Dissertation: Factors Affecting Retention in a Financial Institution Company

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¶ … Retention in a Financial Institution Company

Factors affecting retention in a financial institution

The field of human resource management has often been concerned with the factors affecting the retention of the employees. The current study sets out to assess these factors in the context of the financial institutions. The literature review constitutes the starting point in the analysis and the basis of the questionnaire created. The methodology used is the quantitative approach and the findings indicate that the retention of the employees in financial institution is driven by a multitude of forces, not so different from the forces driving retention in other fields. One particular finding is that aside from the traditional factors, the employees in the financial sector are also driven by job stability. This further indicates the evolving feature of the factors stimulating retention.

Statement of the problem and significance of the study

Human resource management is a complex field, focused on the relationship between employee and employer from before the actual employment contract and even after this contract is closed. One particular dimension of human resource management is represented by the efforts of employers to retain their staff members. Employee retention is crucial in organizations as it reduces the costs associated with high employee turnover rates (replacement, training and so on). In this setting then, the currently addressed issue revolves around the factors impacting employee retention within the specific field of the financial sector.

The study has a dual significance. On the one hand, it is useful for the research academy as it centralizes the information already available on the topic of the factors affecting retention within the financial institutions. Nonetheless, this topic is quite specific and novel and the number of researches conducted is quite limited. In this instance then, the second theoretical significance of the current study is that it generates new information and enhances the knowledge on the topic studied.

Aside from the theoretical importance, the study is also significant as it provides information to the practitioners in the field. Specifically, the study is useful for the managers in the financial sector who can use it to gather input on the factors which stimulate employee retention and use the information to reduce employee turnover rates.

2. The study

a. Objectives of the study

The current study sets out to identify the forces which stimulate the retention of the employees within financial institutions. Its objectives are those of:

Identifying which forces stimulate individuals to remain employed in financial institutions

Proving or disproving the initial hypothesis.

b. Statement of hypothesis

A generally accepted perception is that employees are motivated by the financial rewards they receive from their employers. This project however starts at the premise that the employees in the financial sector are also motivated and retained by other non-tangible factors as well. Throughout the research to be conducted, the hypothesis would be tested at a deeper level, in order to identify which of the retention factors are of more importance. In other words, are the employees in the financial sector more motivated to remain employed with a firm by the financial incentives or by the non-financial incentives?

c. Definition of terms

Retention = the ability of an economic agent to maintain the best staff members (Close, 2008).

Quantitative research = research approach based on facts and figures, rather than personal interpretations.

3. Review of related literature

The topic of employee retention is vastly debated within the specialized literature and various researchers propose various solutions to reducing employee turnover rates. Jennifer Carsen (2005) for instance argues that it is necessary to start at the very business core and develop a strong and trustworthy relationship with the employee. This solution includes factors such as selection, recruitment and hiring, the leadership model, employee training and development, mentoring and performance appraisals. Leslie McKeown (2002) however focuses more on the provision of various benefits to the employees, including financial and non-financial, as a means of rewarding and stimulating.

At the specific level of financial institutions, the executives in the field recognize the importance of retaining the best staff members and focus on this feature as a key success factor. This understanding can be linked to the fact that financial institutions provide services rather than material products, and the satisfaction of the final customers is directly pegged to the nature of the relationship developed between the customers and the company employees (Taylor, 2002).

In this setting then, an article in the Portland Business Journal (2002) notes that the executives in the banking community use similar tools to retain their staffs as the managers in other fields. A central role is as such played by the compensation systems, coupled with benefits packages. Still, in the financial sector, the article noted, there were some differences in the compensation packages offered to key managerial staffs and key staff employees.

Within the compensation package promoted as a retention strategy, employers in the financial sector often include salary increases (annual and pegged to evaluations), 401k plans, bonuses based on personal performances, stock ownership plans and phantom stock options. The latter two benefits were however only offered to the executive employees and they were based on the overall performances of the bank (Portland Business Journal, 2002).

While the need for financial rewards is recognized, the consultants at insurance broker and risk advisor Marsh Global argue that the recent economic problems translated into the inability of the financial sector to continue to lure its employees with financial rewards. In this setting then, they argue that companies in the financial sector strive to differentiate themselves and become preferred employers through the creation and offering of "more progressive and attractive benefits packages" (Marsh, 2010).

The consultants at Marsh have as such created three specific categories of voluntary benefits as follows: protection benefits, lifestyle benefits and time out benefits. The lines below reveal the specific benefits included in each category:

Protection benefits: travel insurance, voluntary income protection, health cash plan, dental care, cancer care, critical illness insurance, personal accident cover

Lifestyle benefits: computers and cameras, fashion and beauty, gifts and flowers, home and garden, electrical appliances, motoring, music and video, toys and books, high street vouchers

Time out benefits: holiday and travel, leisure time and days out, sport and fitness, health and beauty, theme parks, car hire, buses and coaches, trains and ferries, foreign exchange (Marsh, 2010).

While the list of voluntary benefits created by the consultants at Marsh is comprehensive, other sources focus on more specific factors used by financial institutions to retain their employees. The lines below point out to this:

Zabihollah Rezaee (2001) places an increased emphasis on the role of training as a means of retaining staffs. Employee training as development as such serves a dual purpose of increasing the quality of the services and stimulating employee motivation, satisfaction and subsequently retention.

Guler Aras and David Crowther (2010) argue that mentoring is a highly useful means of retaining the employees in the financial sector and it is also useful as it can enhance productivity

Gail Hawkins (2004) argues that one of the pillars of employee retention is represented by the culture of the employing organization.

4. Design of the study

a. Description of research design and procedures used

The research methodology employed throughout this project is a quantitative one, characterized by the fact that it relies on numbers and figures. The researcher is an objective observer who does not become directly involved in the phenomenon researched.

The particular procedure to be employed is the questionnaire, which is a highly commonly used tool in the collection of data. The questionnaire for the current analysis is revealed below:

Question 1: Which of the two motivates you the most to get a job?

a) The salary package, including bonuses and other financial rewards

b) The non-financial incentives, including flexible schedules, training

Question 2: Which of the two would motivate you to leave your current job?

a) The salary package, including bonuses and other financial rewards

b) The non-financial incentives, including flexible schedules, training

Question 3: Would you stay in a position which offers high salaries and other financial rewards, if the working climate and other non-financial features were of negative traits?

a) Yes, because of the money

b) No, I would not subject myself to improper treatment

c) Yes, I would remain employed, but on the side, I would seek new employment opportunities.

Question 4: Which of the non-financial factors listed above are of most importance to you in keeping a job within a company?

a) Assisted education and support in educational attainment

b) Training and development and support with professional advancement

c) Opportunities for career development and promotions

d) Flexible working schedules

e) The relationship with the employer

f) The working environment, including the relationship with the colleagues

Question 5: Please state any other factors which motivate you to continue to work in the current financial institution.

b. Sources of data

The data would be collected from 50 individuals employed in ten different financial institutions.

c. Sampling… [END OF PREVIEW]

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"Factors Affecting Retention in a Financial Institution Company."  Essaytown.com.  November 3, 2011.  Accessed October 16, 2019.
https://www.essaytown.com/subjects/paper/factors-affecting-retention-financial/616650.