Unit 1 – Chap 7: Introduction: Psychology of personnel retention

Exam question (May/June 2013)

As manager you need to understand the psychological principles and factors pertaining to the retention of employees for the purpose of recommending strategies for retaining talented people with scarce and critical skills in the organisational context

Discuss the various factors that influence employees’ turnover intentions, job and occupational embeddedness. Also explain how employees’ job and work satisfaction, commitment and work engagement influence their turnover intentions, job and occupational embeddedness (25)

EMPLOYEE TURNOVER INTENTIONS

One of the schools of thought dominating research and practice on turnover is the psychological school of thought

Focuses on individuals and their decisions to quit or stay This relates personnel or labour turnover to factors such as: job satisfaction,

organisational commitment and employee engagement

Forms of turnover

Categorised into the following:

Involuntary turnover

Occurs when an employee is fired as a result of poor performance or laid off owing to company downsizing

Considered inevitable and possibly beneficialFunctional turnover

Includes all resignations which are welcomed by the employer Those which stem from an individual’s poor work performance

or failure to fit in comfortably with an organisational or departmental culture

Still regarded are lost opportunities and unnecessary costVoluntary turnover

When a competent and capable employee leaves to work elsewhere and is generally costly to the organisation

It means reduced productivity and increased expenses associated with recruiting and training a replacement

Measuring employee turnover

The following measures can be used:o Exit interviewso Anonymous questionnaireso Word of moutho Attitude surveyso Salary surveys

People leave jobs for a variety of reasons, many of which are outside the power of the organisation to influence

Factors that influence employee turnover

Outside factors

These factors relate to situations in which someone leaves for reasons largely unrelated to work

For example: People moving away when a spouse is relocated or when finding difficulty in satisfying needs of both work and family

In a way this turnover is unavoidable, but can be overcome through providing more flexible working hours, childcare facilities or even a job offer in the location where the spouse is being transferred to

Pull and push factors

Pull factors can include a change in career, career mobility opportunities, maternity leave, children and job transfer

Push factors can include level of pay, lack of career development, unmet needs, lack of superior support, working conditions and stress

Push factors show dissatisfaction with work or the organisation and pull factors show reasons for leaving are to improve living standards or better career development opportunities

Factors influencing job and occupational embeddedness

Job and occupational embeddedness refers to the totality of forces that keep people in their jobs and occupations

These forces are threefold: fit (extent to which individuals job complements other areas of their life), links (extent to which individuals ties with other people and activities at work) and sacrifice (ease with which these links can be broken).

The greater the fit, the number of links and the degree of sacrifice, the greater the forces toward job embeddedness will be.

Some push and pull factors that have the strongest influence on employees’ embeddedness:

Macroeconomic conditions

Poor economic conditions have the following impact on the employee:

o Lack of financial resources to invest in occupational training

o Decrease in the number of new positions and number of new firms created

o Increase in job insecurity, so individuals less likely to give up security and benefits in current occupation

Employment equity and affirmative action

Changes to the social and legal policy have increased educational and employment opportunities from designated groups

For instance, reducing barriers to entry (AA legislation) or providing resources for entry (skills development legislation)

Permeability of occupational mobility structures and industry growth

These factors reduce barrier to entry and increase worker expectations into a new career path

Human capital investment is a strong factor that embeds individuals in their current occupations

Employees are reluctant to give up on “sunk costs”, which is amongst others, the investment organisations put into giving employees occupationally-specific skills training

Compensation policies

Pension and insurance benefits have the strongest effect on embedding employees in their current organisations

They are not the strongest factors when choosing an organisation, but are important when deciding to leave an organisation, again employees not willing to give up on these “sunk costs”

Work/life conflict

Employees who like their job responsibilities, but cannot function adequately in a particular organisational context are more likely to seek external job mobility opportunities

Unmet expectations

Unmet expectations are also push factors and closely related to the psychological contract between employer and employee

Employees come to an organisation with certain expectations such as pay, working conditions, opportunity and organisational culture

The state of the psychological contract depends on the degree to which these expectations are met, perceived to be fair and equitable and whether there is trust that they will continue to be met

When reality does not match employee expectations, they become less satisfied and as a result are more likely to leave the organisation

Psychological contracts are unwritten; therefore employees may have unrealistic expectations of the organisation and feel unfairly treated as a result of organisational decisions and practices

