports that the impact of verbal praise has the ability to enhance company loyalty, motivation, and perseverance at no extra charge Individual skill recognition is restricted by age, and motivates positive behavior, ethics, teamwork, confidence, and growth in all employees (Redington, 2007) Thus, both skill recognition (ranging from verbal praise to incentives/rewards) and learning opportunities (growth/development) enhance individual performance, effectiveness, and retention (Agrela, et al., 2008)

ii) Learning & Working Climate: Since learning and development

opportunities appear crucial for the retention of talented employees (Arnold, 2005; Hytter, 2007; Walker, 2001), an organization must establish a supportive learning and working climate The concept “learning and working climate” is derived from previous research (Abrams et al., 2008 etc) In general it refers to the environment wherein employees both learn and work More specifically, the concept could be described by referring to: guidance and appreciation at work; pressure of work; the amount of empowerment and the responsibility that employees experience; choice in job tasks and

development; provision of challenging and meaningful work; and advancement and development opportunities Results from previous research show that the appreciative approach, operationalized through an appreciative learning and working climate, positively influences employee retention (Abrams et al., 2008; Christiaensen et al., 2009; Kyndt et al., 2009; Van Hamme, 2009; Visser, 2001; Verheijen and Dewulf, 2004)

iii) Job Flexibility: Job flexibility is vital for retaining employees of any

age (Boomer Authority, 2009) Researchers describe the importance of employment flexibility such as scheduling variations that better accommodate individual work times, workloads, responsibilities, and locations around family responsibilities (Cunningham, 2002; Pleffer, 2007) Studies show that

"flexibility" empowers individuals to facilitate a healthier balance between work and personal obligations, something that appeals to all ages of employees (Eyster, et al., 2008; Scheef & Thielfodt, 2004) Prenda & Stahl (2001) say that employees having job flexibility options report having higher levels of individual commitment, concentration, satisfaction, productivity, loyalty, and mental capacity at any age

iv) Cost Effectiveness: Studies support the conclusion that

organizations providing cost effective job flexibility options benefit from satisfying the needs of all employees, independent of age, which allows for the re-allocation of expenses related to recruitment, work space changes, sick time, absenteeism, and commuting costs (Agrela, et al., 2008; Boomer Authority, 2009; Cunningham, 2002) Consequently, studies indicate that there is a link between cost-effective "flexibility" choices and advanced levels

of job satisfaction, accuracy, productivity, recruitment, and employee retention

(Boomer Authority, 2009; Cunningham, 2002; Prenda & Stahl, 2001 Eyster,

et al (2008) state that organizations can cost-effectively fulfill the needs for job flexibility options to promote employee retention Thus, the provision of cost-effective "flexibility" options is critical in the retention of all employees despite disparity in age, position, skill/knowledge level, and duration of employment (Eyster, et al., 2008; McIntosh, 2001)

v) Training: Training is a key retention factor for employees at any

age Statistical evidence indicates job training is a critical factor for personal (behavioral) and professional (technical) development (United States Department of Labor, 2009) The availability for all employees having access

to training and development programs is critical in facilitating organizational growth, particularly with performance and technological improvements (Boomer Authority, 2009) Research supports that both the organizational benefits and cost savings associated with training programs outweigh the initial cost it incurs (Prenda & Stahl, 2001) Eisen (2005) states that training programs available to all employees correlate with a 70% increase in employee retention rates Research indicates training methods that engage workers with career challenges, advancement opportunities, work incentives, competitive wages/benefits, and supportive work environments are effective retention strategies for employees of any age (Eisen, 2005) Evidence supports the conclusion that access to regular training programs enhances growth, prosperity, and retention for both employees and employers (Amble, 2006) Research provided by Berryman & Vaughan (1989) and McIntosh (2001) indicate a relationship between enhanced training foundations (competencies, efficiencies, and intelligence) and advanced development of

best practices, cross training, mentoring, and technology changes for all employees Training benefits (tangible or intangible) correlate with higher levels of consistency, competency, productivity, adaptability, independence, and loyalty in employees at any age (Agrela, et al., 2008; Boomer Authority, 2009; Yazinski, 2009)

vi) Benefits: The relationship of benefits with retention is another

aspect of making people stay is often investigated by researchers Maccoby (1984) identified the job satisfaction of employees and supervisors of Bell System over a five-year period and found that the employees and supervisors were satisfied with their pay and benefits and were also motivated to work productively

