Influence of Organizational Culture, Fringe Benefits and Salary on Employee Retention

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Influence of Organizational Culture, Fringe Benefits and Salary on Employee Retention

1. Introduction

1.1 Background

While introducing the topic which is our research project, we are a group of four MBA (HR) students and decided to work on Employee Retention. The topic of our base article is ‘Effects of Job Organizational culture, Benefits, Salary on job satisfaction ultimately affecting Employee Retention’ which is basically a study of deciding whether Organizational Culture, fringe benefits and salary has any positive or negative relation with job satisfaction and ultimately on employee retention or not. Our work is actually a continuation of the same objective i.e. to see the relatedness of Employee Retention with (1) Co-Worker Support in the workplace (2) Employee Engagement and (3) Anti-bigotry leadership. For the sake of research purpose we have selected small firms, outlets & enterprises in the vicinity of Islamabad & Rawalpindi only.

Three variables (Independent Variables) used in the study are co-worker support i.e. extent to which employees at a workplace are happily cooperating in completion of each other’s tasks. Here we have tried to bring the theme of ‘team work’ synchronization which encourages each employee to not only work well on own part but also take care of their colleagues which increases overall efficiency of workforce which in turn affects employee workplace satisfaction and enhances employee retention. Comfort zone is a state of personal condition where an individual mentally refuses to jump over next phase of life and accept upcoming challenges in order to get better future. This particular state might be an obstacle for this specific variable. Second variable is employee engagement. Employee inclusion refers to a situation where subordinates are welcomed to suggest and speak their opinion about a specific problem or situation. A bit more formal shape of employee inclusion is employee engagement that partially covers the aspects of employee inclusion as well. Employee engagement defines the level of employee activeness towards workplace as a whole. The more a firm is willing to actively engage an employee the more are the chances of feeling attribution and affiliation towards work and workplace creating a sense of self-importance and therefore more probable are the retention chances. Third and last variable is most complicated among all due to its newness. It’s related with a broader topic ‘Management Style’ and specifically linked with ‘Laissez-faire’ type of management and even more specifically with ‘fair’ type of management.

Question of the moment is what if an employee is sure about his / her management is one hundred percent fair in their decisions, every major decision is made only on merit and supervisors have no personal issues with any of the subordinates; will it affect the level of willingness for employees to stay in the same workplace for longer period of time? Logically seems quite positive but will see in the results section weather our assumptions are valid or not. The focus we have in today’s business environment is of ‘sustainable Advantage’ rather than competitive advantage because, competitive advantages are easy to replicate and potential to rebound is not enough. Sustainable advantages on the other hand are harder to copy i.e. especially when it is in the form of valuable manpower in an organizations.

1.2 Problem Identification

Employee Retention is always a major issue in every kind of organizational setup. It is an issue that is related with the personal gratitude of every individual in the workplace and it might be different for different employees at the same organization because factors that are responsible for an employee to stay motivated to continue the job and the factors which keeps an employee demotivated in staying on the same job are not parallel (Herzberg’s two factor theory). There is a conclusive debate over tradeoff between cost of hiring new employee and costs incurred on retaining existing workers and researchers have always favored the option to incur costs on retaining instead of hiring. So the problem of the day is to identify some universal factors that could play an important role in retaining those employees which truly matters for the growth of an organization. In our research, these factors are judged as independent variables that have any direct impact on employee retention in the workplace. The theme is; just as an employee work harder to keep his job, on what grounds should an organization work hard to keep their loyal employees? Efforts that are made in the wrong direction are always fruitless regardless of the quality or quantity of the efforts but if same size of hard work is done in the right direction, results are bigger and positive.

In a research done in Review of Public Administration and Management (2017), researchers have studied employee retention in relation with organizational culture and salary. Their results were obvious and conclusively a better organizational culture and good salary does help organizations to retain employees effectively. The gap identified is weather factors like co-worker support, employee inclusion and style of management or leadership also have any impact on employee retention.

