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Effective Rewards and Recognition Strategy: Enhancing Employee Engagement, Customer Retention and Company Performance

  • Management Consultant

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Organizations across the world seek to retain their talent. The loss of an employee has been proven to cause exorbitant costs in the recruitment, selection and training of a replacement-costs amounting to a full year's compensation or more. Moreover, an organization's workforce is among its most precious resources. Skilled and competent employees-and thus their retention-are acknowledged as being imperative for business success. Rewards and recognition are important resources that can motivate employees to accomplish organizational goals and play a key role in employee retention. To guarantee not only the retention of, but also optimum performance from, its employees, an organization must offer a range of diverse means of rewarding its employees. With workers constituting about 80% of a company's expenses, it is vital that the workforce be engaged. Employee engagement not only promotes retention but enhances customer satisfaction, customer loyalty, company reputation and overall stakeholder value. Engagement is found to correlate with positive organizational outcomes such as lower absenteeism, lower turnover intention, lesser costs and higher growth.
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39 Second Quarter | 2020
Pankaj M. Madhani, Ph.D.,
ICFA I Business S chool
Effective Rewards and
Recognition Strategy: Enhancing
Employee Engagement, Customer
Retention and Company
Organizations across the world seek to retain
their talent. The loss of an employee has
been proven to cause exorbitant costs in the
recruitment, selection and training of a replacement —
costs amounting to a full year’s compensation or more.
Moreover, an organization’s workforce is among its most
precious resources. Skilled and competent employees —
and thus their retention — are acknowledged as being
imperative for business success. Rewards and recognition
are important resources that can motivate employees to
accomplish organizational goals and play a key role in
employee retention. To guarantee not only the retention
of, but also optimum performance from, its employees,
an organization must offer a range of diverse means of
rewarding its employees.
With workers constituting about 80% of a company’s
expenses, it is vital that the workforce be engaged.
Employee engagement not only promotes retention
but enhances customer satisfaction, customer loyalty,
company reputation and overall stakeholder value.
Engagement is found to correlate with positive orga-
nizational outcomes such as lower absenteeism, lower
turnover intention, lesser costs and higher growth.
Second Quarter 2020
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40 The Journal of Total Rewards
Effective rewards and recognition systems improve employee engagement and
enhance work performance (Fairlie 2011). Rewards and recognition have long been
established as an antecedent of employee engagement.
Rewards and recognition have major potential to boost employee engagement and
corporate performance in a world in which four out of every 10 employees are
not engaged (Brown and Reilly 2013). According to Gallup (2018), only 34% of the
U.S. workforce is engaged, with 53% not engaged and 13% actively disengaged.
Aktar and Pangil (2018) empirically found that effective rewards and recognition
positively influence employee engagement.
Employee Turnover Cost
The direct economic costs associated with losing talented employees include
replacement of the employee, separation of the employee, downtime, recruiting,
interviewing, onboarding, and training and development of the new hire. The
costs associated with losing employees and recruiting, selecting and training
new employees often exceed 100% of the annual compensation for the position
and vary from 1.5 and 2.5 times the annual salary paid for a job (Cascio 2006).
In addition to these direct financial costs, losing employees can also lead to
work disruptions, loss of tacit or strategic knowledge, losses in productivity and
customer service, diminished diversity, and even a turnover contagion effect on
remaining employees (Allen, Bryant, and Vardaman 2010). Both the direct and
indirect economic costs of employee turnover significantly affect organizational
performance and success. Park and Shaw (2013) presented a strong correlation
between turnover and organizational performance, showing that a 1% increase in
turnover results in a 40% reduction in workforce productivity and a 26% loss in
financial performance.
Employee Engagement – Key Benefits
Employee engagement is much more than contentment and employee satisfaction.
Engaged employees understand and commit to the organization’s mission and
values and go beyond the call of duty toward the organization’s goals, driving
high performance. An effective rewards and recognition strategy is considered one
of the tools for enhancing organizational commitment. Commitment represents
something beyond loyalty to an organization and involves individuals who are
willing to dedicate their talents to contribute to the organization’s well-being.
While engaged employees drive performance, disengaged employees are more
concerned about time rather than energy or dedication during their job perfor-
mance. Organizations with highly engaged employees have been found to enjoy an
increase of more than 5% in operating margins and 3% in net margins, compared to
organizations with highly disengaged employees (Rabbanee et al. 2019). Moreover,
41 Second Quarter | 2020
72% of highly engaged employees (compared to 27% of disengaged employees)
believe they can positively affect customer service, which leads to greater customer
satisfaction, loyalty and profitability. When companies enhance the engagement
of their employees, they accomplish something that would be difficult for their
competitors to imitate (Ghosh et al. 2016).
