Turnover, Job Satisfaction & HR Practices

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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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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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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:


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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viUniversitas Indonesia

ABSTRACT


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


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


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


Guchait & Cho 2010 Service

Industry-

India

Perceived HR Practices

by the employee have a

significant relationship


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


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)


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

Documents

Turnover, Job Satisfaction & HR Practices