Introduction

Employee turnover is one of the largest though widely unknown costs

anorganization faces. While companies routinely keep track of various costs suchas
supplies and payroll, few take into consideration how much employeeturnover will cost
them: Ernst & Young estimates it costs approximately$120,000 to replace 10
professionals. According to research done by Sibson &Company, to recoup the cost of
losing just one employee a fast food restaurantmust sell 7,613 combo meals at $2.50
each. Employee turnover costs companies 30 to 50% of the annual salary of entry-level
employees, 150% of middle-levelemployees, and up to 400% for upper level, specialized
employees. Now that somuch is being done by organizations to retain its employees.Why
is retention so important? Is it just to reduce the turn over costs? Well, the answer is a
definite no. It’s not only the cost incurred by a companythat emphasizes the need of
retaining employees but also the need to retaintalented employees from getting poached.

The South African labour-market suffers from a dearth of skilled manpower and
a continuous brain drain (Kinnear & Sutherland, 2001: 15) suggesting that South African
organisations are under pressure to retain available talent. The retention of talent has
however become a major challenge to human resource practitioners since; according to
Harris (2007: 2) talented job candidates in the global skills market have the luxury of
choice. This is affecting South African organisations since they have to compete not only
with one another but with organisations abroad. The situation has tremendously increased
competition for talent in South Africa with many organisations going to great length to
retain their best employees. Competition has therefore put skilled employees who are
already in short supply under pressure as they are being attracted by more than one
organisation at a time with various kinds of incentives. According to Doke (2008: 26)
many newly qualified South African graduates are drawn to foreign shores with the
promise of better remuneration, wider scope and more opportunities, leaving
organisations hard pressed to fill their vacancies with the right candidates.

Concurring with Doke (2008: 26), Litheko (2008: 26) states that migration of
suitably qualified South Africans abroad is making recruitment an onerous task in South
Africa, because the majority of job candidates are perceived to be unsuitable for the
majority of vacancies at professional and technical levels. Research findings by Hale
(1998) cited in Ramlall (2003: 63) reveals that almost all public and private sector
employers in South Africa are experiencing difficulty in attracting and retaining new
employees.
 The changing labour market has brought about an unprecedented labour
turnover. According to Cappelli (2000: 103) strategic poaching of competitor
organisation’s key employees has become an acceptable practice among employers
nowadays. Friedman, Hatch and Walker (1998) as cited in Aron (2001: 15) report that the
notion of a permanent employee has become a thing of the past. In the changing world of
work; Lee (2001: 8) argues that the psychological contract between employer and
employee has changed fundamentally and long term commitment to an organisation is no
longer guaranteed by either party. Retention of talented employees continues to be a big
problem for a large number of employers thereby constantly challenging HR practitioners
to formulate innovative strategies that will not only attract talent, but equally retain them
in order for these employees to help in achieving organisational goals and objectives.
According to a study of HR professionals in the United States of America (reported by
Mello, 2006: 572), over 75% of those surveyed reported that retention of talented
employees was the top human resource problem they confronted. Similarly, Harris (2008:
22) asserts that the biggest challenge facing the South African breweries is the retention
of critical skills. The main reason for the failure to retain these talented employees can be
attributed to the inability of organisations to apply correct motivational strategies in
addressing the problem of retention and turnover.

