Chapter-I

INTRODUCTION
 CHAPTER - 1

INTRODUCTION

Human resources are the most important asset of any organization. The
success or failure of an organization is completely dependent on the potential of the
employees working in. An organization cannot progress without the positive and
creative contribution from the employee side. Now-a-days organizations are being
competitive in the global market. They are undergoing the difficulties and the
challenges in the area of managing human resources. Many organizations still faces
the problem of keeping their employees active and engaging them for a long period.
To exist in the competitive world organizations require focusing on the strength of
their employees to achieve the competitive advantage. A knowledgeable and skilled
employee is the backbone for the organization that improves creativity and
organizational innovation. Therefore, HR professionals work hard to develop
innovative HR practices for engaging, motivating and retaining their employees. As a
result, these practices improve the organizational performance as well as the
productivity1.

A company invests huge amount of time and money for the purpose of
employee recruitment, selection and training. It leads to great loss to the company
when an employee leaves the organization in a short duration and joins competitor.
Increased employee turnover indicates that the company is losing more number of
employees; it also indicates failure in the selection process as well as not creating
proper environment for the employee. A high level of employee turnover is an
undesirable goal for an organization. It affects the organization in many ways such as
poor performance, low employee morale, low productivity, negative impact on
innovation, customer satisfaction, knowledge gain during the past years, and
profitability of the organization and moreover replacing cost of another employee.
Various estimates suggest that, losing a middle level manager in most organizations
costs up to five times his salary2.

An employee spends considerable amount of time in the organization to

understand its functioning. Long-term employee gets familiar about the company
policies and learns to adjust accordingly. Short term employee finds it difficult to

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settle down in a new environment, as a result the employee fails to perform according
to his potential. On account of this an employee often changes his job as well as the
company. The short term employee treats the organization as the mere source of
earning money. They are never serious about their work and fail to complete the tasks
in the desired time frame. They never bother regarding the performance of the
organization. While joining the rival company there is a chance to take the
confidential data and pass the information to create an impression in the new
organization3.

Retaining talent has never been so important in the Indian scenario; however,
things have changed in recent years. There is no dearth of opportunities for a talented
person. There are many organizations which are looking for such employees. If a
person is not satisfied by a particular job, he/she can shift over to another job which is
suitable for him. In the present extreme competitive environment, HR managers are
facing a lot of challenge; they can either hold on to their employees or lose them to
competitive world. In the old strategy of employment, an employee is committed to
an organization for many years for the better position. Now, opportunities are many,
there are numbers of factors which promote the employees to stay or leave the
organization. It may be external factors or internal factors and the combined effect of
both. It is becoming important to adopt strategies for employee retention. It is the time
for the HR managers to identify the needs of the employee and then devise the
retention strategies4.

Retention of a key employee is critical to the long-term health and success of

any organization. An organization must work hard towards retaining employees, as
they are really important for the organization. The top organizations stand on the top
position because they value their employees to retain them in the organization.
Intelligent employers always realize the importance of retaining the best talent. It is a
known fact that retaining the best employees ensures customer satisfaction, increased
product sales, satisfied colleagues and reporting staff, effective succession planning,
and deeply embedded organizational knowledge and learning5.

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I. CONCEPT OF EMPLOYEE RETENTION

Employee retention involves taking measures to encourage employees to

remain in the organization for the maximum period of time. It is the process of
encouragement of employees to remain with the organization for the maximum period
of time or until the completion of the project. Employee retention is beneficial for the
organization as well as the employee. Effective employee retention is a systematic
effort by employers to create and foster an environment that encourages current
employees to remain employed, by having policies and practices in place that address
their diverse needs. However, many consider employee retention as relating to the
efforts by which employers attempt to retain employees in their workforce. In this
sense, retention becomes the strategies rather than the outcome. A distinction should
be drawn between the low performing employees and the top performers, the efforts
to retain employees should be targeted at valuable, contributing employees6. Some of
the authors define employee retention as follows;

According to Chaminade7 (2007), "Retention is a voluntary move by an

organization to create an environment which engages employees for a long term".

According to Samuel and Chipunza8 (2009), “The most important purpose of

retention is to look for ways to prevent the capable workers from quitting the
organization as this could have negative effect on productivity and profitability”.

Frank et al.9 (2004) defined retention as the "effort by an employer to keep

desirable workers in order to meet business objectives".

Cascio10 (2003) perceived retention as initiatives which the management takes

to prevent employees from leaving the organization. The best practices of retention
are employees being rewarded for doing their jobs effectively, ensuring that the
relationship between employees and managers are harmonious and maintaining a
working atmosphere which is safe and healthy. The main purpose of retention is
primarily for organizational gains, Humphreys et al.11 (2009).