Psychological contract

A broad explanatory framework for understanding employee-organisation linkages

Can be categorised into: Relational contracts and Transactional contracts Relational contracts are broad, open-ended exchanges of intangible things such

as employee loyalty and commitment in return for longer-term job security Transactional contracts are more specific and involve the exchange of tangible

factors such as the amount of pay for a specified level of performance The state of the psychological contract depends on the degree to which these

expectations are met, perceived to be fair and equitable and whether there is trust that they will continue to be met

There is a perception of distributive justice and procedural justice Distributive justice concerns the perceived fairness of the allocation of rewards to

employees – people compare what they get to what they expect to get Procedural justice is the process by which rewards are distributed and whether

they are perceived as fair and reasonable If individuals see a fair balance between in exchange of services, they tend to

honour their part of the contract with commitment and loyalty If individuals see their expectations as unfair the contract becomes damaged and

the employee is demotivated and look elsewhere Balancing individual and organisational needs are essential in the retention of

employees

Career mobility

Career mobility refers to the intra-organisational and inter-organisational career movements of people and includes everything from changing jobs to changing organisations to changing occupations

Intra-organisational mobility

Occurs along three basic dimensions:

Hierarchical dimension

Vertical as employees move from entry level to middle to senior

Accompanied by pay increases and status, increased autonomy and variety

Functional/technical dimension

Can enter a functional speciality and continue that speciality throughout his career, developing technical expertise within the area

Can move across functional specialitiesRadial dimension Individuals that become more trusted and valued by the

organisation get given greater access to its inner core

Inter-organisational mobility

Focuses on globalisation and its influence on employees careers, as well as the boundaryless career

Global careers refer to the crossing of national and regional boundaries in the course of work or life

Globalisation refers to the compression of the world and the intensification of people’s consciousness of the world as a whole

An individual’s career typically includes more than one company Self-initiated cross-border career moves are part of the changes associated with

the boundaryless career

JOB SATISFACTION AND ORGANISATIONAL COMMITMENT

Job satisfaction and organisational commitment are closely related, but distinct Satisfied employees tend to be more committed to an organisation Employees who are satisfied and committed are more likely to attend work, stay

with the organisation, arrive at work on time, perform well and engage in behaviours helpful to the organisation

Job satisfaction

Job satisfaction is how an employee feels about their job and what they think about their job

Job satisfaction is a result of employees’ perception of how well their jobs provide those qualities they perceive as important

Employees with a high job satisfaction experience positive feelings and employees with low job satisfaction experience negative feelings about their duties

Facets of job satisfaction

Pay satisfaction

Employees’ feelings about their pay – what they deserve, secure and adequate Based on comparison of the pay that employees want and the pay they receive

Promotion satisfaction

Employees’ feelings about company promotion policies and their execution – frequent, fair and based on ability

Many employees value promotion because they provide opportunities for personal growth, better salary and more prestige

Supervision satisfaction

Employees’ feelings about their superior – whether they are competent, supportive, caring, respectful and a good communicator

Co-worker satisfaction

Employees’ feelings about their fellow employees – whether they are competent, responsible, helpful, supportive, fun and interesting as opposed to lazy, incompetent, gossipy, unpleasant and boring

Work satisfaction

Employees’ feelings about their actual work tasks – whether they are challenging, interesting, meaningful, respected and make use of key skills rather than being dull, repetitive and uncomfortable

Employees who perceive a good fit with their organisation, job, co-workers and supervisor tend to be satisfied with their jobs, identify with the organisation and perform better and engage in organisation citizenship behaviours

OCB refers to tasks employees perform that are not formally required

Individual differences and job satisfaction

An individual’s mood – positive or negative can affect all aspects of work Positive affect relates to lower absenteeism and negative affect relates to higher

absenteeism and higher turnover The variability in job satisfaction is due to individuals’ personal tendency across

situations to enjoy what they do Certain types of people are just generally satisfied and motivated, regardless of

the type of job they hold

Four personality variables are related to people’s predisposition to be satisfied with life and with their jobs:

o Emotional stabilityo Self-esteemo Self-efficacy (perceived ability to master their environment)o External locus of control (perceived ability to control their environment)

However, no matter how strong an individual’s positive emotions or disposition, if they are not fairly treated – job satisfaction and positive work behaviours will decline

Organisational commitment

Defined as the desire on the part of an employee to remain a member of the organisation

Organisational commitment influences whether an employee stays a member of the organisation or leaves to pursue another job and become a turnover statistic

Employees who are not committed to the organisation engage in withdrawal behaviour.

