NAVOTAS POLYTECHNIC COLLEGE

EMPLOYEE ENGAGEMENT AND ITS RELATION TO RETENTION RATE

AND EMPLOYEE PRODUCTIVITY

A Thesis Presented to the

Faculty of the Human Resource Management Program

Bachelor of Science in Business Administration

In Partial Fulfilment of the Requirements for the Degree of

Bachelor of Science in Business Administration

Major in Human Resource Management

By:

Agoilo, Jhonas

Andraje, Devi Grace

Fernandez, Ghemma

Ferrancol, Yaosha

Reyes, Patricia
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TABLE OF CONTENTS

CHAPTER I: THE PROBLEM AND ITS SETTING

Introduction ……….......………………………………………………………2

Theoretical Framework. ………………………………………………………4

Conceptual Framework …………………………………………………….....8

Statement of the problem ……………………………………………………..8

Significance of the study ………………………………………………….....10

Hypotheses ………………………………………...…………………………11

Scope and Delimitation ……………………………………………………...12

Definition of terms …………………………………………………………..12

CHAPTER II: REVIEW OF IMPORTANT LITERATURE AND STUDIES

2.1 Employee Engagement…………………………………..........................14

2.2 Employee Retention……………………………………………………..20

2.3 Employee Productivity…………………………………………………..22

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Chapter I

THE PROBLEM AND ITS SETTING

This chapter includes the introduction, theoretical framework, conceptual

framework, statement of the problem, significance of the study, hypothesis, scope and

limitation, and the definition of terms used.

Introduction

The pressure on organizations to improve retention rate and employee’s

productivity continues to intensify. Companies acquiring different strategies to attract

employees and make sure to retain them. But as the emerging changes like innovation

of things, people also do.

In the Philippines, Labor Code serves as the guide of employers and employees’

rights, privileges, and limitations as the law governing employment practices. As many

says “knowledge is power”, that knowledge is provided by the Labor Code of the

Philippines and also deciding wisely will determine how knowledgeable you are as a

businessman. A businessman or a businesswoman that will prioritize his/her employees

to be safe, healthy and happy, and satisfied employees tend to be more productive

(Thompson, 2018).

Human Resource Management are still responsible on how employees

employed, engaged, and retain in an organization. Every employee performs a specific

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job on the organization that is why employees are known as the life blood and

muscle of the organization (Flores, 2013).

According to Gallup research, it indicates that only 32% of US employees are

engaged in the year 2015, and 50.8% which is majority of employees were not engaged

while 17.2% of employees were actively disengaged.

Viray, 2018 (Philstar) stated that Filipinos of today are among most engaged

work in Asia. Together with the report from outsourcing company Aon Hewitt shows

that 71 percent of employees in the Philippines and India are engaged in their work,

ranking second from Indonesia with 76 percent. This study by Aon was conducted using

data from more than eight million employee responses in 2016 and 2017.

Labor statistics report released by the Philippine Statistic Authority (PSA) 2017

stated that, since year 2011, turnover rate at Metro Manila continuously grew,

specifically in the year of 2016 which result to the highest turnover rate at 3.67% ,

meaning that for every 1,000 employees 104 workers were laid off or quit their jobs.

Therefore, the purpose of having this research is to determine how level of

employee engagement such as engage employees, not engage employees and actively

disengaged employees affect turn over and one's productivity in every industry here in

the Philippines, specifically Metro Manila. In determining level of engagement of

employees both employee and company itself will benefit on this.

The researchers wanted to know if engaging employee will help to retain

employees, because replacement for every employee can be expensive (Sherrie Scott,
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2018). And if can also affect the individual performance, behavior and the overall

productivity of an organization. In fact, retaining talented employees is a factor in the

productivity of a business. Also, retaining employees also reduces the cost of expenses

incurred in hiring or replacing applicants. Companies cannot totally eliminate employee

turnover in the reason that turnover is a natural part of the work life cycle. This study

will help to determine if employee engagement will not only reduces employee

turnover but also a tendency to bring success to your company with accordance of

researchers’ respondents.