Construction-equipment manufacturer Caterpillar’s increased employee engage-
ment resulted in $8.8 million annual savings from decreased attrition, absenteeism
and overtime in a European plant, a 70% increase in output in less than four
months in an Asia Pacific plant, a decrease in the break-even point by almost 50%
in units/day, a decrease in grievances by 80% in a unionized plant, a $2 million
increase in profit, and a 34% increase in highly satisfied customers in a startup
plant (Vance 2006).
Rewards and recognition practices are integral components of HR strategy. Rewards
are the material and psychological payoffs given to an employee for performing
tasks well in the workplace. Organizations can’t merely replicate the rewards and
recognition practices of other organizations. Rather, a rewards and recognition
strategy should be created to support an organization’s unique culture. Developing
these strategies has typically been more of an art than a science.
People want to be rewarded, but do not necessarily know what rewards would
be of optimal benefit for them. There is no guarantee that the various rewards
and recognition provided will affect each individual employee in the same way.
A system of rewards cannot therefore expect to be successful unless the orga-
nization has a thorough understanding of the various needs, expectations and
values — as well as education, skills and potential — of its diverse employees.
Hence, rewards and recognition plans should be applied differently depending
on employee segment and profile, including functions, roles, skills, geography
and demographics (age, gender, income level and family status). Many companies
put together their rewards and recognition package by relying more on instinct
and opinion than on hard quantitative analysis to decide what will be most
motivational to employees. An effective rewards and recognition strategy enables
organizations to deliver the right types of rewards and recognition, to the right
people, at the right time, for the right reason.
Many managers put considerable effort into performance enhancement and are
then shocked when employees remain unmotivated, unappreciative and unhappy
because rewards and recognition plans lacked proper design and implementation.
Organizations should adopt unconventional and creative methods to restructure
their rewards and recognition programs for engaging and retaining their workforce.
Five critical success factors of effective rewards and recognition strategy are:
42 The Journal of Total Rewards
1 | Holistic. Effective plans must address the entire employee value
proposition (EVP).
2 | Integrated. The components must fit together and complement each other.
3 | Aligned. The plans must be designed to support the organization’s unique
HR and business strategies.
4 | Measurable. The plans should be based on hard facts and quanti-
tative analysis.
5 | Delivered. Effective communications and administration as well as ongoing
monitoring of the rewards and recognition strategies are critical to realizing the
sustainable benefits.
Because rewards and recognition strategies are more about best fit than best
practice, rewards and recognition should complement each other to support all
dimensions of employee motivation. A useful approach is to aim for consistency
with local flexibility. Individuals place different values on various aspects of
rewards and recognition, and these valuations change over time. While differing
dimensions make the job of designing rewards and recognition plans more
complex, they can also create opportunities to eliminate potentially wasteful,
one-size-fits-all spending.
Rewards and recognition are means for organizations to demonstrate the value of
their employees. Effective rewards and recognition strategies also signal that an
organization cares about the well-being of its employees and is willing to invest
in them. The use of recognition serves as a reminder of commendable perfor-
mance. Such recognition can further reinforce that the organization values the
employee. When employees receive appreciation and recognition for their work,
they often reciprocate with a sense of obligation and respond with continued
high performance.
Effective recognition strategies should cover all three types of recognition: orga-
nizationwide formal recognition, departmental-specific informal recognition and
everyday spontaneous recognition. Everyday recognition validates the attitude of
caring and appreciation for a majority of employees. It also gives support, cred-
ibility and meaning to the few who receive the nominated or earned formal or
informal awards.
However, recognition is not sufficient in itself and must come along with rewards.
Rewards can control behavior externally because they can announce future bene-
fits to those who expect them. Rewards can increase the likelihood of a behavior
to be repeated over time as they aim to encourage specific behaviors. Similarly,
rewards without recognition could possibly saturate employees with tangible items
that would gradually lose significance. Therefore, recognition is integrated with
rewards in order to produce a more inclusive, effective and broader HR strategy.
43 Second Quarter | 2020
While rewards may be great for attracting people toward a desired outcome,
recognition is considered a tool for sustaining this attraction by retaining the
motivation. Both rewards and recognition are interlinked and complementary as
they reinforce a continuous performance enhancement culture in the organiza-
tions. (See Figure 1.)
