INTRODUCTION

This chapter is an introduction and intended to provide background information on the nature of the

present study and its objectives and purpose. It is divided into four sections. The first section presents

Background of the study the second part presents the problem statement, the objective, purpose and

significant of the study reviled in the third section. The final section presents how this study is

organized.

BACKGROUND OF THEY STUDY

The retention of employees has been shown to be significant to the development and the

accomplishment of the organization’s goals and objectives. Retention of employees can be a vital

source of competitive advantage for any organization. This study attempted to explore the main factors

that contribute to employee retention. The next paragraphs discuss the background of the study by

clarifying the theoretical framework for the main problems with employee retention.

Today, changes in technology, global economics, trade agreements, and the like are directly affecting

employee/employer relationships. “Until recently, loyalty was the cornerstone of that relationship. The

loss of talented employees may be very detrimental to the company’s future success. Outstanding

employees 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 other

challenges as well. They may demand higher wages, not comply with 2 organization practices, and not

interact well with their coworkers or comply with their managers’ directions. Besides these problems

asymmetric information or lack of information about the employees’ performance may complicate an

organization’s Endeavour to retain productive employees. Without adequate information an

organization may not be able to distinguish productive workers from non-productive ones. Employees

often may take credit for the successes and deflect failures to other employees. This is known as a

moral hazard problem. In many in stances companies may reward or punish employees for an

organization out come for which they had no impact (Kerr 1975). Insufficient information about

employees’ performance may result in adverse selection by them (Gross man & Hart 1986). The better

employees may move to other organizations for better opportunities. The coworkers who cannot

improve 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 up

receiving the same or nearly the same compensation and package of perks because of management’s in

ability to distinguish talented employees from the rest of the labor force in the organization. The

problem of attempting to keep talented members of the work force is further complicated because of

bounded rationality (Simon 1976). It is another result of asymmetric in formation where both the

manager does not know the information for which to ask from the employee and the employee does

not 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, the

company may still have to cope with agency costs resulting from them and their colleagues. When

information about an employee’s activities are difficult to gather, the employee may be motivated to

act in his own interest which may diverge from the interest of the organization. This divergence of

interests results in costs to the organization in the form of excessive perquisite consumption, shirking

of job responsibilities and poor investment decision making. Jensen and Meckling (1976) explained

that it is in an employee’s interest to over consume perks and shirk job responsibilities of the firm if

they are not sole owners of the organization. Employees may also be enticed to make suboptimal

investment decisions for the firm. Since most company employees have their wealth tied up in the

organization for which they work, employees may attempt to make investment decisions which are

less risky than the stock holders of the firm would prefer. This is doneto reduce the risk of failure by

the company, which protects the no diversified employee from loss of wealth. This investment strategy

may 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 investment

selection to enhance their own career chances (Narayanan 1985). The employee can signal the labor

market his superiority through the selection of a fast starting project, which may fizzle out later for the

firm. This strategy may cause the firm to miss profitable long-term projects or much needed research

and development. Employees may also attempt to increase the size of the firm through acquisitions

and project selection regard less of the effect on company profitability in order to increase their own

power base within the firm. 4 Another area contributing to decreased employee satisfaction is that of a

company’s motivational style. For example, Weinberg (1997) states that “Most companies relied in the

past on two traditional strategies for managing turnover. First, they raised wages until the situation

stabilized. If that did not work, they increased training budgets for new hires and first-level

supervisors. These solutions do not work anymore.