The issue of employee motivation in contemporary organisations has become so

dynamic that manager has to appraise and re-appraise their motivational strategies on an
on-going basis. According to Czakan (2005: 8), motivational variables used to attain
retention in the past may no longer be appropriate to motivate talented employees to
remain thereby increasing the rate of turnover. Scarcity of skilled manpower in the South
African labour market is also contributing to the retention problem. For example,
Schalkwijk (2000: 5) found that the South African health sector, particularly the nursing
profession, is badly affected by employee turnover as scores of professional nurses seek
alternative employment or leave the country in search of lucrative work overseas. A study
conducted by the Centre for Health Policy at the University of the Witwatersrand, South
Africa, in April, 2005 estimated vacancy rates for nurses in public hospitals and clinics in
the Limpopo Province at 22.6% and 26.5%, respectively. Ponn-Kekana, Blaauw, Tint,
Monareng and Chege (2005: 54) report that a high percentage of nurses working in public
hospitals in South Africa are demotivated and already consider to quit their jobs.
 The problem of employee turnover is not peculiar to the health sector alone.
Mengel (2001:32) reports that more than half of Information Technology (IT)
organisations in South Africa carried over vacant positions from 1998 to 1999 in respect
of Information Technology professionals. The IT professionals, after acquiring some
work experience, leave South Africa for more lucrative jobs overseas. The reasons often
given by these professionals for quitting their jobs include poor working conditions, lack
of career growth, poor salary incentives, and general lack of motivation from employers.
These are motivational issues which can be managed by individual organisations in order
to reduce the high rate of employee turnover which, according to Schreuder and Theron
(2001: 28) has become prevalent in both public and private sector organisations with the
attendant costs.

High employee turnover is costly to both the individual organisation and the
national economy. Research findings in the United States of America by Ramlall (2003:
12) indicate that the total cost of employee turnover is about 150% of an employee’s
annual salary. The cost of filling job vacancies, lost productivity from vacant jobs and the
cost of training new employees increase operational costs. Dess and Shaw (2001: 446)
argue that turnover incurs significant cost, both in terms of direct costs (i.e. replacement,
recruitment and selection, temporary staff, management time) and indirect costs (i.e.
morale, pressure on remaining employees, costs of learning, product/service quality,
organisational memory and the loss of social capital). All these costs are usually a feature
of involuntary turnover. Organisational managers can reduce these costs by adopting
appropriate motivational strategies in order to retain competent employees, thereby
reducing the turnover rate.

In order to succeed in attracting and retaining talented employees, South

African organisations have to consider the needs of their organisations and those of the
individuals, as well as the environment in which they operate. According to Schalkwijk
(2000: 5), organisations have to develop strategic reward programmes that incorporate
pay and employee benefits as well as consideration for the individual employee’s
personal growth and development. These represent some of the personal needs and career
aspirations of employees which must be considered by employers in order to retain and
motivate them to help in achieving organisational goals. Dess, Lumpkin and Eisner
(2008: 119) concur that productive employees place professional development and
personal enrichment (financial and otherwise) above an organisation’s loyalty. These
arguments are consistent with the positions of Mengel (2001: 32) and Davidson (2001: 4)
who listed critical factors to employee retention to include career growth opportunities,
learning and development, exciting and challenging work, a good boss, fair pay and
benefits, and recognition for work well done. One of the challenges faced by the
managers of human resources in South Africa today lies in the development and retention
of competent employees. Czakan (2005: 8) alludes to this assertion in submitting that the
core of the problem remains the strategic imperative to attract and retain talented
employees who will make the difference in service delivery and profit maximisation.

Schreuder and Theron (2001: 28) contend that the retention of talented
employees by employers is imperative because the organisation’s competitive advantage
is often dependent on the specialised knowledge and skills possessed by these employees.
Given the mobility nature of talented employees, retaining them becomes a matter of
concern to employers since, in the view of Arkin 2001: 28) and Buckingham (2000: 45),
their leaving means a loss to the organisation of its intellectual capital or intangible
assets. The above discussion has provided a background to the problem of employee
retention and turnover among public and private sector organisations including those in
South African, and the challenges posed to employers. Managers are therefore saddled
with the responsibility of addressing the problem through the designing and
implementation of appropriate retention strategies that are capable of reducing turnover
to a manageable proportion.

Retention involves five major things:

 Compensation

 Environment

 Growth

 Support

 Relationship

DEFINING EMPLOYEE RETENTION

 Schuler and Jackson (2006:216) define retention as everything an employer
does to encourage qualified and productive employees to continue working for the
organisation. The main objective of retention is to reduce unwanted voluntary turnover by
valuable people in the organisation. Together, effective recruitment and retention efforts
attract individuals to the organisation and also increase the chance of retaining the
individuals once they are hired.

