Dependent Variable Is Employee Loyalty Management Essay

Literature review is an important chapter in a thesis where we used to review others work and the information obtained is based on text such as journals, articles, newspaper, internet and other aims to review the critical points of current knowledge on a particular topic. In short, this chapter information obtained is all secondary sources. This chapter is divided into four parts which are review of literature, review of relevant theoretical framework, proposed conceptual framework and hypothesis development. Finally, we were concluding chapter 2 with a conclusion.

In this topic, we would define and provide the explanations of the factors below that were related to the research topic and consistent with the research objectives. It means that it is used to provide a clear background and justification for the research. Moreover, we would further explain the relationship of the factors with the employee loyalty.

Dependent Variable

2.1.1 Employee Loyalty

Our dependent variable is employee loyalty. Employee loyalty can be defined in different ways by many researchers. Employee loyalty is all about an employee’s feeling of attachment or concept deals with the behavior of the employees to an organization (Meryer Meyer & Allen, 1991). This attachment was later connected to more specific behaviors such as supporting an organization and the individuals within it (Butler & Cantrell, 1984) and practicing good citizenship (Rusbult, 1988). Such attachment was also thought to be evident when an employee passed on an attractive position with another organization (Logan, 1984) or simply remained with one organization for some length of time (Pina e Cunha, 2002).

But, recently, employee loyalty could be defined as employees are being committed to the success of the organization and believing that their best choice is working for the organization. Not only did they plan to retain in the organization, but they also did not search for alternative employment and reject the offers they have (Part 1: What is Employee Loyalty? (And Why Should We Care?)).

There were three dimensions found in Allport’s suggestion, which were voluntary nature, its demand for ongoing adherence, and its grounding in morality–set it apart from current descriptions of organizational commitment. Support for their inclusion in descriptions of loyalty could be found in a variety of sources, including fairly recent writings by philosophers (Oldenquist, 1982)

Seema Mehta stated that loyalty has two dimensions which were internal and external. The internal dimension is the emotional component such as feelings of caring, of affiliation and of commitment. The external dimension has to do with the way loyalty manifests itself. This dimension is comprised of the behaviors that display the emotional component and is the part of loyalty that changes the most (Mehta, Singh, Bhakar, & Sinha, 2010).

Today’s average job tenure was under five years and declining. Employee loyalty plays an important role in achieving organizational goal. So it is vital for organization to identify the reason for leaving and frequently changed the job to make them happy and stayed with current company.

Independent Variable

2.1.2 Relationship with supervisor

A good relationship between worker and their immediate supervisor is very important since both are working in the same organization and share the same workplace (Sturgeon, 2006). A good relationship can be formed through two way communication. The supervisor plays an important role in an organization for monitoring the employee’s performance and leading them toward goal achievement. Besides, supervisor must have a clear clarification about their follower task and duty and try to understand what their follower think. The employees may leave their job because they are not satisfied. Sometimes, they don’t leave their job and company, but they are divorcing their manager or supervisor. Therefore, supervisor also need ensured to provide the good working environment, available resources and supporting. Supervisor is responsible to develop the good relationship with the employees for narrow the employee’s productivity gap. There was a positively relationship between loyalty to supervisor and employee outcome variable, i.e. intent to stay (Zhenxiong Chen, 2001).

According Lavelle, Rupp and Brockner research, there were 2 dimensions which are perception of support and trust (Tepper, 2003) Findings suggest that supervisors may view their advantageous position for helping subordinates to literature reports positive relationships between supportive supervision and employee in-role and extra-role performance (Bhanthumnavin, 2003). Thus, subordinates’ perceived supervisor support must be enhanced subordinate’s in-role and extra role performance (Figure 2.1.2.1). Highly support from supervisor can lead subordinate feel more satisfy and loyal to the organization.

The trust in supervisors is important for investigated in the management literature, especially leadership studies. Leader-member exchange (LMX) theory consider trust to be one of the core indicators reflecting the quality of the relationship between leader and subordinates, which has a positive effect on various measures of job attitudes and performance (Liden, 2007). Outside of LMX theory, many leadership scholars consider trust a core basis of effective leadership (Fairholm, 1994). This research, accordingly, assumes that trust in supervisors will enhance both employee satisfaction and commitment. Besides, trust in co-workers has gain attention in the widespread transformation of work environments, such as the emergence of the work team in the early 1990s (Ingraham, 1999). Trust built among colleagues will faster the problem solving by sharing information within groups (Zand, 1972). In addition, trusts also will increasing the collaboration among the colleagues and develop a harmony working environment.

