Researchers and HR practitioners
Researchers and HR practitioners have emphasized the importance of retaining productive employees to increase organizational productivity. Previous studies have found that retention of highly productive workers significantly affects organizational performance, but this does not remain true in retaining employees regardless of performance (Horwitz, Heng, & Quazi, 2003: Roehling, Cavanaugh, Moyhihan & Boswell, 2000;
Turnley & Feldman, 2000). Due to its size and structure, small businesses cannot offer the same retention management strategies (Cappelli, 2001; Mitchell et al. , 2001; Steel et al., 2002) that large corporations can, hence small companies try to offer a streamlined but meaningful array of compensations and benefits that would keep the productive employees from leaving most of which include competitive salary, better fringe benefits, and profit sharing, flex time and day care provisions.
The objective of the study is to be able to investigate the relationship of different retention management strategies used by small businesses and to the business’ productivity in order to gather evidence of the importance of employee retention to the operation of small businesses.
Specifically, this study tries to identify the widely used employee retention strategies that most small businesses employ, to measure the productivity rates of small businesses through sales rates and to determine
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28 The study of HR practices and its relation to organizational performance have given importance to the assumption that the human resource of any company must be developed to realize organization productivity. Among the HR functions, what is most important in this changing workforce and economic arena is t be able to retain the best performing workers. Retention management refers to the strategies that employers use to induce the worker to stay with the company or hence making their desire to leave the company at a minimum.
The factors often discussed in retention literature are compensation, career development and training, job characteristics, work environment and work-life balance. Although most of these factors have been gaining importance in the retention literature, compensation still remains to be the most widely researched, however in terms of its ability to retain high performing employees; even very high salaries have not been found to significantly influence turnover (Higginbotham, 1997), while profit sharing and permanent salary increases seem to reduce turnover (Kochanski & Ledford, 2001; Balkin & Gomez-Mejia, 1984).
Most of the studies are also quantitative in nature and employed the use of survey questionnaires or interview schedules. Productivity was also measured in terms of turnover rates and only a handful identified financial performance as influenced by HR functions. The most relevant input that the review of literature elucidated was how the different retention strategies are not all applicable to small businesses and that productivity as direct business outputs have not been studied extensively.
Based on these observations, the present study investigated the kind of employee retention measures of small businesses as it impacts direct business productivity. 29 The results of this study have found that employee retention measures employed by small businesses have very little relationship to sales performance. However when the sales performance of a small business enterprise that had implemented the desired retention strategies was tested against the sales performance of a company with minimal retention strategies, results showed a significant difference in their performance and hence productivity.
Therefore, the presence of employee retention strategies significantly affects business productivity in the sense that the business with retention strategies had more sales revenue compared to those who did not. Conclusion The findings of this study have revealed that employee retention strategies affects productivity levels of small business enterprises in terms of a higher sales rate compared to a business enterprise that do not have adequate employee retention strategies. The matched design of this study enabled the researcher to isolate the effect of employee retention strategies to productivity.
On the other hand this study failed to establish the direct relationship of employee retention strategies to productivity. The correlation coefficients had been very small and one cannot confidently say that as employee retention strategies become better, so will productivity increase. It has been concluded that to some degree employee retention strategies do affect small business productivity and the business owner or manager would be wise to consider implementing more employee retention strategies to help boost productivity.
Looking back onto the model of the relationship between employee retention and productivity, the results of the study did support and confirm the relationship of employee retention measures wherein the presence of which would lead to increased business productivity, on the other hand, the study 30 failed to measure the effect of employee retention strategies to employee loyalty and employee performance.
The design of the study only assumed that presence of employee retention strategies would generally lead to employee commitment and improved employee performance. This study has contributed to the researches on small businesses as well as on the area of human resource functions and productivity. The results of the study can also be used by small business owners and managers as basis for improving their employee retention efforts and allocating resources to areas that matter most for the business. Recommendation
In light of the findings of this study, it is recommended that a more controlled and in-depth study of employee retention strategies and business productivity be conducted that considers how employees perceive the compensation and benefits that the company offers and which of the retention strategies are more important to them. Likewise, one of the difficulty in assessing retention strategies is that different companies offer different benefits and incentives, thus a case study approach would be beneficial.
In the same light, it is recommended that small business owners examine their present retention strategies and conduct a survey of what employees prefer to have as benefits or incentives thereby ensuring that the retention strategies employed are meaningful to the employees. Future studies should focus more on how employee retention strategies lead to employee loyalty and commitment and to identify what kind of retention strategies are more likely to develop loyalty.
A similar study should also be conducted but this time; employees who have no plans to leave the company will be identified and 31 compared against those who intend to leave the company in terms of their work output while holding compensation and benefits constant so as to identify what constitutes employee loyalty and to determine of more loyal employees essentially work better. Lastly, researchers of human resource functions should be able to conceptualize and build theories in order to contribute to theory building in this field.