Objectives

Objectives of the study

The research was aimed at achieving the following objectives:

 Identify and establish the key intrinsic and extrinsic motivational variables being
used by Asian motors in retaining their Employees
 Determine the extent to which the identified intrinsic and extrinsic motivational
Variables are influencing employees’ retention and turnover in the selected Asian
motors
 Make recommendations to management of the selected public and private sector
organisations on how to effectively retain employees and reduce turnover.
 Determine, the impact of organizational factors on employee retention
 Determine the reasons for the retention of employees from the organisation Asian
motors.
 Formulate an employee retention strategy model for implementation at Asian
motors.
 To identify the organisational discipline.
 To summarise the findings of the present study and provide suggestions for
retention of employee in Asian motors.

Review of literature

Gillingham (2008: 17), emigration is having an adverse effect on the private banking
industry, with some highly skilled employees opting out and some clients
Moving their assets offshore. Farrel (2008) reported by Gillingham (2008: 17) states
that…..”Foreign banks tend to target the very best employees in South African private
banks who accept employment from offshore banks”. Losing frontline employees who
have established good relationships with their clients is of particular concern.
Organisations must not only attract the right candidates but must also ensure their
retention in order for these employees to make a difference in the realisation of
organisational goals.

Hendricks (2006: 9) notes that employees with scarce skills are in great demand by the
South African government and are becoming difficult to source. When these categories of
employees are eventually sourced, they become even more difficult for government to
retain. It is not only the government that is finding it difficult to retain highly skilled
employees; private sector managers also admit that one of the most difficult aspects of
their jobs is the retention of key employees in their organisations. It becomes problematic
for organisations when the rate of replacement rises over time especially when highly
skilled employees are involved. The real challenge to HR managers therefore lies in
devising ways of retaining employees in order to reduce the rate of turnover and the
associated costs.

Dess (2008: 119) concurs in stating that hiring and developing the best employee will be
unproductive if organisations cannot provide the working environment and intrinsic and
extrinsic rewards to retain their best and brightest. Employee retention has therefore
become a practical guide for managers in order to retain their talented employees and
avoid spiraling costs that are usually associated with turnover. Indeed, retention practices
have posed enormous challenges to managers considering the shortage of qualified
manpower in the South African labour market. Managers in both public and private sector
organisations have to devise innovative means of retaining high performing employees in
their pool in order to avoid frequent recruitment which is costly and time consuming.

Brown (2006: 2), the lack of proper retention strategies is having an adverse effect on
South African organisations, as replacing key employees is disruptive, expensive, time
consuming and may even threaten the sustainability of an organisation. The implication
thereof is such that South African organisations may not be able to favourably compete in
the global market place if the phenomenon is not properly addressed.

Research by P-E Corporate Services (2001: 1) estimate the rate of voluntary turnover
of skilled employees in South Africa to be at 63%, involuntary turnover, 22% and others,
such as death, retirement and pregnancy, at 15%. The reasons often cited for voluntary
turnover by employees revolve around the inability of employers to motivate them
properly to remain.
Ponn-kekana et al. (2005: 20), some of the reasons include a lack of promotion,
insufficient pay, work overload, and some other motivation related issues such as
opportunities for training and development, job insecurity, work autonomy and a lack of
recognition of good performance. In the light of such evidence, there is a need to
establish the extent to which managers in the South African organisations are using
appropriate motivational strategies to retain employees. Such a step will help managers in
the identification of reliable and sustainable retention programmes and practices that can
effectively reduce turnover in both public and private sector organisations. The present
study is therefore aimed at identifying and establishing the extent to which managers in
selected public and private sector organisations are applying these motivational strategies.

Leedy and Ormrod (2005:64)

 It can offer new ideas, perspectives, and approaches that may not have occurred to
the researcher.
 It can inform the researcher about other researchers who conduct work in the area
of interest – individuals whom the researcher may wish to contact for advice or
feedback.
 It can show the researcher how others have handled methodological and design
issues in studies similar to the researchers own.
 It can reveal sources of data that the researcher may not have known existed.
 It can introduce the researcher to measurement tools that other researchers have
developed and used effectively.
 It can reveal methods of dealing with problem situations that may be similar to
difficulties the researcher is facing.
 It can help to interpret and make sense of the researcher’s own finding and
ultimately, help to tie the researcher’s results to the work of those who have
conducted research in the same field.
 It will bolster the researcher’s confidence that the topic is one worth studying,
because one will find that others have invested considerable time, effort, and
resources in studying it.