The Workforce Planning for Wisconsin State Government12 (2005), placed

emphasis on managers systematic effort to create organizational systems and an
environment which is conducive for addressing the diverse needs of their current

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 employees in order to sustain their continued employment through harmonious work
practices.

II. OBJECTIVES OF EMPLOYEE RETENTION

The major objectives of employee retention are as follows13:

Employee Engagement: Increasing employee engagement is common objective of

employee retention. Without proper management, employee retention issues can have
an extremely negative effect on organizational finances. “Poor retention creates a
“revolving door” culture within the organization, lowering morale and confidence.”
Low morale, as well as low levels of confidence in the organization, can affect
employee job satisfaction and productivity, which in turn affects the organization’s
bottom line.

Reducing Turnover Cost: The reduction of the costs associated with high turnover is
also a typical objective of employee retention. Turnover costs the organization time,
money and a variety of other resources that are not always easily accounted. High
turnover also increases “job stress when remaining employees are burdened with the
distribution of the departed employee’s workload.”

Knowledge Retention: The retention of knowledge and skills is one of the objectives
of employee retention and is essential to the long-term success of the organization.
High turnover rates result in what is referred to in human resources as “brain drain.”
This occurs when an organization is unable to maintain employees who are
knowledgeable about the organization. Without access to such knowledgeable
employees, organizations lose knowledge that is typically passed on from employee to
employee rather than imparted in formal training programs.

Diversity: Maintaining a diverse work force is another objective of employee

retention strategies. Diversity includes workers of varying sex, age and race as well as
educational and workplace experiences. This is difficult to maintain within an
organization that experiences high turnover. Organizations that maintain high
retention levels, “typically have strong, sustainable corporate cultures that can act as
key differentiators in the marketplace.”

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III. IMPORTANCE OF EMPLOYEE RETENTION

It is essential for the organization to retain the valuable employees with good
potential, skill and knowledge. Every organization needs hardworking and talented
employees who can really come out with something creative and different. No
organization can survive if all the top performers quit. It is essential for the
organization to retain those employees who really work hard and are indispensable for
the system. Let us understand why retaining a valuable employee is essential for an
organization14:

Acquiring Talent: When organizations retain their employees, they avoid hiring
costs. These are often hidden costs. The cost to post on job boards can be annual or a
one-time expense. Agencies charge the percentage of an employee’s annual wages.
Larger companies may have staffing departments whose sole responsibility is
screening and interviewing talent. Other companies may assign this task to
department heads or other individuals in the organization. The time an individual
spends screening and reviewing resumes takes him away from his main job
responsibilities. The hiring process is risky. Background checks, personality testing
and aptitude testing can predict a candidate’s capacity, but there is still a risk. Hiring
is not an easy process. The HR professional shortlists a few individuals from a large
pool of talent, conducts preliminary interviews and eventually forwards it to the
respective line managers who further examine them thoroughly to judge whether they
are fit for the organization or not. Recruiting the right candidate is a time consuming
process.

Training and Development: Retaining workers reduces training costs. New recruits
need to be trained in business practices specific to the employer’s need, culture and
office practices. Training requires one or more current employees to take time away
from their job responsibilities to educate the new employee on the organization’s way
of doing business. Two are more people are on the company payroll producing the
results of one person. In the first 90 days, a new hire costs the company money. When
companies retain employees, training dollars can be used to further develop the work
force. Long-term associates have the experience to review what has worked before
and apply that knowledge to future situations.

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Skilled Labour Force: Employment retention develops a strong staff. Working
individually or in teams these individuals share knowledge and expertise. The future
managers of an organization come from this work pool. These employees are the
historians of an organization’s success and challenges, and provide mentoring to new
hires. They are committed to the continuous growth of the organization and its work
force. These individuals have witnessed the inner workings of an organization. As
they continue to develop their skills towards the organization benefits.

Impact on Customer Service: Employee retention has a positive impact on customer

service. Turnover brings disruption in customer service, loss of business and possible
negative business impact. An organization’s customer base expects consistent and
reliable service. There is a learning curve with the new hires and thus the potential for
error or poor communication with a client is monitored which can impact business
relationships. Long-term employees develop relationships with customers. They know
the client’s preferences and can anticipates future needs, this knowledge develops
over time.

Loss of Company Knowledge: When an employee leaves, he takes with him

valuable knowledge about the company, customers, current projects and past history.
Often much time and money has been spent on the employee in expectation of a
future return. Whenever the employee leaves, the investment is been wasted.

Threat of Joining the Competitors: In such cases, employees tend to take all the
strategies, policies from the current organization to the new one. Employees take all
the important data, information and statistics to their new organization and in some
cases even leak the secrets of the previous organization. To avoid such cases, it is
essential that the new recruits are signing a document which stops them from passing
any information even if he leaves the organization. Strict policy should be made
which prevents the employees to join the competitors. This is an effective way to
retain the employees.

