Literature Review
Introduction
Employee turnover can be defined as the rotation of individuals around the labor market, between jobs, organizations, and careers. Besides, it is the amount of movement of workers in and out of a company, normally occur in terms of the employee turnover rate (Ronra & Chaisawat, 2010). Employees may involuntarily leave the company as a result of discharge or layoff, or voluntarily because of retirement or resignation. In most cases, voluntary turnover takes place when a worker feels dissatisfaction with his current job and has attractive alternatives in other companies.
Employee turnover and retention have always been key issues that affect companies in many ways. There are a number of reasons why employee turnover occurs. The reasons range from environmental variables to organizational factors. The individual’s work variables also affect employee turnover intentions and include integrative variables like job satisfaction, promotion, pay, and working conditions (Ali, 2008). Family-related factors and demographic variables cannot be disregarded and comprise the level of education, age, level of income, tenure, gender, and job category (Saed, Waseem & Sikander, 2014). Employee turnover is a costly procedure for employers and consists of invisible and visible costs (Alkahtani, 2015). Visible turnover costs include recruitment costs, leave capitalization, security clearance, relocation costs, reference check, induction expenses, and formal training costs. Invisible costs, in their turn, comprise informal training, loss of productivity, and enlarged payroll and HR administration. Other costs are a possible chain reaction turnover, overwork that leads to low motivation, the loss of organizational knowledge, missed deadlines, and loss of customers (Alkahtani, 2015). Indeed, long-tenured workers usually develop strong personal relationships with clients that are the basis for beneficial interactions and profitability.
1. Organizational Commitment
Organizational commitment is acceptance and strong belief in the organizational values and goals; a desire to exert significant effort on behalf of the company and a willingness to maintain membership in it (Rubel & Kee, 2015). Generally speaking, it is employee’s identification and involvement in a company. In contrast to job satisfaction which is linked to a job, organizational commitment represents the connection with the company (Salleh, Nair & Harun, 2012). The organizational commitment represents an individual’s attitude to the company as a whole. It has become more pivotal in understanding employee behavior because it has been recognized as less dependable on daily variation as compared to job satisfaction (Samad, 2006). A committed employee is less likely to leave the company and feel the need to make a more considerable and personal contribution to the company, engage in organizational behaviors and perform better. Organizational commitment has been identified to appear from positive work experiences, attractive rewards, trust in management, and job satisfaction (Alkahtani, 2015).
In fact, measuring organizational commitment is the evaluation of the compatibility of employee’s own beliefs and values and those of the company. By understanding the level of commitment, managers will better anticipate the impact of a particular practice or policy on the company. Moreover, commitment will enhance a stable self-concept and, as a result, a more consistent and predictable performance and behavior (Salleh, Nair & Harun, 2012). Studies in this area have proved a strong relationship between turnover and organizational commitment, signifying that the higher level of commitment will result in the lower level of employee turnover intentions.
2. Job Satisfaction
Job satisfaction can be defined as the extent to which employees feel about their job. Besides, job satisfaction is a contribution of affective and cognitive reactions to the different perceptions of what employees want to have and what they really receive (Samad, 2006). Due to the fact that job consists of numerous spectrums, job satisfaction is frequently conceptualized as a multidimensional concept that includes various elements called job satisfaction facets (Salleh, Nair & Harun, 2012). Job satisfaction can be influenced by numerous factors such as pay practice, relationship with the supervisor, physical environment, open communication, organizational support, etc. Numerous studied have reported that job satisfaction serves as the main determinant of employee turnover intentions. There are several theories related to job satisfaction, for example, Hierarchy of Needs Theory by Maslow and Two-Factor Theory by Herzberg. In general, Maslow’s theory is based on the assumptions that individuals must satisfy their lower-order needs and only then move on to the next need. Secondly, people’s behavior is stimulated by unsatisfied necessities. Herzberg’s theory includes the motivation factors and hygiene factors where hygiene factors are the characteristics of the environment at the workplace (Ronra & Chaisawat, 2010).
