CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter presents a review of related literature and various concepts on the subject under

study as presented by various researchers, scholars, analysts, theorists and authors. This enables

the researcher to gain knowledge from previous research and to get useful information to

strengthen the study.

2.2 Review of Theoretical Literature

2.2.1 Organizational Policy

A policy is a standing plan that furnishes broad, general, guidelines for channeling management

thinking toward taking action consistent with reaching organizational objectives Certo (2001).

For example, an organizational policy relating to personnel can be stated as: “our organization

will strive to recruit only the most talented employees.” This policy statement is very broad,

leaving managers with only a general idea of what to do in the area of employment. The policy is

intended to display the extreme importance management attaches to hiring competent employees

and to guiding action accordingly. A quality oriented policy is a standing plan that is formulated

with a view to decision making that is consistent with attaining quality objectives. Such policies

can be made in relation to virtually any organizational function such as recruitment, strategic

plans, decision-related information gathered and distributed within the organization, the quality

of products from suppliers the quality of training used to prepare employees to work in foreign

subsidiaries. (Certo 2001).

According to Cole (2004) companies that lack policy guidelines are not be able to offer effective

management due to lack of discipline amongst employees. Policies offer guidelines to both internal

and external customers by setting standards of service to be maintained and adhered to. In

addition, policies ensure that management stays on course and is guided. Moreover, without

organizational policies, nothing can be achieved effectively; hence, codes of conduct must be

adhered to at all times.

A procedure is a standing plan that outlines a series of related actions that must be taken to

accomplish a particular task. In general, procedures outline more specific tasks than policies do.

Organizations have different types of procedures in relation to the tasks to be accomplished.

A rule is a standing plan that designates specific required action. In essence, a rule indicates what

an employee should or should not do and leaves no room for interpretation. An example of a rule

that many organizations are now establishing is “No smoking”. The concept of rules may become

clearer when one thinks of the purpose and nature of rules in such games as scrabble and

monopoly.

2.2.2 Employee Competence

Employee competence is the ability of an individual to do a job properly. A competency is a set

of defined behaviors that provides a structured guide enabling the identification, evaluation and

development of the behaviors in individual employees. Employee competence is a combination

of knowledge, skills and behavior used to improve performance; or as the state or quality of

being adequately or well qualified, having the ability to perform a specific role. For instance,
management competency might include systems thinking and emotional intelligence, skills in

influence and negotiation. Competency is also used as a more general description of the

requirements of human beings in organizations and communities. In emergencies, competent

people may react to a situation following behaviors they have previously found to succeed. To be

competent a person must be able to interpret the situation in context and to have a repertoire of

possible actions to take and must have trained in the possible actions in the repertoire, if this is

relevant. Regardless of training, competency would grow through experience and the extent of

an individual to learn and adapt (Shippmann et al., 2000).

Employee competency has different meanings, and continues to remain one of the most diffuse

terms in the management development sector, and the organizational and occupational literature.

The process of competency development is a lifelong series of doing and reflecting. As

competencies apply to careers as well as jobs, lifelong competency development is linked with

personal development as a management concept. It requires a special environment, where the

rules are necessary in order to introduce novices, but people at a more advanced level of

competency will systematically break the rules if the situation requires it. This environment is

synonymously described using terms such as learning organization, knowledge creation, self-

organizing and empowerment. Within a specific organization or professional community,

professional competency, is frequently valued. They are usually the same competencies that must

be demonstrated in a job interview. Today, there is another way of looking at it: that there are

general areas of occupational competency required to retain a post, or earn a promotion. For all

organizations and communities there is a set of primary tasks that competent people have to

contribute to all the time (Kesser, 2004).

Employee competencies required for a post are identified through job analysis or task analysis,

using techniques such as the critical incident technique, work diaries, and work sampling. A

future focus is recommended for strategic reasons. Competencies refer to skills or knowledge

that leads to superior performance. These are formed through an individual/organization’s

knowledge, skills and abilities and provide a framework for distinguishing between poor

performances through to exceptional performance. Supplier competencies can apply at

organizational, individual, team, and occupational and functional levels. Competencies are

individual abilities or characteristics that are key to effectiveness in work. Supplier competencies

are the characteristics of a manager that lead to the demonstration of skills and abilities, which

result in effective performance within an organization. (Kesser, 2004).

A core competency is fundamental knowledge, ability, or expertise in a specific subject area or

skill set. For example, an individual who becomes certified as a Microsoft Certified Software

Engineer is said to have a core competency in certain Microsoft systems and networks.

Companies with specific strengths in the market, such as data storage or the development of

accounting applications, can be said to have a core competency in that area. The core part of the

term indicates that the individual has a strong basis from which to gain the additional

competence to do a specific job or that a company has a strong basis from which to develop

additional products. Competency is a measurable pattern of knowledge, skills, abilities, behavior,

and other characteristics that an individual needs in order to perform work roles or occupational

functions successfully. Competencies specify the how of performing job tasks, or what the

person needs in order to do the job successfully. Competencies represent a whole-person

approach to assessing individuals. Competencies are classified as general or technical. General

competencies reflect the cognitive and social capabilities required for job performance in a

variety of occupations. On the other hand, technical competencies are more specific as they are

tailored to the particular knowledge and skill requirements necessary for a specific job

(Shippmann et al., 2000).