Rewards and recognition are quite distinct and represent a major duality in
human motivation. The basic difference between rewards and recognition is that
rewards are transactional and recognition is relational. Rewards are awarded in
the context that “if you do A, only then will you get B in return.” Recognition, on
the other hand, is more to do with relational exchange between individuals. It is
about noticing and honoring. Table 1 describes how various management theories
differentiate rewards and recognition.
Rewards and recognition represent two fundamentally different mechanisms
of human motivation. Rewards involve extrinsic motivation while recognition
enhances intrinsic motivation. (See Figure 2.)
Intrinsically motivated behaviors are performed in the absence of any apparent
external contingency as those behaviors are motivated by the underlying need
for competence and self-determination (Deci 1975). Intrinsic motivation focuses
FIGURE 1 Complementary Rewards and Recognition Relationship
Reinforce Intrinsic Motivation
(Relational nature)
Reflect Extrinsic Motivation
(Transactional nature)
(Tan g ib l e,
Source: Model developed by author
44 The Journal of Total Rewards
only on the activity itself
while extrinsic motivation
considers the instrumental
value of the activity. Managers
can prompt intrinsic moti-
vation through careful job
design or tangible incentive
programs. However, there
are many instances where
it is difficult to redesign a
job, and budgets may be too
restricted to provide tangible
incentives. Effective rewards
and recognition strategies
can help create work experi-
ences that meet the needs of
employees and encourage them to contribute extra efforts. An optimal mix of
rewards and recognition not only increases employee motivation and engagement,
it can also reduce organization expenditures and lead to a win-win situation for
both employers and employees.
It has been argued that rewards will motivate some of the people all of the time and,
perhaps, all of the people some of the time. But rewards cannot be solely relied on to
motivate all of the people all of the time, so they need to be reinforced by recognition
programs, especially those that provide intrinsic motivation. Businesses with strong
strategic recognition programs exhibit greater productivity, lower turnover and greater
returns on investment than other companies in their industries (Nelson 2012).
Aberdeen Group Study
A study by the Aberdeen Group highlighted the importance of rewards and recogni-
tion as a vital compensation component (Ostrow 2014). The study, titled “Incentive
Success: Best-In-Class Sales Management,” underscored the competitive advantages
TABLE 1 Rewards vs. Recognition
Management Theory
(196 6)
Work motivation based on
hygiene factors
Work motivation based on
motivator factors
(1975) Extrinsic motivation Intrinsic motivation
Source: Model developed by author
FIGURE 2 Types of Organizational Cultures
Financial Rewards
Nonfinancial Rewards
Source: Author
45 Second Quarter | 2020
companies can gain when they venture outside the traditional realms of compen-
sation. It found that the compensation techniques that worked most effectively
across top-performing companies included a mix of nonfinancial rewards. Successful
companies’ most common practice was their utilization of these nonfinancial rewards.
Organizations that took a more holistic approach and implemented nonfinancial
rewards and recognition programs outperformed rivals that did not.
Effectively managed rewards and recognition systems will have a strong positive
influence on employee attraction, motivation and retention. Happy and dedi-
cated employees provide better service, can enhance customer satisfaction and
contribute to a company’s bottom-line financials, such as sales growth, market
expansion or even profitability (Tortosa, Moliner, and Sanchez 2009).
Effective rewards and recognition strategy should match an employee’s preferences
and needs as employees differ in such factors as risk preferences, career stage, skills
and rewards preferences. Companies are introducing new data mining and analytics
solutions to better understand employee’s preferences and customize rewards and
recognition plans. Managers should remember that the value of a rewards and
recognition plan is often idiosyncratic to each employee. Thus, they should carefully
match rewards and recognition to the specific personal needs of the employee. The
effectiveness of a rewards and recognition plan depends on management’s ability
to match these plans with employees’ characteristics, situations and preferences.
Internal Service Quality
Internal service quality is referred to as the quality of work life — defined by the
favorable conditions of a workplace that support and promote employee satisfac-
tion by ensuring rewards and recognition systems meet or exceed expectations.
A high level of internal service quality will result in higher levels of employee
satisfaction, productivity and retention (Ennew 2015). Employee satisfaction is
imperative for providing better and timely service to customers and achieving
their satisfaction and loyalty. Rewards and recognition are viewed as some of
the most important factors related to employee satisfaction (Madhani 2019). They
are certainly closer to their organizations and perform better jobs when they
receive what they deem optimal rewards and recognition in their organizations
(Khawaja et al. 2012).