Theoretical Framework

Employee Engagement is a strategy implemented to improve employee

retention as well as the performance of every employee. Its principle is expressing

employee’s self in an organization (Kahn 1990) through motivating them to work

productively and retain them.

In accordance with its principle, there are some theories that can be related to

support the topic.

The first theory is William Kahn theory (1990) which he identified three

psychological conditions that necessary in each employee. These are: Meaningfulness,

Safety and Availability. (Don Rheem, 2018)

Meaningfulness refers to the Meaningful Work which identified that the employees

must know what their responsibility in an organization. And also, employees should
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feel valued so that they are aware what’s their role and to perform it fully because they

are motivated to the work (Michael Dean, 2016). Safety is about Freedom in Opinions,

meaning it is significant to hear the voice of employees as they are experiencing day-

to-day difficulties. This Kahn’s concept of safety prevents problem before it goes larger

(Dan Rogers, 2016). Availability concept refers in all aspects in the workplace

particularly the environment that the employee is fit in that place. It gives a better

understanding between traditional workplace to “more- than-an-office-concept affects

employees self-value that reflects to their productivity. (Dan Rogers, 2016)

The second theory is Human Motivation Theory (Abraham Maslow, 1943),

which is an outline of Hierarchy of Needs of human beings. This theory is from the

lowest to highest needs of a person. Firstly, Physiological Needs are biological

requirements for survival of human which are food, water, warmth and rest. Maslow

(1943) considered this as the most important when these needs are not satisfied, the

body itself will not function accordingly. Secondly, Safety like personal and financial

security, health and well-being. Thirdly, Social Belonging which involved the feelings

of belongingness and the need to interact to other people like friendship, kinship and

intimacy. Fourthly, the Self-Esteem, which is classified in to two groups: “(1) esteem

for oneself (e.g., achievement, mastery and independence) (2) the desire for reputation

or respect from others (e.g., status, prestige)” (Saul McLeod, 2018). Lastly, Self-

Actualization, it is the “realization of personal potential through growth experiences”

(Michael Dean, 2018). This theory supports the idea of employee behavior which

reflects to performance. The needs which drives the employees to be motivated to work
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productively as well as to stay in the company.

Another need theory is the ERG theory (Alderfer, 1969), which summarizes

Maslow’s Hierarchy of Needs. ERG is an initialization of Existence, Relatedness and

Growth which is also the basic needs, social esteem and internal esteem of a person.

Alderfer revised this ERG theory with Schneider in their 1973 paper (James Young,

2018). This theory focuses not only to a specific need but also to the workspace

environment by which employees will comfortable enough that creates productivity

level.

The last need theory is Achievement Theory (David McClelland, 1958) which

focuses on achievement, affiliation and power. This theory explained that employees

can perform productively without monetary expense and some incentive. Instead,

through autonomy, trainings and surveys employees will highly motivated. (D.L

Patrick, 2017).

In relation to Achievement Theory, Adams (1963) published the Equity Theory

which has two principles. First, the inputs (effort); what employees contribute in the

organization and outputs (reward); what employees get according to the effort they

exert. Second is the fair treatment with their co-workers. It is about if there is something

unfair practices, employees could restore their perception of equity by lessening their

input.

Moreover, this theory highlights both recognition and reward. It will only vary

on employee’s perception on what recognition and reward is. It could be through

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additional salary or promotion (James Young, 2018).

The third theory is Influential Theory (Herzberg, 1959) which is also known

as the "hygiene and motivation theory". This two set of factors influence motivation in

the workplace and by either enhancing employee satisfaction or hindering it. Hygiene

factors can cause dissatisfaction in the workplace and independent of the work itself

and are link to think such as compensation, job security, organizational politics,

working condition, quality of leadership and relationship between supervisor

subordinates and peer.

According Herzberg, those factors did not motivate employee however, when

they are missing or inadequate, hygiene factors can cause serious dissatisfaction.

Hygiene factors are all about making employee feel comfortable, secure and happy also

this factors need to be present to ensure reasonable level of satisfaction. And the

motivators or factors of satisfaction is a factors that can make employee satisfied it can

influence employee to work harder as they are feel interested to work and the

responsibility they have can directly motivate people to work harder.