vii) Career Development: The purpose of career planning as part of

an employee development program is not only to help employees feel like their employers are investing in them, but also help people manage the many aspects of their lives and deal with the fact that there is no clear promotion track Employers can no longer promise job security, but they can help people maintain the skills they need to remain viable in the job market (Moses, 1999) Eyster, et al (2008) state that job flexibility along with embracing career and life options, is a critical incentive for all employees Research shows the growing trends of employers providing greater job flexibility that includes flexible career options (i.e training, mentoring, workstation accommodations, job mobility, and reduced work hours) and life options (i.e counseling services, health and wellness programs) (Boomer Authority, 2009; Eyster, et al., 2008) The challenge to organizations is that they must accept that this

process may lead some employees to leave the company and pursue outside opportunities (O’Herron and Simonsen, 1995)

viii) Superior-Subordinate Relationship: Employee development

programs cannot exist without a culture that supports them Any effective program must have strong support from people in senior management positions, and these people must also serve as positive role models to subordinates (Zenger, Ulrich, Smallwood, 2000) Managers and supervisors take on a new role when an organization gets into the business of employee development They must become coaches to help people manage their careers and support their development efforts Managers at Sears actually go through a workshop called “Managing Career Development” to prepare them

to work with employees under their career planning system (O’Herron and Simonsen, 1995) Coaching employees is valuable in helping them meet their goals, but it is also important for managers to simply show that they care It is

an intangible incentive that can make a big difference in employee motivation (Moses, 2000)

ix) Compensation: Creating a compensation structure that supports

an employee development program is a distinct challenge for companies Many organizations claim to base pay raises on performance, but that is not actually the case Some companies try to emphasize a team environment, but continue to reward people for individual achievement (Feldman, 2000) These inconsistencies can cause frustration and cynicism by employees It is especially difficult when employees are not seeing significant pay raises, yet company leaders are richly rewarded (Feldman, 2000) The entire organization must buy into the culture of employee development Sears

created a new compensation system when they got into the business of employee development Whereas they used to only offer pay increases to employees who were promoted, they have moved to a system where people may see a pay increase for lateral moves that are appropriate for their own development (O’Herron and Simonsen, 1995)

x) Organizational Commitment: Studies have concluded that

committed employees’ remains with the organization for longer periods of time than those which are less committed Steers (1977) suggest that the more committed an employee is, the less of a desire they have to terminate from the organization These “highly committed” employees were found to have a higher intent to remain with the company, a stronger desire to attend work, and a more positive attitude about their employment Steers (1977) concluded that “commitment was significantly and inversely related to employee turnover.” According to Arthur (1994) when organizations seek to foster a philosophy of commitment, then the likelihood of an employee searching for employment elsewhere is lowered Owens (2006) had a similar finding that employees who have a higher level of commitment also have a higher level of

“turnover cognitions” A higher score in “turnover cognitions” indicated that the employee had a more favorable attitude and was less likely to consider turnover representing an inverse relationship of commitment and turnover The aforementioned studies are representative of much of the research available relating to commitment and turnover Commitment has a significant and positive impact on job performance and on workforce retention The underlying belief is that a more committed employee will perform better at their job (Walton, 1985)

xi) Communication: Studies have indicated that effective communications improve employee identification with their agency and build openness and trust culture Increasingly, organizations provide information on values, mission, strategies, competitive performance, and changes that may affect employees enthuse (Gopinath and Becker 2000; Levine 1995) Many companies are working to provide information that employees want and need

in better way of communication, through the most credible sources (e.g., CEO and top management strategies) on a timely and consistent basis

xii) Employee Motivation: Management theory and practice has

traditionally focused on extrinsic motivators While these are powerful motivators, by themselves, are no longer enough—intrinsic rewards are essential to employees in today’s environment (Thomas, 2000) Nowadays motivational issues are more complex because of the wealth and opportunity

so many employees have enjoyed Over the long haul, people need intrinsic rewards to keep going and to perform at their peak (Thomas, 2000) Workers have been forced to take more responsibility for their own careers, going where the work is rewarding and where they can develop skills that will guarantee their employability, in whatever organization (Hall and Associates, 1996) Talented workers have more choices than ever before, and are likely to leave if not satisfied with their employer or job content As employees have become more likely to leave unrewarding jobs, the impact of losing individuals has become greater In the future, the biggest gains will come from systematically improving an organization’s intrinsic reward process—making the work itself so fulfilling and energizing that employees themselves won’t want to leave Rediscovering the role of purpose in work is key to