Employee competency mapping is the process through which one assesses and determines one's

strengths as an individual worker and in some cases, as part of an organization. It generally

examines two areas: emotional intelligence or emotional quotient and strengths of the individual

in areas like team structure, leadership, and decision-making. Large organizations frequently

employ some form of competency mapping to understand how to most effectively employ the

competencies or strengths of workers. They may also use competency mapping to analyze the

combination of strengths in different workers to produce the most effective teams and the highest

quality of work. Competency development is the design of a competency model to be used by an

organization. As challenges change, businesses need to adapt. Individuals need to know how to

respond, and what specifically they need to do differently. They need this information in credible

language and models they can understand. The best approach to competency framework design

is to work closely with key players in organizations to develop or update their competency

models, positioning the content to the end user needs. This ensures there is buy-in and ownership

of the model at all levels of staff. (Sanghi, 2004)

2.2.3 Employee Motivation

Motivation has been defined as the psychological process that gives behavior purpose and

direction. Kreitner, (1995) states that it is the predisposition to behave in a purposive manner to

achieve specific, unmet needs; an internal drive to satisfy an unsatisfied need and the will to
achieve. For this research, motivation is operationally defined as the inner force that drives

individuals to accomplish personal and organizational goals. He says that “at one time,

employees will be considered just as another input into the production of goods and services.”

What perhaps changed this way of thinking about employees will be research, referred to as the

Hawthorne Studies, conducted by Elton Mayo from 1924 to 1942. This study found out that

employees are not motivated solely by money and employee behavior is linked to their attitudes.

The Hawthorne Studies began the human relations approach to management, whereby the needs

and motivation of employees become the primary focus of managers.

Understanding what motivates employees and how they will be motivated will be the focus of

many researchers following the publication of the Hawthorne Study results. Five major

approaches that have led to our understanding of motivation are Maslow's need-hierarchy theory,

Herzberg's two-factor theory, Vroom's expectancy theory, Adams' equity theory, and Skinner's

reinforcement theory. According to Maslow, employees have five levels of needs physiological:

safety, social, ego, and self- actualizing. He argues that lower level needs have to be satisfied

before the next higher level needs would motivate employees.

Herzberg's work categorized motivation into two factors: motivators and hygiene. Motivators or

intrinsic factors, such as achievement and recognition, produce job satisfaction. Hygiene or

extrinsic factors such as pay and job security, produce job dissatisfaction. Vroom's theory is

based on the belief that employee effort will lead to performance and performance will lead to

reward. Reward may either be positive or negative. The more positive the reward the more likely

the employee will be highly motivated. Conversely, the more negative the reward the less likely

the employee will be motivated (Spreitzer, 1996).

Adams' theory states that employees strive for equity between themselves and other workers.

Equity is achieved when the ratio of employee outcomes over inputs is equal to other employee

outcomes over inputs. Skinner's theory states those employees' behaviors that lead to positive

outcomes will be repeated and behaviors that lead to negative outcomes will not be repeated.

Managers should positively reinforce employee behaviors that lead to positive outcomes.

Managers should negatively reinforce employee behavior that leads to negative outcomes. Why

do we need motivated employees? The answer is, for survival. Motivated employees are needed

in our rapidly changing workplaces. Motivated employees help organizations survive. Motivated

employees are more productive. To be effective, managers need to understand what motivates

employees within the context of the roles they perform. Of all the functions a manager performs,

motivating employees is arguably the most complex. This is partly due to the fact that what

motivates employees changes constantly. For example, research suggests that as employees'

income increases, money becomes less of a motivator. Also, as employees get older, interesting

work becomes more of a motivator (Gupta, 2007).

Nicola (2011) states that motivation is a psychological feature that arouses an organism to act

towards a desired goal and elicits, controls, and sustains certain goal directed behaviors. It can be

considered a driving force; a psychological drive that compels or reinforces an action toward a

desired goal. For example, hunger is a motivation that elicits a desire to eat. Motivation has been

shown to have roots in physiological, behavioral, cognitive, and social areas. Motivation may be

rooted in a basic impulse to optimize well-being, minimize physical pain and maximize pleasure.

It can also originate from specific physical needs such as eating, sleeping or resting. Motivation

is an inner drive to behave or act in a certain manner. It is the difference between waking up
before dawn to pound the pavement and lazing around the house all day. These inner conditions

such as wishes, desires, goals, activate to move in a particular direction in behavior.

A class of theories about why people do things seeks to reduce the number of factors down to

one and explain all behavior through that one factor. For example, economics have been

criticized for using self-interest as a mono-motivational theory. Mono-motivational theories are

often criticized for being too reductive or too abstract. A number of motivational theories

emphasize the distinction between conscious and unconscious motivation. In evolutionary

psychology, the "ultimate", unconscious motivation may be a cold evolutionary calculation; the

conscious motivation could be more benign or even positive emotions. For example, while it

may be in the best interest of a male's genes to have multiple partners and thus break up with or

divorce one before moving onto the next, the conscious rationalization could be, "I loved her at

the time". Freud is associated with the idea that human beings have many unconscious

motivations that cause them to make important decisions because of these unconscious forces,

such as choosing a partner (Robbison, 2007).

