INTRODUCTIONThis chapter is an introduction and intended to provide background information on the nature of thepresent study and its objectives and purpose. It is divided into four sections. The first section presentsBackground of the study the second part presents the problem statement, the objective, purpose andsignificant of the study reviled in the third section. The final section presents how this study isorganized.BACKGROUND OF THEY STUDYThe retention of employees has been shown to be significant to the development and theaccomplishment of the organization‘s goals and objectives. Retention of employees can be a vitalsource of competitive advantage for any organization. This study attempted to explore the main factorsthat contribute to employee retention. The next paragraphs discuss the background of the study byclarifying the theoretical framework for the main problems with employee retention.Today, changes in technology, global economics, trade agreements, and the like are directly affectingemployee/employer relationships. ―Until recently, loyalty was the cornerstone of that relationship. Theloss of talented employees may be very detrimental to the company‘s future success. Outstandingemployees may leave an organization because they become dissatisfied, under paid or unmotivated(Coff 1996), and while trying to retain employees within the organization they may present otherchallenges as well. They may demand higher wages, not comply with 2 organization practices, and notinteract well with their coworkers or comply with their managers‘ directions. Besides these problemsasymmetric information or lack of information about the employees‘ performance may complicate anorganization‘s Endeavour to retain productive employees. Without adequate information anorganization may not be able to distinguish productive workers from non-productive ones. Employeesoften may take credit for the successes and deflect failures to other employees. This is known as amoral hazard problem. In many in stances companies may reward or punish employees for anorganization out come for which they had no impact (Kerr 1975). Insufficient information aboutemployees‘ performance may result in adverse selection by them (Gross man & Hart 1986). The betteremployees may move to other organizations for better opportunities. The coworkers who cannotimprove their positions are more likely to stay. This is especially possible when due to inadequate
information outstanding performance is not rewarded. Non productive and productive workers end upreceiving the same or nearly the same compensation and package of perks because of management‘s inability to distinguish talented employees from the rest of the labor force in the organization. Theproblem of attempting to keep talented members of the work force is further complicated because ofbounded rationality (Simon 1976). It is another result of asymmetric in formation where both themanager does not know the information for which to ask from the employee and the employee doesnot know what to provide. Therefore, productive workers cannot distinguish themselves from non-productive coworkers. 3 Even if an organization is fortunate enough to retain talented employees, thecompany may still have to cope with agency costs resulting from them and their colleagues. Wheninformation about an employee‘s activities are difficult to gather, the employee may be motivated toact in his own interest which may diverge from the interest of the organization. This divergence ofinterests results in costs to the organization in the form of excessive perquisite consumption, shirkingof job responsibilities and poor investment decision making. Jensen and Meckling (1976) explainedthat it is in an employee‘s interest to over consume perks and shirk job responsibilities of the firm ifthey are not sole owners of the organization. Employees may also be enticed to make suboptimalinvestment decisions for the firm. Since most company employees have their wealth tied up in theorganization for which they work, employees may attempt to make investment decisions which areless risky than the stock holders of the firm would prefer. This is doneto reduce the risk of failure bythe company, which protects the no diversified employee from loss of wealth. This investment strategymay also reduce the return on investment that the diversified owners of the firm desire (Murphy 1985).The employees or agents of the organization may also use a short sighted approach in investmentselection to enhance their own career chances (Narayanan 1985). The employee can signal the labormarket his superiority through the selection of a fast starting project, which may fizzle out later for thefirm. This strategy may cause the firm to miss profitable long-term projects or much needed researchand development. Employees may also attempt to increase the size of the firm through acquisitionsand project selection regard less of the effect on company profitability in order to increase their ownpower base within the firm. 4 Another area contributing to decreased employee satisfaction is that of acompany‘s motivational style. For example, Weinberg (1997) states that ―Most companies relied in thepast on two traditional strategies for managing turnover. First, they raised wages until the situationstabilized. If that did not work, they increased training budgets for new hires and first-levelsupervisors. These solutions do not work anymore.
