Employee Retention in Growth-Oriented Entrepreneurial Firms: An Exploratory Study
AbstractThis study uses a sample of 47 high-growth small firms to examine the understudied topic of employee retention. We found that firms reporting very low annual voluntary turnover (0-2%) rates engaged in creating a positive work environment, provided employees more freedom and flexibility, offered ample employee involvement and opportunities for growth; were clear about the processes associated with compensation and benefits, and frequently communicated with and provided assistance to their employees. Firms reporting turnover higher than 10% for the past year described their retention practices in much diminished frequency and richness along these same dimensions. Given that these firms were all part of a pool of 77 high growth small companies (over $1 million annual revenue, less than 12 years old and compound annual growth greater than 15%), retention of intellectual capital would be a prime issue. Industry differences among the companies are explored and theoretical and practical implications are discussed.
Aldrich, H. (1999). Organizations Evolving. London: Sage.
Aldrich, H. & Langton, N. (1997). Human resource management practices and organizational life cycles. Frontiers of Entrepreneurship Research. Wellesley, MA: Babson College Center for Entrepreneurship.
Arthur, D. (2001). The Employee Recruitment and Retention Handbook. New York: American Management Association.
Barber, A.E., Wesson, M.J., Roberson, Q.M., & Taylor, M.S. (1999). A tale of two job markets: Organizational size and its effects on hiring practices and job search behavior. Personnel Psychology, 52: 841-867.
Baron, J.N., Hannan, M., & Burton, M.D. (2001). Labor pains: Change in organizational models and employee turnover in young, high-tech firms. American Journal of Sociology, 106(4): 960-1013.
Baron, J.N. & Hannan, M. (2002). Organizational blueprints for success in high-tech start-ups: Lessons from the Stanford project on emerging companies. California Management Review, 44(3): 8-36.
Becker, B. & Gerhart, B. (1996). The impact of human resource management on organizational performance: Progress and prospects. Academy of Management Journal, 39(4): 779- 801.
Butler, T. & Waldroop, J. (1999) Job Sculpting: The Art of Retaining Your Best People. Harvard Business Review, 77(5): 101-109.
Cardon, M.S. & Stevens, C.E. (2004). Managing human resources in small organizations:What do we know? Human Resource Management Review, 14: 295-323.
Cook, M.F. (1999). Outsourcing Human Resource Functions. New York: American Management Association.
Delaney, J.T. and Huselid, M.A. (1996). The impact of human resource management practices on perceptions of organizational performance. Academy of Management Journal, 39(4): 949-969.
Dibble, S. (1999). Keeping Your Valuable Employees: Retention Strategies for Your Most Important Resource. New York: Wiley.
Dillman, D. (2000). Mail and Internet surveys: The Tailored Design Method. New York: Wiley.
Entrepreneur magazine (2006). Entrepreneurial Challenges Survey. January, 2006.
Frazee, V. (1996). Skilled workers are in short supply. Personnel Journal, 75(11): 23-26.
Glanz, B.P. (2002). Handle with care: Motivating and Retaining Your Employees. New York: McGraw-Hill.
Hayton, J.C. (2003). Strategic human capital management in SME's: An empirical study of entrepreneurial performance. Human Resources Management, 42(4): 375-391.
Heneman, R.L. & Tansky, J.W. (2002). Human resource management models for entrepreneurial opportunity: Existing knowledge and new directions. In: Katz, J. and Welbourne, T. (eds). Managing people in entrepreneurial organizations. Amsterdam: JAI Press.
Henricks, Mark (2006). Are you afraid your key employees are ready to walk? Here's what you can do to hold on to your most valuable players. Entrepreneur 1 April 2006, 84.
Hom, P.W. & Kinicki, A.J. (2001). Towards a greater understanding of how dissatisfaction drives employee turnover. Academy of Management Journal, 44(5): 975-987.
