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UNIVERSITY OF INDONESIA
MEDIATING ROLE OF JOB SATISFACTION ON HUMAN
RESOURCES PRACTICES AND TURNOVER INTENTION IN
INFORMATION TECHNOLOGY CONSULTING COMPANY
(CASE STUDY AMONG INFORMATION TECHNOLOGYPROFESSIONAL IN JAKARTA)
THESIS
WILLIAM SUHAIDIR
1306357730
FACULTY OF ECONOMICS
MASTER OF MANAGEMENT
MM-MBA
JAKARTA
JULY 2015
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UNIVERSITY OF INDONESIA
MEDIATING ROLE OF JOB SATISFACTION ON HUMAN
RESOURCES PRACTICES AND TURNOVER INTENTION IN
INFORMATION TECHNOLOGY CONSULTING COMPANY
(CASE STUDY AMONG INFORMATION TECHNOLOGYPROFESSIONAL IN JAKARTA)
THESIS
Submitted to fulfill one of the requirements to obtain degree of Magister
Management – Master of Business Administration
WILLIAM SUHAIDIR
1306357730
FACULTY OF ECONOMICS
MASTER OF MANAGEMENT
MM-MBA
JAKARTA
JULY 2015
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ii
STATEMENT OF ORIGINALITY
This final paper either represents my own effort, any idea or excerpt from other
writers in this final paper, in form of publication or in other form of publication, if
any, has been acknowledged in this paper in accordance to academic standard or
reference procedures.
Name : William Suhaidir
NPM : 1306357730
Signature :
Date : July 2015
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iv
PREFACE
All praise and gratitude writers dedicate to God for his gift, mercy and blessing in the
completion of this thesis. I would also like to give my sincerest thanks to following
individuals that give me the chances, motivation and support to complete my writing:
1. Harryadin Mahardika, Ph.D. as the director of Magister Management program
to give me the chances to produce and publish my research in the form of
thesis.
2. Dr. Yanki Hartijasti, MBA, M.Si as my thesis supervisor who has guide me
week by week and also give up her weekend time to guide me and my
colleague in finishing our final assignment in the program.
3. My beloved wife, Alsiyas Susanto who supports me in finishing my thesis.
I’m really grateful when you patiently accompany me to do my thesis until the
middle of the night.
4. My beloved parents who always give their love and support me in everything
I do.
5. My thesis colleagues, Jonas, Caroline, Pak Jaman and Aulia. I thank you for
the support and the discussion we all have in finishing our thesis.
6. My colleagues in MBA-13. I thank you for the amazing fun experience in
doing our study together.
7. Management and staff of PT XYZ, PT ABC and PT DEF that give me the
chances and provide me with the data to finish the research.
I hope my thesis can be a useful source both for the company and the industry also
for our society.
Jakarta, July 2015
William Suhaidir
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v
LETTER OF AGREEMENT TO PUBLISH THE THESIS FOR
ACADEMIC PURPOSE ONLY
As a member of University of Indonesia academician society, I have agreed as stated
below:
Name : William Suhaidir
NPM : 1306357730
Program : MM-MBA
Faculty : Economy
Assignment Type : Thesis
On behalf of science development, I have fully agreed to give the Non-ExclusiveRoyalty Free for the Thesis to the University of Indonesia which titled:
MEDIATING ROLE OF JOB SATISFACTION ON HUMAN RESOURCES
PRACTICES AND TURNOVER INTENTION IN INFORMATION
TECHNOLOGY CONSULTING COMPANY (CASE STUDY AMONG
INFORMATION TECHNOLOGY PROFESSIONAL IN JAKARTA)
Along with any related materials if needed. With this Non-exclusive Royalty Free
Right, University of Indonesia has the right to keep, transform and manage in forms
of database, distribute and publish it in the internet and other media as well for
academic purpose only, even without permission as long as my name is mentioned
and included as the sole writer and as the copyright holder. Any form of lawsuit
which possibility occurs in the future event considered as copyright violation of this
thesis will be my personal responsibly.
Sincerely I declare the statement above is true indeed.
Declared at Jakarta
on July 2015
(William Suhaidir)
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ABSTRACT
Name : William Suhaidir
Program : MM-MBAThesis Title : Mediating Role of Job Satisfaction on Human Resources
Practices and Turnover Intention in Information TechnologyConsulting Company (Case Study among Information
Technology Professional in Jakarta)
Human resource is a substantial resource in winning the market share and in having a
sustainable business especially in a service based industry. One of the important issue
in human resources management is employee’s turnover. It can cause a lot of damage
for the company. Finding the right variable that affect turnover intention among theemployees will be a useful knowledge for management to minimize the turnover rate.
Past conceptual study proved that job satisfaction has a mediating role on HR practices and turnover intention. Current study will test this argument empirically.
The survey was conducted among IT professional in three selected IT consultingcompanies in Indonesia, 152 feedbacks were obtained and processed. The result
showed that job satisfaction fully mediated the relationship between HR practices and
turnover intention. Further analysis into the dimension level found thatcommunication and coworkers dimensions fully mediate the relationship between
performance appraisal and turnover intention.
Keywords:
Job Satisfaction, HR Practices, Turnover Intention, Mediation, IT Professional
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ABSTRAK
Nama : William Suhaidir
Program : MM-MBAJudul Thesis : Peran Mediasi dari Kepuasan Kerja terhadap Hubungan
antara Praktek Sumber Daya Manusia dan Turnover Intentiondi Perusahan Information Technology Consulting (Studi
kasus pada Information Technology Professional di Jakarta)
Sumber daya manusia adalah sumber daya yang penting untuk memenangkan pangsa
pasar dan bisnis yang berkelanjutan khususnya dalam industri yang berbasiskan jasa.
Keluarnya karyawan dari perusahaan merupakan salah satu masalah yang penting
dalam manajemen sumber daya manusia. Hal ini dapat menyebabkan banyakkerugian bagi perusahaan. Menemukan variabel yang mempengaruhi turnover
intention akan menjadi pengetahuan yang berguna untuk manajemen perusahaandalam mengurangi turnover rate. Penelitian sebelumnya secara konseptual
membuktikan bahwa kepuasan kerja memiliki peran mediasi terhadap praktek sumberdaya manusia dan turnover intention. Penelitian ini akan coba melakukan pembuktian
empiris terhadap hal ini. Survei dilakukan dengan responden profesional IT dari 3
perusahaan IT consulting di Indonesia, 152 jawaban dikumpulkan dan di proses.Hasil dari penelitian menunjukkan bahwa kepuasan kerja memediasi secara penuh
hubungan antara praktek sumber daya manusia dengan turnover intention. Analisis
lebih lanjut dengan melihat dimensi dari tiap variabel menemukan bahwa dimensi
communication dan coworkers memediasi penuh hubungan antara performancemanagement dan turnover intention.