The fourth theory is Expectancy Theory (Vroom, 1964) which employees

expect from their own effort and relation to good performance. It stated that employee

performance is based on individual factor such as personality, skills, knowledge,

experience, and abilities. It seeks to explain what motivates people to choose one option

over another. This theory supports the importance of employee engagement in a way

that you are going to motivate or engage employees through satisfying their needs.
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Specifically, they will get what was promised to them like the rewards. Through this,
employees will feel valued to the effort they exert.

Conceptual Framework

Retention Rate

Employee
Engagement

Productivity

The illustration had shown the paradigm to determine the relationship between

dependent variables and

independent variable. This research illustrates how employee engagement

affects the retention rate and productivity of an employee. It shows the flow of the

process that the researchers did to gather all the relevant information that is needed for

the study.

Statement of the Problem

This study aimed to determine the relationship of employee engagement to

employee retention rate and productivity

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Specifically, the study answered to the following questions:

1 What is the profile of the respondents in terms of:

1.1 Age

1.2 Gender

1.3 Educational Attainment

1.4 Working years

2 What is the level of employee engagement of the respondents?

3 What is the retention rate of the respondents with respect to its

factors:

3.1 Compensation and Benefits

3.2 Community Service Responsibility

3.3 Environment

3.4 Organization Culture

3.5 Safety and Security

4 What is the productivity level of the respondents?

5 What is the relationship of employee engagement to employee

retention rate?

6 What is the relationship of employee engagement to employee

productivity?

7 Is there any significant relationship between employee engagement,

retention rate and productivity?

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Significance of the Study

The study will lead to the benefit of the Human Resources personnel, for them

to recognize the possible ineffective ways they have been using to retain employees.

Also, for employees whom can have a peaceful yet productive performance in a

company as they are motivated and satisfied to their work. It can also be used by the

students who will pursue Human Resource and Development Management in College

and readers for possible improvement in implementing new strategies to retain

employees. To explain further, this study will be useful to the following:

Employees. This research will benefit employees particularly the never-ending

applications to transfer on other companies will prevent. Another is, employees will be

enlightened on how the job position requires to be done. Therefore, it will raise their

awareness and preparedness. And most importantly, considering employee engagement

provides good workplace that might reflects to the quality of work and their

productivity to the company.

HR Personnel. In this study, HR Personnel will find out the reasons that kept

pushing employees to remain on their work and why they resign. Also, to identify the

possible techniques, strategies and approaches that can touch employees’ hearts that

would answer to increase employee retention rate.

Company. The companies will benefit to this study as they will be open-minded

on how to retain employees and minimize employee’s costs.

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Also, the company will able to recognize how employee engagement is an issue today

that they need a new strategy to developed and implemented.

Government. This research may help the government officials in knowing the

effectiveness of labor code to employees itself. They can also come up to develop law

with regards to employees based on the findings of the study.

HR Students. This study will assist future HR Personnel/ Staff/ Manager to

understand the relevance of allowing the voice of employees is heard. And the research

findings will be an eye-opening for them to see the reality beyond expectations in terms

of how the strategies affect the employees’ decisions towards staying in their work.

Researchers. This study can be an instrument for the improvement and

development of employee engagement in the workplace and it can be used by the future

researchers. This study will help as a guide to them and can be a basis of other

information towards the topic of relationship of Employee Engagement to retention rate

and productivity.

Hypotheses

1. Employee engagement has a significant relation to retention rate and

productivity.

2. Employee engagement has no significant relation to retention rate and

productivity.
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Scope and limitation of the study

This study considers the effectiveness of employee engagement to retention rate

and productivity. The researchers chosen this topic because of emergence of changes

in an organization, retaining employees is today’s issue as well as their productivity in

the workplace

This study limits its coverage on employees in different private companies.

Each employee will be given a set of questionnaires to answer.

Definition of Terms

This part gives the meaning of the important terms in the study. It is also for

clarification so the readers will avoid misinterpretation. There are terms defined

conceptually and operationally which means the researchers defined the terms based on

how it was used in the study.

Employee Engagement- is a strategy to make employees feel that they are

valued in by the superiors in an organization. Also acquiring this strategy in a

company can be the reason to retain employees and increase their productivity.

