Proceedings of World Business, Finance and Management Conference
8 - 9 December 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-66-5
Employee Turnover in a Small Chinese Family Business: The Hoi
Pang Company Case Study
Irene Chan Leng*, Leanda Lee** and João Negreiros*
The present research is an in-depth case study that attempts to identify reasons for
employee turnover in a Chinese Family Business (CFB) in Macao, China. Key turnover
models and the management style of CFB were reviewed in this paper. Subsequently,
a research framework with three core dimensions was developed. Former employees,
current employees and the company owner were interviewed to explore the concepts
in the model. As expected, the findings suggest that there is a negative relationship
between job satisfaction and employee turnover under the context of Chinese family
company. Furthermore, these results indicate the management style of CFB may
exacerbate the generally acknowledged impacts upon employees’ job satisfaction
levels to some degree. Based on the analysis, practical recommendations to reduce
employee turnover for this real Chinese family company are suggested.
JEL Codes: J28, J63 and J50
1. Introduction
Employee turnover is a main concern for many organizations in today’s competitive marketplace.
Retaining employees becomes a key issue for companies, as it is more cost effective for
companies to retain the good employees that are already in place rather than to recruit, select and
train new employees (Kennedy, 2004). At the organizational level, turnover can inflict many tangible
and intangible costs. Employees who leave the company often take away with them valuable skills
and experience. Meanwhile, the relationship and network they built with customers is also broken.
In addition, companies need to invest additional money to undertake exit interviews, recruitment,
select, as well as, train new employees in order to fill the vacancies (Mitchell, Holtom & Lee, 2001).
The pressure of employee turnover is heightened in Macao’s current labor market due to the rapid
development of its gaming and hospitality industry. The labor demand in Macao is increasing and
the local small and medium sized enterprises encounter the problem of manpower shortage
(DSEC, 2011, Sio, 2011). According to the employment survey from the Statistics and Census
Service (DSEC) of Macau, China, the unemployment rate of the second quarter of 2011 was 2.6%,
the lowest rate since 1999. The underemployment rate was 1.3%. When compared with the same
period of 2010, the unemployment rate and the underemployment rate decreased by 0.3% and
0.8% respectively (DSEC, 2011). The new opening of large scale hotels and casinos offered a huge
number of positions with attractive compensation packages to the local labor force. Hence, the local
small and medium sized enterprises encountered the problem of manpower shortage. There are
over 15,000 small and medium enterprises in Macao, which occupy over 90% Macao’s enterprises.
And many of these small and medium sized enterprises are operated as family businesses (Macao
SME Association, 2010). Hiring employees becomes difficult for these small and medium sized
enterprises. Local residents, especially young people tend to apply for jobs in casinos and hotels
because of the higher salaries provided by these organizations (Lee, 2007; Sio, 2011).
*University of Saint Joseph, Macao, China. Email: irene.cni@gmail.com & joao.garrot@usj.edu.mo
**IgamiX Management & Consulting Ltd, Macao, China. Email: leanda.care@gmail.com
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Proceedings of World Business, Finance and Management Conference
8 - 9 December 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-66-5
In order to attract new employees, many local small and medium sized enterprises were willing to
increase the starting salary by 10% in the third quarter of 2011 but this still failed to attract
candidates since the original salary was quite low (Enterprises attract new, 2011). Further, the staff
benefits that are provided by local small and medium sized enterprises are not as attractive or
comprehensive as the casinos and hotels (People-oriented management, 2011).
Given this environment, how can employee turnover for a Chinese Family Business (CFB) be
reduced? The objective of this research is to determine the factors that cause employees’ turnover
intention for CFBs and to analyze factors that may affect employees most. A specific real case
study of employee turnover for a CFB is undertaken with the purpose of developing
recommendations for the to enhance the capability of the CFB to retain employees. Moreover, the
present study can be a useful example for other family businesses in managing turnover and
retention.
In the following section 2, the background of the focal business is highlighted which is followed by a
review of the core theories of turnover. Section 4 stresses the key trends within the typical Chinese
family management system. Sections 5 and 6 introduce the methodology used in this study and
then the analysis and discussion of results. As expected, section 7 and 8 suggests a number of
different techniques to be implemented by the company to ameliorate the high turnover while last
section highlights one last comment in this ongoing present context.
2. Background of the HOI PANG Company
Hoi Pang Company is a Chinese Family Business (CFB) which was established in 2002 in Macao
(for private matters, the real company’s name was protected and a faked one is being used in this
writing). As its major business scope, the company is engaged in retailing marine delicacies and
edible bird’s nest. Its target customers are tourists from mainland China. Due to the rapid
development of Macao’s tourism industry, Hoi Pang Company had a great opportunity to develop
the business and achieved and average annual increase in sales of 10% over the past 9 years. At
present, there are 6 branches located at different sightseeing spots in Macao and the business
continues to improve.
Since Hoi Pang Company is a traditional Chinese Family Business, no formal human resource
department exists. The owner of the company assigns the administrative staff to conduct the daily
human resource operations; thereby comprehensive human resource planning is absent. At
present, the company only undertakes basic personnel management tasks: simple recruitment
procedures, training and compensation packaging. As the owner of the company strictly controls
the daily operations, the employees only need to follow instructions and complete the tasks which
are assigned to the owner. As a result, there is neither empowerment nor individual task allocation
in the company. All the salespeople do the same tasks. Employee performance evaluation and
employee promotion plans are also absent (see Table 1).
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Proceedings of World Business, Finance and Management Conference
8 - 9 December 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-66-5
Table 1. The present human resources of the company.