Kata Kunci:
Kepuasan Kerja, Prakter Sumber Daya Manusia, Turnover Intention, Mediasi,
Information Technology Professional
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TABLE OF CONTENTS
TITLE ........................................................................................................................ i
STATEMENT OF ORIGINALITY ......................................................................... iiLETTER OF APPROVAL ...................................................................................... iii
PREFACE................................................................................................................ ivLETTER OF AGREEMENT ................................................................................... v
ABSTRACT ............................................................................................................ vi
ABSTRAK ............................................................................................................. viiTABLE OF CONTENTS ...................................................................................... viii
LIST OF FIGURES .................................................................................................. x
LIST OF TABLES .................................................................................................. xi
LIST OF APPENDIX ............................................................................................ xiii
1. INTRODUCTION .............................................................................................. 1
1.1 Background..................................................................................................... 11.2 Problem Findings............................................................................................ 3
1.3 Research Objectives ....................................................................................... 91.4 Implication of Research ................................................................................ 10
1.5 Scope of Research ........................................................................................ 10
1.6 Systematic of Writing ................................................................................... 11
2. LITERATURE REVIEW ................................................................................ 12 2.1 Turnover Intention ........................................................................................ 12
2.2 Job Satisfaction ............................................................................................. 142.2.1 Minnesota Satisfaction Questionnaire (MSQ)..................................... 16
2.2.2 Job Description Index (JDI) ................................................................ 172.2.3 Job Satisfaction Survey (JSS) .............................................................. 17
2.3 Human Resources (HR) Practices ................................................................ 23
2.4 Relationship among HR Practices, Job Satisfaction & Turnover Intention . 27
3. RESEARCH METHODOLOGY .................................................................... 333.1 Research Design ........................................................................................... 33
3.2 Research Variables and Operational Definition ........................................... 33
3.3 Research Measurement ................................................................................. 373.3.1 Research Instrument ............................................................................ 37
3.3.1.1 Demographic Information ....................................................... 38
3.3.1.2 Job Satisfaction ........................................................................ 383.3.1.3 Turnover Intention ................................................................... 423.3.1.4 HR Practices ............................................................................ 43
3.3.2 Research Instrument Testing ............................................................... 45
3.4 Data Collection Method ............................................................................... 483.5 Sampling Method ......................................................................................... 49
3.6 Data Analysis Method .................................................................................. 49
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3.6.1 Descriptive Statistic ............................................................................. 49
3.6.2 Inferential Statistic............................................................................... 503.6.2.1 Simple Linear Regression Analysis......................................... 50
3.6.2.2 Multiple Linear Regression Analysis ...................................... 50
3.6.2.3 Multicollinearity Analysis ....................................................... 513.6.2.4 Mediating Variable Analysis ................................................... 52
3.7 Research Object ............................................................................................ 54
3.7.1 PT XYZ ............................................................................................... 543.7.2 PT ABC ............................................................................................... 56
3.7.3 PT DEF ................................................................................................ 57
4. RESEARCH RESULT ANALYSIS ............................................................... 584.1 Respondent Data ........................................................................................... 58
4.2 Demographic Data ........................................................................................ 58
4.3 Mediating Role of Job Satisfaction .............................................................. 63
4.4 Turnover Intention Analysis ......................................................................... 694.5 Job Satisfaction Analysis .............................................................................. 71
4.5.1 Pay ....................................................................................................... 72
4.5.2 Promotion ............................................................................................ 724.5.3 Supervision .......................................................................................... 73
4.5.4 Fringe Benefits .................................................................................... 74
4.5.5 Contingent Reward .............................................................................. 744.5.6 Operating Condition ............................................................................ 75
4.5.7 Coworkers............................................................................................ 75
4.5.8 Nature of Work .................................................................................... 76
4.5.9 Communication ................................................................................... 774.6 HR Practices Analysis .................................................................................. 78
4.6.1 Training and Development .................................................................. 79
4.6.2 Performance Management ................................................................... 794.6.3 Pay Practices ........................................................................................ 80
4.7 Discussion..................................................................................................... 81
4.7.1 Mediating Role of Job Satisfaction on the Relationship between
HR Practices and Turnover Intention ................................................. 814.7.2 Level of Turnover Intention ............................................................... 89
4.7.3 Level of Job Satisfaction .................................................................... 90
4.7.4 Level of Perceived HR Practices ........................................................ 97
4.8 Managerial Implication ................................................................................ 99
5. CONCLUSION AND RECOMMENDATIONS ........................................ 101 5.1 Conclusion .................................................................................................. 1015.2 Recommendations ...................................................................................... 102
5.3 Recommendations for Further Research .................................................... 103
REFERENCES ................................................................................................... 104
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LIST OF FIGURES
Figure 1.1 PT XYZ IT Professional Turnover Rate 2012-2014 ............................... 3Figure 1.2 Relationship between HR Practices, Job Satisfaction and Turnover ...... 8Figure 1.3 Research Framework............................................................................... 9
Figure 2.1 Herzberg Motivator – Hygiene Model .................................................. 15
Figure 3.1 Mediator Path Diagram ......................................................................... 52
Figure 3.2 PT XYZ Organization Structure ........................................................... 55Figure 3.3 PT ABC Organization Structure ........................................................... 56
Figure 3.4 PT DEF Organization Structure ............................................................ 57
Figure 4.1 HR Practices, Job Satisfaction and Turnover Intention Relationship ... 65
Figure 4.2 Performance Management, Coworkers and Turnover IntentionRelationship ............................................................................................................ 67
Figure 4.3 Performance Management, Communication and Turnover IntentionRelationship ............................................................................................................ 68Figure 4.4 Dimension of HR Practices, Job Satisfaction and Turnover Intention
Relationship Model ................................................................................................ 68
Figure 4.5 Job Satisfaction Mediating Relationship on the Relationship betweenHR Practices and Turnover Intention ..................................................................... 83
Figure 4.6 Hofstede’s Cultural Score ..................................................................... 92
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LIST OF TABLES
Table 2.1 Past Studies about Job Satisfaction and Turnover IntentionRelationship ............................................................................................................ 28Table 2.2 Past Studies about HR Practices and Turnover Intention Relationship . 29
Table 2.3 Past Studies about HR Practices and Job Satisfaction Relationship ...... 30
Table 3.1 Likert 6-Point Scale ................................................................................ 37
Table 3.2 Spector JSS Items Mapping ................................................................... 39Table 3.3 HR Practices Items ................................................................................. 44
Table 3.4 Cronbach’s Alpha Consistency .............................................................. 46
Table 3.5 Research Instrument Testing Result ....................................................... 47
Table 3.6 Multicollinearity Analysis on HR Practices Dimension ........................ 51Table 3.7 Multicollinearity Analysis on Job Satisfaction Dimension .................... 52
Table 4.1 Respondent Response Rate .................................................................... 58Table 4.2 Gender .................................................................................................... 59Table 4.3 Age ......................................................................................................... 59
Table 4.4 Marital Status ......................................................................................... 60
Table 4.5 Number of Dependents ........................................................................... 60Table 4.6 Education Background ........................................................................... 61
Table 4.7 Current Position ...................................................................................... 61
Table 4.8 Working Period in Current Company .................................................... 61
Table 4.9 Number of Times Relocated to another Company ................................. 62Table 4.10 Worked Outside IT Consulting Industry .............................................. 63
Table 4.11 Job Satisfaction Mediating Role Test Result ....................................... 63
Table 4.12 Coworkers Dimension Mediating Role ................................................ 66Table 4.13 Communication Dimension Mediating Role ........................................ 67
Table 4.14 Turnover Intention Descriptive Analysis ............................................. 69
Table 4.15 Factor Influencing Turnover Intention Result ...................................... 70
Table 4.16 Job Satisfaction Descriptive Analysis .................................................. 71Table 4.17 Pay Descriptive Analysis ...................................................................... 72
Table 4.18 Promotion Descriptive Analysis ........................................................... 73
Table 4.19 Supervision Descriptive Analysis ........................................................ 73Table 4.20 Fringe Benefits Descriptive Analysis ................................................... 74
Table 4.21 Contingent Reward Descriptive Analysis ............................................ 75
Table 4.22 Operating Condition Descriptive Analysis........................................... 75
Table 4.23 Coworkers Descriptive Analysis .......................................................... 76Table 4.24 Nature of Work Descriptive Analysis .................................................. 76
Table 4.25 Communication Descriptive Analysis .................................................. 77
Table 4.26 Factor Influencing Job Satisfaction Result ........................................... 78Table 4.27 HR Practices Descriptive Analysis....................................................... 78
Table 4.28 Training and Development Descriptive Analysis ................................ 79
Table 4.29 Performance Management Descriptive Analysis ................................. 80
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Table 4.30 Pay Practices Descriptive Analysis ...................................................... 80
Table 4.31 HR Practices Socialization ................................................................... 81Table 4.32 HR Practices Socialization Perceived Effectiveness ............................ 81
Table 4.33 Job Satisfaction Dimension Comparison from Past Studies ................ 90
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LIST OF APPENDIX
Appendix 1 Initial Questionnaire ......................................................................... 124Appendix 2 Validity and Reliability Test Result ................................................. 125Appendix 3 Regression Test Result ..................................................................... 154
Appendix 4 Mediating Analysis per Dimension .................................................. 161
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CHAPTER 1
INTRODUCTION
1.1 Background
Information technology is growing fast and revolutionizes our way of life, in
how we work, communicate and socialize. Now, various activities can be executed
accurately in relatively short time. This changes the way on how business is done.
