SIGNIFICANCE OF EMPLOYEE RETENTION ON ORGANISATIONAL PERFORMANCE

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

Retaining employees whose knowledge has high competitive value is becoming a critical and well-recognized challenge (Taylor, 2004 and Williamson, 2008). Such employees are known as knowledged workers in that they “have high degrees of expertise, education, or experience, and the primary purpose of their jobs involves the creation, distribution or application of knowledge” (Davenport, 2005).

The retention of employees has been shown to be significant to the development and the accomplishment of the organization’s goals and objectives. Retention of employees can be a vital source of competitive advantage for any organization.

Today, changes in technology, global economics, trade agreements, and the likes are directly affecting employee/employer relationships. “Until recently, loyalty was the cornerstone of that relationship. The loss of talented employees may be very detrimental to the company’s future success. Outstanding employees may leave an organization because they become dissatisfied, under paid or unmotivated (Adeniran 2005). While trying to retain employees within the organization, the organisation may face other challenges such as demand for higher wages by skilled employees, not complying with organization practices, and inadequate good interaction with their co-workers.

Besides these problems, lack of information about the employees’ performance may complicate an organization’s endeavour to retain productive employees. Without adequate information an organization may not be able to distinguish productive workers from non-productive ones. Employees often may take credit for the successes and deflect failures to other employees. Insufficient information about employees’ performance may result in adverse selection by them (Grossman and Hart 1999). The better employees may move to other organizations for better opportunities. The co-workers who cannot improve their positions are more likely to stay. This is especially possible when due to inadequate information outstanding performance is not rewarded i.e, lack of motivation for outstanding performance. Non productive and productive workers end up receiving the same or nearly the same compensation and package of perks because of management’s in ability to distinguish talented employees from the rest of the labour force in the organization.

The problem of attempting to keep talented members of the work force may be further complicated because of superiority complex of these talented employees to organisational success (Simon, 1996). It is another result of asymmetric information where both the manager does not know the information for which to ask from the employee and the employee does not know what to provide. Therefore, productive workers cannot distinguish themselves from non-productive co-workers. Even if an organization is fortunate enough to retain talented employees, the company may still have to cope with agency costs resulting from them and their colleagues. When information about an employee’s activities is difficult to gather, the employee may be motivated to act in his own interest which may diverge from the interest of the organization. This divergence of interests results in costs to the organization in the form of excessive prerequisite consumption, shirking of job responsibilities and poor investment decision making. (Jensen and Meckling, 1996) explained that it is in an employee’s interest to over consume perks and shirk job responsibilities of the firm if they are not sole owners of the organization.

Employees may also be enticed to make suboptimal investment decisions for the firm. Since most company employees have their wealth tied up in the organization for which they work, employees may attempt to make investment decisions which are less risky than the stock holders of the firm would prefer. This is done to reduce the risk of failure by the company, which protects the no diversified employee from loss of wealth. This investment strategy may also reduce the return on investment that the diversified owners of the firm desire. (Mark, 2000).

The employees or agents of the organization may also use a short sighted approach in investment selection to enhance their own career chances (Narayanan 1985). The employee can signal the labour market his superiority through the selection of a fast starting project, which may fizzle out later for the firm. This strategy may cause the firm to miss profitable long-term projects or much needed research and development. Employees may also attempt to increase the size of the firm through acquisitions and project selection regardless of the effect on company profitability in order to increase their own power base within the organisation.

1.2  Statement of Problem

Organisations are confronted with diverse problems which affect the accomplishment of their goals and objectives. Retention of employee is one of the major problems in most government investments in recent years. There is the general outcry in Lagos State that her employees are not properly remunerated and incentives were not regularly paid. Recently, Lagos state foreign doctors embarked on strike actions which lead to mass exit of patients from Lagos state hospitals. It is also observed that most of erudite scholars are now leaving government educational institutions to private institutions as a result of better offer. These poses problems for the government to retain its skilled employees so as achieve its objectives.

It also observed that majority of individuals leave government investments for private investment after they have enjoyed government investment on staff investments such as in-service training leading to failure in the output of government investments.

It is also discovered that privatisation of Government investments which leads to mass unemployment of government staff have also contributed to mass outflow of government employees to other private sector due to the fear of lack of job security. This poses the problem of retention of employee as one of the factor hindering the success of government establishments.

1.3  Objectives of the Study

The broad objectives of this study focused on significance of employee retention  on organizational performance. Other specific objectives includes:

1.   Determine the important benefits enjoyed by public sector workforce in Lagos state ministry of education compare to that of the private businesses.

2.   Assess the important organizational strategies that contribute to the retention of the skilled public sector workforce.

3.   Investigate the extent to which organizational culture contribute to the retention of the public sector workforce.

4.   Determine the extent by which staff turnover will enhance the achievement of government objectives.

5.   Determine the rate of demand for government employment to private businesses.

6.   Determine the benefits of retaining skilled employees in public sector.

1.4  Significance of the Study

In order to achieve high organisational success, this study helps organisations to know the extent by which retention of skilled employee contributes to the actualization of organisational objectives.

It also enables organisations to cultivate the habit of retaining skilled employees by setting up criteria for determining the productive capacity of an employee. This study will also help government to know the extent by which skilled manpower contributes to economic growth and development.

Also, it will enable employees with the opportunity of negotiating for condition of service that will ensure job security. It will also provide employee with the knowledge of self-evaluation and upgrading from time to time, through in-service and on-the job training so as to enhance its productivity level.

It also enlightens the trade unions in the selection of appropriate strategies for ensuring job security for its members. It will reveal to what extent employees’ productive capacity has been improved or the organisational objective has been achieved as a result of retention of employee.

It will enable the society to know the extent by which employee retention contribute to organisational success and in turn contribute to societal growth and development.

1.5  Research Questions

Answers were provided for the following research questions in this study.

1.   How is the public sector workforce aware of any retention efforts in their agency?

2.   What make public sector workforce think about leaving their work?

3.   How public sector workforce does feels unique about their agency’s retention situation?

4.   Does public sector organizations discuss with the workforce specific reasons why they were leaving or not?

5.   Does public sector workforce aware of specific retention problems in their agency?

6.   What type of work environment or organizational culture e.g. supervisory style, work itself, is most appealing to workforce?

1.6  Research Hypotheses

The research hypotheses for this study consist of the following.

Ho1: There is no significant relationship between the retention of employee and the organizational success.

Ho2: There is no significant relationship between the performance of an organisation and its environment.

Ho3: retention of employees has no significant impact on organisational achievement.

1.7  Scope of the Study

This study was focused on the impact the retention of employee on the organizational success in Public Sector with a particular concentration on Lagos State Ministry of Education.

1.8  Limitation of the Study

The scope of the study was limited to Lagos State Ministry of Education. The available time and resources for study was quite limited.

1.9  Definition of Terms

Organisational Success: An organisation’s ability to remain solvent and grow within its market.

Talented employee: This is the employee that has capacity to contribute to organisational success through his natural skills.

Privatisation: This is the act of selling government investments to private individuals or bodies.

Career Planning: An organizational initiative to help employees assess their skills, defines their career goals, and creates an action plan for accomplishing those goals. The organization is also responsible for holding employees accountable to those goals.

Employee Development: A system for assisting employees to develop within their current jobs or advance to fulfil their goals for the future.

Employee Retention: A company’s ability to keep quality employees who are contributing to business success.

Employee Satisfaction: The level to which employees enjoy their jobs and are willing to put forth effort toward the success of an organization.

Goal Setting: The process of establishing one’s plans for future jobs and careers.

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