The of effectiveness of employee retention policies in Sainsbury and Tesco

A comparative study

Bachelor Thesis, 2012

62 Pages, Grade: A




Chapter One
1.1 Introduction
1.2 Background of Study
1.3 Purpose and Aim of Study
1.4 Objectives of Research
1.5 Research Question
1.6 Organization Overview
1.7 Significance of Study
1.8 Overview of Chapters
1.9 Summary of Chapter

Chapter Two
Literature Review
1.1 Introduction
1.2 The Importance of Human Capital
1.3 What is Employee Retention?
1.4 Why is Employee Retention Important?
1.5 Employee Retention Strategies
1.6 Summary of Chapter

Chapter Three
3.1 Introduction
3.2 Defining Research
3.3 Research Philosophy
3.4 Research Approach
3.5 Research Method
3.6 Data Collection Tools
3.7 Population and Sampling
3.8 Data analysis method
3.9 Ethical Considerations
3.10 Summary of Chapter

Chapter Four
Data Findings and Presentation
4.1 Introduction
4.2 Findings of questionnaire
4.3 Summary of Chapter

Chapter Five
Data Analysis
5.1 Introduction
5.2 Analysis of Results
5.2.1 Training and Development
5.2.2 Promotional opportunities
5.2.3 Performance Appraisal
5.2.4 Salaries and benefits
5.2.5 Relationships with other employees
5.2.6 Job Security and Job Authority
5.2.7 Working Environment
5.2.8 Role of Managers
5.2.9 Employee retention
5.3 Summary of Chapter

Chapter Six
Conclusion and Recommendations
6.1 Introduction
6.2 Conclusion of Findings
6.3 Recommendations
6.4 Limitations of the Research
6.5 Future Research


This particular research has been conducted in order to compare the employee retention practices of Tesco and Sainsbury in United Kingdom. This particular research has been conducted through triangulation methodology. Qualitative and quantitative data tools have been employed for comparing the employee retention practices of both competitors. Primary data has been collected through a survey which is conducted through a close end questionnaire. A sample of 100 employees has been selected through convenience sampling technique. The survey generated a response rate of 93%. The findings of the research suggest that Tesco has been more effective in its employee retention practices as compared to Sainsbury. Tesco adopts long lasting and effective tools for employee retention whereas Sainsbury looks for short term gains. The research found that in Tesco, management role, high salaries, extra benefits, and good working environment has been created for influencing employees to stay with the organization for a long time. On the other hand, Sainsbury lacks some important practices such as management role, extra benefits, job authority, job empowerment, and communication across departments which make it ineffective in its employee retention practices. In order to retain key employees for a long time period, it is important for Sainsbury to provide extra benefits and management support to the employees. This research has been limited to the Tesco and Sainsbury in United Kingdom. Future researchers can expand the scope of this research by taking a large sample from different stores. They can generalize the results by taking large sample from different organizations.

Chapter One

1.1 Introduction

Human resource management involves several practices. Employee retention practices have great importance among all the human resource management activities of an organization. This particular research is focused at the evaluation of employee retention practices. This is the introductory chapter of the research that presents the background in which research is conducted. It also highlights aims and objectives, questions and significance of the research. This chapter also discusses the organizational background and a brief summary of all chapters of the research.

1.2 Background of Study

Today, organizations compete with each other on revolutionary trends such as accelerating technological and product changes, demographic changes, deregulation, global competition, and at the same time, they also strive for implementing trends towards information age. Due to increasing competition in the market, one of the challenges faced by the organizations is to retain its key employees. Organizations are increasingly competing with each other for retaining best talent (Brown, 2001). Organizations have recognized the importance of motivating and retaining key employees who survive organizational downsizing, restructuring, consolidation, and reengineering efforts (Beer, 1984).

People and organizational capabilities have become important and critical success factor for the organizations. The emphasis of organizations has shifted to the strategies that manage human capital and build organizational capabilities in order to achieve and sustain competitive advantage. Thus, developing and retaining core employees has become a key challenge faced by the organizations and their human resource mangers (Lipiec, 2001).