2.1.3 Rewards and recognition

Organizational reward allocations are one of the dimensions in explaining the reason why employees are willing to stay in the organization. All employees including the low level employees are sensitive in receiving fair rewards for their efforts and may leave when opportunities to receive greater rewards exist elsewhere. There are three forms of reward and recognition most cited by respondents was the verbal praise from supervisor and leaders, compensation and salary increases and gift certificates (Ramlall, 2003).

Employees cited compensation is the most frequent reason for them to stay in the company. As employees satisfied with their rewards and recognition they receive, they have no reason for leaving the company and seek for other position in other company (Ramlall, 2003). The rewards worked well when they stimulate high involvement on the part of employees.

Recognition is a form of non-financial award given to employees selectively as an appreciation in return of their high level of accomplishment for the organization (Milne, 2007). Feeling being appreciated and worthy contributions by employees reduces the chances to leave the organization. In addition, employees are likely to leave the organization when employers treat them poorly and did not meet their needs of feedback and recognition (Hausknecht, Rodda, & Howard, 2008).

Organizations can give benefit for those employee who get commitment and loyal to the organization (Fischer). The employees will loyal if they can get a fair reward. Therefore, the employees will perceive that their organization consider their levels of commitment and loyalty and more loyal to the organization if the organization rewarding them (Fischer).

2.1.4 Teamwork and cooperation

Teamwork and cooperation can be defined as a group of people with different skill and knowledge working together in a team for achieving a common purpose and goal. Besides, each member in team is ready to share the information and trust each other in order to achieve organizational goals effectiveness and efficiency.

In order to improve teamwork of a team, Bruce Tuckman defined a life cycle for team development has proven very effective in teamwork with the four stages of his theory which are forming, storming, norming and performing (Tuckman, 1965). With this theory, a team can be form more effectively which will indirectly increase employee satisfaction towards their team. Meanwhile, according to (Yun, Cox, Henry P.Sims, & Salam, The effects of leadership and job satisfaction on team citizenship, 2007) indicate that both transformational and empowering leadership can enhance teamwork through the influence of job satisfaction. Employee will loyal to the organization when they are satisfied. So, other than team development theory by Tuckman, leadership is also important for enhancing teamwork.

According to Heskett et al., the internal quality of work life simply indicates the feelings of employees towards their colleagues, jobs, and the organization. In other words, it means that feeling of staying in organization is the way employee performing in a team. So, team with good teamwork can strengthen loyalty of employee to their organization.

Besides, a study has been conduct that integrates total quality management (TQM) practices by introducing teamwork into a theoretical model for understanding relationship of employee loyalty (Chang, Chiu, & Chen, The effect of TQM practices on employee satisfaction and loyalty in government, 2010). In this study, it mentions that teamwork is one of the total quality management and positively associated with employee satisfaction. It means that people will loyal once they are satisfied.

On the other hand, the quality of collaboration in teams can be capture through the six facets of teamwork quality, i.e., communication, coordination, balance of member contributions, mutual support, effort, and cohesion (Hoegl. & Gemuenden., Team Work Quality and Success of Innovative Projects, 2001).

Besides that, size will also affect teamwork. A larger size team will tend to have communication difficulty thus will indirect increase the time consuming in doing task that will affect teamwork (Hoegl M. , Smaller teams-better teamwork: How to keep project teams small, 2005).

2.1.5 Working Conditions

Working condition may also one of the factors that will affect employee loyalty. Individuals differ in personality, as well as emotions and cognitive process (Diener, Suh, Lucas, Smith, Schwarz, & Strack, 1999). In additions, the employees will constantly compare and judge the current working conditions from the past and even future. These standards are varied as differences of life experience and living standard in each of the people.