Familiarity with the Company’s Policies, Guidelines: Employees perform better

than others who change jobs frequently. Employees who spend a considerable time in
an organization know the organization in and out and thus are in a position to
contribute effectively.

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 Time to Adjust with Others: One needs time to know his team members well, be
friendly with them and eventually trust them. Organizations are always benefited
when the employees are compatible with each other and discuss things among
themselves to come out with something beneficial for all. When a new individual
replaces an existing employee, adjustment problems may crop up. Individuals find it
really difficult to establish a comfort level with the other person. After striking a
rapport with an existing employee, it is a challenge for the employees to adjust with
someone new and most importantly trust him. It is human tendency to compare a new
joined with the previous employees and always find faults in him.

Loyal towards the Management and the Organization: Employees enjoy all kinds
of benefits from the organization and as a result they are more attached to it. They
should not criticize their organization and always think in favour of the management.
For them the organization comes first and all other things later.

Turnover Leads to More Turnover: When an employee terminates, the effect is felt
throughout the organization. Co-workers are often required to pick up the slack. The
unspoken negativity often intensifies for the remaining staff.

Goodwill of the Company: The goodwill of a company is maintained when the

attrition rates are low. Higher retention rates motivate potential employees to join the
organization.

IV. FACTORS INFLUENCING EMPLOYEE RETENTION

A number of factors have been assembled so as to give explanation of the

reasons why employees stay in an organization. Some of the reasons are job
satisfaction, training and development opportunities, adequate compensation,
motivation and support from superiors, welfare and social security measures, work
life balance, good working conditions, harmonious employee relations and stress free
work environment. The following are the factors which influence the employee
retention:

1. Job satisfaction

According to Qadar Bakhsh Baloch15 (2008), Employee satisfaction is a

reliable predictor of employee retention. Higher job satisfaction generally results in

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higher levels of employee retention. Job dissatisfaction or dissatisfaction with
leadership is commonly reported as the reason why many employees leave for other
jobs. Employee satisfaction means that workers are fully engaged in their tasks and
feel that the company appreciates their effort and diligence. While many employees
leave for other jobs in search of a bigger pay check, the underlying reason for
turnover in many cases is dissatisfaction. Improving satisfaction can reduce turnover
and helps to maintain a stable and motivated workforce. The match between rewards
desired by employees and offered by the organization is what leads to job satisfaction
and job satisfaction in turns guarantees employee retention.

Job satisfaction is the most important factor for organization success. George
& Jones (2002)16 study explains that level of job satisfaction in the work place is the
factor that influences absenteeism which in turn it may cost employee turnover and
the impact of it is at times employees might resign or leave their jobs. In addition, Job
satisfaction represents a combination of positive or negative feelings that workers
have towards their work. Meanwhile, Job satisfaction represents the extent to which
expectations are and match the real awards. Job satisfaction is closely linked to that
individual's behaviour in the work place.

2. Compensation

Compensation can have a direct impact on employee retention. While

employers may use employee incentives and monetary rewards to retain employees,
there are ways to complement compensation that have a much greater impact. Based
on the type of compensation, along with the terms and conditions of an employee
compensation package, an employer can boost employee retention. Regardless of a
person's field, he/she wants to know her compensation is competitive with what others
who perform similar work are earning. Salaries need not be the highest but should be
among the top. Paying low salaries means top people will leave and low performers
will take their jobs.

According to Chandranshu Sinha and Ruchi Sinha17 (2012) Compensation

might not be the most important factor in determining whether an employee will stay
with you, but it can tip the balance. In addition to salary and wages, benefits make up
your compensation package, and it’s possible to improve what you can offer your
employees without spending more money. The better your compensation package, the

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more likely you will retain key employees. Employees who feel significantly under
compensated are likely to leave. Employees want to be paid well for the job they do,
both for their self-esteem and as a practical means to living. The importance of
compensation in employee retention depends somewhat on the type of job and
industry.

3. Training and Development

According to Cataldo, Assen and D'Alessandro18 (2000), employees with key

information technology skills have become increasingly hard to find. Thereby,
organizations that focus extensively on developing newly hired talent through
continuous training will be in a much stronger position to retain the most talented
employees, thus becoming an employer of choice. Companies that have procured the
graduates continue to attract the best should focus on their training programs.
Successful retention programs incorporate training and development in an effort to
retain their employees. Any organization that develops employees will want to retain
the staff and utilize their skills. It is important that key staff members, who are
developed, are also retained. When combined with selective promotion and salary
action, the learning and development process is a strong retention activity.

According to Kellard et al.19 (2002), training has been found to be most

successful when it makes use of a range of education options from on the job to fully
accredited training. It is closely linked with the skill requirements of employers in the
local labour market; and fits with both home and work schedules. This should involve
continual development of hard and soft skills, addressing of skill deficits as they arise
in the workplace and the targeted development of skills in jobs at one level that will
support advancement to jobs at a higher level of employment. On the other hand, once
employees feel they are no longer growing, they begin to look externally for new job
opportunities. This makes development and learning critical for attracting and
retaining employees, because "talented people are inclined to leave if they feel they
are not growing".