As of current practices in the local industries the focus is only on good compensation and flexible routines to counter employees with social support to retain them but our focus in this study is to look at the factors that exist particularly within an organization such as the extent to which colleagues are helpful to each other, the extent to which senior organization cares about what the subordinates have to contribute theoretically and last thing does it matter to supervise in a fair way? What will be the rate of retention where employees are confident about fairness of corporate management? All these factors might have an important link with the main goal of our study i.e. employee retention. When we compare reasoning factors of employee retention between modern economies and least developed economies we would see the deciding elements of employee retention are not the same for both. For developed countries the focus is on work-life balance, future growth & personal development like factors but when we discuss developing nations like Pakistan the shift is different and thus we are encouraged to study three specific factors i.e. co-worker support, employee engagement & Anti-bigotry Management.

1.3 Problem Statement

‘’Since retaining valuable employees is a challenge for organizations in an environment where competition is high, number of organizations exist in the vicinity ; will it help organizations to retain employees by creating an organizational environment having high co-worker support, encouragement of subordinate suggestions & existence of a fair leadership’’

1.4 Research Questions

To what extent does co-worker support positively impact employee retention in an organization?
Does ‘Suggestions from employees’ influence employee retention?
Do ‘Fair’ Management style play a vital role in helping organizations to retain manpower?

1.5 Objectives of the Study

There are three main objectives of the study in our case i.e.

To explore whether co-worker support is a factor (variable) which increases the chances of workers to stay in the same workplace.
To determine whether senior management’s attitude of considering suggestions from low level employees in company’s destoning helps organizations to retain their employees.
To focus on a specific style of management (fair leadership) and to see if it also help organizations to retain their employees. Mainly, our purpose of the research is to formulate a valid framework to have in it the most effective and efficient determinants of employee retention so that firms can confidently put their eggs in the right basket e.g. investing on the right factor of retention.

1.6 Significance of the Study

How much is it important for an organizations to treat its employees as their ambassadors? Very much! According to Forbes. A study suggests that for a company its first customer is their employee, especially motivated, psychologically attached to the firm & developed individuals. Employees that are actively participating in achieving a firm’s financial goals are no less than a sustainable competitive advantage for the same firm. There exists a variety of strategies and techniques to retain employees. Some of these are old, least effective and some are new, still being explored and used by most of the firms. In order to be profitable all the time a firm shall always spend on potentially profitable ventures that is why there is a need to explore the factors and variables to base some new and relevant business strategies that help organizations to retain its employees in an effective and efficient way.

There existed a concept of ‘Maggi Scandal’ i.e. not actually a scandal but a concept where various small and medium compensations (Such as additional day off every year, additional salary increase every year or additional subscription deals every New Year) were introduced in order to keep the manpower motivated to stay in the firm and continue performing the job with complete peace of mind. However, since we are part of a diverse and dynamic workplace environment and we have to change and adapt all the time so we are in process of determining few workable determinants of employee retention in the local market i.e. vicinity of capital and Rawalpindi (Cities of Pakistan) where large number of small and medium organizations exists in food, retail & services sector. Since we are conducting our study scale i.e. locally and not globally so our testable determinants are quite simple and easily identifiable in such kind of market. Existence of workers in a firm leads to co-worker relations, existence of policies and problems in a firm leads to need for honest suggestions and it is further linked with loyal employees of the firm and lastly, presence of management / leadership in a firm points toward various management styles and a particular style of management while talking about that specific organization. Our intentions are to look at all these three factors and comment on their significance in respect with their impact on employee retention.

1.7 Scope of the Study

Our research is supposed to be carried out by a group of four (students). Covered target area will be vicinity of Capital and Rawalpindi and specifically food, retail and services sector. Cost estimation is done and it will be a self-sponsored project. Secondary data (collected through scaled questionnaire) will be used in generalization of results. Impact of three independent variables will be tested on employee retention and technically SPSS (Statistical Package for the Social Sciences) software is intended to be utilized after gathering required data from targeted respondents. Time duration of the project is 3.5 months i.e. estimated duration of our semester. Scope of the study is not confined to any specific events or incidents but purely on the personal experiences and opinions of the employees working in Food, retail & services sector in Rawalpindi, Islamabad.

