Proceedings of 3rd European Business Research Conference

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Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
An Empirical Study of the Impact of HR Practices on Employee
Satisfaction and Employee Retention: The Case of AASTMT
Niveen M. El Sagheir
Employee satisfaction and loyalty is one of the most important challenges that Educational
sector is facing in current competitive market. The main purpose of study is to find the
relationship between three HR practices i.e. compensation, empowerment and appraisal
system and employee satisfaction & loyalty in the Education private sector of Egypt. For this
purpose, The Arab Academy for Science and Technology and Maritime Transport
(AASTMT) has been chosen as one of the biggest learning institutions in Egypt.
Accordingly, a questionnaire was distributed 140 employees at the Arab Academy for
Science and Technology (AAST) in Egypt, which are the full list of employees at the College
of Management and Technology. Data collected was statistically analyzed using SPSS and
the findings revealed interesting conclusions and could be used as a road map for
employers on how to promote knowledge sharing inside organizations. Statistical software
SPSS 17 has been used for validity, reliability, and correlation and regression analysis.
Employee compensation is found to be most important factor for creating satisfaction
among employee while employee empowerment is found to be significant factor for
developing employee loyalty. Theoretical and managerial implications along with limitations
for future research have also been discussed.
Key words: Employee Empowerment Employee Compensation Appraisal System Employee
Satisfaction, Employee Loyalty Egypt
.
I. Introduction
Employees are the backbone of an organization. Hence, the retention of the employees is
important in keeping the organization on track. In order to retain the best talents, strategies
aimed at satisfying employee’s needs are implemented, regardless of global companies or
small-sized firms. Generally, organization would retain their personnel for a specified period to
utilize their skills and competencies to complete certain projects or execute tasks. In another
word, we can understand it as employee retention where the scope of task, is however, often
larger than a simple task and more preferably a job in real world. Retaining the desirable
employees is beneficial to an organization in gaining competitive advantage that cannot be
substituted by other competitors in terms of producing high morale and satisfied coworkers who
will provide better customer service and enhanced productivity, which subsequently resulting in
sales generating, customer satisfaction, smooth management succession and improved
organizational learning (M. Heathfield, 2005).
________________________________________________________________________
Dr. Niveen M. El Sagheir, Email: niveenmohamed@yahoo.com,
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
II. RESEARCH AIM
The main purpose is to reflect how employee empowerment, training, job appraisal and
compensation affect lecturers in their retention with College of Management and Technology
through concentrating on the effectiveness of existing training programs, employee
empowerment, job appraisal and compensation in retaining employee from the academicians’
perception. By collecting academicians’ opinions, it would reflect how they perceive as
satisfactory development which may enhance their future career planning and job promotion.
HYPOTHESES OF STUDY
Employee Training
H0: There is no significant relationship between employee training and employee retention.
H1: There is significant relationship between employee training and employee retention.
Appraisal System
H0: There is no significant relationship between appraisal system and employee retention.
H1: There is significant relationship between appraisal system and employee retention.
Employee Compensation
H0: There is no significant relationship between employee compensation and employee
retention.
H1: There is significant relationship between employee compensation and employee retention.
Employee Empowerment
H0: There is no significant relationship between employee empowerment and employee
retention.
H1: There is significant relationship between employee empowerment and employee retention.
HRM practices are crucial for firm performance. Firms have used human resource practices
to achieve their performance, especially in relation to retention. The impact that human
resource practices have on firm performance are deceptive, as many researchers have shown
in their studies from the United States and Europe (P. Boselie, et al.,) , [K. Hoque ] to Asia [I.
Björkman], [H.-Y. Ngo, et al. 1998),and Africa [F. Ghebregiorgis 2007]. Human resource
management practices involve of many policies and practices that are used by managers to
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
recruit, select, develop, utilize, reward, and maximize the potential of human resources in
organizations [L. C. Megginson 1995]. They have been studied comprehensively by
researchers, but the ones that have a significant effect on firm performance are compensation,
empowerment, appraisal, and training [C. Ichniowski1998], [J. D. Shaw 1998]. These are
considered by organizations to be important human resource practices for the following
reasons. Compensation & benefits management and reward system are needed in
organizations for financial income and well-being of their employees.
Employees’ living status in society, satisfaction, loyalty, and productivity are influenced by
compensation [K. Aswathappa2008].