Retention Rate- refers to the totality measure of employee retention in the

workplace. It indicates the percentage and numbers in accordance to the actual

employee retention rate of the respondents.

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Productivity- it means one’s performance in their work. The level of

employee’s productivity reflects to the company’s productivity also.

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Chapter II

REVIEW OF IMPORTANT LITERATURE AND STUDIES

Over the decades, many authors defined employee engagement and gave

perspective about it. The term is widely spread all over the world. Some companies

are mostly into employee-centered and/or using different technique based on

successful persons with the same objective in engaging employees. Those studies are

applicable to fully understand the effectiveness and how employee engagement works

in different sides.

2.1 Employee Engagement

According to Bob Nelson's quote, "Take time to appreciate employees and they

will reciprocate in a thousand ways". This implies that appreciating employees make

them feel happy and it was driving them to strive more than what they've done.

Appreciating one's effort for making a great job is not hard instead, it was easy giving

praises to the employee who inserted an effort to make things done. Giving importance

to the employees is like a giving a value to the customers since they were the one who

helps to the company's success.

Annamarie Mann and Jim Harter (2016) stated that "engagement isn't

determined by an abstract feeling, it's the result of concrete performance management

activities, such as clarify work expectations, getting people what they need to do their

work, providing development or promoting positive co-worker relationship".

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This means that engagement is not only focused on belongingness, but also the

fulfilment of employee desires.

According to Ben Wigert, there are three employee elements - a good fit, high

engagement and 10+ years at an organization- dominate performance. This indicates

that an employee has to be in a part of a company. And a research shows that they

perform an 18% higher than the average employee and 35% higher than a worker who

lacks all the three elements as mentioned by Gallup. As studies by Gallup, engaged

employees as those who are involved in, enthusiastic about and committed to their work

and workplace (Amy Adkins, 2015) Gallup analytics indicated that just 33% of U.S

workers and 15% of global employees are engaged at work. This is due to desirous and

being committed to their work and also to the workplace. Engaging employees through

decision making and asking for their views and opinions was making them feel that

they were involved.

Companies are spending a lot to improve employee engagement, but yet the loss

and the cost of failing to influence all the employees to commit and be satisfied is higher

than its success. It's hard to determine how employee would be satisfied and not likely

to leave. Employees have these inconsistencies in what they really want in their job and

in the organization, it is not right to say that they are committed because they are happy.

According to Gallup's State of the American Workplace report, "The majority of the

U.S. workplace (51%) is not engaged. These employees are indifferent and neither like

nor dislike their job." Organizations are having a hard time in guessing what will

employees be satisfied of just to have their loyalty and dedication to them. There are
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some organizations succeed in increasing their employee engagement as they treated

their employees as their one of the most valuable assets, they feel valued and important

and think none other than the company where they are belonged will treat them like

that. It is important to have activities concerning the employees and could create a sense

of like they are a big family responsible for each other's future. It is better to clarify

what the organization can expect from the employees and what the employees can

expect from the organization, this way, objectives are clear and they can set their

performance based on their expectations, for it to meet them. Design the organization's

culture on what are the things that will make them engaged in working with each other.

(Jim Harter & Annamarie Mann, 2017). High employee engagement is indeed a

competitive advantage, lowering the possible issues of unsatisfied employees.

In Antonio Damasio Emotion Drive Decision research, shows that 70% of

decision making is emotional and 30% is rational (Gabsa, 2018). Having a good

communication towards to the employees and letting them express themselves has a

great impact that leads to a strong relationship this is because the employees wanted to

feel that they are connected to their jobs, managers and to the companies. An 87% of

employees worldwide are not engaged as Gallup research study revealed

Global Workplace reported that 85% of employees are not engaged or actively

disengaged at work. 18% are actively disengaged and 67% are not engaged that shows

that they give their time but they do not give their best shot.
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According to Alexandra Douwes (2018), there are many factors that lead to

engagement at work, but one of the most effective strategy is prioritizing purpose. She

believed that if employers will emphasize the significance of knowing the purpose of

each employee from the very start, it will raise their awareness and will reflects to their

performance. There is no particular path to purpose as we are different to each other.