External Service Quality
Customer retention becomes an even more important corporate objective given
the growing competition in global markets and pressures from the international
economic environment. To retain customers, service organizations focus on
service quality. A positive service climate is an important antecedent of employee
46 The Journal of Total Rewards
enthusiasm, sensitizing employees toward providing superior service quality and
delivering value to the customer during the encounter.
Customer-contact employees are very important because their service perfor-
mance represents the intangible component of the customer’s perception of service
quality, which influences customer relationships and loyalty. According to Heskett
et al. (1994), employee satisfaction is “reflected” in terms of customer satisfaction,
also referred to as the “satisfaction mirror,” which in turn generates business
growth and profitability.
Business Performance
Satisfied customers will likely continue to buy goods and services from a company,
which leads to higher customer lifetime value (CLV). Customer satisfaction is an
important determinant of repeat purchasing behavior, and therefore it is the essential
component of sustainable competitive advantage (Montfort, Masurel, and Rijn 2000).
Loyal customers amplify sales through frequent repurchases and customer referrals
and also reduce service costs and marketing expenditures because they are familiar
with the service provider’s processes and are reluctant to switch. There is a high
correlation between high customer retention and company profitability. Gronholdt and
Martensen (2019) confirmed the expected positive impact of employee satisfaction,
loyalty and attitudes on customer satisfaction and loyalty and, in turn, on profitability.
Figure 3 shows how effective rewards and recognition strategies enhance
employee engagement, customer retention and overall business performance.
Zappos, the online shoe and clothes retailer, illustrates how optimal design
of rewards and recognition leads to satisfied, engaged and empowered employees.
Zappos believes that the most productive employees work for the intrinsic rewards
that come in helping others (Palmeri 2010). The company, which was acquired by
Amazon in 2009 for $850 million, wants to ensure that employees aren’t focused
only on the pay, but that they also believe in the company’s long-term vision and
FIGURE 3 Enhancing Employee Engagement, Customer Retention and Company Performance
(Optimal Mix) Satisfaction
& Up-selling
Employee –
Customer –
Firm –
Place to Work
Place to Buy
Place to Invest
Service Quality
Service Quality
Source: Author
47 Second Quarter | 2020
want to be a part of its culture (Hsieh 2010). Perks, as well as a comprehensive
benefits package and wellness programs, are an integral part of Zappos’ everyday
culture because management believes that if employees are happy, other chal-
lenges will be met. Employees can earn Zollars (Zappos dollars) for participating
in the required training by answering questions or volunteering to help out. Those
Zollars can be spent at an onsite store, making rewards and recognition visible and
real (Zappos 2012). Deployment of an effective rewards and recognition strategy
has helped Zappos to achieve higher customer retention as 75% of Zappos sales
come from repeat customers who act as advocates for the online retailer (Askin,
Petriglieri, and Lockard 2016).
This research focuses on rewards and recognition that are contingent on an
employee’s work performance. Because people represent a potential source of
sustained competitive advantage, rewards and recognition strategies are significant
to organizations’ success or failure. Effective rewards and recognition practices
enhance internal service quality. The internal quality of a working environment
contributes most to employee engagement and satisfaction. Highly engaged and
satisfied employees are generally more productive and offer superior service than
their disengaged counterparts. Therefore, HR managers should implement better
internal service quality policies and practices that focus on employee engagement,
satisfaction and service orientation to enhance organizational performance. The
effects of internal service quality practices on employee satisfaction vary in part
according to the type of service. Therefore, HR managers should tailor internal
service quality to ensure that the practices fit particular jobs and meet the expecta-
tions of employees in various service settings.z
Pankaj M. Madhani, P h.D., ( pmad earned bachelor’s degrees in chemical engineering and law,
and an MBA from Northern Illinois Unive rsity, a master’s degre e in computer science from the Illinois Institute of
Technology and a Ph.D. in strategic management from CEP T University. He has more than 32 years of corporate
and academic experience in India and the United St ates. Madhani works as associate dean and profes sor
at ICFAI Business School (IBS). He received the “IBSAF Best Teacher Award” twice (2013 and 2017). He has
published several management books and more than 300 book chapte rs and research a rticles in various
academic and practitione r journa ls. He also served as editor of the IUP Journal of Corporate Governance.
Madhani received the “Best Research Paper Award” at the 2016 International Management Convention. He
is a frequent contributor to The Journ al of Total Rewards, having published more than 10 papers. His main
research areas include sales compensation, corporate governance a nd business strategy.
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Allen, D.G., P.C. Bryant, J.M. Vardaman. 2010. “Retaining Talent: Replacing Misconceptions with Evidence-
Based Strategie s.” Academy of Management Perspectives 24: 48-64.