Employees need to be provided with training &
development to develop their skills and perform better at work. Training can lead to superior
knowledge, skills, abilities, attitudes, and behavior of employees, thereby enhancing excellent
financial and non-financial performance of the organizations As for firm performance, employee
retention is chosen as the observed variable since previous studies have shown how it has
been related to effectiveness as a human resource outcome [11].
III.
LITERATURE REVIEW AND HYPOTHESES
Human Resource Management Practice Using the HR system concept, human resource
practice, which is the HR process part of the human resource management system A. A. Lado
], will be examined in this study. HR practices have been defined as a set of distinct yet
interrelated activities, functions, and processes aimed at attracting, developing, and maintaining
a firm’s human resources [ A. A. Lado].
a. Compensation
Compensation refers to all forms of financial returns and tangible benefits that employee
receives as part of the employment relationship [H. J. Bernadin].[ R. O. Odunlade2012].
Compensation’s one of the main features used by organizations to attract and retain their most
valuable and worthy assets [R. I. Khan etal:2011]. It is known to have a positive relationship
with employee retention [E. N. C. Hong etal:2012].
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
b. Training
Training & development refers to a systematic development of the knowledge, skills and
attitudes required by employees to perform adequately a given task or job [E. J. A.
Abiodun1999]. It is regarded as the most common human resource practice [S. S. Tzafrir1999].
When employees feel that training is available at all times, they will have a sense of emotional
attachment and commitment to the organizations, and are thus less likely to leave their jobs [
M. Ashar]. [M. A. Huselid1995] Also suggested that training is an important determinant of
employee retention. This is further supported by [P. Bamberger 2009]. Furthermore, when
managers provide opportunities for training and support regarding career development, they
help create employee development and drive employee engagement [E. M. Mone 2009].
c. Empowerment
It is the process in which the employees are involved in decision-making, are appreciated
and provided proper training and support. Nowadays, many organizations are trying to delegate
the decision-making process to the lower level employees. According to Bowen and Lawler
(1995), there is a significant relationship between employee empowerment and intent to leave.
Laschinger, Finegan and Sharmian (2002) showed that empowerment leads to higher job
satisfaction among employees. At the same time, there are plenty of ways of executing this
process whether by providing adequate training, market competitive compensation or effective
performance management.
d. Performance appraisal
It is a process of inspecting and evaluating an individual’s performance in his duty to facilitate
the decision of career development of the individual. It evaluates the individual overall
contribution to the organization through assessment of his internal characteristics, working
performance and his
capability to pursue higher position in organization (Gruman & Saks,
2011).
e. Employee Retention
Employee retention refers to policies and practices companies use to prevent valuable
employees from leaving their job. It involves taking measures to encourage employees to
remain in the organization for the maximum period of time. Hiring knowledgeable people for the
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
job is essential for an employer. But retention is even more important than hiring. This is true as
many employers have underestimated costs associated with turnover of key staffs (Ahlrichs,
2000). Turnover costs can incurred with issues such as reference checks, security clearance,
temporary worker costs, relocation costs, formal training costs and induction expenses (Kotzé
and Roodt, 2005)
High turnover rate in an organization may affect the reputation and image of the organization.
Employee replacement is problematic and costly because the organization has to train a new
employee if an experienced employee resigned. Some studies have identified that lack of job
dissatisfaction (Moore, 2002) and low level of empowerment (Boundrias et al., 2009) and low
levels of support of superiors (Hatton and Emerson, 1998) may lead to turnover (Salman, Iqbal
and Chandran, 2010). Empowered employees tend to be more confident and try to give their
best to employer because they are given more authority in decision-making process
(Hummayoun Naeem and Muhammad Iqbal Saif, 2010)
IV.
RESEARCH FRAMEWORK
Trainin
g
compensation
Performance
appraisal
empowermen
t
Employee
retention
4.1 Introduction
In this section, the researcher will determine the appropriate research methodology for the
current study, display how data was collected, as well as setting the research hypotheses.
4.2 Research Approach
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
As a general rule, research methodologies can be broadly classified into two distinct
approaches. They are the scientific empirical tradition and the naturalistic phenomenological
modes (Sekaran, 2003). These two approaches are commonly known as Quantitative and
Qualitative research methods respectively.
The quantitative research approach is derived from the natural sciences, where the research
data is usually in the form of precise numbers that have been collected in clear defined steps. It
is generally characterized by a methodology of formulating hypotheses that are tested through
controlled experiment or statistical analysis. This approach includes the following types:
(Sekaran, 2003)
1. Experiments: True experiments are characterized by random assignment of subjects to
experimental conditions and the use of experimental controls.
