IMPACT: International Journal of Research in

Humanities, Arts and Literature (IMPACT: IJRHAL)

ISSN (P): 2347–4564; ISSN (E): 2321–8878
Vol. 8, Issue 8, Aug 2020, 41–46
© Impact Journals

HRM PRACTICES AND EMPLOYEE RETENTION: DEVELOPMENT OF A

CONCEPTUAL MODEL THROUGH LITERATURE REVIEW

Syed Khaleemullah1 & S.C. Behl2

1
Research Scholar, Department of Commerce, Faculty of Management, Himalayan University, Itanagar, Arunachal
Pradesh, India
2
Research Supervisor, Department of commerce, Faculty of Management, Himalayan University, Itanagar, Arunachal
Pradesh, India

Received: 16 Aug 2020 Accepted: 17 Aug 2020 Published: 27 Aug 2020

ABSTRACT

This paper initiates a theoretical enquiry into two very significant aspects of Human resource management i.e.
HR Practices vis a vis Training, Compensation and Performance appraisal and Employee retention. Firstly this
study carries out general and theoretical and extant literature review of the study variables, Secondly some
specific insights were also obtained by thorough literature review. Thirdly the literature was framed to
understand the dynamics and the relationships between HR Practices and Employee retention. Finally, a
conceptual model was developed to test it further empirically.

KEYWORDS: HR Practices, Training, Compensation, Performance Appraisal and Employee Retention

INTRODUCTION

Every industry depends on humans as a part of the product, Human resources (HR) plays an important role in
every organization as the humans cannot be separated from the entire manufacturing or service process
(Ghazali, 2010). Primarily, every industry strongly depends on the human factor through direct or indirect contact
with customers. According to Bharwani and Butt (2012), employees have become very precious assets by
imploring a crucial role in enhancing the organizational goodwill. In today’s competitive market scenario, employee
retention especially of high performers is known as a key to delivery. Thus, employee retention remains a major area of
concern for the organizations. Aksu (2004), Kuean, Kaur, and Wong (2010), and Proud foot Consulting (2008) found that
turnover rates significantly affects the organizational performance. It is unproductive expenditure for
organization’s management to spend money and time on employees who leave a short time later after they go
through the employment process.

As suggested by David- son, Timo, & Wang, (2010), Organizations face difficulty in recruiting manpower, but
the menace of relatively high levels of turnover represents a significant loss of investment in employment process human
capital, quality, and training. According to Deery and Shaw (1997) and Lashley and Chaplain (1999), firms cost structure,
workplace efficiency, and productivity are affected due to high turnover and lower retention of employees

According to the International Labour Organization (2003), the most frequently cited problems, which
organizations face, are low retention and short- age of committed and skilled employees. Annual labor turnover rates in

Impact Factor(JCC): 5.2397 – This article can be downloaded from www.impactjournals.us

42 Syed Khaleemullah & S.C. Behl

developing countries were approximately between 9.6% and 75%, which are extremely high. It is also found that the high
turnover rate, suggesting the low retention of skilled employees is becoming a major problem for the organizations.

After the extant literature review in the area several factors have been suggested to be helpful in retaining
employees. Among these factors, human resource management (HRM) practices such as compensation, training and
development, and performance appraisal are known as of key importance. In order to retain employees, it is important
that the organization uses proper HR practices, that is, compensation, training and development, and performance
appraisal support (Walia & Bajaj, 2012). Researchers and academicians (e.g. Saba, 2011; Sohail & Delin, 2013) who
tries to explain why employees are less committed and retained in organizations, use HRM practices (such as
compensation, training and development, and performance appraisal. Moreover, social exchange theory (SET) (Blau,
1964), also provides a basis for linking these HR practices with employee retention. Liao (2011) also advocated that
when employees receive benefits from the organization, they, in turn, will repay the organization in the form of
commitment and staying with it for a longer period of time.
Specifically, this study will endeavor to contend how compensation, training and development, and
performance appraisal are theoretically significant in improving employee retention, therefore aims at adding to
the current literature on the part of compensation, training and development, and performance appraisal in
employee retention. Moreover, this study offers a theoretical clarification on the part of association between these
HR Practices and employee retention. This article additionally explains that Conceptual model which can be further
empirically tested and look into the past studies conducted on the role of HRM practices for influencing employee
retention have conflicting results.