48 The Journal of Total Rewards
Askin, N., G. Petriglieri, and J. Lockard. 2016. “Tony Hsieh at Zappos: Structure, Culture and Radical Change.”
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Hotel Industry.” Total Quality Management & Business Excellence 30( 1) : S 74 -S8 2 .
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Improve Service Q uality: A Quasi-Expe rimental Field Study in a Public Higher Education Institution.” Public
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... Therefore, a comprehensive review of rewards and recognition concurrently is critical. The comprehensive study is even more critical in a highly competitive and uncertain business environment (Long, 2017;Riaz et al., 2018) to motivate employees to maximise employee performance and organisational performance. ...
... On the other hand, recognition is a positive acknowledgement of employees' behaviour (Sidhu and Nizam, 2020). Rewards and recognition signal the extent to which an organisation cares about its employees' well-being and is willing to invest in them (Madhani, 2020). When employees receive rewards and recognition for their work, they feel that the organisation recognises and appreciates them and their work. ...
... There have been extant studies with mixed findings (e.g., Danish et al., 2015;Kosfeld et al., 2017;Ndungu, 2017;Nguyen and Giang, 2020;Owoeye et al., 2020;Sidhu and Nizam, 2020) linking selective dimensions or the entire concept of rewards (intrinsic and extrinsic) or recognition to employee performance. While many studies focused on extrinsic rewards, intrinsic rewards, or recognition only, a comprehensive review of both rewards and recognition is critical to optimise employee performance, particularly in a highly competitive and uncertain business environment (Long, 2017;Riaz et al., 2018). Anchoring on the social exchange theory, we argue that employees who perceive rewards and recognition positively exhibit improved employee performance. ...
... Accordingly, when firms redirect their focus of learning on the customers, it could lead to enhanced performance. This is because organisations that deploy a customer-focused strategy could achieve a high level of harmony and synergy in responding to the needs of their customers (Madhani, 2020). Deshpandé et al. (1993, p.27) described customer focus as 'the set of beliefs that put the customers' interest first, while not excluding those of all other stakeholders such as owners, managers, and employees, to develop a long-term profitable enterprise'. ...
... Due to the fact that learning results in an accumulation of knowledge that inspires the development of new ideas for the organisations, organisational learning is a crucial component of developing and pursuing a strong customer-focused strategy (Madhani, 2020;Yuliansyah et al., 2021). Fundamentally, organisational learning may provide some pointers for the firms to redirect their facility innovations towards customer needs satisfaction. ...
... Accordingly, when firms redirect their focus of learning on the customers, it could lead to enhanced performance. This is because organisations that deploy a customer-focused strategy could achieve a high level of harmony and synergy in responding to the needs of their customers (Madhani, 2020). Deshpandé et al. (1993, p.27) described customer focus as 'the set of beliefs that put the customers' interest first, while not excluding those of all other stakeholders such as owners, managers, and employees, to develop a long-term profitable enterprise'. ...
... Due to the fact that learning results in an accumulation of knowledge that inspires the development of new ideas for the organisations, organisational learning is a crucial component of developing and pursuing a strong customer-focused strategy (Madhani, 2020;Yuliansyah et al., 2021). Fundamentally, organisational learning may provide some pointers for the firms to redirect their facility innovations towards customer needs satisfaction. ...
... Rewards and recognition are feasible ways to promote employee engagement (Madhani, 2020). While during the pandemic, companies had to face various circumstances to bring about the engagement of employees where many companies keep their employees engaged by providing opportunities for professional growth during the lockdown, such as resources like TED Talks, webinars with industry experts, books, online courses and content that was created by themselves. ...
Full-text available
This research investigates the influence of four-box business model and its components on employee engagement, in accordance with the theoretical foundation of organizational commitment theory. The moderating effect of company performance on the relationship between four-box business model and employee engagement was also determined. This study employed quantitative methodology by gathering data from targeted Chinese SMEs via questionnaire during the post-COVID-19 period. Descriptive study and structural equation modelling were performed on 238 qualified data by using SPSS and AMOS software. This research reveals that employee engagement is highly impacted by four-box business model and its components. The components of four-box business model, i.e. customer value proposition, profit formula, key resources and key processes all show significant effect on employee engagement. Besides, company performance positively moderates the impact of four-box business model on employee engagement. However, on single factor level, the company performance only moderate on the relationship between key resources, key processes and employee engagement. As a conclusion, this research recommended that company management to employ the four-box business model on its operation and extensively pay attention to the impact of model on varying company performance.
