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  • IRJC

    International Journal of Social Science & Interdisciplinary Research

    Vol.1 Issue 8, August 2012, ISSN 2277 3630

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    IMPACT OF JOB SATISFACTION AND ORGANIZATIONAL

    COMMITMENT ON EMPLOYEE LOYALTY

    MS. CHETNA PANDEY*; MRS. RAJNI KHARE**

    *Assistant Professor,

    Aditya College,

    Gwalior.

    **Assistant Professor,

    BVM College of Management Education,

    Gwalior.

    ABSTRACT

    Employee loyalty can be defined as employees being committed to the success of the

    organization and believing that working for this organization is their best option. The aim of the

    study was to find the impact of job satisfaction and organizational commitment on employee

    loyalty. This study also finds out the relationship between job satisfaction and organizational

    commitment. Further the study will also find the comparison of employee loyalty in

    manufacturing and service industry. At last the factors affecting employee loyalty was also

    determined. To achieve the aim of the study questionnaire survey was used. The results show

    that there is an impact of job satisfaction and organizational commitment on employee loyalty.

    KEYWORDS: Job Satisfaction, Organizational Commitment, Employee Loyalty.

    ______________________________________________________________________________

    INTRODUCTION

    Employees are a vital resource for nearly all organizations, especially since they represent a

    significant investment in terms of locating, recruiting, and training let alone salaries, healthcare

    plans, bonuses, etc. The management of many organizations develops their training programmes,

    benefit packages, performance appraisal and work system based on their company policy.

    Usually these policies are aimed at developing loyal employees because this leads to a more

    lengthy tenure. The longer an employee works for a company the more valuable they become.

    DEFINITIONS

    EMPLOYEE LOYALTY

    "Loyalty, as a general term, signifies a person's devotion or sentiment of attachment to a

    particular object, which may be another person or group of persons, an ideal, a duty, or a cause.

    It expresses itself in both thought and action and strives for the identification of the interests of

    the loyal person with those of the object" (Encyclopedia Britannica, 1998).

    Employee loyalty (typically synonymous with commitment) to the organization has sometimes

    been viewed as an attitude. However, it is not so much an attitude (or thought component) that is

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    important in organizations, but rather it is the bottom-line action component (Meyer & Allen,

    1991). Employee loyalty is the willingness to remain with the organization (Solomon, 1992).

    Employee loyalty can be defined as employees being committed to the success of the

    organization and believing that working for this organization is their best option. Not only do

    they plan to remain with the organization, but they do not actively search for alternative

    employment and are not responsive to offers (The Loyalty Research Center, 1990). Employee

    loyalty is an organizational citizenship behavior that reflects the allegiance to the organization to

    the promotion of its interests and image to the outsiders. (Bentten Court, Gwinner and Meuter,

    2001). Employee loyalty is a manifestation of organizational commitment, the relative strength

    of an individuals identification with and involvement in a particular organization (Mowday,

    Porter and Steers 1982), Based on internalization and identification (OReilly and Chatman

    1986). This behaviors can be characterized by three related factors. They are strong belief and

    acceptance of the organizations goals and values, a willingness to exert considerable effort on

    behalf of the organization and a strong desire to maintain membership in the organization.

    (Mowday, Porter and Steers 1979)

    JOB SATISFACTION

    Job satisfaction is a term used to describe how content an individual is with their job. It is a

    relatively recent term since in previous centuries the jobs available to a particular person were

    often predetermined by their parents occupation.

    Job Satisfaction also refers to the employees general attitude towards his job. It refers to the

    contentment experience by an employee when his wants are satisfied. Job satisfaction is defined

    as positive affect of employees towards their job or job situations (Locke, 1976). Job satisfaction

    is considered as the most important and frequently studied attitude in the field of Organizational

    Behavior (Mitchel & Larsel Hoppock (1935) stated that job satisfaction is any combinations of

    psychological, physiological and environmental circumstances that cause a person truthfully say

    I am satisfied with my job. The term job satisfaction can be defined as a positive feeling about

    ones job (Robbins, 2007) Job satisfaction is a set of favorable or unfavorable feelings and

    emotions with which employees view their work (Newstrom, 2007). Consequently they

    advocated reform of management practices to reflect a humanistic concern for employees and to

    enhance employee work satisfaction. Job satisfaction was subsequently linked to increases in

    productivity, though the nature of causality has continued to be strongly debated (Katzell et al.,

    1975).

