Chapter 1

1.0 Introduction

1.1 Background of the research

Almost every organisation seeks to improve their performance over time to increase their value generation capacity to foster higher competitive advantage. The organisational success is mostly dependent on the human capital of the firm, which determines its potential to perform.  This clearly indicates that the human workforce plays a crucial role in determining the performance of a company. In order to achieve higher yield, the companies need to ensure that the level of human capital is maintained, so that the company is able to perform at its full potential. In this context, employee retention has been considered as one of the most critical issues from the point of view of the management of a particular firm. The human resource (HR) managers provide immense importance in determining the factors that stimulate the employees to leave a job. A significant number of researchers have found that job satisfaction is an antecedent of turnover intentions of the employees. However, most of the studies have been performed in the context of USA and Canada. These researches have primarily focused on hospitals, military and food service companies. Although, the level of job satisfaction has been identified as a consistent predictor of employee turnover, the relationship between satisfaction and turnover intention may fluctuate according to the circumstances. However, only a few researches have been conducted in the context of South East Asia (Brooke, Russell and Price, 2008).

In the context of organisational psychology, employee turnover can be considered as one of most popular topic. Based on a research published in the American Journal of Applied Sciences, it has been observed that the satisfaction level of the employees with their job related aspects such as compensation or job roles and responsibilities directly affect their decision to remain in the organisation. On the other hand, it can also be found that the loyal employees play a significant part in influencing the performance of the organisation (Frone, Yardley and Markel, 2007). The HR managers of the organisation of the organisations have developed numerous strategies to retain the employees. However, it has been found that frequent turnover of the staff can directly affect the performance of the organisation. Moreover, it has also been found that the operational cost of the organisations have increased significantly due to the increased rate of employee turnover (Wright and Bonett, 2007). Hiring new employees can also reduce productivity of the firm. In this regards, Miller, Katerberg and Hulin (2009) mentioned that the firms can attain competitive advantage by retaining qualified, productive and loyal employee base. Employee turnover can also be considered as one of the most focused area by the scholars, researchers, academicians and HR managers. Hom and Kinicki (2011) cited that employee retention can be considered as an input for enhancing financial performance of the firms. Increased rate of the employee turnover in the firms can boost up indirect cost such as stress on the existing workforces and loss of social capital. Moreover, it can be inferred that morale of the employees can be affected due to the high rate of employee turnover.

Therefore, it has been clearly stated that the performance of the organisation is directly associated with the number of employees that leave the organisation. The higher number of employee turnover eventually puts an unfavourable impact on the overall performance of the organisation. Furthermore, it also leads to revenue leakage, as the higher turnover rates means that the company cannot perform at its full potential thereby limiting its ability to produce higher revenue.  Moreover, it can also increase the operating cost of the company, as recruiting new employees to fill up the employee base, also needs some degree of expenditure, effort and time. Moreover, it also involves training costs that the company needs to bear, each time new employees are recruited. This clearly indicates that the companies seek to achieve higher retention rate to achieve higher organisational performance and increased revenue generation.

It has been also stated that the number of employee turnover rate also influences the corporate image of a firm. The higher employee turnover (also known as attrition) creates a corporate image of unethical work culture, and improper organisational management that leads to employee dissatisfaction. Therefore, a company where employees are leaving in great number may find it difficult to create a good impression among the investors and shareholders. This is mostly because of high attrition is often associated with instability in the organisation.

Owing to these ill-effects of employee turnover, the firms take several initiatives to ensure that the employees are satisfied enough to stay in the organisation for longer. There are several different factors that are responsible for fostering higher employee satisfaction, which includes job fit, proper remuneration, and relationship with the supervisors, organisational culture, culture background of employees and leadership styles. Each of these factors can have different impact on the satisfaction level and the managers and the higher authority ensures that these factors are properly implemented to create a harmonic work environment that can lead to higher job satisfaction of the employees, which eventually results in low attrition rate and improve competitive advantage.

In order to understand the aspects of job satisfaction of the workers, the researchers have conducted an in-depth psychological analysis on the behaviour of the workers. Based on such study, the researchers have evaluated the factors that can motivate the staff and increase their satisfaction level. On the other hand, the researchers have also conducted several researches for identifying the factors that contributes employee turnover.

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