2. Literature Review

2.1 Co-worker Support & Employee Engagement

When it comes to decide whether the concept of coworker support in the field of Human Resource in connection with employee retention is a new one or an older generosity, the coin favors optimism. The Workers which have support and remain more engaged by having good relationships and open communication with the supervisor, generally have less intentions to leave the organization (Greenhaus, 1987). Interesting linkage between the two is of coworker relations and peer supervisor relations. Does it affect how workers support each other considering the relations of workers and their supervisors? Supervisory support should positively be related to employee retention and it is negatively related to turnover intentions (Rhoades, 2001). Coworker support has much to do with retaining / turnover of workers regardless of the fact that how important or not these workers are for the firm. The employees who are not getting support from their supervisors generally leave the job / organization, and likewise mostly employees intend to leave the supervisor not the job (Ontario, 2004). Jealousy among workers is also important to understand in the process of defining elements of employee retention why? Jealousy is considered one of those factors that directly affect coworker support and thus ultimately impacting employee retention.

Furthermore, it has been encouraged by several researchers to comprehend envy as it appeared to be a hostile emotion that often prompts aggressive behaviors towards others (Smith, 2007). Envy has a powerful influence on behavior and can negatively affect the individual’s performance level, satisfaction level and in some cases, lead to more severe outcomes, in worst case, murder (Vecchio, 2007). Researchers have worked on ‘employee burnout’ that very much related to coworker love and employee containment. Emotional exhaustion is a core component of the burnout syndrome, which leads to depersonalization, and subsequently results in lack of personal accomplishment (Maslach, 1981). Comprehensively discussing coworker support in the past highlights some classical links & supportive variables such as employee’s social support, comprehending envy & coworker jealousy which have been defined & explained in detail by various researchers in the past. When we observe around our workplace, there are few invisible dynamics which affect coworker bonding psychologically such as increased intolerance, depreciation of social values & lack of psychological commitment towards work (contribution as a worker). In the context of the workplace, hope has been found to support and sustain the capacity of workers to be resilient, to overcome adversity, and to bounce back in ways that strengthens their effectiveness (Luthans, 2007). Last but not the least, what gender differences have to do with coworker relations in the workplace? Not much but researchers have tried to explain as much as possible. Various impacts on overall performance have been identified by observing different combinations of gender scheme in the workplace. Similarly, several studies point to the fact that women are more likely than men to approach and use social information to gain information about themselves (Roberts, 1991). It could be out of track but in our opinion it does relate, today’s overall co-worker relations are dull and dizzy as compared to the level they had in previous years. Co-worker relations in today’s working environment lack sincerity just as today’s lyrics lack poetry.

The present study which is the extension to a theory which was written by the researcher Abraham Maslow in his book (Maslow, 1943) “A Theory of human motivation.” All individual has put their struggle constantly to fulfill their requirements, as their necessities are everlasting (when any certain employee of any organization leaves, the other show up in his or her replacement), those need which are fulfilled can never encourage a person and those needs are planned out in an order of position. An individual worker is associated to a person who has experienced this cycle, has every one of their needs are beginning from physical to self-completion fulfilled, and find a satisfaction in life through the work that one does. (Goffman, 1956) In his book “The Presentation of self in Everyday Life” has utilized a term “Embracement.” Which is simply the asset and their energies into their jobs? How one is committed to their role is important.

