Relationship between Human Resource Management Practices,

Non – Managerial Employee Intention to Turnover in Garment Industry in

Sri Lanka

WWAN Sujeewa Abstract- The objective of this research paper was to investigate whether human resource management (HRM) practices are related to the non - managerial employee intention to turnover. Study setting, unit of analysis and time horizon was hypotheses testing, non-causal, non contrived and individual respectively. The structured questioner was administrated to cover stratified randomly selected sample of 1000 non – managerial employees, however, data was possible to be collected from 826 non – managerial employees. The data analysis included the univariate, bivariate and multivariate analysis. In order to test the first five hypotheses the Pearson Product – moment Correlation technique was applied. To test the sixth hypothesis, multiple regression and F – test were applied. The results of the study showed negative relationship between HRM Practices with employee intention to turnover. Multivariate analysis revealed that combined influence of HRM practices on intention to turnover on non – managerial employees was significant. Findings of the study are that a garment industry should retain the competent employees because employees gain the competitive advantages in any organization. Key words- Compensation, Career Development, Discipline Management, Grievance Handling, Health and safety management, Human Resource Management Practice, Intention to Turnover

I. INTRODUCTION ROMOTION of exports and liberalization of exports continued to be the key instruments in the open economic

policy in Sri Lanka. Textiles and garments continue to maintain its position as the Sri Lanka’s largest single item of exports since 1986. There is no doubt that the "person" as the principal resource of labour incentive garment industry plays a crucial role in any productivity improvement effect. Further, this argument is supported by the facts that labour comprises about 20 per cent of the cost price of a garment (Gerry, 1997). Therefore, the way people are directed, motivated or utilized will be decided upon whether the organization will be prosperous and survive or ultimately fail. Hence, people are the key element for competitive advantage (Luthan, 1995). Absenteeism and turnover resulting from poor productivity could be seen almost in each of past years. Kelagama and Epaarachchi (2001) found that 55 per cent of average labour turnover rate has recorded from Sri Lankan garment industry

WWAN Sujeewa is senior lecturer in Faculty of Management studies, Rajarata University of Sri Lanka

Phone: +94 716838733; fax: +94 252266227; email:nasu@rjt.ac.lk

sector per annum with the highest rate of 60 per cent being recorded for factories in the western province. Researchers (Kelegama and Epparachchi, 2001; Irving and Meger, 1994; Sheridan, 1992; Campion, 1991; Heneman, Schwab, Fossum and Dyer, 1999;) find that the employee absenteeism and turnover affect the development of organization productivity. In a broader sense, it relates to the development of a country. A country’s ultimate goal is to get the higher standard of living of the people in that country (Opatha, 1996). These two indicators are heavily depending on productivity. The HRM practice and absenteeism and turnover are one of the major determinants of organization productivity. It is very important to maintain a better HRM practice for the better productivity and reduce employee turnover in any organization (Patterson et al, 1996). Therefore, organizations need to design effective HRM practices that encourage the retention of high performing employees, particularly among skilled employees. This is because there is a global shortage of skilled employees and firms will need to have competitive practices to retain them. Past research have linked various HRM practices to employee turnover and productivity, for example, realistic job previews, selection procedures, socialization programs, promotion opportunities and compensation practices were found to affect employee turnover and productivity. Thus, the theoretical literature clearly suggests that the behavior of employees within firms has important implications for organizational performance and that HRM practices can affect individual employee performance through their influence over employees’ skill and motivation and through organizational structures that allow employees to improve how their jobs are performed. If this is so, a firm’s HRM practices should be related to employee performance. Therefore, in anticipation, review of the empirical literature concentrates on prior work examining the HRM practices on non-managerial employee productivity and their turnover in relation to the garment manufacturing industry in Sri Lanka. Hence the problem statement addressed in the present study is:

P

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Do employee compensation, employee grievance handling, employee discipline management; employee career development and employee health and safety practices contribute to non-managerial employee intention to turnover significantly in garment industry in Sri Lanka?

