THE CHALLENGES OF EMPLOYEE RETENTION IN

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THE CHALLENGES OF EMPLOYEE RETENTION IN INSTITUTIONS OF HIGHER LEARNING (A Survey of the Institute of Advanced Technology Branches, Nairobi)

BY: WANGATIA MANYAH VINCENZIO DHRM / NRB/ 37094

Research project submitted in partial fulfillment of the requirement for the award of the Diploma in Human Resource Management to The Kenya Institute of Management

JULY 2010

DECLARATION

This research study is my original work and has not been presented to any other examination body. No part of this research should be reproduced without my consent or that of The Kenya Institute of Management.

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DECLARATION BY THE SUPERVISOR This work has been submitted for defense with my approval as The Kenya Institute of Management Supervisor.

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For and on behalf of The Kenya Institute of Management

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Branch Manager

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ACKNOWLEDGEMENT

I am grateful to the Kenya Institute of Management (KIM) for the provision of the necessary facilities I needed for this project research. I acknowledge the close assistance and sacrifice accorded to me by my supervisor M/S Jane Kariuki in guiding me throughout my project research process and report write up.

I greatly appreciate my fellow students for their moral support and encouragement at different levels as we went through this course.

Special thanks go to my beloved wife Elizabeth for her moral support, understanding and commitment towards our family during the entire period of my studies.

Thank you all and God bless you for your sacrificial contribution to my success.

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DEDICATION

This work is dedicated to my wife Mrs. Elizabeth Kahayi Wangatia.

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ABSTRACT The purpose of the study was to establish the challenges faced in employee retention at IAT. The research sought to: - establish how organization culture, Training, compensation, recruitment contribute to employee retention. The study results will be helpful to human resource managers in formulating effective employee retention techniques. The findings will be useful to the policy makers at the Ministry of Labour by providing an analysis on the factors that contribute to employee retention and propose possible policy interventions. The study will contribute to literature in the field of employee retention for reference by future researchers. Descriptive methodology was adopted with both quantitative and qualitative approaches. Stratified sampling technique was used to come up with seven homogeneous departmental strata while simple random sampling was applied to each stratum to come up with a sample size of 43. In collecting data, the study purposively selected seven managers one from each branch who were interviewed using an interview schedule and questionnaires self administered to the rest of the sample size. The study found that the organization experienced an average of 9 % employee loss annually. 55 % of respondents were between ages 28 to 37 years. The organization exercises a power culture that emphasizes human inequalities. 71 % of employees had attended training programs but only 45 % felt motivated after training. 51.6 % of respondents rated training programs as average. 69 % rated compensation scheme as below average while 60 % rated recruitment scheme as average. 72 % of employees who leave the organization are between the age of 28 and 37 years. The researcher recommends adoption of an open and friendly organizational culture to break the high “power distance”, implementation of a well planned Training program, a good succession plan and employee retention programs to deal with possible crisis situations, enforcement of guidelines and laws governing compensation of all job groups in both the public and private sectors by government, as well as fair and just recruitment programs.

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TABLE OF CONTENTS DECLARATION............................................................................................................ ii DEDICATION ...............................................................................................................iv ACKNOWLEDGEMENT ............................................................................................ iiii ABSTRACT ....................................................................................................................v TABLE OF CONTENTS................................................................................................vi LIST OF TABLES ..................................................................................................... viiii LIST OF FIGURES ........................................................................................................ix OPERATIONAL DEFINITION OF TERMS...................................................................x ACRONYMS ............................................................................................................... xii CHAPTER ONE 1.0 INTRODUCTION ...................................................................................................1 1.1 Background of the Study ........................................................................................1 1.2 Statement of the Problem .......................................................................................5 1.3 Research Objectives ...............................................................................................6 1.4 Research Questions ................................................................................................6 1.5 Significance of the Study .......................................................................................6 1.6 Limitations of the Study .........................................................................................7 1.7 Delimitation of the Study .......................................................................................7 1.8 Scope of the Study .................................................................................................8 1.9 Conceptual Framework of the Study ......................................................................8 CHAPTER TWO 2.0 LITERATURE REVIEW ...................................................................................... 11 2.1 Introduction .........................................................................................................11 2.3 Factors affecting Employee Retention ..................................................................13 2.4 Critical Review ....................................................................................................25 2.5 Summary .............................................................................................................26 CHAPTER THREE 3.0 RESEARCH DESIGN AND METHODOLOGY ................................................. 27 3.1 Introduction .........................................................................................................27 3.2 Research Design ..................................................................................................27

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3.3 Target Population.................................................................................................27 3.4 Sampling Design and Procedure...........................................................................28 3.7 Data Analysis .......................................................................................................29 CHAPTER FOUR 4.0 DATA ANALYSIS, PRESENTATION AND INTERPRETATION ................... 30 4.1 Introduction .........................................................................................................30 4.2 Quantitative Data Analysis ...................................................................................30 4.3 Qualitative Data Analysis .....................................................................................42 CHAPTER FIVE 5.0 SUMMARY OF MAJOR FINDINGS, CONCLUSIONS, RECOMMENDATIONS AND SUGGESTION FOR FURTHER STUDY………... 45 5.1 Introduction .........................................................................................................45 5.2 Summary of Major Findings ................................................................................45 5.3 Answers to research questions ..............................................................................46 5.4 Conclusions .........................................................................................................48 5.4 Recommendations ................................................................................................50 5.5 Suggestion for Further Study................................................................................51 REFERENCES ............................................................................................................ 52 APPENDIX Questionnaire ................................................................................................................ 54

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LIST OF TABLES Table 3.1:

Target population by branch……………………….…..………………..27

Table 3.2:

Sample Size……………………….…..……………………….…………28

Table 4.1:

Response Rate ……………………….…..……………………….……...30

Table 4.2:

The distribution of the sample size by gender……………………….…..31

Table 4.3:

Age Distribution……………………….…..……………………….……32

Table 4.4:

Work Experience……………………….…..…………………………....33

Table 4.5:

Employee distribution in departments by branch………………….…….34

Table 4.6:

Employee loss……………………….…..……………………….………35

Table 4.7

Organizational Culture……………………….…..………………………36

Table 4.8:

Respondents who attended training programs……………………….…..37

Table 4.9:

Motivation after attending Training programs……………………….…..38

Table 4.10:

Respondents feeling on relevance of Training attended…………………38

Table 4.11

Rating for Compensation……………………….…..……………………39

Table 4.12

Rating for Recruitment……………………….…..……………………...40

Table 4.13:

Percentage employee lost by age……………………….…..……………41

Table 7.1:

Number of employees lost annually from the organization……………...55

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LIST OF FIGURES Figure 1.1:

IAT organization structure…………………………………..………….....5

Figure 1.2:

Conceptual framework………………………………………………….....8

Figure 4.1:

Response Rate……………………………………………………………31

Figure 4.2:

Gender Distribution……………………………………………………...32

Figure 4.3:

Respondents’ age Distribution……………………….……………..........33

Figure 4.4:

Employees work experience……………………………………………..34

Figure 4.5:

Employee population by branch..………………………………………..35

Figure 4.6:

Percentage Employee loss by departments……………….…………......36

Figure 4.7:

Responses on Organization Culture……………………………………..37

Figure 4.8:

Training and its effects on employees…………………………………...38

Figure 4.9:

Rating on Relevance of Training………………………………………...39

Figure 4.10: Rating on Compensation………………………………………………....40 Figure 4.11: Rating on Recruitment….………………………………………………..41 Figure 4.12: Percentage Employees loss by age………………………………………42

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OPERATIONAL DEFINITION OF TERMS Challenge

a demanding or stimulating situation, a test of ones’ abilities or resources in a demanding but stimulating undertaking

Education

training

Talent

an endowment or quality in some field or activity; It is part-born, part-learned; either way takes determination and effort; employee.

Employee retention is a process in which the employees are encouraged to remain with the organization for the maximum period of time or until the completion of the project. Technique

a procedure used to accomplish a specific activity or task.

