IOP3706
NOTES.
,LESSON 1: INTRODUCTION: PSYCHOLOGY OF PERSONNEL RETENTION
LESSON 1: INTRODUCTION: PSYCHOLOGY OF PERSONNEL RETENTION
Learning outcomes
After completing this lesson, you should be able to
· explain the function of personnel processes and practices in retaining valuable, talented and
high-performing employees
· discuss the various factors that influence employees’ turnover intentions, job, and occupational
embeddedness
· evaluate the function of the psychological contract in the retention of personnel
· explain how employees’ job and work satisfaction, commitment, and work engagement
influence their turnover intentions, job, and occupational embeddedness
· describe the link between personnel processes, retention factors, and retention strategies
1.1 Introduction
Effective planning, resourcing and retention represent the cornerstone of the organisation’s ability to
employ talented people who will be able to adapt to rapid changes and meet the demands placed on
organisations in the current unpredictable world of work. The retention of key employees is a critical
success factor and organisations should start investing in their current employees in order to prevent
shortages of critical and scarce skills in the future. In order to do this, organisations should be aware of
the factors that encourage employees to stay as well as the factors that encourage them to leave; and they
should create effective strategies for employee retention.
1.2 EMPLOYEE TURNOVER INTENTIONS
When an organisation has high levels of personnel turnover, it could be an indication of problems in human
resources or personnel-related practices and processes in the organisation, such as inappropriate
recruitment and/or selection methods, poor designed or non-competitive remuneration and reward
systems, and/or ineffective grievance and talent management priorities Understandably, external factors
such as competition for labour or the “war for talent” also contribute to the problem of high staff turnover.
There are two schools of thought that dominate research and practice on turnover – the labour market or
economic school of thought and the psychological school of thought. The labour market/economic school
of thought focuses on factors external to the organisation, such as the level of unemployment, wage
differentials, and the availability of alternative jobs in the local, national or global economy.
The psychological school of thought focuses on individuals and their decisions to quit or stay, relating
personnel or labour turnover to factors such as job satisfaction, organisational commitment, and
employee engagement.
,Employee turnover can be categorised into three categories, namely: involuntary turnover, functional
turnover, and voluntary turnover. Involuntary turnover occurs when an employee is, for example, fired as
a result of poor performance, or laid off owing to company downsizing. Involuntary turnover can be
considered inevitable and possibly even beneficial at times. Functional turnover includes all resignations
which are welcomed by the employer. The major examples are those which stem from an individual’s poor
work performance or failure to fit in comfortably with an organisational or departmental culture. While
such resignations are less damaging than others from an organisation’s point of view, they should still be
regarded as lost opportunities and as an unnecessary cost. Voluntary turnover takes place when a
competent and capable employee leaves the organisation to work elsewhere and is generally regarded as
costly to the organisation.
The notion of embeddedness is important when attempting to make sense of why people opt to remain in
their current employment situations. Job and occupational embeddedness refers to the totality of forces
that keep people in their present jobs and occupations. These forces are threefold: fit, links, and
sacrifice. Fit is the extent to which a person’s job and occupation mesh with, or complement, other areas
of their lives. Links refer to the extent of an individual’s ties with other people and activities at work and
occupation. Sacrifice is the ease with which these links can be broken (that is, what people would have to
give up if they left their current position or changed their occupation). The greater the fit, the number of
links, and the degree of sacrifice, the greater the forces toward job embeddedness will be.
Outside factors relate to situations in which someone leaves for reasons that are largely unrelated to their
work. The most common instances involve people moving away when a spouse or partner is relocated and
finding it difficult to cope with juggling the needs of work and family. To an extent, such turnover is
unavoidable, although it is possible to reduce it somewhat through the provision of career breaks, forms
of flexible working, and/or childcare facilities.
The key reasons people give for leaving generally reflect a mixture of pull factors (change of career, career
mobility opportunities such as promotion outside the organisation, and unavoidable reasons such as
maternity leave or children and the job transfer of a spouse) and push factors (level of pay, lack of career
development opportunities, unmet needs owing to a lack of person-organisation fit, no support from line
managers, working conditions, or stress of job). Whereas with push factors the problem is dissatisfaction
with work or the organisation, leading to unwanted turnover, pull factors are the opposite side of the coin.
Employees often leave in order to improve their living standards or for better career development
opportunities.
Unmet expectations are also a push factor that is closely related to the notion of a psychological
contract between the employee and the organisation. The psychological contract is based on the
reciprocal expectations and obligation of employers and employees. Employees come to an organisation
with certain expectations about a variety of issues, such as pay, working conditions, opportunity for
, advancement, and organisational culture. The state of the psychological contract depends on the degree
to which these obligations and expectations are met, the degree to which they are perceived to be fair
and equitable, and whether there is trust that will continue to be met in the future. When reality does not
match employees’ expectations, they become less satisfied and as a result are more likely to leave the
organisation. Because psychological contracts are unwritten, employees may have unrealistic expectations
of the organisation and feel unfairly treated as a result of organisational decisions and practices.
Turnover resulting from unmet expectations can be reduced by providing applicants with realistic job
previews. Key features of a retention strategy should centre on realistic job previews and effective
selection, induction and socialisation strategies. This underscores the importance of (1) following a
scientifically valid and reliable approach to job analysis and the use of appropriate selection techniques;
(2) the process of socialisation in creating realistic expectations of the job and the organisation; and (3)
the development of a robust psychological contract. Realistic job expectations will also help ensure that
the employee remains with the organisation.
Lastly, the balancing of both individual and organisational needs is essential in the retention of employees.
Career mobility within the organisation can contribute to the retention of talented employees. Different
forms of intra-organisational mobility include: movement along the hierarchy; the functional/technical
dimension; and radial mobility. Inter-organisational mobility, on the other hand, focuses on globalisation
and its influence on employee careers, as well as the boundaryless career.
ACTIVITY 1.1:
Reflect on what you have learned so far and answer the following questions:
1. What are the key factors impacting on South African organisations’ ability to attract and retain key
talent?
2. Considering the seriousness of South Africa’s current shortage of scarce and critical skills, what
would be the pull and push factors for individuals who are skilled professionals?
FEEDBACK ON ACTIVITY 1.1
For question 1, your answer should explain in detail the factors that influence employee retention in South
Africa, which are: remuneration; job characteristics; training and development opportunities; supervisor