PROBLEM STATEMENTUnderstanding employee perspectives and measuring their retention factors are critical to anorganization success. However, each employee in an organization creates his or her ownunderstanding of a phenomenon and assumptions (Argyris and Schon, 1978). It is the understanding ofthe situation that provokes an action (Weick, 1979, 1995). an employee interprets their organizationalenvironment through his or her own mental model, creating his or her own world; a reality of thesecond order thus arises (Watzlawick, 1976) that is in some way imperfect (Senge, 1990). Manystudies concerning employees retention have been conducted in mainly U.S and Europe to determinethe main factors that contribute to their satisfaction and motivation to exist, few of these researcheshave conducted in Middle East, thus, scarcity of researches are indicated. Replication of such studiesin other regions is highly justifiable. One of the regions that lack such studies is the Gulf region(Kuwait, Saudi Arabia, United Arab Emirates, Qatar, and Oman and Bahrain). It is one of the mostprosperous regions in the world (Azzam, 1989). In Kuwait, the retention of private sector employeeshas not been fully addressed. Many questions related to private sector workforce retention have notbeen reported yet. For 5 examples, how is the private sector workforce aware of any retention effortsin their agency? What make private sector workforce think about leaving their work? How do privatesector workforce feels unique about their agency‘s retention situation? Does private sectororganizations discuss with the workforce specific reasons why they were leaving or not? Do privatesector workforce in know of specific retention problems in their agency? What type of workenvironment or organizational culture e.g. supervisory style, work itself, is most appealing toworkforce? Thus, the present study aimed to enhance our understanding and improve the shortage ofliterature by focus on the state of Kuwait to explore the main private sector workforce retention factorsthat lead to their existing in their work place.RESEARCH OBJECTIVEThus, the present study aimed deepens our understanding and improve the shortage of literature to themain determinate of employee retention to existing in private sector. The main research objectives canbe summaries as follows:• Explore what types of benefits those are most important for the private sector workforce.
• Assess the most important organizational strategies that contribute to the retention of the privatesector workforce.• Investigate what issues related to organizational culture contribute to the retention of the privatesector workforce.• Explore the future plan of Private sector workforce that contribute to their retention.SIGNIFICANCE OF THE STUDYThis study derives its significant from its potential contribution at two primary levels: theoretical andpractical. At the theoretical level, the present study is expected to bridge a gap in the literature forempirical research focusing on employees retention. For the practical contributions, this study isexpected to provide new solutions and evidence on the usefulness of segmentation techniques forhuman resource management.PURPOSE OF THE STUDYThis paper aims to attempts to determine employees retention in the private sector. The studydesigned to explore the main retention factors for Private sector employees. The paper attempts todeepen our understanding about employees satisfaction and in private filed.LITERATURE AND THEORETICAL BACKGROUNDIn this chapter, the previous studies for employee‘s retentions are presented to be the framework tounderstand and systematically analyze factors the affect employee‘s intentions. Retention defined as―an obligation to continue to do business or exchange with a particular company on an ongoing basis‖(Zineldin, 2000, p. 28). A more detailed and recent definition for the concept of retention is ―customerliking, identification, commitment, trust, readiness to recommend, and repurchase intentions, with thefirst four being emotional-cognitive retention constructs, and the last two being behavioral intentions‖(Stauss et al., 2001). Studies have indicated that retention driven by several key factors, which ought
to be managed congruently: organizational culture, strategy, pay and benefits philosophy, and careerdevelopment systems (Fitzenz 1990). The above mentioned definitions explain many situations in ourcontemporary life while many employees are no longer having the sense of organization loyalty oncethey leaved. Increasing numbers of organization mergers and acquisitions have left employees feelingdispleased from the companies that they work and haunted by concerns of overall job security. As aresult, employees are now making strategic career moves to guarantee employment that satisfy theirneed for security. On the other hand, employers have a need to keep their stuff from leaving or goingto work for other companies. This is true because of the great expenses associated with hiring andretraining new employees. The adage, good help is hard to find, is even truer these days than everbefore because the job market is becoming increasingly tight (Eskildesen 2000, Hammer 2000). 