Two types of withdrawal behaviour:o Work withdrawal – lateness and absenteeism – withdraw from work, but

still maintain ties with the organisationo Job withdrawal – intentions to quit, retire and willingness to sever ties with

the organisation

Forms of commitment

Organisational commitment consists of three elements:o Attitude – acceptance and belief in organisation’s valueso Behaviour – willingness to exert effort on behalf of the organisationo Motivation – strong desire to remain in the organisation

There are also different forms of organisational commitment:o Affective commitment – preference to stay arising from a sense of

emotional attachment (staying because you want to) Develops when occupation proved to be a satisfying experience

o Continuance commitment – sense of economic necessity or the perceived cost of leaving (staying because you need to)

Develops when the individuals has made investments that would be lost

o Normative commitment – moral obligation (staying because you ought to) Develops as a result of the internalisation of normative pressures to

pursue a course of action

Three types of organisational commitment combine to create an overall sense of psychological attachment to the company and people prioritise these differently

Overall organisational commitmentWhat makes someone want to stay with their current organisation?

Affective commitment Continuance commitment Normative commitmentStaying because you want to Staying because you need to Staying because you ought

to Some of my best friends

work in my office and I’d miss them if I left

My current job is rewarding. I enjoy coming to work each morning. Also, I really like the atmosphere…it’s fun and relaxed

I’m due for a promotion soon. Will I advance as quickly at the new company?

My salary and benefits get us a nice house in our town and my spouse has a good job here

The cost of living is higher in this area and will my spouse be able to find a job?

My supervisor has invested so much time in me, mentoring me, training me and showing me the ropes and has helped me out of a jam on a number of occasions. How could I leave now?

My organisation gave me a start. They hired me when others thought I wasn’t qualified

Emotion-based reasons Cost-based reasons Obligation-based reasons

Individual variables and commitment

Age and organisational commitment have a relation – older employees become more attitudinally committed

Individuals that accumulate more years with the company are likely to acquire greater investments and develop greater continuance commitment

Males are committed to an organisation that provides them with more autonomy Females are committed to an organisation that respects personal and family

concerns

EMPLOYEE ENGAGEMENT

Engaged employees have a significant impact on the performance of an organisation and generally most committed

Work engagement is distinct from constructs such as organisational commitment, job satisfaction or job involvement

Organisational commitment refers to an employee’s allegiance to the organisation that provides employment – the focus is on the organisation

Engagement focuses on the work itself – a psychological state that employees can be in when they are performing their work roles

Levels of engagement can fluctuate Job satisfaction is the extent to which work is a source of need fulfilment and

contentment

Dimensions of work engagement

Employee engagement consists of various dimensions, depending on which theory is studied

Engagement can be defined as a positive, fulfilling, work-related state of mind that is characterised by:

Vigour Characterised by high levels if energy and mental resilience while workingWillingness to invest effort in one’s work and persistence to face difficulties

Dedication Characterised by a sense of significance, efficacy, enthusiasm, inspiration, pride and challengeEmotional side of work engagement – willingness to expend time and effort in doing something meaningful

Absorption Cognitive aspect where individuals are fully focused on something and experience a high level of concentration while performing a task

Another four facets together also describe employee engagement:

Absorption Extent to which employees become engrossed in their work that time seems to stand still

Alignment Employees’ beliefs about where the organisation should be going and what goals and aspirations should be

Identification How important characteristics of an organisation are to an employee in defining who they are – sense of belonging

Energy Physical energy and motivational resources that employees direct towards their work, rather than other activities

Engaged employees become physically involved in their tasks, cognitively alert and emotionally connected when performing their job

Disengaged employees become disconnected from their jobs and hide their true identity, thoughts and feelings during role performances

Engaged employees are typically characterised by:o The willingness to take initiative and self-direct their liveso They generate their own positive feedback and encourage themselveso Engaged outside of their employmento Their values and norms are in agreement with those of the organisation

Causes of work engagement

Engagement is predicted by the work environment in which the employee spends their time

Features of the work environment can either drive the employees towards becoming engaged, or push them toward disengagement

Work engagement is closely related to the work environment, job resources, social support and the characteristics of the job

Job resources are those aspects of the job that have the capacity to reduce job demands, functional in achieving work goals and stimulate growth, learning and development