Recruitment & Selection
Through newspaper advertisements
Referred by owner’s friends or relatives
Referred by current employees
Training
On-the-job training
Compensation & Benefits
Fixed monthly salary
Fixed monthly commission
Year-end bonus
Basic holidays
Social Security Fund
There are 45 employees working for the company and, with the exception of three administrative
staff, all are salespeople (see Table 2). The organizational chart only contains two main groups:
front line and back office. The front line staff includes all salespeople who mainly provide service to
customers: they are in charge of the whole process of selling goods to customers, including
packing, delivery and the cashier role. The back office staff mainly takes care of daily administrative
operations, human resource management and accounting. Since Hoi Pang Company is a
traditional Chinese family company, the small size and simple structure allows the owner of the
company to readily make all the decisions for the company. The owner centralizes the management
power and assigns tasks to the employees. The employees, therefore, only need to follow the
instructions and fulfill the tasks that are assigned by the owner.
Table 2. The Hoi Pang Company Employee Demography (as at June 2011). There is roughly a 10% difference between
Hoi Pang Company and the local retail industry salaries and an 18% difference between that of Hoi Pang Company and
the gaming sector.
The most significant problem for this CFB is the high employee turnover rate. According to data
provided by the company, the average rate of turnover was 26% last year. On average, one staff
member left the company each month. Table 3 shows the employee turnover record of last year
which was collected by the administrative staff through exit interviews. From this data it can be seen
that employees who left the company are mainly in their thirties and forties. Except for personal
reasons, such as early retirement, health problems and family issues, employees left the company
with job alternatives to go to.
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Proceedings of World Business, Finance and Management Conference
8 - 9 December 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-66-5
Table 3. The employee turnover record in 2010.
Month
Age
Gender
Position
Reason for leaving
F
F
M
F
M
F
F
F
M
Educational
Level
Primary
Senior Secondary
Salespeople
Junior Secondary
Junior Secondary
Junior Secondary
Tertiary
Primary
Junior Secondary
Feb
Mar
Mar
May
Jun
Jun
Aug
Aug
Sept
55
35
32
45
42
41
28
48
38
Junior salesperson
Junior Salespeople
Junior Salespeople
Junior Salespeople
Senior Salespeople
Junior Salespeople
Administrative staff
Junior Salespeople
Junior Salespeople
F
F
F
Senior Secondary
Junior Secondary
Junior Secondary
Junior Salespeople
Junior Salespeople
Senior Salespeople
Early Retirement
Got a job in a casino
Got a job in Casino
Health Issue
Developed own business
Developed Own business
Got a job in a hotel
Family issue
Got a job in the retail
industry
Unknown
Got a job in Retail Industry
Got a job in Retail industry
Sept
Oct
Oct
35
45
40
3. Turnover: Review
Employee turnover has become an important topic in human resource management and has been
widely investigated (Koh & Goh, 1995; Maertz & Campion, 2004; Taylor & Chin, 2004; Zheng, Kaur
& Tao, 2010). Price (2001) defines employee turnover as individual movement across the
membership boundary of an organization. Williams (2012) also defined “Employee Turnover [as]
the loss of employees who voluntarily choose to leave the company”. From the literature, employee
turnover can be considered as two major types: (A) Functional turnover; (B) Dysfunctional turnover.
Rewstrom (2009) defined functional turnover as the loss of a poor-performing employee who
voluntarily chooses to leave a company. Dysfunctional turnover is the loss of high-performing
employees who voluntary choose to leave a company. Williams (2010) indicated that a certain level
of functional turnover is good for a company because it can enhance the efficiency of the human
resource management, but the dysfunctional turnover is a loss as valuable employees leaving the
company may affect business performance. Management should thus pay attention to
dysfunctional turnover (Morell, Clarke & Wilkinson, 2002; Rewstrom, 2009).
In studying voluntary turnover, the concept of turnover intention is often applied (Zheng et al.,
2010). Hom and Griffeth (1991) defined turnover intention as an individual’s own estimated
probability that he or she has intent to leave the organization permanently within a certain period.
Indeed, many turnover models consider turnover intent as an immediate precursor to eventual
turnover (Morell et al., 2002) and it has also been acknowledged as the best predictor of actual
turnover (Mobley, 1977; Mobley, Griffeth, Hand & Meglino, 1979; Hom, Griffeth & Sellaro, 1984;
Hom & Griffeth, 1991; Randhawa, 2007). A wide range of research has tested the relationship
between actual turnover and turnover intention. Mobley et al. (1979) indicated that individuals’
intention to leave or stay is consistently related to actual turnover. Moreover, actual turnover is
expected to increase when the intention increases.
Most studies of employee turnover are developed based on the work of March and Simon in 1958
(Hom & Griffeth, 1995; Taylor & Chin, 2004; Zhang et al., 2010). March and Simon (1958)
described employees and organizations as being in a state of equilibrium, where employees
contribute to the organization and the organizations offer compensation to the employees in return
(as cited in Hom & Griffeth, 1995). The model assumes that when the compensation provided by
the organization no longer matches the contribution of the employee, the employee may leave the
organization. Being one of the earliest models of turnover, the study of March and Simon (as cited
in Taylor & Chin, 2004; Zhang et al., 2010) introduced two vital motivational components from the
equilibrium between employee’s contribution and organization’s compensation - perception of ease
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Proceedings of World Business, Finance and Management Conference
8 - 9 December 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-66-5
of movement and desirability of movement (Lee & Mitchell, 1994; Taylor & Chin, 2004; Zhang et al.,
2010). The theory suggests that employees’ turnover intention is also influenced by these two
factors (Morell et al., 2002).