PROBLEM STATEMENT

Understanding employee perspectives and measuring their retention factors are critical to an

organization success. However, each employee in an organization creates his or her own

understanding of a phenomenon and assumptions (Argyris and Schon, 1978). It is the understanding of

the situation that provokes an action (Weick, 1979, 1995). an employee interprets their organizational

environment through his or her own mental model, creating his or her own world; a reality of the

second order thus arises (Watzlawick, 1976) that is in some way imperfect (Senge, 1990). Many

studies concerning employees retention have been conducted in mainly U.S and Europe to determine

the main factors that contribute to their satisfaction and motivation to exist, few of these researches

have conducted in Middle East, thus, scarcity of researches are indicated. Replication of such studies

in 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 most

prosperous regions in the world (Azzam, 1989). In Kuwait, the retention of private sector employees

has not been fully addressed. Many questions related to private sector workforce retention have not

been reported yet. For 5 examples, how is the private sector workforce aware of any retention efforts

in their agency? What make private sector workforce think about leaving their work? How do private

sector workforce feels unique about their agency’s retention situation? Does private sector

organizations discuss with the workforce specific reasons why they were leaving or not? Do private

sector workforce in know of specific retention problems in their agency? What type of work

environment or organizational culture e.g. supervisory style, work itself, is most appealing to

workforce? Thus, the present study aimed to enhance our understanding and improve the shortage of

literature by focus on the state of Kuwait to explore the main private sector workforce retention factors

that lead to their existing in their work place.

RESEARCH OBJECTIVE

Thus, the present study aimed deepens our understanding and improve the shortage of literature to the

main determinate of employee retention to existing in private sector. The main research objectives can

be 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 private

sector workforce.

• Investigate what issues related to organizational culture contribute to the retention of the private

sector workforce.

• Explore the future plan of Private sector workforce that contribute to their retention.

SIGNIFICANCE OF THE STUDY

This study derives its significant from its potential contribution at two primary levels: theoretical and

practical. At the theoretical level, the present study is expected to bridge a gap in the literature for

empirical research focusing on employee's retention. For the practical contributions, this study is

expected to provide new solutions and evidence on the usefulness of segmentation techniques for

human resource management.

PURPOSE OF THE STUDY

This paper aims to attempts to determine employee's retention in the private sector. The study

designed to explore the main retention factors for Private sector employees. The paper attempts to

deepen our understanding about employee's satisfaction and in private filed.

LITERATURE AND THEORETICAL BACKGROUND

In this chapter, the previous studies for employee’s retentions are presented to be the framework to

understand 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 “customer

liking, identification, commitment, trust, readiness to recommend, and repurchase intentions, with the

first 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 career

development systems (Fitzenz 1990). The above mentioned definitions explain many situations in our

contemporary life while many employees are no longer having the sense of organization loyalty once

they leaved. Increasing numbers of organization mergers and acquisitions have left employees feeling

displeased from the companies that they work and haunted by concerns of overall job security. As a

result, employees are now making strategic career moves to guarantee employment that satisfy their

need for security. On the other hand, employers have a need to keep their stuff from leaving or going

to work for other companies. This is true because of the great expenses associated with hiring and

retraining new employees. The adage, good help is hard to find, is even truer these days than ever

before because the job market is becoming increasingly tight (Eskildesen 2000, Hammer 2000). 8

Literature of employees retaining again show that attracting existed employees costs less than

acquiring new talents as organizations know their employees and what they want, and the initial cost

of attracting the new employees has already been expended (Davidow and Uttal, 1989). Employees

retention 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 and

higher efficiency (Zineldin, 2000).

Based on a review of the literature, many studies have investigated employee’s intentions to

exist, for example Eskildsen and Nussler (2000) in their research suggested that employers are

struggling 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 is

a straight line linking employee satisfaction and customer satisfaction. Thus, high satisfaction has been

associated to retention of both customers and employees. The literature of employee retention clearly

explain that satisfied employees who are happy with their jobs are more devotion to doing a good job

and vigorous to improve their organizational customers satisfaction (Hammer2000; Marini 2000;

