CHAPTER ONE

INTRODUCTION
1.01

BACKGROUND OF THE STUDY

In todays world, targets of organizations can be reached only if the employees

brought together for a certain purpose do their job willingly and voluntarily. Unless a
process which retains employees from doing their job or makes them unwilling for their
job occurs, organizational targets can be reached without a deviation. On the other hand,
it is not right to expect the employees to realize the same job performance like a
programmed machine all the time. Since individuals are social beings, their needs and
expectations change in course of time and when these expectations are not met, negative
perception can also be reflected in their job performance. Therefore organizations need
some internal and external means of interference in order to change the perception of the
employees according to their targets. Determining the right means requires analyzing
employees well and identifying the primary needs correctly. Because there is a direct
relationship between the effect of selected tools of motivation and employee
expectations, and only a correctly selected means of motivation can satisfy employees,
and eventually satisfied employees willing to do their jobs will use their talents in their
workplaces, which will pave the way for realizing organizational targets. This study aims
at measuring the effect of job security on the perception levels of job satisfaction tools
effective on the job motivation of employees. It is out of the question that employees
anxiety of losing their jobs will increase at the times of economic instability business
1

world encounters. In this kind of a situation, it is thought that job security is one of the
most effective factors on job satisfaction due to its eliminating employees future anxiety.
Job satisfaction and job security are issues both of which are related to working. This
suggests that there is a meaningful relationship between employees perception level of
job security and effectiveness of other motivational tools on the employee.
Research on job security has provided consistent evidence across firms, industries,
and countries that declining job security level is associated with negative
employee perception, behaviours and health which in turn affect work
performance (Sverke, Hellgren, and Naswall, 2002). Substantially, banking
reforms have been an ongoing phenomenon around the world starting from 1980s,
but became more intensified in recent time because of the impact of globalization
which is precipitated by continuous integration of the world market and
economies. In Nigeria, the reforms in the banking sector was triggered by the
economic downturn cum weaknesses in the banking system characterized by
persistent illiquidity, undercapitalization, high level of non-performing loans;
weakness in the regulatory and supervisory framework; weak management
practices; and tolerance of deficiencies in the corporate governance behavior of
banks (Uchendu, 2005). This posed a threat to the operation of many banks
resulting in sudden replacement of many banks Chief Executive Officers
(C.E.Os) for example, Oceanic Bank (now Eco Bank), Union Bank,
Intercontinental Bank (now Access Bank), Fin Bank and Afri Bank (now
Mainstreet Bank) in August 2009.
2

In 2009, in the Nigerian banking industry, large numbers of bank workers were
retrenched, leaving the remaining workers with fear of uncertainty and heavy
workloads, such that they work under tense conditions with the phobia of losing
their jobs anytime. In addition, the Nigerian banking sector has witnessed
retrenched or downsizing of most qualified employees in order to minimize costs
and maximize profit. However, this trend in the banking sector has devastating and
long lasting effects on the well-being of affected bank employees. This is coupled
with its attendant effects on the organizational commitment and performance of
those in the system arising from inability of bank workers to maintain positive
attachment to modern work in the absence of security of employment. Thus, the
growing interest in the ways in which workers adapt to what is now a normative
situation, employment in jobs that offer only limited or no security is the major
thrust of this paper.
Ultimately, the model explains how government policy affects the operation and
structure of banking activities whereby most banks find it difficult to pay their
workers salaries. Hence, the need to cut down their expenditure by reducing the
number of workers through downsizing so as to cut down their costs and
maximize profits. On the other hand, Herzbergs two-factor theory viewed job
security as a motivating need in the work situation which once assured readily or
consequentially enhance performance on the part of employees.
However, the fusing together of the two theories made significant contributions to
the study of the condition of workers in the selected banks. Marxian theory is
3

helpful in identifying employment relations between employers and employees

while Herzbergs theory provides insights into the goals and incentives that tend to
satisfy individual needs.

1.02

PROBLEM STATEMENT
Even though studies clearly nd that job security is positively correlated with job
satisfaction, important concerns surround the identication of the relationship.
First, the job securityjob satisfaction relationship is likely to be endogenous.
(Theodossiou and Vasileiou, 2007) point out that perhaps it is the high job
satisfaction of workers that generate their readiness to proclaim their jobs are
secure, or alternatively it is the low job satisfaction of some workers that increase
their likelihood of future job loss. The authors nd in European data that job
security is indeed a factor in explaining job satisfaction, but after correcting for the
bias generated by this reverse causality, the positive job securityjob satisfaction
relationship remains. (Geishecker, 2012) uses the German Socio-Economic Panel
and suggests that endogeneity is a real problem in any study of the relationship
between perceived job security and subjective well-being measures, focusing once
again on the reverse-causality problem.
The author corrects for this endogeneity and nd the estimated relationship is
twice the size of the estimates that ignore the endogeneity. Identication of the
relationship between job security and job satisfaction may suffer from sample
selection in that risk-averse workers may self-select into more secure jobs. Namely
4