2. Quasi-Experiments: Quasi-experimental studies share almost all the features of
experimental designs except that they involve non-randomized assignment of subjects to
experimental conditions.
3. Surveys: Surveys include cross-sectional and longitudinal studies using questionnaires
or interviews for data collection with the intent of estimating the characteristics of a large
population of interest based on a smaller sample from that population.
In the research under study, the researcher uses the quantitative approach as the current
research is using survey.
4.3 Data Selection
Data was collected for 52 questionnaires from employees in Arab Academy for science,
technology and maritime transport.
In the current research, the researcher will present the empirical study and findings
obtained by analyzing the data under study using Statistical Package for Social Science (SPSS)
– version 22. This was done through the following; first of all, the researcher will test the validity
and reliability of the data under study, as well as verifying assumptions of ordinary least
squares method for regression analysis. Also, the researcher will introduce some descriptive
analysis regarding the data under study using frequency tables. In addition, the researcher will
test the relations between the dimensions under study by constructing a correlation matrix
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
between each pair of the dimensions under study. Finally, the researcher will introduce a
regression analysis to test the effect of dimensions under study on Employee Retention.
V.
RESEARCH ANALYSIS
5.1Testing
In this section, the researcher tests if data is reliable and valid or not. If both conditions
are satisfied, the researcher can start using the data available in responding to the hypothesis
already set above.
5.1.1 Validity Testing
Validity means the extent to which an instrument measures what it supposes to measure
correctly (Hair, Anderson, Tatham, & Black, 1998; Sekaran & Bougie, 2005). One of the validity
testing is Convergent validity, which tests the data using factor analysis (multivariate technique)
that confirms whether or not the theorized dimensions are applicable (Sekaran & Bougie, 2005).
Convergent validity was essential to ensure that the items measuring the same construct are
highly correlated (Hair et al., 1998). In order to test the convergent validity, the average value
extracted for each of the scales was calculated. The average variance extracted (AVE)
represents the average community for each latent factor, and in an adequate model it should be
greater than 0.5, which means that the factors should explain at least half the variance of their
respective indicators (Garson, 2011; Hair et al., 1998). The results of the factor analysis
conducted on the current research constructs indicate that AVE values for all scales under
study were found to be greater than 0.5 or 50%, as represented in Table 1, which means that
all dimensions under study are all having convergent validity.
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
Table 1
Average Variance Extracted and factor Loadings
Variables
Under
AVE in %
Study
Empowerment
E3
81.769
E4
Compensation
C2
83.992
C4
Training & Development
T1
72.128
T2
Appraisal System
A1
74.344
A2
Employee Retention
R1
R2
68.878
R3
Factor
Loading
Items
of
0.818
0.818
0.840
0.840
0.721
0.721
0.743
0.743
0.692
0.693
0.681
Also, item loading can be evaluated by the size of the loadings of the measures on their
corresponding constructs. The loadings should be at least 0.60 or above (Chin, 1998) indicating
each measure is accounting for 60 percent or more of the variance of the underlying latent
variable (Fornell and Larcker, 1981).
Table 1 shows that all loadings of items for each of the variables under study exceed
0.60. This indicates adequate convergent validity for the variables under study.
5.1.2 Reliability Testing
Cronbach's Alpha, as the most commonly used test of reliability, was applied, where
Alpha coefficient ranges in value from 0 to 1. The higher the score, the more reliable the
generated scale is. It was indicated that 0.7 is an acceptable reliability coefficient but lower
thresholds are sometimes used in the literature. (Nunnaly, 1978)
The results are shown in Table 2 below, where alpha values revealed the reliability and
the internal consistency between the selected items of the studied variables. It can be shown
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
that the values of cronbach’s alpha for the variables under study exceeds 0.7, which is an
acceptable level for the reliability of the variables.
Table 2
Reliability Test for Variables under Study
Variables
Number Reliability
of items Indicator
Empowerment
2
0.773
Compensation
2
0.807
2
0.713
2
0.753
3
0.773
Training
&
Development
Appraisal
System
Employee
Retention
5.1.3 Testing Multicollinearity
Multicollinearity occurs when two or more predictors in a model are highly correlated so
as they provide redundant information about the response.
With respect to the assumption of multicollinearity in the current study, variance inflation
factor (VIF) was conducted for the 3 models under study. The VIF value for all models under
was shown to be less than 5. This result indicates that the independent variables are not intercorrelated among themselves implying that the problem of multicollinearity does not exist.