... Organisations cannot simply imitate the incentives and recognition methods of many other companies. Furthermore, an incentive and recognition programme should be established to complement a company's distinct culture (Madhani, 2020). ...
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Orientation: Rewarding employees for meeting the organisation’s targets is crucial in order to motivate staff members to improve their performance.Research purpose: The aim of the study was to investigate if the incentive plans given to the employees at a comprehensive university in KwaZulu-Natal province have a positive impact on employee performance.Motivation for the study: Studies linking the role of performance incentives in driving performance in higher education, specifically academics, are limited, and this study aims to fill this gap of knowledge in the literature.Research approach/design and method: The study followed a qualitative approach where data were collected through interviews. An investigation was conducted with academics in the Faculty of Commerce, Law and Administration on the role of performance incentives in driving performance at a faculty from a comprehensive university in KwaZulu-Natal. The collected data were analysed using NVIVO.Main findings: The overall findings of the study showed a strong link between performance incentives and employees’ performance. It was found that financial incentives in the form of performance bonuses influenced the employees to work harder to meet the performance targets.Practical/managerial implications: The results of this study will assist human resource managers in higher education institutions to identify financial and non-financial incentives that seek to drive performance.Contribution/value-add: The results of the study revealed a strong link between performance incentives and employee performance. For this reason, it will add value to the reward strategies employed by universities in improving performance.
... If providing a benefit substantially affects employee retention, then the indirect savings and gains could more than offset the higher cost of the benefits. As shown in Figure 2, possible returns from benefits include their effects on employees' attitudes -for example, pay satisfaction, organizational commitment and engagement (Madhani 2020;Albrecht et al. 2015) -and behaviors, including retention and performance. Cost reductions that do not have a corresponding negative impact (e.g., eliminating a benefit that few employees use) as well as taking on additional costs that have a much greater corresponding positive impact will result in a positive benefit ROI. ...
... Effective rewards and recognition strategies can determine the success or failure of an organization because highly engaged and motivated employees are more productive and offer superior service compared to disengaged employees (Madhani, 2020). Compensation connects employee and organizational goals, and it is a bridge between the macro issue of retention in an organization and the micro behavior of its members in the organization (Sarkar, 2018). ...
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In today's global economy, more companies are going global, and employees are actively seeking better career opportunities and growth. This dynamic has made employee retention a significant focus for Human Resources Management. The main purpose of this study is to understand the factors that influence employee retention at pharmaceutical companies in Malaysia. The research objectives were to examine whether factors such as reward, career advancement, and manager engagement have a significant influence on employee retention in pharmaceutical companies in Malaysia. The population in this study is made up of employees of pharmaceutical companies in Malaysia. This research was conducted in a natural setting in a non-contrived manner using non-probability convenience sampling. Of the 400 surveys provided, 365 were answered by Malaysian pharmaceutical company employees, regardless of status. The validity and reliability of the questionnaire were checked, and responses were collected and analyzed via SPSS software. The result suggests that rewards, career advancement, and manager engagement positively influence the retention of employees in pharmaceutical companies in Malaysia. For hypothesis testing, all independent variables show a significant relationship with employee retention.
... Some researchers looked at customer retention in terms of accounting metrics, such as the company's financial performance, growth, and profit. Customer retention, lower marketing costs, and an increase in the market share of its customers are all associated favourably with customer satisfaction, word-of-mouth advertising, and consumer loyalty [79,21,58]. ...
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This study looked into how customer empowerment affects a company's performance (i.e., a bank). The relationship between customer empowerment and the firm's performance of banks in India's Delhi and NCR region has been studied, and innovation and customer satisfaction have been found to mediate this relationship. 439 bank employees, both male and female, were chosen for this study. Confirmatory factor analysis was used to analyze the data, and it was discovered that the variables met the requirements of path analysis. Customer empowerment has been found to have a significant impact on firm performance (i.e., a bank) as well as a negligible impact on customer satisfaction and customer retention. Therefore, this research differs from earlier studies that demonstrate that customer empowerment has a significant impact. It suggests a comprehensive framework that explains the connections between customer empowerment, innovation, customer satisfaction, customer retention, and business performance.
