THE PERCEIVED RELATIONSHIP BETWEEN EMPLOYEE
RETENTION AND ORGANIZATIONAL PERFORMANCE
Background information
Organizations today constantly wrestle with revolutionary trends; accelerating product and
technological changes, global competition, deregulation, demographic changes, and at the same
time, they must strive to implement trends towards a service and information age society.
Society has now become knowledge-based where clearly human capital is considered a key
resource and indispensable to the survival of businesses. Increasingly, organizations are
competing for the best talent employees, (Fox et al., 2009). New paradigm companies recognize
that an important element in business management practices is the need to successfully motivate
and retain high talent employees who survive organizational restructuring, downsizing,
consolidation, reorganizing or re- engineering initiatives (Storey, 2005). These trends have
increased dramatically the degree of competition in virtually all industries. Companies in such
an environment either become competitive high-performers or they vanish (Dessler, 2000).
Within this competitive organizational context, human resource management practices have
gained increased significance. More specifically, human resource has been linked to increased
productivity, good customer service, greater profitability and overall organizational survival
(Fox et al., 2009). To achieve such link, management must not only face current issues of
human resource management but ensure that they put in place mechanisms that will retain its
employees. It is imperative that firms create employee retention practices and adopt them so as
to increase employee’s performance (Gayathriet al., 2012). According to Rawat, (2013)
organizations face a lot of problems when they have a high turnover rate due to employees
leaving the organization for reasons such as job dissatisfaction, poor working conditions, not
having a decent salary packages and if there are no advancements in career among others. High
loss of staff leads to low performance in the organization therefore, organizations have to come
up with policies and practices on retaining employees so as to ensure that employees stay in the
organization for a longer duration and have a positive effect on their performance. Most
business leaders understand that having the right people in the right place at the right time to
maximize business opportunities has become the most important factor in ensuring ongoing
organizational success. While managing employees effectively is obviously important, to
consider it‟s the acquisition, allocation, development, retention and succession that is even more
important since value adding people can best create competitive advantage (Mellahi and
Collings, 2010). It is no surprise therefore that a number of surveys show effective management
of an organization‟s employees as one of business leaders‟ most critical challenges.
Concept of Perception
Perception has been defined as the process by which people translate sensory impressions into a
coherent and unified view of the world around them. Perception plays a key role keeping
employees hoping for a better tomorrow hence want to work with a given organization for long
(Curtis, 2001). According to Nelson and Quick, (1997) social perception is the process of
interpreting information about another person. In other words, one may be in possession of the
same set of information that other people have on a particular situation, person or group but still
arrive at different conclusions due to individual differences in the capacity to interpret the
information that you all have. Rao and Narayan, (1998) emphasize that perception ranks among
the important cognitive factors of human behavior or psychological mechanism that enable
people to understand their environment. In their own words, perception is the process whereby
people select, organize, and interpret sensory stimulations into meaningful information about
their work environment. They argue that perception is the single most important determinant of
human behavior, stating further that “there can be no behavior without perception.” Though
focusing on managers in work settings, Rao and Narayan draw attention to the fact that since
there are no specific strategies for understanding the perception of others, everyone appears to
be left with his own inventiveness, innovative ability, sensitiveness and introspective skills to
deal with perception. Positive employee perception of the organisation portfolio is an important
factor for existence growth and development of an organisation. What the employee perceives is
generally what the employee believes and acts on. Employee perceptions are shaped by many
factors, prominent among them organizational roles, supervisory styles, and communication
styles. Employee perceptions cannot be ignored, even when they are known to be incorrect,
because they are factual to the employees who in turn act as a major factor to continued
existence of the employee to the organisation (Parkinson,1990).
Employee Retention
Employee retention refers to policies and practices companies use to prevent valuable
employees from leaving their jobs Glen, (2006).Employee Retention involves taking
measures to encourage employees to remain in the organization for the maximum period of time
(Griffeth & Hom, 2001). Leign, (2002) also defines retention as keeping those employees that
keep you in business. Nowadays, organizations are experiencing a balance of power shifting
from employers to employees. Employees can be retained and satisfied within those
organizations which keep on learning how to keep their employee satisfaction at the highest
level. Sohailet, (2011) enlightened that employee retention as an important process for
organisation performance to remain competitive. Thus for Organizations to remain competitive,
they need to have in place employee who are focused, equipped with effective skills and
committed to their work. It means therefore, that crafting and implementing retention practice is
a core function of Human resource management. It follows therefore that before implementing
retention practice, companies have to understand employee’s expectation in the workplace.
Failure to understand employee’s expectations results to erroneous practice and spoils retention
intentions. Employee retention practice is a plan or policies that are practiced by an organization
to retain its employees throughout their work life. In other words Retention means the long-
term relationship between employee and the organization. Effective implementation of
Employee retention practices increase employee loyalty, commitment and minimize employee
turnover cost. By having a better handle of why the employees are leaving or want to leave the
organization, effective retention practices can be adopted and reduce turnover. (James &
Mathew, 2012).
Previous studies show that, a good recruitment practice is the key to employee retention
Hascall, Hopkins & Hollman,(1995).The first thing leading organizations are doing to retain
employee is a focus on “hiring retainable employees.” Recruitment should aim at finding a fit
between the employer and employer. How managers handle selection process can also
influence employee retention. Use of Biodata technique empirically enables identification of life
experience that tends to differentiate those who will stay with organization and those who will
not. Such experience may include trend of how long they have been staying with previous
organizations. Training and development teaches existing employees new knowledge, skills and
abilities to ensure their continued usefulness to the organization and meeting their personal
desires for advancement. In organizations where there is no career growth employees tend to
leave and work elsewhere. When training opportunities are lacking, workers gets demoralized
and easily move to other companies even for allow pay but as long as there are chances for
training and development. Compensating or Paying employee high wages in relation to their job
will enable employees to remain in the firm and avoid them from looking for a job elsewhere.
Giving bonuses to employees who have improved their performance and increased
profitability and offering stocks to employees thus making them own a part of the organization.
This will result to them being more loyal and committed to the firm. Managers should establish
an effective two way communication with operatives as this result in employees to remain in the
organization (Taplin, &Winterton, 2007). Providing employees with career paths and steps on
how they can reach their goals and achieve them. Among many organisations high turnover is
mainly in new employees.
Research shows socialization and work environment practice can help new hires become
embedded in the company and thus likely to stay. The interesting part of work environment is;
work environment characteristics in services sector differ from production sector,
because services sector directly deal with consumers/clients (Normann, 1986).
Organizational Culture encompasses perceived images towards organizations, relationships
among employees, attitudes towards customers and accepted ways of performing tasks Donald
and (Catt, 1989). Organizations with high levels of employee commitment have significantly
higher operating margins and net profits than organizations with low employee commitment.
Employee Retention saves an organisation a lot of inconveniences including finances,
replacement costs, training costs among many other costs. Such practices may include
individualized learning experience formal and informal activities that help people get to know
one another, and the assignment of more seasoned employees as role models for the newcomers.
If there is excess of departures of staff then it indicates a basic problem within the company and
for such organization it is important to be familiar with how to retain employees. Attracting and
retaining the employees in emerging countries is highly desired practice of the high
performance organizations. Also after some years, the competition will be fierce and having the
best talent in the company will be a challenge. Research reports that most of the employees
leave an organization out of frustration and constant friction with their superiors or other team
members. Organisation should ensure a favorable environment in terms of line manager
employee relationship to be able to retain employees.
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