4. Motivation

According to Glen20 (2006), ''it is possible to retain key skills within highly
cash-strapped, extremely lean organizations; by focusing, as a necessity, on broader
predictors of retention and motivation. It is quite conceivable that, career leverage,

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rewards and recognition, whilst other groupings may be motivated by a combination
of role challenge, organization values, work environment, and so on. According to
Arms21 (2010), compensation is said to play a fundamental role in attracting, retaining
and motivating workers. Although employee recognition is largely important, it is
said to be quite simple to deal with. It is just a matter of an everyday interaction by
saying a simple "thank you" to the staff that has gone out of their way. An employer
must often acknowledge the stress and effort of employees working on an important
and timely project. It is essential for the boss to give them credit they deserve for
work that they have done for the firm and instead not to give them the impression that
the employer is taking credit for their efforts. By proposing to employers that they can
set up a more formal program for employee recognition having both the financial
rewards such as "gift certificates" and intangible rewards that is having a personal
parking place, obtaining summer flexible time and "dress code perks".

Employee motivation is one of the important factors that can help the
employer to improve employee and organizational performance. Through employee
motivation, the employer can encourage the employees by enhancing their skills and
also by improving their morale. Employee retention involves various steps taken to
retain an employee who wishes to move on. Incentives, perks, cash prizes are good
motivators to motivate the employees. Performance appraisals are also important
motivators to motivate the employees. Increase in employee performance helps the
organization achieve higher productivity. The employees in the organization expect
compensation as the motivation strategy for their personal benefits. Compensation is
an important motivator when the employer rewards the employee for his achievement
of the desired organizational results.

5. Manager Support

Establishing a leadership program will help counteract any uncertainty, staff-

level employees may feel that creates a support network that provides them with
resources to help them better understand corporate culture, accountability, team
interaction and perhaps the most important is the unspoken rules of business
engagement. Mentoring programs are a proven method for generating professional
interest and commitment to the firm or department (Arms 2010)22. Chen and
Sliverthorne23 (2006) claimed that the higher the rate of the leader's point of progress

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concerning leadership, the more an employee will want to do a work. This also results
in an increase in the level of employee job satisfaction which includes a reduction in
employee's stress at work and also the employee's turnover intention decreases. The
actions of a manager can both positively and negatively affect the working
environment which can have a direct impact on job satisfaction as the employees can
perceive and feel the behaviour of the manager.

Michaud24 (2005) said that the majority of employees will have no problem in
happily talking about their needs and issues of their job. The employees should obtain
the employer's full attention in order to make them feel important to the organization.
To make things more effective, Thornton25 (2001) proposed that there is a systematic
approach used to motivate employees which is the feedback program. The author
stated that without this program, the employer will not be sure if the employees sees
the working environment good or bad and whether the communication systems used
around the workplace is enough or not. According to Morgan26 (2008), the number
one reason that employees choose to leave a company is that their managers fail to
lead. Leader credibility is comprised of many attributes: competence, courage,
character, composure and care for people. Those who consistently master these
attributes are our most effective leaders and mentors. When leaders elevate their game
to improve their leadership capabilities, they will be much more likely to retain their
high-performers.

Opening communication lines between employees and their supervisors or

between supervisors and their managers is one of the most effective ways to improve
job satisfaction. When employees aren't privy to information they believe will help
them perform their job duties or are kept in the dark about organizational changes,
they can feel that the employer doesn't value them enough to share critical
information. Scheduling regular staff meetings, encouraging supervisors and
managers to routinely provide constructive feedback and compliment employees on
their work and publishing a company newsletter are ways to create an employer-
employee communication path.

6. Working Conditions

Working conditions are affected by factors including health and safety,

security and working hours. Poor working conditions can damage employee health

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and put their safety at risk. If the employees are satisfied and happy with their job and
working conditions then they will give their best for the improvement of an
organization. Happy and satisfied employees always put more efforts for the
organizational achievements and stay loyal to the company. Less satisfying working
conditions can in turn lead to turnover or turnover intentions. Positive work
environments are essential for workers' mental and physical well-being, but they
aren't created by accident. Good working conditions arise from values that the
company views as important to its mission, such as ensuring a manageable workload,
and promoting two-way communication through open office spaces and regular team
meetings. In order to increase efficiency, effectiveness, productivity
and job commitment of employees, the business must satisfy the needs of
its employees by providing good working conditions27.