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This paper centres on examining the link between emotional labour and dinning duration within the restaurant industry. In this study emotional labour practice was modelled as one of the crucial predictors of dining duration. This is a multiple case study methodology using a cross sectional approach. The target population was 480 dyads encounters in 6 of the most popular fast food restaurant chains in Harare. Some 214 seat-in customers were the unit of analysis while wait staff were the unit of observation. In terms of responses, 200 responses were attained and were deemed sufficient for meaningful Structural Equation Modelling. The quantitative approach employed a self-completed structured questionnaire in collecting data. A structural equation modelling was run to test the direct effects, a multi-group structural equation modelling was run to test the moderating effects of categorical variables, and a moderated multiple regression was run to test the moderation effects of the latent variables. The study revealed various factors that influence the connection between emotional labour and dinning duration such as the gender factor of the people involved, the rate and strength of the interaction between restaurant employees and the clients. The outcome directed that emotional labour is positively associated with consumer dining duration. The consumer dining duration is in turn associated with consumer expenditures within the restaurant. However, all the hypothesised moderators had no statistically significant effect. The study recommended the use of emotional labour as one of the predictors for increased revenue in the restaurant industry through increased consumer spending as mediated by the dining duration under the scenario of excess capacity and limited demand.
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While literature is awash with evidence that links strategic human resource management to organizational performance, little is known on sustaining the relationship dynamics within a public sector context that is operating under polarized conditions. This study explores the challenges faced in implementing the human resource strategy within urban councils in Zimbabwe to unearth solutions that are sensitive to a polarized work environment. A case study approach was used to collect data from the 32 urban councils in Zimbabwe which are classified into four categories namely, cities, municipalities, towns and local boards. Stratified sampling was used to identify nine urban local authorities for data collection and purposive sampling identified the participants for interviews. The point of saturation was reached after interviewing 18 participants and the data was analyzed using the Atlas.ti. This study revealed, a misalignment of the human resource function and the organizational goals, a serious financial resource crisis and a lack of trust between key stakeholders. The study contributes to the development of human resource competencies that respond to the organizational needs in a polarized environment. Further, incorporate the adoption of technology in the human resource strategy and foster a culture of supporting soft skills such as teamwork and collaboration from the level of elected officials down to the entire workforce.
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The research deploys service–profit chain model to underscore the impact of effective rewards strategy on contribution and performance of employees in enhancing customer service and, thus, business performance. The service–profit chain postulates that higher employee satisfaction levels lead to high customer satisfaction and ultimately affect consumer loyalty and profitability. Therefore, human resource managers should implement better internal service quality practices, such as effective rewards strategy that focus on employee satisfaction, operational excellence and service orientation, to enhance firm performance. The research emphasizes that the service–profit chain begins with internal service quality triggered by financial and nonfinancial rewards and ends with business performance in terms of revenue growth and profitability. The research highlights that with effective rewards strategy, companies should take care of their employees first, because doing so will result in employees delivering a better customer experience and creating loyal customers who generate greater profits.
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Purpose – The purpose of this paper is to investigate the impact of human resource management (HRM) practices on the performance of Jordanian banks as determined by using the balanced scorecard (BSC) performance measurement system and by testing the effect of organizational citizenship behavior (OCB) as a possible mediator variable. Design/methodology/approach – A questionnaire was used to collect data from the study sample, which consisted of 230 managers working in various banks across Jordan. The study hypotheses were then tested using SPSS and AMOS software by applying structural equation models (SEMs). Findings – The data set revealed that the use of HRM practices had a significant impact on both employee OCB and bank performance in all the four dimensions of the BSC ( financial, customer satisfaction, internal processes, learning and growth). In addition, OCB was found to have a positive significant impact on organizational performance. Moreover, results indicated that OCB partially mediates the relationship between HRM practices and organizational performance. Originality/value – The authors examine the impact HRM practices on the organization performance through the mediation role of OCB. The results obtained from this study extend the existing literature by providing evidences from non-western country such as Jordan. Based on the findings, the theoretical and practical implications of the study as well as limitations and suggestions for future studies are also discussed.
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We describe an intervention undertaken to improve service quality in a public sector institution. More specifically, our service quality initiative focused on improving the work behavior and job attitudes of employees in a job category that is often overlooked, yet which is integral to the success of most public (and private) sector organizations—administrative assistants. In colleges and universities it has long been customary at the end of each academic year to recognize the outstanding achievements of faculty and students; however, administrative assistants have traditionally never received any accolades. A recognition and reward initiative for administrative assistants was implemented during the three academic years (2003/2004 through 2005/2006) as part of a service excellence initiative. Data on service quality were collected on an ongoing basis by an independent entity, Educational Benchmarks, Inc. After the third year of the recognition and reward initiative, survey data were also obtained from administrative assistants and individuals in related job titles. In general, attitudes were highly favorable (e.g., 89 percent of respondents wanted the program to continue), and numerous positive comments were provided such as “it is a good feeling to be recognized by your peers and commended for your work.” The present action research suggests that a recognition and reward intervention can improve service excellence in a public sector higher education organization. Further, we believe that the present intervention is transportable to various public sector entities.
