Sukesh R 15MBAP054 II year MBA

Human Resource Development

ROLE OF ORGANIZATIONAL CULTURE AND EMPLOYEE

COMMITMENT IN EMPLOYEE RETENTION
Sukesh R 15MBAP054 II year MBA
Abstract
Employee retention is a critical component in managing human resource flow. In this era of
unpredictable market and organizational changes, organizations must create an environment where today's
top talent can thrive. The business organizations are aware of the importance of employee commitment
and organization culture and its role in organizational performance and talent retention. This paper focuses
on automobile manufacturing and service sector, and highlights factors such as Employee Commitment
and Organizational Culture that measure how to retain an employee in an organization. So this paper tries
to study whether organizational culture and employee commitment has its impact on employee retention.
Introduction
Employee Retention
Human resources are the life-blood of any organization. Even though most of the organizations are
now a days, found to be technology driven, yet human resources are required to run the technology. They
are the most vital and dynamic resources of any organization. With all round development in each and
every area of the economy, there is stiff competition in the market. With this development and
competition, there are lots and lots of avenues and opportunities available in the hands of the human
resources. The biggest challenge that organizations are facing today is not only managing these resources
but also retaining them. Securing and retaining skilled employees plays an important role for any
organization, because employees knowledge and skills are central to companies ability to be
economically competitive. Besides, continuously satisfying the employees is another challenge that the
employers are facing today.
Long-term health and success of any organization depends upon the retention of key employees.
This paper studies the role of organization culture and employee commitment on retention of employee.
Organizational Culture
The concept of organizational culture has recently captured the interest of practicing managers as
well as academic researchers. This appeal is based on the observation that a strong productive culture is
associated with increased sales growth, profitability, employee satisfaction and overall organizational
performance regardless of where the organization is physically located.
Organizational culture is the behavior of humans within an organization and the meaning that
people attach to those behaviors. Culture includes the organization's vision, values, norms, systems,
symbols, language, assumptions, beliefs, and habits. An effort by a business to maintain a working
environment which supports current staff in remaining with the company is termed as employee retention.

Sukesh R 15MBAP054 II year MBA

Human Resource Development

Many employee retention policies are aimed at addressing the various needs of employees to enhance their
job satisfaction and reduce the substantial costs involved in hiring and training new staff.
Employee Commitment
In todays competitive world every organization is facing new challenges regarding sustained
productivity and creating committed workforce. Now a days no organization can perform at peak levels
unless each employee is committed to the organizations objectives. Hence, it is important to understand
the concept of commitment and its feasible outcome.
A large numbers of studies have been conducted to investigate the concept of Employee
commitment(EC). Still, commitment is the most challenging and researchable concept in the fields of
management, organizational behavior.
In the past decade, Meyer and Allens (1991) developed a three- component model of EC which
has been the dominant framework for EC .This three-component model is based on a more comprehensive
understanding of EC.
The three-component model consists of:
(a) Affective commitment (AC) is the emotional attachment to ones organization.
(b) Continuance commitment (CC) is the attachment based on the accumulation of valued
side bets (pension, skill transferability, relocation, and self-investment) that co-vary with
organizational membership.
(c) Normative commitment (NC) is the attachment that is based on motivation to conform
to social norms regarding attachment.

Organisational
Culture
Affective
commitment
Continuance
commitment

Employee retention

Normative
commitment
Affective Commitment is based on ho w much individual want to remain in the organization.
Continuance Commitment refers to an awareness of the costs associated with leaving the organization.
Continuance commitment based on individual having to remain with the organization lost their previous
investment before gone. Normative Commitment reflects a feeling of obligation to continue
employment. Employees with a high level of normative commitment feel that they ought to remain with
the organization.