II. RESEARCH FRAMEWORK

Intention to turnover refers to perceived as existing employees voluntary leave on their organizations. In order for firms to be competitive, they must retain their competent and motivated employees. HRM is one important area that affects employees’ intentions to leave, their levels of job satisfaction and organizational commitment in the organizations practices (Lee & Heard, 2000). Pitt and Ramaseshan (1995), Kelegama and Epparachchi (2001), Irving and Meger (1994), Cotton and Tuttle (1986), Sheridan (1992), Campion (1991), Heneman, Schwab, Fossum and Dyer (1999), etc stressed that there is a negative relationship between the fair and well constructed HRM practices and employee intention to turnover. Compensation practice refers to all the extrinsic rewards employee receive in exchange for their salary, any incentives or bonuses and any benefits. Trevor, Gerhart and Boudreau (1997) found that salary growth had a pronounced effect on turnover. Particularly, salary growth effects on turnover were greatest for high performers, that is, high salary growth significantly reduced turnover for high performing employees. Similarly, Williams and Livingstone (1994) found that a negative performance-turnover relationship was stronger in organizations using performance contingent reward systems. Individuals who were compensated more for their high levels of performance were less likely to quit. Park, Ofori-dankwa and Bishop (1994) also found that turnover is negatively associated with levels of pay, particularly when pay was determined by individual incentive programs. However, employee turnover was positively associated with the presence of group incentive programs. Hence, an individual’s level of effort, the lower the levels of employee turnover determined the higher the levels of pay etc. Based on the above evidences, it is hypothesized that: Hypothesis 1: The degree to which the non-managerial employees perceive the current compensation practice, as right will be negatively related to their intention to turnover.

Grievance handling practice refers to perceived degree of current grievance handling practice being accepted as fair and justice. Both employers and employees are influenced by the filing, processing and outcome of grievances (Heneman et al 1999). Gandz and Whitehead (1981) said that high grievance levels are associated with a conflictual labour relation climate. They bound that high grievance rates were associated with conflictual rather than cooperative labour relations. Ichiowski (1986) found that higher grievances were associated with lower plant productivity. Employee work-related concerns and grievances, which are not promptly and effectively resolved, could lead to: lost productivity; lower quality work, products and customer services; distraction from corporate goals; loss of confidence and communication between employees, managers and supervisors; low morale

job satisfaction which can lead to industrial problems, increased absenteeism and increased staff turnover; loss of reputation to the employee; loss of reputation as an employer and service provider; lost working time of everyone involved in dealing with a complaint; and the potential for legal action and damages. Based on above argument, it is hypothesized that;

Hypothesis 2: The degree to which the non-managerial employees accept the current grievance handling practice will be negatively related to their intention to turnover.

Discipline management practice refers to non – managerial employees perceived degree to which current administration of worker discipline has attributes that are fair and constructive for managing work and behaviour of workers. The objective of discipline practice is to protect the established standards, policies, procedures and rules and regulations from the employees in order to achieve the objectives of organization. Therefore, discipline practice is the group of activities related to set-up a disciplinary system, its execution and maintenance that help the achievement of the organizational objectives. Morris (1998) found that there is a negative relationship between fair discipline management practices with employee turnover. Torrington (1998) also found that turnover is negatively associated with fair discipline management practice. Based on the above evidences, it is hypothesized that:

Hypothesis 3: The degree to which the current discipline management practice is perceived fair and well constructed by the non-managerial employees will be negatively related to their intention to turnover.

Career development practice refers to non – managerial employee’s perceived degree of systematic career development practice that focuses on developing and enriching the employees in the organization. According to Minor (1988), career development is a general term used to describe a number of activities aimed at enhancing both individual and organizational performance. Career development may be viewed as an individual responsibility, or as an organizational practice, depending upon the focus of the process. From the organization’s viewpoint, career development can reduce cost due to employee turnover. According to Armstrong (1999), dissatisfaction with career prospects is a major cause of turnover. To a certain extent, this has to be accepted. More and more people recognize that to develop their careers they need to more on, and there is little their employers can do about it, especially in today’s flatter organizations where performance prospects are more limited. According to a recent survey by the society of HRM, dissatisfaction with potential career development was cited by 85 percent of respondents as the largest threat to employee retention (Hein, 1998). Hence, it is hypothesized that;

Hypothesis 4: The quality of career development practice perceived by the non-managerial employees will be negatively related to their intention to turnover.

Health and safety practice refers to perceived quality mental and physical health and safety environment provided

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by the organization. According to Opatha (2003), health is a situation with non-existence of physical and psychological problems, which hinder the human general and special tasks and activities, and under employee safety the precautions administered to avoid any potential hazard in working environment. The protection of employee/s from the potential hazards in the working environment is called employee safety. The activities related to establish maintenances and growth for the hygiene and safety of the employees is included in health and safety administration. Poor psychological and physiological conditions result from organizational stress and a low quality of working life. These encompass dissatisfaction, withdrawal, projection, forgetfulness, inner confusion about roles and duties etc (Schuler and Jackson, 1996). Therefore, working condition in an organization is perceived as an associated factor of turnover and productivity. Based on the above evidences, it is hypothesized that;

Hypothesis 5: Higher the perceived quality of

employee health and safety practice by the non-managerial employees lower their intention to turnover will be.