7. Welfare and Social Security Measures

According Walsh and Taylor28 (2007), it was important to obtain a good

remuneration and welfare schemes. Employees remaining with the organization
primarily depend on the degree to which their employers respond to their professional
growth. The employees most committed to performing challenging work are the ones
most likely to remain with their companies. "A retention strategy such as job
enlargement could be offered, which refers to adding challenging or new
responsibilities to an employee's current job." Welfare includes anything that is done
for the comfort and improvement of employees and is provided over and above the
wages. Welfare helps in keeping the morale and motivation of the employees high so
as to retain the employees for longer duration. The welfare measures need not be in
monetary terms only but in any kind/forms. Employee welfare includes monitoring of
working conditions, creation of industrial harmony through infrastructure for health,
industrial relations and insurance against disease, accident and unemployment for the
workers and their families. Employee welfare entails all those activities of employer
which are directed towards providing the employees with certain facilities and
services in addition to wages or salaries. The logic behind providing welfare schemes
is to create efficient, healthy, loyal and satisfied labour force for the organization. The
purpose of providing such facilities is to make their work life better and also to raise
their standard of living.

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 Social security forms an important part of employee welfare providing the
“Security”, which is of great importance to the worker’s and his family’s wellbeing.
ILO defines social security as, “the security that society furnishes through appropriate
organisation against certain risks to which its members are exposed. Social security
can be broadly classified into two types such as social insurance and social assistance.
Under social insurance, employees and employers make periodical contribution to a
fund, with or without a subsidy from the government. Out of these contributions,
benefits are provided to the contributories necessary for satisfying wants during old
age, sickness, unemployment and other contingencies of life. Social assistance on the
other hand includes the provision of benefits towards the maintenance of children,
parents, the aged, the disabled and others like the unemployed. The adequate social
security measures leads to employee job satisfaction and commitment leads to
improved performance of the organisation. Further, it leads to reduced absenteeism
and improved industrial peace and harmony29.

8. Work Life Balance

According to Halbesleben and Wheeler30 (2008), "Professional practice

environments are successful in attracting and retaining staff intentionally utilize
events and activities that promote employees social attachment to the workplace
community." Similarly, some companies actively promote a positive work
environment and also value employee contributions while achieving a true work-life
balance which has been found to be more successful in communicating the idea that
their employees are one of their most valuable resources. An organization should help
employees to maintain balance between personal and work life. Practices like
childcare facilities available in the premises and flexible time can makes a lot of
difference in retaining the employees. Work/life policies include flexible work
scheduling, family leave policies allowing periods away from work for employees to
take care of family affairs, and childcare assistance.

Milman and Ricci31 (2004) concluded that the most significant retention
predictors included intrinsic fulfilment and working conditions rather than monetary
rewards. Compensation and work-life balance are important; it is the absence of
opportunity for professional growth and development that affects management
retention and turnover. According to Dibble32 (1999) the statements about the

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environment, caring attitude towards workers etc… appears as the official statements
of the organizations, but are not practiced in most work environments. Additionally,
Loyal, highly technical employees are more concerned with leave, flexible work
schedules, family friendliness and a proximity to their home, than job seeking
employees who are actively looking for a new position.

9. Employee Relations

Company culture, relationship with reporting manager and internal

communication plays very important role in employee retention. Employee relations
within business can positively or negatively affect recruitment and retention efforts of
the organization in multiple ways. Maintaining a strong employer and employee
relationship can be the key to the ultimate success of an organisation. It is known that
if a strong relationship is in place, employees will be more productive, more efficient,
create less conflict and will be more loyal. Strong employment relations create a
pleasant atmosphere within the work environment; it increases the employee
motivation and can also be increased through improved employee morale. Creating
the productive and pleasant work environment has a drastic effect on an employee’s
loyalty to the business, it encourages a loyal workforce. Having such a workforce
improves employee retention, in doing so the cost of recruitment, hiring and training
is cut drastically. For most businesses the high cost of employee turnover outweighs
the cost of the employee relations program that they have in place. Another benefit is
that when the employee turnover is low it ensures that the employer has a trained and
skilled set of employees33.

10. Stress Free Work Environment

The retention strategies will ultimately be ineffective when employees are

simply overburdened. To avoid employee stress, keep your requirements reasonable,
particularly during peak workloads-such as tax season and year end time that last for
more than a few weeks. Also, encourage employees to use their paid time off,
consider the use of contingent labour to offset peak workloads, fill vacation gaps, and
manage work life balance. In contrast to the costs of disengagement and turnover,
temporary staffing costs can pay long-term dividends in terms of productivity and
revenue (Arms 2010)34. Mayer35 (2006) discovered that the reasons for employees to
leave were varied as follows: too much workload, lack of input in decision making,

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 inadequate new challenges, insufficient autonomy, not enough salary and personal
circumstances. Workload was ranked as the highest, while salary was the least
motivating factor for quitting.