    ORGANIZATIONAL COMMITMENT

    Meyer and Allen (1994) state that organizational commitment is a psychological state that a)

    characterizes the employees relationships with the organization, and b) has implications for the

    decision to continue membership in the organization Organizational Commitment is typically

    measured by items tapping respondents willingness to work hard to improve their companies,

    the fit between the firms and the workers values, reluctance to leave, and loyalty toward or

    pride taken in working for their employers (Maume, 2006). The concept of organizational

    commitment has attracted considerable interest in an attempt to understand and clarify the

    intensity and stability of an employees dedication to the organization (Mester, Visser, Roodt &

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    Kellerman, 2003) Allen & Meyer (1990), defined organizational commitment as psychological

    state that binds the individual to the organization (i.e. makes turnover less likely).

    According to Northcraft and Neale (1996), commitment is an attitude reflecting an employees

    loyalty to the organization, and an ongoing process through which organization members express

    their concern for the organization and its continued success and well being. Organisational

    commitment is the degree to which an employee identifies with a particular organisation and its

    goals, and wishes to maintain membership in the organisation (Robbins, 1998, p. 142). Bateman

    and Strasser (1984) states organizational commitment as multidimensional in nature, involving

    an employees loyalty to the organization, willingness to exert effort on behalf of the

    organization, degree of goal and value congruency with the organization, and desire to maintain

    membership (p.95).

    REVIEW OF LITERATURE

    EMPLOYEE LOYALTY

    Many researchers conducted research on employee loyalty in western context showed relation

    between the various antecedents of employee loyalty Walker (2005) found that satisfied

    employees will become loyal when they perceive their organization as offering the opportunities

    to learn, grow and at the same time providing a clear established career path that they can pursue

    in the organization. He also found that training and development to be one of the biggest factors

    that lead to employee loyalty. According to the report, employees want the opportunity to grow,

    and they want career path and opportunities that allow them to advance within the company. This

    study found that the benefits package correlated with employee loyalty measures. Benefits

    package take into account factors such as, the amount of vacation, sick leave policy, amount of

    health care paid for by the organization. Florkowsi and Schuster, (1993), found a positive

    relationship between profit sharing and job satisfaction and commitment. Meyer and Allen

    (1997) recognize that in order for there to be continuance commitment between the employee

    and organization, the employee must be able identify alternatives. This was supported Carlson

    (2005), who concluded that in order for the employees to be committed, which is a broad

    definition of loyalty, they look forward to the opportunities of continuous learning in order to

    improve their skills and knowledge. Fosam et al (1998) suggested strongest correlation between

    employee satisfaction and employee loyalty in their study comes from the following satisfaction

    variables, namely, recognition and rewards, teamwork and cooperation, working conditions and

    relationship with supervisor. The score for relationship with supervisor strongly correlates with

    all three dimensions of employee loyalty. Taylor (1979) identified the essential components of

    quality of work life as basic extrinsic job factors of wages, hours and working conditions, and the

    intrinsic job notions of the nature of work itself which results in employee loyalty. Jawahar

    (2006), found that Performance appraisal played a role in the relationship between employee

    satisfaction and employee loyalty in this study. Performance appraisal is an important element of

    satisfaction because it is positively related to job satisfaction, organizational commitment and

    negatively related to turnover intentions. Job satisfaction and organizational commitment fall

    into a broader definition of loyalty.

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    JOB SATISFACTION AND ORGANIZATIONAL COMMITMENT

    There are numerous investigations that have studied the relationship between organizational

    commitment and job satisfaction (Currivan, 1999). Predominant view is that job satisfaction is

    an antecedent to organizational commitmen (Lincoln & Kalleberg, 1990; Mowday; Porter, &

    Steers, 1982; Mueller, Boyer, Price, & Iverson, 1994; Williams & Hazer, 1986). There is also

    some support for the reverse causal ordering, organizational commitment as an antecedent to job

    satisfaction (Vandenberg & Lance, 1992). LaLopa (1997) effectively used the Organizational

