European Journal of Academic Essays, Special Issue, 94-103, 2017

ISSN (online): 2183-1904

ISSN (print): 2183-3818
www.euroessays.org

Special Issue: 2nd International Conference on Economics & Banking 2016 (2nd ICEB)

How to Make Employees Stay in a Company

Puteri Andika Sari
Management Study Program
School of Business Ekuitas (STIE Ekuitas) Bandung, Indonesia
puteri.andika31@gmail.com/puteri.andika@ekuitas.ac.id
ABSTRACT
Employee has a crucial role in company. Knowledge that employee has is the big asset that
company have. Problem will appear if their employee has intention to leave or even leave the
company, the knowledge of employee has will be leaving to. Then it will effect employee
satisfaction for being a member of the company. This phenomenon has become a primary
concern in many organizations. The purpose of this paper is to examine the literature relating
how to make employee stay in a company. Based on review of the literature that has been
studied, it can be concluded that the determinants of employee retention are compensation,
training and development, flexibility of working and organizational culture.
Keywords: Employee Retention; Compensation; Training and Development; Flexible
Working; Organizational Culture

BAGAIMANA MEMPERTAHANKAN KARYAWAN ANDA?

ABSTRAK
Karyawan memegang peranan penting dalam suatu perusahaan. Pengetahuan yang dimiliki
oleh karyawan meruapakan asset yang besar bagi perusahaan. Masalah akan muncul ketika
karyawan mempunyai keinginan untuk meninggalkan atau bahkan keluar dari perusahaan,
pengetahuan yang dimiliki oleh karyawan pun akan ikut pergi. Fenomena ini menjadi
perhatian utama di berbagai organisasi. Tujuan dari paper ini adalah mengkaji literature yang
berhubungan tentang bagaimana cara mempertahankan karyawan di sebuah perusahaan.
Berdasarkan hasil kajian literature yang telah dipelajari, dapat disimpulkan bahwa terdapat
beberapa faktor penentu retensi karyawan antara lain kompensasi, pelatihan dan
pengembangan, fleksibilitas dalam bekerja, dan budaya organisasi.
Kata kunci: Retensi Karyawan; Kompensasi; Pelatihan dan Pengembangan; Fleksibilitas
Bekerja; Budaya Organisasi
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1. Introduction

The existence of employee plays important role in an organization. As we know

organization is a place of two people or more that doing their routine activity and coordinated
with each other in order to achieve a common goal. We can conclude that organization can
compete with another in globalization is depends on their employee. Certainly, many
organizations have voiced the idea that their human resources differentiate them from their
competitors, in another words we can say that human resource (employee) become a core
competency (Mathis & Jackson, 2004).

In a few decades instead of being organization’s resource, employee turns to asset for
their organization that we can call human capital. Human capital is a combine of knowledge,
lesson, experience, core competence, skill and ability that employee has in a company (Sari
et.al, 2012). Based on the understanding before, the company will lose its investment if many
employees intend to leave or leaving the company in which they work. How come? With all
the capabilities, skills and competencies possessed by the employee-which may also result
from the investment of the company-will move as well as they leave the company.

Basically firms want to reduce turnover because turnover is costly. In practice turnover
results from many factors so measuring the exact cost of turnover is difficult. For the simple
examples there are direct costs to simply replacing employees that leave the firm, such as
recruit and training costs for the new employee. And also there may be costs associated with
the general disruption caused by an employee leaving the firm, such as the need to transfer
that employee’s clients or workload to other employees (Russell, 2005).

Retaining human capital with high performance is the key for organization to reach their
business goal. In company/organization perspective to retain means that one less person to
have to recruit, select and train which allow to efficiency business practice (Mathis &
Jackson, 2004). Now the question is why people stay or leave their jobs? If the answer is stay
then it should be employee feel satisfy with their job. If vice versa, employee could have
intention to leave or even leaving the company for several reasons.

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2. Framework and Empirical Studies

A. Employee Retention

Many factors can cause retention of human resources. It has been recognized by both
employers and employees that some common areas affect employee retention. Mathis &
Jackson (2004) have discovered the retention determinants. First it comes from organizational
components which include values and culture, strategies and opportunities, well manage and
result oriented, and job continuity. Then it will influence the other factors such as: career
opportunities, rewards, job design & work, and employee relationship.
Research conducted by Deo (2014) examined the factor of employee empowerment,
appraisal system, compensation and training and development on the retention of human
resources. The results of the study revealed that only appraisal system, compensation and
training & development which give positive and significant impact on the retention of human
resources while the employee empowerment gives opposite results. Further research in
academic staff in the university conducted by Selesho & Naile (2014) proved that salary,
promotion and development take main role in employee retention. Research conducted by
Masibigiri and Nienabaer (2011) on generation X Public Servants, factors that influence
employee retention such as: work content, utilization of skills, career advancement, work-life
balance, compensation, security needs, leadership and drive. In study conducted by Haider
et.al (2015) revealed that compensation and organizational culture has a positive relationship
with employee retention whereas training and development has a negative one. Ibidunni et.al
(2016) in their study of talent retention, organizational performance, and competitive
positioning, factors that influencing talent retention are: pay, promotion, physical working
condition, relationship with others, and recognition. In their study revealed that pay has a
positive significant implication on employee commitment and employee’s involvement
which lead to employee retention.