And our journey varies to our personal passion and status in life.

Regardless of individual differences, Alexandra Douwes (2018) provides three

extensive behavioural shifts that can be useful to have a more engaged global

workforce. (1) Lead with WHY. By which both employees and employers will ask

themselves why they exist on the company. Those whys formed to their minds will help

them to perform according to their means. (2) Take purpose off its pedestal. In knowing

your purpose, you should break the usual definition of it. As Alexandra Douwes (2018)

mentioned, if we let society to dictate our purpose instead of individual, employees will

continuous to feel unworthy because as some finds personal achievement on satisfying

others, many still wanted to create something new that they love about. (3) Uplevel

Expectations. Tells that employees should raise their expectations not only towards

employers but also to the work itself. She explained that if employees give a measure

of time to focus on their profession it could help to stop increasing number of

disengaged employees.
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However Charles Rogel (2016) define employee engagement as a state and a

behavior that makes employees feel passionate about their work, and give their hearts,

hands, and minds to that work; it leads to employees caring more and contributing more

to their work and their companies; it is driven by experiencing meaning, autonomy,

growth, impact, and connection in one’s job. He explained the difference of employee

engagement to satisfaction, happiness and empowerment.

First he differentiate Employee engagement to satisfaction; employees is

satisfied when they are contented with their compensation, work environment and the

job they do. So it means that satisfaction is needed to engage employees. But however

it doesn’t mean that those employees are really passionate about their jobs. Secondly,

employee engagement is not happiness; it is easily for the employees to adapt on a fun

working environment that can make them happy. But sometimes it may cause for them

to take advantage on it and to think that it’s okay to not do their job well because they

take it easy without contributing to engagement. Thirdly, employee engagement is not

motivation; motivation is a component or result of engagement in one’s work. If the

employee is engaged they feel motivated to do their best but motivation does not always

correspond to action. Lastly, employee engagement is not empowerment. Autonomy or

empowerment is a component of engagement, but some mistake being empowered with

being left alone. So the opposite of this, of course, is to be powerless and

micromanaged. Empowerment also often ignores the supervision to employees that

cause to employees to not work well.

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On the hand Ben Eunbaks (2016) differentiate employee engagement to

program and to outcome. (1) Engagement is not a program .Some leaders when they

feel low engagement of their employee in the workplace, they always wanted to have a

program to push their engagement up. But, engagement is not a program because begin

and has an end. Therefore, great employment relationship is more important than

providing of recognition or a gift card. Pack of money is important and it reduce

dissatisfaction, but as long as employee meets their needs financially, happiness of

employee and getting morally valued is more important. The challenge is to see

engagement not as a one-off activity, but as a holistic view of the employee experience.

Every opportunity for interaction with the organization is either a plus or a minus in the

engagement column, and while it can’t expect to win every battle every time, the goal

is to keep that number going in a positive direction over time. (2) Engagement is not an

outcome. Some leaders check engagement scores as if they were the latest sales figures

or turnover statistics. In reality engagement is not the outcome we are shooting for we

are looking for something deeper and more meaningful. It means that engagement must

be done at first and not seeing as a result. It must starts with the recruiting and hiring

processes and continues through on boarding, benefits enrolment and beyond. If

employees and managers cannot complete essential HR related administrative task in a

short period of time, it will risk of losing possible talent employees that might put also

the company at risk.

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2.2 Employee Retention

High turnover can cost "twice an employee's salary to find and train a

replacement" based on Wall Street Journal. Apart from this, it gives a negative

perception to the company and also would affects employee performance. By that,

Steve Olenski (2015) provides seven tips to better employee retention. (1) Hire

Selectively. Meaning, in able to have assurance that employees will stay, you should

choose wisely whom to hire from the very start. As Wall Street Journal suggests,

interview carefully each employee to figure out whose employee is fit to the job. (2)

Offer a Competitive Benefits Package Salary. Olenski explained that if you want to

keep talented employee, you should pay them well. But it doesn't mean that employee

is after money, in general. In fact, based on Wall Street Journal, most employees look

for competitive benefits offered like health insurance, life insurance etc. (3) Provide a

Comfortable Work Environment and Culture. It is about feeling safe and comfortable

at work. Because if this feeling granted it will serve as effective driver towards

employee happiness. (4) Offer Training. By which employees enhance their skills and

upgrade their knowledge most especially we are in Digital age now. (5) Listen to them.