In terms of work attitudes, job satisfaction was viewed as the primary determinant
of quit intentions in their model, and the authors were also among the first to discuss the
role of organizational commitment in turnover decisions, which was defined in earlier
work as an “individual’sidentification with and involvement in a particular organization”
(Steers, 1977, p. 46).

Robinson et al., (1994); Zhao et al.,( 2007)

We also found systematic job-level differences between employees at

hourly, supervisory, managerial, and salaried/professional levels, and our findings lend
support to the distinction in the psychological contracts literature between transactional
and relational contracts .Generally speaking, as the job level increased, so too did the
frequency of reports that employees stay for relational reasons including advancement
opportunities, job satisfaction, organizational commitment, organizational justice, and
organizational prestige. Conversely, as job level increased, the frequency of transactional
retention reasons related to extrinsic rewards and flexible work arrangements decreased.
Job level differences are rarely studied in the literature, yet these findings indicate that
beliefs about what the organization owes to employees differ across hourly and
managerial ranks.

Employee Turnover is Expensive

In addition to elevated employee turnover rates being a frustration for

employers, they can become a financial concern as well. The EPF believes average
turnover costs to be 25 percent of an employee’s annual salary (2004). Other studies have
proposed that the cost of replacing lost talent is even higher, as much as 70 to 200 percent
of that Employee’s annual salary (Kaye, 2000). Expanding on these thoughts, the EPF
(2004) Stated that “for a firm with 40,000 full-time employees, the difference between a
15- Percent turnover rate and a 25-percent turnover rate is over $50 million annually. The
Difference between a 15-percent turnover rate and a 40-percent turnover rate is over
$130Million annually” (p. 2).

Kay (2000) justifies such costs in “…advertising and recruiting

expenses,orientation and training of the new employee, decreased productivity until the
newemployee is up to speed, and loss of customers who were loyal to the departing
employee” (p. 9). The costs mentioned above touch upon another area of concern:
productivity. When a high rate of employee turnover exists, most of the workforce is at
an entry level stage of production. A very high cost is associated with large numbers of
employees who have not reached full productivity. This cycle continues with very few
employees performing at maximum productivity.
 The environments producing such employee patterns can be seen
extensively in fields The environments producing such employee patterns can be seen
extensively in fields commonalities in these environments include, low to moderate
employee compensation lack of upward mobility, high-turnover due to hiring
characteristics and competitive job markets, complex training processes, and a wide
range of customer issues to be learned (EPF, 2004). As can be seen, a combination of
factors may exist, decreasing employee job satisfaction and thereby increasing turnover.

Tyler (2004)

Highlights that “…the end of the first day is just as important as the
beginning. Make employees feel you want them to come back for a day two” (p. 6). The
warm reception should not end with the end of orientation. Experienced employees can
be provided as mentors for new hires to turn to as a resource. The training team can also
check in on a new employee periodically to address any concerns that may arise.

Clarke, (2001)

Even a simple acknowledgement of an employee’s good work can be quite a

motivator. In a survey conducted by Office Team, 60% of executives polled believed
that companies do a somewhat effective job of acknowledging top performers, while 33%
believe that staff recognition efforts are inadequate Clarke highlights that “…a pat on the
back or a word of praise after they have worked hard to deliver for the company goes a
long way toward building individual and group morale” (p. 1). Paris (2002) agrees,
stating that “…incentives provide the ‘golden handcuffs’ that keep employees from
getting away” (p. 52).

Weinberg, (1997).

