prosepctus employee retention wilfred brown_final

Running head: AN INQUIRY IN EMPLOYEE RETENTION 1

An Inquiry in Employee Retention:

The Search for the Relationship between Employee Perception and Employee Actions

Wilfred Brown

Texas A&M University - Commerce

AN INQUIRY IN EMPLOYEE RETENTION 2

Contents

Chapter 1: Introduction...........................................................................................................4

Background............................................................................................................4

Problem Statement..................................................................................................4

Purpose of the Study...............................................................................................5

Study Hypothesis....................................................................................................5

Chapter 2: Literature Review..................................................................................................6

Literary Gap...........................................................................................................6

Chapter 3: Methodology.......................................................................................................10

Chapter 4: Findings...............................................................................................................12

Chapter 5: Summary, Conclusions, AND Recommendations..............................................14

References.............................................................................................................................16

Appendix A...........................................................................................................................18

Appendix B...........................................................................................................................19


Abstract

The purpose of this paper is to determine if employee perceived external prestige

influences employee retention. The study aims to determine the relationship, if any, between how

prestigious employees believe their company is to others and employee retention. Qualitative

data was collected from 50,000 employees working across multiple industries in both tier one

(well known) and tier two firms (not so well known). Employees were asked to complete four

open ended questions. Previously used surveys and scales were used to codify the collected data

and quantify the research. Study results revealed a positive relationship between perceived

external prestige and employee retention. This study provides valuable insights into the

significance of employee perceived external company prestige in retaining valuable human

capital. This study may have further implications on the adoption of non-conventional human

resource strategies, like a focus on enhancing external organization prestige through increase

company marketing and brand development.


Chapter 1: Introduction

Background

Employee retention refers to the ability of a firm to keep the employees it deems as

valuable. Employee retention can be measured quantitatively by evaluating a particular point in

time and calculating the amount of employees the company retained during that period. For

example, one year ago a company hired ten new employees. In the present, exactly one year

later, the company has retained eight out of the ten employees hired. Assuming all of the

employees were an asset to the company, the retention rate for the company during the period

measured was eighty percent. For many, the idea of employee retention may seem unimportant

after experiencing the “Great Recession” and the joblessness rates rising to historic highs. But

even before the economic cataclysm that was the “Great Recession,” firms have been struggling

to retain the best human capital. The problem that has plagued firms for the last twenty years has

been the ever growing skills gap or lack of knowledgeable workers. Firms have struggled to

expand even in years of tremendous growth due to the lack of a deep pool of talented workers.

The high cost of finding, hiring, training, and replacing talented workers have made more

managers focus on the strategies needed to attract and retain the best people available.

Problem Statement

Companies are desperate to avoid the high cost of employee turnover, as well as keep their

best employees from their competitors. To accomplish this goal, employers must clearly

understand what factors truly encourage employees to stay put. In answering the question “does

employee perceived external prestige affect employee retention,” firms and business scholars


alike can take a step out of the darkness of the unknown and take a large step into the

illumination of new found knowledge.

Purpose of the Study

This study has key implications for business professionals working in the realm of human

resource development, as well as, senior firm leaders looking to ensure company stability and

improve bottom line through reduced turnover. With the acceleration of the advancement of

technology, the inability of the global education system to produce enough quality candidates

and the cutthroat level of competition that has come with a globally integrated economy,

companies are looking to understand what works in HR and how to implement it in their

organizations. This study will help further the knowledge base of managers faced with the

challenges of talent acquisition in the new knowledge economy, as well as, direct other

researchers in their quest to expand the knowledge base of human resource development and

human resource management.

Study Hypothesis

Based on a limited understanding of human nature, it would be highly plausible that

employee perceived company prestige would have a positive effect on employee retention rates

and a negative effect on employee turnover intentions. From the knowledge that people are

highly social creatures, similar to great apes, it would seem that people’s drive to impress others

would supersede other rational urges and compel a person to stay with an employer that brings

them some level of prestige, rather than leave to work for one with less prestige but maybe more

benefits or better work conditions. So much of what humans do is based on the perceptions of

others that there is little doubt that choosing a place to work would be any different.


Chapter 2: Literature Review

Literary Gap

One of the most pressing issues of our time is employee retention. Yet with there being

over 1,000 published articles on turnover and retention (Allen 2008), in May 2015, 2.5 million

American workers still quit their jobs (Bureau of Labor Statistics, 2015). A close look at

workforce trends suggests a shortage of highly skilled labor in the workforce; leaving employers

understaffed and with a less qualified workforce, and ultimately leaving employers less

competitive (Rappaport, Bancroft, & Okum, 2003). Despite the large amount of research devoted

to why people quit, only a small amount of research on retention explores why people stay

(Hausknecht, Rodda, & Howard, 2009).