Each of the employees has different aspiration levels (Stutzer, 2004). In some cases, some work activities may create a psychological frustration or state of decline, if the employee expected himself or herself to gain a better valued job, while the other employee, may have a very low desire on gaining better valued job due to a lower level of education or other reasons. Hence, at this point the topic produces an entire new view, where the same work may be associated with quality views. Meanwhile, the research also found that the objective working conditions is not only the important determinant that motivates people positional concerns. In fact, environment and the past or expectation towards the future has also become aspirations about working conditions.

People adapt to the contexts they live in (Clark, Diener, Georgellis, & Lucas, 2008). In business organization context, it would mean that employee able to adjust themselves when they encounter adverse working condition. This is due to the adaptability skills that everyone possesses of when they enter or facing a whole new working condition.

Furthermore, the author believes that individuals look both upward and downwards when making comparisons and aspirations (Poggi, 2010). Looking downward, individuals set a lower aspiration bounds representing minimum acceptable working conditions. Looking upward, workers set an upper aspiration bounds representing the best working conditions they can obtain on the labor market. The results of the study show that reality lies between the lower and the upper aspiration bounds. Therefore, the larger the distances between reality and lower aspiration bounds, the more satisfied workers will feel. Instead, the larger the distances between reality and upper aspiration bounds, the more unsatisfied workers will feel. Besides that, adverse working conditions has been shown to increase either worker’ intentions to quit or actual quits. In brief, there is a general agreement that improved working conditions and the work environment is certainly one of the more important working conditions, tending to increase productivity (Levy-Garboua, 2007).

Meanwhile, according result from other research indicate that employees in larger firms face a worse work environment. This is due to the reason of working in large firms significantly reduces job satisfaction due to no controls for working conditions are included, yet taking them into account across size categories was no significant differences and no systematic differences exist in intentions to quit across firm size categories, regardless of amount of salary (Serrano, 2011).

2.2 Review of Relevant Theoretical Models

Theoretical models of Employee Loyalty

We found that few theoretical models were relevant with employee loyalty. According to Dr. Wendy Wang and Dr. Sigalit Ronen, they stated that it would be interesting to find out the impact of work arrangement which referred to research model of figure 2.1 on their sense of loyalty, productivity, and job satisfaction. Employers were always concern on employee loyalty (Wang & Ronen, 2011). Therefore, we had to identify and evaluate the relationship of factors that affecting employee loyalty. Research model in Dr. Wendy Wang and Dr. Sigalit Ronen’s study was shown as figure 2.1.

Figure 2.1: Research Model in Dr. Wendy Wang & Dr. Sigalit Ronen’ Study

Source: Wang, D. W., & Ronen, D. S. (2011). Employee Loyalty and Telecommuting. World Academy of Science, Engineering and Technology 77 , 687-689.

Theoretical models of factors affecting employee loyalty

1st theoretical model

Based on the statement of McCusker & Wolfman, 1998; McGuiness, 1998; Selnow & Gibert, 1997; Vardi et al., 1989, they had been emphasized the basic human values such as honesty, trust, respect for others, etc., which were naturally present among employees are essential for employee loyalty. Elements within the variable ‘human relations and values’ affect employees’ daily job experience- the greater the value of the every-day human interaction was, the greater the job satisfaction would be. This condition also significantly affected employee loyalty – good relations between colleagues or supervisor were essential to whether the employee would stay in the company. Most work situations in social context would influence a great number of conditions such as the individual employee’s performance, the relation between the employees, communication and cooperation between the employees, the atmosphere, etc. while good working environment was characterized by basic human values (Martensen & Grønholdt, 2006). This meant that relationship with supervisor, working condition, and teamwork and cooperation were included in the factors that relate to the human relations and values in the figure 2.2 as below:

Figure 2.2: Research Model in Martensen & Grønholdt’ Study

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Source: Martensen, A., & Grønholdt, L. (2006). Internal Marketing: A study of employee loyalty, its determinants and consequences. Innovative Marketing, Volume 2, Issue 4 , 92-116.

2nd theoretical model

Furthermore, Lawler (1986) said that the process of rewarding employees was believed to have a strong relationship to the success of employee involvement initiatives and accomplished by aligning the objectives and interests of the employee with the goals of the organization. Rewards included both intrinsic and extrinsic motivators, such as recognition and the amount of pay while these would lead employee satisfactions (Light, 2004). The figure 2.3 showed the relationship between involvement, empowerment, and satisfaction as below:

Figure 2.3: The Relation between Involvement, Empowerment, and Satisfactionreward model2

Source: Light, J. (2004). The relationships and effects of employee involvement, employee empowerment and employee satisfaction. Job type in a large manufacturing environment .