Rock Bottom Restaurants is one of such companies. This Boulder, Colorado

based restaurant chain allows employees to participate in the hiring process. In this way,
new hires understand the demands and expectations of the work environment from others
directly involved in the work themselves. Rock Bottom also allows employees to help
insetting work schedules. This type of environment contributes to employees who enjoy
their work and provide exceptional service as a result (Weinberg, 1997).
Hospital
 A Canadian study by Lum et al (1998) assessed the impact of certain pay
policies upon the turnover intentions of paediatric nurses. Two types of salary
supplements were introduced – bonuses to intensive care nurses only and a 5 per cent
salary differential for all staff nurses – to reduce turnover. The supplements were
structured in such a way as to have the most favorable influence on the senior staff nurses
who were presumed to be the most experienced and those most valuable employees.
Satisfaction with pay had both direct and indirect effects on turnover intent. They found
that although pay satisfaction (unlike job satisfaction) was significantly associated with
reducing intended turnover, its indirect effect upon turnover intent, mediated through job
satisfaction and organizational commitment was weaker. In particular, nurses with greater
experience were more satisfied with their pay and were less likely to leave, which was the
anticipated effect of the salary supplements. The anecdotal evidence showed that the
senior nurses perceived the pay supplements to be an important recognition of their
contribution to the organization

Clothing industry

In Taplin et al’s (2003) study of the British clothing industry, employer

initiatives to reduce turnover included a range of measures. Improving remuneration
packages was the single most common initiative with changes to the payments systems
made so that workers could increase their earnings. Also important were more rigorous
screening procedures for new hires, and improved training programs designed to bring
new workers up to speed so that they could maximise their piece rate earnings potential.
Various quality of working life initiatives were introduced, such as flexible working
hours and forms of employee participation (eg works councils).

Carney (1998)

Believes that the key to employee retention is quite simple: communicate,

Communicate, communicate. Communication with the employees must begin early on in
the relationship. He believes that the imprinting period of a new employee is probably
less than two weeks. Employers must engage the employee early on by sharing how
important the job they do.

Lynn (1997)
 Notes that communications must be a two way street to be effective. Employers
Must listen to what employees have to say. An atmosphere must be created in which
employee’s feel comfortable making suggestions and trying our new ideas.

People need to be recognized for their accomplishments in the workplace. In

most organizations the feeling of under-recognition is the most pervasive feeling in the
workplace (Mendonsa, 1998). Provide a great deal of personal and team recognition
(Carney, 1998). Recognize achievements with memos, mentions in staff meetings or
articles in the newspapers (Lynn, 1997).

Taylor, (1997)

To retain employees, departments must offer career advancement opportunities.

Departments failing to offer employees career opportunities, room for advancement and
enhancement of skills and knowledge may find it difficult to retain qualified employees.

Marx (1995)

Concludes this by pointing out that promoting from within is one of the proven
methods of employee retention. Promoting from within shows that there is truly room for
advancement and growth within the department.
Employee involvement, recognition, importance of work, and career advancement
opportunities Are all important, when dealing with employee retention?

Pay and Benefits

Mendonsa, (1998)

In general people think that money and benefits or lack thereof, are the main
reasons people leave their jobs, but this is not the case. While compensation and benefits
may be a key factor in the final decision-making process, a money shortage is usually not
what causes people to look in the first Place.

Branch, (1998).
 Money may be the reason they give when they resign, but it’s like “white
noise”. They are conscious of it for a while but if they are bored on the job, money alone
is not going to keep them there.

Branch, (1998)

Employers should also emphasize the importance of the work being done and
the importance of the employee to the organization. The literature also notes that
employees must be given the opportunity to advance in the organization. The final keys
to retention are pay and benefits. Although money may be the reason given for resigning,
it is usually not the main Reason people leave

Chief Benton believed that personnel were leaving due to the extended work schedule, lack of
advancement opportunities, dissatisfaction with current senior officers, and the lack of a viable
retirement program.

Mark Ayers pointed out that local municipal firefighters work five fewer days per month than
RCFD firefighters and make roughly the same amount of money. He felt that the shorter
workweekwas an attractive incentive to leave the RCFD

Four to the seven managers of the RCFD felt that benefits were a key reason why members
were leaving the department, however, none of the past members interviewed mentioned benefits
as amotivator to leave.

Four to the seven managers of the RCFD felt that benefits were a key reason why members
were leaving the department, however, none of the past members interviewed mentioned benefits
as a motivator to leave.