    Commitment Questionnaire to evaluate 300 non-supervisory resort employees' levels of

    commitment. Further, LaLopa developed a "Resort Job Satisfaction" scale by adopting items

    from previous studies. Findings provide further evidence that job satisfaction is a significant

    predictor of organizational commitment. Many studies use different facets of satisfaction to

    predict employee attributes such as performance, organizational commitment, and service quality

    (Dienhart & Gregoire, 1993; Oshagbemi, 2000a, 2000b; Yousef, 1998). Its a debatable issue

    whether job satisfaction is the predictor of organizational commitment or vice versa. Several

    researchers have made the case that job satisfaction is a predictor of organizational commitment

    (Porter, Steers, Mowday, & Boulian, 1974; Price, 1977; Rose, 1991). Andrew Hale Feinstein did

    a study on the relationships between job satisfaction and organizational commitment of

    employees at two locations of a national restaurant chain in Southern Nevada. They also worked

    on revealing homogeneous demographic characteristics these employees exhibit that affect their

    satisfaction level. Research was conducted through a survey instrument consisting of

    demographic, job-satisfaction, and organizational commitment questions adopted from the

    validated Minnesota Job Satisfaction and Organizational Commitment Questionnaires. Results of

    the study indicate satisfaction with policies; compensation, work conditions, and advancement

    have a significant relationship to organizational commitment. Slattery & Selvarajan (2005)

    examined the associations between job satisfaction, organizational commitment, and turnover

    intention among temporary employees. The results, based on structural equation modeling,

    provide support for nearly all of the hypothesized associations in the model. They found positive

    associations between job satisfaction and organization commitment.

    JOB SATISFACTION, ORGANIZATIONAL COMMITMENT AND EMPLOYEE

    LOYALTY

    The following review shows the relationship between job satisfaction, organizational

    commitment and employee loyalty. Abdullah et al (2009) in their study among the service

    employees found that increase of employee satisfaction could actually result in increased in

    employee participation and has the potential of making both the employee and employer equally

    loyal to the company. Basically employee satisfaction is dependent on benefits package, training

    and development, relationship with supervisor, working conditions, teamwork and cooperation,

    recognition and rewards, empowerment and communication. Whereas, employee loyalty is a

    result of the satisfaction that stems from satisfaction variables such as, recognition and rewards,

    working conditions, teamwork and cooperation, and relationship with supervisor. Price 1977 and

    Mobley et al. (1979) stated that, employees with a low job satisfaction level have a high

    likelihood to quit their job. This is supported by Shaw (1999) study which looks at the

    relationships between job satisfaction and the inclination to quit. The study found that there is a

    high inclination for an individual to quit job if his or her level of job satisfaction is low.

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    Additionally, employees in such a situation are also likely to be absent from work (MacShane et

    al. 1984, Hackett and Guinon 1985, Scot and Taylor 1985). Jawahar (2006) found that

    Performance appraisal played a role in the relationship between employee satisfaction and

    employee loyalty in this study. Performance appraisal is an important element of satisfaction

    because it is positively related to job satisfaction, organizational commitment and negatively

    related to turnover intentions. Job satisfaction and organizational commitment fall into a broader

    definition of loyalty. Walker (2005) also found that satisfied employees will become loyal when

    they perceive their organization as offering the opportunities to learn, grow and at the same time

    providing a clear established career path that they can pursue in the organization. Aizzat et al

    (2003), found that organizational commitment has a direct relationship with employees satisfaction level towards pay, promotion system, work, supervision and co-workers. The study

    concludes that promotion system is the most important factor influencing an employees

    commitment level. Donna (1996), found a significant positive correlation between each of the

    employee loyalty, and the three follower outcome variables, both job satisfaction and

    organizational commitment. Landsmans (2001), found that in a multivariate causal model, a

    relatively small number of key variables affect job satisfaction and commitment. Specifically,

    commitment was enhanced by three factors: stronger perceived support from both the supervisor

    and the agency; opportunities for advancement.

    RESEARCH METHODOLOGY

    OBJECTIVES

    To develop standardize and measures to evaluate job satisfaction, organizational commitment and employee loyalty.

    To study the impact of job satisfaction and organizational commitment on employee loyalty in manufacturing and service industry.

    To study the difference between employee loyalty in manufacturing and service industry.

    To study the relationship between job satisfaction and organizational commitment.

    To find out the factors affecting loyalty of employees.