Competition is becoming fierce and companies need to find a new way to gain a
competitive advantage so they can grow and enjoy sustainability. They are racing to
implement information technology to make their process transparent, accurate and
faster in pursuit of efficiency and effectiveness.
According to BMI Research (2015), Indonesia IT spending is forecasted to
increase 11.4% from 2014 to 170.2 trillion in 2015 which is 1.5% of Indonesia’s
GDP. Responding to this huge demand there are many Information Technology
consulting company emerge in Indonesia and try to meet the demand. Some of the
companies are multinational companies and some are local ones. They are racing to
get the big portion of the demand by providing excellent services to the customer.
The services industry is characterized differently than manufacturing industry
especially on sales since it is intangible. The sales in service industry depends more
on the knowledge, skill and ethics of the people who provide the services. In other
words, the service company most important asset is the human resources and
managing them become more strategic rather than administrative. The winner of the
competition is the one who has the highest standard of human capital to differentiate
them from the others.
Having a high performing human resources is a must to win the race in IT
consulting industry while losing them is a disaster for the company. Since the early
day of information technology industry, turnover has always been a big issue and still
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continues to the present (Moore, 2000). According to Jiang and Klein (2002), the
turnover rate in 1990s already reached 25 to 33 percent annually. This data is
supported by Hayes (1998). He states that Fortune 500 firms also have the same
turnover rate among their IT personnel. Due to the economic downturn and overall
weak labor market in 2000s, there is a decline in the overall turnover rate (Dinger,
Thatcher, Stepina & Craig, 2012) where IT turnover rate still in 15% rate annually
and the number is even higher among information system consultants (Nelson &
Todd, 2004). This problem is getting worse by growth and maturity rate in the IT
industry that is not supported by the growth rate of available skill supplies
(McLaughin, Sherry, Carcary & O’Brien, 2012). In the US, all job types are projected
to grow by 10% within 2006-2016, but IT professional jobs are projected to grow by
25% (Dohm & Sniper, 2007). The demand will automatically increase. While
according to Saunders and Lockridge (2011), the student enrollment in IT programs
has dropped which created a shortage in supply.
The turnover itself causes considerable amount of damage to the company.
Boushey and Glynn (2012) argue that turnover will cause a significant business cost.
Some of them is elaborated by Hinkin and Tracey (2000) as separation cost,
recruiting cost, selection cost, hiring cost and lost productivity cost. Organizationwith a high turnover rate cannot perform it optimally. This is supported by research
conducted by Tariq, Ramzan and Riaz in 2013, which stated that turnover would
decrease organization efficiency. Moral of the other employees will also decline
along with the increasing turnover rate (Abassi & Hollman, 2000). All of this will
impact company performance at the end where many research showed that turnover is
negatively related with company performance (Watrous, Huffman & Pritchard, 2006;
Ton & Huckman, 2008). Company needs to take this matter seriously since this can
lead to customer dissatisfaction (Butali, Wesang’ula & Mamuli, 2014).
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1.2 Problem Findings
It is clear that turnover can do significant damage to the organization as stated
in many previous researches above. To keep being competitive in the industry, a
company has to tackle this issue and try to reduce the turnover intention among the
employees. Preliminary study has been conducted in PT XYZ an IT consulting
company in Indonesia. Below is the data of IT professional voluntary turnover rate in
PT XYZ from 2012 to 2014.
26%
21%
25%
0%
5%
10%
15%
20%
25%
30%
2012 2013 2014
XYZ Rate
Figure 1.1 PT XYZ IT Professional Turnover Rate 2012-2014
Source: Triastuti (2015)
Figure 1.1 above show that PT XYZ turnover rate is fluctuating every year but
it is always bigger than 20% and can be considered high. PT XYZ CEO stated that
the high turnover rate is causing a lot of problem and cost. He said that having a high
performing, good quality employee is a strategic issue for the company since in
service industry human capital is the strategic assets. Turnover is damaging the
company since PT XYZ is losing knowledge and money from the investment it has
done to the employee while there is another recruitment and knowledge development
cost ahead for the new recruit. In addition, PT XYZ also suffers from opportunity
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cost that is lost when PT XYZ have to turn down a prospect project due to lack of
available resources (Kurnia, personal communication, January 12, 2015).
It needs to be able to tackle and reduce the turnover rate knowledge about the
variables which causing the turnover intention among the employees. The manager of
PT XYZ HR reveals some reasons obtained from employee’s exit interviews. Most of
the main factors are pay and benefits, supervision, long working hours and some of
them said that they got another good opportunities in another company (Triastuti,
personal communication, January 12, 2015). Many studies have been conducted to
find out what variable cause turnover intention. Most of them try to link the turnover
intention with job satisfaction and some of them also try to link it with HR practices.
According to Wang & Feng (2003), the higher the job satisfaction level of the
employee, the more likely employee will have a good attitude toward their jobs and
more likely to be loyal to the company. This also supported by Wright & Bonnet
(2007) who argued that employee that have high level of job satisfaction will have a
decreased tendency to look for a new job and decreased propensity to leave the
organization. Job satisfaction is negatively related with the turnover intention (Mahdi,
Zin, Nor, Sakat & Naim, 2012; Yucel, 2012). Some of the researches also try to find
out dimension of job satisfaction that matter the most in affecting turnover intention,for example is the research by Nazim (2008) who discovered that pay, contingent
reward, fringe benefits and promotion as the most influencing dimension. Another
research in another industry found that supervisor and pay has significant relation
with turnover intention (Tnay, Ekhsan, Othman, Siong, Lim, 2013).
The world is changing and also HR Practices from Transactional HR to
Transformational HR (Noe, Hollenbeck, Gerhart, & Wright, 2009). HR practices in a
company according to many researches also have an effect to the employee’s
turnover intention. According to Cho and Guchait in 2010, HR practices will lower
the employee turnover intention. HR practices in a company are negatively related
with intention to quit among the employees (Khilji & Wang, 2007). Another research
found that compensation & benefit practices, performance management and training
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have a negative significant relation to turnover intention (Long, Ajagbe & Kowang,
2013).