The problems arise when the employee’s dissatisfaction is not taken into account (Ali, 2008). Anyway, dissatisfied employees will leave the company, and simultaneously, the company loses the knowledge that the workers had brought in. if the company employs new workers to replace those who leave and does not meet their feeling of dissatisfaction, the vicious cycle of employee turnover will take place. Actually, if dissatisfied employees remain in the company, they will probably involve in counter-productive activities including poor service, theft, destructive rumors, tension, depression, psychological frustration, and apprehension (Ali, 2008). It is important to identify the factors that lead to dissatisfaction because, ultimately, they will do harm to the smooth operation of the company.
3. Training
Generally speaking, training refers to a planned effort made by the company to facilitate the learning of skills, job-related knowledge, and behavior by employees. Training increases productivity and is closely associated with turnover (Mudor & Tooksoon, 2011). Many scholars agree that there is a positive connection between investment in employee training and the staff turnover (Tan, 2008). Another important issue is how much companies should invest in the on-the-job training to balance between the benefits of the increased productivity, turnover intentions, and the costs of training (Mudor & Tooksoon, 2011). Companies with high turnover must invest in training programs so as to replace the skills of the outgoing personnel, and in future, this practice will increase loyalty and decrease employee turnover intentions. On the other hand, the companies that provide excessive training programs will face a high level of employee turnover because well-trained and qualified specialists will try to find a better-paid job. Thus, training increases the value of the employees as well as the probability that the qualified workers will be lured by rival organizations (Alkahtani, 2015).
4. Perceived Organizational Support
Perceived Organizational Support represents the overall beliefs of workers that the company extremely values and respects their contribution to its development and productivity as well as cares about their well-being (Khan & Aleem, 2014). The concepts of social exchange theory are often used by authors to describe the things which serve as the motivation for employees to demonstrate positive behaviors and loyalty towards their company that are not normally required and rewarded (Rubel & Kee, 2015). Moreover, it has been identified that the provision of organizational support to an individual will create friendly and cooperative feelings towards the company and strengthen the bonds between employee and employer, which increases the desire of an employee to repay the company through the norm of reciprocity. Receiving support from the company, an employee feels an obligation to stay with it which leads to lower turnover intentions (Maertz, Griffeth & Campbell, 2007).
Actually, numerous supportive organizational practices are intended to develop and increase the relationship between employees and employers to reduce voluntary turnover. Such practices usually include fairness of rewards, participation in decision-making, autonomy, developmental experiences, promotion, and job security have been empirically connected with perceived organizational support. By these actions the company proves that it tries to meet the employee’s socio-emotional needs, and he, in his turn, is likely to be willing to contribute to the company’s goals (Hundera, 2014). An individual perceiving organizational support should perceive greater incentives because they can potentially increase employee’s instances of good mood at work which causes positive emotions associated with the company and increases the affective commitment of employees (Maertz, Griffeth & Campbell, 2007).
5. Perceived Supervisor Support
Generally speaking, supervision is a management activity, and supervisors perform an essential management role in the company. Supervisors must have extensive knowledge of job requirements and observe the other employees’ job performance (Mudor & Tooksoon, 2011). Perceived supervisor support refers to the phenomenon when an employee has general views on the degree to which his supervisor cares about his well-being and values his contribution to he company. It has received the considerable attention of the researchers because they have already discovered its significance to employee turnover intentions (Baloch, Zaman & Jamshed, 2009). Actually, supervisors mainly participate in the evaluation of employee’s performance and provide feedback. Thus, when individuals are supported by their supervisors and given a voice and open communication, they are likely to stay with the company for a long period. The research by Maertz, Griffeth & Campbell (2007) suggests that perceived supervisor support causes attachments to the supervisor, which affects turnover cognitions directly through increasing affective commitment. Improving supervisor support would be a far less complex and expensive procedure that raising compensation to reduce turnover. Indeed, for employees attachment to supervisors stands for attachment to the whole company as they recognize them as someone closely attached to the organization (Maertz, Griffeth & Campbell, 2007). To demonstrate support and care, supervisors should constantly ask employees how they can help to do their job better and employ fair methods for making decisions, thus, show personal consideration.