3rd Theoretical model

Employee will loyal to the organization is affected by rewards and recognition, teamwork and work-life balance (Khan, Mahmood, Ayoub, & Hussain, 2011). Factor propping up turnover traditionally is rewards and recognition. Control over this factor can save the hospitality industry from bearing high cost turnover. The study revealed that for higher control over retention, management must work over monetary rewards (Aaisha et al., 2011). Employees will be more loyal to the organization when they get reward and involved in any task. So, in this proposal, we choose rewards and recognition as one of our independent variable to provide employers on how to use different tactics such as attractive rewards and recognition to retain their employees.

Figure 2.4: Research Model in Aaisha Arbab Khan, Babak Mahmood, Mehvish Ayoub and Shabbir Hussain’ Study

Rewards and Recognition

Teamwork

Employee Retention

Work-Life Balance

Independent Variables Dependent Variable

Source: Aaisha Arbab Khan, Babak Mahmood, Mehvish Ayoub and Shabbir Hussain (2011), An Empirical Study of Retention Issues in Hotel Industry: A Case Study of Serena Hotel, Faisalabad, Pakistan.

2.3 Proposed Theoretical/ Conceptual Framework

From the journals, the four determinants we had selected are relationship with supervisor, recognition and rewards, working conditions and teamwork and cooperation as our proposed theoretical framework. These four determinants are very important in influencing the employee loyalty among the back of house staffs in hotel industry. Therefore, at this part, these variables would be form out as the theoretical framework that shown as below:

Figure 2.5: Theoretical Framework of Factor that Affect Employee Loyalty

Source: Developed from the research

2.4 Hypothesis Development

2.4.1 Relationship with Supervisor

Based on the journal “A closer look at the relationship between affective commitment to supervisors and organizations and turnover” by Christian Vendenberghe and Kathleen Bentein, the author stated that if the employees had high levels of affective commitment to their supervisors, their turnover intentions were expect to be reduce and they are willingness to stay at the organization.

According to Sturgeon’s research, it indicates that is significant relation between the relationships of subordinate-supervisor. The subordinates perceive that the commitment of supervisor will get their job easily and effectiveness. They will believe their supervisor and willing to contribute to the organization. The level of loyalty will increase reflect by the level of relationship with supervisor.

Based on the above research conducted by those researches we can conclude that relationship with supervisor have significant positive relationship with back of house employee loyalty.

H1: There is a significant relationship between relationship with supervisor and the loyalty among the back of house staffs in hotel industry.

2.4.2 Reward and Recognition

Organization that offers competitive salary with attractive benefits has high potential to retain their employees (Ramlall, 2003). From research, participants responded that they have an average satisfaction with the rewards and recognition they received from organization. In addition, further analysis as indication of employees’ satisfaction with their position showed that they satisfied with the rewards and recognition received from the company (Ramlall, 2003).

From the research carried out by Solon Fire Rescue (2001), recognition seems to be the most prevalent types of reward for employees to stay in the organization (William J.Shaw, Rescue, & Solon, 2001). The reward or recognition programmed survey by William J. Shaw, Solon Fire Rescue (2001) shows that most of the employees feel that they are adequately recognized by for their contribution to the organization. The result of research also shows that higher employee retention can be assisted by reward and recognition programs (William J.Shaw, Rescue, & Solon, 2001). From previous theory and research proposed that rewards and recognition were the most frequently reasons for staying in an organization (John et al., 2008).

On the other hand, findings indicated that high performers are more loyal to the organization when there is an opportunity for salary growth and the availability of contingent rewards (Allen & Griffeth, 2001) as cited by (Hausknecht, Rodda, & Howard, 2008). Employees’ commitment and rewards are important factors for them to retain in the company (Griffeth & et al., 2000).

Based on all the studies conducted by these researchers we can conclude that rewards and recognition implement by organizations have significant positive relationship with back of house employee loyalty.