2.2.4 Compensation and Remuneration (Reward)

Compensation refers to any reward or payment given to a person for services performed. It

includes but is not limited to direct or indirect financial rewards. The purpose of formalized

compensation is to attract sufficient number of qualified persons to fill the positions the

organization has, to retain them in the organization so that turn-over is held to acceptable levels;

and to motivate employees to perform to the fullest extent of their capabilities (Donald L. Caruth

& Gail D. Handlogten, 2001). Human resource managers define compensation as the package of
financial rewards - wages, salaries, commission, bonuses, insurance and other financial types of

indirect monetary benefits given to employees in exchange for their services. Remuneration on

the other hand refers to the subset of rewards that encompasses the total monetary income that

employees receive, together with those benefits with perks that are of monetary value, which the

individual receives by virtue of being an employee. (Keith Macky, Marie Wilson, 2013).

According to Christiane Zugner and Stefan Ullrich (2005), payment systems are significant for

employees as well as for the organization, remuneration might be the main reason why people

are willing to work. In general, there are three different approaches to compensation and

remuneration which are mainly used in human resource management. Fixed levels of payment

consist of salaries and wages which do not change except for general pay increases. Payment is

fixed on the skills and age of the employee and the position. In this case, remuneration is not

affected by the performance and productivity.

In the second approach, reward is linked to performance, meaning the wages and salaries depend

on the quantity and quality of work which might change within a period of time. Most

companies use a mixture between these two systems in order to exchange the received workforce

of an employee. This system is a good way to give feedback to employees. If performance in

the last period was better, they will receive a higher salary as in the previous phase. The third

approach is where reward is linked to the results of the company. In this case, employees receive

monthly-based (minimum) wages and get certain bonuses which depend on the successful

performance of the company.

According to Christiane Zugner and Stefan Ullrich (2005), there are three main factors

influencing compensation strategy: workforce expectations, internal variables (mission targets,

strategy and organizational culture), and external variables (e.g. government policy, certain

lobbies and competitors). Workforce expectations by employees demand fairness of pay amongst

individual employees in an organization who do the same kind of job. Individual equity

therefore refers to pay differentials among employees in the same organization, who do similar

work. Internal equity refers to pay differentials between different jobs within the organization

while external equity refers to fairness in remuneration relation to different organizations.

2.2.5 Job Security

According to Gupta (2007) job security is the probability that an individual will keep his or her

job. A job with a high level of job security is such that a person with the job would have a small

chance of becoming unemployed. Factors affecting job security are dependent on the economy,

prevailing business conditions, and the individual's personal skills. It has been found that people

have more job security in times of economic expansion and less in times of a recession. In

addition, some laws bolster job security by making it illegal to dismiss employees for certain

reasons. Typically, government jobs and jobs in education, healthcare and law enforcement

sectors are considered secure while private sector jobs are generally believed to offer lower job

security. This usually varies by industry, location, occupation and other factors. To some extent,

job security also varies by employment laws of each country. Personal factors such as the

education level, work experience, job functional area, work industry, and work location play an

important role in determining the need for an individual’s services, and impact their personal job

security. Since job security depends on having the necessary skills and experience needed by
employers, which in turn depend on the prevailing economic conditions and business

environment, highly skilled employees tend to enjoy higher job security. (Cole, 2004)

According to Salemi (2009) a job security score is a numerical expression of an individual's

unemployment risk based on a statistical analysis of a person's individual demographics, such as

location, industry, and occupation, as well as external factors, such as technology, outsourcing,

and overseas competition, which is captured in macro-economic data and trends. Job Security

Score also represents the creditworthiness of an individual based on their ability to pay by

predicting an individual's probability of unemployment risk. It is similar to the Credit Score,

which represents the credit worthiness of an individual based on their willingness-to-pay by

evaluating an individual's probability of paying debts in a timely manner. The Job Security Score

is a patent-pending payment risk scoring technology that was first developed by Scorelogix, a

pioneer in consumer risk analytics. Job security index is a measure of job conditions. It

represents how economic factors, internet and computers, international trade and competition,

outsourcing, off-shoring, job migration, among others, are impacting the demand and supply of

employment.

A higher Job Security Index for a region, such as a ZIP code, county or metropolitan statistical

area (MSA), indicates that people in that region have a better opportunity of finding jobs and

remaining employed. A lower Job Security Index for a ZIP or county means that job is relatively

difficult to find and keep. Typically, cities and counties that have a larger concentration of

government jobs or education related jobs have higher Job Security Index values as these jobs

are less impacted by the economy. (Cole, 2004).

2.3 Review of Critical Literature

Organizations set rules and codes of conduct and enforce them to control and regulate the

conduct of people to protect their property and contractual rights with an access to security

justice. Policy is a standing plan that establishes general guidelines for decision making. It sets

boundaries around decisions including those that can be made and eliminating those that cannot.

The policies are made to ensure a level playing field and fairness in the use of resources.