V. NEED FOR THE STUDY

In today’s corporate world employee retention is becoming a major issue to
the organizations, most of the business units facing employee turnover problems. The
review of literature on employee turnover and employee retention shows that different
authors theoretically explained the concept focusing on different factors of employee
retention like job satisfaction, motivation, compensation, training and development,
employee relations, job stress and work environment. Some people like Ankitha
Chaturvedi and Kanchan Sangwan (2016) have done research on “Impact of job
satisfaction on retention of employees in BPO industry” in India, George Mucai
Mbugua (2015) et al on “Relationship between recruitment and employee retention in
commercial banks” in Kenya, Maqsood (2015) et al on “The impact of human
resource practices on employee retention in the telecom sector” in India, Jain Ruchi
and Kaur Surinder (2014) on “Effect of job satisfaction on employee retention in
banking sector – A case study of ICICI bank in Jaipur city” in India, Jackson M.E
Muhoho (2014) on “Assessment of factors influencing employee retention in
Tanzania’s work organizations” in Tanzania, Asim Masood (2013) on “Effects of
job stress on employee retention: A study on banking sector of Pakistan” in Pakistan,
K. Chitra (2013) on “Role of leaders in employee retention – A pragmatic study with
reference to private sector bank employees” in India, Joy Mohala (2012) et al on
“Employee retention within the information technology division of a South African
bank” in South Africa, Muhammad Hassan (2011) et al on “Employee retention as a
challenge in Leather industry” in Pakistan, Chen (2010) et al on “structural
investigation of the relationship between working satisfaction and employee turnover”
in Taiwan and some of the researchers conducted research studies on employee
turnover issues, challenges of employee turnover and employee engagement in India
and abroad. Based on available reviews few studies found to exist on employee
retention in India, most of these studies have been undertaken in the context of
manufacturing industries, IT sector and public sector banking. Keeping this in mind
the present study makes an attempt to understand employee retention in various
dimensions by investigating at a micro level. Private sector banks have grown faster

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 and bigger over the two decades since liberalization using the latest technology,
providing contemporary innovations and monetary tools and techniques. Axis, HDFC
and ICICI banks are leading private sector banks in terms of market capitalization,
customer service and employee strength. No research work has been done on
employee retention with reference to these corporate private sector banks in Andhra
Pradesh. Therefore, there is a great need to fill up this gap and to undertake research
on this topic with reference to these corporate private sector banks in Andhra Pradesh.

VI. OBJECTIVES OF THE STUDY

The main objectives of the present study are:

1. To study the theoretical framework of employee retention.

2. To review the profiles of selected private sector banks i.e. Axis, HDFC and
ICICI banks.
3. To examine the employee retention strategies followed by the selected private
sector banks.
4. To analyze the perceptions of the respondents of selected private sector banks
on employee turnover and employee retention strategies.
5. To offer suitable suggestions to reduce employee turnover and to design
effective employee retention strategies in private sector banks.

VII. SCOPE OF THE STUDY

There is a great scope to conduct the present study on employee retention in

India. To take up this study on employee retention, it needs an organization which
maintains good amount of human capital. In India there are twenty nine private sector
banks, out of these banks Axis, HDFC and ICICI banks are leading in top positions in
terms of market capitalization, customer service and employee strength. Hence, these
banks have been selected to conduct the present study. The study examines various
dimensions of employee retention i.e. job satisfaction, compensation, training and
development, motivation, management support, welfare and social security measures,
employee relations, work life balance, stress at work place and working conditions in
selected banks. The study also focuses on identifying the reasons of employee
turnover in the selected banks and its impact on bank’s performance. The study covers
three regions of Andhra Pradesh i.e. Rayalaseema, Coastal Andhra and Uttarandhra.

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VIII. RESEARCH METHODOLOGY

The process of gathering reliable and meaningful information is cardinal

aspect of the enquiry that forms a critical link in the operational plan for the entire
research design and is vital to draw valid conclusions. Hence, the present study
entailed a good deal of preparation and planning in order to secure the necessary data
and information. Keeping the objectives of the study in mind, the following
methodology has been adopted for conducting the present study. The research
methodology which is adopted for this study has been discussed under the following
heads:

1. Method of data collection

2. Questionnaire design
3. Population and sample
4. Techniques of analysis and interpretation

Method of Data Collection

Secondary Data:

The secondary data has been collected from different text books, journals, and
periodicals from various libraries in Hyderabad, Visakhapatnam Guntur and Tirupati,
different websites available from the internet, administrative records, annual reports,
management reports, banks personnel manual, and special project reports of the
selected banks. This data has been largely used in providing different theoretical
chapters in this thesis.

Primary Data:

The study focuses on perceptions and attitudes of employees with regard to

employee retention strategies and factors of employee retention like job satisfaction,
compensation, motivation, training and development, working conditions, employee
relations, manager support, work life balance, welfare and social security measures
and stress at work place. The views and opinions on the above issues have been
collected through structured questionnaire from selected employees of the banks. The
sample respondents are the main source of information for this study.