6. Organizational Culture and Workplace Environment
Culture is considered the biggest factor in attracting and retaining the key employees. It is extremely important for individuals to feel that they are a part of the team and require ways of better cooperation between co-workers. Thus, discouraging climate in a company adversely affects job satisfaction and employee turnover (Saed, Waseem & Sikander, 2014). Organizational culture is a relatively stable characteristic which differentiates one company from others. It reflects employees’ shared perceptions about their company with respect to such notions as support, recognition, autonomy, innovation, and cohesiveness. Besides, it serves as a basis for interpreting various situations, manifests the dominant norms, attitudes and values (Hundera, 2014). Allen, Bryant & Vardaman (2010) recommended six elements of organizational climate such as warmth, decision making, risk, reward, openness, and structure. Medina (2012) examined how organizational culture affects job satisfaction and turnover intention among adult workers. The results are presented in Graph 1.
Graph 1. Job Satisfaction (%) By Organizational Culture
The location of the work where individuals perform their duties, such as site or office construction, is a part of the workplace environment. Communication at workplace, colleagues, political environment, manager behavior play a significant role in turnover intention (Qureshi, Abbas & Zaman, 2013). Other factors like fresh air, noise levels, and refreshment are also included in this factor. In general, workplace environment may both positively and negatively affect the level of job satisfaction depending on the nature of working conditions. For example, poor or unfavorable working conditions increase employee turnover. The individuals have a tendency to perform better if they are provided with the satisfying work environment that leads to low turnover intention (Tan, 2008).
7. Pay
Reward and compensation systems are the crucial issues in each company, which attract and retain employees. The fundamental hypothesis is that money affects employees’ behavior by means of shaping their attitudes. Thus, a company’s compensation strategy should attract qualified employees, retain suitable individuals, and maintain equity among all members of the staff. A company is considered successful if its compensation system offers marked-related, competitive pay and benefits due to the fact that this motivates workers to become committed to the company. Besides, individuals will remain in a company if they are rewarded and may leave if they are inadequately rewarded because people are likely to stay in a company where they think that their efforts, contributions, and capabilities are appreciated. (Terera & Ngirande, 2014).
Financial reward represents one of the basic kinds of extrinsic monetary rewards. For employees, financial rewards mean the basic income to survive and pay bills, a feeling of stability and job security, and, finally, recognition (Ali, 2008). Pay satisfaction is a multidimensional variable and consists of several factors such as satisfaction with pay level, pay raises, benefits, and pay administration and structure (Vandenberghe, & Tremblay, 2008). High salaries are not extremely important; however, fair and good ones indicate a strong intention to stay with the company as long as the compensation is competitive. Moreover, feelings about pay raises are of great importance for employees. A high level of pay can attract and retain qualified employees and by tying productivity to pay, the company may elicit a higher level of job performance from an employee. In addition, significant pay determines job satisfaction and, as a result, decreases employee turnover and recruitment costs (Mudor & Tooksoon, 2011). What is more, a higher salary increases individual’s loyalty and commitment to the company.
Work rewards represent extrinsic and intrinsic benefits that employees receive from their jobs. Work rewards are divided into two groups: organizational and task rewards. Task rewards are the intrinsic rewards that are directly connected with doing the job. Organizational rewards are the extrinsic rewards provided by the company for the purpose of motivating and facilitating job performance and maintaining strong membership. Organizational rewards represent rewards visible to others and include such factor as promotion, pay, security, and fringe benefits. Both forms of work rewards contribute to job satisfaction and employee turnover intentions (Mahdi, Zin, Nor & Naim, 2012). The research by Medina (2012) also demonstrates how employee turnover intention depends on the level of incomes.
Graph 2. Employee Turnover Intention (%) by the Level of Income
8. Organizational Justice
Greenberg was the first author to describe this phenomenon in his works. The author defined this notion as an equitable and fair behavior of the companies towards their workers (Alkahtani, 2015). To ensure loyalty, commitment, and satisfaction of employees, the company must be fair in the systems regarding procedural, distributive, and interactional justice. Distributive justice implies the amount the employees received fairly and equally reflects the value added to work. Procedural justice represents employees’ beliefs in the fairness of all the procedures and decision-making processes in the company, and unfair procedures usually lead to the rejection of the whole system (Maertz, Griffeth & Campbell, 2007). Taking into consideration pay issues, distributive justice refers to the degree to which individuals perceive their amount of pay as fair while procedural justice is connected to the perceived fairness of the methods or means used to determine the amount of pay (Tekleab, Bartol & Liu, 2005).