A Brief History of Employee Retention Research

March and Simon’s (1958) theory of organizational equilibrium was one of the first

theories proposed on the subject of employee retention. The theory made the argument that

desirability of movement and ease of movement were the two main reasons employees chose to

quit their jobs. March and Simon’s definition of desirability of movement as the individual’s

satisfaction with the job and ease of movement represented the employee’s perceived or actual

job alternatives on the labor market. The two researchers argued that employees would be more

likely to stay with their employer if they were satisfied with their jobs and believed that there

were few alternatives available on the open job market. After March and Simon’s theory of

equilibrium was published in 1958, later theories on turnover built upon the

satisfaction/alternatives framework. The first significant update to the satisfaction/alternatives

model came from Porter and Steers in 1973. The two researchers introduced the idea that many


more work-related and personal variables, other than the two presented by March and Simon,

were important factors of employee turnover. Extrinsic rewards such as pay, advancement

opportunities, affinity towards coworkers, treatment from superiors, and tenure were all

presented by Porter and Steers (1973) as add on to March and Simon’s (1958) model, along with

non-work influences such as family responsibilities. (Mobley et al., 1979) introduced work

attitudes, job satisfaction, and organizational commitment as further factors of employee

turnover. Price and Mueller (1981) presented a new addition to the previous models. The two

added to the model the idea of distributive justice. The researchers suggested that employee

satisfaction was directly tied to how employees felt about the outcomes they received from the

efforts and other inputs that they as employees have invested. More recently, new literature has

been published by (Baltes, Briggs, Huff, Wright, & Neuman, 1999) on company driven work

flexibility programs and how they impact employee retention. The researchers found that

competing priorities often led employees to leave but, allowing employees to have work

flexibility lessens the likelihood of conflicts of interest. This may lead to better employee

retention. One of the last retention variables to be explored through research has been employer

prestige. Muchinsky and Morrow (1980) introduced the concept of organizational prestige as a

potential retention factor. Fombrun and Shanley (1990) added the idea that employees may stay

with a company because of its status as an “employer of choice”. Branham (2005) expanded the

“employer of choice” idea by measuring how often a company communicates and emphasizes

the positive features of working for it to current and potential employees. Though Muchinsky

and Morrow introduced the concept of organizational prestige, Fombrun and Shanley expanded

the idea. No study to this point has measured if employees will mention prestige as a reason for


staying with employers without being prompted. This study will work to bridge the gap left in

the literature by asking employees four open-ended questions related to retention, without asking

the participants about prestige directly.

The Importance of Discovering Why People Stay

Understanding why people stay is important because competent employees are the

foundation on which all corporate success is built (Nawaz, Jahanian, & Tehreem, S. 2012). Plus,

the retention of employees has been shown to be significant to the development and

accomplishment of the organization’s goals and objectives (Muhoho, 2014). Just understanding

why people leave does not give managers the effective tools to intervene and change conditions

rapidly enough to get people to stay. Perceived Employee Prestige (PEP) can be defined as the

level at which the employee believes the company he/she works for is prestigious compared to

other companies in the market place (Mignonac, Herrbach, & Guerrero, 2006). This study

proposes to collect data in an attempt to discover if, in fact, Perceived Employee Prestige does

affect employee retention. One major control will be the focus on high performing employees.

High performing employees are the gears that drive organizational success. Allen (2008) states,

“Blanket retention policies may be disadvantageous if they appeal to employees at all levels of

performance, and organizations would want to adopt particular strategies that contribute to the

retention of their most valued employees while avoiding control methods that would appeal

primarily to average or low performers (as cited in Steel et al., 2002).” Thus, this study will

focus on collecting data from high performing employees designated by their company.

To conclude, this study aims to expand on the limited amount of research that has

examined perceived employee prestige as an employee’s reason for staying, while testing


whether this factor relates to high performers. To perform the study, a theoretical framework was

constructed from a model of employee retention that has developed more than fifty years of

rigorous inquiry (March & Simon, 1958). To collect data, a sample of 50,000 high performing

employees, as designated by their employer, were asked to answer four open-ended questions

pertaining to what factors would make them stay with an employer.


Chapter 3: Methodology

Participants

To determine if company prestige plays a factor in employee retention, a population of

50,000 employees at various levels of seniority, from four different companies (two tier one &

two tier two), were asked to answer a questionnaire of four open-ended questions via an online

link.

Each employee from the four companies was designated by their company as high performers

based on the employee’s most recent job performance rating. Four job levels were included in

the study. The four included hourly (55%), salaried/professional (25%), managers (17%) and

executives (3%). The survey was present in two linguistic options: English and Spanish. The

participants were geographically dispersed and were located in all fifty states in the United Sates.