Sukesh R 15MBAP054 II year MBA

Human Resource Development

Automobile Manufacturing & Service Sector

The automotive industry in India is one of the largest in the world with an annual production of 23.37
million vehicles in FY 2014-15, following a growth of 8.68 per cent over the last year. The automobile
industry accounts for 7.1 per cent of the country's gross domestic product (GDP). The Two Wheelers
segment, with 81 per cent market share, is the leader of the Indian Automobile market, owing to a growing
middle class and a young population. Moreover, the growing interest of companies in exploring the rural
markets further aided the growth of the sector. The overall Passenger Vehicle (PV) segment has 13 per
cent market share. India is also a prominent auto exporter and has strong export growth expectations for
the near future. In FY 2014-15, automobile exports grew by 15 per cent over the last year. In addition,
several initiatives by the Government of India and the major automobile players in the Indian market are
expected to make India a leader in the Two Wheeler (2W) and Four Wheeler (4W) market in the world by
2020. The vision of the Automotive Mission Plan 2006 - 2016 drafted by the Ministry of Heavy Industries
and Public Enterprises department of the Government of India is To emerge as the destination of choice
in the world for design and manufacturing of automobiles and auto components with output reaching a
level of US $ 145 billion, accounting for more than 10 per cent of the GDP and providing additional
employment to 25 million people by 2016. Since automobile industry were the large employment
generators of the nation, employee retention is the key issue for the automobile companies. This study
conducted at Coimbatore district.
Objectives
1. To study the existing level of positive perception of Organizational Culture, the level of
Affective Commitment, Continuance Commitment and Normative Commitment find level of Employee
Retention.
2. To find the association between Organizational Culture, Affective, Continuance and Normative
Commitment and Employee Retention
3. To find the impact of Organizational Culture, Affective, Continuance and Normative
Commitment on Employee Retention
Methodology
The study is descriptive & casual in nature. This describes the cause and effect relationship
between organizational culture, three components of commitment (Affective commitment, Continuance
commitment and normative commitment) and employee retention.
Two stage random sampling was used to identify the sample. In first stage the companies were
selected. One automobile manufacturing company (Roots Industries India Limited, Coimbatore) & 5
automobile service sector companies (Ford, Chandra Hyundai, Nissan, Toyota and Chevrolet in
Coimbatore district). Second stage of sampling is used to identify the number of samples form the selected

Sukesh R 15MBAP054 II year MBA

Human Resource Development

companies. Totally 200 samples selected form approximately 2000 employees of the selected companies.
In that 200 samples, 100samples from Service sector & 100 from manufacturing sector.
The pre-tested questionnaire (Reliability = 0.863) is distributed to the samples. Each response was
measured using a five-point likert scale, ranging from 5 (strongly agree) to 1 (strongly disagree).
Mean value analysis, correlation and regression used with the help of SPSS to test the objectives.
Findings & Analysis
Objective 1: To study the existing level of positive perception of Organizational Culture, the level of
Affective Commitment, Continuance Commitment and Normative Commitment find level of
Employee Retention.
Descriptive Statistics
Factors
Organizational culture
Employee retention
Affective commitment
Continuance commitment
Normative commitment

Mean

Std. Deviation

4.1104
3.7688
3.6269
3.5406
3.6350

.55478
.53636
.79438
.78528
.69222

The mean value of the organizational culture is about 4.1104 (4 Agree, 5 - Strongly Agree),
which is more than the agree factor. The other factors are comparatively lesser than organizational culture.
That shows that the organizational culture have more importance than others.
Objective 2: To find the association between Organizational Culture, Affective, Continuance and
Normative Commitment and Employee Retention
Factors
Organizational Culture
Affective Commitment
Continuance Commitment
Normative Commitment

Employee Retention
.735**
.756**
.670**
.516**

The association between the Organizational Culture and three components of Employee
commitment are having highly correlated with the employee retention. All this factors are having
significant impact on employee retention.
Objective 3: To find the impact of Organizational Culture Affective, Continuance and Normative
Commitment on Employee Retention
Model

.819"
Model
(Constant)

Adjusted R
Square
.671
.664
Coefficients
Standardized
Coefficients
Std. Error
Beta
.181
R Square

B
.500

Std. Error of the Estimate

.31087
T

Sig.

2.760

.006

Sukesh R 15MBAP054 II year MBA

Organizational Culture

Human Resource Development

.512

.046

.529

11.070

.000

Affective Commitment
.055
Continuance Commitment .178
Normative Commitment .092

.041
.050
.044

.082
.261
.118

1.345
3.586
2.099

.180
.000
.037

Regression analysis is performed to find the level of influence of the factors on the employee
retention. The adjusted R square value indicates that the factors having 66.4% influence on employee
retention. Affective Commitment (p = .082, t = 1.345, p = 0.180 greater than 0.05) have low impact on the
Employee Retention as P value is greater than the significance level. Organizational Culture (P = 0.529, t
= 11.070, p <0.001), Continuance Commitment (P = 0.261, t = 3.585, p <0.001), and Normative
Commitment (P = 0.118, t = 2.099, p <0.001), are positively related to Employee Retention as the
coefficient shows positive sign. And have high impact on Employee Retention.
Conclusion
Both the variables Employee commitment and Organization Culture are highly significant in
Employee retention. The study shows that organization culture plays a vital role for an employee to be
retained.

Organization Culture is the main influencing variable and Continuance commitment &

normative commitment is the next influencing variable. The study suggest that employees who understand
their organizational cultures (p = 0.529, t 11.070, p <0.001) shows their willingness to spend their rest of
their career in their respective organization. Continuance Commitment & Normative Commitment also
has the highest impact on the Employee Retention.

Continuance commitment refers to employees'

assessment of whether the costs of leaving the organization are greater than the costs of staying. So this
study recommends that Organization should aspire to develop employees with the characteristics of
understanding their organizational cultures of goals and mission, Continuance Commitment and
Normative Commitment would, obviously have to engage in a more serious approach in establishing a
higher degree of work ethics among their employees.