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Impact Of Workplace Environment On Employee Retention Business Essay

Paper Type: Free Essay Subject: Business
Wordcount: 4794 words Published: 1st Jan 2015

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This section includes the background, significance of the study, objectives of the study and the structure of the organization. The study was about the impact of work place environment on retention of employees of private banks in Pakistan. Basically this study was conducted to analyze the impact of different components of work place environment on the employees of private banking sector in Pakistan

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Background of the study

The quality of the employee s workplace environment has an impact on employee motivation and ultimately affects his performance. How well they engage with the workplace of their organization influences to a great extent to their error rate, level of innovation and collaboration with other employees, absenteeism and, ultimately, how long they stay in the job. (Heath, 2006)

Workplace environment includes the condition or environment under which employees have to work. This includes matter such as permitted breaks, the state of heating, lighting and ventilation of workplaces, the safety and comfort of machinery, vehicles, and other equipment, normal manning levels, and disciplinary procedures supervision, compensation packages, communication and other benefits.

Organizational culture is one of the components of the workplace environment and it influences the every aspects of organizational life. It is suggested that organizational culture affects the outcomes like productivity, performance, employee commitment, confidence and ethical behavior. (Ritchie and Michael, 2000)

In today’s competitive environment, it is believed that talented employees are a valuable and often irreplaceable resource of an organization. Because of this, now days, effective Human Resource Management is a major component of every manager’s job. Strategic Human Resource Management is an approach of making human resources related decision in line with the strategic plans of the organization. It includes policies and practices of recruitment, training, development, performance management, and compensation & reward system and employee relations. It refers to organizational use of employees to gain or keep a competitive advantage against competitors.

Now a days, organizations face turbulent and uncertain environment and consequently Human Resource Management being considered as an important and valuable resource. An organization gains competitive advantage by using its people effectively, drawing on their expertise and skill to meet defined objectives (Price, 1997).

As a result, a focus solely on investment in physically resources as opposed to Human Resource is considered now days as shortsightness (Bhatia, 2007, chap.1, p.6). Organizations need to invest heavily in their human resource in order to be competitive during the twenty-first century.

In today’s business environment, the survivability of an organization depends upon the extent to which organization delivers its products and services to its customers efficiently. The most important constituent of an organization is its human resource. Once the managers select individuals form the labor supply to work in the organization, they become part of internal environment. These employees conduct day to day affairs of the organization by working in various organizational functions. So the organizational performance is highly determined by its employee’s performance. It is now widely believed that talented employees are valuable and sometimes irreparable resource. (Schermerhorn, Hunt and Osborn, 2005).

Hence, it is very important for an organization for sustained, high level performance to not only attract but also satisfy, retain and motivate their talented and high performing employees. One of the most important challenges for today’s organizations is to retain their best employees. As in today’s service based economy, organizations not only differentiate themselves, but also compete with each other on the basis of their Human Resource as it is the only source of their sustainable competitive advantage. So it is now widely believed that talented employees are valuable and often irreplaceable. In almost all high performing organizations, one massage stands above them all “People are an organization’s most important asset” (Schermerhorn, Hunt, Osborn, 2005).

So, every organization needs to retain people with the right skills and talent, Practically, one employee retained means one less person to have to be recruited, selected and trained by the organization. One survey of supervisors and workers found that losing high performers made it more difficult for organization to reach their business goals (Mathis and Jackson. 2004)

As employee satisfaction leads towards the customer satisfaction and indirectly it earns the profit for an organization therefore, employee satisfaction is also very important. Researchers showed that satisfied employees always provide the best customer services and in this way enhancing the customer satisfaction and loyalty towards the organization as compare to unsatisfied employees (Robinson and Garcia, 2003)

Satisfied employees also tend to willingly make contributions to the organizations to ensure its financial security and longevity; realize and take pride in the importance and value of their work to internal and external customers alike; feel valued; welcome personal development and growth; feel free to share their opinions and ideas honestly; and better serve the needs of the customer (Piper, 2006)

Successful managers have awareness about employee importance. They know that the success and prosperity of the company is closely related to the well-being of its each employee. So, for getting their maximum efforts they treat them with respect and dignity (Helge).