Training

the planned process of facilitating learning in order to become effective and equipped for handling more challenging tasks in future

Compensation

Basic pay, salary, benefits, services, recognition

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ACRONYMS AIR

American Institute for Research

EBC*L

European Business License

ETC

et cetera

IAT

Institute of Advanced Technology

CompTIA

Computer Technicians’ Industry Association

ICDL

International Computer Driving License

IRD

Instructional Research Design

ISO

International Standards Organization

IT

Information Technology

HRM

Human Resource Management

KIM

Kenya Institute of Management

MCSE

Microsoft certified Systems Engineer

MCPs

Microsoft Certified Professionals

MCITP

Microsoft Certified IT Professional

MOL

Management of Learning

NCC

National Computing Centre

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CHAPTER ONE 1.0 INTRODUCTION 1.1 Background of the Study Employee retention is a process in which the employees are encouraged to remain with the organization for the maximum period of time or until the completion of the project. This process is beneficial for the organization as well as the employee. Employees may have job opportunities at hand and when they feel dissatisfied with the current employer or the job, they switch over to the next job. It is therefore the responsibility of the employer to retain their best employees because if they don’t, they would be left with no good employees (http://retention.naukrihub.com/retention.html). One of the greatest challenges facing companies today is retaining top talent. The yearly expense to an organization of replacing an employee - including separation, replacement, training and lost performance costs- can be as much as that employee’s salary for a year. Turnover also erodes morale among those who stay and harms customer retention (American Institute for Research, 2009) According to the American Institute for research (AIR, 2009) reasons for turnover vary by industry and profession. They include multiple factors such as; Compensation and benefits, Supervisor - subordinate relations, Organizational culture, Two-way communication, corporate identity/ prestige, and Working conditions. These factors may play a role in determining employee retention, but the relative importance of each depends upon the organization. AIR applies several instruments, including individual interviews, focus groups, surveys, and benchmarking, for each unique enterprise to offer the most comprehensive solution to their clients’ retention needs giving solutions or suggesting services provided by their strategic partners to achieve reduction in turnover and a stronger, more satisfied workforce. Organizations can do little to manage turnover unless there is enough understanding of the talent they have at hand. Most commentators recommend exit interviews to collect information about reasons for leavers resignations, but the problem is whether the individual will feel secure to tell the truth and will depend on the culture of

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the organization, the specific reasons for leaving and the support that the individual will need from the organization in the future in form of references (Torrington, Hall & Taylor, 2005). Despite the disadvantages, exit interviews may be helpful if handled sensitively and confidentially perhaps by the Human resources department rather than the line managers. Analyses of turnover rates between different departments and different job groups may also shed light on causes of turnover. Attitude surveys can also provide relevant information (Torrington et. al., 2005). According to Torrington (2005) employees leave jobs for a variety of reasons. The Outside factors constitute reasons not related to their work for example a person moving away when a spouse or when partner is relocated. Others include the wish to fulfill a long-term ambition to travel, pressures associated with juggling the needs of work, family and illness. To some extent such turnover is unavoidable. Reduction can be through provision of career breaks, forms of flexible working and / or childcare facilities. Functional turnover include resignations welcomed by both employers and employees alike. They may stem from an individuals poor performance or failure to fit in comfortably with the organizational or departmental culture. The main solution to reduce this turnover lies in improving recruitment procedures so that fewer people in the category are appointed in the first place. However some poorly engineered change management schemes are to blame especially where they result in new work pressures or workplace ethics. Push factors result into turnover due to dissatisfaction with work or organization. This may be due to insufficient development opportunities, boredom, ineffective supervision, poor levels of employee involvement and straight-forward personality clashes. It occurs due to absence of mechanisms for picking up signs of dissatisfaction and lack of opportunity for unhappy employees to voice their concerns. Pull factors relate to attraction by rival employers offering better salary and employees leaving in order to improve their living standards. In addition, it encompasses broader notions of career development, the wish to move into new areas of work with better opportunities, the chance to work with particular people, and more practical

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questions such as commuting time. Solutions to this include the need of employers to be aware of what other employers are offering and ensure that as far as possible this is matched or offer a broadly comparable package of pay and opportunities. Another solution is to ensure that the employees appreciate what they are currently being paid emphasizing on effective communication of any unique selling points and the extent to which opportunities comparable to those offered are given. Taylor (2002) and his colleagues conducted interviews and found relatively few of the employee leaving the job for financial reasons. Indeed, more of the interviewees took pay cuts in order to move from one job to another than those who moved due pay rise. Other factors that played a bigger role are; dissatisfaction with work conditions, especially hours; a perception that they were not being given sufficient career development opportunities and a bad relationship with their immediate supervisor. This third reason was the most commonly mentioned in the interviews lending support to the fact that employees often leave their managers and not their organizations. It is easy for an organization to get itself into a vicious circle of turnover if it does not stem a retention problem. Modest turnover rates can rapidly increase as the pressures on remaining staff become greater, leading to serious operational difficulties. When more than one established members of a team leave, more is demanded of those left to carry the burden. First, there may be a sizeable time gap between leavers resigning and new starters coming into post. There is the period when the new people are learning their jobs, taking more time to accomplish tasks and needing assistance from the more established employees (IDS, 2000). The problem can be compounded with additional pressure placed on managers and Human resources specialists faced with the need to recruit people quickly, leading to the selection of the people not wholly suited for the job in question. The result is greater turnover as people respond by looking for less pressured job opportunities elsewhere. Problems of this kind were faced by the Japanese engineering Company, Makita. It addressed the issue by increasing its induction program from half a day to four weeks and by taking a good deal more care over its recruitment process. The result was a reduction in turnover levels from 97 per cent in 1997 to 38 per cent in 1999 (IDS, 2000).

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The key driver for both skills retention and utilization is the presence of a learning orientation in the organization. People stay in organizations if they feel they are learning and progressing in their careers. Retention or utilization of skilled people is not necessarily improved through strategies such as increasing wages, adopting familyfriendly working policies, and the use of non - monetary rewards. These things help make people feel satisfied, but they are not sufficient to retain skilled people in a tight labour market. What does facilitate retention is the application of high-performance work practices such as a commitment to learning, open-mindedness and shared vision. More widespread adoption of these practices would benefit employers and workers alike. 1.1.1 Profile of IAT The Institute of Advanced Technology (IAT) is a fully accredited training institution offering international Microsoft certified Information technology products, National Computing Centre (NCC) of the United Kingdom courses, Computer Technicians’ Industry Association (CompTIA) certifications, Cisco systems, European Business License (EBC*L) certifications, International Computer Driving License (ICDL) which is an ICDL foundation program and degree programs in collaboration with St. Pauls’ University and Maseno University in Kenya. IATs’ Vision is to be recognized as Africa’s center of excellence, role model and authority in education and training. Its Mission is to delight her customers, enhance stakeholders’ social and economic well-being and continuously expand her market share by aligning her training with industry best-practice benchmarks and providing world class quality education and training through modern and conducive learning environments. With over 12,000 students having achieved ICDL certifications and over 10,000 in the other courses, IAT was the first training institution in Africa to attain recognition for its quality system as set by International Standards Organization (ISO) and has retained the ISO 9001: 2000 Certification since 1999 (IAT Prospectus, 2009). IAT has eight (8) training centers with one branch in Mombasa while the remaining seven are in Nairobi namely: - Loita, Westlands, Yaya, Buruburu, Fedha Towers, Thika Road and Symphony branches.

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Figure 1.1: IAT organization structure East Africa Manager

Country Manager

MOL Manager

Senior Accountant

Centre Managers

IT Managers

Sales Managers

HR Director

Employees

Source: HR Data (2009) 1.2 Statement of the Problem All companies, regardless of size, are struggling with employee retention. A debate raging for many decades has been whether retaining them is more important than finding a successor to the vacant position (Rajesh, 2007). The yearly expense to an organization of replacing an employee- including separation, replacement, training and lost performance costs- can be as much as that employee’s salary for a year. Turnover also erodes morale among those who stay and harms customer retention (AIR, 2009). It is easy for an organization to get itself into a vicious circle of turnover if it does not stem a retention problem. Modest turnover rates can rapidly increase as the pressures on remaining staff become greater, leading to serious operational difficulties and challenges. When more than one established members of a team leave, more is demanded of those left to carry the burden. First, there may be a sizeable time gap between leavers resigning and new starters coming into post. There is the period when the new people are

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learning their jobs, taking more time to accomplish tasks and needing assistance from the more established employees (IDS, 2000). The problem can be compounded with additional pressure placed on managers and Human resources specialists faced with the need to recruit people quickly, leading to the selection of the wrong person for the job. This result in greater turnover as employees respond by looking for less pressured job opportunities elsewhere, (IDS, 2000). The study will therefore concentrate on establishing the challenges experienced in employee retention in higher institutions of learning with specific reference to IAT, Nairobi. 1.3 Research Objectives 1.3.1 General Objective To establish the challenges faced in employee retention at the Institute of Advanced Technology. 1.3.2 Specific Objectives i.

To find out how organization culture affects employee retention

ii.

To investigate how Training affects employee retention

iii.

To establish the effect of compensation on employee retention.

iv.

To find out how recruitment contributes to employee retention.

1.4 Research Questions i. How does organization culture affect employee retention? ii. How does Training contribute to employee retention? iii. What is the effect of compensation on employee retention? iv. How does recruitment contribute to employee retention? 1.5 Significance of the Study 1.5.1 Human Resource Managers The study results will be helpful to human resource managers in formulating effective employee retention techniques. It will also form a basis for decision making on administration policies that can address recruitment, training, compensation and organization culture challenges. 6

1.5.2 Policy makers The findings of the study will be useful to the policy makers at the Ministry of Labour since it will provide an analysis on the factors that contribute to employee retention in institutions of higher learning. The study will look at factors that lead to employee turnover and propose possible policy intervention measures. 1.5.3 Researchers Finally, this study will contribute to literature in the field of employee retention for reference by future researchers. 1.6 Limitations of the Study 1.6.1 Uncooperative Respondents There was lack of cooperation by respondents in giving relevant information fearing that it would be used against them. Due to the nature of work, staffs were busy attending to respective duties thus lacked time to respond to the questionnaires issued. 1.6.2 Suspicion There was suspicion among respondents over researchers’ intentions for collection the data thus a general reluctance in the filling questionnaires. 1.6.3 Biasness Some respondents gave biased information based on their interpretation of research questions and while some were denied permission to release information considered to be confidential to the organization which they felt threatened the organizations image. 1.7 Delimitation of the Study 1.7.1 Uncooperative Respondents All respondents were given assurance of confidentiality for information collected in the survey. 1.7.2 Suspicion The researcher explained to the respondents that their responses were meant solely for the purpose of study and would not be used against them. Writing of respondents’ names was made optional.