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Questionnaire Design

The questionnaire has been an important tool of data collection in the present
study. The purpose of this research is to know the opinion of managers and employees
towards the various aspects relating to employee retention. Hence, the tool of
questionnaire was used for collecting the primary data. The total process of
preparation of the questionnaire was developed in three phases.

Phase - I: Development of Questionnaire

The questionnaire used in this study is composed of four sections. The first
section of questionnaire contains socio-economic profile includes personal details
such as name, designation, age, educational qualifications, experience and monthly
salary etc... The second section of the questionnaire dealt with basic employee
turnover issues and the third section dealt with employee retention strategies followed
by the banks. The fourth section of the questionnaire dealt with factors of employee
retention which embraces of ten broad dimensions namely:

1. Job Satisfaction
2. Compensation
3. Training and Development
4. Motivation
5. Manager Support
6. Working Conditions
7. Welfare and Social Security Measures
8. Work Life Balance
9. Employee Relations
10. Stress at Work Place

Phase-II: Finalization of the Questionnaire

Before administrating the questionnaires the researcher has conducted a pilot

study in order to test the validity and accuracy of the statements. To establish
reliability and validity of questionnaires, the researcher personally visited and
conducted pre-test administration of the questionnaires.

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Phase – III: Administration of the questionnaires

The researcher personally visited banks and administered the questionnaires

among selected managers and employees of Axis, HDFC and ICICI Banks which
were selected from the three regions of Andhra Pradesh. The researcher visited the
above selected banks continuously to distribute and collect the questionnaires.

Population and Sample

In India there are 10,653 branches of selected banks i.e. Axis, HDFC and
ICICI banks. In which 1, 90,742 employees were working as on 31st March, 2015.
The table (1.1) represents the total number of bank branches and employee strength of
the selected banks.

Table 1.1 – Total Number of Selected Private Sector Bank Branches and
Employees in India

Bank Total number of branches Total number of employees

Axis 2589 42230
HDFC 4014 76286
ICICI 4050 72226
Total 10653 190742
Source: Annual reports of Axis, HDFC and ICICI banks, 2015.

In Andhra Pradesh there are 300 branches of selected banks. In these 92

branches are Axis bank, 104 branches of HDFC bank and 104 are ICICI bank
branches. These branches were spread through all the three regions of the state i.e.
Rayalaseema, Coastal Andhra and Uttarandhra. The below table (1.2) shows the
spread of bank branches in Andhra Pradesh region.

Table 1.2 – Spread of Selected Private Sector Bank Branches in Andhra Pradesh

Bank
Region Axis HDFC ICICI Total
Rayalaseema 24 32 30 86
Coastal Andhra 53 60 59 172
Uttarandhra 15 12 15 42
Total 92 104 104 300
Source: www.bankifsccode.com

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 Out of 300 bank branches, 72 branches were selected which are situated at
major cities and towns of Andhra Pradesh, in which 24 are from Rayalaseema, 24 are
from Coastal Andhra and 24 are from Uttarandhra; further 24 are Axis, 24 are HDFC
and 24 are ICICI bank branches. Expert’s opinion was taken and decided 720 as
sample size by using quota sampling. The response rate in pilot study was 66 per cent;
hence, 1100 questionnaires were distributed with a view to get 720 questionnaires
back. The final sampling frame shown in the table (1.3) as follows:

Table 1.3 – Bank Wise Population and Sample

Bank Total Selected Total Number of Sample

Branches Branches Employees Size
Axis 92 24 537 240
HDFC 104 24 541 240
ICICI 104 24 532 240
Total 300 72 1610 720

Tools for Investigation

Various methods are adopted for investigation of the different aspects relating
to the sample. Primary and secondary data are formed a basis for this. The researcher
visited three different types of banks in three different areas of Andhra Pradesh and
administered the schedule meant for covering all categories of the respondents
mentioned in the data analysis chapter. Secondary data were also collected through
various documentary sources like files, brochures, books and journals and online data
search etc., Employee Retention in banks.

After completion of the pilot study, the required data is collected using
schedule, interview and observation methods. One comprehensive schedule was
designed for the purpose of the study, which forms the third important source of data
collection. The schedule contains in all about different items including the items
eliciting the personal Information of the respondents. Further, the questionnaires
consist of different dimensions related to present study. The face validity of the items
is established through the specialists selected from among the faculties of
management. Similarly, the schedule has been originally administered to a small
sample of 50 respondents. The reliability of the schedule has been established through

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test – retest method. The interval between test-retest was six months. The response
rate in pilot study was 66 per cent.

Confidentiality
The respondents were assured that their names would not be disclosed and that
confidentiality would be strictly maintained. In additional, participants were clearly
asked not to disclose their names on the questionnaire, and were free to decline
responding to any survey question that they felt might reveal their identities.