Organizations that face problems of labor shortage, effective recruitment strategies are important for survival, which makes it core strategic issue. Recruitment strategies play important role for the organizations, not only for attracting new talent but also enhances its chances for retaining employees, once they are hired (Sims, 2002). This suggests that after hiring the employees in the organization, retaining them is of supreme importance. It also emphasizes the importance of recruitment strategies that have ultimate impact on the retention of employees.

Wright (2002) says that in today’s organizations, one of the global trends is to fight with the talent war. She also argues that human resource management also faces challenge for attracting and retaining new generation people for whom money is important but not everything. New generation people have many concerns other than the money. For these people, opportunities for development and work life balance have prime importance. She argues that if organizations really don’t want to lose talented people, they must search for the options that can attract as well as retain talented people. Organizations implement different strategies for retaining employees such as flexible work, employee empowerment and career development plans.

Sims (2002) identifies that many organizations fail to retain employees because their management thinks that only high salary is enough for satisfying and retaining employees. This strategy of organizations is not true because employees have material as well as psychological needs. Satisfaction of material as well as psychological needs of employees is important for retaining employees. Many employers provide career planning efforts to the employees in order to reduce the chance of losing key employees.

Satisfaction of employees and customers has relation with each other (Noe, 2006). If employees of the organization are satisfied, they can serve the customers in effective way and thus contribute in the customer satisfaction. Providing attractive facilities and opportunities to the employees play important role in employee and customer retention. Many studies have found that employees who are satisfied with their jobs have high level commitment for the organization and go for an extra mile for satisfying customers (Klein and Kozlowski, 2000; Yammarino and Dansereau, 2004; Raudenbush and Bryk, 2002). This emphasizes the importance of employee retention strategies for the organization.

Another factor that emphasizes the importance of employee retention strategies is the hiring cost associated with the new recruitment. Employees, who are not satisfied with the policies of the organization, are likely to leave it if they find any better opportunity in the external employment market. In order to fill the vacancies, organizations need to hire new employees that can create extra cost to the organization. Thus, high turnover means high cost to the organization. In this context, organizations need to implement effective policies for retaining employees (Klein and Kozlowski, 2000).

The above discussion points out the importance of retaining key employees in the organization. Organizations compete on the basis of skilled staff members. In today’s competitive and changing environment, employees have several demands from organizations other than the salaries. Thus, the importance of employee retention strategies has increased too many folds. Different organizations adopt different mechanisms and strategies for retaining their key employees. As the issue is very important and relevant to the environment prevailing in the organizations, this particular research is going to make comparative analysis of employee retention strategies of Tesco and Sainsbury in United Kingdom.

1.3 Purpose and Aim of Study

The purpose of the study is to apply the academic theories and research methodologies in practical research project. The research is focused at the employee retention policies adopted in the retail sector of United Kingdom. The aim of the research is

“To compare the effectiveness of employee retention practices of Tesco and Sainsbury in United Kingdom”

1.4 Objectives of Research

The objectives of the study are as follows:

- To understand the importance of employee retention for the organization
- To investigate the strategies ,used for retaining employees, from existing literature
- To identify the employee retention strategies adopted by Tesco and Sainsbury in the United Kingdom
- To compare the effectiveness of employees retention strategies adopted by Tesco and Sainsbury in the United Kingdom
- To propose recommendations to the management of Tesco and Sainsbury for improving employee retention practices

1.5 Research Question

Following research questions are addressed in this particular research:

- Why is employee retention important for the organizations in current scenario?
- What are of strategies adopted by the organizations for retaining employees, discussed by the literature?
- What are the strategies adopted by Tesco and Sainsbury for retaining employees in the United Kingdom?
- Which retailer, Tesco or Sainsbury, is more effective in its practices for retaining its key employees?
- How can Tesco and Sainsbury improve existing practices of employee retention?