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1.7.3 Biasness A pre-test of the questionnaire and interview schedule was carried out in the seven departments at Loita branch on a sample of respondents randomly sampled and not included in the sample size to enhance validity of the questionnaires and assess clarity of the instrument items. Those that failed to measure the intended variables were modified or discarded. Respondents who gave unclear information were asked to clarify what they meant by their responses. 1.8 Scope of the Study The study was carried out at seven (7) IAT branches in Nairobi taken as a representative of other institutions offering similar services. They included Loita, Westlands, Yaya, Buruburu, Fedha Towers, Thika Road and Symphony branches. 1.9 Conceptual Framework of the Study Figure 1.2: Conceptual Framework Independent variables

Dependent variable

Organizational Culture Training Talent Retention Compensation

Recruitment

Source: Author (2010)

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1.9.1 Organizational Culture Culture is a pattern of basic assumptions that has worked well enough to be considered valid and thus taught to new members as the correct way to perceive, think, and feel in relation to those problems. Although organizational problems are universal, different groups resolve them differently. The resolutions are internalized and shape the way in which groups of people live and think. They represent why people behave the way they do and why they hold the beliefs and values they espouse. Generally, a friendly and accommodating organization culture where employees feel secure retains employee more than a closed and harsh one. 1.9.2 Training Training is that attempt to provide an employee with information, skills and an understanding of organization and its goals. This is to help a person continue to make positive contribution in the form of good performance. Employees who invest heavily in education and training will suffer high employee turnover rates. The logic behind this wisdom is that employers who pay for employee development cannot afford to pay their employees the full value of their worth, because the employer must recoup the cost of the education. Therefore, employers who do not provide or pay for the education can offer higher wages - raiding those employers who do provide education. So the prediction is that investing in employees’ education and training contributes to high turnover rates. Because this line of reasoning has permeated the thinking of many senior executives, it is one of the barriers that must be overcome in positioning learning as a strategic investment. Appropriate Training programs accompanied with commensurate compensation retains employee while good training with poor compensation results to employee losses due to poaching by competitors and in their search for better paying opportunities among other factors. 1.9.3 Compensation This is a management function that deals with rewards individuals receive at work. Employees trade labour and loyalty for financial and non-financial compensation 9

(Pay, benefits, services, recognition, etc). It’s the major cost of doing business for many organizations of the 21st century and is also the main reason individuals seek employment. Generally, good pay packages attract and retain employees while poor compensation often leads to employee loss depending on prevailing market and organizational conditions. 1.9.4 Recruitment Innovation and quality arise from your human resources and not from machines, processes, or financial instruments. In order to maximize the performance of your human resources and, thus organization, you must attract, select, develop, motivate and retain the best people possible. Poor recruitment makes every part of the organization less effective. Excellent recruitment can transform an organization in a short period of time. An organization with 20 % turnover per year and recruitment practices that hire average employees can theoretically become fully mediocre within five (5) years. Recruitment of right personnel contributes to high employee retention as they feel they are handling fulfilling jobs that meet their job related needs.

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CHAPTER TWO 2.0 LITERATURE REVIEW 2.1 Introduction This section contains literature review on employee retention. The chapter is divided into two sections namely: overview on employee retention and secondly, factors affecting employee retention based on study objectives. The critical review cites gaps with the summary highlighting keys issues raised. 2.2 Overview of Employee Retention A company's employee refers to its most important people - it's most indispensable and valued employees. These are skilled individuals who are difficult to recruit and, because of their competency levels, easy to lose. These are the people who companies fight for. Employee retention becomes an important item of the HR management agenda when organizations are faced with skills shortages. When labour is in reasonably good supply, leavers can easily be replaced by new starters (Torrington et. al., 2005). According to The Herman Group (2010) report on Employee Retention in the New Millennium, employee retention is most critical issue facing corporate leaders as a result of the shortage of skilled labor, economic growth and employee turnover. Today's labor force is different. Supervisors must take responsibility for their own employee retention. If they don't, they could be left without enough good employees. A wise employer will learn how to attract and keep good employees, because in the long run, this workforce will make or break a company's reputation. New supervisors must be prepared to be collaborative, supportive, and nurture their people. The old style of "my-way-or-the-highway" style of management is a thing of the past. Most new supervisors need training to understand what it really takes to retain employees. Employee retention involves being sensitive to people's needs and demonstrating the various strategies in the five families detailed in Roger Herman's classic book on

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employee retention, Keeping Good People as: - Environmental , Relationship, Support , Growth and Compensation. Employee retention takes effort, energy, and resources but the results are worth it. According to research, the most stable work forces are to be found in the public services, where reported annual turnover rates in United Kingdom were only 10-11 per cent (CIPD, 2003). Torrington et. al.,(2005) reported that turnover rates also vary regionally and over time being highest when and where average pay levels are highest and unemployment is low and between professions. As a rule, the more highly paid a person is, the less likely they are to switch jobs, but there remain some highly paid professions such as sales where turnover is always high. People tend to move from employer to another early in their careers, often staying in one employment for just a few months. But once they find a job or an employer they like; they tend to remain for several years (Torrington et. al., 2005) Young workers also tend to switch jobs more often than their older colleagues. Macaulay (2003) found out that 86 per cent of employees over 50 years had completed one year with their employers compared to only 51 % with 18- 24 years of age in the United Kingdom. Employee retention has always been an important focus for human resource managers. Once a company has invested time and money to recruit and train a good employee, it is in their own best interest to retain that employee, to further develop and motivate him so that he continues to provide value to the organization. But, employers must also recognize and tend to what is in the best interest of their employees, if they intend to keep them. When a company overlooks the needs of its employees and focuses only on the needs of the organization, turnover often results. Excessive turnover in an organization is a prime indicator that something is not right in the employee environment. Employee retention is measured by an employee's longevity with a company, and is the desired outcome of a company hiring workers it wants and needs. Many organizations find it more productive and profitable to redirect resources formerly allocated to recruiting, hiring, orienting, and training of new employees and use them instead toward employee retention programs. Such programs identify good performers

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who are likely to leave the company and work proactively to retain them (www.123helpme.com) Turnover always rises when the economy is strong and jobs are plenty because there are more opportunities available for people to change employers. Conversely, during recessions, staff turnover falls because of relatively few attractive permanent positions advertised. 2.3 Factors affecting Employee Retention Human Resource Management recruits and develops personnel to promote the organization’s objectives. It involves interviewing applicants, training staff, and employee retention through Compensation, benefits, employee/labor relations, health, safety, and security aspects. Its ultimate goal is to manage human capital and culture for the organization’s success. The selection of an effective manager is crucial in maintaining a nurturing and supportive environment for employees (Butcher, 2007).

2.3.1 Organizational Culture Organization Culture refers to the employees’ perceptions of the work environment of the Organization. It is influenced by the organization, personalities of participants, and organizational leadership. The Culture of the Organization may be conceived as the personality of an Organization and has a significant impact on employee retention. Organizations with an open Culture lead to higher employee retention. The open Culture is characterized with cooperation and respect within the employees and management. The management listens and is open to suggestions, gives praise, and respects the employees. Management also provides facilitating leadership. Employees are supportive of each other and there are high collegial ties among the employees. Employees are close and there is an atmosphere of cooperation and commitment (Butcher, 2007). Schein (1985) defined culture as a pattern of basic assumptions- invented, discovered or developed by a given group as it learns to cope with its problems of external adaptation and internal integration – that has worked well enough to be

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considered valid and therefore to be taught to new members as the correct way to perceive, think, and feel in relation to those problems Although the problems that all human societies face are universal, different groups will resolve them in different ways. The resolutions are internalized and become taken for granted but shape the way in which groups of people live and think. They represent why people behave the way they do, and why they hold the beliefs and values they espouse (Schneider and Barsoux, 1997). Members of a group or society share a distinct way of life with common values, attitudes and behaviors that are transmitted over time in a gradual, yet dynamic process (Harris et. al. 2003). Several models of how culture influences work exist. The most widely recognized is Hofstedes’ “theory of the cultural relativity of organizational practices”. He argues that national cultural differences are not changing much at all, even though more superficial work-related norms and values might be. As a result, he feels that national culture will continue to have a strong influence on the effectiveness of various business practices (Ivancevich, 2003). According to Hofstede culture differs in at least five ways. He found that differences in responses at work could be explained by four main factors namely; Individualism versus collectivism, power distance, avoidance of uncertainty and masculinity (Ivancevich, 2003). According to Individualism versus collectivism dimension, cultures differ in terms of relationship of person to his or her family. In some societies such as Peru and Taiwan, the groups’ achievement and well-being will be emphasized over individuals’. In contrast, individualistic societies such as United States and Australia place emphasis on individuals’ actions accomplishments and goals. In view of the power relationships, cultures with high “power distance” emphasize human inequality. For example symbols of power and authority such as large offices, tittles are usually found in a culture with a high power distance. In German corporations, the concepts of codetermination and worker councils are an organizational practice typical of low-power distance cultures (Ivancevich, 2003). Avoidance of uncertainty relates to knowing what the future holds. Cultures in Japan and Portugal with high avoidance of uncertainty attempt to predict, control and