Looking from another perspective, there are also researches that prove HR
practices are influencing job satisfaction. In 2009 Verma, Malhotra and Bedi
conducted a research in an IT Company and found that HR Practices can encourage
job satisfaction among the employees. HR practices have a positive relation with job
satisfaction (Syed & Yan, 2012). Some of the researches also go deeper to specific
HR Practices that influence job satisfaction like HR Planning, Compensation,
Training and Development as the most significant practices that influence job
satisfaction (Absar, Azim, Balasundaram & Akhter, 2010). Pasaoglu and Tonus
(2014) also conducted same study in private hospitals and found that recruitment,
training and development are the most significant practices.
In response to the result of previous studies that link turnover intention with
job satisfaction and HR practices a preliminary questionnaire has been sent to all of
PT XYZ employees as a sample. The questionnaire can be found in Appendix 1 page
125. The questionnaire consists of open answer question that try to grab some
information related to job satisfaction and HR practices. Total feedback acquired for
the initial questionnaire is 42 feedbacks out of 70 PT XYZ total employees. Below
are the temporary findings from the initial questionnaire and some sample feedbacks
from the respondents:
Job Dissatisfaction
Pay (40%)
- “My salary doesn’t fit with my job task and with the pressure
that I got.”
- “My current salary barely fit my necessity to support my
family and the increase in petrol price making it worse.”
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Benefit (19%)
- “I’m not satisfy with the amount of health benefit that is
provided by the company.”
- “There is no reimbursement on employee child birth.”
Supervision (10%)
- “There are some supervisors that doesn’t really care about their
subordinate’s problem.”
- “Some supervisors doesn’t give a constructive feedback in a
performance appraisal.”
Job Satisfaction
Coworkers (52%)
- “I love my relation with my coworkers, we are like family and
helping each other in doing our job.”
- “Cooperative working environment with my coworkers,
kinship but still professional.”
Nature of Work (52%)
- “I love my job since it gives me a lot of experience and
knowledge.”
- I love to go in a business trip and study new business processes
in every new client.”
Inadequate HR Practices (50%)
“HR Department only functioned in administrative or transactional
area and not in the strategic area.”
“HR practices need to be turned on again especially in compensation,
performance and knowledge enhancement.”
The result from the questionnaire indicates that there is a link between high
turnover rate in the company with HR practices and job satisfaction. Many
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researchers believe that HR practices do not directly link to turnover intention but to
an existing a mechanism that can explain how HR practices are able to influence it
(Huselid & Becker, 2011; Jiang, Lepak, Hu & Baer, 2012). According to Ribeiro and
Semedo (2014), organizational justice mediates the relationship between HR
practices and turnover intention. There is also a study among IT professionals that
argues organizational commitment as the mediating variable between HR practices
and turnover intention (SamGnanakkan, 2010). This study also conducted in
Malaysia across industries, which result an organizational commitment, partially
mediates HR practices and turnover intention (Juhdi, Pa’Wan, Milah, Hansaram &
Othman, 2012). Another study by Joarder, Sharif and Ahmmed (2011) said that
affective commitment mediates the relationship between HR practices and turnover
intention. Another view is provided by Manistitya and Fongsuwan (2015), they
conducted a study on IT Staff in Thailand and the findings is that the company
implements a good HR Practices will eventually lead to employee’s satisfaction and a
satisfied employee will be committed to their work and loyal which result in a
reduction of turnover intention. Analyzing from some previous studies and
preliminary research provided above, it is clear that job satisfaction has a significant
potential to become a mediating variable between HR practices and turnover
intention.
Mudor and Tooksoon in 2011 conducted a research related to the relationship
between HR practices, job satisfaction and turnover intention. The result is the
conceptual framework between the variables given in figure 1.2 below. The
conceptual framework explain that HR practices specifically supervision, job training
and pay practices have a positive and significant relation with job satisfaction but
negative and significant relation to turnover intention. Job satisfaction has a positive
significant relation to turnover intention. It plays an important role since employee
with low job satisfaction will have a high turnover intention.
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Figure 1.2 Relationships between HR Practices, Job Satisfaction and Turnover
Source: Mudor & Tooksoon (2011)
In this study, the conceptual framework above will be tested empirically in
three selected IT consulting companies. Pay and training HR practices variables from
Mudor and Tooksoon (2011) research will be used but one additional HR practices
performance management will be added to replace the supervision dimension. There
are several reasons why performance management is used instead of supervision.
First, performance management is a common process in the three IT consulting
companies. Second, previous research proved that performance management have a
positive relation with job satisfaction (Fay, 2006) and lower turnover intention will be
achieved also if employees satisfy with how the performance appraisal conducted in
the company (Kuvaas, 2006). Performance management is a process where managers
or supervisors maintain and ensure their employee’s job activities align with the
company goals (Noe, Hollenbeck, Gerhart, & Wright, 2009). Supervisor will
supervise, review and give feedback to their subordinates. On other hand, according
to Delano and Shah (2009) supervision is professional relationship where supervisor
will provide support, education and monitoring of quality. It can be seen that
supervision is in the scope of performance management and this is the third reason
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why performance management is chosen. Framework of this study is given below in
figure 1.3.
Figure 1.3 Research Framework
Current study conducted a more comprehensive empirical study and analysis
to conclude the initial findings and concept by measuring the relationship between
job satisfaction, HR practices and turnover intention and this study also tries to find
our whether job satisfaction has a mediating role between HR practices and turnover
intention or HR practices directly affect the turnover intention. Turnover in this
current study refers to a voluntary turnover. From this purpose, research questions
below are derived:
1. Does job satisfaction has a mediating role on HR practices and turnover
intention?
2. What is the level of turnover intention in the three IT consulting companies?
3. What is the level of job satisfaction in three IT consulting companies?
4. What is the level of perceived HR practices in the three IT consulting
companies?
1.3 Research Objectives
1. To understand if job satisfaction has a mediating role between HR practices
and turnover intention.
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2. To understand the level of turnover intention in the three IT consulting
companies.
3. To understand the level of job satisfaction and its dimension in the three IT
consulting companies.
4. To understand the level of perceived HR practices and its dimension in the
three IT consulting companies.
1.4 Implication of Research
Previous researches show that turnover can cause a lot of damage to the
company performance. Information about how job satisfaction and HR practices can
influence turnover intention among the employees in the three IT consulting
companies will be valuable for the companies to efficient and effectively tackle the
issue reducing the voluntary turnover rate at the end. Job satisfaction itself can
improve or positively related with employee’s performance (Springer, 2011; Sarwar
& Abugre, 2013). HR practices are also known to have the same positive influence
toward employee’s performance (Sels, Winne, Delmotte, Maes, Faems & Forrier,
2006; Wang, Hwang & Lin, 2011). This research will also show the job satisfaction
and HR practices level and in addition what job satisfaction dimension and HR practices contribute the most to turnover intention in the three IT consulting
companies. This information can be used by company to prioritize and plan their next
move in improvement. Designing a whole complete human capital management
improvement program or HR practices will be a daunting task and take a lot of
investment. Company can put a priority of which dimension they have to improve
first and which dimension they can put in the last priority.
1.5 Scope of Research
The unit of analysis used is IT Professionals in PT XYZ, PT ABC and PT
DEF. All companies are in IT consulting industry in Indonesia. There is a potential
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response bias and the research itself is a cross-sectional study. The data was collected
between April and May 2015.