1.6 Organization Overview

Tesco is a multinational retail store base in United Kingdom. In terms of revenues, it is the third largest retail store in the world. It operates across Asia, Europe, and North America in 14 countries. Till 2012, 520,035 employees have been working in Tesco across the world. In order to manage such a great number of employees, Tesco has been recognized as one of the most effective retail stores.

J Sainsbury plc is the third largest retail store of the United Kingdom. Sainsbury was started as family business and now became one of the leading retail stores of the United Kingdom. Once, Sainsbury was the leading retail store of the United Kingdom. Then Tesco and ASADA came in the market and pushed Sainsbury at third place.

These two competitors have been competing with each other for acquiring talent from the United Kingdom. It will be very interesting to compare the counter practices of both retailers for retaining employees.

1.7 Significance of Study

This particular study is significant as it is going to discuss the important issue faced by the organizations. Managing human resource capital in the organizations is a key challenge in the current market scenario where numbers of organizations compete on talented staff members. Hiring and retaining key employees is not an easy practice for the organizations, as employees have different needs and wants. Organizations need to practice effective employee retention strategies in order to attain competitive edge in the market. This particular research is going to elaborate the employee retention strategies of Tesco and Sainsbury in United Kingdom. By comparing the employee retention practices of both organizations, effective analysis of retention practices will be conducted. The research is significant for both retailers as it is going to highlight the flaws in employee retention practices of both retailers. Moreover, recommendations will also be proposed at the end of the study for improving existing employee retention practices adopted by Tesco and Sainsbury.

1.8 Overview of Chapters

Chapter One: Introduction

This is the first chapter and creates background of the research. This chapter has outlines aims, objectives and research questions. It has also discussed about the significance of the study. Organizational preview has also been described in this chapter.

Chapter Two: Literature Review

This is the second chapter. This chapter discusses importance of human capital, employee retention, and need of employee retention, motivational theories and other factors of employee retention.

Chapter Three: Methodology

This is the third chapter of the research that describes about the research methodology in detail. This chapter discusses the whole methodology adopted for this research. Research methods, research scope, data collection tools and ethical considerations of research have been discussed in this chapter.

Chapter Four: Data Presentation

This chapter presents the findings of the questionnaire in a systematic manner. Findings of survey are presented in the form of graph in this chapter.

Chapter Five: Data Analysis

This chapter analyses the findings of the research in a systematic manner. All the findings are discussed in detail. This chapter also describes the relationship of primary and secondary data findings.

Chapter Six: Conclusion and Recommendations

This is the last chapter of the research which concludes all the findings of the research. It answers all the questions asked in the first chapter. On the basis of findings of the research, recommendations have been proposed to the management of Sainsbury for improving its employee retention practices.

1.9 Summary of Chapter

This particular research has been conducted in order to compare the effectiveness of employee retention practices of Tesco and Sainsbury. The researcher is going to discuss the employee retention strategies highlighted by the literature as well as strategies adopted by Tesco and Sainsbury in the United Kingdom. This chapter has presented background of the research. In the next chapter, employee retention strategies highlighted by the literature are explored.

Chapter Two
Literature Review

1.1 Introduction

This particular research is going to discuss the employee retention strategies of Tesco and Sainsbury in the United Kingdom. In this chapter, previous studies about employee retention are discussed. First of all, the concept of human capital and its importance for the organizations is elaborated comprehensively. Next, meaning of employee retention is clarified and its importance for the organizations is elaborated. Next, important strategies of employee retention are explained of which motivation is the main strategy. This chapter critically reviews existing literature regarding employee retention practices.

1.2 The Importance of Human Capital

Organizations work in the framework of many stakeholders such as shareholders, employees, suppliers, customers, government, environment and general public. Employees and shareholders are the internal stakeholders and have direct impact on the organizational practices. Employees are considered to be the important ones for accomplishing organizational goals.