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influence future events while those with low avoidance of uncertainty are more willing to take things day by day. To the extent that control reduces uncertainty, the rigid use of managerial control systems is more likely to be found in organizations in highuncertainty- avoidance cultures. In Masculinity dimension, Hofstede refers to division of roles for male and females that a particular culture imposes. Masculine cultures have strict sex roles; feminine cultures have less well-defined roles. Masculine organizational cultures like Austria and Japan might tend to be less supportive of efforts to integrate women into toplevel management than feminine cultures found in Norway and Sweden (Ivancevich, 2003). In addition to the above five factors are the Chinese long-term versus short-term orientation values. This refers to the extent to which cultures think in terms of the future or in terms of more immediate events. Human resources management can be influenced by the cultural differences along one of or more of theses dimensions. For example, there is evidence that national differences in uncertainty avoidance and power distance can affect the extensiveness of organizational selection practices (Ryan et. al. 1999). Similarly, differences in individualism and collectivism can affect overall success that a training program has on culturally diverse audiences (William 2001). These culture differences may work either for or against employee retention based on employee perceptions among other factors. 2.3.3 Training Training is a process that attempts to provide an employee with information, skills and an understanding of organization and its goals. They are also designed to help a person continue to make positive contribution in the form of good performance (Ivancevich, 2003). Training helps employees to do their work better while development prepares individuals for the future. It focuses on learning and personal development. Training is important for new and present employees. It attempts to improve the current or future performance. It is a systematic process of altering the behavior of employees in a direction that will help employees master specific skills and abilities needed to achieve

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organizational goals. This can be done through formal training where the employer provides opportunities for the employee to acquire job-related skills, attitudes, and knowledge (Ivancevich, 2003). One key factor in employee motivation and retention is the opportunity employees want to continue to grow and develop job and career enhancing skills. There are a couple of secrets about what employees want from Training opportunities. These ideas emphasize what employees want in Training opportunities and articulate your opportunity to create devoted, growing employees who will benefit both your business and themselves through your Training opportunities. These factors are key in multiplying the value of the Training you provide. They include allowing employees to pursue training in directions they choose, not just in company-assigned and needed directions and having the company support learning, in general, and not just in support of knowledge needed for the employee’s current or next anticipated job. Recognize that the key factor is keeping the employee interested, attending, and engaged (Heathfield, 2009). The development of a life-long engaged learner is a positive factor for the organization no matter how long the employee chooses to stay in your organization. These Training activities should be used to ensure that you optimize the employee's motivation and potential retention. One way to impact Training significantly is through realigning the responsibilities in an employee’s current job. This can be done by expanding the job to include new, higher level responsibilities, reassigning responsibilities that the employee does not like or that are routine, providing more authority for the employee to self-manage and make decisions, inviting the employee to contribute to more important, department or company-wide decisions and planning, providing more access to important and desirable meetings and providing more information by including the employee on specific mailing lists, in company briefings, and in your confidence(Heathfield, 2009). In addition, provide more opportunity to establish goals, priorities, and measurements assign reporting staff members to his or her leadership or supervision, assign the employee to head up projects or teams, enable the employee to spend more time with his or her boss and provide the opportunity for the employee to cross-train in other roles and responsibilities.

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According to Heathfield, (2009), formal Training programs may take various forms. They should enable the employee to attend external seminars and internally offered training session. Employees should be able to perform all of the activities listed before, during, and after a training session to ensure that the learning is transferred to the employee’s job. The programs should require the employee to train other employees with the information learned at a seminar or training session. It is the responsibility of the organization purchase business books for the employee, sponsor a book club or offer the time at a department meeting to discuss the information or present the information learned to others. It can also offer commonlyneeded training and information on an Intranet, an internal company website, pay for the employee to take online classes and identify low or no cost online training, provide a flexible schedule so the employee can take time to attend university, college, or other formal educational sessions as well as provide tuition assistance to encourage the employee's pursuit of additional education (Heathfield, 2009). Employees’ retention Conventional economic wisdom- the stuff of economics and MBA curricula- holds that employers who invest heavily in education and training will suffer high employee turnover rates. The logic behind this wisdom is that employers who pay for employee development cannot afford to pay their employees the full value of their worth, because the employer must recoup the cost of the education. Therefore, employers who do not provide or pay for the education can offer higher wages—raiding those employers who do provide education. So the prediction is that investing in employees’ education and training contributes to high turnover rates. Because this line of reasoning has permeated the thinking of many senior executives, it is one of the barriers that must be overcome in positioning learning as a strategic investment (Bassi, 2004). Some collective insights that emerged from a variety of recent research reports done by Aon Consulting, the Hay Group, the William M. Mercer Group, the Gallup Organization, and the American Society for Training in 2008 show that although money is clearly an important consideration, cash is not the primary factor that keeps people in their current job or attracts them away to a new job. Opportunity to grow and learn at work is emerging as a primary determinant of attracting and retaining employees (Bassi, 2004).

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Another key determinant of employee retention is the quality of an employee’s immediate supervisor. This is based on the fact that the management qualities that contribute to employee satisfaction and retention are “trainable.” Although employees consistently indicate that education and training are key aspects of their willingness to stay at or leave their current job, employees also typically rank the quality of their employer’s education and training function as low (Bassi, 2004). The only “intangible asset” found to predict the future financial performance of a firm- its revenue per employee and stock market price- is the firm’s retention rate for key employees (Bassi, 2004). Together, this body of research suggests that: - Keeping good people is an important determinant of financial performance, and The way to keep good people is to provide them with the skills they need to leave; that way they don’t feel that they have to. During the 1980s and 1990s, employers indicated to their employees that they were responsible for their own ongoing development. The increasing wage premium that was paid to those with high levels of skills communicated the message that lifelong learning is an increasingly important determinant of an individual’s financial security (Bassi, 2004). According to Bassi, (2004), it is not surprising that employees are focusing more than ever on their own development. Ironically, given many employers’ message that employees are responsible for their own development, is that those employers who are willing to share this responsibility now enjoy a competitive advantage in the marketplace. Winning the war for talent, a prerequisite for effectively competing, increasingly hinges on an enterprise’s capacity to provide and manage effective development for its people. What is perhaps surprising, given the centrality of employee development that is evident from the research summarized above, is the poor regard with which it is typically held by employees. This suggests that lip service given to the view that “people are our most important asset” is inadequate. If employers are serious about attracting and retaining the best people, then they must be equally serious about attending to managing learning. Learning must be run like the strategic business investment that it has become (Bassi, 2004).

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2.3.3 Compensation This management function deals with rewards individuals receive at work. Employees trade labour and loyalty for financial and non-financial compensation (Pay, benefits, services, recognition, etc) (Ivancevich, 2003). It’s the major cost of doing business for many organizations and is the main reason why individuals seek for employment (Hackett & McDermott, 1999). According to Antaya (2005), research demonstrates that people don’t start looking for new jobs because of money. They change jobs to work for companies that make them feel valuable, offering the opportunity for empowerment, career and personal growth, and the development of new skills. Employees should be shown that you care about them. Bonuses can be rewarded for good service. Handwritten notes can express appreciation. Employees’ should have the opportunity to attend workshops, conferences, and conventions. Employees can also be rewarded with special lunches and dinners. Studies have shown that higher employee satisfaction leads to increased customer satisfaction. Salaries and benefits are key components in attracting future employees and retaining current employees. Competitive salaries, offering incentive pay to current employees who recruit new staff are ways to enhance recruitment and retention. In addition to salaries, other benefits include participation in an employee retirement plan, disability insurance and sick leave, professional liability insurance and personal days, professional development, membership in professional associations and time away from work, (Kritsonis, 2002). Financial compensation is either direct or indirect. Direct financial compensation consists of the pay an employee receives in the form of wages, salaries, bonuses, or commissions. Indirect financial compensation or benefits consist of all financial rewards that are not included in direct financial compensation. Typical benefits include vacation, various kinds of insurance, services like child care or elder care etc (Ivancevich, 2003). From the employees’ point of view, pay is a necessity of life. It is a means by which they provide for their own and family needs. Compensation does more than provide for physiological needs. What a person is paid indicates their worth to the organization. The objective of compensation is to create a system of rewards that is equitable to employers and employees alike. The desired outcome is to attract employees

