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Literature review:

The previous studies for employees retentions are presented to be the framework to understand and systematically analyze factors that affect employees intentions. Employee turnover is a much studied phenomenon. There is a vast literature on the causes of voluntary employee turnover dating back to the 1950s. By developing multivariate models that combine a number of factors contributing to turnover and empirically testing the models researchers have sought to predict why individuals leave organizations. Many studies are based on only a small number of variables which often only explain a small amount of variability in turnover. Another criticism of turnover studies is that they do not adequately capture the complex psychological processes involved in individual turnover decisions. A recent study of turnover by Boxall et al (2003) in New Zealand confirmed the view that motivation for job change is multidimensional and that no one factor will explain it. However, over time there have been a number of factors that appear to be consistently linked to turnover. An early review article of studies on turnover by Mobley et al (1979) revealed that age, tenure, overall satisfaction, job content, intentions to remain on the job, and commitment were all negatively related to turnover (i.e. the higher the variable, the lower the turnover). In 1995, a meta-analysis of some 800 turnover studies was conducted by Hom and Griffeth, which was recently updated (Griffeth et al, 2000). Their analysis confirmed some well-established findings on the causes of turnover. These include: job satisfaction, organisational commitment, comparison of alternatives and intention to quit. These variables are examined in more detail below, as are a number of other factors where the evidence on the link to turnover is less conclusive. Intentions to quit: Much of the empirical research on turnover is based on actual turnover, although some studies are based on intentions to quit. Apart from the practical difficulty in conducting turnover research among people who have left an organization, some researchers suggest that there is a strong link between intentions to quit and actual turnover. Mobley et al (1979) noted that the relationship between intentions and turnover is consistent and generally stronger than the satisfaction-turnover

relationship, although it still accounted for less than a quarter of the variability in turnover. Much of the research on perceived opportunities has been found to be associated with intentions to leave but not actual turnover (Kirschenbaum & Mano-Negrin, 1999). One of the possible reasons is that intentions do not account for impulsive behaviour and also that turnover intentions are not necessarily followed through to lead to actual turnover. Job satisfaction: The relationship between satisfaction and turnover has been consistently found in many turnover studies (Lum et al, 1998). Mobley et al 1979 indicated that overall job satisfaction is negatively linked to turnover but explained little of the variability in turnover. Griffeth et al (2000) found that overall job satisfaction modestly predicted turnover. In a recent New Zealand study, Boxall et al (2003) found the main reason by far for people leaving their employer was for more interesting work elsewhere. Wages and conditions: The research conducted on the link between dissatisfaction with pay and voluntary turnover appears to be inconclusive. Mobley et al (1979) concluded that results from studies on the role of pay in turnover were mixed but that often there was no relationship between pay and turnover. Other studies found no significant relationship. On the other hand Campion (1991) cited in Tang suggests that the most important reason for voluntary turnover is higher wages/career opportunity. Martin (2003) investigates the determinants of labour turnover using establishment-level survey data for the UK. Martin indicated that there is an inverse relationship between relative wages and turnover (i.e. establishments with higher relative pay had lower turnover). Pay and performance: Griffeth et al (2000) noted pay and pay-related variables have a modest effect on turnover. Their analysis also included studies that examined the relationship between pay, a persons performance and turnover. They concluded that when high performers are insufficiently rewarded, they leave. They cite findings from Milkovich and Newman

(1999) that where collective reward programs replace individual incentives, their introduction may lead to higher turnover among high performers.