No international participants were included.

Procedure

Employees at four companies were asked about their reasons for staying in a four

question open-ended survey. Participants were sent a link to the survey in their work email via

ATLAS. Management from each company organized the logistics, booked computer rooms, and

handled any IT related issues. The surveys were taken at all locations over a five week period.

Each survey location varied. Some locations held from 10-25 participants at a time and some

locations held up to 50 participants. Privacy screens were placed on all computers so that

participants would not see other respondents’ answers.

Measures


To identify the reasons that influenced employees to stay, participants were asked to type

a response to the following four questions:

“What are the top three reasons you stay with this company?”

“What factors keep you from quitting your job here and working somewhere else?”

“Name the aspects that would make up the ideal company for you?”

“What characteristics must a company have in order for you to want to stay with that

company until retirement?”

The responses above were coded as either mentioning company prestige or not mentioning

company prestige. Using ATLAS, a qualitative data analysis software each participant’s

response was coded as “1” when prestige was mentioned and “0” when it was not.

To only study high performers, the human resources department of each company was asked to

make a list of employees who performed at or above expectations. The participants were

uploaded into the ATLAS database and an anonymous email went out to each participant at each

company.

Once all the data was collected it was independently analyzed by two researchers. Each

researcher was instructed to read the questionnaires and rate all the answers that mentioned

prestige with a “1” and answers that did not mention prestige with a “0”. After the questionnaires

were independently scored, the five researchers went through each question together to increase

the validity of the scores. For an added level of validity and reliability. Cohen’s Kappa was used

to measure the level of agreement between the two researchers Cohen, J. (1968). Results of

Cohen’s Kappa yielded a Kappa of .74; suggesting 74% agreement between the two raters.


Chapter 4: Findings

On average, about 41% of the 50,000 questionnaires collected from the employees mentioned

prestige at least one time within their questionnaire. Table 1 shows the breakdown of how many

participants actually talked about the prestige of their respective company in the questionnaire.

Of the 20,396 employees who talked about prestige, not every person specifically used the word

prestige to describe the company. However, of those who did not specifically use the word

prestige, they did use supportive text that triggered “prestige” so the questionnaires will be

counted accordingly. Looking at the Frequency of Non-specified Prestige and Representative

Quotes (Table 2), it exemplifies how a participant’s response can be coded as “mentioned

prestige” without the participant actually using the word prestige.

Table 1


Frequency of Non-specified Prestige and Representative Quotes Retention Factor Frequency % Representative Quotes

1. Organizational Prestige 20,396 40.8 The top three reasons I’m here is because: 1. it’s [company’s name] and not many people can say they’ve worked for [company’s name], they pay well, and I get to travel.

2. Organizational Prestige 20,396 40.8 It makes me proud to say I’m working for one of the largest consulting firms in world. Being a part of such a select group of people is an honor, and I’m happy to be contributing to what make us at [company’s name] better than the rest.

3. Organizational Prestige 20,396 40.8 An ideal company for me would be a company that is well established in its field, known across the globe, focuses on team building, and equal opportunity for growth and promotions.

4. Organizational Prestige 20,396 40.8 Security! I need to know that the company will be around long enough for me to build my way up and retire. It needs to have versatility, and be able to withstand changes within the economy. In addition, the company has to show they are just as concerned of my retirement fund as I am; just like [company’s name] does.

Table 2


Chapter 5: Summary, Conclusions, AND Recommendations

In an environment where companies are desperate to avoid the high cost of employee

turnover and keep their best employees from their competitors, employers are searching more

than ever for ways to understand what factors truly encourage employees to stay. This research

set out to answer the question, “Does employee perceived external prestige affect employee

retention?” By doing so, we have advanced the human capital literature and we gave employers a

little more insight into protecting their most valuable resource.

Methods and Findings

In this research, employees at four companies were asked about their reasons for staying in

a four question open-ended survey. Through this survey, qualitative data was collected and then

codified in order to quantify the responses. From 50,000 participant responses, we discovered

that employee perceived external prestige does affect employee retention. In the study, we found

that not only was employer prestige consistently cited as one of the reasons people stayed but,

also it was cited 40.8% of the time.

Implications for Business and Future Research

For employers, this data opens the door for another way companies can retain their best

talent for longer and recruit the best talent in the first place. Using this data, human resource

managers can go to executives and persuade them to work harder at promoting the company’s

brand to employees, as well as to the general public. Chief executive officers may now see the

benefit of getting company research published in prestigious magazines, doing interviews during

primetime and spending advertising dollars on marketing the company to the general public; as

opposed to its products or services. As for researchers, this study had a very limited scope and


there are several ways future researchers can expand it and improve on it. First, future

researchers can make hypotheses about the way prestige is viewed by high performing

employees versus low performing employees and then test those hypotheses through research.