relative to the private sector, public sector jobs are more secure (Clark and PostelVinay, 2009) and public sector workers are more risk-averse (Pfeifer, 2011) and
sort themselves into public sector jobs (Heywood et al., 2002). As a result of this
ndings, (Geishecker, 2012) and (Luechinger et al., 2010) indicate that exogenous
variation in perceived job security can be achieved through public and private
sector comparisons.
Yet another and separate, sample-selection problem stems from the employment
choices and outcomes of people selecting employment (and therefore in the
estimation sample) rather than staying outside of the labour force (and not in the
sample) and how these selection criteria might differ between 1997 and 2008.
Namely differences in unobservable worker heterogeneity between 1997 and 2008
that are correlated with job satisfaction may determine the employment outcome
(and presence in the sample), potentially causing the models results to be biased.
Even though job satisfaction models include many variables that inform workers
choices and ability to gain employment, they cannot guarantee that there is no
omitted worker heterogeneity in the models that are correlated with both
employment and job satisfaction. As they are unfortunately unable to nd
appropriate exclusion restrictions in their data of wage and salary workers that
would allow the model of employment, they assumed that the same employment
selection process occurs in 1997 and in 2008.
There may be omitted variables that are correlated with the error term in job
satisfaction estimations and also with perceived job security. (Theodossiou and
5

Vasileiou, 2007) identify this problem as well and employ instrumental variables
techniques to control for this bias. Even, after controlling for this for mofendo
geneity and the other confounding inuence listed earlier, the positive link
between perceived job security and job satisfaction remain the same. Even though,
the presence of end of geneity and sample selection is a real concern. Although
most of the literature studying the job satisfaction and job security relationship
stems from European data, these issues are more than likely to be present in US
data as well.
Several correction techniques were employed by isolating only the private sector
and estimate job satisfaction of only those workers who tend to be less risk averse
and are employed in jobs that create less perceived job security. This does not
control for sample selection, especially the selection into or out of employment,
but instead permits the discussion of the job securityjob satisfaction relationship
for a specic group of workers likely identied by their preferences (or lack
thereof). For job security. They substitute objective proxies of job security,
constructed using industries and occupations that are more (or less) likely to offer
secure jobs, for the subjective measure of perceived job security. This allows to
avoid any omitted variables problems that might have caused any subjective
natures of both perceived job security and job satisfaction. It also allows to correct
the problem of reverse causality between perceived job security and job
satisfaction.

Psychological attitudes and preferences towards work and life, are often important
determinants of job satisfaction and are able to be controlled for using xed effects
estimations. However, in the absence of longitudinal panel data, (Ferrer-iCarbonell and Van Praag B.M.S, 2006) and (Origo and Pagani, 2009) dispute that
including proxies of these personality traits into the model may serve as an
adequate correction for the type of endogeneity that xed effects estimations
generally control for. Job satisfaction and job security may be simultaneously
determined by unobserved worker characteristics, potentially bias in our estimates
of the relationship between job security and job satisfaction in contraction versus
expansion.
They apply a two-stage OLS estimation framework to further correct this potential
endogeneity and following (Origo and Pagani, 2009), identify as an instrument the
share of workers by gender, education, age and geographic location that are secure
in their jobs.

1.03

PURPOSE AND OBJECTIVES OF THE STUDY

The main objective of this study is to investigate the impact of employee
perception of job security on their job satisfaction. The specific objectives of
the study are the following:
i.

To determine the relationship between employee perception of job

ii.

security and job satisfaction.

To determine the relationship between perceived management fairness in
7

iii.
iv.

treatment of workers and employee perception of job security.

To determine the effect of employee powerlessness on job satisfaction.
To determine the impact of employee perception of job security on

v.

turnover intention.
To determine the impact of experience at previous retrenchment exercise
on employee commitment.

1.04

RESEARCH QUESTIONS
To achieve the above stated objectives, answers would be provided to the
following questions:
i.

Is there any significant relationship between employee perception of job

ii.

security and job satisfaction?

Is there any significant relationship between management fairness in

iii.
iv.

treatment of workers and employee perception of job security?

How does employee powerlessness contribute to job satisfaction?
Does employee perception of job security have an impact on turnover

v.

intention?
How does experience at previous retrenchment exercise affect employee
commitment?

1.05

RESEARCH HYPOTHESES
The following hypotheses would be tested:
H01: There is no significant relationship between employee perception of job
8

security and job satisfaction.

H02:

Employee powerlessness does not contribute to job satisfaction.

H03:

Experience at previous retrenchment exercise does not affect employee

commitment.

1.06

JUSTIFICATION OF THE STUDY

This research work is very important to organization growth and development
especially judging from the very dynamic environment which banking industry
operates. This makes job security a very important activity. As such, the
completion of this research work will provide understanding of the concept
present so as to generate data and information that every employee should known,
when coming up with motive and attitude that will make them to be different and
full of experience at present.
By fulfilling the aims that were stated in the objective section, this study will be
helpful to other researchers who may be focusing on understanding the concept of
employee perception of job security. The notable significance of this study is the
possibility that other researchers may be able to use the findings in this study for
future studies that will create a huge impact on the society. This study finding can
be used for other findings that might prove to be helpful in introducing changes to
the employee perception.

