THEORETICAL REVIEW ON REWARD MANAGEMENT PRACTICES AND
EMPLOYEE RETENTION
A theoretical framework helps a researcher to limit the scope of data. A theory is critical
in clarifying features of the physical world (Cherry, 2015; Labaree, 2013). The data for
this study was molded according to the principles of four theories, namely: Human
Capital theory, Maslow’s Hierarchy of needs Theory, Equity theory and Two Factor-
theories. These theories were apt in establishing the link between employee turnover
rates in Meru County Government and the selected reward strategies.
Human Capital Theory
Chemmanur, Cheng and Zhang (2013) describe human capital as the human aspect of a
company’s resources and the contribution they bring to the company by virtue of their
expertise. The theory asserts that employee’s intelligence and talent constitutes the
company’s reserve of industrious resource. This approach sees employees of an
organization as assets that ensure the survival of the organization in a highly competitive
atmosphere (Sutherland, 2004).
Human capital can be defined as the human factor in organizations (Armstrong, 2009).
Uniqueness of a company is established around the intellectual endowment of its
workers. It constitutes people capable providing the creative thrust which ensures
survival of an organization. Human capital is a multifaceted concept which includes the
intellectual capital, the social capital, the organizational capital and the emotional capital
(Sutherland, 2004).
According to Sutherland (2004), value of an organization is derived from its employees,
and when these employees leave the organization, they take this value with them. As
such, attracting, retaining, developing and maintaining employees are key to maintaining
the value of any organization.
Human capital theory gives relevance to career development variable since it
underscores the importance of defining the career paths in within the county government
of Meru as a motivation of employee retention. It is also relevant to the study since the
organization need to develop its employees for them to strike a balance between the
human capital required in an organization and the skills needed. Having the correct
number of employees required with the necessary skills gives an organization a
competitive advantage. Employee recognition is also covered under this theory since it is
through recognition that an organization is able to retain the competent employees that in