B. Compensation
Compensation is important factors that can affect employee choose the company to
work. Employee compensation includes all forms of payment granted to employees and
arising from their employment relationship. Compensation has two main components, namely
direct financial payments (i.e. wages, salaries, incentives, commissions, bonuses) and indirect
financial payments (i.e. financial benefits such as insurance and vacation that paid by the
employer (Dessler, 2015).

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Numerous surveys and experiences of HR professionals reveal that one key to retention
is to have competitive compensation practices (Mathis & Jackson, 2004). In some cases the
reason of employee stops working is the low pay they receive. Especially for high-performing
employees, has particular expertise and key employees, they are definitely expecting high pay
in their place of work.
In the mind of employee they will think about fairness in compensation. That’s what we
called the concept of equity. Equity means the perceived fairness between what a person does
and what the person receives (Mathis & Jackson, 2004). Dessler (2015) divided four types of
justice in compensation namely:
 External justice refers to how the level of pay of a job in a company compared to the
rate paid jobs in other companies.
 Internal justice refers to the extent to which the fees are fair when compared with
other jobs in the same company.
 Individual justice refer to the individual pay fairness when compared to that obtained
by colleagues or by a very similar job in the company, based on each person's
performance.
 Procedural justice refers to the fairness process and procedure that is felt is used to
make decisions regarding the allocation of payment.

How to cope with this justice issue? Companies can do a salary survey to other
companies to solve the problem of external justice. In terms of the internal justice company
can use job analysis and comparison of each job (job evaluation). Performance appraisal and
pay incentives to maintain individual justice. Whereas the communication, the grievance
mechanism, and employee participation can be used to ensure that employees view the
payment process is procedurally fair (Dessler, 2015).

C. Training and Development

In the era of globalization, where technology changes rapidly, training becomes the
prerequisite for every organization to remain in the global market. Nowadays organizations
cannot rely only on conventional specialism, but to compete in the future, they must develop
their employee skills, because it is a century of productivity and quality (Anis et.al, 2010).
Training assist organizational competitiveness by aiding in the retention of employees.
Employers that invest in training and developing their employees do so as part of retention
efforts (Mathis & Jackson, 2004).

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Training is a process whereby people acquire capabilities to aid in the achievement of

organizational goals. The employer must conduct an analysis of the training needed by
employees. It is to overcome the gap between the capabilities of current employees with the
skills needed by employers in a given job. Training objectives and priorities are set to close
the gap. Three types of training objectives can be set (Mathis & Jackson, 2004):
 Knowledge: impart cognitive information and details to trainers
 Skill: develop behavior changes in how jobs and task requirements are performed.
 Attitude: create interest in and awareness of the importance of training.

Whereas development represents efforts to improve employee’s ability to handle a

variety of assignments. Development differs from training because it focuses on less tangible
aspects of performance, such as attitudes and values. Generally we can separate two
approaches of employee development: a) on-the-job method: coaching, committee
assignments, job rotation, and assistant-to positions; b) off-the-job method: classroom
courses, human relations training, simulations, sabbatical leaves, and outdoor training
(Mathis & Jackson, 2004).

D. Flexibility Working
In a world of growing business, the workplace is not necessarily in the same place. The
technological advances that occurred while supporting flexibility in work. For example, by
using advances in technology such as e-mail and voicemail makes anyone could keep
working wherever and whenever. This means that the boundary between work and personal
lives are increasingly thin. Employees can continue to work while enjoying private life,
which means they can work beyond the stipulated time.
The change of views on the workplace, including the company's desire to achieve its
goal, making the employees have to work smarter, more productive, and more effective. Not
only those, the employees are also required to balance between work life and their personal
lives. If employees can combine these two lives, then the company will indirectly benefit.
Plus, generations of employees at this time has a different view of the meaning of a job.
They have their own expectations about the meaning of work in which they live, the role of
such work in their lives, and how they interpret the meaning of "work" itself. Therefore, the
phenomenon of flexibility in the work required by many employees at this time due to the
following reasons:

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 To be able to complete a variety of jobs without having restricted work time in the
office and in anticipation of the work that comes suddenly.
 To be able to meet with colleagues and clients anywhere.
 In order to keep in touch with your hobbies or other activities in private life while
work is piling up.
 Avoiding jams.
 In order to keep caring for children or sick family members.
 The transition of employees into retirement.

