How to Make Employees Stay in a Company

Transcription

1 European Journal of Academic Essays, Special Issue, , 2017 ISSN (online): ISSN (print): Special Issue: 2 nd International Conference on Economics & Banking 2016 (2 nd ICEB) How to Make Employees Stay in a Company Puteri Andika Sari Management Study Program School of Business Ekuitas (STIE Ekuitas) Bandung, Indonesia puteri.andika31@gmail.com/puteri.andika@ekuitas.ac.id ABSTRACT Employee has a crucial role in company. Knowledge that employee has is the big asset that company have. Problem will appear if their employee has intention to leave or even leave the company, the knowledge of employee has will be leaving to. Then it will effect employee satisfaction for being a member of the company. This phenomenon has become a primary concern in many organizations. The purpose of this paper is to examine the literature relating how to make employee stay in a company. Based on review of the literature that has been studied, it can be concluded that the determinants of employee retention are compensation, training and development, flexibility of working and organizational culture. Keywords: Employee Retention; Compensation; Training and Development; Flexible Working; Organizational Culture BAGAIMANA MEMPERTAHANKAN KARYAWAN ANDA? ABSTRAK Karyawan memegang peranan penting dalam suatu perusahaan. Pengetahuan yang dimiliki oleh karyawan meruapakan asset yang besar bagi perusahaan. Masalah akan muncul ketika karyawan mempunyai keinginan untuk meninggalkan atau bahkan keluar dari perusahaan, pengetahuan yang dimiliki oleh karyawan pun akan ikut pergi. Fenomena ini menjadi perhatian utama di berbagai organisasi. Tujuan dari paper ini adalah mengkaji literature yang berhubungan tentang bagaimana cara mempertahankan karyawan di sebuah perusahaan. Berdasarkan hasil kajian literature yang telah dipelajari, dapat disimpulkan bahwa terdapat beberapa faktor penentu retensi karyawan antara lain kompensasi, pelatihan dan pengembangan, fleksibilitas dalam bekerja, dan budaya organisasi. Kata kunci: Retensi Karyawan; Kompensasi; Pelatihan dan Pengembangan; Fleksibilitas Bekerja; Budaya Organisasi

2 1. Introduction The existence of employee plays important role in an organization. As we know organization is a place of two people or more that doing their routine activity and coordinated with each other in order to achieve a common goal. We can conclude that organization can compete with another in globalization is depends on their employee. Certainly, many organizations have voiced the idea that their human resources differentiate them from their competitors, in another words we can say that human resource (employee) become a core competency (Mathis & Jackson, 2004). In a few decades instead of being organization s resource, employee turns to asset for their organization that we can call human capital. Human capital is a combine of knowledge, lesson, experience, core competence, skill and ability that employee has in a company (Sari et.al, 2012). Based on the understanding before, the company will lose its investment if many employees intend to leave or leaving the company in which they work. How come? With all the capabilities, skills and competencies possessed by the employee-which may also result from the investment of the company-will move as well as they leave the company. Basically firms want to reduce turnover because turnover is costly. In practice turnover results from many factors so measuring the exact cost of turnover is difficult. For the simple examples there are direct costs to simply replacing employees that leave the firm, such as recruit and training costs for the new employee. And also there may be costs associated with the general disruption caused by an employee leaving the firm, such as the need to transfer that employee s clients or workload to other employees (Russell, 2005). Retaining human capital with high performance is the key for organization to reach their business goal. In company/organization perspective to retain means that one less person to have to recruit, select and train which allow to efficiency business practice (Mathis & Jackson, 2004). Now the question is why people stay or leave their jobs? If the answer is stay then it should be employee feel satisfy with their job. If vice versa, employee could have intention to leave or even leaving the company for several reasons. 95