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
Table 5
Multicollineraity Testing
VIF
Variables
Indicator
Empowerment
1.160
Compensation
1.213
Training
&
1.342
Development
Appraisal System
1.367
Employee
1.160
Retention
5.2 Analysis
In this section, the researcher will introduce descriptive analysis using frequency tables,
as well as conducting correlation matrix and regression analysis to test the relations between
dimensions under study.
5.2.1 Descriptive Analysis
Observing table 6, it can be found that the response of the sample under study is relatively
higher in the agree level than that in disagree level.
Frequency
Variable
Strongly Disagree Neutral
Disagree
Empowerment
0
Compensation
0
Training
2
Appraisal
1
Retention
2
4
4
5
3
6
11
2
5
6
19
Agree
Strongly
22
25
23
27
15
Agree
15
21
17
15
10
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
5.2.2 Hypotheses testing
5.2.2.1 Correlation Matrix
In this section, the researcher attempts to find a link between the studied independent
variables and the dependent variable. The correlation matrix is a matrix giving the correlations
between all pairs of data sets. It provides the Pearson’s Correlation Coefficient between
variables under study and each other, to be able to evaluate the relationship between those two
variables. Pearson's correlation is used to find a correlation between at least two variables. The
value for a Pearson’s correlation can fall between 0.00 (no correlation) and ±1.00 (perfect
correlation). Pearson correlation analysis is conducted to analyze the constructs and test direct
relationship between pair of variables (Foster et al., 2001).
A correlation matrix between the variables under study is constructed, where the value of
Pearson’s correlation is calculated between each pair of variables under study to investigate the
relationships between the variables.
Results shown in the table below identify that the correlations between Employee
Retention and other dimensions; Empowerment, Compensation, Training, and Appraisal are
0.347, -0.072, 0.312, and 0.450 respectively. It was found that there is a significant positive but
weak relation between Employee Retention and the dimensions; Empowerment, Training and
Appraisal.
On the other hand, it was found that there is an insignificant relation between Employee
Retention and Compensation.
Regression analysis is widely used for prediction and forecasting. Regression analysis is
also used to understand which among the independent variables are related to the dependent
variable, and to explore the forms of these relationships. By using regression analysis, one may
assess the direct relationship between variables as well as show the causal relationship and the
nature of relationship between variables (Aiken et al., 1991; Foster et al., 2004). Through this
section, a regression analysis will be presented for the relationships among variables under
study according to the predefined model relations.
A multiple linear model is fitted between Employee Retention as a dependent variable,
and the variables Empowerment, Compensation, Training, and Appraisal. The results were
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
shown
in
the following table 8.
Table 8 Model Summary
R Square
F-Test
Sig.
1
.353
6.272
0.000
It was found that the model coefficient of determination (R Square) equals 35.3% in the
table
below. This means that the model explains 35.3% of the variance in Employee
Retention. This means that there may be other variables affecting Employee Retention other
than the ones in the current study and which can explain the remaining percentage of
unexplained variation in Employee Retention. In addition, observing significance, it is found that
the model as a whole is significant (P-value = 0.000).
Table 9 shows that the variables Empowerment and Appraisal System are having a
positive significant impact on the dependent variable “Employee Retention” at 0.01 significance
level.
Also, the researcher could find that the importance of the variables could be ranked with
respect to Employee Retention as follows; Appraisal System, then Empowerment. This rank is
according to the values of standardized coefficients, which are; 0.394, 0.267 respectively.
Proceedings of 3rd European Business Research Conference
4 - 5 September 2014, Sheraton Roma, Rome, Italy, ISBN: 978-1-922069-59-7
Table 9 Regression Model and Coefficients
Unstandar
dized
Coefficient
s
Standardi
B
(Constant)
zed Beta t
.56 .57
7
4
.431
Empowerme .310
nt
Appraisal
.454
System
Sig.
.367
2.1 .03
25 9
-.328
3.1 .00
29 3
LIMITATION OF THE STUDY
In this research, researchers encountered a few limitations. The researchers solved the
problems faced to make sure the research can be done in time
Conclusion:
As what the study has shown, there are significant relationship between the factors of
training, compensation and appraisal on AASTMT lecturer’s retention. However It was found
that there is a significant positive but weak relation between Employee Retention and the
dimensions; Empowerment, Training and Appraisal. On the other hand, it was found that there
is an insignificant relation between Employee Retention and Compensation. This reflects the
major finding of this study on how different culture might have different expectation on
determining their employment satisfaction and retention.
VI.
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