Based on the former studies, Mobley (1977) proposed an extensive psychological turnover process
that explains how individuals make their decisions to quit or stay in their positions. Mobley (1977)
indicated that a consistent negative relationship between job satisfaction and employee turnover
does exist but the relationship is not particularly strong. It is possible that other variables may
mediate the relationship between job satisfaction and the actual act of quitting (Mobley, 1977;
Mobley et al., 1979; Hom et al., 1984). As a result, a more complete understanding of the
withdrawal decision/turnover process is presented in Mobley’s model. The model suggests several
possible intermediate steps in the turnover process.
Unlike Mobley’s model which focuses on studying an individual’s psychological process, Price
(1977) focuses on other variables that may influence job satisfaction (Hom & Griffeth, 1995; Zheng,
2010). Price developed a model which incorporated some important variables that may affect job
satisfaction. In his model, Price proposed job satisfaction as the central variable and identified five
key determinants which may affect job satisfaction. These five determinants are pay, integration
(the relationship between individual and his/her supervisor or colleague), instrumental
communication (how clearly the work role is communicated with employee), formal communication
(how well the organization to deliver its formal policy and practice) and centralization (the power
delegation within the organization). The first four determinants have a positive relationship with job
satisfaction while centralization has a negative relationship with job satisfaction. Furthermore, the
availability of job alternatives is considered to moderate the effects of job satisfaction upon turnover
(Hom et al., 1984).We first consider 3 models in our analysis. All 3 models composed of same set
of independent variables but with different dependent variables.
The unfolding model of voluntary turnover first proposed by Lee and Mitchell, in 1994, offers a new
direction for voluntary turnover (see Table 4). Different from the traditional turnover model, the
model advocated by Lee and Mitchell (1994) does not only maintain the focus on the relationship
between job satisfaction and turnover as there are many reasons for people to leave their positions.
Some reasons are personal while others belong at the organizational level. People do not
necessarily leave the company based upon factors related to the job: personal reasons may have a
greater influence (Lee & Mitchell, 1994; Mitchell et al., 2001). Therefore, Lee and Mitchell
conducted extensive research and developed the unfolding model to explain why people leave their
positions. Through their research, the authors found that some people leave their positions without
searching for a new job and thereby without conducting a comparison with the current one. And
some people leave even though they feel satisfied with their job. In addition, Lee and Mitchell
(1994) stated that they initially thought that leaving was caused by a particular event (e.g.
unsolicited job offer, spouse relocation, friends’ leaving). These particular events are named as
shocks in the model (Mitchell et al., 2001, Morell et al., 2002).
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Proceedings of World Business, Finance and Management Conference
8 - 9 December 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-66-5
Table 4. The unfolding model paths by Mitchell et al. (2001).
Path 1 is started by a shock and the employees have a plan or script in advance. Once the event
occurs, the employee thinks about quitting, calls up the plan and actual turnover happens. A shock
can be personal shocks or job related shocks. Job dissatisfaction is not the root cause in this path
while a job alternative does not exist. Path 2 also begins by a shock, but there is no plan or script in
place. The shocking event is often negative and involves expectation violation: thus negative
emotions accompany the turnover process. As with Path 1, job dissatisfaction and job alternatives
are irrelevant in Path 2. Path 3 suggests that a shock leads to minimal job dissatisfaction and the
employee starts to evaluate the current job, considers other alternatives and eventually leaves the
company for a better one. Path 4 is initiated by accumulated job dissatisfaction. Some employees
who experienced job dissatisfaction may leave the current position without searching for another
job (Path 4A). Some employees who experience job dissatisfaction leave the current position after
searching and evaluating other alternatives (Path 4B). Apart from Path 4B which represents the
traditional turnover process that is suggested by many earlier researchers, the first four paths had
not been discussed in the literature before the introduction by Lee and Mitchell in 1994. The
Unfolding Model offered a new orientation for turnover research (Morell et al., 2002).
4. The management Style of the Chinese Family
Although it is difficult to define what a family business is, it is generally agreed that the family
business is unique due to the involvement of the family (Lansberg, Perrow & Rogolsky, 1988; Chua,
Chrisman & Sharma, 1999). Lansberg et al. (1988) indicated in the first issue of Family Business
Review that some definitions of family business are too exclusive and some are too inclusive. There
is as yet no universal definition of family business. Chua et al. (1999) extensively reviewed the
literature and defined family business as a comprehensive concept, a business governed and/or
managed with a intention to shape and pursue the vision of the business held by a dominant
coalition controlled by members of the same family or a small number of families in a manner that is
potentially sustainable across generations of the family or families.
(1) Hwang (1990) stated that the family business is one type of organization in contemporary
Chinese society. Turning to the management style of CFBs, it is found to be distinct from the
western approach (Hwang, 1990; Lee, 1996; Hernandez & Marin, 2007; Gatfield & Youseff, 2010).
Being deeply influenced by Confucian ideology. The adherence to Confucian ethics may influence
the management of CFBs (Hwang, 1990; Lee, 1996; Gatfield & Youseff, 2001, Wah, 2001; Shapiro
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Proceedings of World Business, Finance and Management Conference
8 - 9 December 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-66-5
& Erdener, 2003). These businesses commonly share some characteristics in terms of their
management style. There are four most outstanding features of CFBs (Hwang, 1990; Lee, 1996;
Gatfield & Youseff, 2001). Relation-oriented: Chinese management is considered to be a humancentered style that emphasizes human relationships (Alston, 1992; Lee, 1996; Wah, 2001).