Denton 2000). Employees who are satisfied have higher intentions of persisting with their

organization, 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 the

customer links between satisfaction and behavior. Potter-Brotman (1994) in his research explained

how service could affect retention and may result in improving the value of teaching employees to be

service providers, with the capability to enhance interaction with customers rather than 9 endanger

them. 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 earlier

efforts of Desai and Mahajan (1998) in examine the concepts of acquiring customers from a rational

and affective perspective provides us with different approaches of how cognition and affects are

implemented 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 of

customers. Desai and Mahajan (1998) assumed that retained customers are in fact satisfied, and not

simply retained because of habit, indifference or inertia. Included in retention strategies are the

development 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 the

relationship between customer's satisfaction and their retention clarifying that such relation is very

weak. He explains that an understanding of the two concepts cannot always be achieved by isolating

them from each other, but rather by examining the relationship between them. Gerpott et al. (2001) in

his research attest Johnston (2001) as he mentioned that customer retention and customer satisfaction

should be treated as distinct, but causally inter-linked constructs. Rust and Subramanian (1992), in

their study, link quality to customer satisfaction and argue that this has a direct effect on customer

retention and market share. In the same bases Athanassopoulos (2000) explain satisfaction as an

antecedent of customer retention. The authors study customer satisfaction cues in retail banking

services in Greece. The fining of his study shows that product innovativeness, convenience, staff

service, price and 10 business profile are dimensions of customer satisfaction. The authors also

mentioned that customers do not consider switching banks until they have encountered a series of

negative 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, satisfaction

itself 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 such

as 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 concept

of 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 of

either party ending the relationship decreases because of high termination costs. Other studies have

proposed that the cost of replacing lost talent is even higher, as much as 70 to 200 percent of that

employee’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 rate

and a 40-percent turnover rate is over $130 million annually”. Abundant studies have hypothesized

and empirically validated the link between satisfaction and behavioral intentions and behaviors such as

employee’s retention and word of mouth (e.g. Anderson and Sullivan, 1993; Rucci et al., 1998, Bansal

and Taylor, 1999, Cronin et al., 2000). Indeed, this link is essential to the 11 marketing concept, which

holds 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 major

economies now measure satisfaction at the industry level using large sample surveys to predict

employee's retention and future financial performance (Fornell et al., 1995). Kay (2000) describe

costs 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 to

the departing employee”. The costs and expenses mentioned above open another area of concern

which is productivity. When highlevel of employee’s turnover existed, most of the workforce is at an

entry level stage of production. A very high cost is associated with large numbers of employees who

have not accomplish full productivity. This cycle continues with very few employees performing at

maximum productivity. Numerous studies explain the importance of high employee’s involvement and

how it could enhance their retention (Arthur 1994; Huselid 1995; Koch and McGrath 1996). Flexible

work schedules and assistance programs need to be considered, however, only a small share of the

workforce takes advantage of them (Perry Smith and Blum 2000). As earlier studies indicated that

young employees are more interested in payment, advancement opportunities and time off. Such

differences may reflect stages in the career plan or deeper generation differences. Additionally, there

are often gender differences within demographic groups; e.g., young female may want different things

from what young male want (Beck 2001). the lack of opportunities to learn and develop in the work

can 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 opportunities

to develop their path and career direction. Turnover tumbled from 75 percent to 50 percent (Withers

2001). Studies indicated that employees stay when they have strong relationships with others with

whom 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 off

the job (Johns et al 2001). Other studies indicated that effective communications improve employee

identification with their agency and build openness and trust culture. Increasingly, organizations

provide information on values, mission, strategies, competitive performance, and changes that may

affect employees enthuse (Gopinath and Becker 2000; Levine 1995). Many companies are working to

provide information that employees want and need in better way of communication, through the most

credible 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 price

sensitivity, greater market share, improve productivity, increase employees performance and thus

increase profits and meet their organizational goals and objectives. The relationship between

satisfaction and retention in many studies has described as weak, and researches shows that

satisfaction does not necessarily cause to retention.

RESEARCH METHODOLOGY

The researchers divided the chapter into three sections; the first section presents the data collection

procedures, the second section presents study population and sampling, the final section presents data

analysis. 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 state

of Kuwait.

• Assess the most important organizational strategies that contribute to the retention of the private

sector workforce.

• Investigate what issues related to organizational culture contribute to the retention of the private

sector workforce.

• Explore the future plan of Private sector workforce that contribute to their retention.