The research did not include all the potential dimensions that can affect job
satisfaction only the one that is considered important and under control by the
organization. The research also did not include all the HR practices and only include
some relevant HR practice for the company.
1.6 Systematic of Writing
This research consist of five chapters as below:
Chapter 1: IntroductionThis chapter will explain the research background, problem statement, objective and
scope of the research and also the implication for the companies and industry.
Chapter 2: Literature Review
This chapter will provide the basic theoretical reference including some previous
studies that will be used to analyze the research data.
Chapter 3: Research Methodology
This chapter will explain the research methodology that contain method to collect
data, sampling detail, measurement tools used, brief company profile and also
statistical method to process the data.
Chapter 4: Research Result and Analysis
Research data, measurement result and also the analysis of the result will be provided
in this chapter.
Chapter 5: Conclusion and Suggestion
Summary of the research and some recommendation for the companies in the
industry and also for further research will be provided in this chapter.
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CHAPTER 2
LITERATURE REVIEW
2.1 Turnover Intention
Employee’s intention to leave or commonly termed as turnover intention is a
plan of employees to leave their current company or organization (Yoshimura, 2003).
Cotton and Tuttle in 1986 give another definition in which they argue that turnover
intention refers to a perceived probability by an employee to either stay or leave an
employing company. Turnover intention is a predecessor of a resign behavior or
employee turnover (Lee & Mowday in Haque & Aslam, 2014). Employee’s turnover
happens when employees move between company, job and occupations and
sometimes also between the states of employment and unemployment (Abassi &
Hollman, 2000). According to Kazi & Zadeh (2011) there are four types of job
turnover:
Internal Turnover
This turnover happens internally in the company. It includes movement in
position, job description or maybe transfers to another department. This typeof turnover is fully controllable by the company.
External Turnover
If internal turnover happen within the company, external turnover happens
across company. The employee move to another company and it can be
caused by many factors like job dissatisfaction, salary increase and other
reasons.
Voluntary Turnover
This type of turnover comes from the initiative of the employee itself and
sometimes and usually to attain personal satisfaction related to job. The
company cannot control this type of turnover but it can be reduce and the
Human Resources Department can decline some of it.
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Involuntary Turnover
This type of turnover comes from the initiative of the company and based on
factors, which are beyond the control of management. There are many factors
that can cause involuntary turnover like bad performance of the employee,
conflict or sometimes because of the poor financial performance of the
company.
Turnover in a company is usually a major concern for the company human
resources department (Peterson, 2004) but since there are many studies related to
turnover effect and many companies realized how turnover can do a lot of damage to
the company itself then it becomes a major concern of the whole company (Ton &
Huckman, 2008). Some cost identified by Hinkin and Tracey (2000) are separation
cost, recruiting cost, selection cost, hiring cost and lost productivity cost. When an
employee quit the company for the separation company needs to provide severance
pay, effort to do exit interview and some paper work. Company also needs to endure
cost for advertising and attracting potential replacement candidates then another cost
is needed for doing the selection process like medical test, background check and
others. A big portion of cost is needed to redevelop a new employee, i.e., providingthem with training so they have the required skill to do the work and at the end one
the biggest concern is loss productivity cost. This argument is supported Tariq,
Ramzan and Riaz (2013) who says that turnover will decrease organization efficiency
and productivity and it will lead to customer dissatisfaction (Butali, Wesang’ula &
Mamuli, 2014).
According to Morrel, Clarke and Wilkinson (2004) there are two main factors
that influence employee decision to quit their job. First, the perceived ease of
movement can represent the employee assessment of opportunity to get alternatives
or better job in other organization. Second, the perceived desirability of movement is
influenced usually by job satisfaction for instance. There is another research that
support this theory like the research by Firth, Mellor, Moore and Loquet (2004) that
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said turnover intention is caused by lack of commitment toward reaching the
organization goal and job dissatisfaction in the form of various personal factors.
Some other variables affecting turnover intention will be elaborated in the upcoming
section in this chapter.
2.2 Job Satisfaction
Until now there is still no general agreement on job satisfaction definition.
Every researcher and author has his or her own way of looking toward job
satisfaction. Some of the very well-known definitions will be discussed in this
chapter.
Job satisfaction is focuses on the role of the person in the workplace. It is an
emotional orientation of an individual toward work roles they currently
engaged in (Vroom in Aziri, 2011).
Job satisfaction represents both positive and negative emotional state that
employees have towards their job. It characterizes the extent to which
expectations match the real reward. Job satisfaction is closely connected to
employee's behavior in the work place (Davis & Nestrom in Aziri, 2011).
Job satisfaction is how employees feel about their job in various dimensions
(Spector, 1997).
Job satisfaction consists of many feelings and beliefs that employees have
about their current work which can range from extreme satisfaction to
extreme dissatisfaction. Employee also can have attitudes about many aspects
of their job and work place, for example like the kind of work they do, their
coworkers, supervisors or subordinates and their payment or benefit (George
& Jones, 2008).
There are a lot of research in job satisfaction since many believes that job
satisfaction can promote employee performance. A research by Springer in 2011
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suggest that job satisfaction has a positive relation with job performance and suggest
company have to apply managerial strategy to improve job satisfaction and
eventually it will improve the company performance. Another research by Sarwar and
Abugre (2013) also found that job satisfaction can increase employee performance
and eventually customer satisfaction.
Herzberg in Kreitner and Kinicki (2010) state that there is a separate and
distinct cluster of factors that can influence job satisfaction or influence job
dissatisfaction. Mode of Herzberg motivators and hygiene theory is given below in
figure 2.1
Figure 2.1 Herzberg Motivator – Hygiene Model
Source: Kreitner & Kinicki (2010)
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Herzberg found that job satisfaction usually is more associated to recognition,
characteristic of the work, achievement, responsibility and promotion, which he
labelled as motivator. Herzberg argued that motivators can cause an employee to
move from a state of no satisfaction to a satisfied state therefore a managers can
increase employee job satisfaction by incorporating these motivators into the
employee’s job. Herzberg labels the second cluster of factors hygiene factor. He
states that job dissatisfaction usually associated with the factors in the work context
or environment like company policy, technical supervision, salary, and interpersonal
relations with supervisors and working conditions. These factors are not motivational
so an employee will not have a job dissatisfaction as long as the hygiene factors is
fulfilled but hygiene factors itself cannot improve job satisfaction.
Measuring levels of job satisfaction can be difficult because of the
subjectivity of the concept. People have different way of thinking in defining
themselves as being satisfied or dissatisfied at work. There are many ways to measure
job satisfaction. Common scientific method usually is the use of a questionnaire.
Some of the very well-known job measurement tools are given below.
2.2.1 Minnesota Satisfaction Questionnaire (MSQ)
The Minnesota Satisfaction Questionnaire developed at the University of
Minnesota in ”Work Adjustment Project”. The measurement itself is based on the
assumption that work fit is dependent on the correspondence between the individual
skills and the reinforcements that exist in the work environment (Weiss, Dawis,
England, & Loftquist in Martins & Proença, 2012). The MSQ items are rated on a 5-
point scale:
1 “very dissatisfied with this aspect of my job” 2 “dissatisfied with this aspect of my job”
3 “can’t decide if I’m satisfied or dissatisfied with this aspect of my
job”
4 “satisfied with this aspect of my job”
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5 “very satisfied with this aspect of my job”
Responses are summed or averaged to obtain a total score. The lower the score, the
lower the level of job satisfaction. MSQ captures following facets of job: activity,
independence, variety, social status, supervision (human relations), supervision
(technical), moral values, security, social services, authority, ability utilization,
company policies and practices, compensation, advancement, responsibility,
creativity, working conditions, coworkers, recognition and achievement.