H2: There is a significant relationship between recognition and rewards and the loyalty among the back of house staffs in hotel industry.

2.4.3 Teamwork and Cooperation

A study integrates total quality management (TQM) practices by introducing employee training, teamwork, employee empowerment employee compensation into a theoretical model for understanding relationship of employee satisfaction and loyalty (Chang, Chiu, & Chen, The effect of TQM practices on employee satisfaction and loyalty in government, 2010). Based on the result of this study, teamwork has positive relationship with employee loyalty.

Furthermore, cooperation from employee and low turnover rate of employee are positively affected by job satisfaction (Dow, Bishop, & Chen, 2003). From this research, we can understand that employee cooperation positively affects individual job satisfaction which can lower their intention to quit as well. Also, satisfaction in nurse field of working environment will reduce intention to quit and improve quality of work. (Park & Kim, 2009). From two researches above, we can understand that employee from any industry as well as service industry with high job satisfaction can lower the intention and reduce turnover. Besides, due to the nature of loyalty, the intention of turnover is used as an alternative indicator for employee loyalty (Soo-young & Whitford, 2008).

When turnover rate is lower, employee loyalty will be higher. Meanwhile, teamwork can enhance performance which can reduce turnover and indirectly strengthen loyalty. Besides that, clear visions that are reasonable and can be pursuing together with teamwork should be provided by leaders for their employee in order to strengthen job satisfaction (Yun, Cox, Henry P.Sims, & Salam, 2007). The teamwork that shows between employee and their leader can enhance job satisfaction and indirectly enhance loyalty when they pursue the same vision together.

Based on all the studies conducted by these researchers we can conclude that teamwork and cooperation of employee in organizations have significant positive relationship with back of house employee loyalty.

H3: There is a significant relationship between teamwork and cooperation and the loyalty among the back of house staffs in hotel industry.

2.4.4 Working condition

Refer to the journal of “work environment factors and job performance: the construction project manager’s perspective” by Arman Abdul Razak, Mastura Jaafar, Shardy Abdullah and Samsiah Muhammad. From the result of the analysis conducted on the gathered data, it was found that the job satisfaction (one of the determinants in working conditions) has influenced on work performance and research also find out that the importance ranking of work environment factors were dominated by factors attributed to the projects being undertaken. The findings of the study further support that a more attention need to be given to these work environment factors in the hopes of enhancing job performance of the construction project manager (Razak, Jaafar, Abdullah, & Muhammad, 2009).

Meanwhile, based on the journal “Relationships among leadership empowerment, job satisfaction, and employee loyalty in university dining student workers” by Seung Suk Lee, the author stated that confidence in high performance and autonomy were significant indicators of employee loyalty to non-supervisory student workers while goal accomplishment was a significant indicator of employee loyalty to supervisory student workers (Lee, 2008).

In overall, research result found from the two studies conducted by these researchers indicates that proper working conditions implement by organizations have significant positive relationship with back of house employee loyalty.

H4: There is a significant relationship between working conditions and the loyalty among the back of house staffs in hotel industry.

2.4.5 Dependent Variable VS Independent Variable

Based on the journal above, “A closer look at the relationship between affective commitment to supervisors and organizations and turnover”, “A Reward, Recognition, and “Appraisal System for Future Competitiveness: A UK Survey of Best Practices”, “Recognition: A Powerful, but often Overlooked, leadership tool to improve employee performance”, “The relationship between leader-member relations, job satisfaction and organizational commitment in international tourist hotels in Taiwan” and “The study of the antecedent factors of organizational commitment for high-tech industries in Taiwan”, we concluded that the four independent variables (relationship with supervisor, recognition and rewards, working conditions and teamwork and cooperation) which can affect employee loyalty.

H5: The four independent variables (relationship with supervisor, recognition and rewards, working conditions and teamwork and cooperation) have significant relationship with employee loyalty.

2.5 Conclusion

This chapter provided literature survey for identifying the dependent variable which are back of house employee loyalty whereas the independent variables which are relationship with supervisor, recognition and rewards, working condition and teamwork and cooperation. Based on foundation of Based on foundation of literature review, the theoretical framework had been developed and to advance the investigation and hypothesis testing. Perhaps with the references of the journals can make the aspects in this become more reliable.