Theories related to the study
The chapter starts with introduction of employee retention concept. Utilizing Maslow Hierarchy of Needs Theory by Abraham H. Maslow (1954) and Social exchange theory, employee retention can be explained; these concepts are encapsulated in this chapter two. Both theories act as foundation to support the findings in investigating the relationship of the implementation of HRM practices with organisational commitment act as mediating role that impact on employees’ retention among the engineering companies in vicinity of Kota Kinabalu, Sabah.
Abraham Maslow’s Hierarchy of Needs Theory
Mohamed, Ngui, & Mulili (2017) in their investigation expressed that Maslow projected that there are 5 human needs, these needs are physiological, safety, social, self-esteem and self-actualization and these needs are ranked, according to the order in which they influence human behaviour, in hierarchical fashion. Kamau & Omondi (2015) clarified Maslow needs hierarchy with examples that physical needs refer as food, clothing, shelter; safety needs refer as physical protection; social needs that refer as developing close associations with others; self-esteem needs are regarding as the prestige given by others; and the highest self-actualization is the focus on self-fulfilment and accomplishment through personal growth.
Charity (2015) pointed out that Maslow views mankind as wanting beings who are persistently endeavoring to discover approaches to satisfy their needs which are not static and once a need has been satisfied, it can no longer serve as a motivator of behaviour. The fundamental of the theory is that beginning with lower basic physical needs in the hierarchy have to be fulfilled first and then progressing up to higher needs for self-change and employment headway. When all these essential needs have been accomplished, one would now be able to get to self-realization which hence causes them feel loyal to the company (Mohamed et al, 2017).
Charity (2015) featured that with the higher order needs of esteem and self-actualization, Maslow stresses the significance of non-monetary incentives in motivating the people. Maslow’s hypothesis inferred that non-monetary incentives can be best on employees who are meeting their essential needs, and satisfaction of basic needs is not alone enough to motivate employees. According to Charity (2015) non-monetary incentives have an important place in satisfying other needs of employees which cannot be met by pay. The examples of social non-monetary incentives such as a verbal recognition by supervisors or letter of thankfulness to the representatives add to their self-esteem,while social activities such as after-work parties, company picnics, sports activities and so on fulfill the belongingness needs of employees (Charity, 2015).
Maslow theory demonstrates that for employees to work efficiently that they need to achieve those needs in order to give their top and best performance and hence the employer also needs to motivate the employees by giving them reasonable incentives, pays, rewards, recognition and also subjecting them to training and development to enhance their loyalty or rather retention to the organisation ( Mohamed et al, 2017). As per Atalya & Genga (2019), employees are probably to move in search of better positions with relatively higher compensation advantage, better working environment, and a favourable work-life balance. The theory of hierarchy of needs applied to the employee retention study in that it provides motivating factors that when employees achieve their needs, they are able to remain as employees in an organisation.
Thus, it can be anticipated that the Maslow's Hierarchy of Needs clarifies the motivation components which ultimately lead to employees’ willingness to remain loyal to the company. It is essential for organisation to identify the needs of their employees and committed to satisfy them and to retain them as human capital assets. This research will utilize Maslow hierarchy of needs on examining and predicting the possible influence of HRM practices towards employee retention and organisational commitment among the engineering companies in the region of Kota Kinabalu.
Social Exchange Theory (SET)
Coyle & Conway (2005) stated that Social Exchange Theory was developed originally by Thibaut and Kelley in 1959, as it has been utilized extensively as theoretical base of employee retention and organisational commitment research to comprehend the employer and employee relationship (as cited by Bibi, Pangil, Johari & Ahmad, 2017, p. 381). Blau (1964) defined Social exchange as voluntary actions of individuals that are motivated by the returns they are expected to bring and typically do in fact bring from others (as cited in Chinomona, & Dhurup, 2015). Harden,Boakye & Ryan (2018) mentioned that social exchange theory posits that as individuals engage in a series of interactions, such as when employers are supportive of their employees, a feeling of obligation emerges from the exchange. Blau (1964) postulated that the interactions between parties are usually seen as mutually dependent and contingent on the actions made by the other persons (Almaaitah et al, 1964). Osman et al.,(2015) stated that social exchange theory positively influences employee performance, commitment and retention where it explains that the stronger the relationship between employee and employer, the higher effect it has on employee’s attitude and behavior which in return generates better performance, motivation and retention (as cited in Shah, S. B., M.Khalil & Hashim, 2019).
