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Paper 7 Review of employeemotivation theories and their
implications for employee retention
within organizations
By Ramlall
Purpose and structure
How does employee motivation affect employee retention
within organizations? How do effective employee retention
practices can be explained through motivation theories and
how strategies serve as a strategy to increase organizational
performance. To manage change, organizations must have employee committed to demand of rapid change and as
such committed employees are the source of competitive advantage. Commitment is critical to organizational
performance, but other ingredients have to be added to the mix and when right complements are added motivation
will be result.
Why is it necessary to retain critical employees?
10 managerial & professional employees leaving costs average company 1 million. There is a significant economic
impact with organization losing critical employees as knowledge is lost (used to meet the needs & expectations of
customers). Knowledge management process of creating, capturing, and using knowledge to enhance organizational
performance. Knowledge seen as most valuable assets, most organizations lack supportive systems required to
retain and leverage value of knowledge. Cannot afford to take passive stance in hopes that people are acquiring and
using knowledge and that sources are known and accessed throughout organization. Instead organizations seeking
to sustain competitive advantage moved quickly to develop systems to leverage the value of knowledge. Easy to see
dramatic effect of losing employees who have valuable knowledge.
Concept of human capital and knowledge management is that people have economic value (as they posses skills,
experience and knowledge). Represent capital as they enhance productivity. Human capital theory, some labor is
more productive as more resources have been invested into that training of labor. Investment in skill building more
profitable and more likely to be undertaken the longer the period over which ROI can accrue. Employee retention is
important in realizing full return on investment (ROI). Theory includes length of service as proxy for job relevant
knowledge or ability as it influences person’s wage, promotional opportunity and/or type of job. Understanding of
length of service relates back to definition of intellectual capital (competence multiplied by commitment).
Intellectual capital = knowledge, skills, and attributes of each individual within an organization multiplied by their
willingness to work hard. More important in years ahead to recognize the commitment of individuals to an
organization as well as its need to create an environment in which one would be willing to stay. Organization will
need to either create an intellectual capital environment where transmission of knowledge takes place throughout
structure or continue to lose important individual knowledge developed through length of service.
Deep knowledge will help meet the needs & expectations of customers and to create and sustain competitive
advantage within global economy.
A synthesis of employee motivation theories
Motivation represents psychological process that cause the arousal, direction, and persistence of voluntary actions
that are goal oriented. Motivation is the willingness to exert high levels of effort toward organizational goals,
conditioned by effort’s ability to satisfy individual need. Need here is internal state making outcomes appear
attractive and when unsatisfied creates tension stimulating drives within individual which generate behavior to find
, goals satisfying need and lead to reduction of tension. Motivated employees are in state of tension and want to
relieve it so they exert effort (the greater the tension, the higher the effort level). Most relevant theories explaining
respective theories of motivation and how motivation may impact employee commitment in organization. 5
methods of explaining behavior (needs, reinforcement, cognition, job characteristics, and feelings/emotions)
underlie evolution of modern theories of human motivation. Need, equity, expectancy theories and job design
model giving emphasis and reported significance on employee retention.
Need theories of motivation
Pinpointing internal factors energizing behavior. Needs are physiological or psychological deficiencies arousing
behavior. Needs can be strong or weak and are influenced by environmental factors. Human needs vary over time
and place.
Maslow’s Need Hierarchy Theory
Development of the hierarchy of needs. Maslow believed that human beings aspire
to become self-actualizing and viewed human potential as underestimated and
unexplained territory.
5 set of goals referred to as basic needs: physiological, safety, love, esteem, and
self-actualization. People are motivated by the desire to achieve/maintain various
conditions upon which these basic satisfactions rest and by certain more intellectual
desires. Humans are a wanting group; the satisfaction of wants is not mutually
exclusive but only tends to be. Average member of society partially satisfied and
unsatisfied in all of one’s wants.
Theory provided insights for managers like finding ways to motivate employees with programs/practices aimed at
satisfying needs. Organization need to implement support programs and focus group to help employees and take the
time to understand their needs. Managers have the responsibility to create proper climate for employees to develop
potential. Failure leads to frustration, poorer performance, lower job satisfaction and more withdrawal from
organization.
Ways of satisfying employee needs: Physiological with Cafeterias; Security with economic (wages and salaries),
psychological (job descriptions, give praise) and physical (working conditions); affiliation with encouraging social
interaction (create team spirit); Esteem with designing challenging jobs (delegating responsibilities) and Self-
actualization with giving training (providing challenges).
Some ideas easy and inexpensive to implement and others not, level of type of need may vary. Managers who use
strategies are viewed more favorably by managers and thought to be more considerate, supportive and interested in
welfare of employees.
McClelland’s Need Theory
McClelland (1961) three needs:
- Need for Achievement: drive to excel, achieve in relation to set of standards, strive to succeed. Achievement
theories propose that motivation and performance vary according to the strength of this need and is defined
as a desire to accomplish something difficult. Country’s level of economic development is positively related
to overall achievement motivation. High achievers are more likely to be successful entrepreneurs.
- Need for Power: make others behave in way that they wouldn’t have behaved otherwise. Reflects
individual’s desire to influence, coach, teach, or encourage others to achieve. Effective managers must
positively influence others so McClelland proposes that top managers have to have a high need for power
coupled with low need for affiliation.
- Need for Affiliation: desire for friendly and close interpersonal relationships. People have desire to spend
time in social relationships and activities, prefer to spend more time maintaining social relationships, joining
groups and wanting to be loved. Individuals high in this need aren’t most effective managers or leaders as
they have a hard time making decisions without worrying about being disliked.
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