Management concerns itself with relationships, and places great emphasis on individual emotion
and trust. Management decisions often take interpersonal relations into consideration (Alston,
1992; Lee, 1996; Gatfield & Youseff, 2001).
(2) Family-centeredness: Family relationships are unavoidably brought into the organization, as
family plays an important role in Chinese culture (Lee, 1996; Carrigan & Buckley, 2008). In a
traditional Chinese family company, the relationship between employer and employee follows the
model of parent and child. It means obligation is the core value in the management of a Chinese
family company (Lee, 1996). Non-family members tend to look upwards for direction and guidance
even when they may be inappropriate (Alston, 1992). There is a large power distance between
family members and non-family members (Hwang, 1990).
(3) Power-centralization: There is a distinct power hierarchy within the organization, since the
power is highly controlled by the owner or the family member. A CFB tends to assign family
members or people with close relationships to the family into important positions. Accordingly,
power centralization can be kept due to the mind-set of nepotism, which helps the Chinese family
company to maintain control and ownership amongst the family members (Hwang, 1990). As
expected, power delegation is usually absent in a typical Chinese family company. CFBs suppress
the development of any organizational culture that relates to empowerment so as to maintain the
level of family control within the organization (Gatfield & Youseff, 2001). Price (1977) has proposed
that power centralization has a negative impact on employees’ job satisfaction (Hom et al., 1984).
Non-family members cannot participate in company decision-making processes, as there is
relatively low trust and confidence of non-family members (Hwang, 1990; Lee, 1996). Loyalty is
more appreciated and rewarded than daring and initiative (Alston, 1992).
(4) Small in size: A unique characteristic of CFBs that has a great impact on the management style
(Lee, 1996; Gatfield & Youseff, 2001; Carrigan & Buckley, 2008; Hwang, 1990) is that most are
operated on a small scale and the number of hired employees is limited. CFBs seldom use formal
organizational structures, communication, rules or written procedures (Carney, 1998) as a smallsized company with relatively simple structure is much easier to control and manage (Hwang, 1990;
Gatfield & Youseff, 2001).
These features allow the maintenance of close interpersonal relationships within the CFB. It is also
an advantage for a small-sized company in terms of a short and fast decision-making process
(Shapiro & Erdener, 2003). However, the disadvantage of the small size is that employees have
less opportunity for internal transfer and promotion that may influence employees’ turnover
intention (Hom et al., 1984; Gatfield & Youseff, 2001).
5. Research Methodology
Based on the literature reviewed here on key turnover models and the management style of CFBs,
three core dimensions were found to be highly relevant and applicable for analyzing employee
turnover. The conceptual framework for this study was developed based on the close relationship
between three core dimensions and employee turnover. The model proposes that, (a) job
satisfaction (pay level, integration, communication), (b) job alternatives (planning, searching,
evaluating) and (c) CFB’s management style (relation-oriented, family centeredness, power
centralization, organization size) influence employee turnover.
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Proceedings of World Business, Finance and Management Conference
8 - 9 December 2014, Rendezvous Hotel, Auckland, New Zealand, ISBN: 978-1-922069-66-5
Qualitative research is the approach taken in this case study as it concentrates on context analysis,
explores the root cause of the problem in detail and gives a deeper understanding for the problem
that is being studied (Eisenhardt, 1989). The current study is based on face to face interviews with
three types of respondents: Five former employees, seven current employees and the owner of the
company were invited to participate in the interviews. The interview was developed using openended questions and is characterized by a conversation where the respondents are being guided
by the interviewer (Eisenhardt, 1989: Miles, 1979; Wu & Wu, 2011). The one-on-one in-depth
interview format allows interviewees to express their ideas and provides the opportunity for
expansive responses (Miles, 1979). Moreover, one-on-one interviews help to establish a
relationship of trust and confidence between interviewer and interviewee through a casual
conversation format (Miles & Hubeman, 1994). Each interview lasted approximately 45 minutes to
one hour. The respondents were informed that their responses would be reported in aggregated
format and confidentiality would be maintained.
The current employee respondents were chosen from the company at random. The former
employee respondents were first selected from the records of employee turnover in 2010 and
depended on the willingness of the former employees; some former employees refused to take part
in the interview. All interviews were conducted by an interviewer who could speak both Cantonese
and Mandarin (Putonghua) fluently, which was important since not all respondents were conversant
in Cantonese: Some of them speak Putonghua instead. The interview instrument was developed to
access data on three nucleus dimensions that related to employee turnover in the conceptual
model: (a) Job satisfaction, (b) Job alternatives, (c) CFB management style. Obviously, there were
some distinctions between the questions for employees and employers. The questions for
employee respondents focused on job satisfaction and job alternatives while the questions for
employers focused on the management style of the company. As a result, three question sheets
were designed.
As the present study is conducted in English but all the interviews are administered in Chinese, in
order to minimize errors and maintain data consistency during the translation process, forwardbackward translation was undertaken (Basim, Sesen & Korkmazyurek, 2007; Ozolins, 2009).
6. Analysis, Findings and Discussion
Eight female and four male employees were interviewed. They ranged in age from 24 to 55, with a
median age of 38.1. The average length of service of the respondents is one and half years. There
was some variability in the respondents’ educational background, varying from primary education to
tertiary education, while five respondents were former employees and seven respondents were
employed at the time of the study.