1.07

SCOPE AND DELIMITATION OF THE STUDY

9

This research work will be conducted exclusively on Stanbic IBTC Bank PLC and
Skye Bank PLC in Sango, Ogun State. This research works will help the
organization to examine the relationship between job security and employee
satisfaction.
This research work will be limited only to lower and middle level employee of
Stanbic IBTC Bank PLC and Skye Bank PLC.

1.08

HISTORICAL BACKGROUND OF STANBIC IBTC BANK PLC.

Stanbic IBTC Holdings, commonly referred to as Stanbic IBTC Bank PLC, is a
financial service holding company in Nigeria with subsidiaries in banking, stock
brokerage, investment advisory, pension and trustee business. Stanbic IBTC
Holdings is a member of the Standard Bank Group, a financial services giant
based in South Africa.
The Standard Bank Group merged its Nigerian operations, Stanbic Bank Nigeria
with that of IBTC Chartered Bank PLC. The merger, by way of the first ever
tender offer in Nigeria and a $525 million FDI, the largest in Nigerian financial
history, gave birth to a new entity now known as Stanbic IBTC Bank PLC. which
became part of the Standard Bank Group. The merger was officiated in August
2007 and legalized on the 24th of September 2007.
Stanbic IBTC Bank PLC through its wholly owned stock broking and asset
management subsidiary, IBTC Asset Management Limited has several excellent
mutual funds including the IBTC Nigerian Equity Fund, which is Nigerias largest
10

mutual fund with a net asset in excess of 25 billion (as at December 2007). It is
the only bank that has a direct subsidiary that is a pension fund administrator;
through the market leading IBTC Pension Managers Limited (IPML).
The Corporate and Investment banking offering includes global markets, project
and structured finance, equities trading, corporate finance, global custody and a
countless numbers of transactional and electronic banking solutions. As part of
Africas largest bank, it is able to give its clients access to expertise and on the
ground presence across the globe, a vital service in the ever increasing global
requirements of business.
Stanbic IBTC Bank PLC continues to play a significant role in some of the largest
capital markets deals not only in Nigeria but in the continent as well. Stanbic
IBTC Bank PLC was involved with Standard Bank London and Afrinvest as lead
arrangers of the

historic $350 million Eurobond issue for GT Bank. More

recently, together with its parent company, Standard Bank, it put together the
largest telecommunications deal ever in Africa- a $2 billion syndicated loan for
MTN Nigeria.
Stanbic IBTC Bank PLC offers its clients a wide range of corporate, investment,
business and personal banking products and solutions. With over 60 branches
across the country and over 1500 dedicated staff, the bank is positioned to take
care of your banking requirements.

11

REFERENCES
Sverke M. & Hellgren J. (2002). The nature of job insecurity: Understanding employment
uncertainty on the brink of a new millennium. Applied Psychology: An International
Review, 51, 2342.

12

Theodossiou, I. and Vasileiou, E. (2007): Making the Risk of Job Loss a Way of Life:
Does it Affect Job Satisfaction? Research in Economics, 61, pp. 71-83.

Simon Luechinger & Stephan Meier & Alois Stutzer, 2010. "Why Does Unemployment
Hurt the Employed? Evidence from the Life Satisfaction Gap between the Public and
Private Sectors," Journal of Human Resources. 45(4) 998-1045.

Ferrer-i-Carbonell, A., van Praag, B.M.S. (2006): Insecurity in the Labor Market: The
Impact of the Type of Contract on Job Satisfaction in Spain and the Netherlands, mimeo.

Origo, F.Y Pagani, L. (2009): "Flexicurity and Job Satisfaction in Europe: The
Importance of Perceived and Actual Job Stability for Well-Being at Work, Labour
Economics, 16(5), pages. 547-555.

CHAPTER TWO
LITERATURE REVIEW
2.01

CONCEPT OF JOB SECURITY

The concept of job security has emerged with the aim of assuring continuity of
employment and preventing arbitrary terminations. Employees confidence in future and
their not being deprived of earning a livelihood are among the most essential rights of
them (Koc, 2005, p. 20). One of the main purposes of modern labor law is also to secure
13

