Determinants of employee turnover among small and medium enterprises in Nairobi Central Business District, Kenya

Abstract

It has been argued that employee turnover is a major determinant of this survival but most SMEs do not have employer-employee contracts governing work relationships. A study on SMEs in Nairobi established that 71.2% of SMEs entrepreneurs had observed Kenyan SMEs face problems in attracting and retaining skilled labour hence impeded their growth. The purpose of this study was to examine factors influencing employee turnover among the Small and Medium Enterprises in Nairobi Central Business District (NCBD) Nairobi County, Kenya. Specifically, the study set out to examine the influence of organization-related factors, training related factors, economic-related factors and motivation factors on employee turnover of Small and Medium Enterprises in Nairobi central business district, Nairobi County, Kenya. The study was anchored on three theories, namely human-capital theory, theory x and theory y and hierarchy of needs theory. The target population in this study was 1000 SMEs. The unit of analysis was SMEs Operating within CBD. The sample size of the SMEs was 286 SMEs. The unit of observation was managers, supervisors and subordinates & technical staffs. From each of the categories of the SMEs, the researcher used stratified random sampling to pick one manager, one supervisor and one subordinate & technical staff. Therefore, the sample size was 858 employees. Questionnaires were used to obtain data from the employees of the respective SMEs at their workplaces. A pilot study was carried out to check the validity and reliability of the questionnaires in collecting the data required for purposes of the study. SPSS was used to organize code and analyze information and generate the quantitative report. The data was analyzed using descriptive and inferential statistics. The descriptive statistics were presented in mean, standard deviation and frequencies, while the inferential statistics included the Pearson correlation and multiple linear regression model. The findings of the study showed that related organizational factors and employee turnover were negatively and significantly related (β =-0.158, p=0.071). Training and employee turnover were negatively and significantly related (β =-0.251, p=0.077). Economic factors and employee turnover was positively and significantly related (β =0.257, p=0.081). Finally, motivational factors was negatively and significantly related to employee turnover (β =-0.176, p=0.077). The study concludes a positive and significant association existed between training-related factors and employee turnover. The study also concludes that economic-related factors and employee turnover is positively and significantly related. Besides, the study concludes that most of the economic-related factors that enhance the employee comprise of salary and compensation, Commissions and bonus of income and retirement benefits. The study concludes a negative and positive relationship exists between motivational factors and employee turnover. The study recommends that organization justice should be administered to all of the employees in Small and Medium Enterprises in the Nairobi Central Business District (NCBD). The study also recommends that the management of the organizations invest in providing their employees with the necessary training relevant to their job description. Furthermore, the study recommends that SMEs ensure that salary and compensation, commissions, bonus, and retirement benefits are improved. Lastly, the study recommends that management within the SMEs improve the rewarding systems, the service and promotion structure.