Reliability of the Questionnaire

Cronbach's alpha
Cronbach's alpha is a measure of internal consistency that is, how closely
related a set of items as a group. Cronbach's alpha can be written as a function of the
number of test items and the average inter-correlation among the items. For
conceptual purposes, the formula for the standardized Cronbach's alpha is given
below.

Here N is equal to the number of items; c-bar is the average inter-item covariance
among the items and v-bar equals the average variance.

Table 1.4 – Reliability Test on Factors of Employee Retention

Sl. No Dimension Alpha value Items
1 Retention Strategies 0.8867 14
2 Job Satisfaction 0.8644 6
3 Compensation 0.8944 6
4 Training and Development 0.9365 5
5 Motivation 0.783 5
6 Manager Support 0.8494 6
7 Working Conditions 0.7749 6
8 Welfare and Social Security Measures 0.8482 10
9 Work Life Balance 0.7316 5
10 Employee Relations 0.8168 5
11 Stress at Work Place 0.8641 5

The alpha coefficients for all the dimensions are greater than 0.7, suggesting
that the items have relatively highly internal consistency.

21
Data Interpretation

An attempt is made to analyse and understand the perceptions of the sample

respondents about employee retention in banks. The data were fed to the computer.
The tabulations and the results for analysis were done with the help of SPSS
(Statistical Package for Social Sciences) version 14, MINITAB version-17 and
Microsoft Excel-2013 for statistical measurements such as simple percentages, mean
values, standard deviation values and median values etc… For each and every
statement in all the dimensions related to the present research, Kruskar Wallis
Statistic was carry forward with regard to bank. Further, for each dimension,
ANOVA test was conducted with regard to bank to know differences in the opinions
of the respondents among the banks on the dimensions of employee retention and to
find out level of association between employee retention and its factors.

As the opinion scores are in the form of ordering variables and these variables
are not follows normal distribution, so non-parametric tests was accompanied i.e.,
Kruskar Wallis tests are applied for the opinion scores of the respondents for each
statements of all the dimensions. For ANOVA tests the ordered variables are
converted into continuous variables by averaging each dimensional statement into
single variable.

HYPOTHESES
The following hypotheses were formulated for testing the relationship between
the variables.

1. H0: There is no association between job satisfaction and employee retention.

2. H0: There is no association between compensation and employee retention.
3. H0: There is no association between training and development and employee
retention.
4. H0: There is no association between motivation and employee retention.
5. H0: There is no association between working conditions and employee retention.
6. H0: There is no association between manager support and employee retention.
7. H0: There is no association between welfare and social security measures and
employee retention.
8. H0: There is no association between work life balance and employee retention.
9. H0: There is no association between employee relations and employee retention.

22
 10. H0: There is no association between stress free work environment and employee
retention.
11. H0: There is no difference in the opinions of the respondents among the banks on
the dimensions of employee retention.

IX. LIMITATIONS OF THE STUDY

The limitations of the study may briefly be stated as follows:

1. During the collection of data, it was found that some of the respondents were
rather hesitant and ambivalent in providing the required information and
sometimes they were reluctant to discuss.
2. Another limitation of this study is that the personal bias of respondents may be
involved in their opinions.
3. Employees were hard pressed for time in view of the job demands and rigorous
work schedule. The researcher had to persuade them for sparing time for
responding to the questionnaire and interviews. Establishing rapport with the
respondents posed a problem initially.
4. While the questionnaire survey administered over such a large respondent sample
has been a major strength, it is evident that, on occasion, social desirability effect
has contaminated the responses and employees have tended to give rather
generalized views on the various items.

However, the above-mentioned limitations do not detract the quality

output of the present study.

X. PRESENTATION OF THE STUDY

The study has been presented in seven chapters;

 The first chapter “Introduction” deals with the concept and importance of
employee retention. Besides that, this chapter also explains research design,
need for the study, objectives, methodology and limitations of the study.
 The review of research and literature has been presented in the second chapter.
An attempt has been made in this chapter to review the earlier studies on the
Employee Retention. The studies have been presented from recent to past.

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 The profiles of the selected banks i.e. Axis bank, HDFC bank and ICICI bank
have been presented in third chapter. This chapter examines the overall picture
of the selected private sector banks.
 The fourth chapter is confined to theoretical framework of the employee
retention. In this chapter; the various factors and strategies of employee
retention are explained.
 The fifth chapter studies the employee retention strategies followed by
respective private sector banks. This chapter narrated the different factors of
employee retention which are providing by the selected private sector banks.
 The sixth chapter is concerned with perceptions of the respondents regarding
various issues of employee turnover and employee retention strategies.
 The seventh chapter draws the summary, findings and suggestions emanating
from the study.

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