6.1. JOB SATISFACTION: PAY LEVEL
All respondents were first asked to express their feelings regarding the pay level. Four of them said
they were unsatisfied with the fixed salary, six of them felt satisfied with the salary while two
respondents said the salary is not the key issue of concern for them. Former employees, who felt
unsatisfied with pay levels, mentioned that they enjoy working in the company. Yet, the pay level is
lower than other large companies, and this was the reason of their intention to quit the job or even
actual resign. One former employee said: “I was unsatisfied with the monthly salary I received
because it can’t cater my family financial needs. I am the only member who has ability to earn
money in my family. I found a new job in casino in order to earn more. In fact, I would like to work
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Proceedings of World Business, Finance and Management Conference
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for the company rather than working in casino if I don’t need to care about money.” (former
employee, male, 42)
Six respondents indicated that they are quite satisfied with the pay level as they realized that the
workload and work stress are less than working in a large company. And some of them said that
they have tried to compare with other friends who are working in the same field. One respondent
reported: “I have asked one of my friends who is also working in the retail industry and I found that
my salary is a little bit more than her, so I am quite happy with the salary I received. Moreover, I can
get a commission every month even though it is not that much.” (current employee, female, 42)
Another comment regarding pay for contribution was as follows: “I am quite satisfied with the salary
as I think the duties are simple. I can earn more if I choose to work for casino or hotel, but I know I
need to work on shift and must be on time to report duty. It makes me feel nervous.” (current
employee, female, 36)
In addition to the pay level problem, seven respondents felt the current commission policy is not
fair. Starting from the beginning of 2010, the company launched a monthly fixed commission for
every staff member where the commission is calculated based on the overall business performance
for the particular month. The aim of distributing commission is to motivate employees to perform
better. However, through the interviews, it was found that some respondents felt the commission
policy to not be fair and transparent enough and they said the commission policy should be
changed to one depending on individual performance. One respondent complained: “I am a senior
staff member and have more experience in this industry but I still receive the same amount of
commission with other junior staff. It makes me feel upset.” (former employee, female, 40)
Except for the fixed salary and monthly commission, some respondents commented on the staff
benefits. Half of them voiced out that the company should improve its benefit for employees, such
as meal subsidies and transportation subsidy. Furthermore, two respondents thought the company
should also provide retirement welfare for staff who works for the company until his/her retirement
(see Table 5).
Table 5. Response of pay level.
Subcategories
Fixed salary
Unsatisfied with fixed salary
Satisfied with fixed salary
Neutral
Monthly commission
Feel the commission scheme is unfair
Want to have an individual-based scheme
Other employee benefits
Compensation package should be improved
Want to have retirement welfare
Frequency of
response
4
6
2
7
7
6
2
The owner indicated that staff salary and benefits were first developed based on the tradition of the
company, and then the company considered the local labor market situation to adjust the salary
and make a final decision. He understood that money is a vital factor to influence employee’s job
satisfaction level. He believed that most staff working for the company do so mainly for monetary
rewards, as they need the salary to afford their daily expenses and fulfill family responsibilities.
Hence, the owner sometimes has meetings with other owners in the same industry to share ideas
on how to adjust the salary and other management issues. He emphasized that he has made
comparisons with other companies in the same industry before setting the salary.
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Meanwhile, the owner also reinforced that he pays attention to the pay level in the local labor
market through newspaper and news broadcasting. He advised that there has been an increment
of 5% to 10% per year on average. He believed that the current pay level in the company is
reasonable although there is still a difference when compared with casinos and hotels. He also
pointed out that employees should realize that the workload of this job is less than working in a
large company, and there is more flexible for them to arrange their days off, so employees should
weigh up the benefits before they choose to leave.
The owner added: “I also know some of the former employees left the company due to an
unsatisfactory salary level but as an owner of a small company I also need to control the operating
cost, so it is impossible to increase salaries too often.”
In reference to the monthly commission, the owner said the company had an individual employee
based commission policy at the very beginning, but it is difficult to calculate the individual
commission, as in many situations, one staff member cannot complete the deal, especially when
the customers are very demanding. Two or more employees have to cooperate to serve the
customers from weighing the goods, packing the goods, to calculating the cash. As a result, it is not
easy to implement an individual commission scheme. That may cause conflict among employees
and impact negatively on their relationship. The owner was of the opinion that the current
commission scheme is a simple one for the company to administer.
6.2. JOB SATISFACTION: INTEGRATION
In analyzing the responses of employee integration with both the employer and colleagues, eight
out of twelve respondents generally felt happy with the relationship with both parties (see Table 6).
Most of respondents are satisfied with the relationship with their colleagues. Two of them even
expressed that if their best colleagues leave the company, they may also consider quitting.
However, the relationship between employer and employees is not as good as the relationship
among colleagues. There were three respondents who emphasized that they had a bad relationship
with their employer due to his bad temper. One of them expressed: “I had bad experiences when I
needed to work with my boss, especially when he was in a bad mood. I still remembered that he
used to shout at me in front of customers just because I made a small mistake, making me feel
embarrassed.” (current employee, female, 55)
Another commented on the owner’s personality as follows: “I know my boss is a kind person, but it
will be better if he has the ability to control his temper and know how to treat us with respect.”