3 2. Framework and Empirical Studies A. Employee Retention Many factors can cause retention of human resources. It has been recognized by both employers and employees that some common areas affect employee retention. Mathis & Jackson (2004) have discovered the retention determinants. First it comes from organizational components which include values and culture, strategies and opportunities, well manage and result oriented, and job continuity. Then it will influence the other factors such as: career opportunities, rewards, job design & work, and employee relationship. Research conducted by Deo (2014) examined the factor of employee empowerment, appraisal system, compensation and training and development on the retention of human resources. The results of the study revealed that only appraisal system, compensation and training & development which give positive and significant impact on the retention of human resources while the employee empowerment gives opposite results. Further research in academic staff in the university conducted by Selesho & Naile (2014) proved that salary, promotion and development take main role in employee retention. Research conducted by Masibigiri and Nienabaer (2011) on generation X Public Servants, factors that influence employee retention such as: work content, utilization of skills, career advancement, work-life balance, compensation, security needs, leadership and drive. In study conducted by Haider et.al (2015) revealed that compensation and organizational culture has a positive relationship with employee retention whereas training and development has a negative one. Ibidunni et.al (2016) in their study of talent retention, organizational performance, and competitive positioning, factors that influencing talent retention are: pay, promotion, physical working condition, relationship with others, and recognition. In their study revealed that pay has a positive significant implication on employee commitment and employee s involvement which lead to employee retention. B. Compensation Compensation is important factors that can affect employee choose the company to work. Employee compensation includes all forms of payment granted to employees and arising from their employment relationship. Compensation has two main components, namely direct financial payments (i.e. wages, salaries, incentives, commissions, bonuses) and indirect financial payments (i.e. financial benefits such as insurance and vacation that paid by the employer (Dessler, 2015). 96

4 Numerous surveys and experiences of HR professionals reveal that one key to retention is to have competitive compensation practices (Mathis & Jackson, 2004). In some cases the reason of employee stops working is the low pay they receive. Especially for high-performing employees, has particular expertise and key employees, they are definitely expecting high pay in their place of work. In the mind of employee they will think about fairness in compensation. That s what we called the concept of equity. Equity means the perceived fairness between what a person does and what the person receives (Mathis & Jackson, 2004). Dessler (2015) divided four types of justice in compensation namely: External justice refers to how the level of pay of a job in a company compared to the rate paid jobs in other companies. Internal justice refers to the extent to which the fees are fair when compared with other jobs in the same company. Individual justice refer to the individual pay fairness when compared to that obtained by colleagues or by a very similar job in the company, based on each person's performance. Procedural justice refers to the fairness process and procedure that is felt is used to make decisions regarding the allocation of payment. How to cope with this justice issue? Companies can do a salary survey to other companies to solve the problem of external justice. In terms of the internal justice company can use job analysis and comparison of each job (job evaluation). Performance appraisal and pay incentives to maintain individual justice. Whereas the communication, the grievance mechanism, and employee participation can be used to ensure that employees view the payment process is procedurally fair (Dessler, 2015). C. Training and Development In the era of globalization, where technology changes rapidly, training becomes the prerequisite for every organization to remain in the global market. Nowadays organizations cannot rely only on conventional specialism, but to compete in the future, they must develop their employee skills, because it is a century of productivity and quality (Anis et.al, 2010). Training assist organizational competitiveness by aiding in the retention of employees. Employers that invest in training and developing their employees do so as part of retention efforts (Mathis & Jackson, 2004). 97

5 Training is a process whereby people acquire capabilities to aid in the achievement of organizational goals. The employer must conduct an analysis of the training needed by employees. It is to overcome the gap between the capabilities of current employees with the skills needed by employers in a given job. Training objectives and priorities are set to close the gap. Three types of training objectives can be set (Mathis & Jackson, 2004): Knowledge: impart cognitive information and details to trainers Skill: develop behavior changes in how jobs and task requirements are performed. Attitude: create interest in and awareness of the importance of training. Whereas development represents efforts to improve employee s ability to handle a variety of assignments. Development differs from training because it focuses on less tangible aspects of performance, such as attitudes and values. Generally we can separate two approaches of employee development: a) on-the-job method: coaching, committee assignments, job rotation, and assistant-to positions; b) off-the-job method: classroom courses, human relations training, simulations, sabbatical leaves, and outdoor training (Mathis & Jackson, 2004). D. Flexibility Working In a world of growing business, the workplace is not necessarily in the same place. The technological advances that occurred while supporting flexibility in work. For example, by using advances in technology such as and voic makes anyone could keep working wherever and whenever. This means that the boundary between work and personal lives are increasingly thin. Employees can continue to work while enjoying private life, which means they can work beyond the stipulated time. The change of views on the workplace, including the company's desire to achieve its goal, making the employees have to work smarter, more productive, and more effective. Not only those, the employees are also required to balance between work life and their personal lives. If employees can combine these two lives, then the company will indirectly benefit. Plus, generations of employees at this time has a different view of the meaning of a job. They have their own expectations about the meaning of work in which they live, the role of such work in their lives, and how they interpret the meaning of "work" itself. Therefore, the phenomenon of flexibility in the work required by many employees at this time due to the following reasons: 98