However, the author has failed to show us how organizational policy affects employee retention

in parastatals in Kenya. Due to this reason, the study will be conducted to find out the extent to

which this factor affects the employee retention in parastatals.

According to Pigots and Myers (2000) employee competence is an enhancement of knowledge

which acts not only as motivator to the employee but also an opportunity for a better job that has

more responsibilities and authority with good involvement. Its purpose in the workplace is to

develop the individual and to satisfy the current and future manpower needs of the organization.

Employee competence enhances staff motivation, it improves individual, team and corporate

performance in terms of output, quality, speed and overall productivity. Whereas this is true, the

author failed to show us how employee competence affects employee retention in parastatals in

Kenya. This study intends to find out how employee competence affects employee retention in

parastatals.

Motivation has been defined as the psychological process that gives behavior, purpose and

direction. Kreitner, (1995) states that predisposition to behave in a purposive manner to achieve
specific, unmet needs; an internal drive to satisfy an unsatisfied need and the will to achieve. For

this research, motivation is operationally defined as the inner force that drives individuals to

accomplish personal and organizational goals. He says that at one time, employees will be

considered just another input into the production of goods and services. Although this is true, the

author did not show us how motivation affects employee retention in parastatals in Kenya. This

missing link created the need for this study to be conducted in order to fill the gap.

According to Gupta (2007) job security is the probability that an individual will keep his or her

job. A job with a high level of job security means that the job holder has a small chance of

becoming unemployed. Factors affecting job security are dependent on economy, prevailing

business conditions and the individual's personal skills. It has been found that people have more

job security in times of economic expansion and less in times of a recession. Although this is

true, the author did not show us how job security affects employee retention in parastatals in

Kenya. This problem created the need for a study to be conducted to fill the gap.

2.4 Summary

Organizations set rules of conduct and enforce them to control and regulate the conduct of

employees and to protect contractual rights with access to security justice. Policy is a standing

plan that establishes general guidelines for decision making. It sets boundaries around decisions

including those that can be made and eliminating those that cannot. Policies are made to ensure a

level playing field so that there is fairness in exploitation or use of resources.

Employee competence is the ability of an individual to do a job properly. A competency is a set

of defined behaviors that provide a structured guide enabling the identification, evaluation and

development of the behaviors in individual employees. Employee competence is a combination

of knowledge, skills and behavior used to improve performance.

Motivation is the psychological process that gives behavior purpose and direction. Pre-

disposition to behave in a purposive manner to achieve specific, unmet needs; an internal drive to

satisfy an unsatisfied need and the will to achieve. For the purpose of this research, motivation is

operationally defined as the inner force that drives individuals to accomplish personal and

organizational goals.

Compensation refers to any reward or payment given to a person for services performed. It

includes, but is not limited to direct or indirect financial rewards. The purpose of formalized

compensation is to attract sufficient number of qualified persons to fill the positions the

organization has, to retain them in the organization so that turn-over is held to acceptable levels;

and to motivate employees to perform to the fullest extent of their capabilities.

Factors affecting job security are dependent on economy, prevailing business conditions, and the

individual's personal skills. It has been found that people have more job security in times of

economic expansion and less in times of a recession. Also, some laws bolster job security by

making it illegal to dismiss employees for certain reasons. Unemployment rate is a good

indicator of job security and the state of the economy and is tracked by economists, government

ministries and banks.

2.5 Conceptual Framework

Fig 2.1 Conceptual Framework

Independent Variables Dependent Variable

Organizational Policy

Employee Competence
Employee Retention

Employee Motivation

Compensation &
Source: Author (2016)
Remuneration

Job Security

Source: Author (2016)

2.5.1 Organizational Policy

Organizations should be guided by the government regulatory framework when setting rules and

procedures and when formulating policy. Policies should be made with a view to attracting more

customers towards an organization’s services or products.

2.5.2 Employee Competence

Employee competence is the ability of an individual to do a job properly. Employees have

different ways of approaching production processes hence this may be used to determine the

production schedules. Employee competence is a combination of knowledge, skills and behavior

used to improve performance; or as the state or quality of being adequately or well qualified,
having the ability to perform a specific role. Management competency includes systems thinking,

emotional intelligence, and skills in influence and negotiations.

2.5.3 Employee Motivation

Motivation is the psychological process that gives behavior purpose and direction. Pre-

disposition to behave in a purposive manner to achieve specific, unmet needs; an internal drive to

satisfy an unsatisfied need and the will to achieve. Motivation of customers through quality

customer service will lead to enhanced customer loyalty.

2.5.4 Compensation and Remuneration

Compensation refers to any reward or payment given to a person for services performed. It

includes but is not limited to direct or indirect financial rewards. The purpose of formalized

compensation is to attract sufficient number of qualified persons to fill the positions the

organization has, to retain them in the organization so that turn-over is held to acceptable levels;

and to motivate employees to perform to the fullest extent of their capabilities.

2.5.5 Job Security

Job security is the probability that an individual will keep his or her job. A job with a high level

of job security is such that a person with the job would have a small chance of becoming

unemployed. Factors affecting job security are dependent on economy, prevailing business

conditions, and the individual's personal skills.