    To identify new areas for further research

    HYPOTHESIS FRAMED

    Ho(1): There is no impact job satisfaction and organizational commitment employee loyalty in

    manufacturing industry.

    Ho(2): There is no impact job satisfaction and organizational commitment employee loyalty in

    service industry.

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    Ho(3): There is no significant difference between loyalty in manufacturing and service

    organization

    Ho(4):There is no significant relationship between job satisfaction and organizational

    commitment.

    RESEARCH METHODOLOGY

    The research is based on primary data. Data was collected through self-designed questionnaire,

    administered to the teams of employees manufacturing and service industry of Gwalior Region

    to generate views on job satisfaction, organizational commitment and employee loyalty. The

    questionnaires on 5-point (Likert) scale were prepared to evaluate job satisfaction, organizational

    commitment and employee loyalty consisting 31, 14 and 19 items respectively. In this study,

    Judgmental (non probability) sampling technique was used. A sample of 200 employees was

    selected for the purpose of this study, which included 100 employees of both manufacturing and

    service industry respectively.

    In this study, statistical tools such as item to total correlation to establish the internal consistency

    of the questionnaire, Cronbachs alpha to check reliability and Regression Analysis to find out

    the effect of job satisfaction and organizational commitment (independent variable) on employee

    loyalty (dependent variable) and correlation analysis was used to find out relationship between

    job satisfaction and organizational commitment were applied. Further T-test was applied to make

    comparison between loyalty of employees in manufacturing and service employees. At last

    factor analysis was to find out the factors affecting employee loyalty.

    RESULTS

    After studying the data of 200 employees by applying the statistical tools following results were

    found:

    CONSISTENCY MEASURE

    Consistency of all the factors in the questionnaire was checked through item to total correlation.

    In this correlation of every item with the total was measured and the computed value was

    compared with standard value of (0.137). Only those factors/statements were accepted whose

    value was more than the standard value.

    RELIABILITY MEASURE

    JOB SATISFACTION: Reliability of the measure was tested using SPSS software and the

    Cronbachs Alpha value was found to be 0.951 and the Split half value was found to be 0.894.

    The face validity was checked and found to be high.

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    ORGANIZATIONAL COMMITMENT

    Reliability of the measure was tested using SPSS software and the Cronbachs Alpha value was

    found to be 0.891 and the Split half value was found to be 0.886. The face validity was checked

    and found to be high.

    EMPLOYEE LOYALTY: Reliability of the measure was tested using SPSS software and the

    Cronbachs Alpha value was found to be 0.836 and the Split half value was found to be 0.755.

    The face validity was checked and found to be high.

    Ho(1): There is no impact job satisfaction and organizational commitment employee loyalty in

    manufacturing industry.

    TABLE 1: SHOWING REGRESSION COEFFICIENT VALUES

    Model

    Unstandardized

    Coefficients

    Standardized

    Coefficients

    t Sig. B Std. Error Beta

    1 (Constant) 26.788 4.222 6.345 .000

    Job sat .279 .077 .567 3.637 .000

    Orga.

    comm .131 .155 .132 .844 .401

    JOB SATISFACTION

    (Manufacturing)

    ORGANISATIONAL

    COMMITMENT

    (Manufacturing)

    EMPLOYEE LOYALTY

    (Manufacturing)

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    A. DEPENDENT VARIABLE: EMPLOYEE LOYALTY

    Regression analysis was applied between Job satisfaction, organizational commitment

    (independent variables) and Employee Loyalty (dependent variable) in manufacturing

    organizations. The results of regression indicate that independent variables (Job Satisfaction and

    Organizational Commitment) has significant relationship with dependent variable (employee

    loyalty) signified by the coefficient of Beta factor of job satisfaction is 0.567 and T value is

    3.367 is significant at 0.0 significant level hence it can be said that job satisfaction is having

    significant impact on employee loyalty. The other independent variable organizational

    commitment is having beta coefficient of beta factor 0.132 and T value 0.844 the significance

    level of this value is 0.401 which again signifies impact of organizational commitment on

    employee loyalty.

    The null hypothesis that there is no significant impact of job satisfaction and organizational

    commitment on employee loyalty is not accepted which means that there is significant impact of

    job satisfaction and organizational commitment on employee loyalty in manufacturing industry.