FRAMING LITERATURE

In order to get proper conceptual model, extant and thorough literature review was conducted on research constructs and
studies were identified advocating relationships between study variables.

Employees’ Retention

Employee retention is defined as a process through which employees are motivated to stay in the organization for a
longer tenure (Griffeth & Hom, 1995). In another definition employee retention refers to the different strategies and
practices, which let the workers adhere to an institution for a longer period (Singh and Dixit, 2011). Popular debates
and discussions on employee retention stemmed from 1900s when scholars and researchers in the area began to
identify various reasons that affected employee’s level of interest in their job and possible opportunities (Rowland &
Ferris, 1982). The problem of employee retention is not new. It has always been a challenge for employers
(Mathimaran & Kumar, 2017).
The human resource is one of the valuable and significant resources for any organization (Bibi, Ahmad, & Majid,
2016). According to Ng’ethe, Iravo, and Namusonge (2012), retaining employees in their job and also necessary to achieve
competitive advantage. Akila (2012) argued that employee retention is very beneficial for all the organizations. Research
showed that replacing an old employee with new one increases operational costs in the form of new employees’ training,
development and cost associated with new recruitment (Dess & Shaw, 2001).
Many studies have examined the relationship of compensation on employee retention (Chiang & Birtch,
2010; Chickwe, 2009; Choi & Dickson, 2010; Hinkin & Tracey, 2010; Sturman, 2001). For instance, Kosoe (2010)

NAAS Rating: 3.10 – Articles can be sent to [email protected]

HRM Practices and Employee Retention: Development of a Conceptual Model through Literature Review 43

studied the impacts of compensation on employee retention and found a positive relationship between them. In a
similar study, Irshad (2000) revealed a significant relationship between compensation and employee retention.
Moreover, Nawab and Bhatti (2013), Saeed et al. (2013) and Ramlall (2013) also found a significant relationship
between compensation and employee retention.

Training and Development

Training has been defined as a deliberate and well thought series of activities aimed at improving employees’
performance by helping them realize a standard level of understanding through communication (Forgacs, 2009).
It is also suggested by Samuel & Chipunza, (2009) that training and development helps in increasing the level of
commitment and loyalty of employees in order to stay for a longer period with the organization; hence, it decreases
turnover and enhances retention. Chang (1999) demonstrated that when an organization provides sufficient
training and development opportunities, the employees are more satisfied and they stay with the organization for a
longer period. Hence, from the above discussion, it can be safely concluded that there is a relationship between
training and employee retention.

Performance Appraisal

Performance appraisal can be defined as the basic HRM function such as the evaluation of employees’ performance
periodically to improve the utilization of human resources within the organization (Raihan, 2012). Waldman, Bass,
and Einstein (1987) argued that performance appraisal helps the organization in enhancing and measuring the
performance of employees. According to Kuvaas (2006), an appropriate performance appraisal system is used as a
tool for, developing, retaining, and motivating employees in the organization. Moreover, this notion is also supported
from the perspective of SET (Blau, 1964), when employees feel that decisions are made honestly and performance is
evaluated fairly, they are more likely to stay for a longer period with the organization.
All the researches mentioned in this section have made significant contributions to the literature by
demonstrating the effect of Compensation, training and development and performance appraisal on employee
retention, still it is worth noting that the findings of these studies are inconsistent; hence, more research is needed to
explain the relationship in a better way. Thus, the current Conceptual model is developed for empirical testing.

CONCEPTUAL MODEL

Figure 1: Showing Conceptual Model.

Impact Factor(JCC): 5.2397 – This article can be downloaded from www.impactjournals.us

44 Syed Khaleemullah & S.C. Behl

REFERENCES

1. Akila, R. (2012). A study on employee retention among executives at BGR Energy systems LTD, Chennai.
International Journal of Marketing, Financial Services & Management Research, 1(9), 18–32.

2. Aksu, A. (2004). Turnover costs: Research among five-star hotels in the city of Antalya, Turkey. Tourism
Analysis, 9(3), 207–217.

3. Batt, R. (2002). Managing customer services: Human resource practices, quit rates, and sales growth.
Academy of Management Journal, 45(3), 587–597.

4. Bharwani, S., & Butt, N. (2012). Challenges for the global hospitality industry: An HR perspective.
Worldwide Hospitality and Tourism Themes, 4(2), 150–162.