From management perspective employee motivation is also an important component for organizational success. If employees get motivation from their organization they like to stay longer in the organization and give extra time to fulfill the important tasks of the organization (Bruce and Pepitone, 1998)

For getting things done motivation is an important skill. Every where people use this technique to get results. Motivation is basically the balance between the communication, incentives and structure. (Falconer, 2007)

This research analyzes the employee retention in the private banks of Pakistan located at Rawalpindi and Islamabad regarding the following variable workplace environment including the components leadership/supervision, social support, rewards/benefits, Learning Growth/Professional Development, Organizational structure, salary, culture and tools/equipment and works itself.

Employee retention is the dependent variable and workplace environment is the independent variables in this study.

Statement of problem

To investigate the impact of workplace environment on retention of employees in private sector banks located at Rawalpindi and Islamabad.

Organization under Study

This study was conducted on three private sectors banks whose branches are located at Rawalpindi and Islamabad. These banks are

Habib Bank Limited

Bank Alfalah Limited

Askari Bank Limited

Habib Bank Limited

Habib Bank Limited established its operation in Pakistan in 1947 and moved its head office to Karachi. Their first international branch was established in Colombo, Srilanka in 1951. With a domestic market share of over 40%, HBL was nationalized in 1974. its international operations were expanded to USA, Singapore, Oman, Belgium, Maldives, and Netherlands. On June 13, 2002, Government of Pakistan formally granted the Agha Khan Fund for Economic Development (AKFED) rights to 51% of the shareholding in HBL. On February 26, 2004, management control of HBL was handed over to AKFED. It’s headquarter is located at Habib Bank Plaza, Karachi. HBL has a network of over 1450 branches in Pakistan and 55 branches worldwide. World’s premier banking and finance magazine “The Banker” rated HBL at the top banking brand in Pakistan. HBL received the “Most Innovative Global Trade Finance Award” in 2008. In October 2008, HBL received the “Best Bank in Pakistan Award” as well.

Bank Alfalah Limited

Bank Alfalah Limited was incorporated on 21st June, 1992, as a public limited company under the Companies Ordinance 1984. Later on, Bank Alfalah Limited was privatized in 1997. Major shareholder of this Bank is Abu Dubai Group. Bank Alfalah Limited has a network of more than 238 branches in 74 cities of Pakistan with the registered office at B.A building 1.1 Chundigarh, Karachi. Its international branches are at Bangladesh, Afghanistan and Bahrain. In recent years, the bank has shown aggressive growth in all areas of business including deposit mobilization, credit expansion and geographical outreach.

Askari Bank Limited

Askari Bank Limited (formally Askari Commercial Bank) was incorporated in Pakistan on October 9, 1992, as a Public Limited Company. The Bank is listed on the Karachi, Lahore and Islamabad Stock Exchange and its shares are currently the highest quoted from among the new private sector banks in Pakistan. Askari Bank has expanded into a nation wide presence of 149 branches including 14 Islamic Banking Branches and an offshore banking unit in Bahrain. A shared network of over 1100 online ATMs, covering all major cities in Pakistan, supports the delivery channels for customer service. Askari Bank has been given the “Best Retail Bank in Pakistan Award” by the Asian Banker. Askari Bank has been given the “First Consumer Choice Award, 2004” for the commercial banking category by the consumer association of Pakistan. Askari Bank has also received the “Corporate Excellence Award” for the financial sector from the management association of Pakistan for the year 2002, 2003 and 2004.

Research Objective

The basic objectives for conducting this research are to find out;

To identify how workplace environment is going to impact employee commitment in private sector banks?

To identify how workplace environment is going to impact workplace morale in private sector banks?

To identify how workplace environment is going to impact absenteeism in private sector banks?

To identify how workplace environment is going to impact intent to quit in private sector banks?