    Ho(2): There is no impact job satisfaction and organizational commitment employee loyalty in

    service industry

    TABLE 2: SHOWING REGRESSION COEFFICIENT VALUES

    Model

    Unstandardized

    Coefficients

    Standardized

    Coefficients

    t Sig. B Std. Error Beta

    1 (Constant) 23.313 4.497 5.184 .000

    Jobsat .367 .043 .731 8.426 .000

    Orga comm .053 .108 .043 .492 .624

    JOB SATISFACTION

    (Service)

    ORGANISATIONAL

    COMMITMENT

    (Service)

    EMPLOYEE LOYALTY (Service)

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    A. DEPENDENT VARIABLE: EMPLOYEE LOYALTY

    Regression analysis was applied between Job satisfaction, organizational commitment

    (independent variables) and Employee Loyalty (dependent variable) in manufacturing

    organizations. The results of regression indicate that independent variables (Job Satisfaction and

    Organizational Commitment) has significant relationship with dependent variable (employee

    loyalty) signified by the coefficient of Beta factor of job satisfaction is 0.731 and T value is

    8.426 is significant at 0.0 significant level hence it can be said that job satisfaction is having

    significant impact on employee loyalty. The other independent variable organizational

    commitment is having beta coefficient of beta factor 0.43 and T value 0.492 the significance

    level of this value is 0.624 which again signifies no impact of organizational commitment on

    employee loyalty.

    The null hypothesis that there is no significant impact of job satisfaction on employee loyalty is

    not accepted which means that there is significant impact of job satisfaction and on employee

    loyalty on service industry and the hypothesis stating that there is no impact of organizational

    commitment on employee loyalty is accepted. This shows that employee loyalty is not affected

    by organizational commitment in service industry.

    Ho(3): There is no significant difference between employee loyalty in manufacturing and service

    organization

    TABLE 3: SHOWING INDEPENDENT SAMPLES TEST VALUES

    Levene's

    Test for

    Equality

    of

    Variances t-test for Equality of Means

    F Sig. t df

    Sig. (2-

    taile

    d)

    Mean

    Difference

    Std.

    Error

    Difference

    95% Confidence

    Interval of the

    Difference

    Lower Upper

    VAR00001 Equal

    variances

    assumed

    .738 .391 -

    .007 198 .995 -.01000 1.51767 -3.00287 2.98287

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    TABLE 3: SHOWING INDEPENDENT SAMPLES TEST VALUES

    Levene's

    Test for

    Equality

    of

    Variances t-test for Equality of Means

    F Sig. t df

    Sig. (2-

    taile

    d)

    Mean

    Difference

    Std.

    Error

    Difference

    95% Confidence

    Interval of the

    Difference

    Lower Upper

    VAR00001 Equal

    variances

    assumed

    .738 .391 -

    .007 198 .995 -.01000 1.51767 -3.00287 2.98287

    Equal

    variances

    not

    assumed

    -

    .007 197.979 .995 -.01000 1.51767 -3.00287 2.98287

    The Levenes test value 0.738 at 0.391% significance level shows that the two samples are

    having unequal variance and the T value -0.020 at 0.995% significant level suggest that the null

    hypothesis that there is no significant difference between employee loyalty in manufacturing and

    service organizations is not accepted. This means that the employee loyalty differs in

    manufacturing and service organizations.

    Ho(4):There is no significant relationship between job satisfaction and organizational

    commitment.

    To determine strength of linear relationship between variables correlation coefficients are

    calculated. These correlation analyses were interpreted on the scale offered by Guilford (1956)

    (i) r< 0.20 indicates slight, almost negligible relationship (ii) r= 0.20 to 0.40 indicates low

    correlation, definite but small relationship (iii) r= 0.40 to 0.70 indicates moderate correlation,

    substantial relationship (iv) r= 0.70 to 0.90 shows high correlation and (v) r> 0.90 is indicative of

    very high correlation, very dependable relationship

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    TABLE 4: SHOWING CORRELATIONS COEFFICIENT VALUES

    Job Satisfaction Organizational Commitment

    JS Pearson Correlation 1 .771**

    Sig. (2-tailed) .000

    N 200 200

    OC Pearson Correlation .771**

    1

    Sig. (2-tailed) .000

    N 200 200

    **. Correlation is significant at the 0.01 level (2-tailed).

    The correlation between job satisfaction and organizational commitment is r=0.771 which shows

    that there is high relationship between job satisfaction and organizational commitment as per

    Guilford (1956) which suggests that the null hypothesis that there is no relationship between job

    satisfaction and organizational commitment is not accepted, suggesting that there is a

    relationship between jobs satisfaction and organizational commitment in both manufacturing and

    service organization.