these rights of employees and prevent them from losing their job without a valid reason
(Suzek, 2006, p. 430). In this report, job security provides social benefits and it also
functions as an important motivational tool enhancing employees positive feelings
towards their jobs.
All around the world, job security is protected by labor laws. On the other hand, due to
some constraints like weaknesses in enforcement of laws, employer pressure on the
governments or distinctive structure of some businesses, it is difficult to maintain job
security in the real sense. Particularly, in tourism sector, implementation of job security
laws is quite problematic because some hotels are seasonal and the ones open all year
round tend to employ temporary staff. For this reason, in this branch of business
psychological security provided by employers is more effective on overcoming
employees work anxiety than job security enforced by laws. Therefore, dimension of
relationship between employee and management in organisations becomes more
important in the positive or negative perception of job security. This aspect of the sector
has always attracted the attention of the researchers and various studies have investigated
the subject. An environment of economic uncertainty leaves employees more defenseless
because in such an atmosphere, organizations tend to protect themselves or resist
protective regulations, which increases employees work stress and affects their
psychologydeeply (Onder and Wasti, 2002, p. 639). A study done in the USA showed that
fear of being fired can affect employees psychological and physical health seriously.
The economic downturn and instability around the world caused economic strained
globally. Indicators to this economic strain include job instability (frequency and time
frame between unemployment and employment), economic unaffordability (low salary
and loss of income), job insecurity and economic strain. As a result of this economic
strain, many organizations have retrenched their workers and some have also closed up as
means to save their business or organizations. This economic strain and stress will impact
on the workers and their family and also contribute to uncertainty about job security
(Fullerton and Wallace, 2007).
14

Restructuring of organization through mergers, workers retrenched and closing of

companies has impact on thousands of workers worldwide through unemployment. This
situation gives rise to the issue of job security (Probst, 2001). Many look at job security
as a component of job satisfaction which is an important element in an organization
because of its relationship with work behavior. When a worker is not satisfied with his
job he will start looking for other jobs and be less committed to the organization. And
when he gets the opportunity elsewhere he will have the tendency to leave the
organization.
The specter of losing ones job as a result of corporate restructuring, merger and
acquisitions, or organizational downsizing looms in the foreground for many of todays
employees. Since the late 1970s, economic recessions, industrial restructuring,
technological change, and an intensified global competition have dramatically changed
the nature of work. Millions of workers have been retrenched while others have become
involuntarily part-time unemployed, hired on temporary employment contracts, or
experienced a fundamental and involuntary change in their sets of beliefs about the
organisation and their place in it.
Job security is a protection against job loss and it is one of the reasons why an individual
join the organization. This is and will probably be a big concern for the individual. There
are some authors who think enough that job security is associated with work and if
employees should be cut first to leave they are those with less experience needed. Job
security often implies security of a job within a particular organization and job security
related to an individual's career (R. Wayne Mondy, Noe, M. R., (2005). So in short, job
15

security has to do with how much a person feels safe and protected in the fact of losing
his job involuntarily. However, during the exploration about different attitudes to job
security has also revealed that another concept that includes job security and it is security
of employment, it has to do with rights and mechanisms to reinforce these right about the
fact of staying in work of an individual more than to remain in the job in a particular
organization, but this is a very broad concept and it involves many other factors that lie
outside the main purpose of the study as for example employment policies of a given
country, the macro and micro parameters etc. Perceived job security is a mind state in
which employee sees his job stability with the firm in near future.
Researches on job security show that it relates with job satisfaction while job insecurity
relates with job dissatisfaction and negative physical health. Job insecurity is said to be
more stressful compared to job loss. The risk of losing a job is said to be more frightful
when an individual feels it is difficult to get an equivalent job and the risk is higher when
unemployment rate is high. This is because when employees feel insecure with their jobs,
they will face the threat of losing positive benefits socially and psychologically that come
with the job. In addition, job employment insecurity will influence job satisfaction
because of uncertainty in predicting and controlling the threat regarding the availability
of the job. The negative impact of job insecurity can be seen in job performance where
the workers show less effort in performing the job and show increase in work deviant
(Reisel et al., 2007).
Mac Neil (1994) acknowledges that job security and job employment are important
factors that affect job satisfaction for workers. Job security is ranked the third important
16

factor that influences job satisfaction while job employment relates more to job
dissatisfaction. Probst (2005) states that job employment correlates with high needs to
leave the organization, lower job satisfaction and job performance. When workers feel
that they are going to lose their jobs, they need to make adjustment and one of the way is
through withdrawal in their job either physically or psychologically. Heany et al., (1994)
in their research among 207 automobile workers found that job satisfaction decreases
when employment insecurity is prolonged. Ahmed et al., (2002) in their research among
5729 managers found there was a negative relationship between job security and level of
economic uncertainty. While De Cuyper and De Witte (2007) in their study among
permanent staff and non-permanent staff in Belgium found permanent staff showed
higher job and employment security compared to non-permanent staff.
They say that the temporary workers perform well than the permanent workers. Rousseau
and Tijoriwala (1998) argued that worker now dont expect categorical job security since
the competition in the volatile market is maximum which in turn has placed the security
outside management control. However the worker of the current era expects the
managements to apply employee involvement programs in good faith efforts which in
turn will lead to job security or we can also say that workers may now expect only that
management will engage in good faith efforts to secure jobs. The repercussion of this
view is that, when the worker will develop a trust for management to be making such
efforts he will willingly participate in the employee involvement programs, which may
have the positive results even in the downsizing or restructuring of the organization.
Ashford, Lee and Bobko (1989); Steers (1977); Forbes (1985); Oldham et al., (1986)
17