(current employee, male, 42)
In general, most respondents stated that the relationship with the employer and colleagues
influence their job satisfaction directly (see Table 6). In particular, the relationship with colleagues
affected them most. The most commonly cited aspects of how relationships influence their job
satisfaction were that (1) good relationships with the employer encouraged them to work hard for
the company, (2) the close relationships with their colleagues can create a happy working
atmosphere, (3) emotion was affected by the relationship with colleagues and (4) the friendship that
they built with their colleagues helped them to decrease job stress. Nonetheless, two respondents
indicated that their relationship with employer and colleagues influenced their job satisfaction
indirectly as they consider material factors (pay level) more vital than the relationship with others.
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Table 6. Response to integration
Subcategories
Frequency of
response
Satisfaction with integration
Good relationship with employer
Bad relationship with employer
Neutral regarding relationships with
employer
Good relationship with colleagues
Bad relationship with colleagues
Neutral regarding relationships with
colleagues
Influence of integration
Direct influence
Indirect influence
No influence
8
3
1
10
1
1
9
2
1
The owner of the company reported that he had confidence that the relationship between him and
his staff was not bad, but he also realized that employees tend to keep a certain distance from him
so to feel more comfortable. He stated that it is a common phenomenon in Chinese society. He
also commented that “I think a power distance between employer and employee is good, as it is
much easier for me to control the business and ask them to follow my instruction”.
6.3. JOB SATISFACTION: COMMUNICATION
In addition to integration, respondents were also asked to comment on the communication with
their employer. Only five respondents often communicated with the owner, while the remaining said
they may make contact with him if an urgent problem occurred and they need to ask for the owner’s
instructions (see Table 7). One respondent, who had a bad relationship with the owner, even
commented: “I tried to avoid communicating with my boss as I want to keep a distance with him and
normally I contact the senior staff first if I need instruction. This way of communication makes me
feel comfortable.” (current employee, female, 55)
Table 7. Motivation in daily tasks
Subcategories
Fulfill customer’s request
Build up relationship with
customers
Convince customer to purchase
more
Meet the budgeted sales target
Self-improvement
Frequency of
response
6
5
4
4
3
Respondents also commented on the frequency of receiving feedback from their employer. Two
thirds of the respondents seldom received feedback and even when they received it, some of them
felt that it was difficult to fully understand what the owner meant to convey since the message
delivered by him was not sufficiently clear. Some respondents reflected that they tried their best to
give suggestions to the owner, but their suggestions were never adopted.
The owner reported that the communication between employees and the managerial level is not
bad, as he works in the main store every day, so staff is able to contact him if they encounter
problems. Every week, the owner visited different branches and asked for staff opinions. The owner
said he is pleased to give feedback to employees and tries to adopt suggestions, but when he
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deems the suggestion to not suitable, he rejects them, as being the owner of company he should
make the final decision by himself.
6.4. JOB SATISFACTION: OTHER DETERMINANTS
Lastly, all respondents offered additional factors that have the possibility to affect their job
satisfaction level. From respondents’ answers, there is no particular difference between the
responses from former employees and current ones regarding the factors that may affect their job
satisfaction level. However, there is a difference in opinion between young employees and older
employees. Young employees were concerned about their career path whilst middle aged
employees tended to focus on job location and working hours. One former employee suggested
that: “The promotional opportunity is very important to me as I am still very young and hope to
develop my career path. There is no chance for me to get a promotion in this company” (former
employee, female, 28). One current employee also commented that “I need to look after my son
and the store location and working hour become the main concern for me” (current employee,
female, 36).
6.5. JOB SATISFACTION: ALTERNATIVES
Only former employees were required to answer whether they had planned to leave the job prior to
quitting and how long they needed to find a new one. Three out of the five admitted that they had a
plan to quit the job and it took around three to four months from the initial planning to actually
leaving. Two former employees also mentioned that the reason that they left the company was due
to pay level being lower than the new offers they found in casino jobs. Two other former employees
left the company as they felt bored with the job nature, due to the simple duties and repetitive
processes. They wanted to develop their career path. The last respondent said he was invited to
work by a competitor company (see Table 8).Only former employees were required to answer
whether they had planned to leave the job prior to quitting and how long they needed to find a new
one. Three out of the five admitted that they had a plan to quit the job and it took around three to
four months from the initial planning to actually leaving. Two former employees also mentioned that
the reason that they left the company was due to pay level being lower than the new offers they
found in casino jobs. Two other former employees left the company as they felt bored with the job
nature, due to the simple duties and repetitive processes. They wanted to develop their career
path. The last respondent said he was invited to work by a competitor company (see Table 7).
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Table 7. Determinants in Job Evaluation
Subcategories
Frequency of
response
Pay level
7
Staff benefits
4
Promotion
2
opportunity
Workload
3
Working environment
3
Two thirds of all respondents considered job searching to be an important action before they decide
to quit their current position. The remaining respondents said job searching is not a necessary step
if they are going to quit the current position because they are looking for a break before starting a
new job. Job evaluation between the current position and the new offer was crucial for most of the
respondents. The most frequent elements to be evaluated were pay level, staff benefits, promotion
opportunities, workload and working environment (working hour, location, and schedule).
Furthermore, current employees are required to list the reasons that would attract them to stay with
the company such as less workload and simple duties, the flexibility of arrangements for days off,
feeling comfortable with the working environment and the warm atmosphere of a Chinese family
company. One current employee summarized this. “I enjoy staying with the company not only
because of the lower workload, but also the freedom to arrange my holidays, for example. I can
even call back to the store in the early morning and tell them that I need to have a day off today.