It emphasizes if you have time to find out your employees in professional situation, you

should also know what they are up to personally. Listening is a way to show that

employees play a part in the business. (6) Quarterly Reviews. The main purpose of it is

to determine employees' goals and how they can achieve it. (7) Recognize their

Accomplishments. It is a simplest way but has a huge effect on every employee's heart.

The recognition they get, somehow will boost their confidence and will motivate them

to perform as best they can be.

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As stated by Manuwar Gul (2018) in an article " Millennial are somewhat

fuelled by money, and care about personal growth over loyalty. People are invested in

their jobs only so long as they are satisfied with what it has to offer them. Salary is the

primary reason why employees’ quit an organisation. Employees of today have short-

term rather than long-term goal. Millennial experiment with their careers, ideas, and

take risks. That is why retaining employees are quietly difficult task. And, it is also

extremely expensive to let them go.

At times, it can cost an employer double the employee’s salary to replace them.

It might be difficult but nothing is impossible, with the right strategies in place, you can

ensure that your employees’ are happy to work for your organisation and also put their

best foot forward. Strategies like "hire the right person to begin with" and the biggest

mistake you can make is hiring on the basis on quantity rather than quality. Yes, there

is always the fear that people will quit and you will have to hire candidates over and

over again. But, if you hire the right candidate from the very beginning, you do not have

to worry about them quitting that early in the first place. "Establish an open

communication environment" where employee grievance redress is very important in

an organisation. And, it helps if you have established an open communication

environment for your employees to freely discuss their problems and any other

conflicts. It makes them feel like a valued part of your organisation because it shows

that you have not put any barriers in the way of them communicating their grievances.

Also, make sure that your managers are committed to following the same practice and

encourage this behaviour in their team.

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2.3 Employee Productivity

According to Jochen Menges, an expert in organizational behaviour, employee

productivity is based on one’s emotions. His study says that employee will work

productively if they feel happy at work. He mentioned in an article, “The very fact that

many organizations how ‘invest in happiness’ means they understand that emotions

matter. But what they typically do-offering benefit like chill-out zones, free food, yoga

classes- is rather blunt and does not account for the complexity of people’s emotional

life.” It tells that companies agreed in the principle make employees happy but not

directly for the benefit emotional of employees. Menges also involved in a project

interviewed 10,000 employees from different profiles, in the USA with the main

purpose of knowing not only they feel, but also how they wish to feel at work”. And it

results that employees wanted to be appreciated, excited and happy at work. (Anisha

Singh, 2018)

On a Ken Blanchard quotation says that "people who feel good about

themselves produce good results". Being productive is giving your best effort to do

things done beautifully.

According to Mc Gregor's Theory of X and Y, it shows that these two different

theories have a precisely link to the employees at the workplace. (Shirish Deodhar,

2015) They are presently at work but they don't want what they are working. This theory

indicates that they are not motivated in their work, they always need to assists and tell

what to do in able for them to move and do their jobs.

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The theory of Y of Mc Gregor "assumes that employees are self-motivated,

creative, proactive, willing to solve problems and take responsibility". (Shirish

Deodhar, 2015) It is the opposite of the theory of X wherein it shows the positive and

active employees. It indicates that employee’s productivity is in high because they are

motivated and has a development for themselves. The growth and development of

employees are supported and encourages by the company which has an effect on the

higher level of competency, creativity, and fulfilment. (Sreeramana Aithal & Suresh

Kumar, 2016) This is because employees have a freedom to speak what's on their mind

and express their feelings which is the company also needs to give attention and

consider the employee idea that they can also use.

According to Gallup Poll 2016, engagement of employee rates are more

proactive at 21 percent and Gallup Poll stated that engaged employees are "excellent

performance" reported at 27 percent. (Dukes, 2018) This study seeks to analyze that

engaging employees has a relation with employee’s productivity, this is because

employees felt that they belonged in the organization they are working and implies that

they were important.

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