 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter presents a review of related literature and various concepts on the subject under

study as presented by various researchers, scholars, analysts, theorists and authors. This enables

the researcher to gain knowledge from previous research and to get useful information to

strengthen the study.

2.2 Review of Theoretical Literature

2.2.1 Organizational Policy

A policy is a standing plan that furnishes broad, general, guidelines for channeling management

thinking toward taking action consistent with reaching organizational objectives Certo (2001).

For example, an organizational policy relating to personnel can be stated as: “our organization

will strive to recruit only the most talented employees.” This policy statement is very broad,

leaving managers with only a general idea of what to do in the area of employment. The policy is

intended to display the extreme importance management attaches to hiring competent employees

and to guiding action accordingly. A quality oriented policy is a standing plan that is formulated

with a view to decision making that is consistent with attaining quality objectives. Such policies

can be made in relation to virtually any organizational function such as recruitment, strategic

plans, decision-related information gathered and distributed within the organization, the quality

of products from suppliers the quality of training used to prepare employees to work in foreign

subsidiaries. (Certo 2001).

According to Cole (2004) companies that lack policy guidelines are not be able to offer effective

management due to lack of discipline amongst employees. Policies offer guidelines to both internal

and external customers by setting standards of service to be maintained and adhered to. In

addition, policies ensure that management stays on course and is guided. Moreover, without

organizational policies, nothing can be achieved effectively; hence, codes of conduct must be

adhered to at all times.

A procedure is a standing plan that outlines a series of related actions that must be taken to

accomplish a particular task. In general, procedures outline more specific tasks than policies do.

Organizations have different types of procedures in relation to the tasks to be accomplished.

A rule is a standing plan that designates specific required action. In essence, a rule indicates what

an employee should or should not do and leaves no room for interpretation. An example of a rule

that many organizations are now establishing is “No smoking”. The concept of rules may become

clearer when one thinks of the purpose and nature of rules in such games as scrabble and

monopoly.

2.2.2 Employee Competence

Employee competence is the ability of an individual to do a job properly. A competency is a set

of defined behaviors that provides a structured guide enabling the identification, evaluation and

development of the behaviors in individual employees. Employee competence is a combination

of knowledge, skills and behavior used to improve performance; or as the state or quality of

being adequately or well qualified, having the ability to perform a specific role. For instance,
management competency might include systems thinking and emotional intelligence, skills in

influence and negotiation. Competency is also used as a more general description of the

requirements of human beings in organizations and communities. In emergencies, competent

people may react to a situation following behaviors they have previously found to succeed. To be

competent a person must be able to interpret the situation in context and to have a repertoire of

possible actions to take and must have trained in the possible actions in the repertoire, if this is

relevant. Regardless of training, competency would grow through experience and the extent of

an individual to learn and adapt (Shippmann et al., 2000).

Employee competency has different meanings, and continues to remain one of the most diffuse

terms in the management development sector, and the organizational and occupational literature.

The process of competency development is a lifelong series of doing and reflecting. As

competencies apply to careers as well as jobs, lifelong competency development is linked with

personal development as a management concept. It requires a special environment, where the

rules are necessary in order to introduce novices, but people at a more advanced level of

competency will systematically break the rules if the situation requires it. This environment is

synonymously described using terms such as learning organization, knowledge creation, self-

organizing and empowerment. Within a specific organization or professional community,

professional competency, is frequently valued. They are usually the same competencies that must

be demonstrated in a job interview. Today, there is another way of looking at it: that there are

general areas of occupational competency required to retain a post, or earn a promotion. For all

organizations and communities there is a set of primary tasks that competent people have to

contribute to all the time (Kesser, 2004).

Employee competencies required for a post are identified through job analysis or task analysis,

using techniques such as the critical incident technique, work diaries, and work sampling. A

future focus is recommended for strategic reasons. Competencies refer to skills or knowledge

that leads to superior performance. These are formed through an individual/organization’s

knowledge, skills and abilities and provide a framework for distinguishing between poor

performances through to exceptional performance. Supplier competencies can apply at

organizational, individual, team, and occupational and functional levels. Competencies are

individual abilities or characteristics that are key to effectiveness in work. Supplier competencies

are the characteristics of a manager that lead to the demonstration of skills and abilities, which

result in effective performance within an organization. (Kesser, 2004).

A core competency is fundamental knowledge, ability, or expertise in a specific subject area or

skill set. For example, an individual who becomes certified as a Microsoft Certified Software

Engineer is said to have a core competency in certain Microsoft systems and networks.

Companies with specific strengths in the market, such as data storage or the development of

accounting applications, can be said to have a core competency in that area. The core part of the

term indicates that the individual has a strong basis from which to gain the additional

competence to do a specific job or that a company has a strong basis from which to develop

additional products. Competency is a measurable pattern of knowledge, skills, abilities, behavior,

and other characteristics that an individual needs in order to perform work roles or occupational

functions successfully. Competencies specify the how of performing job tasks, or what the

person needs in order to do the job successfully. Competencies represent a whole-person

approach to assessing individuals. Competencies are classified as general or technical. General

competencies reflect the cognitive and social capabilities required for job performance in a

variety of occupations. On the other hand, technical competencies are more specific as they are

tailored to the particular knowledge and skill requirements necessary for a specific job

(Shippmann et al., 2000).