Blau (1964) assessed that social exchange theory stressed on all human connections are shaped by the use of subjective cost-benefit, which is rooted in three vital areas: economics, sociology and psychology (as cited in Almaaitah, Harada & Sakdan, 2017). Harden et al., (2018) opined that the social outcomes of such exchanges are couched in an individual’s social and esteem needs such as a greater number of connections or a higher status within one’s social network; whereas, the economic outcomes resulting from a social exchange address an individual’s financial needs, such as promotion or pay raise. The psychology outcome as Harden et al., (2018) pointed out that employees will reciprocate organisation supportive role by wanting to perform in an effective manner and with a positive attitude as evidenced by their organisational commitment.
Almaaitah et al. (2017) explained that social exchange as a process of negotiated exchanges between parties in which both parties involved in the exchange take responsibility for one another and strongly depend on each other. Chinomona, & Dhurup(2015) asserted that when one party to the exchange does something for the other, or provides benefits for the other, there is an expectation of some form of valued, future return that is both non-specific and not tied to an explicit market value.
According to Chinomona & Dhurup (2015) when implemented the social exchange theory to organisational settings, leaders, coworkers and even the organisation may offer employees a variety of benefits that induce feelings of indebtedness and this is due to the fact that social exchanges builds up feelings of personal obligation, gratitude and trust among partners, all of which lay a foundation of social solidarity and micro social order even without binding contracts. Bibi et al (2017) reiterated that SET has been demonstrated that good acts and performances need to be reciprocated and the SET is based totally on the perception that a person who feels that he/she gets benefits from someone will sense obligated to repay or compensate through positive behaviours, attitudes, efforts and devotion.
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It is consequently essential that companies/organisations utilize different HRM practices (i.e., training and development, compensation and performance appraisal in this study) shall establish distinct exchange relationships with employees. Bibi et al (2017) is convinced that social exchange theory is relevant such that employees are more willing to perform better when they are supported and valued by organization and hence establish positive relationship towards employee retention and organisational commitment in long term.
Employee Retention
Definition of Employee Retention
Adegoka (2015) defined employee retention is a deliberate and systematic effort by employers to create and foster an environment that motivates current employees to maintain an employment relationship with the employers by having policies and practices in place that address their diverse needs and interests (as cited in Okolie & Umemezia, 2017). Fahim (2018) therefore evaluated that retention can be viewed as a logical inverse of turnover, as it indicates the behavior to continue/stay rather than to quit/leave the organization. Al-sharafi, Hassan & Alam (2018) stressed that retention as an employee’s decision to stay or continue working in their present organizations as a result of efforts made by organizations to encourage their staying. According to Al-sharafi et al (2018) added views that retention as the efforts organizations made to keep its desirable employees and thereby reach company objectives. Similarly, Kumar and Mathimaran (2017) stressed that retention is a systematic effort made by organizations to build a supportive and positive environment that encourages current employees to stay at their present organizations (as cited in Al-sharafi, 2018). Zineldin (2000) defined that employee retention is the all-round module of an organization’s human resource strategies of this it includes the recruitment of the right people with the right skills that is demanded by the organization and continues with practices which promotes employee engagement and commitment to the organization (as cited in Rono & Dr Kiptum, 2017, p.110). Kadiresan, Kamil, Mazlan, Musah & Selamat (2016) further defined employee retention as the practices used by organisations to prevent employees from leaving an organisation, and retention is the capability to retain those employees that the management want to keep, for longer than their competitors.
The Significance of Employee Retention to Organisations
Alias, Zailan, Jahya, Othman & Sahiq (2019) points out that a decreasing rate of employee retention rate is becoming a major problem for every organization nowadays (p.62). Ngethe, Iravo & Namusonge (2012) concede that employees are taken into consideration as the most valuable asset of all organizations as they provide competitive advantage to an organization; and employee retention is crucial or an organization (as cited in Bibi, Ahmad & Majid, 2018, p.42). Kadiresan et al. (2016) suggested that organisation need to be in a position to retain the bright employees who are highly experienced and difficult to replace; and at the same time was not easily available in the employment market. According to Ozolina-Ozola (2014), and Anvari, JianFu, and Chermahini (2014), employee retention is a trademark to the organization on their ability to initiate effective retention strategies with the intention to retain their excellent performer among the organisations’ employees (as cited in Alias et al., 2019, p.62).
