School of Management Blekinge Institute of Technology Employee Retention Strategies: the case of a patent firm in Australia Supervisor: Dr. Fredrik Jörgensen Khalid AHMAD Kenneth Kwame AZUMAH 761221‐P230 760703‐P692 [email protected] [email protected] Abstract Retaining employees is an important goal of every organization. This thesis explores the factors that can significantly impact employee retention in an organisation. It attempts to relate some of the factors discovered to major theories such as the Employee Equity Model, Herzberg’s (Two- Factor) Theory and the Job Embeddedness Theory. The literature surveyed by this study mention employee motivation, job satisfaction and job embeddedness as the main factors that influence employee retention rates. The study proposes that job embeddedness is a superior model that significantly explains employee retention. The population for the study were 53 respondents out of 75 taken from a patent firm in Australia, a representation of the rapidly growing knowledge industry. The participants of the survey were contacted through private email and selected for the study by simple random sampling done via the listing of the employee names in a spreadsheet program. The survey questions were categorized under six major theories of employee retention with each category having an average of five questions. Four most significant theories emerging were compared and the theory best explaining employee retention was chosen. The four most significant theories were Employee Equity Model, Herzberg’s (Two-Factor) Theory and the Job Embeddedness Theory, and the one that most explains employee retention was Herzberg’s (Two- Factor) Theory. This implies that notwithstanding the age of the Two-Factor theory, it is still significant for managing employee retention in today’s rapidly expanding service- and knowledge-based organisations. i Acknowledgements Our thanks and appreciation go to our friends and colleagues who were kind and patient with us and did not erase us from their minds while we were fully occupied with our studies and work. We are also thankful to the survey respondents who took time and effort to complete and return questionnaires. We appreciate our respective companies for being supportive and flexible with us while we were busy working on the thesis. We are grateful to them for providing access to the data and allowing us to conduct the survey. Our million thanks go to our respective families who have always and continue to encourage and support us in all our endeavours of life. We are also grateful to the reviewers for providing their valuable feedback during opposition of this thesis. We believe their input and criticism has helped us improve the quality of this work. We pay our respect and gratitude to our supervisor and mentor Dr. Fredrik Jörgensen. He gave us key input when we were struggling to get started. He supplied constant feedback during the process and encouraged and guided us to the completion of the thesis. And lastly, we extend our enormous gratitude to and feel indebted to BTH for providing us this wonderful opportunity and environment to study for the MBA degree and carry out this work. We take this opportunity to earnestly acknowledge the contribution that the university has made to our lives and our careers by providing world-class education free of cost. ii Contents Abstract .......................................................................................................................................................... i Acknowledgements ....................................................................................................................................... ii Contents ....................................................................................................................................................... iii Table of Figures ............................................................................................................................................. v List of Tables ................................................................................................................................................ vi 1. INTRODUCTION ......................................................................................................................................... 1 1.1 Background ......................................................................................................................................... 2 1.2 Problem Statement ............................................................................................................................. 3 1.3 Hypotheses.......................................................................................................................................... 4 1.4 Significance of Study ........................................................................................................................... 4 1.5 De‐limitations ...................................................................................................................................... 4 1.6 Thesis Structure .................................................................................................................................. 5 2. THEORY ..................................................................................................................................................... 7 2.1 Job satisfaction .................................................................................................................................... 7 2.1.1 Job Satisfaction in the Light of Needs .............................................................................................. 7 2.1.2 Intrinsic Factors of Job Satisfaction ................................................................................................. 8 2.1.3 Employee Self‐Efficacy and Job Satisfaction .................................................................................... 8 2.1.4 Seeing Employees as Customers of a Business ................................................................................ 9 2.2 Motivational Factors ......................................................................................................................... 10 2.2.1 Expectancy Theory and Employee Motivation .............................................................................. 10 2.2.2 Equity Theory and Employee Motivation ...................................................................................... 11 2.3 Factors Attributed to Employee Turnover and Retention ................................................................ 12 2.3.1 Market Forces ................................................................................................................................ 12 iii 2.3.2 Organizational Environment .......................................................................................................... 13 2.3.3 Social Networks .............................................................................................................................. 13 2.3.4 Colleagues’ Quality ........................................................................................................................ 14 2.3.5 Person‐Organisation Fit ................................................................................................................. 15 2.3.6 Job Embeddedness ........................................................................................................................ 15 2.3.7 Contribution of Job Embeddedness to Employee Retention ......................................................... 16 3. METHODOLOGY ...................................................................................................................................... 18 3.1 Research Typology ............................................................................................................................ 18 3.1.1 Motivation for the typology and Strategy ..................................................................................... 19 3.2 Survey Instrument ............................................................................................................................. 19 3.3 Study population ............................................................................................................................... 22 4. PRELIMINARY ANALYSIS AND EMPIRICAL FINDINGS .............................................................................. 24 4.1 Coding of Responses ......................................................................................................................... 24 4.2 Preliminary Analysis: Descriptive Statistics and Test of Normality ................................................... 25 4.2.1 Graphical view of the Normality Test of the Variables .................................................................. 26 4.3 Frequencies of the Observations ...................................................................................................... 28 5. ANALYSIS OF RESULTS ............................................................................................................................. 30 5.1 The Frame of Questions and Expectation of Support for the Theories ............................................ 30 5.2 Empirical Comparison of the Theories .............................................................................................. 30 5.3 Discussion of the Major Findings .....................................................................................................