Employee Retention

Employee Retention Can Influence the Profitability of Small Sized Service Companies. Essay by : Ayhan Durain

This essay aims at justifying the suitability of the provisional purpose statement �Employee retention can improve the profitability of the small sized service providers’ for a master dissertation. Therefore it is of a great importance to find out �to what extent any investment in employee retention can influence the companies profitability positively’. For that reason this latter will be the main research question.

Human behaviour at the workplace has always been an attractive research subject. Especially throughout the last century many theorists and philosophers developed new ideas about how to influence employees’ behaviour in order to make their performance more efficient and effective. These theories and ideas showed that the traditional personnel management is not sufficient enough to manage human resources to create extra profit (Dessler, 2006).

Based on the aforementioned developments, a lot of large sized companies, if not all, have adapted the idea of establishing a department to manage the human resources during the last quarter of the previous century (Dessler, 2006). However it is quite difficult to make a similar statement for the small sized companies. Even companies that are willing to pay attention to employee retention are not always really successful. Beitler, (2004) mentions lack of knowledge about human nature and lack of knowledge about changing world as main reasons for this failure.

Prior to search the extent to which employee retention may influence the profitability, it is important to look at the existing models that show a certain relationship between employee satisfaction and the profitability. The models like �The Service Profit Chain’ (Heskett at al, 1997), �The Balanced Scorecard’ (Kaplan and Norton, 1996) and �The Gap Model’ (Zeithaml et al, 2006) discuss this matter as a long term investment that will lead in the end to a higher profitability. This investment does not only concern the financial benefits but also the other benefits and programmes that help employees feel and perform better. According to Marshall (2006), unlike the traditional approaches, many points that are seen as the basic actions to create employee retention do not need a huge financial investment. Most of them are to be applied by motivating employees through different techniques.

Further it is necessary to pay attention to the future expectations and the trends in strategic management. Creating a good corporate image helps companies to attract and retain more customers which finally lead to more profit. One of the most popular ways of creating a good corporate image was investing in environmental issues. However De Zwager (2007) expects that both the employees and the customers will assess the companies in the future according to the