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to work hard and motivate them for better results. Patton suggests that compensation policy should provide several criteria for effectiveness (Ivancevich, 2003). According to Ivancevich (2003), Compensation should be; Adequate meeting the minimal governmental, union and managerial levels; equitable making sure that each person is paid fairly inline with their efforts, abilities and level of training. It should also be balanced incorporating pay, benefits and other rewards to provide a reasonable total reward package; be cost-effective implying that it should not be excessive considering what the organization can afford to pay; secure in terms of enabling the employee feel secure enough and aid him or her to satisfy basic needs. Good compensation should also be incentive-providing thus motivate effective and productive work as well as be acceptable to the employees meaning that they should understand the pay system and feel that it is a reasonable system for them and the enterprise. Kevin (2001) and Fay (2002) suggest that the compensation for services offered may vary. Most employers pay different rates to employees performing the same job. Pay differentials are based on two main factors i.e. one; the individuals experience, skills and performance and two; expectations that seniority, high performance or both deserve a higher pay. The reasons for paying employees different rates for the same job include the fact that pay differentials; allow firms to recognize that different employees performing the same job make substantially different contributions to meeting the organizational goals; allows employers to communicate a changed emphasis on important job roles, skills, knowledge etc; provide organizations with an important tool for emphasizing norms of enterprise without having employees change jobs that’s promotion; allow firms to recognize market changes between jobs in the same grade without requiring a major overhaul of the whole compensation system and making sure that the pay system does not violate the internal equity norms of most employees because this may reduce satisfaction with pay and make attraction and retention of employees more difficult (Kevin, 2001). Employee retention starts with competitive compensation and benefits. A company’s’ package should be reasonably close to her competitors. An employer doesn't have to offer the top salaries and benefits in the market. In fact, for a market leader you may be wasting money. If you find that your salary and benefits aren't competitive, fix

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them immediately. The consequences are very expensive - far greater than the cost of upgrading. Non-competitive compensation and benefits will limit you to attracting and hiring 'bottom feeders'. These people will accept job offers because it's their only one. Bottom feeders generally have low talent, skills, attitudes, and consequently low performance. They work to survive, rather than achieve. While they may not always arrive at work on time, they always leave on time(Kevin, 2001). The concept of saving money by not hiring employees may be dangerous. In addition to low performance, these people love to create or join unions - to protect their right to maintain low talent, skills, attitudes, and poor performance. Remember that when designing hiring, leadership, and organizational practices, unions do not cause unions, management does. Paying for low performance and potential unions are only the costly tip of the iceberg. The customer dissatisfaction that bottom feeders help create will cost you far more. Hiring 'cheap' employees becomes very expensive when your customers experience product quality inconsistencies, service quality inconsistencies and higher prices due to inefficiencies (Kevin, 2001). Kevin, (2001) indicates that the resulting customer dissatisfaction and lack of loyalty leads to the ultimate turnover cost and customer losses. This leads to lower profits which logically leads to lowering your organization's compensation and benefits package to make up for the loss in profits. 2.3.4 Recruitment Recruitment provides an opportunity to select from a pool of qualified applicants. HR department is responsible for designing a plan for employee retention. Treating all employees with dignity and respect is the key in retaining employees. The objective of HRM is to help an organization meet strategic goals by attracting and maintaining employees as well as manage them effectively (Butcher, 2007). Employee retention starts at orientation. HRM should provide an outline of relevant information to new employees regarding policies, values, operations, and culture. It should be thorough and include time in the training for questions from new

21

employees. After the orientation, feedback should be given as to what was effective and what should be done differently for future orientations (Butcher, 2007). Recruitment is the most crucial internal activity of every service organization. Poor recruitment makes every part of the organization less effective. Excellent recruitment can transform an organization in a short period of time. An organization with 20% turnover per year and recruitment practices that hire average employees can theoretically become fully mediocre within five (5) years (Sullivan, 2009). The concept of human resource management is that innovation and quality arise from your employees and not from your machines, processes, or financial instruments. In order to maximize the performance of your human resources and, therefore, your organization, you must attract, select, develop, motivate and retain the best people possible. Recruitment is the cornerstone of human capital management(Sullivan, 2009). There is a need to strike a balance at the recruitment stage between sending out messages which are entirely positive and sending out messages which are realistic. It is important not to mislead candidates about the nature of the work that they will be doing. Realistic job interviews are therefore most important when candidates, for whatever reason do not know a great deal about the job for which they are applying for. This may be because of limited job experience or because the job is relatively unusual and not based on type of workplace with which the job applicants are familiar. This helps to avoid recruiting people who subsequently leave within few weeks (Wanous, 1992; Hom & Griffeth, 1995) Better recruitment strategies result in improved organizational outcomes. The more effectively organizations recruit and select candidates, the more likely they are to hire and retain satisfied employees (Wanous, 1992; Hom & Griffeth, 1995). Sheila and Bernthal (2008) findings shows that strategies used by organizations to recruit both managerial/professional and non-management candidates differ. For recruiting managerial/professional candidates, the Internet is the most popular advertising medium, used by 76 % of the organizations surveyed. Organizations regularly utilize internal resources (e.g. internal job postings and employee referrals) when recruiting both internal and external candidates.

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Different kinds of agencies are used to recruit for positions at different levels. Temporary and government agencies are used mainly to recruit non-management candidates. Employment agencies, colleges, and professional organizations are used more often to recruit managerial/professional candidates. The quality of an organization’s offerings affects its ability to attract job candidates. Organizations believe they offer candidates a strong company reputation (69 %) and high-quality benefits packages (65 %) and learning opportunities (55 %). Many organizations do not offer stock options (37 %) or child care options (36 %) (Sheila and Bernthal, 2008). On best practices, Organizations with the most effective recruiting strategies were 15 to 19 % more likely to offer candidates high-quality options such as: - Potential for advancement, Company reputation, Stocks, Benefits package, Corporate culture and Salary scale. Organizations offering candidates and employees a positive culture (e.g., innovative, diverse, potential to advance) and learning environment have more satisfied employees and are more successful at retaining them (Sheila and Bernthal, 2008). There are many barriers to effective recruitment. The surveyed organizations report that the top barriers to effective recruitment of candidates are: - Shortage of qualified applicants (62 %), Competition for the same applicants (62 %), Difficulty finding and identifying applicants (48 %). Today’s tight labor market is making it more difficult for organizations to find, recruit, and select talented people. The competition for talent is intensifying, as there are fewer qualified applicants available. This shortage of applicants makes it all the more important for organizations to be able to effectively attract, select, and retain quality candidates (Sheila and Bernthal, 2008). As results from this survey indicate, organizations need to offer more than an attractive wage to entice qualified candidates. With the number of job opportunities currently available, candidates can afford to be choosy when searching for their ideal job. They are looking for more than just an attractive salary; candidates are seeking organizations that can offer them various kinds of benefits, the potential to advance, and an environment in which they can learn and thrive. If an organization cannot offer these, job seekers will find one that does. Thus, it is important for organizations to know exactly

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what they have to offer potential employees, and then highlight their best features when recruiting candidates (Sheila and Bernthal, 2008). Once organizations have successfully recruited candidates, they must select the best ones for the positions under consideration. Organizations use various tools to help them select individuals (Sheila and Bernthal, 2008). Sheila and Bernthal, (2008) show that results from some studies indicate that selection tools designed to obtain behavioral and motivational information about candidates contribute to effective selection systems. For example, behavioral interviewing is a popular selection activity among organizations with highly effective selection systems. In the future even more organizations plan to use this and similar tools more extensively to select employees. Organizations realize that having an effective, legally sound system in place is crucial to helping them select the right people for the right jobs; to do so, many organizations are planning to increase their use of various tools and devote more money to the process. Finally, better recruitment strategies result in improved organizational outcomes. The more effectively organizations recruit and select candidates, the more likely they are to hire and retain satisfied employees. In addition, the effectiveness of an organization’s selection system can influence bottom-line business outcomes, such as productivity and financial performance. Hence, investing in the development of a comprehensive and valid selection system is money well spent (Sheila and Bernthal, 2008). According to Kimberly Digit (2009), Recruitment, Selection & Retention Theory an e-How Contributing Writer, Recruitment, selection and retention theory is based on an organization's success of hiring and retaining valuable employees. Recruiting skilled or educated employees saves cost because an organization will spend less time training a skilled candidate. Employers will list required qualifications when posting a job opening. On selection, many organizations use a variety of tools and technologies to assess a candidate's abilities, allowing them to choose the most qualified candidates to proceed in the interview process. Assessing candidate's skills allows the organization to focus on other qualifications during an interview. Part of the recruitment process can include assessing the candidate's true interest in the organization and position, which can lead to hiring a long-term employee.