Next, future researchers can reproduce this study to make sure the testing constructs were both

reliable and valid. Finally, researchers may want to study how prestige works in tandem with

other retention factors to see what combination of retention factors works best or is cited most

often by respondents. As employers look to survive in the new knowledge economy, they must

learn to adapt or die. By working with researchers, business leaders can learn more about what

their employees both want and need. Researchers will also benefit from this arrangement and

will do well to look to business for problems to research.


References

Allen, David. G (2008). Retaining Top Talent. Effective Practice Guidelines: A Guide to

Analyzing and Managing Employee Turnover. Retrieved from

http://www.shrm.org/about/foundation/research/Documents/Retaining%20Talent-

%20Final.pdf

Baltes, B.B., Briggs, T.E., Huff, J.W., Wright, J.A., & Neuman, G.A. (1999) Flexible and

compressed workweek schedules: A meta-analysis of their effects on work-related criteria.

Journal of Applied Psychology, 84, 496-513.

Branham, L. (2005). Planning to become an employer of choice. Journal of Organizational

Excellence, 24, 57-68.

Bureau of Labor Statistics. (2015). Job Openings and Labor Turnover Survey Highlights.

Washington, DC: U.S. Government Printing Office.

Fombrun, C. J., & Shanley, M. (1990). What’s in a name: Reputation-building and corporate

strategy. Academy of Management Journal, 33, 233-258.

Hausknecht, J., Rodda, J., & Howard, M. (2009). Targeted Employee Retention: Performance-

Based and Job-Related Differences in Reported Reasons for Staying. Human Resource

Management, 269–288. doi:10.1002/hrm.20279.

March, J.G., & Simon, H.E. (1958). Organizations. New York: John Wiley.

Mignonac, K., Herrbach, O., & Guerrero, S. (2006). The Interactive Effects of Perceived

External Prestige and Need for Organizational Identification on Turnover Intentions.

Journal of Vocational Behavior, 69 (3), 477-493.

http://www.shrm.org/about/foundation/research/Documents/Retaining%20Talent-%20Final.pdf

http://www.shrm.org/about/foundation/research/Documents/Retaining%20Talent-%20Final.pdf


Mobley, W.H., Griffeth, R.W., Hand, H.H., & Meglino, B.M. (1979). Review and conceptual

analysis of the employee turnover process. Psychological Bulletin, 86, 493-522.

Muchinsky, P.M., & Morrow, P.C. (1980). A multidisciplinary model of voluntary employee

turnover. Journal of Vocational Behavior, 17, 263-290.

Muhoho, J. (2014). Assessment of Factors Influencing Employee Retention in Tanzania’s Work

Organisations. Innovative Space of Scientific Research Journals, 9 (2), 687-697.

Nawaz, N., Jahanian, A., & Tehreem, S. (2012). Determinants of Employee Retention in

Pakistan International Airlines (PIA). European Journal of Business and Management, 4

(7), 1-53.

Porter, L.W., & Steers, R.M. (1973). Organizational, work, and personal factors in employee

turnover and absenteeism. Psychological Bulletin, 80, 151-176.

Price, J.L., & Mueller, C.W. (1981). A casual model of turnover for nurses. Academy of

Management Journal, 24, 543-565.

Rappaport, A., Bancroft, E., & Okum, L. (2003). The Aging Workforce Raises New Talent

Management Issues for Employers. Journal of Organizational Excellence, 23, 55-66.

Steel, R.P., Griffeth, R.W., & Hom, P.W. (2002). Practical Retention Policy for the Practical

Manager. Academy of Management Executive, 16, 149-162.


Appendix A

E-mail Letter with Survey Link

Dear <Insert Employee Name>,

Your opinion is valued in order to determine ways to improve employee / employer relations. Your input will help us understand what factors employees value the most from employers. The conclusions we draw from this study will help us add services to this company that will make the lives of all of our employees better. The assessment may take 15 to 20 minutes to complete. The link and case-sensitive password are provided below. Click the finish button only at the end of the assessment.

www.texasa&m-commerce.edu/surveys/

Thank you for your time and commitment.

<Insert HR Representatives Name>

http://www.texasa&m-commerce.edu/surveys/


Appendix B

Reasons for Staying Survey

1. “What are the top three reasons you stay with this company?”

2. “What factors keep you from quitting your job here and working somewhere else?”

3. “Name the aspects that would make up the ideal company for you?”

4. “What characteristics must a company have, in order for you to want to stay with that

company until retirement?”

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