There is no a strict rule for us to follow so I feel comfortable with the working environment.” (current
employee, female, 42)
The owner said that if the company knows that an employee is considering leaving, he usually talks
to the employee individually in order to understand the reason for their intention to leave. If it is a
personal reason, then it is nothing to do with the company. However, if it is related to job issues, he
tries his best to retain the employee. An example was given by the owner himself: “One employee
was going to quit the job due to communication problems with colleagues. Then, I re-allocated her
to another store and retained that employee successfully”.
The owner stated that he put lots of effort to keep human resources stable. Being a retail-based
business manpower is quite critical for daily operations. Based upon his past experience, the owner
believes the main difficulty with retention is in dealing with employees who are unsatisfied with the
pay level: “As there is a big gap between large and small companies, by being a small company, it
is hard to compete with a big company”. In some cases, employees are not willing to tell the
company their true feelings or reasons for turnover and then it is not possible for the company to do
anything.
7. The Theoretical Perspective
7.1. EQUITY THEORY
The unfairness of the existing commission scheme was raised numerous times. Respondents
reflected that a flexible and transparent commission calculation should be launched to replace the
current fixed commission, as employees believed that commission should be offered based on
individual performance, not just calculated based on overall sales performance. The felt unfairness
of commission distribution in Hoi Pang Company can be explained by Equity Theory developed by
John Stacey Adams in 1960s. This theory proposes that employees compare their efforts and
rewards with their colleagues. Equity exists when employees perceive that the ratios of their effort
to their rewards are equivalent to the ratios of others. Inequity exists if employees find that the
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Proceedings of World Business, Finance and Management Conference
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ratios are not equivalent (Ivancevich & Matteson, 2002). This equity concept is central as
individuals are motivated by a desire to be treated equitably (Reece & Brandt, 2005). Highly
motivated employees observe their rewards to be equal to their contributions, whereas when
employees observe that inequity exists, that might increase their dissatisfaction regarding
compensation (Morell et al., 2002).
7.2. JOB EMBEDDEDNESS MODEL
The data show that some middle-aged employees would rather stay in the company because they
feel comfortable with the working environment, expressed as the warm atmosphere of workplace
and the flexible rules of the Chinese family company. When answering the questions regarding
integration, some respondents reflected that if their best colleague left the company they may quit
the job as well, as a good relationship can create a warm and happy working atmosphere that helps
them to decrease job stress.
The above responses offer evidence that the job embedding phenomenon does exist in the
company and is neglected in the previous conceptual model. In fact, this finding can be explained
by the job embeddedness theory that was developed and tested by Mitchell et al. (2001). Job
embeddedness is a construct used to explain why people stay with an organization and to predict
employee voluntary turnover (Mitchell et al., 2001). Job embeddedness focuses on why people stay
with the company rather than why people leave the company (Mitchell et al., 2001; Holtom, Mitchell,
Lee & Eberly, 2008). Several empirical studies offered evidence that there is a negative relationship
between job embeddedness and employee’s turnover intention (Mitchell et al., 2001; Lee et al.,
2004; Holtom et al., 2008; Zheng et al., 2010). Employees who reported being more embedded in
their jobs are less likely to leave their company.
Different from the traditional turnover models, the job embeddedness model focuses on a broader
context than job satisfaction and job alternatives (Holtom & O’Neill, 2004). There are three
dimensions in the model: link (the linkage an employee has with company, people, and community),
fit (how the employee fits into the company or community) and sacrifice (what the employee needs
to sacrifice when leaving the position) (Mitchell et al., 2001; Holtom et al., 2008). From the findings,
it is apparent that the job embeddedness model is worth further consideration in future studies so to
better interpret employee’s turnover behavior.
7.3. ORGANIZATIONAL COMMITMENT
Organizational commitment can also explain the findings that some employees stay with the
company for years just because they feel comfortable with the working environment or they want to
maintain the friendship with colleagues. This notion is defined by Porter et al. (1974) as when an
individual has a strong belief in the organization’s goals, a willingness to input considerable effort
on behalf of the organization and a desire to maintain organizational membership (as cited in Shore
& Martin, 1989; Meyer & Allen, 1991).
Three types of commitment (affective, continuance and normative) developed by Meyer and Allen
(1991) are proposed to interpret employees’ behavior of job embedding. Affective commitment is
defined as employees having an emotional attachment and involvement with the organization and
its goals (Shore & Martin, 1989; Meyer& Allen, 1991). Continuance commitment is employees’
willingness to stay with an organization because of the investment that the employee has made and
the perceived costs upon leaving, such as relationships with colleagues or benefits that the
employee will receive due to long-term employment (Shore & Martin, 1989). Normative commitment
happens when that employee has a feeling of obligation to their company. A typical example is the
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training offered by company may make employees have a feeling of obligation that to stay with
company to work hard in order to repay the liability (Shore & Martin, 1989; Meyer & Allen, 1991).
With the Hoi Pang Company, both affective and continuance commitments can explain those
employees who stay with the company due to good relationships with colleagues or a comfortable
working environment. In order to enhance organizational commitment, it is suggested that the
company create an environment of trust and respect. The employer should trust his employees
through power delegation in daily operations and try to encourage employees’ involvement in
making decisions that would affect their work.
8. The Practical Perspective
Being a small-sized enterprise, the resources of Hoi Pang Company are limited. It is not realistic to
apply all strategic alternatives at the same time. It is also risky to undertake too many innovations
over a very short period of time. Accordingly, the alternatives which are specific enough to solve the
company’s key concerns are suggested to be the first adopted as presented in the next four subsections.