8Literature of employees retaining again show that attracting existed employees costs less thanacquiring new talents as organizations know their employees and what they want, and the initial costof attracting the new employees has already been expended (Davidow and Uttal, 1989). Employeesretention also attain benefits such as customers satisfaction, better service, lower costs (Reichheld,1995), lower price sensitivity, positive word-of-mouth, higher market share, higher productivity andhigher efficiency (Zineldin, 2000). Based on a review of the literature, many studies have investigated employee‘s intentions toexist, for example Eskildsen and Nussler (2000) in their research suggested that employers arestruggling to be talented employees in order to maintain a successful business. In the same bases,Mark Parrott (2000), Anderson and Sullivan (1993) and Rust and Zahorik (1993) believe that, there isa straight line linking employee satisfaction and customer satisfaction. Thus, high satisfaction has beenassociated to retention of both customers and employees. The literature of employee retention clearlyexplain that satisfied employees who are happy with their jobs are more devotion to doing a good joband vigorous to improve their organizational customers satisfaction (Hammer2000; Marini 2000;Denton 2000). Employees who are satisfied have higher intentions of persisting with theirorganization, which results in decreased turnover rate (Mobley et al., 1979). Fishbein and Ajzen‘s(1975) attest the theory of reasoned action as the heart retention of both the employee and thecustomer links between satisfaction and behavior. Potter-Brotman (1994) in his research explainedhow service could affect retention and may result in improving the value of teaching employees to beservice providers, with the capability to enhance interaction with customers rather than 9 endangerthem. In the same research, the authors recommended that firms should focus on hearing customers
unique voices as result to find out what kind of service they consider to be extraordinary. The earlierefforts of Desai and Mahajan (1998) in examine the concepts of acquiring customers from a rationaland affective perspective provides us with different approaches of how cognition and affects areimplemented to increase retention. The authors recommended that in order to retain employees,companies must continually develop their products and services so as to meet the evolving needs ofcustomers. Desai and Mahajan (1998) assumed that retained customers are in fact satisfied, and notsimply retained because of habit, indifference or inertia. Included in retention strategies are thedevelopment of new products and services to meet and satisfy the evolving required of the customers;thus satisfaction is a component of retention. However, Johnston (2001) in his research negated therelationship between customers satisfaction and their retention clarifying that such relation is veryweak. He explains that an understanding of the two concepts cannot always be achieved by isolatingthem from each other, but rather by examining the relationship between them. Gerpott et al. (2001) inhis research attest Johnston (2001) as he mentioned that customer retention and customer satisfactionshould be treated as distinct, but causally inter-linked constructs. Rust and Subramanian (1992), intheir study, link quality to customer satisfaction and argue that this has a direct effect on customerretention and market share. In the same bases Athanassopoulos (2000) explain satisfaction as anantecedent of customer retention. The authors study customer satisfaction cues in retail bankingservices in Greece. The fining of his study shows that product innovativeness, convenience, staffservice, price and 10 business profile are dimensions of customer satisfaction. The authors alsomentioned that customers do not consider switching banks until they have encountered a series ofnegative effects. Heskett et al. (1994) and Schneider and Bowen (1999) suggested that, in some cases,service suppliers may be unable to retain even those employees who are satisfied. Thus, satisfactionitself may not be sufficient enough to ensure long-term workers commitment to an organization.Instead, it may be essential to look beyond satisfaction to other variables that strengthen retention suchas conviction and trust (Hart and Johnson, 1999). This explanation is consistent Morgan andHunt(1994) research on marketing channel, which shows that organizations often look beyond the conceptof satisfaction to developing trust and ensure long term relationships with their employees. Further,this suggestion is based on the principle that once trust is built into a relationship, the probability ofeither party ending the relationship decreases because of high termination costs. Other studies haveproposed that the cost of replacing lost talent is even higher, as much as 70 to 200 percent of thatemployee‘s annual salary (Kaye, 2000). Expanding on these thoughts, the EPF (2004) stated that ―for
a firm with 40,000 full-time employees, the difference between a 15- percent turnover rate and a 25-percent turnover rate is over $50 million annually. The divergence between a 15-percent turnover rateand a 40-percent turnover rate is over $130 million annually‖. Abundant studies have hypothesizedand empirically validated the link between satisfaction and behavioral intentions and behaviors such asemployee‘s retention and word of mouth (e.g. Anderson and Sullivan, 1993; Rucci et al., 1998, Bansaland Taylor, 1999, Cronin et al., 2000). Indeed, this link is essential to the 11 marketing concept, whichholds that satisfying employee‘s needs and wants is the key to exist in the organization (Kotler et al.,2002). Further, the importance of satisfaction on retention is well recognized that some majoreconomies now measure satisfaction at the