Employee competency mapping is the process through which one assesses and determines one's

strengths as an individual worker and in some cases, as part of an organization. It generally

examines two areas: emotional intelligence or emotional quotient and strengths of the individual

in areas like team structure, leadership, and decision-making. Large organizations frequently

employ some form of competency mapping to understand how to most effectively employ the

competencies or strengths of workers. They may also use competency mapping to analyze the

combination of strengths in different workers to produce the most effective teams and the highest

quality of work. Competency development is the design of a competency model to be used by an

organization. As challenges change, businesses need to adapt. Individuals need to know how to

respond, and what specifically they need to do differently. They need this information in credible

language and models they can understand. The best approach to competency framework design

is to work closely with key players in organizations to develop or update their competency

models, positioning the content to the end user needs. This ensures there is buy-in and ownership

of the model at all levels of staff. (Sanghi, 2004)

2.2.3 Employee Motivation

Motivation has been defined as the psychological process that gives behavior purpose and

direction. Kreitner, (1995) states that it is the predisposition to behave in a purposive manner to

achieve specific, unmet needs; an internal drive to satisfy an unsatisfied need and the will to
achieve. For this research, motivation is operationally defined as the inner force that drives

individuals to accomplish personal and organizational goals. He says that “at one time,

employees will be considered just as another input into the production of goods and services.”

What perhaps changed this way of thinking about employees will be research, referred to as the

Hawthorne Studies, conducted by Elton Mayo from 1924 to 1942. This study found out that

employees are not motivated solely by money and employee behavior is linked to their attitudes.

The Hawthorne Studies began the human relations approach to management, whereby the needs

and motivation of employees become the primary focus of managers.

Understanding what motivates employees and how they will be motivated will be the focus of

many researchers following the publication of the Hawthorne Study results. Five major

approaches that have led to our understanding of motivation are Maslow's need-hierarchy theory,

Herzberg's two-factor theory, Vroom's expectancy theory, Adams' equity theory, and Skinner's

reinforcement theory. According to Maslow, employees have five levels of needs physiological:

safety, social, ego, and self- actualizing. He argues that lower level needs have to be satisfied

before the next higher level needs would motivate employees.

Herzberg's work categorized motivation into two factors: motivators and hygiene. Motivators or

intrinsic factors, such as achievement and recognition, produce job satisfaction. Hygiene or

extrinsic factors such as pay and job security, produce job dissatisfaction. Vroom's theory is

based on the belief that employee effort will lead to performance and performance will lead to

reward. Reward may either be positive or negative. The more positive the reward the more likely

the employee will be highly motivated. Conversely, the more negative the reward the less likely

the employee will be motivated (Spreitzer, 1996).

Adams' theory states that employees strive for equity between themselves and other workers.

Equity is achieved when the ratio of employee outcomes over inputs is equal to other employee

outcomes over inputs. Skinner's theory states those employees' behaviors that lead to positive

outcomes will be repeated and behaviors that lead to negative outcomes will not be repeated.

Managers should positively reinforce employee behaviors that lead to positive outcomes.

Managers should negatively reinforce employee behavior that leads to negative outcomes. Why

do we need motivated employees? The answer is, for survival. Motivated employees are needed

in our rapidly changing workplaces. Motivated employees help organizations survive. Motivated

employees are more productive. To be effective, managers need to understand what motivates

employees within the context of the roles they perform. Of all the functions a manager performs,

motivating employees is arguably the most complex. This is partly due to the fact that what

motivates employees changes constantly. For example, research suggests that as employees'

income increases, money becomes less of a motivator. Also, as employees get older, interesting

work becomes more of a motivator (Gupta, 2007).

Nicola (2011) states that motivation is a psychological feature that arouses an organism to act

towards a desired goal and elicits, controls, and sustains certain goal directed behaviors. It can be

considered a driving force; a psychological drive that compels or reinforces an action toward a

desired goal. For example, hunger is a motivation that elicits a desire to eat. Motivation has been

shown to have roots in physiological, behavioral, cognitive, and social areas. Motivation may be

rooted in a basic impulse to optimize well-being, minimize physical pain and maximize pleasure.

It can also originate from specific physical needs such as eating, sleeping or resting. Motivation

is an inner drive to behave or act in a certain manner. It is the difference between waking up
before dawn to pound the pavement and lazing around the house all day. These inner conditions

such as wishes, desires, goals, activate to move in a particular direction in behavior.

A class of theories about why people do things seeks to reduce the number of factors down to

one and explain all behavior through that one factor. For example, economics have been

criticized for using self-interest as a mono-motivational theory. Mono-motivational theories are

often criticized for being too reductive or too abstract. A number of motivational theories

emphasize the distinction between conscious and unconscious motivation. In evolutionary

psychology, the "ultimate", unconscious motivation may be a cold evolutionary calculation; the

conscious motivation could be more benign or even positive emotions. For example, while it

may be in the best interest of a male's genes to have multiple partners and thus break up with or

divorce one before moving onto the next, the conscious rationalization could be, "I loved her at

the time". Freud is associated with the idea that human beings have many unconscious

motivations that cause them to make important decisions because of these unconscious forces,

such as choosing a partner (Robbison, 2007).

