Employee Retention, Training and Development: Literature Review

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Employee Retention, Training and Development: Literature Review

Abstract

Employee retention is one of the most important factors that an organization needs to consider when developing its strategies. In today’s ever evolving world, retaining employees has become a challenge in itself for employers, since employees tend to change jobs very easily. Employers must therefore focus on a lot of different aspects like training and development, compensation packages, motivation and morale, job satisfaction, work environment etc. for the retention of their workers. For the purpose of our research, we will look into employee retention specifically from two angles: training and development, and compensation.

The findings of this secondary research conclude that there is a positive and significant relationship between training and development, and compensation with respect to retaining employees. We will further explore each aspect in detail in the following review.

Employee retention:

Employee retention is the general strategy or capacity of a company to hold its best employees and as a result have a lower turnover. An organization can accomplish this by embracing different employee retention programs employee retention should always be a priority for any Human Resource department in any company. It is also one of the most important aspects for a company aiming to gain a competitive advantage over its rivals.

An employee retention program includes steps beginning from distinguishing the significant benefactors (employee) in the organization and designing strategies to include them with the organization to ensure that they don’t leave. The accomplishment of these projects is estimated by basic metrics like retention ratio, and turnover.

According to Samuel and Chipunza (2009) the primary motivation behind retention is to keep the loss of able employees from the association as this could have unwanted impact on profitability and administration conveyance. Notwithstanding, retention of high performing workers has turned out to be all the more challenging for managers as this classification of representatives regularly switch jobs as they are provided with more attractive offers. (Samuel & Chipunza, September, 2009 )

Every Organization spends a ton on drawing in the best talent. These Employees contribute a great deal towards the accomplishment of the organization. These accomplishments are reflected in the bottom line of the organization. The Employees who remain with the organization for longer time contribute productively and become fundamental piece of the organization and the position. But if these workers leave the organization and join the competitor, this would mean double the loss for the main organization. First they will be straightforwardly affected by the worker not being accessible and also the representative is presently adding to the challenge. Also, the person who may replace may not be able to come at par that early.

Employee retention is one of the serious issues confronting organizations facing the competitive conditions. The huge business challenge is to adjust your objectives to the growing demand for a fair company atmosphere that meets fundamental human needs and where work is synonymous with individual satisfaction and satisfaction. (Teixeira & França, 2013)

Screening and retaining great people is the challenging task faced by the companies’ Human resource department these days. (Sadik, 2015)

Employee retention is influenced by myriad factors, such as the leadership style of management, individual employees’ intrinsic motivation and engagement, burnout, collective morale of staff, the influence of the family, salary, and the desirability of the job’s location. Employees who view their organization or association as morally stable are likewise bound to be focused on remaining there. Transformative authority and servant leadership are both getting expanding research consideration worldwide as methods for advancing employee engagement, commitment, and retention. (Froiland, 2015)

Aguenza and Som (2012) caution that Employees stay in organizations when they get Motivational preferences, for example, rewards. Be that as it may, compensation can’t be viewed as the main retention factor. There are different components that might be progressively powerful, for example benefit programs, flexible schedules, equity options, training, and the internal culture itself, which is likely the most applicable factor

Human capital is one of the most important resources of the modern business world. Unlike other assets and resources it is very difficult to arrange a productive and talented Human resource. That is why firms are shifting ever increasing focus on to retaining their employees. The HR department uses different methods for different firms. Our main emphasis is on how motivation, compensation and training and development of employees affects employee retention.

Employee retention & training and development:

There are several important factors that contribute to retain employees within the organization. Employers use different techniques for the retention of employees. One of the most common of which is training and development of the employee. This affects an employee’s commitment to an organization and increases their satisfaction and productivity.

Training is the planned intervention designed to enhance individual job performance. Employees are trained using techniques like on the job training, vocational training and general and specific training. Training is divided into further two segments. General training and specific training. General training consists of internship opportunities for the employees whereas specific training is geared towards increasing productivity at work station level. Learning and change are necessary for human development and training is the changes that are gained by learning. Training is the practical education which aid in the development of skills and knowledge of employees. Development of employees reduces the turnover rate and these opportunities encourage employees to enhance and deal with difficulties on the job more effectively.

Organizations are focused on maintaining the turnover of their employees within acceptable limits as loss of employee results not only in the loss of Human capital but also results in the loss of the resources spent on training and development of those employees along with the resources that will have to be spent to train the new employee.

Training and development of employees plays a significant role in inculcating a sense of responsibility to benefit the organization, as a result employees repay the organization with their commitment and loyalty by staying for a longer period of time (Liao, 2011). Training and development help the organization to gain a competitive edge when they make their employees equipped with skills, knowledge and experience. The performance of a better workforce also reflects in the overall performance of the organization. Training and Development increases the level of job satisfaction in employees which motivates the employees to remain associated with the organization, thus decreasing the turnover rate and increasing the retention rate. The correlation of job satisfaction and employee retention is supported by the notion of Social Exchange Theory (Blau, 1964).The Social Exchange Theory suggest that if someone has benefited from the other person he/she feels obliged to repay that person in any possible way; it can be through positive behavior, devotion, commitment and efforts.