have also found a negative inverse relationship between perceived job insecurity and both
employee satisfaction and commitment. The negative result of insecurity while we talk
about EI programs is vital because insecurity may demoralize the possibility of Employee
involvement programs. Therefore few theorists like Levine theory suggests that
prescribed security assurances are important to minimize the employee uncertainties that
their involvement in the programs will lead to their own layoffs. However if on the other
hand the firm market share is not increased Employee involvement programs will indeed
lead to declining workforce. Osterman (2000) discussed the same. He argued that recent
findings are evident that high performance work organizations practices are linked with
greater occurrence of layoffs. Researchers have shown that job security induces
organizational commitment of workers. It was discovered that job security significantly
related to employee commitment. Lambert views job security as an extrinsic comfort that
has a positive relation with workers commitment and performs has a significant impact
on organizational commitment. However, Rosenblatt and Ruvio also reported in their
study that organizational commitment and job performance negatively correlated with job
insecurity. This finding was in agreement with the research by Guest (2004) who
discovered that low job security and working conditions had adverse effect on employee
commitment and job satisfaction. However, Khan, Nawaz, Aleem and Hamed (2012) in
their study discovered that job safety/ security significantly related to commitment and
performance. This finding was supported by the research finding of Abdullah and Ramay
(2012) who reported a significant positive relationship between job security and
organizational commitment of employees. This certifies that job security induces
18

employee commitment in any work situation. In other words, employees who perceive
threat of job security may become less committed to the organization they are working
for and may decide to quit the job. Thus, satisfaction with job security is positively
correlated with both organizational commitment and job performance.

2.02

CONCEPT OF JOB SATISFACTION

Job satisfaction is the employees cognitive, affective towards their job. It is the general
attitude amount of rewards workers receive and the amount they believe they should
receive.
Researchers have also proved that job satisfaction is a predictor of organizational
commitment. A vast majority of research indicates a positive relationship between job
satisfaction and commitment. However, Kalleberg and Mastekaasa (2001) reported a nonsignificant relationship between job satisfaction and commitment. But Tett and Meyer
(1993) showed that a satisfaction-to-commitment model assumes that satisfaction is a
cause of commitment. This assumption is supported by the work of Bull (2005) who
reported a significant relationship between job satisfaction and organizational
commitment. The study also revealed a significant relationship between normative
commitment and job satisfaction, a significant correlation between continuance
commitment and job satisfaction, but a moderate relationship between job satisfaction
and affective commitment among bankers. Thus, both job satisfaction and organizational
commitment have been shown to be positively related to performance and negatively
related to turnover (Clugston, 2000). Job satisfaction would show whether individuals are
19

attached to an organization, would only comply with directions or would quit the
organization.
In an earlier study, it was found that high level of job satisfaction leads to high level of
organizational commitment and job performance. In support of this finding, Okpara
(2006) reported that job satisfaction is linked to organizational commitment that reduces
turnover intentions and absenteeism. Employee job satisfaction can be categorized into
intrinsic and extrinsic satisfaction. Intrinsic satisfaction is related to job content and
include things like, work itself, recognition, achievement and promotion (Akpan, 2007).
Extrinsic satisfaction originates from outside the job and is related to the job environment
and includes pay, allowances, working conditions etc. Job satisfaction enhances job
involvement because job satisfaction stimulates greater involvement with the job and as
such satisfaction with the job enhances the important of work identity.
The increasing literature on relationship of job satisfaction and job performance showed
that job satisfaction is positively related to the job performance. Like Shahu & Gole
(2008) found that the companies having less satisfied employees must be developed in
order to be able to motivate their employees to give higher performance. The studies has
been conducted on both levels; the individual employee level and overall company
performance level.
A large number of researchers have proved the importance of job satisfaction of
employees in business organizations. It was considered that the job satisfaction and job
performance relationship are prerequisite for higher productivity of organizations.
Sowmya and Panchanatham (2011), contend that satisfied bank employees are the reason
20

for higher productivity, higher involvement and a less likelihood of resignation. Harrison,
Newman & Roth (2006), Schleicher, Watt, & Greguras (2004), and Gupta & Joshi (2008)
emphasized job satisfaction as an important technique used to persuade the employees to
work harder as "A HAPPY EMPLOYEE IS A PRODUCTIVE EMPLPOYEE. While
Mullins (2005) opposes by arguing that job satisfaction is a complex and multifaceted
concept meaning different things to different people. He considered it more of an attitude,
hence may be an internal state that can be measured quantitatively or qualitatively.
Siebern-Thomas (2005) and Clark maintained that the correlation between wage and job
satisfaction is significant and positive. Cabral Vieira (2005) argued that low-pay workers
are likely to have low-quality jobs and consequently less job satisfaction and vice versa.
Same is followed by Luddy (2005) that employees earning the lowest income report
significantly lower levels of job satisfaction. Then Nguyen, Taylor & Bradley (2003)
reveal that income is an important determinant of job satisfaction. Frederick Hertzberg
proposes in his motivation-hygiene theory that intrinsic factors are related to job
satisfaction and motivation, whereas extrinsic factors are associated with job
dissatisfaction. In 1965, Adams stated in his Equity Theory that pay satisfactionoutcomes determine balance. Employees are satisfied if payment is equal to their hard
work, and vice versa. Later on, Locke (1965) followed the same in his Discrepancy
theory by describing that satisfaction is determined by the difference between the
employees desires and earning. Then Lawler (1971) also followed in his Model of
Determinants of Pay Satisfaction by saying that pay satisfaction is determined by the
difference between actual pay and the expected pay. He identified two factors: (a)
21