Social support from co-workers, superiors, performance feedback, coaching, job control etc. is also positively related

The more job resources available – the more engaged the employee Job characteristics such as skill, variety, autonomy and feedback contribute to

intrinsic motivation

RETENTION FACTORS IN THE SOUTH AFRICAN CONTEXT

The factors that influence employee retention in South Africa are as follows:

Remuneration

Money is still the primary incentive to lure managers and professionals High salaries not essential, but ‘fair’ salaries show strong correlation with

intention to stay Employees want to understand how the pay system works and how they can

earn pay increases Once the pay level is reached, intangibles such as career, supervisor support,

work and family balance become important Compensation has a strong relationship to organisational commitment, affective

commitment and normative commitment Pay satisfaction on retaining technology professionals confirms that these

employees want competitive salaries Elaborate benefit packages are becoming increasingly common in high

technology firms, i.e. indirect financial rewards received in terms of time off for example

In the end, some want money, some want security, recognition and career pathways and some want improved self-worth and importance

Job characteristics

Most employees want to do interesting work that challenges their skills and talents

Unchallenging and narrow tasks hamper growth and employees become less engaged

Organisational citizenship behaviours diminish when employees are given repetitive tasks to complete

Job characteristics such as variety and autonomy are determinants of organisational commitment

Professionally-qualified employees will leave the organisation if their skills are underutilised

Skill variety relates to feelings of belonging and a sense of attachment to the organisation

Training and development opportunities

Sustaining employability has given importance to further training and development for the survival of any worker

Organisations need to keep their employees well trained in latest technologies Employees stay at companies that promote career opportunities through learning

and the ability to apply their learnt skills Employees who are aware of the expense of training and appreciate the skills

they have acquired develop a sense of obligation If employees receive irrelevant training not based on their needs, they tend to

lose interest

Supervisor support

Supervisory behaviours that sustain the employee’s innovation Employees value the feedback from their co-workers and supervisors Sufficient performance feedback helps bolster positive attitudes toward the

organisation and helps prevent early intentions to leave Supervisors must be competent, accessible, accountable and visible to the

employee Supervisors should provide guidance where they need most assistance and to

consult with employees on decisions that affect them

Career mobility opportunities

Labour market trends present increased career mobility opportunities for employees

People tend to become concerned with their own future; they want progress and growth and tend to become frustrated if their path is blocked

Work/life policies

This includes flexible work scheduling, family leave policies and childcare assistance

Employees who have access to work/life policies show significantly greater organisational commitment and express a lower intention to quit their jobs

For people to commit to an organisation, they need to know they are cared about

RETENTION STRATEGIES

Assessment and evaluation of employees

Having the right person in the right job Optimal fit must exist between values and goals A psychological contract reflects an optimal fit between employee and

organisation The focus should be on personal goals and the necessary resources to achieve

these goals Wellness audits focusing on the positive and negative aspects of work-related

wellbeing should be implemented

Job re-design and work changes

Job enrichment involves raising the level of responsibility associated with a particular job

Job enlargement allows employees to take on additional, varied tasks so they can feel more valuable

Roles change and so should jobs Environments change, jobs should also change

Leadership

Has a significant influence on high trust employment relationship Employees tend to leave managers, not companies Good leaders enhance motivation and engagement Managers must pay attention to the selection and development of their personnel

and achieve a good fit between talent and work Managers must provide regular feedback and recognition for work well done

Training and development

Training programmes promote employee health and wellbeing and should also be directed at personal growth and development

Work training is a learning process across the entire lifespan and ultimately related to job performance and also increases employees’ efficacy beliefs

Career development and mobility

Employees need to rely on their own initiative to develop themselves continuously in order to remain employable

Planning one’s career by selecting jobs that provide opportunities for development increases level of engagement and degree of embeddedness

Managing work/home inter-role conflict

Staff turnover is affected by conflicting demands of work and family responsibilities

An employer of choice has the ability to recruit in a competitive labour market and issues such as work/life balance, reduced employee turnover and absence levels influence the employer of choice

Organisations need to assist in creating a work/life balance for their employees, like providing flexibility

Reward and remuneration

Perception of fairness in pay is associated with greater job satisfaction Employees who are compensated well are less likely to search for jobs

elsewhere Companies need to decrease their dependency of cash compensation and find

creative ways to recognise and reward employees