Significance of the Study

In today’s competitive environment, employees are a valuable asset of an organization. As a result of which, this study bears considerable importance. The significance of this research is that it gives a brief description of how workplace environment, in today’s challenging environment, enables organization to satisfy, motivate and retain their talented HR. this research facilitate the organizations as how they can use workplace related practice in order to motivate and retain their employees. The present study helps organizations to know the perception of employees regarding workplace prevailing in their current organization.

By increasing the employee retention there will be an increase in sales, customer loyalty, customer retention and improvement in performance of the employees as well as the organization. It will have the positive impact on repute of an organization. On the other hand this study could be of great benefit for other organizations to adopt an emerging concept of healthy workplace environment which has a great impact directly on their employees and indirectly on their customers.

Operational Definition of Variables

For the purpose of this study, “Workplace environment” act as an independent variable and “Employee retention” act as dependent variable.

Workplace Environment

The conditions or environment under which employees have to work. For the purpose of present study, this variable has been operationalzed with the help of following dimensions; Leadership/supervision communication, Social support Rewards/benefits, Training, Tools/equipments, Culture, Pay, Work itself.

Employee Retention

Employee retention means stopping people from leaving their organization or keeping good people. In other words employee retention means the existence of an ongoing employment relationship (Huang, Lin and Chuang, 2006).


As employee satisfaction plays a vital role in the success of an organization. If the employees are satisfied and happy with their job and working condition then they will give their best for the improvement of an organization. Happy and satisfied employees always put more efforts for the organizational achievements and stay loyal to the company. Job satisfaction is directly related to the productivity (http://www.expresshospitality.com/20080430/management08.shtml).

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The term employee satisfaction is basically used to describe either employees are happy and contented or working conditions are meeting their needs and expectations. (Heath, 2006). Many factors are contributing towards the employee satisfaction with in the workplace like salary, rewards, promotions, incentives etc. These are the things which create the sense of belongingness in the employees towards their organization and they realized that they are bringing success in the organization. (Sundar, 2006).

The success of any organization depends upon its members so; if the members are happy with their jobs and they are rewarded for their work then they will ultimately give their best to the organization. Satisfaction also leads towards concentrating on the work. (Foster,1999)

(Harris et al, 2007) studied the impact of social support on employee satisfaction and job tenure. Social support has been defined as the “actions of others that are either helpful or indented to be helpful” They analyzed the impact of career mentoring and task support on job satisfaction and leadership style and task support on employee tenure and accounted Seventeen percent of the variance in job satisfaction and Nine percent of the variance in job tenure. (Harris et al, 2007).

Similarly employee motivation also plays a very important role in achieving the organizations goal and it is a manager job to motivate the employees in order to get things done in the workplace. Motivation is the exchange process in which employee in exchange of his services can acquire financial gains, positions, social benefits and personal relationship. But to involve the employees in the work and to get his maximum efforts in order to achieve the organizational objectives and to promote/advance the organization they must be involved in an exchange process based on some solid reasons. (Cropanzano et al, 1997).

It is argued by them that employees always do work hard and provide his energies and talent in order to get some benefits in response of that work. However, these incentives/rewards are not only the financial rewards like salary and bonuses but also include the non-financial benefits. The rewards/benefits given to the employees by the organization either tangible or intangible have positive or negative impact on the individual employee motivation. (Cropanzano et al, 1997)

In this study relationship of different demographic variables like age, gender, designation and qualification is checked with employee motivation and it is concluded that gender and qualification has no relation with employee motivation while designation and age is correlated with the employee motivation. (Qammer, Khan and Siddiq)

Motivation can be defined in the number of ways like, (Luthans, 1998) asserts that “Motivation is the process that arouses, energizes, directs, and sustain behavior and performance. That is, it is the process of stimulating people to action and to achieve a desired task.”

Many contemporary authors have also defined the concept of motivation. Motivation has been defined as: the psychological process that gives behavior purpose and direction (Kreitner,1995) a predisposition to behave in a purposive manner to achieve specific needs (Buford, Bedeian and Lindner, 1995) an internal drive to satisfy an unsatisfied need ( Higgins, 1994 ); and the will to achieve ( Bedeian, 1993 ).