5. Bibi, P., Ahmad, A., & Majid, A. H. (2016). The moderating role of work environment on the relationship
between compensation, job security, and employees retention. International Journal of Economic
Perspectives, 10(4), 726–738.

6. Blau, P. M. (1964). Exchange and power in social life. New York, NY: Wiley.

7. Carney, K. (1998). How businesses can reduce high employee turnover. Inc, 47. Retrieved from
http://www.usfa.fema.gov/pdf/efop/efo29426.pdf

8. Chang, E. (1999). Career commitment as a complex moderator of organizational commit- ment and
turnover intention. Human Relations, 52, 1257–1278.

9. Coyle-Shapiro, J. A. M., & Conway, N. (2005). Perceived organizational support and employee diligence,
commitment and innovation. Journal of Applied Psychology, 90, 774–781.

10. Davidson, M. C. G., Timo, N., & Wang, Y. (2010). How much does labor turnover cost? A case study of Australian
four and five star hotels. International Journal of Contemporary Hospitality Management, 22, 451–466. doi:
10.1108/09596111011042686

11. Edgar, F., & Geare, A. (2005). HRM practice and employee attitudes: Different measures- different results.
Personnel Review, 34(5), 534–549.

12. Eisenberger, R., Armeli, S., Rexwinkel, B., Lynch, P. D., & Rhoades, L. (2001). Reciprocation of perceived
organizational support. Journal of Applied Psychology, 86, 42–51.

13. Griffeth, R. W., & Hom, P. W. (1995). The employee turnover process. Research in Personnel and Human
Resources Management, 13(3), 245–293.

14. Haines, V. Y., Jalette, P., & Larose, K. (2010). The influence of human resource management practices on
employee voluntary turnover rates in the Canadian non-govern- mental sector. Industrial and Labor
Relations Review, 63(2), 228–246.

15. ILO. (2010 cited in Bharwani, 2012). Challenges for the global hospitality industry: An HR perspective. Hospitality
and Tourism Themes, 4(2), 150–162. doi: 10.1108/ 17554211211217325

NAAS Rating: 3.10 – Articles can be sent to [email protected]

HRM Practices and Employee Retention: Development of a Conceptual Model through Literature Review 45

16. International Labour Organization. (2003). Employment and human resources in the tourist industry in Asia
and the Pacific. Geneva: International Labour Office.

17. Irshad, M. (2000). Factors affecting employee retention: Evidence from literature review. Abasyn Journal of
Social Science, 4(1), 84–102.

18. Liao, P. (2011). Linking work-family conflict to job attitudes: The mediating role of social exchange
relationships. The International Journal of Human Resource Management, 22(14), 2965–2980.

19. Nawab, S., & Bhatti, K. K. (2011). Influence of employee compensation on organizational commitment and
job satisfaction: A case study of educational sector of Pakistan. International Journal of Business and Social
Science, 2(8), 25–32.

20. Raihan, J. M. H. (2012). Mediating effects of organizational commitment and perceived organizational support on
HRM practices and turnover intention: A study of private universities in Bangladesh. Malaysia: Utara.

21. Ramlall, S. (2003). Organizational application managing employee retention as a strategy for increasing
organizational competitiveness. Applied HRM Research, 8(2), 63–72.

22. Riaz, Q., Ayaz, K., Wain, A. M., & Sajid, M. (2012). Impact of HR practices on perceived performance of
hospital employees in Pakistan. Journal of Economics and Sustainable, 3(11), 10–16.

23. Saeed, R., Nayyab, H. H., Lodhi, R. N., Baqir, R., Rehman, M. A., & Mussawar, S. (2013). Impact of
retention factors on organizational commitment in general education division of Pakistan. Middle-East
Journal of Scientific Research, 17(4), 539–545.

24. Singh, S., & Dixit, P. P. (2011). Employee retention: The art of keeping the people who keep you in business.
VSRD International Journal of Business & Management Research, 1(7), 441–448.

25. Sohail, M. T., Delin, H. (2013). Job satisfaction surrounded by academics staff: A case study of job
satisfaction of academics staff of the GCUL, Pakistan. Interdisciplinary Journal of Contemporary Research
in Business, 4(11), 126–137.

26. Walia, A., & Bajaj, S. (2012). Impact of human resource management (HRM) practices on employee
retention. International Journal of Research in IT & Management, 2(2), 836–847.

Impact Factor(JCC): 5.2397 – This article can be downloaded from www.impactjournals.us