DATA COLLECTION PROCEDURES

To accomplish the aforementioned research objectives, the data for this study was collected through

self-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. The

questionnaire used in the study was added and developed some factors through interviews with private

sector employees by visiting different organizations and workplace in the five main areas. By referring

to the literature review on this topic, many items in the organizational culture and retention strategies

sections of the survey were adapted 14 from Griffeth and Horn (1983). The primary aim of this study

is to explore the factors that affect private sector workforce attention in their work place. To achieve

this purpose the survey asked respondents to rate the degree of importance and level of agreement with

a number of statements related to:

• Benefits factors

• Retention strategies factors

• Organizational culture factors

The first part of the questionnaire asked respondents to rate the relative importance of 6 potential

benefits factors, on their retention, using a five-point Likert type importance scale ranging from “very

important” to “not important at all”. Table 1 show these factors.

Table 1: Benefits Factors

Benefits Factors

1. Salary and monetary compensation

2. Leave benefits (including vacation, sick, personal, paid holidays).

3. Retirement plan

4. 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 importance

of 13 potential strategies factors on their retention, using a five-point Likert type importance scale

ranging from “very important” to “not important at all”. Table 2 show Organizational strategies

factors.

Table 2: Organizational strategies factors

Organizational strategies Factors

1. Alternative Work Schedule

2. Voluntary Reduction in Work Schedule

3. Telecommuting/Work at Home.

4. Wellness Programs

5. Mentoring and coaching

6. Job Rotation and New Assignments

7. Help with career planning

8. On-site day care

9. Rewards and recognition

10. Employee Suggestion Program

11. Education opportunities

12. Training opportunities - job related

13. Annual Performance Appraisal

The third part of the survey address the organizational culture factors, respondents asked to rate the

relative 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 the

organizational strategies factors.

Organizational culture Factors

1. Supervisors in my workplace sit down with employees and discuss their development plans at least

every 6 months.

2. Employees are often given the opportunity to be part of task groups and assignments outside their

core job responsibilities.

3. My agency has a career development program that helps people become more aware of and

responsible 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. 16

6. 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 as

follows: leave workplace employment within 1-2 years, 3-5 years, 6-10 years or no plans to retire or

leave work place in the foreseeable future. The final section of the survey collects demographic

information, with few lines space, respondents are given an opportunity to provide general comments

on any other areas related to retention that they felt were not addressed in the focus groups or on the

survey. The focus group participants completed the survey for practical purpose of this study, thus the

findings 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 the

state of Kuwait.

STUDY POPULATION AND SAMPLING

In convince approach, the authors selected five main cities to distribute the survey where private sector

workforce conducted their work. A total of 145 surveys were distributed in equal numbers to the

private organizations. In convenience method, private sector employees who conducted their work in

the sampling location during the chosen time intervals were selected. 17 Distribution process took

place 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 obtain

information 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 from

each city), out of which 20 were usable (valid and completed), thereby yielding a response rate of

about 86.2 percent, a response rate considered sufficiently large for statistical reliability and

generalizability (Tabachnick and Fidell, 1996; Stevens, 2002). This relatively high response rate

attributed to the self-administered approach undertaken in distributing questionnaires and approaching

respondents at the various locations.

METHODS

The responses obtained were analyzed using SPSS V.17. To ascertain which of the private sector

workforce retention factor criteria are perceived as more or less important, the data were analyzed

using descriptive statistics and factor analysis. These techniques were deemed to be appropriate for

this particular analysis because the main purpose of this thesis is to explore the main determinate of

employee exiting retention.

CHAPTERISATION SCHEME

This study comprises six major chapters.

Chapter I

Provide a discussion of nature, background and problems of the study and its objectives.

Chapter II

Presents an extensive review of the literature on employee's intention for the purpose of laying out the

theoretical foundation of the study.

Chapter III

Presents research methodology, it discusses the population and sampling, data collection procedures,

questions of the research and instrumentation.

Chapter IV

Presents the finding and result of data analysis.

Chapter V

Reveals the discussion of the study.

Chapter VI

Presents summary, conclusions.

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