Hornsby, J.S. & Kuratko, D.F. (2003). Human resource management in U.S. small businesses: A replication and extension. Journal of Developmental Entrepreneurship, 8(1): 73-92.
Ireland, R.E. & Webb, J.W. (2007) Strategic entrepreneurship: Creating competitive advantage through streams of innovation. Business Horizons, 50(3): 49-59.
Kaplan, S. & Henderson, R. (2006). Employee incentive systems: Why, and When, They are so hard to change. Knowledge @ Wharton. Retrieved 6/5/06 http://knowledge.wharton.upenn.edu.
Kickul, J. (2001). Promises made, promises broken: An exploration of employee attraction And retention practices in small business. Journal of Small Business Management, 39(4): 320- 335.
Kristof, A.L. (1996). Person-Organization Fit: An Integrative Review of Its Conceptualizations, Measurement, & Implications. Personnel Psychology, 49(1): 1-49.
MacMahon, J. & Murphy, E. (1999). Managerial effectiveness in small enterprises: Implications for HRD. Journal of European Industrial Training, 23(1): 25-35.Mak, B.L. & Sockel, H. (2001). A confirmatory factor analysis of I.S. employee motivation and retention. Information & Management, 38: 265-276.
McKeown, J.L. (2002). Retaining Top Employees. New York: McGraw-Hill.
Mcgrath, M. (2006). Plateauing: Redefining Success at Work. Knowledge @ Wharton, October 20, 2006. Retrieved 9/5/07. http://knowldege.wharton.upenn.edu.
Mitchell, T.R., Holtom, B.C., Lee, T.W., Sablynski, C.J., & Erez, M. (2001). Why people stay: Using job embeddedness to predict voluntary turnover. Academy of Management Journal, 44(6): 1102-1122.
Mulvey, P.W., LeBlanc, P.V., Heneman, R.L., & McInerney, M. (2002). Study find that knowledge of pay process can beat out amount of pay in employee retention, organizational effectiveness. Journal of Organizational Excellence, 21(4): 29-32.
Payne, S.C. & Huffman, A.H. (2005). A longitudinal examination of the influence of mentoring on organizational commitment and turnover. The Academy of Management Journal, 48(1): 158- 168.
Peterson, R.A., Albaum, G., & Kozmetsky, G. (1986). The public's definition of small business. Journal of Small Business Management, 24(3): 63-68.
Prewitt, E. (1999). How to keep your company's star employees. Harvard Management Update, August, 3-4.
Ramlall, S. (2003). Managing employee retention as a strategy for increasing organizational competitiveness. Applied H.R.M. Research, 8(2): 63- 72.
Rutherford, M.W., Buller, P. F., & McMullen, P.R. (2003). Human resource management problems over the life cycle of small to mediumsized firms. Human Resource Management, 42(4): 321-335.
Rye, D. (2002). Attracting and Rewarding Outstanding Employees. Santa Monica, CA: Entrepreneur Press.
Saari, L. & Judge, T. (2004). Employee attitudes and job satisfaction. Human Resource Management. 43(4): 395-407.
Saks, A.M. & Ashforth, B.E. (1997). Organizational socialization: Making sense of the past and present as a prologue for the future. Journal of Vocational Behavior, 51(2): 234-279.
Smither, L. (2003). Managing employee life cycles to improve retention. Leadership and Management in Engineering, January, 19-23.
Stewart, W.H., Watson, W., Carland, J.C., & Carland, J.W. (1999). A proclivity for entrepreneurship: A comparison of entrepreneurs, small business owners, and corporate managers. Journal of Business Venturing, 14(2): 189-214.
Tanksy, J.W. & Heneman, R. (2003). Guest editor's note: Introduction to the special issue on human resource management in SMEs: A call for more research. Human Resource Management, 42(4): 299-302.
Winter, S. (1998). Knowledge and Competence as Strategic Assets. In: David A. Klein (Ed). The Strategic Management of Intellectual Capital. New York: Butterworth-Heineman, 165-168.