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Retention can also include offering salary and benefits that will offer a good work environment (Kimberly, 2009). The Significance is that organizations that have developed a successful recruitment, selection and retention theory often have a low resignation rate, which can save an organization a significant amount of time and money. Hiring and training can be costly for an organization (Kimberly, 2009). Extensive research and organizational involvement including human resources, department managers and valued employees should be considered when developing principles and policies. Many considerations can lead to successful recruitment, selection and retention (Kimberly, 2009). 2.4 Critical Review According to The Herman Group (2010) report, supervisors must take responsibility for their own employee retention. If they don't, they could be left without enough good employees. New supervisors must be prepared to be collaborative, supportive, and nurture their people. The old style of "my-way-or-the-highway" style of management is a thing of the past. Most new supervisors need training to understand what it really takes to retain employees. A wise employer will learn how to attract and keep good employees, because in the long run, this workforce will make or break a company's reputation. According to Antaya (2005), research demonstrates that people don’t start looking for new jobs because of money. They change jobs to work for companies that make them feel valuable, offering the opportunity for empowerment, career and personal growth, and the development of new skills. Employees should be shown that you care about them. Bonuses can be rewarded for good service. Handwritten notes can express appreciation. Employees’ should have the opportunity to attend workshops, conferences, and conventions. Employees can also be rewarded with special lunches and dinners. Studies have shown that higher employee satisfaction leads to increased customer satisfaction. Employee retention involves being sensitive to people's needs and demonstrating the various strategies in the five families detailed in Roger Herman's classic book on employee retention, Keeping Good People as: - Environmental , Relationship, Support ,

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Growth and Compensation. Employee retention takes effort, energy, and resources but the results are worth it. Though information about employee retention has been documented, specific literature on challenges faced in employee retention in higher institutions of learning is missing.

2.5 Summary Employee retention starts at orientation. HRM should provide an outline of relevant information to new employees regarding policies, values, operations, and culture. It should be thorough and include feedback should be given as to what was effective and what should be done differently for future orientations. People don’t start looking for new jobs because of money (Antaya, 2005). They change jobs to work for companies that make them feel valuable, offering the opportunity for empowerment, career and personal growth, and the development of new skills. Employees should be shown that you care about them. Employees should be trained and developed, appreciated and rewarded for good service. Studies have shown that higher employee satisfaction leads to increased customer satisfaction.

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CHAPTER THREE 3.0 RESEARCH DESIGN AND METHODOLOGY 3.1 Introduction This section describes the research methodology under the subtopics: research design, target population, sampling procedures and design, data collection, validity and reliability of research instruments and data analysis. 3.2 Research Design The study adopted descriptive research. According to Best, (1977) descriptive research involves the description, recording, analysis and interpretation of conditions that now exist. It also involves some type of comparison and contrast and may attempt to discover relationships that exist between non manipulated variables. 3.3 Target Population The survey covered seven (7) IAT Branches in Nairobi with a population of 215 employees in the frameset as in table 3.1 below.

Table 3.1: Target population by branch Branch

Population

Percentage (%)

BuruBuru

17

8

Fedha Towers

16

7

Loita

73

34

Thika Road

41

19

Westlands

17

8

Yaya

11

5

Symphony Campus

40

19

Total

215

100

Source: Author (2010)

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3.4 Sampling Design and Procedure Based on departments at different IAT branches, stratified sampling technique was used to come up with seven homogeneous departmental strata namely: Front office, Training and MOL, IT services, Quality, Instructional Research design (IRD), Administration and Sales and Marketing. This was based on the premise that employees are shared out among the branches on departmental basis thus some employees would not be tied to particular branches but departments. Simple random sampling using a ratio of 0.2 was applied to each department to come up with a sample size of 43 ensuring that each element within the accessible population had an equal and independent chance of being selected.

Table 3.2: Sample Size Department

Population

Sample size (20%)

Front office

20

4

Training and MOL

65

13

IT services

40

8

Administration

45

9

Quality

20

4

IRD

10

2

Sales and Marketing

15

3

Total

215

43

Source: Author (2010) 3.5 Data Collection Instruments and Procedure Interviews schedule and a questionnaire survey were used to collect data. The study purposively selected seven managers one from each branch who were interviewed using an interview schedule and questionnaires were self administered by the researcher. The questionnaire was both structured and semi-structured. The questionnaire survey was used to collect data on population characteristics that include: - gender, age, work experience, number of employees lost annually by department, organizational culture, training, compensation and recruitment.

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The interview schedule was used to collect data on annual employee loss by branch and age bracket, measures recommended to avoid employee loses, techniques used in the organization to retain employees and the challenges faced by the organization in employees retention

3.6 Reliability and Validity of the Research Instruments A pre-test was carried out in the seven departments at Loita branch on a sample of respondents randomly sampled and not included in the final research sample size. The pilot study was conducted on the target population to enhance validity of the questionnaires. This was for assessing clarity of the instrument items so that those that failed to measure the intended variables were modified or discarded. 3.7 Data Analysis The questionnaires were edited to ensure completion and consistency. Data was classified and tabulated according to departments. Data analysis was done using descriptive statistics involving simple statistical techniques by use of excel. Qualitative data was analyzed and presented in discussive format while Quantitative data was presented in tables, bar charts and summarized into meaningful narrative format.

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CHAPTER FOUR 4.0 DATA ANALYSIS, PRESENTATION AND INTERPRETATION 4.1 Introduction This section contains data analysis and presentation by the research objectives. Quantitative analysis covers employee population distribution characteristics looking at gender, response rate, age and work experience, and employee losses by department Qualitative data analysis covers the open ended items in questionnaires and interview schedule.

4.2 Quantitative Data Analysis 4.2.1 Response Rate Table 4.1 shows the response of the sample to questionnaires issued in the survey.

Table 4.1: Response Rate

Questionnaires No. of Questionnaires returned No. of Questionnaires not returned Total Questionnaires issued

Number 31 12 43

Percentage 72% 28% 100%

Source: Author (2010)

Out of the 43 Questionnaires given, 31 were returned. This translates to a response rate of 72%.

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Figure4.1: Response Rate 12, 28%

31, 72%

No. of Questionnaires returned

No. of Questionnaires not returned

Source: Author (2010) 4.2.2 Gender Distribution Table 4.2: The distribution of the sample size by gender Gender

Frequency

Percentage (%)

Male

21

68

Female

10

32

Total

31

100

Source: Author (2010) 68 % of respondents were males while 32 % were women as in table 4.2. This suggests that a higher number of males than females are employed in the organization.

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Figure 4.2: Gender Distribution

32%

68% Female Male

Source: Author (2010) 4.2.3 Age Distribution Table 4.3: Age Distribution Age in years

No. of responses

Percentage (%)

18 – 27

7

23

28 – 37

17

55

38 – 47

5

16

48- 57

2

6

Total

31

100

Source: Author (2010) Table 4.3 shows that 55 % of the respondents were between the ages of 28 to 37 years followed by 23 % between 18 to 27 years. No responses were received from employees between the age above 57 probably indicating that very few elderly employees exist in the organization or their unwillingness to participate in the survey exercise for personal reasons.

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Figure 4.3: Respondents age distribution 60

Value

50 40 30 20 10 0 18 - 27

28 - 37

38 - 47

48- 57 No. of Responses

Age in years

Percentage (%)

Source: Author (2010)

Table 4.4: Work Experience Experience in years

No. of years(x)

Frequency (f)

Percentage (%)

Below 1

1

6

19%

6

1–2

2

12

39%

22

3–4

4

5

16%

20

5–6

6

3

10%

18

7–8

8

2

6%

16

9 – 10

10

2

6%

22

11 – 12

12

1

3%

12

Total

43

31

100%

116

Mean (Work experience) = ∑(fx/ x)

fx

2.7

Source: Author (2010) The Mean employee experience was 2.7 years with 39 % of employees having 1 to 2 years followed by those with less than 1 year at 19 % as in table 4.4. The results indicate that employees do not stay with the organization for long periods of time suggesting high employee turnover.

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Figure4.4: Employee work experience 39%

40% 35% 30% 25% 19%

20%

16% 15% 10% 10% 6%

6% 3%

5% 0% Below 1

1–2

3–4

5–6

7–8

9–10

11–12

Percentage (%)

No. of years worked

Source: Author (2010) 4.2.4 Employee Distribution Characteristics Table 4.4 shows the distribution of employees in IAT by branch. The company policy allows sharing of employee’s across departments thus some branches do not have permanently stationed employees. Table 4.5: Employee distribution in departments by branch Buru Fedha Department

Thika

Population Buru Towers Loita Road

Westlands

Yaya Symphony

Front office

20

2

1

6

7

2

1

1

Training and MOL

65

10

0

35

11

5

4

0

IT services

40

2

2

8

11

1

2

14

Administration

45

2

11

12

3

3

2

12

Quality

20

0

2

7

3

3

1

4

IRD

10

1

0

0

2

2

0

5

Sales and Marketing

15

0

0

5

4

1

1

4

215

17

16

73

41

17

11

40

Total Source: Author (2010)

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The number of employees in the 7 branches for the year 2009 was 215 distributed as in table 4.4 and Figure 4.5. Based on branches, Loita has the highest numbers of employees at 73 while the training and MOL has the highest number among departments.