Purpose The purpose of this paper is to offer a better understanding of managing engagement in an emerging economy service. It explores the role of organisational climates for initiative and psychological safety as the key drivers of employee engagement (EE). It also examines the effects of EE on customer engagement (CE) and, in turn, on relationship commitment and switching intention. Design/methodology/approach Data were collected through a structured survey of service employees and customers of 69 bank branches in Bangladesh using two survey instruments. Responses were collected from 156 employees and 316 customers. A dyadic data set was created by matching customer data with the corresponding employee data collected from each bank branch. Structural equation modelling using AMOS (version 22.0) was employed for data analysis. Findings Organisational climates for initiative and psychological safety positively influence EE. In turn, EE significantly influences CE which has a significant impact on customer relationship commitment and switching intention. Research limitations/implications Future research could consider actual customer behaviour, such as repeat purchase, as the key outcome variable. Practical implications The findings emphasise that investment by service managers in organisational resources to facilitate favourable climates for initiative and psychological safety would engage employees at work, which would ultimately help to attain CE and commitment, and reduce switching intention. Originality/value This research extends the existing engagement literature with empirical evidence supporting two new EE drivers and two new CE outcomes. It offers a better understanding of managing engagement in the financial services industry of an emerging economy, focussing on the relationship chain from organisational climate to EE, CE and customer-based outcomes.
Purpose: The purpose of this paper is to examine the links between employee attitudes, customer loyalty and business results. Methodology/approach: From a conceptual point of view, this employee–customer–business results chain is well founded and generally accepted, also in the European Excellence Model. But for many companies, it seems difficult to demonstrate such links, and several issues must be addressed to uncover the links. To investigate these links empirically, a hotel chain provided data matching employee and customer measures with measures of profit, and a modelling approach is developed. Findings: The model is successfully applied. As it is possible to estimate and test the links, we have demonstrated the effects of employee attitudes on customer loyalty and further on business results. The findings provide strong empirical evidence for the developed model, and the study provides evidence of the employee–customer–business results chain. Research limitations: The study is limited to four hotels in Copenhagen, Denmark. Practical implications: The research findings provide a better understanding of the employee–customer–business results chain and may help practitioners in improving company financial performance. Originality/value: This paper provides new insights into the relationships between employee attitudes, customer loyalty, and business results.
Purpose The main purpose of this study is to examine the mediating role of organizational commitment on the relationship between HRM practices and employee engagement among banking employees in the context of an emerging economy namely Bangladesh. Design/methodology/approach The survey data includes 383 employees from 30 private commercial banks in Bangladesh. For analyzing the data, structural equation modeling (SEM) is employed with bootstrapping method. Findings This study finds that HRM practices such as career advancement, employee participation, job security, performance feedback, rewards & recognition, training & development are the significant predictors of employee engagement. Results also identify OC as a partial mediator on HRM practices and employee engagement relationship which suggest that direct relationship of predictors and criterion variables are stronger than indirect association. More interestingly, findings indicate that the mechanism of black-box stage is not always work on the relationship between HRM practices and employee performance. Originality/value Exploring the role of OC on the relationship between HRM practices and employees’ behavioral outcome i.e., employee engagement is appeared as an initial effort in the academic literature. Furthermore, empirical research that examine the association of different organizational factors with employee engagement through OC is rarely been investigated. Thus, the findings of this study act as a strategic tool for the bank managers to design their organizational policies in such a way that foster their employee’ level of engagement.
Purpose The purpose of this study is to examine the potential mediating role of employee engagement between rewards and recognition and normative commitment. Design/methodology/approach Responses of a sample of 176 private bank employees in India were used to examine the proposed mediated model. Findings The variable rewards and recognition is found to be significantly correlated to both employee engagement and normative commitment. Results of regression have been analyzed in line with the four conditions of mediation laid down by Baron and Kenny (1986). Further, SPSS macro developed by Preacher and Hayes (2004) is used to test the proposed mediation model. The relationship between rewards and recognition and normative commitment is found to become smaller after controlling the variable employee engagement. The results provide partial support to the mediation hypothesis. Originality/value Normative commitment has been less researched relative to the attention paid to affective commitment. Further, no research has yet focused on the impact of rewards and recognition on normative commitment, with the mediating impact of employee engagement. This study hence provides the first empirical test of the established relationship between rewards and recognition and employee engagement by introducing normative commitment as an outcome variable.