industry level using large sample surveys to predictemployees retention and future financial performance (Fornell et al., 1995). Kay (2000) describecosts as in ―…advertising and recruiting expenses, orientation and training of the new employee,decreased productivity until the new employee is up to speed, and loss of customers who were loyal tothe departing employee‖. The costs and expenses mentioned above open another area of concernwhich is productivity. When highlevel of employee‘s turnover existed, most of the workforce is at anentry level stage of production. A very high cost is associated with large numbers of employees whohave not accomplish full productivity. This cycle continues with very few employees performing atmaximum productivity. Numerous studies explain the importance of high employee‘s involvement andhow it could enhance their retention (Arthur 1994; Huselid 1995; Koch and McGrath 1996). Flexiblework schedules and assistance programs need to be considered, however, only a small share of theworkforce takes advantage of them (Perry Smith and Blum 2000). As earlier studies indicated thatyoung employees are more interested in payment, advancement opportunities and time off. Suchdifferences may reflect stages in the career plan or deeper generation differences. Additionally, thereare often gender differences within demographic groups; e.g., young female may want different thingsfrom what young male want (Beck 2001). the lack of opportunities to learn and develop in the workcan be the top reason for employee dissatisfaction and thus turnover. a corporation namely Kimko,implemented this information and provide a training program that gave employees 12 an opportunitiesto develop their path and career direction. Turnover tumbled from 75 percent to 50 percent (Withers2001). Studies indicated that employees stay when they have strong relationships with others withwhom they work (Clarke 2001). this explain the efforts of organizations to encourage team building,project assignments involving work with colleagues and opportunities for interaction both on and offthe job (Johns et al 2001). Other studies indicated that effective communications improve employee
identification with their agency and build openness and trust culture. Increasingly, organizationsprovide information on values, mission, strategies, competitive performance, and changes that mayaffect employees enthuse (Gopinath and Becker 2000; Levine 1995). Many companies are working toprovide information that employees want and need in better way of communication, through the mostcredible sources (e.g., CEO and top management strategies) on a timely and consistent basis. In summary, the literature defines retention as continuing relation between customers(employees) and their organization. The benefits of retention are lower costs for their agent, less pricesensitivity, greater market share, improve productivity, increase employees performance and thusincrease profits and meet their organizational goals and objectives. The relationship betweensatisfaction and retention in many studies has described as weak, and researches shows thatsatisfaction does not necessarily cause to retention.RESEARCH METHODOLOGYThe researchers divided the chapter into three sections; the first section presents the data collectionprocedures, the second section presents study population and sampling, the final section presents dataanalysis. As mentioned in the first chapter, the objectives of the current study are to:• Explore what types of benefits those are most important for the private sector workforce in the stateof Kuwait.• Assess the most important organizational strategies that contribute to the retention of the privatesector workforce.• Investigate what issues related to organizational culture contribute to the retention of the privatesector workforce.• Explore the future plan of Private sector workforce that contribute to their retention.DATA COLLECTION PROCEDURESTo accomplish the aforementioned research objectives, the data for this study was collected throughself-administered questionnaires. As part of its data gathering efforts, the researchers asked the focus
group participants to complete a written survey about various aspects of their work place. Thequestionnaire used in the study was added and developed some factors through interviews with privatesector employees by visiting different organizations and workplace in the five main areas. By referringto the literature review on this topic, many items in the organizational culture and retention strategiessections of the survey were adapted 14 from Griffeth and Horn (1983). The primary aim of this studyis to explore the factors that affect private sector workforce attention in their work place. To achievethis purpose the survey asked respondents to rate the degree of importance and level of agreement witha number of statements related to:• Benefits factors• Retention strategies factors• Organizational culture factorsThe first part of the questionnaire asked respondents to rate the relative importance of 6 potentialbenefits factors, on their retention, using a five-point Likert type importance scale ranging from ―veryimportant‖ to ―not important at all‖. Table 1 show these factors.Table 1: Benefits FactorsBenefits Factors1. Salary and monetary compensation2. Leave benefits (including vacation, sick, personal, paid holidays).3. Retirement plan4. Health and other benefits (health insurance, vision, dental, prescription).5. Deferred compensation.6. Employee assistance program.