perceived amount that should be received and (b) perceived amount actually received.
When a = b => satisfaction. When a > b =>dissatisfaction, and when a < b => inequity,
and discomfort.

2.03

CONCEPTUAL FRAME WORK

Madhavan, (2001), believes that job satisfaction is employees reaction to their roles in
their jobs. Job satisfaction is a kind of employees negative or positive feeling on their
jobs (Woo et al., 2005). Since job has embraced an important part of employees life and
its resulted satisfaction influence over their life in terms of penetration on satisfaction as
well as the role played by job dissatisfaction on organization and even society, it is
important to investigate employees job satisfaction (Alam, 2009, Alam et al., 2010). In
one hand, job satisfaction is an independent variable which impacts on depended
variables such as return, absenteeism, turnover, service leaving, individuals behavior in
society, individuals behavior in family and on social, cultural and political environments
(Hunjira et al., 2010). On the other hand, it is a depended variable affected by such
variables as wage, benefits, relations with colleagues and superiors, job security and job
type. Additionally, employees commitment to job evokes their working consciousness
which will lead into performing the affairs better and rationalism due to faith
enhancement (Ozer and Gunluk, 2010).
Job satisfaction is individuals overall attitude on his/her job. According to Smith,
Kendall and Hullin, there are five job traits which show remarkable characteristics of a
job including job satisfaction, satisfaction from superior, satisfaction from colleagues,
22

satisfaction from promotion and satisfaction from wage/salary (Hosseinzadeh and

Saemian, 2002). Commitment job is positive or negative attitudes of people who are
working in an organization towards achieving the whole objectives of the organization.
Organizational commitment means the relative degree of individuals identity in an
organization and his/her contribution. In this definition, organizational commitment
consists of three elements which are: Believing in organizational values and goals;
Propensity to broad efforts in organizational path; and High propensity to the continuance
of organizational membership.

The major conceptual models on the relationship between job satisfaction and
organizational commitment are as follows:
A) In the first model to which Mowday (1992) believes that it is accepted by most
authors, job satisfaction shapes immediately after entering organization while
organizational commitment develops slowly. Therefore, job satisfaction is the
prerequisite of organizational commitment. Studies by Williams and Hezer support
this model.
B) In the second model, Batman and Straws (1984) believe that there is rationality
beyond behavioral commitment by which a person accepts membership in an
organization which leads into commitment and such person acquires positive
attitudes such as satisfaction about his/her current situation. As a result,
organizational commitment is represented as the prerequisite of job satisfaction.
The findings of some studies support the assumption that commitment leads into
23

satisfaction.
C) In the third conceptual model, mutual relations between the first and second
models are pointed out. Studies by Farrel and Stamm (1988) show a cyclical and
lateral relation between these two variables.
D) In the fourth conceptual model, it is emphasized on the lack of relationship
between job satisfaction and organizational commitment (Tomlinson and Jenkins,
1997).

The findings of studies by Tomlinson and Jenkins titled the role of organizational
commitment and job status in preventing employees' service leaving indicate that
respecting types of commitment can be useful in maximizing job satisfaction and in
decreasing deliberately and avoidable service leaving. Mathieu and Zajac studied and
summarized the findings of over 200 studies and said that the ambiguity and
contradiction of role has a reverse correlation with organizational commitment.
It was found that employees' contribution has a direct effect on the results of their work
and increase in employees' contribution in their working unit has a correlation with high
job satisfaction and organizational commitment. Preuss and Lautsch (2002) concluded
that job insecurity reduces job satisfaction and organizational commitment (Gil and
Brenda, 2002). The findings of Warner's study (2005) illustrate the impact of
organizational justice on job satisfaction (Gafori, 2008). Joins (2006) observed that there
is a positive and significant correlation between organizational justice and various areas
of organizational commitment (Clay et al., 2005). Based on Maslow's needs hierarchy
24

and his findings, Tannenbaum (1992) reports: in the third world countries, need to job
security is the top priority. Cole (1989) says that Japanese organizational commitment is
too high and it justifies the high rate of Japanese employees' organizational commitment
compared to employees in western organization as well as the employment system
(permanent employment) in Japanese organization. The results of studies by Alnajjar
titled the relationship between job satisfaction and organizational commitment in UAE
employees based on job security indicated that there is significant relationship between
employee job satisfaction and job security.