2.2.2 Job Description Index (JDI)
The Job Descriptive Index (Smith, Kendall, & Hulin in Lopes, Chambel,
Castanheira, & Oliveira-Cruz, 2015) is one of the job satisfaction measuring
instruments. JDI is specifically cognitive job satisfaction measure and it measures
five facets below:
Compensation and Benefits
Opportunities for Promotions
Coworkers
Supervision Nature of Work
The scale of five facets is defined by relevant, not relevant and no opinion. Smith,
Kendall and Hullin do not recommend to sum all the five facets into an overall score.
2.2.3 Job Satisfaction Survey (JSS)
One of the well-known job satisfaction measurement tools is developed by
Spector in 1997 and called a Job Satisfaction Survey (JSS). JSS itself contains 36
items to measure 9 dimensions below:
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opportunity of promotion is positively related with job satisfaction and Liu
(2008) also proved that promotion is negatively related with turnover
intention.
Supervision
According to Herzberg in Elliot (2007), supervision is related to the level of
independence received by employees in performing their work and also the
technical skill or the level of competency of their superiors. In this dimension
Spector wants to measure the fairness and the competence at managerial task
by one’s superior or supervisor. Job satisfaction will increase when a
supervisor respect and support the subordinates, having a friendly attitude and
also good listening ability (Mathis & Jackson, 2003). McAuliffe, Daly,
Kamwendo, Masanja, Sidat and Pinho (2013) conducted a study that proved
that supervision could improve job satisfaction and lower turnover intention.
Fringe benefits
There are some definitions of fringe benefits. Merchant in Sihombing (2009)
says that benefit are additional income that paid by company outside the
salary, for instance medical allowance, transport allowance and others.
Tremblay, Sire & Balkin (2000) in their research found that there is a
significant difference between satisfaction on pay and satisfaction on fringe
benefits and a good benefits system can maintain a best talent to stay in the
company.
Artz (2010) found that fringe benefits have a positive relation with job
satisfaction. Study conducted in China by Kasper, Muehlbacher, Kodydek and
Zhang (2012) found that fringe benefits has a negative relation with turnover
intention. There are also another researches that are related to fringe benefits
like the research conducted by Frauenheim in 2006 that found job satisfaction
is not only affected by fringe benefits but also another dimension like the
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relationship with other coworkers. Another research by Dreher, Ash and Bretz
in Sinclair, Leo and Wright (2005) also found that the employee knowledge
and perception about the fringe benefits plays an important role in influencing
the job satisfaction. This mean communication dimension in the company
needs to be improved as well in order to have the employee satisfied with
their benefits.
Contingent rewards
Contingent reward is a non-monetary reward for employees in which
company gives to employees in the form of recognition, praise or maybe
special responsibility, job or assignment because of the employee’s merit(Lawler, 2003). Lawler also argued that the existence of this kind of reward in
a company would increase job satisfaction. Spector defined this measurement
as a level of perceived respect, appreciation and recognition accepted by the
employees. Contingent reward has a negative relationship with turnover
intention according to Jackson, Rossi, Rickamer, Hoover and Johnson in
2012. According to Aplander and Lee in Sihombing (2009) that a reward
system needs to be tested and to be analyzed from time to time regarding their
effect toward the employee. By conducting this review, a company can
maximize the reward effectiveness in order to improve job satisfaction among
the employees.
Operating condition
Spector put this dimension to analyze on the company policies, rules and
procedures, whether they support the employee in doing their job or inhibit
them. In addition, Elliot (2007) in his dissertation defined operating condition
are factors such as facilities to support employee in doing their job. Working
condition like lighting, room layout and equipment also can be considered an
operating condition. Bakotic and Babic on their research on 2013 find that
operating condition plays a big part in influencing employee job satisfaction.
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Milman (2002) argued that poor working condition would lead to turnover
intention.
Coworkers
According to Spector, this dimension will try to measure coworkers in
perceived competence and perceived pleasantness. Simmons (2006)
mentioned that since human basically is a social beings, the opportunity to be
able to work with other people can give a big difference in job satisfaction
level and also it will influence the working life quality. Luthans in Kehinde
(2011) argued that this phenomenon happened because a group people
working together normally can provide the source of comfort, support, adviceand also assistance to the individual worker.
Sias (2005) stated that relationship with coworkers in working environment
can influence the decision-making and information sharing or communication.
A good relationship among coworkers will help information like best
practices in doing a task, company vision and mission, opportunity in training
and other constructive information spread more quickly and effectively in an
organization.
Coworkers can also contribute in shaping someone behavior, both for a
positive behavior and a negative behavior (Raabe & Beehr, 2003). If senior
employees in the organization talk and behave positively about their jobs,
most likely the new employees will model this behavior and are satisfied with
the job. It applies to the reverse condition (Aamodt, 2004).
Robbins and Judge (2013) said that a good relationship with coworkers will
increase job satisfaction, which Ali and Baloch (2008) also supported this
statement by arguing that coworkers have a positive relation with job
satisfaction but a negative relation with turnover intention. Cooper (2002)
stated that company needs to be aware with the relationship among their
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employees since a bad relation with coworkers can decrease the job
satisfaction and its effect amplifies when there is a role or task ambiguity
among the employees.
Nature of work
Through this dimension, Spector wants to measure the employees’ satisfaction
with the type of work they do. Saleem, Majeed, Azis and Usman conducted a
research in 2013 and found that nature of work is significantly related with
job satisfaction. In addition, the nature of work also have a negative
relationship with turnover intention (Mbah & Ikemefuna, 2012).
Communication
According to Gibson, Ivancevich, Donnely and Konospake (2006)
communication refers to how a company ability to receive, collect, spread and
react upon appropriate information to be able to connect individual, groups
within the organization and also with the external environment effectively.
Downs and Hazen in Jones (2006) stated that communication elements in an
organization are including:
o Organization perspective
o Personal feedback
o Horizontal communication
o Communication climate
o Organization integration
o Supervision communication
o Communication media quality
All of these communication elements, according to Booppanon (2008) are
very important to job satisfaction and it will help employee to understand the
organization better which can help an organization to achieve its goals.
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Booppanon also said that there are many factors that influence the
communication quality in the organization including the interpersonal quality
of each individual and their level of relationship. In this dimension, Spector
wants to measure how well is the information sharing in the company.
Carrière and Bourque in 2009 argued that a good internal communication will
improve job satisfaction. According to Mohamad (2008), it will also reduce
turnover intention among the employees.
Job Satisfaction Survey (JSS) will be used in current study. JSS is one of the
most frequently used job satisfaction measurement (Giri & Kumar, 2010; Yelboga,
2009). Based on the respondent’s comments from preliminary questionnaire sent to
PT XYZ, JSS 9 dimension is expected to capture the information regarding job
satisfaction in the target IT consulting companies more accurate.