Training and career development: Martin (2003) detected a complex relationship between turnover and training. He suggested that establishments that enhance the skills of existing workers have lower turnover rates. However, turnover is higher when workers are trained to be multi-skilled, which may imply that this type of training enhances the prospects of workers to find work elsewhere. The literature on the link between lower turnover and training has found that off-the-job training is associated with higher turnover presumably because this type of training imparts more general skills (Martin, 2003). Retention: 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). 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-ofmouth, higher market share, higher productivity and higher efficiency (Zineldin, 2000). Based on a review of the literature, many studies have investigated employees intentions to exist, for example Eskildesen 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 Ajzens (1975) attest the theory of reasoned action as the heart retention of both the employee and the customer links between satisfaction and behavior. Other studies have proposed that the cost of replacing lost talent is even higher, as much as 70 to 200 percent of that employees 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 40percent turnover rate is over $130 million annually. Earlier employee turnover models have overwhelmingly focused on the individual rather than institutional characteristics that address the role of the organisation in contributing to the individual employees decision to stay or leave. The key merit of these past models is that they provide us with incremental knowledge (Lee et al., 1999: 450) on multidimensional causes and consequences of turnover over time (for a comprehensive review of the past models on employee turnover at the individual level, see Peterson, 2004). Some of this knowledge has now led to more promising research, examining the role of the organisation in reducing the turnover rate (Peterson, 2004; Shaw et al., 1998). For the purpose of this project, four groups of models relating to managing employee turnover at the organisational level are assessed. First is the process model grouping, which emphasizes the sequential steps of the process leading to employee quitting (see Dougherty, Bluedorn, & Keon, 1985;

Hom & Griffeth, 1995; Mobley, 1977; Tett & Meyer, 1993). The model tends to explain the antecedents of job satisfaction and organisational commitment as job scope, role stress, group coercion and procedural justice, employment security, training and job investments (Peterson, 2004: 213). Rhoades, Eisenberger, and Armeli (2001) and Allen, Shore, and Griffeth (2003) further develop these antecedents to include the organisational level of human resource (HR) practices, such as organisational rewards, employee participation in decision-making, training and career development opportunities, and overall organisational supports. These are particularly relevant to the organisational level of analysis on turnover in this study. The second group comprises the socialization models developed by Felderman (1976), Fisher (1986) and Allen and Meyer (1990). These models tend to associate individual characteristics with the organisational process of socialization (Peterson, 2004: 214) and emphasize organisational culture as a predictor of how well employees can adjust to and function in the organisational environment. The key argument is that if employees fit in with the organisational culture and function in a satisfactory manner, they are likely to stay (Sheridan, 1992; Taormina, 1999). The third grouping is that of expanded models, which are essentially process models, but extended to cover multidimensional organisational factors (Peterson, 2004). Even though these models still discuss the development of individual employees desires to stay with the organisation, they focus more explicitly on the organisational perspective (Mowday et al., 1982: 203). These models stress some confounding variables such as industry nature, size, employee types, cost control and time, which could determine the strongest linkage, and ultimately affect the turnover decision (Peterson, 2004: 216). The last employee turnover model grouping is defined by Holtom et al. (2005) as a shocks model. This model was developed by Lee and Mitchell (1994) and further refined by Lee et al. (1999) to look beyond job dissatisfaction as a common precipitation for individuals to resign, but to examine some unexpected events as explanations for employee turnover. Shocks, or unexpected events,

are those to do with alternative job offers, job transfers, acquisition/merger of a company, and changes in marital status or spouses work. Use of shocks to explain turnover is relevant to the current study, as shocks are believed to be potentially manageable at the organisational level (Holtom et al., 2005). A turnover model recently developed by Peterson (2004) deals more directly with the turnover issue by emphasizing the role of organisational HRD. The model is relevant as the current study also focuses on the extent of organisational level of commitment to employee training and how it would affect employee turnover among the MNCs examined. The focus of the Peterson (2004) model is on internal organisational factors over which the organisation has substantial control, and in which HRD can play a critical role. The argument for focusing on HRD in controlling turnover has its own merits. First, as noted in the earlier discussion, it is essential to go beyond individual 426 C. Zheng, D. Lamond characteristics and examine organisational factors which may better explain turnover. Petersons (2004) conceptual model is not yet fully tested, but it may provide a framework to clarify the understanding about the importance of the organisation in creating a learning environment with employees in mind, where employees perceive they are valued and, in return, are more committed to staying. In summary, the literature defines retention as continuing relation between 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.