Figure 4.5: Employee population by branch 80 70

Population

60 50 40 30 20 10 0 BuruBuru

Fedha Towers

Loita

Thika Road Westlands

Yaya

Symphony Employee population

Branch

Source: Author (2010) 4.2.5 Employee Loss Table 4.6: Employee loss Target

No. of

Department

Population

employees lost

Percentage loss

Front office

20

2

10%

Training and MOL

65

8

12%

IT services

40

2

5%

Administration

45

3

7%

Quality

20

1

5%

IRD

10

1

10%

Sales and Marketing

15

2

13%

Totals and Average % loss

215

19

9%

Source: Author (2010) 35

The study found that the organization experienced an average of 9% employee loss in 2009 with 13% and 12% losses in Sales and Marketing and Training and MOL respectively as in table 4.6 above and Figures 4.6 below.

Figure 4.6: Percentage employee loss by department 13%

14% 12% 12% 10%

10%

10% 8% 7% 6%

5%

5%

4% 2% 0% Front office

Training and MOL

Front office

IT services

Training and MOL

Administration

IT services

Quality

Administration

Quality

IRD IRD

Sales and Marketing

Source: Author (2010) Table 4.7 Organizational Culture Response

Frequency

Percentage (%)

Very good

0

0

Good

1

3

Average

26

83

Below average

4

14

Total

31

100

Source: Author (2010)

36

Sales and Marketing

Figure4.7: Responses on Organization Culture 0% 3% 14%

83%

Very good

Good

Average

Below average

Source: Author (2010) On a Likert scale of one (1) to four (4), 83 % of respondents rated the organization culture as average with only 3% rating it as good as in table 4.7 above. They felt that the organization exercises a power culture where the power relationships have a high “power distance” that emphasizes human inequalities. Those in management are given large offices and titles emphasized thus a closed organization culture that maintains official relationships between employees in the different hierarchical order of operation.

Table 4.8: Respondents who attended Training programs Response

Frequency

Percentage (%)

Yes

22

71

No

9

29

Total

31

100

Source: Author (2010) The study established that 71 % of respondents had a chance to attend training programs while 29 % had not. 37

Figure4.8: Training and its effect on employees

No. of employees

25 20 15

Yes No

10 5 0 Trained

Motivated after training

Source: Author (2010) Table 4.9: Motivation after attending Training programs Response

Frequency

Percentage (%)

Yes

14

45

No

17

55

Total

31

100

Source: Author (2010) The study results in table 4.9 show that 45 % of employees felt motivated while 55 % were not motivated after attending training programs. The results suggest that training is not a motivator when applied independent of other factors. Table 4.10: Respondents feeling on relevance of Training attended Response

Frequency

Percentage (%)

Very relevant

1

3.2

Relevant

11

35.5

Average

16

51.6

Not relevant

3

9.7

Total

31

100

Source: Author (2010)

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The survey result in table 4.10 shows that 51.6 % of respondents rated training programs as average while 9.7 % thought it was not relevant. This indicates that the employees did not find the skills applicable to their work after the training. Figure4.9: Rating on relevance of Training

10%

3%

36%

52%

Very relevant

Relevant

Average

Not relevant

Source: Author (2010) Table 4.11 Rating for Compensation Response

Frequency

Percentage (%)

Very good

0

0

Good

2

6

Average

8

25

Below average

21

69

Total

31

100

Source: Author (2010) 69 % of respondents rated their compensation scheme as below average while 6 % rated them as good as in table 4.11. They felt that top management was not concerned with the plight of the employees regarding reward systems. This greatly contributed to the exit of employees threatening employee retention.

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Figure4.10: Rating on Compensation 0% 6% 25%

69% Very good Good Average Below average

Source: Author (2010) Table 4.12 Rating for Recruitment Response

Frequency

Percentage (%)

Very good

1

3.0

Good

2

6.5

Average

18

60.0

Below average

10

30.5

Total

31

100

Source: Author (2010) The survey found as in table 4.12 that 60 % of respondents rated the recruitment scheme as average while 3 % rated them as very good. The organizations’ recruitment policies target fresh diploma graduates. Based on their recruitment pattern of engaging young employee, employee loss is very high.

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Figure4.11: Rating on Recruitment 3% 7%

31%

Very good Good Average Below average

59%

Source: Author (2010)

Table 4.13: Percentage employee lost by age Age (in Years)

Frequency

Mean Percentage

18 – 27

6

19

28 – 37

22

72

38 – 47

2

6

48 – 57

1

3

Total

31

100

Source: Author (2010) The survey results in table 4.13 found that 72 % of employees who leave IAT are in their very productive ages of between 28 and 37 years followed by those between 18 to 27 years at 19 %. The organizations’ recruitment policies target fresh diploma graduates and this recruitment pattern of engaging young employees without adequate support and compensation results in high turnover. Factors like individuals’ age at recruitment and the organization taking advantage of the slow economic growth in a flooded labour market to offer low pay have not been effective because the young employees not satisfied with the company’s treatment walk out to get other opportunities elsewhere. 41

Figure4.12: Percentage employee loss by age 3% 6% 19%

72% 18 – 27

28 – 37

38 – 47

48 – 57

Source: Author (2010)

4.3 Qualitative Data Analysis The study established that major reasons for resignations include poor remuneration, job descriptions not adhered to by managers in assigning tasks and lack of clearly defined career growth paths for example in some departments, a person with high qualifications can still remain in lower departments. Most people who lack advancement opportunities within the organization tend to leave after they have attained relevant training. The desire for change from routine jobs leading to search for new challenges, work pressure especially when overworked without compensation, growing out of favor with management, the search for greener pastures with better pay and promising opportunities were given as possible reasons for employee loss. The short contracts offered serves as a motivation for some employees to work till end of the contract then leave without renewing it so that they avoid getting into conflicts

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with management on staying longer. Other reasons include difficult working conditions and unrealistic targets to be met without provision of necessary facilitative tools of work as well as poor manager-employee relations i.e. the master-servant relations rather than teamwork. The study revealed that company has adopted various methods to ensure employee retention. Specific techniques used include Bonding agreements, Cash payments to guarantee for the job, Academic loans, the Earn and Learn scheme, Contracts, Promotions, Lower certification recruitments, Performance recognition, Individuals’ age at recruitment and taking advantage of the slow economic growth in a flooded labour market. The challenges experienced at IAT in employee retention relate to poor remuneration which results in employees opting out to look for greener pastures, ethical issues for example where unethical behavior is rewarded against proper ethics contributes to degraded organizational performance. Training adds value to employees making them marketable in the business environment resulting to employee loss to competitors causing the organization to incur unplanned expenses in recruitment. The lack of growth opportunities makes the employees see no future with the organization thus seek for opportunities in competitor firms creating extra expenses to the organization. The other challenge arises when employees gain relevant work experience which makes them marketable for higher paid jobs thus they are poached by competitors making it challenging for the organization to maintain qualified staff to work with them whilst not being ready to compensate them to equal levels as competitor firms. The lack of proper motivation also contributes to employee loss. The challenge here is that some needs are impossible to satisfy and this may result in aggression, rationalization, regression, fixation and resignation. The demand for new skills from employees who are not willing to go through Training arguing that it’s a waste of time or that the training is irrelevant to them since they do not intent to pursue career development along the current job line is a great challenge.

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Unmanaged expectations created out of promises that the company is not ready to meet is the other challenge. The lower level entry employees at diploma have to be trained by the lowly compensated graduate employees thus quality is compromised and the organization suffers double training expenses, bad image from exiting employees, poor quality products and services handled by the poorly trained lower level entry employees. The last identified challenge is lack of employee retention programs. This keeps the organization in the dark about the kind and quality of talent they have resulting into the challenge of inability to attach value to talent currently held in or lost from the organization. The study revealed that the measures that can be applied in addressing challenges faced in employee retention include provision of improved remuneration commensurate to work and responsibilities assigned, good working conditions, quality Training programs to gain relevant skills to handle current job tasks and future assignments, workable employee retention programs as well as having clear, easy to understand and realistic contracts. Other measures include ensuring high level of employee motivation, having well defined career progression paths, ensuring that superiors do not micromanage employees, good employee welfare programs and effective communication programs.

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CHAPTER FIVE 5.0 SUMMARY OF MAJOR FINDINGS, CONCLUSIONS, RECOMMENDATIONS AND SUGGESTION FOR FURTHER STUDY 5.1 Introduction The study established the challenges faced in employee retention at IAT. This chapter summarizes the findings, their conclusions, recommendations and suggestions for further study. 5.2 Summary of Major Findings The Institute of Advanced Technology experiences challenges in employee retention. Employee loss has a negative impact in IAT. The study found that the organization experienced an average of 9 % employee loss annually. The study established that 55 % of the respondents were between the ages of 28 to 37 years while only 6 % were between 48 to 57 years. No responses were received from employees between the age above 57 years probably indicating that very few elderly employees exist in the organization or their unwillingness to participate in the survey exercise for personal reasons The Mean employee experience was 2.7 years with 39 % of employees having 1 to 2 years followed by those with less than 1 year at 19 %. 83 % of respondents rated the organization culture as average with only 3% rating it as good. The organization exercises a power culture with power relationships that have a high “power distance” that emphasizes human inequalities. The study established that 71 % of employees had a chance to attend training programs but only 45 % felt motivated. 51.6 % of the population rated Training programs as average while 9.7 % felt it was not relevant to them Compensation scheme was rated by 69 % as below average with none rating it as very good. Employees felt that top management was not concerned with the plight of the employees regarding reward systems thus greatly contributed to employee exit threatening employee retention. The study established that about 60 % of respondents

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rated the recruitment scheme as average. 72 % of employees who leave the organization are in their very productive age between 28 and 37 years. Though the organization has adopted various techniques to ensure employee retention like Bonding agreements, Cash payments to guarantee for the job, Academic loans, the Earn and Learn scheme, Contracts, Promotions, Lower certification recruitments, Performance recognition, low age at recruitment and taking advantage of the slow economic growth in a flooded labour market, it is still challenged I retaining its employee.