2.3 Human Resources (HR) Practices
Human Resources practices is how company internally manage their human
resources including activities, rules, policies and practices involved in human
resources planning, obtaining, developing, utilizing, evaluating, maintaining andretaining the appropriate competency and skill mix of employees in order to achieve
organizational goal (Appelbaum, 2001). Verma, Malhotra and Bedi (2012) gave
another definition. HR practices can be defined as any practice that deals with
improving competencies, commitment and company cultural building. HR practice
can take many type of form like a process, an activity, system, a rule, an accepted or
expected habit or norm. Daft (2000) tries to give three broad goals of HR practices:
Attracting an effective human resource
Developing the human resources to the full potential
Maintaining and retaining the human resources over the long term
Wright and Kehoe (2008) supported the statement above and also give
another purposes of HR practices which is to give motivation to the employees and
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Mudor and Tooksoon in 2011 managed to prove conceptually the relationship
between HR practices, job satisfaction and turnover intention. They identified 3
variables of HR practices, which are pay, supervision and training. Current study will
test empirically the research result from Mudor and Tooksoon (2011). Therefore, HR
practices dimension from Mudor and Tooksoon will be used in current study,
however as stated in chapter 1 that current study will use performance management
dimension instead of supervision. Performance management cover a wider area of
HR practices than supervision and JSS already have a supervision dimension within
it.
Training and development
Training and development is one of the well known and common HR
practices (Tzafrir, 2006). Most of the organizations provide this practices for
their employees to facilitate employee development that will enhance
competency, skill and knowledge (Aswathappa, 2008). This is very crucial for
the company because it will enhances the competencies that will give a
competitive advantage against the competitors (Sherman & Snell, 2008).
Training and development can be a very strong tool to keep people in the
company to develop and grow with the company (Butteriss, 1999). Benson
(2006) conducted a research and found that training and development can
reduce turnover intention. Training and development practices can improve
job satisfaction and also in addition increase employee motivation and
commitment (Schmidt, 2007).
Performance Management
Performance management is a process where company managers ensure their
employees activities is aligned with the company goals. Some of the
activities are to understand what activities and outputs that are desired then
observe whether the activities are occurring or not and finally provide
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feedback to help employees achieving the desired output (Noe, Hollenbeck,
Gerhart, & Wright, 2009).
Performance appraisals is a systemize process conducted by the company in
order to evaluate performance of their employees in a certain period (Schuler
in Absar, Nimalathasan & Jilani, 2010). The result should be used for
organizational needs and shared to the employees so it will result in
performance improvement (Abdullah, Bilau, Enegbuma, Ajagbe, Ali &
Bustani, 2012). Company also usually uses the information to decide on the
pay raises, training needed, promotions, demotions or even terminations.
Ryan and Todd (2006) found that if employees have better information about
their performance through a comprehensive coaching system with their
supervisor, it will reduce their turnover intention. Abdullah, Bilau,
Enegbuma, Ajagbe & Ali, 2011 also found the positive relationship
between performance management with job satisfaction and negative
relationship with turnover intention.
Pay Practices
Pay practices is one of the essential elements and it includes all types
of pay, benefits, and rewards received by the employees arising from their
employment according to Dessler in 2007. This practice is very important
since according to Aswathappa (2008), it influences employee’s satisfaction,
loyalty and productivity. Singh in 2004 argued that pay practices especially
performance based compensation system will increase company performance.
Managing compensation and reward through pay practices strategy in a
company can strengthen business strategy by improving individual employee
performance. Lobburi (2012) argued that pay and reward practices have a
positive relationship with job satisfaction and negative relationship with
turnover intention. Pay practices are very important in keeping the employees
in the company but alone it is not enough to keep them stay in the company
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since according to Lawler in Lochhead and Stephens (2004) the key issue is
the amount of total compensation relative to the amount offered by the other
company. Another research that support this argument is done by Smith
(2001) in which he argued that money gets employees to join the company but
it doesn’t keep them there. It is very clear that the other HR practices play a
key to retention, not the pay alone.
2.4 Relationship among HR practices, Job Satisfaction and Turnover Intention
Turnover intention among the employees in an organization is a phenomenon
that is widely studied to understand the basic philosophy of empl oyee’s mind, which
is related with the job turnover intention, or job nature attitude (Shaw, John, Jerkins
& Nina, 1998). There are many factors that cause turnover intention, and specifically
in the current study, the relationship with job satisfaction and HR practices in the
company will be analyzed.
Table 2.1 below show some previous studies that tried to find the relationship
between job satisfaction and turnover intention. The studies conducted in different
countries and also different industries but they all agreed on the result, which is there,
is a significant negative relationship between job satisfaction and turnover intention.
It means if employees are satisfied with their job they tend to stay in their current job
and have less intention to quit the company. Some research go into detail of job
satisfaction dimension and the result is quite vary in different industry and different
country like research by Ali (2008) in Pakistan private sector college found that pay,
fringe benefit, contingent reward and promotion are the most related dimensions with
turnover intention. Research by Tnay, Ekhsan, Othman, Siong & Lim (2013) in
Malaysia production industry found that pay and supervision are the most related
dimension with turnover intention. Research by Wright & Bonnet (2007) also found
another variable that has a moderating effect where they argued that job satisfaction
effect to turnover intention will get higher when well-being of the employee is low.
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Table 2.1 Past Studies about Job Satisfaction and Turnover Intention
Relationship
Researcher Year Data Findings
Mahdi, Zin, Nor,
Sakat & Naim2012 Printing
Company-
Malaysia
Both intrinsic and
extrinsic job satisfactionhave a negative relation
with turnover intention
Ali 2008 Private Sector
College-
Pakistan
Overall job satisfaction
has a significant
negative relation withturnover intention. Pay,
promotion, fringe
benefits and contingent
rewards have thehighest relation above
the other dimensions
Tnay, Ekhsan,
Othman, Siong, &
Lim
2013 Production
Industry-
Malaysia
Job satisfaction
supervisor and paydimension have a
negative relationship
with turnover intention
Wright & Bonnet 2007 West Coast
LargeOrganization-
USA
Job satisfaction
negatively related withturnover intention
especially when the
well-being is low
Yucel 2012 ManufacturingIndustry-
Turkey
Job satisfaction has a positive relationship
with commitment and
negative relationship
with turnover intention
Another past studies regarding the relationship between HR practices and
turnover intention variable are given below in table 2.2. The studies were conducted
in numerous countries including India, Pakistan, Sri Lanka and United Kingdom. The
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industries where the study was conducted also vary including service, banking,
leasing and pharmacist.
Table 2.2 Past Studies about HR Practices and Turnover Intention Relationship
Researcher Year Data Findings
Guchait & Cho 2010 Service
Industry-
India
Perceived HR Practices
by the employee have a
significant relationship
with turnover intention
Khilji & Wang 2007 BankingIndustry-
Pakistan
HR Practices negativelyrelated with turnover
intention with age andcompany performance
moderate significantly
this relationship
Long, Ajagbe &
Kowang2013 Conceptual
Research
HR practices negatively
related to turnover
intention
Seston, Hassel,
Ferguson & Hann
2009 Pharmacist-
UK
HR practices are good
predictors of turnoverintention
Ruwan 2007 Leasing
company-
Sri Lanka
HR practices have a
negative relation withturnover intention with
the most strong
predictors arecompensation and job
analysis
It can be seen that although the researches are conducted in different countries and
across industries, all the research yielded into a same overall conclusion that
perceived HR practices negatively related with turnover intention. There are some
slight variation on the dimension and other findings, for example research by Ruwan
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(2007) proved that in Sri Lankan leasing company, remuneration practices and job
analysis are the most related practices with turnover intention. Another research by
Khilji & Wang (2007) managed to prove that demographic variables like age and also
company performance are the moderator variable between the relationship of HR
practices and turnover intention.