Human resource is considered as the most important asset of an organization which is held responsible for achieving organizational aims and objectives. Many organizations consider their human resource at high priority while others proclaim this but do not mean it. Pfeffer (1998) has given detailed elaboration of this fact. He says that many organizations focus on finding solutions in order to deal with competitive challenges and put their efforts for finding means and places that can prove to be productive. Such organizations emphasize on buying or selling their portfolios in order o find a suigraph niche, outsource of downsize in order to find a way for improving their profit and do many other things for minimizing labor cost that destroy or weaken the organizational culture-even then they proclaim that people are their most important assets (Pfeffer, 1998). This shows that many organizations focus on the other aspects of organization rather than putting their people at first priority.

The organizations that place their human resources at secondary priority face difficult situations while combating challenges presented by competition, globalization and organizational changes.

Namasivayam et al . (2007) suggests that managers need to consider employees as active social beings instead of considering them as passive economic beings and should create human work environment in the organizations. It has been found by many studies that organizations that give high level importance to their employees achieve high level success and remain competitive in the market as compared to the organizations that place their employees at secondary level.

Pfeffer (1998) discusses that customer satisfaction, which determines the strategic directions of an organization and fosters repeat purchase, depends on the high quality service of organizational people. He further argues that high standards of organizational service depend on the employees. This is the reason organizations need to place their employees at first priority. On another occasion, Pfeffer (1998) argues capital and machinery of an organization make it possible to achieve the organizational aims and objectives whereas people make it happen. This means organizational non-human resources are the apparatus whereas organizational people are the experimenters who use apparatus and achieve the desirable results.

It has been generally accepted that industrial age has started the age of intellectual capital. Many organizational leaders have recognized the importance of human capital. In June 2000, Bill Gates who is the chairman of Microsoft claimed that lifeblood of the technological industry is not industrial capital such as equipment and machinery but the human capital. Many companies do not consider employees as the resources whose main function is the production of goods but recognize that responsive and motivated employees are the way to make customers happy which in turn contribute to the bottom line of the organization (Gentry , 2006).

Organizations have recognized that their competitive advantage is primarily based on their people. Now, the organization has become a smaller place because of improved technology, globalization and advancement in the communication. All this has made the ‘war for talent’ ruthless in the business societies. Many companies have been considering talent management at high level. Such organizations are seeking for the ways for selecting, developing, and retaining their best employees (Martin, 1979). Human resource has become the most important department of the organization. This is because human resource department is responsible for selecting and developing employees who are important source of achieving organizational aims and objectives. Human resource managers need to adopt strategic approach for developing their employees as important source of competitiveness in order to support business decisions (Prince, 2005).

In today’s competitive and changing environment, companies need to be proactive in their strategies rather than reactive. Emerging problems cannot be dealt with the old methods of doing things. Companies need to be innovative in their strategies in order to find efficient, timely and better solution of problems. Creativity and innovation can be attained through organizational people. This characteristic of organizational people makes human resource the most valuable resource of the organizations (Rhoades et al., 2002). Organizations need to hire creative people in order to deal with perpetual changes in the external and internal environments. Organizations are about people, thus, they way through which organizations deal with their people determines the failure of success of the business. Human resource managers need to lead employees in appropriate direction for achieving organizational aims and objectives by motivating, satisfying and retaining them.

1.3 What is Employee Retention?

Employee retention refers to the ability of organizations to make their employees stay with the organization. Employee retention can also be related to the efforts of the companies by which they attempt to retain employees. In this context, employee retention is considered as a strategy rather than an outcome of strategies. Employee retention refers to many policies and practices of the organizations by which employees stay with the organization for a long time period (Prince, 2005).

Organizations invest substantial amount of money and time on new employees in order to make them compatible with the external market and also to bring them at a level equal to the existing employees. The organizations face high loss when employees leave them after getting training. Employee retention takes several measures and practices in order to keep the employees with the organizations so that they can benefit organizations for a long time period.