Aleem & Bowra (2019) asserted that retention has many benefits for the organization, i.e., to increase productivity, maintain high-quality services and products in the organization and leads toward profitability by holding the customer for long term. Kyndt et al. (2009) claimed that, employees’ retention could assist an organization to become economically stable and competitive because employees’ retention involves retention of knowledge and skills (as cited in Gan & Yusof, 2019). Rakhra (2018) asserted that the performance of the organisation depends on the productivity of the employee as a consequence the HR team ought to do their best endeavour to keep the present employees satisfied with their job so that they do not consider leaving because no organisation can perform if the top talent quits.
The Impact of Employee Retention to Organisations
Rakhra (2018) stated that employee retention boosts the organisation’s productivity. Johennesse & Chou (2017) remarked that if employers do not carefully manage the retention of their staff, organizations may be challenged by understaffing, as well as ineffective and inefficient employees, for this reason at once impacting at the competitiveness, success and sustainability of these organizations. Similarly, Azeez (2017) added that low level of employee retention in an organisation has a direct impact on the smooth running, productivity, performance and long-term sustainability of the organisation. According to Rakhra (2018) that hiring and training the new employees takes time thus if the experienced and efficient employees are retained the productivity of the company can be improved.
Renard & Snelgar (2016) found out that when employees exit their organisations, turnover as opposed to retention occurs. According to Noe, Hollenbeck, Gerhart & Wright (2012) that ‘Turnover’ can be stated as a permanent form of physical job withdrawal due to some form of job dissatisfaction and If employees are dissatisfied at work and cannot change their job conditions, then leaving the position may be their only means of solving the problem (as cited in Renard & Snelgar, 2016). Alias, Othman, Koe, Ridzuan, & Krishnan (2017) highlight the worse scenario is when talented employees voluntarily resigned their current position from the organization (as cited in Alias et al., 2019, p.62).
Azeez (2017) mentioned that once competent employees leave the organisation, there are movements of the customers towards those employees who are loyal to those employees, this result to the organisation loss of both employees and the customers. It is also no surprise that in a few occasions that subordinates who are loyal to the leaving employee may leave the organisation as well (Azeez, 2017). Gray (2012) suggest the view that if an employee leaves the organization voluntarily due to better offer or job dissatisfaction will have an effect on other employees to make the same direction, thus setting off a phenomenon of turnover and focusing on initiatives to retain them from becoming a contagious in an organization always a major concern by organizational leaders (as cited in Alias et al., 2019, p.62).
Bibi, Ahmad &Majid (2018) indicate that switching an employee with a new one rises operational costs in many forms which include high cost of recruitment, replacement, selection, management time. Similarly,
Hosain (2016) remarks that the HR department of the organisation should concern that other hidden or invisible costs are result of incoming employees through new job analysis, co-workers relationship with the departing employee, time taken for the co-workers to develop a good working relationship with the new employee and the other expenses occurring while the position is being filled. Mathimaran and Kumar (2017) mentioned that losing a middle manager in most organizations' costs up to five times of his salary and loss of social capital. Rono & Dr Kiptum (2017) also highlighted in previous study on the negative effect of failure in retaining the employees that results in productivieness loss in the course of the assimilation period, loss of business opportunity poor and weaken customer relationship.
Azeez (2017) stressed that employee retention ought to be the primary focus of the organization to take care of a strategic distance from the unpredictability and high cost of selecting an expert and qualified workforce to the organisation. Renard & Snelgar (2016) expressed that human resource manager must not solely to recruit and hire employees but also to retain individuals who possess the necessary talents and skills that required for organisation to attain strategic objectives. Hence, it’s crucial for the management of the organisations to critically evaluate and develop employee retention as a management tool to retain the potential employees within the organisation
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