Motivation becomes very important when an organization trying to increase its productivity, market share and effectiveness. If the individuals, groups, and organizations are working in order to meet some expectations than it is the first and for most duty of the leaders/supervisors to provide them appropriate motivation to keep them on track. For different employees the motivational factors also vary so while providing the motivation the leaders must use the knowledge so that appropriate encouragement is provided to them ( Godinez and Quinn, 2004 )

Employee motivation is one of the elements that determine the final outcome of some activity. All capabilities and experience of an individual are in vain without proper motivation. Motivation is like the fuel in the engine. You can have a perfect machine, but without the fuel you can go nowhere. Motivation is important aspect of business management. Motivating employees is not just task of Human Resource but it is a responsibility of all managers.

Organizational culture is also very important as it has the direct impact on employee motivation. Different cultures are prevailing in the workplace differently motivating the employee. Positive workplace culture is very important for consistent improvement and it also the employees in a way that they are agree to give extra efforts for the organizations and on the other hand negative workplace culture have negative impact on the employees as it increases the employee turnover and absenteeism. (Das, Gupta and Tommer,2005).

Motivated employees are also very important for the organizational survival and they are required to cope up with the changing workplace environment. As the motivated employees are more productive so an effective manager always motivates its employees according to their needs and expectations. In this research Lindner described the following important motivating factors in his study like good working conditions, personal loyalty to employees, full appreciation of work done and good wages. (Lindner, 1998).

Managers usually state the wages, security, and good working conditions motivate employees. Younger workers and those with limited income do rate these factors highly when surveyed. However, these factors do not characterize the primary motives of the general working place. He suggests that each employee is individual and it is essential for management to understand what motivates each individual. When the mission of the organization, the employee’s motivates, and employee’s opportunity to achieve is in alignment, motivation takes place. The more the three are aligned and overlap, the greater the motivation. (Skopec, 1990)

Money is definitely a motivator of those who have little or none of it. However, each dollar gained is less valuable than the one that preceded it. At some point, money is virtually no motivator at all. (Petzinger, 1999)

Organizational culture can play its role in enhancing employee motivation, which leads towards retaining employees with their current employer through enhancing employee’s organizational commitment. Therefore, the employee’s turnover costs to be faced by the organization are reduced, having positive impact on the organization’s productivity and performance. On the other hand, if the organizational culture values result in a negative environment within organization, then it may have to face high turnover of staff as they try to escape unpleasant working environment. Highly productive organizations contribute a lot to enhance their organizational culture to keep employees motivated and committed to their organizations. (Srivastava and Rastogi, 2008)

Therefore, several researches have been carried out by social scientists for studying the impact of organizational cultures on employee’s behavior at work place. One of the employee behaviors that has been commonly studied by social scientists/ researches in relation to the organizational culture is employee’s intention to stay within the organization possessing particular cultural values, that leads towards determining employee’s retention in that organization. Mostly employees leave the organization because they are dissatisfied. The reasons of dissatisfaction could be lack of objectivity in job location, unfairness in job advancement and compensation packages. This dissatisfaction ultimately leads towards escape from the job.Thus, to retain the employees in the organization the organization’s dissatisfaction management control system must be able of bringing the objectivity in the organization for managing this dissatisfaction. (Srivastava and Rastogi, 2008)

Employee retention is among one of the most important functional responsibilities of Human Resource Management. In today’s competitive world, employees are the most valuable assets of any organization and retaining valuable employees have really become important issues, as there are many opportunities in global market for those employees possessing knowledge and skills. It is usually in an organization’s interest to put its efforts and time in retaining the quality employees that they already have, and not recruiting new one. (Hong and Kaur, 2008)

Another author, Bhatia, has also recognized organizational culture as one of the important determinants or factors affecting employee’s retention by influencing their intention to stay with their current employer. According to him retaining employees within the organization requires such cultural values with in the organization that focus on individual dignity/values and teamwork. Building a culture with in the organization that values work, where people are treated with respect and interpersonal relationship/cooperation among employees are encouraged, plays an important role in retaining ( Bhatia, 2007 )

The previous researches conducted in context of organizational climate and employee retention revealed that organizational values have significant impact on employee’s intention to stay within organization, leading towards influencing employee’s retention. According to (Hong and Kaur, 2008), intention to leave and actual turnover are often highly correlated. For this reason, researchers for measuring turnover, have often used intent to leave as an alternative for turnover and intention to stay as that for measuring employee retention.