8.1. PERFORMANCE RELATED PAY
Performance related pay (PRP) is considered as a motivator to encourage employees to perform
well and to increase overall job satisfaction (Green & Heywood, 2008). PRP can be either an
individual scheme, such as a piece rate wage, or a collective scheme such as a profit sharing
(Gielen et al., 2010). PRP can be a monetary reward for the employee, as individuals are motivated
to satisfy unfulfilled needs. The PRP that is currently applied by Hoi Pang Company is a monthly
fixed commission. Its aim is to motivate employees’ to work enthusiastically and enhance their
satisfaction with pay levels. However, its shortcoming relies on its unfair nature. Employees are
aware the commission is calculated based on the overall business performance and is distributed
to every employee evenly. A new PRP may be designed to ameliorate the concern of unfairness.
Taking into account the owner’s concern, an individual commission may cause conflict among
employees. Two or more staff need to cooperate in order to complete a deal. As a result, it is not
easy to implement an individual commission scheme. After considering both parties’ concerns, a
team-based performance related pay scheme is recommended to replace the existing scheme.
Under the new outline, each branch will be considered a team. The employees working in the same
branch will be the team members. Since Hoi Pang Company conducts retail-based business, it is
easy to set the performance goals by the sales volume. The sales volume will be set based on the
branches’ past business performance record and situation, so that the goal is reasonable and
realistic and has a high possibility of achievement. Moreover, utilizing sales volume is specific and
easy to measure. The information is available to both employer and employees. Thus, employees
can routinely check the business performance. If the team can reach the sales volume target, all
the team members will obtain a commission at the end of the month. An effective and fair PRP is
critical, as it is a supplement to enhance employees’ pay level satisfaction and self-achievement. It
is not realistic for Hoi Pang Company to compete on fixed salary with big companies, so
performance related pay is a tool for the company to retain its employees.
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8.2. JOB ROTATION
Job rotation is regarded as a method of job design, allowing employees to learn job skills from
different tasks and eliminate employee fatigue (Nelson, 1994). The objective of job rotation is to
enrich and expand employee’s job assignment and motivate them. According to the findings in this
current case study, employees currently carry out the same simple tasks and they reflect upon the
job nature as boring. That becomes one of the factors that influence the young employee’s
turnover. Hence, job rotation and workplace reallocation is recommended to avoid employees
feeling bored with their job and to increase their enthusiasm. Meanwhile, workplace re-allocation
can also deal with the problem of the current unfair commission scheme because every employee
can have the chance to work in different stores. They thus can have the same opportunity to earn
more commission in the stores that have better sales performance. Besides, the low level of trust
and confidence by the employer in employees cause the unwillingness to delegate power so only
simple duties are assigned to employees. Employees perceive this phenomenon and find that
interesting and challenging jobs are not given to them which may lower their organizational
commitment.
8.3. PERFORMANCE APPRAISAL
Performance appraisal can have a positive impact on job satisfaction when employees believe they
are being evaluated based upon the proper criteria (Pettijohn, 2000). From the findings, employees
complained that a clear and transparent promotion scheme is absent; performance appraisal is the
foundation for establishing a promotion scheme. At the same time, the performance appraisal
prevents the owner’s over-concentration on relationships with family members and ignoring the
performance of non-family member employees. It is also suggested that the company provide
special rewards for the top performers. Compensation is a right. Recognition is gift (Nelson, 1994).
It is worth valuing and appreciating employees who have better performance since selfachievement and recognition is a vital component of job satisfaction. The special rewards can be
either monetary rewards (one-off bonus) or non-monetary rewards (a thank you letter or certificate)
or even both. The idea of special rewards as a recognition delivered by employer is a valuable gift
to motivate potential employees.
8.4. IMPROVEMENT OF THE RECRUITMENT PROCESS
Recruiting the right people for the right position decreases the possibility of employee turnover
(Hewlett, 2009). Therefore, a comprehensive recruitment process is the first step to prevent
employee turnover. Although the resources of the company are limited, some important steps of
recruitment and selection still ought to be conducted in order to hire the right people for the right
job. First of all, it is suggested that the company write a job description based on the requirements
of the company. The job description assists the company to identify what the important elements
are. Secondly, it is suggested that the company attempt to observe the current employees who
have stayed with the company over a longer period of time and try to determine the common
features these employees share. Thereby, the company develop an understanding of what type of
employee’s best fit the company. Thirdly, the owner may conduct in-depth interviews with
candidates in order to understand each candidate’s background and personality. Good
communication during the recruiting interview also provides the candidate with an opportunity to
consider whether the position offered is suitable for him/her.
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9. Conclusions
The present research provides a framework to better understanding the relationship between job
satisfaction, job alternatives and employee turnover. The results showed a negative relationship
between job satisfaction and employee turnover under the context of CFB. Moreover, the research
also found that there is an inter-relationship among three key constructs: job satisfaction, job
alternatives and CFB management style: the management style of CFBs influences employee’s job
satisfaction level to some degree. Further. the economic circumstances and high labor mobility
offers ready access to job alternatives which strengthens the effect of factor.
Based on the findings, both theoretical and practical recommendations are provided for the
company to enhance its capability to retain its employees. The present open case of Chung Heng
company relies on the capability of the owner to adopt these recommendations and monitor the
change in turnover over a two/three year period time. Only time will tell. Certainly, the present study
can also be a reference for other CFBs in managing turnover and retention. The research also
provides insight for future in-depth study to be taken into consideration in order to further interpret
employee turnover behavior in CFB. The research has indicated that the three elements of CFB’s
management style (relation-oriented, family-centralization, power centralization and small in size)
do interact with other factors commonly viewed in the literature to be related to employee turnover.
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