1.4 Why is Employee Retention Important?

One of the big challenges faced by the organizations is to stay up to high speed in the era of intensive technological innovation. Companies spend very high investments in order to stay on the cutting edge. In the today’s business environment, organizations are living in the increasing pace of technology and on the other side; they face increased shortage of competent and skilled employees. In this context, employee retention is the main concern for all types of organizations. For talented employees, there is great number of employment opportunities. It has been argued by Prince (2005) that higher the skilled employees, higher are their demand in the job market. An important factor which fuels the problem is the slow pace of growth of workforce. The act of trimming the fact and keeping the healthy portion of the cow is becoming a big challenge in today’s business environment. Organizations face heavy cost for replacing the employees. It takes more time, effort and money of the organizations for replacing the employees. Wells (2002) has discussed that as more companies hire, fire and perform the both actions simultaneously, the overall growth of the workforce becomes slow.

Prince (2005) has discussed that employees who leave an organization take 30% of the annual salary to replace them. He also found that employees who are happy in an organization are less likely to leave the organization. Such employees also give high productivity to the organization. He also argues that the capability of the organizations to retain their key employees impacts their profitability. Many studies have discussed the factors that make the employees to leave the organizations. These studies show that frustration, constant resistance from the colleagues or supervisors, lack of growth opportunities, low salaries, lack of motivation and rigid job timings compel the employees to leave the organization and find a better opportunity (Schuler, 2004). There is great difficulty for the organizations to create a balance in the area of people factor. Current employers convey a clear message to employees that ‘if we need you, please stay with us. If we do not need you, the guard is present to escort you out of the company’. Thus, employees and employers both are affected by the hiring and firing practices. This juggling activity of keeping the cream and throwing away the residual is becoming a complex task for the employers. Many factors are responsible for retention of employees. Employee morale is the critical factor that can make employees either stay with the organization or leave it. Thus, organizations need to manage the employee retention with great care.

1.5 Employee Retention Strategies

1.5.1 Motivation

For managers, it is very difficult task to extract the desired behavior from employees all the time. This suggests the need of motivation for the employees. Gratton (1999) suggests that the relationship between employees and organizations is regulated by the factors that motivate them and also on the fulfillment that they get from it. Thus, motivation is an important phenomenon regarding employee retention.

Motivation refers to specific psychological processes that cause direction, arousal and perseverance of particular voluntary activities that are directed towards goals. Williams (1995) have defined motivation as the forces that determine attitudes, behaviors and characteristics of the employees towards a particular setting. Motivation is a kind of feeling that comes from inside of individuals. In this context, it can be said that motivation cannot be created in the individuals rather they are self motivated. It is the situation that makes them motivated. Schuler (2004) discusses that motivation is a kind of force in all individuals that directs and sustains their behavior.

The factors that motivate employees can be broadly differentiated into two groups which are extrinsic factors and intrinsic factors (Williams, 1995). Intrinsic motivation refers to the attainment of high performance or achievement (Dubie , 2000). Intrinsic motivation results from the employee interest in the job. The external factors such as benefits, rewards and appreciation do not have any impact on the intrinsic motivation of individuals. On the other hand, individuals can be intrinsically motivated by providing them high salaries, attractive benefits and rewards. Scholars have emphasized on both types of factors for motivating individuals.

Managers need to understand the factors and psychological processes in order to guide employees for accomplishing aims and objectives of the organizations in effective way (Krietner et al ., 2002). People have their personal goals such as recognition, money, achievement, avoiding punishment and career advancement for which they seek to work (Williams, 1995). Work goals of individuals are often other individual’s goals. It is the responsibility of the managers to get a meaningful insight of the work goals and attach meaning to them.


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The of effectiveness of employee retention policies in Sainsbury and Tesco
A comparative study
The University of Liverpool
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sainsbury, tesco
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Alex Cole (Author), 2012, The of effectiveness of employee retention policies in Sainsbury and Tesco, Munich, GRIN Verlag,


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