Behavioral activities that’s mean connection/ absence of fairness between an individual and their jobs were demonstrative of embracement. This term job embracement was the same as worker commitment. (kalman, 1958) Researcher Herbert Kalman in his study interviewed with almost two hundred employees of different organization to understand their attitude and behaviors, his study suggested many differences in context of agreement and internalization. Through an investigate Dark American Understudies, in which he mentioned some of the factors which were related to motivation and job satisfaction. He had the ability to demonstrate that an individual can settle on their decision significantly and more openly among an internalization condition. This opportunity enabled them to express their feelings, to achieve a commitment of worker one need to accomplish the condition of internalization.(Herzberg, 1959) Met around two hundred architects and bookkeepers to understand the mentality of individuals towards work. At that point double factory hypothesis of inspirations, He found that there are a lot of cleanliness factor, the absence of which might be damage, however they do little commitment to give fulfillment and remain outward to the work. It is the natural for work reason or inspirations that are enter in satisfying individual with their activities. Worker commitment is all about supporting the cleanliness factors and playing totally in those inspirations. (Gatenby, 2009) Create commitment to be a two-way relationship. For the business it was making an extraordinary workplace and for the representative it is an idea that places flexibility, change and nonstop enhancement at the focal point of everything. The two should respond to make a commitment culture. (al, 2009) Commitment was tied in with making open doors for workers to interface with their partners, administrators and more extensive association. (al L. e., 2006) Offered significance to the representative voice, the capacity of the worker to have a contribution to the choices that are made in the associations. Ordinary meanings of commitment mention to involvement, passion, enthusiasm, excitement and energy. In addition, experts frequently characterize representative commitment as far as full of feeling duty, fulfillment and individual proof, along these lines baffling distinctive builds by ‘putting old wine in new containers’ (bakker, 2010) (al M. e., 2004) struggled that demonstrative commitment is identified with passionate meetings and success.

(wilson, 2004) Remarked that emotions interface us with our materials and provide classified effort on how we are getting success along, what we need and what we may do directly. Being in associations includes us in tension, grudge, upset, anger, weakness, energy and different feelings. (bakker, 2004) And opined that sketched in representatives are probably going to have a more prominent assembly to their suggestion and a lower tendency to stop. (al T. e., 2006) Found that, generally speaking, sketched in representatives are more unfavorable to leave their manager. (al h. e., 2009) Exposed workers more client centered when secure in. As they are encouraged to increase their optional effort to make business progress as opposed to simply close to home increases. Further connected with worker moreover decidedly impacts the biological system around. A few predictors similarly offer that empowered agents have a more raised amount of firm duty, as engaged workers will in general be exceedingly focused, self-persuaded and multipurpose (al A. e., 2004). Researcher view the profession and specific resources as critical essentials related with demonstrative commitment. (al b. e., 2008). According to (al m. e., 2008) there is an association between objective setting, good faith, and commitment and the effect on individual worker execution. Results demonstrate that associations that highlight formal, organized objective setting forms encourages larger amounts of worker commitment. More high amounts of worker commitment lead to expanded representative good faith. Solid working environment positive thoughtful thus encourages improved worker performance.

2.2 Anti-bigotry Leadership & Employee Retention

Anti-bigotry leadership is a rather new topic in research, not entirely new but closer to one of the management / leadership styles that are largely recognized till date i.e. when we use the word ‘style’, it actually indicates the behavior of the leader as to how he / she choose to behave in a given scenario. It is the way in which the leader influences the followers (Luthans, 1977). Behavioral style of leaders who generally provide the group complete sense of freedom, provide necessary materials, participate only to answer questions and avoided giving unnecessary feedback (Martin, 1994). Much needed arguments have been made about whether the Laissez-fair style of leadership is successful only when the subordinates are highly skilled, contained professionalism is at peak and required closer to zero supervision? Or it can be effective in rather different situations as well? Laissez fair leadership was only considered relevant while leading a team of highly skilled team (Zakeer, 2016). Leadership is in fact discussion of control i.e. final verdict of who is controlling? The system or the one trying to influence the system. Leadership is the act of making things happen rather than letting things happen (Goddy, 2014). On one hand, being ‘fair or anti-bigotry’ (laissez fair) leader, decision making process is very slow, leader has no confidence on his leadership ability & result could be in the shape of ‘buck passing’ (Goddy, Impact of Leadership Style on Organizational Performance, 2014). Laissez-Fair is uninvolved in the work of the unit. It’s difficult to defend this type of supervision unless the subordinates are experts and well-motivated specialists, such as scientists (Mondy, 1995).

