04. Most Popular Models and Theories on Employee Retention

 Concerns about the performance of organizations are developing due to the high rates of employees turnover. This is due to the significant damages it causes to a company's social and financial capital. It has negative effects on both the organization and the people involved, results in significant setbacks, and drains resources. To understand why employees depart and reduce turnover, organizations use a variety of employee retention theories.

01.The theory of Organizational Equilibrium (TOE)

The Barnard-Simon Theory of Organizational Equilibrium, which provides a thorough understanding of the significance of staff retention, is regarded as the first formal theory on turnover retention. According to this hypothesis, a person will stay employed in a company as long as their perceived contribution to the company and the company's perceived contribution to their lives are equal. According to TOE, the following variables affect job satisfaction:

1. Compatibility with one’s various roles at the company
2. Predictability of one’s relationships in the office, and
3. Conformity of one’s self image with their job

 

Employee retention rates will be satisfactory as long as an individual's personal and professional aspirations do not conflict.

 

02.Herzberg’s Two-Factor Motivation-Hygiene Theory

The link between employee retention and employee motivation is described by Frederick Herzberg's famous "Two-Factor theory.” that employee motivation and employee satisfaction are influenced by two different sets of factors. These elements are:

Hygiene Factors: which refers to elements that support motivation during work. The physiological requirements that employees expects to be met are the hygiene aspects. Employee dissatisfaction results from their absence.

Satisfactory income, job security, and working conditions are a few physiological needs. The leadership style and interactions between peers and superiors are other elements.

Motivational factors: The actual working conditions at a job affect employee motivation. These elements encourage employees to give their best effort.

Responsibility, job happiness, acknowledgment of accomplishments, growth prospects, are some examples of motivating elements.

Image source:https://blog.vantagecircle.com/employee-retention-strategies/

 

03.The human capital theory

According to the theory of human capital, businesses have an incentive to enhance their employees and operations. The term "human capital" refers to intangible assets like an employee's expertise and experience. Therefore, if you invest in the education and training of your staff, you're building up your human capital. The hypothesis contends that employee retention increases with increased human capital..

Your teams will perform better and are more likely to remain on the job if you spend more money and effort into their growth and education.

 

04.The Equity Theory

The equity Theory, developed by behavioral psychologist John S. Adams, is predicated on the idea employees expect equity in rewards for the amount of work they put in. If the results of their efforts are not satisfactory, they feel wronged. If reference groups like coworkers and relatives are aware of such encouraging reinforcements, this sense is strengthened. This argument also advances the idea that employers frequently take action to restore inequity.

If an employee feels undervalued and unjustly treated, he or she will work less in an effort to make things right. As a result, the retention strategy used in such situations may involve efforts to preserve an unequal workplace.

 

05. The resource-based employee retention theory (RBV)

When a company has resources that are rare, valuable, and expensive to imitate, it has an advantage over its competitors. Being a member of such businesses allows the staff to provide greater customer service while generating higher revenues. The Resource-Based theory, one of the main theories for employee retention, contends that when employees can be more helpful to their clients, it improves their feelings about their jobs and the organization.

Employees are less likely to leave their jobs if they are seen as special and valued, according to studies on the subject. As a result, retention concerns can be resolved by making sure employees believe their contributions to the company are worthwhile.

06.Maslow’s hierarchy of needs (people management)

This approach promotes the significance of taking into account your employees' fundamental needs, including their physiological requirements, job stability, sense of belonging, self-esteem, and self-actualization. Employees are more inclined to stick with a company if they feel that their needs are being satisfied and that their jobs are secure.

Image source:https://www.sodexoengage.com/blog/rewards-recognition/applying-maslows-hierarchy-of-needs-theory-to-hr-responsibilities

Conclusion 

these employee retention theories collectively illuminate the intricate interplay of factors influencing employee loyalty and longevity within organizations. By embracing these theories and tailoring strategies accordingly, businesses can foster environments that not only curb turnover but also cultivate thriving, engaged, and dedicated workforces.

References

byMerin, P. (2023) Employee retention theories - analysis & implementation: HR shelf, HRShelf. Available at: https://hrshelf.com/employee-retention-theories/ (Accessed: 25 August 2023).

Crawley, Saskia. “12 Must-Know Models and Theories on Employee Retention.” Www.gomada.co, www.gomada.co/blog/models-and-theories-on-employee-retention.

 

30 important Employee Retention Strategies for the “new” business world in 2023 (2021) Nurture an Engaged and Satisfied Workforce | Vantage Circle HR Blog. Available at:

https://blog.vantagecircle.com/employee-retention-strategies/ (Accessed: August 25, 2023).