The Second part elicited retention strategies factors, respondents asked to rate the relative importanceof 13 potential strategies factors on their retention, using a five-point Likert type importance scaleranging from ―very important‖ to ―not important at all‖. Table 2 show Organizational strategiesfactors.Table 2: Organizational strategies factorsOrganizational strategies Factors1. Alternative Work Schedule2. Voluntary Reduction in Work Schedule3. Telecommuting/Work at Home.4. Wellness Programs5. Mentoring and coaching6. Job Rotation and New Assignments7. Help with career planning8. On-site day care9. Rewards and recognition10. Employee Suggestion Program11. Education opportunities12. Training opportunities - job related13. Annual Performance AppraisalThe third part of the survey address the organizational culture factors, respondents asked to rate therelative importance of 10 organizational culture factors on their retention, using a five-point scale type
agreement scale ranging from ―Strongly Agree‖ to ―Strongly disagree‖. The following table shows theorganizational strategies factors.Organizational culture Factors1. Supervisors in my workplace sit down with employees and discuss their development plans at leastevery 6 months.2. Employees are often given the opportunity to be part of task groups and assignments outside theircore job responsibilities.3. My agency has a career development program that helps people become more aware of andresponsible for their own career development.4. Working on a new projector assignment is an open process with few barriers.5. Supervisors communicate effectively with employees. 166. the workplace where I work has a culture that recognizes and values diversity.7. There is an environment of openness and trust in my agency.8. Employees in my workplace are treated with fairness and respect.9. Supervisors spend a good deal of time listening to employees ideas.10. Supervisors have a style that empowers people to take responsibility and authority.One section of the survey ask respondents about their retirement plan, four options are given asfollows: leave workplace employment within 1-2 years, 3-5 years, 6-10 years or no plans to retire orleave work place in the foreseeable future. The final section of the survey collects demographicinformation, with few lines space, respondents are given an opportunity to provide general commentson any other areas related to retention that they felt were not addressed in the focus groups or on thesurvey. The focus group participants completed the survey for practical purpose of this study, thus thefindings cannot be generalized to the entire GCC countries. Rather, the results provide a snapshot of
opinions from a small sample of Kuwaiti private sector employees who conduced their work in thestate of Kuwait.STUDY POPULATION AND SAMPLINGIn convince approach, the authors selected five main cities to distribute the survey where private sectorworkforce conducted their work. A total of 145 surveys were distributed in equal numbers to theprivate organizations. In convenience method, private sector employees who conducted their work inthe sampling location during the chosen time intervals were selected. 17 Distribution process tookplace in a two week period in the early part of April 2009. Private sector workforce was approached,explaining the nature of the study and asked if they would be prepared to fill in the questionnaire.The survey took approximately 10-15 minutes to complete. The survey was designed to obtaininformation about the main determinants of employee‘s retention to exist.From a total of 145 questionnaires distributed, 125 were returned (only 25 surveys were collected fromeach city), out of which 20 were usable (valid and completed), thereby yielding a response rate ofabout 86.2 percent, a response rate considered sufficiently large for statistical reliability andgeneralizability (Tabachnick and Fidell, 1996; Stevens, 2002). This relatively high response rateattributed to the self-administered approach undertaken in distributing questionnaires and approachingrespondents at the various locations.METHODSThe responses obtained were analyzed using SPSS V.17. To ascertain which of the private sectorworkforce retention factor criteria are perceived as more or less important, the data were analyzedusing descriptive statistics and factor analysis. These techniques were deemed to be appropriate forthis particular analysis because the main purpose of this thesis is to explore the main determinate ofemployee exiting retention.
CHAPTERISATION SCHEMEThis study comprises six major chapters.Chapter IProvide a discussion of nature, background and problems of the study and its objectives.Chapter IIPresents an extensive review of the literature on employees intention for the purpose of laying out thetheoretical foundation of the study.Chapter IIIPresents research methodology, it discusses the population and sampling, data collection procedures,questions of the research and instrumentation.Chapter IVPresents the finding and result of data analysis.Chapter VReveals the discussion of the study.Chapter VIPresents summary, conclusions.
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