6 To be able to complete a variety of jobs without having restricted work time in the office and in anticipation of the work that comes suddenly. To be able to meet with colleagues and clients anywhere. In order to keep in touch with your hobbies or other activities in private life while work is piling up. Avoiding jams. In order to keep caring for children or sick family members. The transition of employees into retirement. Flexibility of work has been widely discussed by the experts referring to the theory of work life balance. Subject literature on work life balance has three assumptions, among others (Moore, 2007): a) Performance of an employee would adversely affect the management of a company when a problem occurred in the balance of their working life (work life balance); b) That improve work life balance of employees will not only increase productivity but also increase employee loyalty and satisfaction towards the workplace. c) The work-life balance can be run either through the implementation of the program of work flexibility. E. Organizational Culture The organizational culture is an important element which directs the employees to leave the organization (Haider et.al, 2015). Anitha & Begum (2016) defined organizational culture as the behavior of human beings within an organization and the meaning that people attach to those behaviors. Organization culture is a pattern of shared values and beliefs that provides organizational member meaning and rules for behavior. Robbins (2015) discovered 7 characteristics of organizational culture that are: a) Innovation and Risk Taking: degree to which employees are encouraged to be innovative and to take risk. b) Attention to Detail: degree to which employees are expected to exhibit precision, analysis, and attention to detail. c) Outcome Orientation: degree to which managers focus on result or outcomes rather than on how this outcomes are achieved. 99

7 d) People Orientation: degree to which management decisions take into account the effects on people in the organization. e) Team Orientation:degree to which work is organized around the teams rahrte than individual. f) Aggressiveness: degree to which employees are aggressive and competitive rathrt than cooperative. g) Stability: degree to which organizational decisions and actions emphasize maintaining the satus quo. Numerous examples can be given of key technical, professional, and administrative employees leaving firms because of corporate cultures that seem to devalue people and create barriers to the use of individual capabilities. In contrast, creating a culture that values people highly enables some corporations to successfully attract and retain employees (Mathis & Jackson, 2004). 3. Methodology of Research The author using literature review in research method. Form of the literature such as of journals, books and other reading materials that appropriate in its relevance to the topics discussed in this paper. 4. Discussion on Empirical Result Based on research that conducted by Deo (2014) compensation has a significant effect on employee retention. Compensation is the prominent element in retaining employee. In the research that conducted by Russell (2005), to test the deferred compensation on employee retention revealed that the deferred compensation (i.e bonus, stock and stock option) can effectively influence employee retention. Training and development is the efforts that company can do to enhance employee performance. This efforts are important in order to improve the effectiveness and in retaining the key employees. If the company committed and assist long-term career development of their employees, the company will gain the loyalty from them (Haider et.al, 2015). Based on study that conducted by Kasekande et.al (2013) employee satisfaction has a positively related 100

8 to employee retention. The results of their study concurred with the hypothesis and confirmed that when employees are satisfied on the job, they exhibit high levels of retention, and the rate of turnover decreases. Anis et.al (2011) in their study about relationship training and development on employee retention with compensation as mediating variable revealed that without increasing the compensation of employee after their training and development, to retain the employees for a longer time period does not give fruitful result because of the increase in his abilities and perfection in field. Research that conducted by Idris (2014) types of flexible working are flex time, job sharing, flex leave, flex career, and flex place or telecommuting. When company has to decide to facilitate their employee s flexibility working, they can choose one of these options such as: flexi time, compressed working hours job sharing, breaks from work, self-rostering, teleworking, and child care (Igbinomwanlia et.al, 2012). Research that conducted by Haider et.al (2015) revealed that organizational culture has a positive relationship with employee retention. Anitha & Begum (2016) in their research found that organizational culture has high impact on employee retention than employee committment. From the explanation before we can conclude that: compensation (pay), training and development, flexibility working, and organizational culture are such determinants to employee retention. Training & Development Flexibility Working Compensation Employee Retention Organizational Structure Figure 1. Employee Retention Determinants 101