As there are five HRM practices considered for the study, five hypotheses were formulated to test the relationship between each of variables and the intention to turnover on non – managerial employees in garment industry. Following hypothesis tested the aggregate effect of the five HRM practices on the intention to turnover.

Hypothesis 6: The degree to which current HRM practices are perceived as fair and well constructed by the non – managerial employees will be negatively related their intention to turnover.

Relevant schematic diagram is shown in fig 1. Systematic use of employee compensation, grievance handling, discipline management, career development, and health and safety management practices are labeled as the independent variables and employee intention to turnover is labeled as dependent variable. These independent variables are assumed to have an influence on the dependent variable. Independent Variable Dependent Variable

Fig 1: Schematic Diagram of the Theoretical Framework

III. STUDY DESIGN This study establishes the relationship between independent and dependent variables; therefore, this study was a correlation rather than cause effect relationships among the

variables. Hence, this study was analytical in nature or purpose. The unit of analysis of this research is individual non -executive employees in garment industry. The survey method equipped with a hand delivered questioner enabled the researcher to tap each unit of analysis in the sample. Population of the study consisted all the non – managerial employees in ten large-scale garment factories in the Western Province of Sri Lanka and the survey was carried out among the sample of 1000 non – managerial employees of those garment factories.

IV. MEASURES

The independent and dependent variables in the research model were measured through questionnaire with five point Likert scales of strong disagree to strong agree. Weightages or values of 1 to 5 were given to these responses taking the direction of the question items (whether they were negative or positive as far as systematic use of each function was concerned) into account. The questionnaire were completed by the respondents themselves approximately as they have experienced. The variables of the study constitute interval scales. To measure the HRM practices 45 question items were developed in relation to elements identified based on the relevant literature.

V. VALIDITY AND RELIABILITY

Validity is the extent to which the research findings accurately represent what is really happening in the situation. “An effect or test is valid it demonstrates or measures what the researcher thinks or claims it does” (Hussey et al, 1997). Content validity of a measuring instrument is the extent to which it provides adequate coverage of the topic under study (cooper et al, 1995). In this research study the questionnaire provided an adequate coverage by embodying an adequate number of items (or questions) that represents variables of interest, ensuring the content validity of the instrument. The questionnaire adequately covers the topics that have been defined as the relevant dimensions. Hypotheses were formulated based on these variables and indicators or elements were developed by operationlising the variables. Therefore, the content validity of the questionnaire was protected by embodying sufficient number of question items related to all the variables of interest in this study. The questionnaire of this study had to be tested to see whether it produces similar results in repeated administrations. To ensure the reliability of the questionnaire, using test-re-test method tested it. In this method researcher used same questionnaire in same group on two separate occasions. Responses for the two occasions are correlated and the correlation coefficient of the two sets of data is computed. The correlation is known as the reliability coefficient.. As shown in the TABLE I the coefficients of the test – retest of the instruments indicate that each instrument has a high external reliability.

Grievance Handling Practice

Discipline Management Practice

Career Development Practice

Health and Safety Management Practice

Intention to Turnover

Compensation Practice

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TABLE I

Reliability Analysis Variables Alpha Value

Independent Variables Compensation Practice 0.9260 Grievance Handling Practice 0.9047 Employee Discipline Practice 0.8776 Career Development Practice 0.8548 Health and safety Practice 0.9226 Dependent Variable Employee Intention to turnover 0.9211

Chronbach alphas were computed to test the inter item consistency reliability of independent and dependent variables and it deemed that a minimum value of 0.7000 would be considered acceptable (Nunnally, 1978). The results of Chronbach's alpha test are given in the table 02, which suggest that the internal reliability of each instrument is satisfactory.

TABLE II Chronbach's Alpha Coefficients

Variables Alpha Value Independent Variables Compensation Practice 0.9135 Grievance Handling Practice 0.8621 Employee Discipline Practice 0.7242 Career Development Practice 0.7242 Health and safety Practice 0.9014 Dependent Variable Employee Intention to leave 0.9104

The results of chronbach's alpha test are given in the table 03, which suggest that the internal reliability of each instrument is satisfactory. All the alphas indicated strong support for internal consistency reliability.