2.2.4 Compensation and Remuneration (Reward)

Compensation refers to any reward or payment given to a person for services performed. It

includes but is not limited to direct or indirect financial rewards. The purpose of formalized

compensation is to attract sufficient number of qualified persons to fill the positions the

organization has, to retain them in the organization so that turn-over is held to acceptable levels;

and to motivate employees to perform to the fullest extent of their capabilities (Donald L. Caruth

& Gail D. Handlogten, 2001). Human resource managers define compensation as the package of
financial rewards - wages, salaries, commission, bonuses, insurance and other financial types of

indirect monetary benefits given to employees in exchange for their services. Remuneration on

the other hand refers to the subset of rewards that encompasses the total monetary income that

employees receive, together with those benefits with perks that are of monetary value, which the

individual receives by virtue of being an employee. (Keith Macky, Marie Wilson, 2013).

According to Christiane Zugner and Stefan Ullrich (2005), payment systems are significant for

employees as well as for the organization, remuneration might be the main reason why people

are willing to work. In general, there are three different approaches to compensation and

remuneration which are mainly used in human resource management. Fixed levels of payment

consist of salaries and wages which do not change except for general pay increases. Payment is

fixed on the skills and age of the employee and the position. In this case, remuneration is not

affected by the performance and productivity.

In the second approach, reward is linked to performance, meaning the wages and salaries depend

on the quantity and quality of work which might change within a period of time. Most

companies use a mixture between these two systems in order to exchange the received workforce

of an employee. This system is a good way to give feedback to employees. If performance in

the last period was better, they will receive a higher salary as in the previous phase. The third

approach is where reward is linked to the results of the company. In this case, employees receive

monthly-based (minimum) wages and get certain bonuses which depend on the successful

performance of the company.

According to Christiane Zugner and Stefan Ullrich (2005), there are three main factors

influencing compensation strategy: workforce expectations, internal variables (mission targets,

strategy and organizational culture), and external variables (e.g. government policy, certain

lobbies and competitors). Workforce expectations by employees demand fairness of pay amongst

individual employees in an organization who do the same kind of job. Individual equity

therefore refers to pay differentials among employees in the same organization, who do similar

work. Internal equity refers to pay differentials between different jobs within the organization

while external equity refers to fairness in remuneration relation to different organizations.

2.2.5 Job Security

According to Gupta (2007) job security is the probability that an individual will keep his or her

job. A job with a high level of job security is such that a person with the job would have a small

chance of becoming unemployed. Factors affecting job security are dependent on the economy,

prevailing business conditions, and the individual's personal skills. It has been found that people

have more job security in times of economic expansion and less in times of a recession. In

addition, some laws bolster job security by making it illegal to dismiss employees for certain

reasons. Typically, government jobs and jobs in education, healthcare and law enforcement

sectors are considered secure while private sector jobs are generally believed to offer lower job

security. This usually varies by industry, location, occupation and other factors. To some extent,

job security also varies by employment laws of each country. Personal factors such as the

education level, work experience, job functional area, work industry, and work location play an

important role in determining the need for an individual’s services, and impact their personal job

security. Since job security depends on having the necessary skills and experience needed by
employers, which in turn depend on the prevailing economic conditions and business

environment, highly skilled employees tend to enjoy higher job security. (Cole, 2004)

According to Salemi (2009) a job security score is a numerical expression of an individual's

unemployment risk based on a statistical analysis of a person's individual demographics, such as

location, industry, and occupation, as well as external factors, such as technology, outsourcing,

and overseas competition, which is captured in macro-economic data and trends. Job Security

Score also represents the creditworthiness of an individual based on their ability to pay by

predicting an individual's probability of unemployment risk. It is similar to the Credit Score,

which represents the credit worthiness of an individual based on their willingness-to-pay by

evaluating an individual's probability of paying debts in a timely manner. The Job Security Score

is a patent-pending payment risk scoring technology that was first developed by Scorelogix, a

pioneer in consumer risk analytics. Job security index is a measure of job conditions. It

represents how economic factors, internet and computers, international trade and competition,

outsourcing, off-shoring, job migration, among others, are impacting the demand and supply of

employment.

A higher Job Security Index for a region, such as a ZIP code, county or metropolitan statistical

area (MSA), indicates that people in that region have a better opportunity of finding jobs and

remaining employed. A lower Job Security Index for a ZIP or county means that job is relatively

difficult to find and keep. Typically, cities and counties that have a larger concentration of

government jobs or education related jobs have higher Job Security Index values as these jobs

are less impacted by the economy. (Cole, 2004).

2.3 Review of Critical Literature

Organizations set rules and codes of conduct and enforce them to control and regulate the

conduct of people to protect their property and contractual rights with an access to security

justice. Policy is a standing plan that establishes general guidelines for decision making. It sets

boundaries around decisions including those that can be made and eliminating those that cannot.

The policies are made to ensure a level playing field and fairness in the use of resources.