    FACTOR ANALYSIS: The raw scores of 19 items were subjected to factor analysis to find out

    the factors that contributed towards Employee Loyalty. After factor analysis, four factors are

    identified. The factors were commitment, motivation, belongingness and career development.

    1. COMMITMENT (5.364): This factor has emerged as the most important determinant of

    employee loyalty with 28.2295% of variance. The major elements constituting this factor

    include; speak positively about the company (0.799), if got a offer would not change

    organization (0.739), enjoy discussing my organization to others (0.719), will work indefinitely

    (0.705), emotional attachment (0.678), organization is of great personal meaning (0.527).

    2. MOTIVATION (2.225): This factor has emerged as an important determinant of employee

    loyalty with 11.180% of variance. The major elements constituting this factor include; growing

    with this company (0.694), Recommend Company to friend (0.656.), recommends my employer

    JOB SATISFACTION ORGANISATIONAL

    COMMITMENT

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    to other employees (0.630), clearly defined roles and responsibility (0.506), part of the

    organization (0.538).

    3. BELONGINGNESS (1.382): This factor has emerged as an important determinant of

    employee loyalty with 7.274% of variance. The major elements constituting this factor includes;

    organizational problems are my own (0.713), strong belonging to my organization (0.628), loyal

    to my organization (0.552), committed to companys success (0.516).

    4. CAREER DEVELOPMENT (1.322): This factor has emerged as an important determinant

    of employee loyalty with 6.957% of variance. The major elements constituting this factor

    includes; take pride in my work (0.668), fulfill my career goals (0.663), look ways to improve

    my organizational efficiency (0.649), would stay with company in the future (0.513).

    CONCLUSION

    The objectives of the study were to find out the impact of job satisfaction and organizational

    commitment on employee loyalty in manufacturing and service industry, to compare between the

    loyalty of employees in manufacturing and service industry, to study the relationship between

    job satisfaction and organizational commitment and to explore the underlying factors affecting

    employee loyalty. The findings of the research conclude that there is a significant impact of job

    satisfaction and organizational commitment on employee loyalty in manufacturing industry and

    in case of service industry job satisfaction has an impact on employee loyalty but organizational

    commitment has no impact on employee loyalty. Also there is significant difference in loyalty

    exist between the employees of manufacturing and service industry. Further there is a

    relationship between job satisfaction and organization commitment. At last the underlying

    factors of loyalty emerged from this study are commitment, motivation, belongingness and

    career development

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    Bettencourt Lance A., Kevin P Gwinner and Mathew L Meuter (2001), A comparison of attitude, personality and knowledge predictors of service oriented organizational

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    ANN EXURES

    TABLE 1: SHOWING RESULTS OF FACTOR ANALYSIS OF EMPLOYEE

    LOYALTY

    Factor Eigen value Variable/ Convergence Statement Loadings

    Total %

    variance

    Commitment

    5.364

    28.229

    15. I speak positively about the company to

    friends

    .799

    17. would not change company if got a offer .734

    14. I enjoy discussing my organization to

    others

    .719

    19. I will work for this company indefinitely .705

    9. I am not emotionally attached to company

    11. organization is of great personal

    meaning to me

    .678

    .527

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    Motivation

    2.125

    11.186

    3. in 5 years Ill still be growing with this

    company

    .694

    4. I would recommend this company to

    friend

    .656

    8. Ill recommend my employer to other

    employees

    .630

    6. Clear definition of roles and responsibility .506

    13. I am part of family at this organization .463

    Belongingness 1.382 7.274

    12. organizations problems are my own .713

    10. strong belonging to my organization .628

    18. I am loyal to my organization .552

    1. I am committed to companys success .524

    Career

    Development

    1.322 6.957

    5. I take pride in my work .668

    2. I can further fulfill my career goals .663

    7. look ways to improve organizational

    efficiency

    .649

    16. like to stay with this company in the

    future

    .510

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