The researcher has developed a conceptual framework for this study based on the review
of literature and the research variables namely, job security, job satisfaction and
organizational commitment.

Figure1. Conceptual Model

25

Based on theoretical and researching discussions, one should consider objective aspects
of job conditions in addition to subjective factors in studying job satisfaction and
organizational commitment. Besides to using objective indices of behavioral outcomes
such as absenteeism and job leaving, respecting the differences of job security are also
important. As a result, author has conducted present study in framework shown in Figure
1 above on the basis of research limitations.

2.04

THEORETICAL FRAMEWORK

There are various theories or models of Organisation Behaviour which has great
contribution on job satisfaction in enhancing employee satisfaction. Among them are
these two (2) theories in which the research would be restricted. They are Gany Becker
Side bet Theory and Herzberg Two-factor Theory.

2.04.1 GANY BECKER THEORY (HUMAN CAPITAL THEORY)

The primal thinking is based on Howard Becker's (1960) conception that defined
organizational commitment as the side-bet theory. This approach was one of the earliest
attempts to study a comprehensive conceptual framework about organizational
commitment from perspective on the individual's relationship with the organization.
According to Beckers theory, the relationship between employee and organization are
based on the contract of economic exchange behavior, committed employees are
committed because they have totally hidden or somewhat hidden investments, sidebets, they have made by remaining in a given organization. If someone left, the
26

investments of side-bet will be claimed hardly. The term side-bets refer to the
accumulation of investments valued by the individual. Becker (1960) argued that over a
period of time certain costs accrue that make it more difficult for the person to disengage
from a consistent pattern of activity, namely, maintaining membership in the organization.

Becker's approach claimed that a close connection between organizational commitment

and employees voluntary turnover behavior. In fact, it identifies organizational
commitment as a major predictor in the explanation of voluntary turnover. According to
Becker's approach, commitment should be measured by evaluating the reasons, if any,
that would cause a person to leave his organization. Becker's approach and the scales that
were assumed to represent it were adopted by later research as the approach to
conceptualize and examine commitment to the organization and/or to the occupation.
The influence of the side-bet approach is evident in Meyer and Allens Scale (1993),
which might be named as the continuance commitment. This scale was advanced as a tool
for the better testing of the SIDEBET approach and is one of the three dimensions of
organizational commitment outlined by Meyer and Allen, although be challenged from
Cohens (2007) instrumental commitment.
The focus of commitment shifted from tangible side-bets to the psychological attachment
one had to the organization. The affective dependence school attempted to describe
commitment as a kind of attitude-centered but economic-contract. Employees
retention nor just only come from economic factors but also affective influence and
maybe the later are more significant. Accordingly, commitment was defined by Porter
27

and his followers as the relative strength of an individual's identification with and
involvement in a particular organization

2.04.2 HERZBERG TWO-FACTOR THEORY

Herzberg suggested that human being have two separate need systems; the need to avoid
unpleasantness/discomfort/pain etc and the need for personal growth. Fredrick Herzberg,
using 200 Engineers and Accountants, asked them to think of their jobs and;
i.

Tell me about a time when you felt exceptionally good about your job

ii.

Tell me about a time when you felt exceptionally bad about your job

They were to describe conditions leading to these feelings. Based on the analysis of the
responses, he distinguished between two sets of factors. One he called hygiene context or
maintenance factors or dissatisfied are associated with aspect of a persons work.
Hygiene factors are essentially preventive as they minimize dissatisfaction. They include
level and quality of supervision, company policy and administration, interpersonal
relations, pay/salary, job security and working condition.
The motivator factors offer lasting increase in job satisfaction and actually motivate
employees to higher performance. They are found in the job itself (i.e. job
content/intrinsic factors). They include Achievement, Personal growth and advancement,
Recognition, Responsibility and nature of work
Management has always wondered why the provision of fringe benefits and other
attractive policies have not resulted in increased productivity. The reason is that they are
basically maintenance (hygiene) factors and not motivator factors. High presence of
28

motivator factors will result in job satisfaction and commitment while low motivator
factors would lead to low job satisfaction and employee turnover. On the other hand, the
presence of hygiene factors would lead to high level of dissatisfaction while low hygiene
factors would lead to low level of dissatisfaction.