However, the author has failed to show us how organizational policy affects employee retention

in parastatals in Kenya. Due to this reason, the study will be conducted to find out the extent to

which this factor affects the employee retention in parastatals.

According to Pigots and Myers (2000) employee competence is an enhancement of knowledge

which acts not only as motivator to the employee but also an opportunity for a better job that has

more responsibilities and authority with good involvement. Its purpose in the workplace is to

develop the individual and to satisfy the current and future manpower needs of the organization.

Employee competence enhances staff motivation, it improves individual, team and corporate

performance in terms of output, quality, speed and overall productivity. Whereas this is true, the

author failed to show us how employee competence affects employee retention in parastatals in

Kenya. This study intends to find out how employee competence affects employee retention in

parastatals.

Motivation has been defined as the psychological process that gives behavior, purpose and

direction. Kreitner, (1995) states that predisposition to behave in a purposive manner to achieve
specific, unmet needs; an internal drive to satisfy an unsatisfied need and the will to achieve. For

this research, motivation is operationally defined as the inner force that drives individuals to

accomplish personal and organizational goals. He says that at one time, employees will be

considered just another input into the production of goods and services. Although this is true, the

author did not show us how motivation affects employee retention in parastatals in Kenya. This

missing link created the need for this study to be conducted in order to fill the gap.

According to Gupta (2007) job security is the probability that an individual will keep his or her

job. A job with a high level of job security means that the job holder has a small chance of

becoming unemployed. Factors affecting job security are dependent on economy, prevailing

business conditions and the individual's personal skills. It has been found that people have more

job security in times of economic expansion and less in times of a recession. Although this is

true, the author did not show us how job security affects employee retention in parastatals in

Kenya. This problem created the need for a study to be conducted to fill the gap.

2.4 Summary

Organizations set rules of conduct and enforce them to control and regulate the conduct of

employees and to protect contractual rights with access to security justice. Policy is a standing

plan that establishes general guidelines for decision making. It sets boundaries around decisions

including those that can be made and eliminating those that cannot. Policies are made to ensure a

level playing field so that there is fairness in exploitation or use of resources.

Employee competence is the ability of an individual to do a job properly. A competency is a set

of defined behaviors that provide a structured guide enabling the identification, evaluation and

development of the behaviors in individual employees. Employee competence is a combination

of knowledge, skills and behavior used to improve performance.

Motivation is the psychological process that gives behavior purpose and direction. Pre-

disposition to behave in a purposive manner to achieve specific, unmet needs; an internal drive to

satisfy an unsatisfied need and the will to achieve. For the purpose of this research, motivation is

operationally defined as the inner force that drives individuals to accomplish personal and

organizational goals.

Compensation refers to any reward or payment given to a person for services performed. It

includes, but is not limited to direct or indirect financial rewards. The purpose of formalized

compensation is to attract sufficient number of qualified persons to fill the positions the

organization has, to retain them in the organization so that turn-over is held to acceptable levels;

and to motivate employees to perform to the fullest extent of their capabilities.

Factors affecting job security are dependent on economy, prevailing business conditions, and the

individual's personal skills. It has been found that people have more job security in times of

economic expansion and less in times of a recession. Also, some laws bolster job security by

making it illegal to dismiss employees for certain reasons. Unemployment rate is a good

indicator of job security and the state of the economy and is tracked by economists, government

ministries and banks.

2.5 Conceptual Framework

Fig 2.1 Conceptual Framework

Independent Variables Dependent Variable

Organizational Policy

Employee Competence
Employee Retention

Employee Motivation

Compensation &
Source: Author (2016)
Remuneration

Job Security

Source: Author (2016)

2.5.1 Organizational Policy

Organizations should be guided by the government regulatory framework when setting rules and

procedures and when formulating policy. Policies should be made with a view to attracting more

customers towards an organization’s services or products.

2.5.2 Employee Competence

Employee competence is the ability of an individual to do a job properly. Employees have

different ways of approaching production processes hence this may be used to determine the

production schedules. Employee competence is a combination of knowledge, skills and behavior

used to improve performance; or as the state or quality of being adequately or well qualified,
having the ability to perform a specific role. Management competency includes systems thinking,

emotional intelligence, and skills in influence and negotiations.

2.5.3 Employee Motivation

Motivation is the psychological process that gives behavior purpose and direction. Pre-

disposition to behave in a purposive manner to achieve specific, unmet needs; an internal drive to

satisfy an unsatisfied need and the will to achieve. Motivation of customers through quality

customer service will lead to enhanced customer loyalty.

2.5.4 Compensation and Remuneration

Compensation refers to any reward or payment given to a person for services performed. It

includes but is not limited to direct or indirect financial rewards. The purpose of formalized

compensation is to attract sufficient number of qualified persons to fill the positions the

organization has, to retain them in the organization so that turn-over is held to acceptable levels;

and to motivate employees to perform to the fullest extent of their capabilities.

2.5.5 Job Security

Job security is the probability that an individual will keep his or her job. A job with a high level

of job security is such that a person with the job would have a small chance of becoming

unemployed. Factors affecting job security are dependent on economy, prevailing business

conditions, and the individual's personal skills.