Interactional justice is the main concern in the workplace and consists of informational and interpersonal justice. Informational justice focuses on the reasons for the specific outcome of any activity whereas interpersonal justice concerns the polite, respectful treatment of all employees (Qureshi, Abbas & Zaman, 2013). As a result, when employees feel that they are treated fairly by the company, they are more likely to demonstrate positive behaviors and attitude including commitment and job satisfaction (Tekleab, Bartol & Liu, 2005). What is more, organizational justice has been associated with dynamics related to change including acceptance of change, openness to change, satisfaction with change, and cooperation with change. Intentions of employees to leave and turnover are an important part of change, and management should be aware of it (Salleh, Nair & Harun, 2012). In general, justice consists of several dimensions from compensation to behavioral treatment by a supervisor. The function of organizational justice is to decide fair treatment of individuals during to their job performance, which, in its turn, influences the behavior of the employees at work.
9. Promotion
The job satisfaction level also depends on the existence of promotion opportunities for an individual in organizations. In general, the promotion occurs when an individual makes a shift in the upper position in company’s hierarchy and acquires greater responsibility (Rubel & Kee, 2015). Thus, if a company wants to retain its employees, it should invest in the career advancement of employees. The absence of promotion can become a cause for the employee turnover intentions because brilliant workers usually desire to grow and develop their career (Khan & Aleem, 2014). The availability of career development opportunities shows the efforts and willingness of a company to cherish its employees (Tan, 2008). Indeed, better promotion opportunities enhance the chances of receiving greater benefits, salary, and prestige due to the fact of the advanced position.
Promotion opportunities act as a mechanism for developing the sense of commitment and belongingness to the company, which results in the long term attachment to the organization. Besides, promotion opportunities are one of the indispensable elements of HRM practices which induce workers’ loyalty to the company, increase work performance, and reduce turnover intentions (Rubel & Kee, 2015). Companies, which provide relevant quality and quantity development schemes, are signaling to workers their desire to develop skillful employees to grow together with their business (Tan, 2008). In addition, promotion within a company demonstrates evidence of recognition of employee’s ability and performance rewarded by work challenges, pay raises, autonomy, responsibility, and status. Therefore, through employee performance recognition the company invites individuals to stay, show their skills and ability, and extend their goals in future (Vandenberghe, & Tremblay, 2008).
Conclusion
Human capital is the fundamental element that drives the development of the company, thus, the ability of a company to retain its human resources will bring greater success and rewards to the company itself. A job that provides high pay, greater promotion opportunities, high security, interesting work, and fair supervision will lead to positive feelings and the desire of an employee to stay with the company. Job satisfaction is considered one of the major factors that contribute to the employee’s intention to leave; nevertheless, it is important for management to understand and take into consideration other factors that influence employee turnover including organizational commitment, training, perceived supervisor support, perceived organizational support, organizational culture and work environment, pay, promotion, and organizational justice. It is important to identify the factors that influenced the desire to leave of the previous employee because employee turnover also affects those who stay in the company, and they begin to feel demotivated and reduce productivity. Besides, other employees may discover the new job opportunities being tempted by their colleagues, and these costs are difficult to calculate which is extremely harmful to a company (Alkahtani, 2015).
Some human resource management practices have been suggested to solve the problem of turnover, such as providing organizational support, innovative selection and recruitment processes, investment in training, providing better career opportunities, and implementing strategies to improve loyalty and job satisfaction (Alkahtani, 2015). What is more, it is essential to hire the right individuals from the start and interview all candidates carefully. It is also important to pay attention to workers’ individual needs and employ flexible schedules and rewards. A positive work environment, praise, and meaningful recognition are also effective ways to maintain employees.
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