CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Retaining employees whose knowledge has high competitive value is becoming a critical and well-recognized challenge (Taylor, 2004 and Williamson, 2008). Such employees are known as knowledged workers in that they “have high degrees of expertise, education, or experience, and the primary purpose of their jobs involves the creation, distribution or application of knowledge” (Davenport, 2005).
The retention of employees has been shown to be significant to the development and the accomplishment of the organization’s goals and objectives. Retention of employees can be a vital source of competitive advantage for any organization.
Today, changes in technology, global economics, trade agreements, and the likes are directly affecting employee/employer relationships. “Until recently, loyalty was the cornerstone of that relationship. The loss of talented employees may be very detrimental to the company’s future success. Outstanding employees may leave an organization because they become dissatisfied, under paid or unmotivated (Adeniran 2005). While trying to retain employees within the organization, the organisation may face other challenges such as demand for higher wages by skilled employees, not complying with organization practices, and inadequate good interaction with their co-workers.
Besides these problems, lack of information about the employees’ performance may complicate an organization’s endeavour to retain productive employees. Without adequate information an organization may not be able to distinguish productive workers from non-productive ones. Employees often may take credit for the successes and deflect failures to other employees. Insufficient information about employees’ performance may result in adverse selection by them (Grossman and Hart 1999). The better employees may move to other organizations for better opportunities. The co-workers who cannot improve their positions are more likely to stay. This is especially possible when due to inadequate information outstanding performance is not rewarded i.e, lack of motivation for outstanding performance. Non productive and productive workers end up receiving the same or nearly the same compensation and package of perks because of management’s in ability to distinguish talented employees from the rest of the labour force in the organization.
The problem of attempting to keep talented members of the work force may be further complicated because of superiority complex of these talented employees to organisational success (Simon, 1996). It is another result of asymmetric information where both the manager does not know the information for which to ask from the employee and the employee does not know what to provide. Therefore, productive workers cannot distinguish themselves from non-productive co-workers. Even if an organization is fortunate enough to retain talented employees, the company may still have to cope with agency costs resulting from them and their colleagues. When information about an employee’s activities is difficult to gather, the employee may be motivated to act in his own interest which may diverge from the interest of the organization. This divergence of interests results in costs to the organization in the form of excessive prerequisite consumption, shirking of job responsibilities and poor investment decision making. (Jensen and Meckling, 1996) explained that it is in an employee’s interest to over consume perks and shirk job responsibilities of the firm if they are not sole owners of the organization.
Employees may also be enticed to make suboptimal investment decisions for the firm. Since most company employees have their wealth tied up in the organization for which they work, employees may attempt to make investment decisions which are less risky than the stock holders of the firm would prefer. This is done to reduce the risk of failure by the company, which protects the no diversified employee from loss of wealth. This investment strategy may also reduce the return on investment that the diversified owners of the firm desire. (Mark, 2000).
The employees or agents of the organization may also use a short sighted approach in investment selection to enhance their own career chances (Narayanan 1985). The employee can signal the labour market his superiority through the selection of a fast starting project, which may fizzle out later for the firm. This strategy may cause the firm to miss profitable long-term projects or much needed research and development. Employees may also attempt to increase the size of the firm through acquisitions and project selection regardless of the effect on company profitability in order to increase their own power base within the organisation.
1.2 Statement of Problem
Organisations are confronted with diverse problems which affect the accomplishment of their goals and objectives. Retention of employee is one of the major problems in most government investments in recent years. There is the general outcry in Lagos State that her employees are not properly remunerated and incentives were not regularly paid. Recently, Lagos state foreign doctors embarked on strike actions which lead to mass exit of patients from Lagos state hospitals. It is also observed that most of erudite scholars are now leaving government educational institutions to private institutions as a result of better offer. These poses problems for the government to retain its skilled employees so as achieve its objectives.
It also observed that majority of individuals leave government investments for private investment after they have enjoyed government investment on staff investments such as in-service training leading to failure in the output of government investments.
It is also discovered that privatisation of Government investments which leads to mass unemployment of government staff have also contributed to mass outflow of government employees to other private sector due to the fear of lack of job security. This poses the problem of retention of employee as one of the factor hindering the success of government establishments.