VI. RESULTS

The bivariate analysis, Pearson’s Correlation between HRM practices and intention to turnover of non – managerial employees in the garment industry are shown in the following table.

TABLE III The Pearson’s Correlation between Independent Variables and Dependent

Variable

The results of the Pearson’s Product Moment Correlation that was used to test the null hypotheses for the five hypotheses are shown in TABLE III. As a 99 percent confident level is desired, the level of significance (∝) is 0.01. One tailed test was used. According to the Pearson’s Correlation Coefficients of employee compensation, grievance

handling, discipline management, career development, and health and safety management practices (independent variables) were negatively correlated with employee intention to turnover of non-managerial employees in the garment industry in Sri Lanka. The last hypothesis, which postulates was multiple correlation between the employee on intention to turnover and the set of independent variables was tested with the multiple regression analysis under multivariate analysis. The relevant results of the multiple regressions are shown in TABLE IV.

TABLE IV Results of Multiple Regression Analysis

R R2 Adj. R2

Std: Error of the Estimate

F Value

Sig: F

0.481 0.333 0.327 0.145 5.002 0.000

The result shows that the Multiple Regression Coefficient (R) of the five HRM practices and intention to turnover was 0.481 and R square was 0.333. R square is significant at 0.05 as F value is 5.002 with an observed significant value of 0.000. It indicates that about 33 percent of the variance in the intention to turnover has not been significantly explanted by the five independent variables together. But, there is statically evidence to accept the null hypothesis and alternative hypothesis was rejected.

VII. DISCUSSION

According to the results of Pearson’s Correlation analysis, it was found that HRM practices were negatively and significantly correlated with employee intention to turnover of non – managerial employees in garment industry. Hence, there are statistical evidences to support to accept the hypotheses formulated for the study. This empirical finding confirms the argument of Gerhart and Boudrean (1997) that the compensation growth affects on intention to turnover. Similarly finding is consistent with findings of Williams and Livingstone (1999), Ofori – dankwa and Livingstone (1994). The research finding confirms that the degree to which the non-managerial employees perceive the current compensation practice, as right will be negatively related to their intention to turnover. It was found that there was a negative relationship between grievance employee turnovers. This finding confirms the findings of Heneman et al (1999), Gandz and Whitehead (1981) that the high grievance level was associated with a conflictual labour relation climate and turnover. Hence, it was confirmed that poor grievance handling practice leads to higher the employee intention turnover. There was negative relationship also found between employee discipline management practices with employee intention to turnover. This finding confirmed the findings of Steel, Jennings, Mento and Hendria (1992) that the well-constructed grievance handling will lead to lower the employee intention to turnover. Employee career development practice was found to be negatively related to the employee intention to turnover in garment industry. This empirical finding confirms the

HRM Practice Intention to Turnover

Significant (1- tailed)

Compensation -0.145 0.01 Grievance Handling -0.103 0.01

Discipline Management -0.052 0.01 Career Development -0.126 0.01

Health and Safety -0.130 0.01

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argument of Hein (1998) that the dissatisfaction with potential career development was the largest threat to employee retention. Also this is matched with the findings of Gerhardt and Wright (1994), which the employee career developments practice have been found to affect employee intention to turnover. A significant negative relationship was found between employee health and safety practice with employee intention to turnover. This study found empirical evidence to support the hypothesis. This finding is matched with the finding of Schuler and Jackson (1996) that the health and safety practice is important to lower the intention to turnover. From the multivariate analysis, it was found that compensation, grievance handling, discipline management, career development, and health and safety management practices significantly and jointly explain the variance of intention to turnover on non – managerial employee in the garment industry in Sri Lanka. It indicates that these five independent variables give a moderate impact of the employee intention to turnover. The implication of the finding is that it is important for an organization to consider these HRM practices in order to lower the intention to turnover in garment industry in Sri Lanka. The researcher believes in that the important independent variables that may account for the unexplained variations in the perceived intention to turnover may be level of technology, product style, training of work force, motivation level of work force, production scale, labour relations, awareness of optimal productivity level, relationship with the boss, poor supervision, poor planning, inadequate tools and equipment, demographic factors, organizational commitment, industrial union coverage other HRM practices and so on. Further research studies are suggested to carry out to find out the effects of these factors on employee productivity and intention to turnover of non – managerial employees in garment industry in Sri Lanka.

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