Flexibility of work has been widely discussed by the experts referring to the theory of
work life balance. Subject literature on work life balance has three assumptions, among others
(Moore, 2007):
a) Performance of an employee would adversely affect the management of a company
when a problem occurred in the balance of their working life (work life balance);
b) That improve work life balance of employees will not only increase productivity but
also increase employee loyalty and satisfaction towards the workplace.
c) The work-life balance can be run either through the implementation of the program of
work flexibility.

E. Organizational Culture

The organizational culture is an important element which directs the employees to leave
the organization (Haider et.al, 2015). Anitha & Begum (2016) defined organizational culture
as the behavior of human beings within an organization and the meaning that people attach to
those behaviors. Organization culture is a pattern of shared values and beliefs that provides
organizational member meaning and rules for behavior.

Robbins (2015) discovered 7 characteristics of organizational culture that are:

a) Innovation and Risk Taking: degree to which employees are encouraged to be

innovative and to take risk.
b) Attention to Detail: degree to which employees are expected to exhibit precision,
analysis, and attention to detail.
c) Outcome Orientation: degree to which managers focus on result or outcomes rather
than on how this outcomes are achieved.

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d) People Orientation: degree to which management decisions take into account the
effects on people in the organization.
e) Team Orientation:degree to which work is organized around the teams rahrte than
individual.
f) Aggressiveness: degree to which employees are aggressive and competitive rathrt
than cooperative.
g) Stability: degree to which organizational decisions and actions emphasize maintaining
the satus quo.

Numerous examples can be given of key technical, professional, and administrative

employees leaving firms because of corporate cultures that seem to devalue people and create
barriers to the use of individual capabilities. In contrast, creating a culture that values people
highly enables some corporations to successfully attract and retain employees (Mathis &
Jackson, 2004).

3. Methodology of Research

The author using literature review in research method. Form of the literature such as
of journals, books and other reading materials that appropriate in its relevance to the topics
discussed in this paper.

4. Discussion on Empirical Result

Based on research that conducted by Deo (2014) compensation has a significant effect
on employee retention. Compensation is the prominent element in retaining employee. In the
research that conducted by Russell (2005), to test the deferred compensation on employee
retention revealed that the deferred compensation (i.e bonus, stock and stock option) can
effectively influence employee retention.
Training and development is the efforts that company can do to enhance employee
performance. This efforts are important in order to improve the effectiveness and in retaining
the key employees. If the company committed and assist long-term career development of
their employees, the company will gain the loyalty from them (Haider et.al, 2015). Based on
study that conducted by Kasekande et.al (2013) employee satisfaction has a positively related

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to employee retention. The results of their study concurred with the hypothesis and confirmed
that when employees are satisfied on the job, they exhibit high levels of retention, and the
rate of turnover decreases.
Anis et.al (2011) in their study about relationship training and development on employee
retention with compensation as mediating variable revealed that without increasing the
compensation of employee after their training and development, to retain the employees for a
longer time period does not give fruitful result because of the increase in his abilities and
perfection in field.
Research that conducted by Idris (2014) types of flexible working are flex time, job
sharing, flex leave, flex career, and flex place or telecommuting. When company has to
decide to facilitate their employee’s flexibility working, they can choose one of these options
such as: flexi time, compressed working hours job sharing, breaks from work, self-rostering,
teleworking, and child care (Igbinomwanlia et.al, 2012).
Research that conducted by Haider et.al (2015) revealed that organizational culture has a
positive relationship with employee retention. Anitha & Begum (2016) in their research
found that organizational culture has high impact on employee retention than employee
committment.
From the explanation before we can conclude that: compensation (pay), training and
development, flexibility working, and organizational culture are such determinants to
employee retention.

Training & Flexibility

Development Working

Organizational
Compensation
Structure
Employee
Retention

Figure 1. Employee Retention Determinants

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5. Conclusion
As we know that the employee is an asset to the company, the company needs to know the
various ways to retain employees, especially with high-performing, have specialized
expertise and key employees. Several factors that can determine the employee to remain in
the company are compensation, training & development, flexibility of working and
organizational culture. Relating to the compensation the company should be able to provide
competitive compensation. Training and development is the efforts that company can do to
enhance employee performance. This efforts are important in order to improve the
effectiveness and in retaining the key employees. And employers should have a plan to
choose the right method of training and development. Companies can determine the policy of
the flexibility of working in order to retain employees. With the flexibility working practices
undertaken by the company, employees can do their job and family life with ease. So that
employees who work in companies that embrace the practice of flexibility working will feel
satisfied and loyal to the company. Finally, creating a culture that values people highly
enables some corporations to successfully attract and retain employees.

References

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Anitha, J, Begum, F. (2016). Role of Organisational Culture and Employee Commitment in

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Ibidunni, S., Osibanjo, O., Adeniji, A., Salau, O.P., Falola, H. (2016). Talent Retention and
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