It has been observed that organizations who fail to develop the competencies of their employees by not investing in training and development face substantial challenges in order to retain low turnover rate. In addition to this organizations who regularly invest in their training and development programs incur less turnover cost in terms of time, money and efforts of hiring and training a new employee. Although the counter argument suggests that training and development make the employees more attractive and appealing for other organizations and the value of the employees in the global market also increases, hence they might opt for a better opportunity by leaving the organization (Haines, 2010). This causes great losses to organization’s resources that is its trained and skilled workforce. It is every difficult for a company to hold back any of its employees even if there’s a very stringent contract. They believe that training employees is a two-edge sword which can either result in losing the employee to a competitor (Wood, 2009; Dalziel 2010) or gaining their loyalty for a longer time (Birdthistle and Fleming, 2007; Talhiya, 2012). Therefore, in order comprehend the correlation of training and development with employee retention we consider other factors which may have influence on employees such as compensation, work environment, organization culture etc.

Larger businesses invest considerably more in their staff training and development than Small and Medium Enterprises (SMEs). The training and development practices are inferior in nature in the context of SMEs which result in low involvement of the employees to the organization. This sometimes cause employees to move to another competitor enterprise consequently the fear of potential employees being taken away by the competitor can be a barrier for these small organizations to invest in training and development. Furthermore, when and organization offers learning opportunities and career paths which can help the employees develop and grow personally and professionally there’s an enhanced employee retention.

Generally employees expect a greater level of responsibility after training therefore they must be adequately compensated. The organization initiates training to improve skills of employees at a lower skill level and in turn it affects the hourly wages of the workers positively. The increased capabilities of the trained employee create an impact on the growth of the organization as a whole.

Employee retention & compensation:

Compensation packages play a huge part in influencing employee’s willingness to continue the job in the same place. Compensation also greatly affects the employee’s willingness to work for the company, because it helps keep the employees attracted to that particular firm and not look for alternative jobs elsewhere. A remuneration package that suit’s the employee’s demands and expectations plays a huge role in not just the general attitude of the employee towards the firm but rewards are also see to provide a social status and a position of power in the organization. (Terera and Ngirande 2014). Allen, Shore and Griffeth (2003) stated that the way that employers tend to differentiate themselves to retain more employees than their competitor is by through better compensation strategies. Hence, employers need to make policies in a way that they are able to attract just the right kind of employee they need, by offering them just the right kind of compensation he/she desires.

Compensation is defined by an American association as “cash and non-cash remuneration provided by the employer for services rendered” (ACA, p. 9). This system of input-output (compensation-retention) therefore leads towards the success of the organization as long as this mutual behavior is being supported. Employees these days are always in search of making more money which means that they switch from one job to another for higher compensation offers. This ultimately leads to the fact that effective compensation packages are an essential of retaining key employees to help the business survive in the competitive world.

According to Wentland and Nazir et al, one of the most difficult task is to choose the best fit amongst the compensation packages and strategies to retain employees for the real challenges in multinational world. 54.9% employees agree that they have been willing and motivated to put an effort in the performance and production level because of the reward they receive from an organization. These rewards not only retain the employees for their thirst of money but also strengthens and maintains their belongingness which leads towards their greater responsibility for the organization that eventually leads towards their retention for a long period of time.

However, it is important to make sure that the valued employees are paid above the industry average to help them retain in the organization. This is important to clear the misconception in employee’s minds that if they threaten the company to leave, they’ll get higher pay and that for instance if an employee is already receiving a lot being at the top of his/her salary scale for the same duties performed; will affect organization wide differentials.

Attractive compensation packages include rewarding for good work done that can motivate employees to continue in the same organization for long which influences job satisfaction as well. Benefits from overtime and fringe benefits and paid holidays are an integral part of effective compensation packages. It has also been found that employees tend to be unhappy in an organization because they do not get the authority to demand the changes in their existing compensation packages.

Compensation also helps to motivate employees to stay committed to that particular firm when the organization adopts this strategy- the longer an employee stays, the higher his chances of being promoted and hence achieving a higher salary package. It is also seen by the employee as a communication tool; i.e. how much the organization values the individual is seen in how much it is willing to pay him. The recognition of employees boosts their morale, and they feel significant for the organization and tend to stay.

Compensation is something that is also seen as shaping the inner culture of the organization. The more easily an organization increases compensation of its employees, it is seen as more accommodating and less demanding. This particularly affects the company’s image and the overall willingness of people to apply to that firm or to continue working in it. Research has proven that those employers with efficient wage systems have better recruitment and retention of its employees. This is driven from the natural human instinct to always strive for more money, more so in this day and age, and hence employees are seen to quickly shift organizations in the case of a better opportunity elsewhere.

When employees are given high compensations from organizations that are best suited according to their work, they are more satisfied and feel obligated to repay through positive attitudes, loyalty and devotion (Mossholder, Settoon & Henagan, 2005). This opens a new dimension of the compensation study. Compensation makes employees feel good about the organization which not only increases their retention, but results in better performance by the employee. The employee after being satisfied with his or her compensation, may feel obligated and loyal to the organization, and therefore give better performance overall, resulting in profits for the organization.

Compensation is highly linked with promotion. When an employee is promoted, the compensation is also increased. A study conducted by Johanim and Pangil revealed that there was a positive and significant relationship between promotional opportunities and employee retention, even more so than compensation and retention. Hence, companies need to focus largely on efficient systems that keep each employee’s performance record to accurately decide who is eligible for a promotion.

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