Current study will analyze the relationship among the 3 variables on previous
studies given in table 2.3 related to the relationship between HR practices. Job
satisfaction also reviewed in this study. Many studies have been conducted and also
support the same argument that HR practices is positively related with job satisfaction
or if employees have a good perception of HR practices in their company then it will
lead to a higher job satisfaction.
Table 2.3 Past Studies about HR Practices and Job Satisfaction Relationship
Researcher Year Data Findings
Absar, Azim,
Balasundaram &
Akhter
2010 Manufacturing
firms-Bangladesh
HR practices have a
positive relationship
with job satisfactionwith training anddevelopment as the
most influential
practices
Pasaouglu &
Tonus
2014 Health Personnel-
Turkey
HR practices have a
positive relationship
with job satisfactionespecially training
and development,
performanceassessment,remuneration and
recruitment
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Table 2.3 Past Studies about HR Practices and Job Satisfaction Relationship
(cont’d)
Researcher Year Data Findings
Syed & Yan 2012 TelecommunicationIndustry-Pakistan
HR practices have a positive relationship
with job satisfaction
Verma, Malhotra
& Bedi
2012 IT Industry-India HR practices like
information, variety,
closure and pay practices have a
strong positive
relationship with job
satisfaction
Kooji, Jansen,Dikkers and De
Lange
2010 Meta-Analysis HR practices have astrong positive
relationship with job
satisfaction
HR practices that influence job satisfaction the most is quite vary among
different countries and industries. For instance; in Bangladesh manufacturing firms,
Absar, Azim, Balasundaram & Akhter (2010) found that training and development is
the most influential practices towards job satisfaction while in Turkey health industry,
Pasaouglu & Tonus (2014) found that not only training and development that has the
significant influence to job satisfaction but also performance management,
remuneration and recruitment practices as well.
Mudor and Tooksoon in 2011 conducted a study to find out the relationship
among the three variables. Their result support past studies mentioned above that HR
practices has a positive relation with job satisfaction and job satisfaction has a
negative relation to turnover intention as well as HR practices to turnover intention.
In addition, they argued that job satisfaction mediate the relationship between HR
practices and Turnover Intention. Mudor and Tooksoon conducted a conceptual
research by reviewing some past studies to come up with the result. Current study
will conduct an empirical research to test Mudor and Tooksoon relationship model in
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IT consulting industry. There are 3 HR practices that have a significant influence
according to Mudor and Tooksoon, those are Pay, Supervision and Training. As
stated previously in chapter 1, current study will use performance management
instead of supervision dimension.
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CHAPTER 3
RESEARCH METHODOLOGY
3.1 Research Design
According to Sekaran and Bougie (2010), after all the related variables have
been identified and research model or framework has been developed, the next step is
to design the research so the data can be collected and analyzed before conclusion can
be made. The research is undertaken in order to learn and be able to describe
characteristics of variables. Sekaran and Bougie (2010) stated that descriptive studies
can start with exploratory stage where qualitative data is gathered to understand the
phenomenon and after that quantitative data like frequencies, mean, standard
deviation and others becomes necessary. Research model is built based on the
problem from the preliminary study and previous studies conducted by other
researchers. The research type itself is a correlational study and from the time horizon
point of view. It can be classified as a cross-sectional study since the data is gathered
just once in a particular time.
3.2 Research Variables and Operational Definition
Current study has three variables. First variable is HR practices that act as the
independent variable. Second variable is the job satisfaction that acts as the mediating
variable and the last variable turnover intention, which is a dependent variable.
HR practices have three dimensions, the first one is performance
management, second one is the pay practices and the third one is training and
development. There are four questions for each dimension and in total there are 12
questions in the questionnaire to capture the information about the perceived HR
practices as the independent variable.
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Job satisfaction adopted Spector (1997) model. In total, there are 36 questions
in the questionnaire with four questions for each dimension. Job satisfaction is a
mediating variable in this current study. According to Baron and Kenny in 1986,
mediating variable is the variable that mediates the relationship between the
dependent variables and the independent variables.
The dependent variable in current study is the turnover intention. There are
six questions in the questionnaire to capture the information about respondent
intention to quit the organization.
According to Deming (1994), operational definition is a procedure or
definition that is agreed upon for interpretation of a concept or in a research context it
is a description of a variable and how it is measured within the study. Below is the
operational definition of the three variables and each dimensions.
Job Satisfaction
Job satisfaction is how the employee feel or the emotional state that employee
currently at related to their job in various dimensions which in current study
Spector 9 dimensions are used including pay, promotion, supervision, fringe
benefits, contingent reward, operating condition, coworkers, nature of workand communication.
Pay
Pay dimension is related to whether the employee satisfied with the
compensation given by the company. It includes also the pay raise aspect and
the suitability between the job task and responsibility with the compensation
given.
Promotion
Promotion itself means that the employee is moving to a higher level with
additional responsibility. In this present study, promotion dimension wants to
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measure the employee satisfaction regarding the chances of being promoted,
the time needed to be promoted and the fairness of the process itself.
Supervision
Supervision dimension refers to the satisfaction of the employee regarding
their direct supervisor competency, the fairness, and the attention given by the
direct supervisors to their subordinates.
Fringe Benefits
Fringe benefit is the additional income paid by the company outside the
salary. Some examples of fringe benefits are medical allowance, project
allowance, transport allowance, etc. This dimension will measure the level ofemployee satisfaction regarding their received benefits, whether it is sufficient
or there should be other additional amount or benefits.
Contingent Reward
Contingent reward is a non-monetary reward given by the company to
appreciate their employee’s good work. The dimension measures whether the
employee receives the reward when they have to and how the company
appreciates the employees on their success.
Operating Condition
The dimension refers to company policies and procedure. It measures whether
the employee is satisfied with the company policy and procedure. The
dimension captures whether the company policies are supporting the
employees in their job task or inhibit them in doing it.
Coworkers
Coworkers dimension measures whether the employees enjoy working with
their coworkers or not. Employee’s satisfaction with their coworker
competency is also measured in the dimension.
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Nature of Work
Nature of work dimension measures the employee satisfaction on how they
see and enjoy their job. This dimension also gives understanding whether the
employee proud of their job or not.
Communication
Communication dimension refers to how well the information flow in the
company internally, for example whether the management passed on the
purpose of the company and other relevant information to their employees
well enough or not and whether the employees understand their job tasks that
are communicated by the supervisor or they feel confuse about their tasks.
HR Practices
A Human Resources practice refers to activities, rules, policies, and practices
developed by the company to manage their human resources. The practices
are developed to better plan, obtain, develop, utilize, evaluate, maintain, and
retain the employees. There are some types of HR practices but current study
use 3 HR practices including pay practices, performance management and
training and development.
Pay Practices
Pay practices refers to HR practices that is related to all type of compensation
like salary, benefits, incentives, or bonus. For example, a policy on the pay
raises and benefits. This dimension measures the employee perception on how
the pay practices is applied in the company.
Performance Management
Performance management refers to the employee perception of the
performance appraisal process on the company. It measures if there is a
regular evaluation and feedback in the company also if the evaluation process
is objective and transparent to the employees.
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Training and Development
Training and development dimension measures the employees perception on
the training opportunities that they have in the company and also the quality
of the training and development program provided in the compan