In the literature of Human Resource Management, several authors have argued that building organizational characteristics, which fulfill employees social and individual

needs, can serve as a useful strategy for retaining employees. (Mathis and Jackson, 2004) has identified a number of organizational factors that influence employee’s decisions to leave or stay with their current employers/organization.

They further noted that many of the key technical, professional and administrative employees have been leaving the organizations because of the workplace prevailing in an organization that promotes such working pattern, which seems to undervalue people and create barriers to the use of their individual capabilities. In contrast, creating an environment that value people highly enables organizations to successfully attract and retain employees, the author noted organizational workplace environment as a factor that mostly influenced employee intentions to stay with their current employers. (Mathis and Jackson, 2004)

Employees in today’s business environment are known as the most important asset of any organization. Once, when a person has been selected by the organization to work as its employee, organization usually has to spend its time and financial resources to train that person to improve his skills and to accustom him to the environment of an organization in which he has to work. (Ramlall, 2003) carried out a study to determine the factors that most significantly influence employee’s decisions to remain employed at a particular organization and possible reasons for choosing to leave. His purpose was to reduce employee’s turn over cost faced by organization by influencing the factors identified by the research to have their impact on employee retention. In his study he asked participants to complete a survey to identify reasons and explanation as to why they might seek employment at other organization, reasons for employed with the current employer, and what the organization could do to retain its high performing employees. Among some other factors, employees cited organizational working environment as one the reason for choosing current organization as employer, identifying the work place environment plays its role in the determination of employee’s retention. Results of the study revealed that although compensation packages and company location was identified as the most significant factor influencing employee retention, organizational culture was also identified as important organizational factor that have its role in determining employee retention. (Ramlal, 2003)

Employee turnover is the main concern of management in any organization, as it is much costly for the organization to recruit the new employees with the appropriate skills, train and bring them at the level of old employees, especially when an organization is reaching at the peak and working in the tight labor market.(Taplin, 2007)

While the number of studies of turnover that focus upon individual attributes continues to grow, less attention is paid to the issue of retention other than to assume that workers who stay are somehow satisfied or at least resigned their job. In other words people stay because of the absence of intermediary linkages that adversely affect job satisfaction (Harley, 1999)

Retention becomes related to a residual category; workers stay because the opportunities or pressures to leave do not emerge. It is our contention that many workers stay because of positive features associated with work and that the ensuing organizational commitment is a function of managerial attitudes as well as work structure. Principally, we argue that managers can play an instrumental role in creating a work environment that utilizes the otherwise problematic aspects of the job and work/family linkages. While other studies have demonstrated the importance of pay, work organization and work condition in shaping job satisfaction (Cohen and Bailey, 1997)

Workplace environment is a concept, which has been operationalized by several researchers using different variables to measure it ( Williamson, 2007 ) also analyzed the extent to which the individual perceive the workplace environment as fulfilling their intrinsic, extrinsic and social needs and their reason of staying with the organization. He conducted his research and information technology organization in united state. He analyzes the impact of over all rewards on employee commitment and turnover in the organization. He concluded that if the employees are provided high level of organizational support they are highly satisfied and show the high level of commitment towards their organization and low turnover rate. (Williamson, 2007)


This theoretical frame work has been derived after extensive study of literature review which was on analysis of employee retention which respect to different components of workplace environment.

The independent variable workplace environment is linked to employee retention (dependent variables). If the quality of the workplace environment of the organization does not meet the needs and expectations of the employees working in the either the employees quit from their jobs or they may not perform according to the set standards.


To testify the overall impact of workplace environment on employee retention, following hypothesis have been made.

H1. Workplace environment has positive impact on employee retention.


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