The conceptual definition of Laissez was well given by Osborn as ‘Abdicates responsibilities and avoiding decisions’ (Hunt, 2010). Here when we try to imply the same on fairness of a manager (or supervisor), odds are that we end up saying laissez-faire type managers are fair and untouched-natured just because they are afraid of taking responsibilities, least confident in making decisions & thus prefer to play their role inactively rather than in a direct and instant mode. Companies today are interested in retaining valuable employees and good employees are increasingly becoming more difficult to find (Panoch, 2001). “As our community continues to experience significant growth in the hospitality industry, employee recruitment and retention has become a priority”(Czurak, 2011). Retention matters because high turnover creates high replacement costs and is clearly associated with low levels of customer satisfaction, customer loyalty, and lost revenues. Retention is particularly challenging today due to an aging work force and a growing imbalance in the supply and demand of qualified personnel (Padron, 2004).

Many of the companies that already spend big bucks to recruit and train talented employees are bracing for even stiffer competition as baby boomers start to retire amid a shortage of skilled labor (Rawe, 2006). Annual turnover rates as high as 50 percent remain the standard in the hospitality industry, and many hotel operations have chosen to simply accept this as a fact of doing business (Levine, 2005). It is certain that many will not be surprised by the fact that the hospitality industry has such a high rate of turnover because turnover culture is considered to be a major problem in the industry. It is a normative belief held by employees that turnover behavior is quite appropriate (Chikwe, 2009). A survey (Laff, 2006) revealed that 51 percent of respondents expected to make a job transition in five years or less. In this continually changing global economy, business needs to understand and utilize key concepts concerning employee retention. Without adapting to potential problems, organizations face debilitating outcomes, one of which is the cost of turnover (Panoch, 2001).

The hospitality industry has reported varying annual turnover rates ranging from 32 percent to 300 percent. The cost associated with high employee turnover, which has been well documented in hospitality publications, averages from $3,000 to $10,000 per hourly employee, to over $50,000 for managers. The most costly element of employee turnover, representing 60 percent, is that of lost productivity (Moncarz, 2008). According to Cornell University estimates, turnover in the hospitality industry averages more than 100 percent with the cost of turnover at about $5,000 per associate in lost productivity and wages (Davies, 2006). A 1993 study by the US Department of Labor on high performance work practices revealed that involving employees in the decision-making, goals and the direction of an organization through participation in teams will help produce job satisfaction and reduce turnover (Moncarz, 2008). Thus, the key to reducing turnover seems to be finding out what motivates employees to leave a job (Chikwe,2009). Customer and employee turnover both have a direct link to the bottom–line and profit (Agrusa & Lema, 2007). With the growing industry in the 1970’s, it had become important for organizations to redesign work to create quality jobs, primarily in order to increase employee motivation. At this time, employee response to the monotony of low-quality, unskilled, assembly-line work resulted in costly absenteeism and turnover (Wilson, Brown & Cregan, 2008).

Looking to the future means taking care of your employees, according to several panelists who spoke during the 70th semiannual Council of Hotel Restaurant Trainers. Whether it is implementing an employee training program or utilizing surveys to improve employee retention, hotel managers must find avenues that are creative and personal (Higley, 2005). Problem solving strategies in the hospitality industry are becoming critically important for organizational effectiveness (Agrusa & Lema, 2007). In a recent hospitality study, 91 percent of managers who participated said retaining their skilled, solid–performing employees is equally important as it was five years ago (Laff, 2006). Ultimately, the success of any business rests in the hands of its employees, from profitability and productivity to recruitment and retention (Honore, 2009).

We know three things about staff retention: “You just can’t find good help these days” (Milick, 2006). In looking at properties and organizations that have a high level of retention, there are two key areas targeted: start with the end in mind and they target front-line managers and supervisors (Davies, 2006). In organizations where employees receive proper training to assume greater responsibilities, their turnover rates are generally lower (Moncarz, 2008).