5.3 Answers to research questions 5.3.1 How Organization Culture contributes to Employee Retention The study results from the open ended items revealed that the power culture exercised in IAT cultivates power relationships that have led to a high “power distance” that emphasizes human inequalities. 83% of the respondents felt that the lack of social interactions generally makes individuals feel that they lack a sense of belonging thus contributes to employee losses when employees do not get a chance to express themselves to management. Those in management are given large offices and titles emphasized thus a closed organization culture that maintains official relationships between employees in the different hierarchies. Close social ties that value teamwork encourage interactions between and among employees of different hierarchies thus contributes to employee retention. To further encourage employee retention, the organization should reorganize its organization structure and provide clear career progression paths communicated effectively to employees who join the organization with clear reporting lines of authority

5.3.2 How Training contributes to Employee Retention On Training programs, 55% of respondents felt that they were forced into training programs due to management pressure reacting to employee losses by exiting employees thus requiring immediate filling of gaps. This created tension between managersemployee relations thus poor relationships that led to employee losses.

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9.7% never got an opportunity to utilize their skills after training complained that management never put the new skills acquired by employees to task by utilizing and engaging them in more challenging jobs making the skills redundant and a loss of opportunity to enhance the organizations’ performance. Training programs are mainly internal rather than external. This many times contributed to compromise in the quality of training. After training due to the fact that new skills were not put to use immediately for some, employees opted to look for opportunities in competitor organizations to practice their skills at better pay. Most of the employees felt that training should be outsourced so as to make the training credible. Majority of the respondents felt that management did not respect and value employee competency and did not pay attention to their aspirations. The Earn and Learn contracts were not always honoured due to manager manipulations thus the internal training did not take place as scheduled in the contracts leading to employee losses. Training should however be accompanied by adequate remuneration to retain employees.

5.3.3 How Compensation contributes to Employee Retention 69% rated compensation as below average. The neglect by top management with regard to compensation made employees feel de-motivated and not part of the organization. The issues raised included generally low pay in comparison to competitor firms, complains about medical cover and refund applications that were not honoured, unpaid overtime allowances and gaps between the “we and them” class groupings due to disparities in salaries that led to employee losses. Improved remuneration commensurate to work and responsibilities assigned would attract and retain employees to work with the organization. The pay should be reasonable and fair in accordance with market rates offered by competing firms in the same industry and should have clearly documented benefits attached to each position in the organization. Respondents suggested that the company should have a good reward scheme to support better performance, innovativeness and creativity. For example where employees meet or exceed set targets, tokens of appreciation e.g. Christmas gifts, gift vouchers etc that are tied to certain performance achievements and clearly communicated to all

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employees should be given so as to inculcate a spirit of hard work with just and fair treatment for all. 5.3.4 How Recruitment contributes to Employee Retention The study established that the organizations’ recruitment policies target fresh diploma and degree graduates. Ignorantly and out of excitement of getting the first job immediately after college they take up contracts they consider flowery. This is done under the Earn and Learn contract program where recruits are promised a lower pay alongside being taken through Training programs. 30.5% respondents expressed dissatisfaction with the program because many times this arrangement is not always honoured by the organization resulting into poor supervisor- subordinate relations because the managers are given the authority to make decisions as to when and this ends up resulting to employee loss. Though 3% rated recruitment as very good, majority suggested that the company should also ensure that there is a flexible working schedule providing for reasonable number of working hours to enable or allow employees pursue further studies probably through evening programs and other work study programs. It should encourage employees to further their studies externally to assure quality of training to gain new skills to handle current job tasks and future assignment incase of a promotion. In addition, the organization should appreciate the new skills gained by employees by offering more challenging tasks as well as better pay after studies. The study revealed that majority respondents were of the opinion that the expense for an organization in replacing an employee is so higher than that of retaining a current employee in a vacant position. Morale is also eroded among remaining employees and it gives a poor organization image resulting to customer losses. 5.4 Conclusions Though various techniques have been adopted to ensure employees are retained, IAT still faces challenges in employee retention. The techniques adopted have varied effects on employees. Bonding agreements, Earn and Learn contracts and promotions effected at end of contract seem to irritate employees especially where the agreements

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and expectations are not fulfilled by the company leading to more employee loss than retention.

Based on their recruitment pattern of engaging young employee, employee loss is very high. 72% of employee lost is between the ages of age of 28- 37 years. Factors like individuals’ age at recruitment and the organization taking advantage of the slow economic growth in a flooded labour market to offer low pay have not been effective because the young employees not satisfied with the companies treatment and thus walk out of the agreements with the notion that they still have a chance to get other opportunities elsewhere due to their youthful age and therefore have nothing to loose by moving out. Payment of cash by new employees to secure a job has generally been interpreted as buying the job. Though the company has split the amount payable so that half is paid on job admission while the rest is deducted on a monthly basis from employee salaries, it is worth noting that people looking for employment may not be able to easily raise the amount of cash demanded for by the company. This scares away potential quality employees’ instead of attracting them into the organization. Academic loan framework earlier used rarely applies to the current employees but even when used, employees who have gone through the program have walked out forfeiting their benefits when better opportunities come their way. Performance recognition has not been effective because it is not implemented as a company policy across all departments. Its segregative application therefore creates a lot of strife among employees in the different departments. The lower level entry employees at diploma have to be trained by the lowly compensated graduate employees since training is internal thus quality is compromised and the organization suffers double training expenses, bad image, poor quality products and services handled by the poorly trained lower level entry employees. Employee retention at IAT is therefore a challenge. The challenges experienced relate to poor remuneration, ethical issues, poorly structured Training, lack of growth opportunities, employee work experience, lack of proper motivation, the demand for new skills from employees who are not willing to go through training, unmanaged

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expectations created out of promises that the company is not ready to meet and the lack of employee retention programs. These challenges result in either employee loss to competitors causing the organization to incur unplanned expenses in recruitment, contributes to degraded performance in the organization or the inability to attach value to employee currently held in or lost from the organization thus poor planning. Annually, IAT looses an average of 7.9% of its employee. These findings present major issues that have contributed to failure in employee retention in organization and need to be addressed by management to avert further employee losses.

5.4 Recommendations Based on the study findings and discussion, the research made the following recommendations: The organization should adopt an open and friendly organizational culture for its employees to break the high “power distance” so as to minimize the existing human inequalities. To further encourage employee retention, the organization should reorganize its organization structure and provide clear career progression paths communicated effectively to employees who join the organization with clear reporting lines of authority. Application of high-performance work practices such as a commitment to learning, openmindedness and shared vision would benefit employers and workers alike. Training should be planned so as to avoid forcing employees into training programs due to management pressure reacting to employee losses by exiting employees requiring immediate filling of gaps. Employees should be respected and valued providing opportunity to apply new skills acquired after training should however be accompanied by adequate remuneration to retain employees. The government through the ministry for labour should come up with enforceable guidelines and laws governing compensation of all job groups in both the public and private sectors. This will help in harmonization of salaries across the sectors giving a level ground to all employees with similar qualifications to avoid unfair treatment, bias and discrimination by employers.

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Recruitment should be fair, equitable and just. It should provide for a mix of all ages to allow learning and mentorship from experienced employees. Payment of cash by new employees to secure a job should be stopped. The organization should implement appropriate employee retention programs as well as a succession plan to help them take stock of the kind and quality of talent they have and to attach value to talent currently held in or lost from the organization thus implement a succession plan to avert the challenges they face. 5.5 Suggestion for Further Study To help organizations understand which employee retention techniques are most effective, a study may be carried out on effectiveness of the different employee retention techniques.

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APPENDIX Questionnaire

This questionnaire aims at helping the researcher to gather information on “The Challenges of Employee Retention in Institutions of Higher Learning (A Survey of the Institute of Advanced Technology- Nairobi)”. The information you give will be treated confidentially. You are kindly requested to complete the form giving your honest opinion in the spaces provided.

Section A

1. Name (optional)…………………………………Date……………….…………… 2. Your gender (tick one) Male 3.

4.

Female

Your age in years (tick one) 18 – 27

48- 57 48- 57

28- 37

58- 67

38 – 47

68- 77

Indicate the number of years you have worked with IAT ( tick one option below)