9 5. Conclusion As we know that the employee is an asset to the company, the company needs to know the various ways to retain employees, especially with high-performing, have specialized expertise and key employees. Several factors that can determine the employee to remain in the company are compensation, training & development, flexibility of working and organizational culture. Relating to the compensation the company should be able to provide competitive compensation. Training and development is the efforts that company can do to enhance employee performance. This efforts are important in order to improve the effectiveness and in retaining the key employees. And employers should have a plan to choose the right method of training and development. Companies can determine the policy of the flexibility of working in order to retain employees. With the flexibility working practices undertaken by the company, employees can do their job and family life with ease. So that employees who work in companies that embrace the practice of flexibility working will feel satisfied and loyal to the company. Finally, creating a culture that values people highly enables some corporations to successfully attract and retain employees. References Anis, A, Rehman, I.U, Nasir, A, & Safwan, N. (2010). Employee Retention Relationship to Training and Development: A Compensation Perspective, African Journal of Business Management. Vol. 5 (7) pp Anitha, J, Begum, F. (2016). Role of Organisational Culture and Employee Commitment in Employee Retention, International Journal of Asian School of Business Management. Vol. IX, Issue 1 pp Deo, D. (2014). Role of Human Resource Practices on Employee Retention in Institutes of Higher learning in Delhi-NCR, Proceedings of 4th National Conference on Human Resoure Management, NCHRM Vol.3. Dessler, G. (2015). Human Resource Management. Jakarta: Salemba Empat. Haider et.al. (2015). The Impact of Human Resource Practices on Employee Retention in the Telecom Sector. International Journal of Economics and Financial Issues. Vol. 5 (Special Issue) pp

10 Ibidunni, S., Osibanjo, O., Adeniji, A., Salau, O.P., Falola, H. (2016). Talent Retention and Organizational Performance: A Competitive Positioning in Nigerian Banking Sector, Periodica Polytechnica Social and Management Sciences. Vol. 24 (1) pp Igbinomwanlia, O.R., Iyayi, O., & Iyayi, F. (2012). Employee Work-life Balance as an HR Imperative, African Research Review. Vol. 6 (3) pp , Serial no. 26, July. Kasekande, F., Byarugaba, K.J., & Nakate, M. (2013). Employee Satisfaction: Mediator of Organizational Service Orientation and Employee Retention, Journal of Busniess and Management Vol. 19 No.3 pp Masibigiri, V., & Nienaber, H. (2011). Factors Affecting the Retention Of Generation X Public Servants: An Exploratory Study, SA Journal of Human Resource Management/ SA Tydskrif vir Menslikehulpbronbestuur, 9(1), Art. #318, 11 pages. doi: /sajhrm. v9i Mathis, R.L., & Jackson, J.H. (2004). Human Resource Management. International Edition. Singapore: South Western-Thomson Learning. Moore, F. (2007). Work Life Balance: Contrasting Manager and Workers in an MNC, Employee Relations, Vol.9 No. 4. Robbins, S & Judge, T. (2015). Organizational Behavior, 16 th edition. Jakarta: Salemba Empat. Russell, K.D. (2005). Deferred Compensation and Employee Retention. Dissertation. United State of America: Stanford University. Sari, P.A., Syamsun, M., & Sukmawati, A Developing Human Capital Model: Case Study on Cooperative Dairy Farmers in North Bandung West Java, Banking & Management Review Journal Vol. 1 No.2 pp Selesho, J.M., & Naile, I. (2014). Academic Staff Retention as a Human Resource Factor: University Perspective, International Business & Economics Research Journal, Vol. 13 No.2 pp