2.05

JOB SECURITY AND JOB SATISFACTION

Job satisfaction is growing as a subject of economic research as it has been linked to

important labour market outcomes such as quits, absenteeism and worker training.
Discovering determinants of job satisfaction is also a blossoming area of research.
Security from job loss is one such determinant and has been studied before, in large part
using European data. No such study exists to the knowledge of using US data while
accounting for variations in the business cycle though. This is an important consideration,
as it is the macroeconomic condition at the time of the survey that helps to inform the
worker as to whether he or she is secure from job loss. Moreover and particularly in the
case of the Great Recession, the rate of job loss itself tends to be a lagging indicator while
the rate of job openings tends to be a leading indicator. Since job openings decrease
before job losses increase, workers may perceive the same level of job security in
expansionary growth periods as at the beginning of contractionary growth periods.
This reduction in the rate of job openings that occurs prior to increases in the rate of job
losses presents a unique way to identify the impact that job security has on job
satisfaction. Namely the variation in job satisfaction explained by job security in these
instances is generated not only by the probability of job loss itself but also by the
29

workers perceptions of the length and outcome of the job search that they might expect
post-job loss. If security from job loss is a more valuable job amenity when
unemployment is more likely to persist and perhaps end in a worse job, worker job
satisfaction may increase with job security more when job openings are scarce than when
job openings are plentiful.
Indeed, evidence from the Great Recession indicates that workers have much to be
concerned about in unemployment after a job loss. Farber ( 2010), using data from the
Current Population Survey (CPS) for period 1976 to 2010, finds not only that the rate of
job loss is considerably higher from 2007 to 2009 than in many earlier periods but also
that compared to earlier recessions post-job loss re-employment rates are lower in the
Great Recession, part-time employment is more common among full-time job losers and
reductions in average earnings are larger. As a result, workers during the Great Recession
(from 2007 to 2009) likely perceived that job loss would have a worse impact on their
lives than at any other period in recent Nigeria history. We contend that it is this
substantial cost of potential job loss that generates a more positive link between job
security and job satisfaction in contractions relative to expansions.
We contribute to the literature by examining not only the impact of perceived job security
on job satisfaction but also the impact that two objective measures of job security might
have on worker job satisfaction in Nigeria. In addition and to our knowledge, never
before in the literature, we use difference-in-differences (DD) analysis to control for
differences in covariates across two time periods and to analyze the effect of job security
in con-traction versus expansion. Although we find a positive effect of job security on job
30

satisfaction in both expansions and contractions, the effect is significantly greater during
contractionary time periods. We also separate workers by education level and find that
only less-educated workers report a significantly positive impact of job security on job
satisfaction in contractions relative to expansions. Finally, we measure the impact of job
security on workers intentions to quit and again find that only less-educated workers
secure in their jobs are less likely to intend to quit in contractions relative to expansions.
Measures of subjective well-being, including job satisfaction, are gaining attraction as
important and credible economic variables. Oswald and Wu (2010) establish that job
satisfaction has been linked to reduced quits (Akerlof et al., 1988), reduced absenteeism
and even increased productivity (Punnett et al.,

2007). In fact, measures of job

satisfaction may even be used to test the presence of compensating wage differentials
(Bckerman et al., 2011). Job satisfaction can be thought of as a proxy of an individuals
utility derived from working, with a corresponding array of demographic and job
characteristics that determine this on-the-job utility. These include, but are not limited to,
gender, age, income and union membership (Bryson et al., 2004).
One of the most important, and powerful, job characteristics in determining job
satisfaction is job security. Clark (2003) uses the British Household Panel Study to find
that job security is most often cited as the most important job aspect from a list of seven
specific job attributes. Blanch flower and Oswald also use three different cross-sectional
data sources to show that expectations of job loss have the largest negative impact on job
satisfaction. Geishecker (2010) states that perceived job security is one of the most
important components of job satisfaction, and Sousa-Poza (2000) find that job security is
31

an important determinant of job satisfaction across countries. Consequently, this literature

suggests that employed workers perceived job security and job satisfaction may be
informed by regional unemployment levels, implying that both job security and job
satisfaction may be lower in contraction relative to expansion.
Another way to measure the importance of job security to workers in contractions and
expansions is to estimate the impact of job security on the likelihood a worker will quit.
Here, the workers revealed preference to either quit the job or remain at the job is the
ultimate indication of job satisfaction. Clark (2003) uses the British Household Panel
Study to show that job security is largely the most important negative predictor of quit
behavior. Arnold and Feldman also find that job security influences quit behavior, but
also that worker quit intentions strongly relate to actual quit behavior. Moreover, Ashford
et al., (1989) model worker intentions to quit and find that job security significantly
reduces quit intentions. In fact, Campbell et al., (2007) find that worker expectations or
perceptions of future of job loss are strong and reliable predictors of actual job loss in the
subsequent year, establishing that perceived job insecurity is not just a subjective
construct of a disgruntled worker but rather a materialization of workplace or
macroeconomic realities.
Thus, we hypothesize that job security is associated with both increased job satisfaction
and reduced quit intentions, but these hypotheses are hardly unique or novel. Our
contribution rests on the notion that these associations are strongest and largest in
economic contractions, not only because workers are more likely to lose their jobs but
also because workers are likely to find it more difficult to replace a lost job. In particular,
32

our hypothesis suggests that worker job satisfaction should increase, and quit intentions
should decrease, with job security more in contractions mostly for those workers who
have characteristics associated with higher probabilities of job loss. Perhaps, one of the
more robust of such characteristics is a lower level of education.
The rate of job loss for college graduates is 77% of otherwise equivalent high school
graduates (Farber, 2010). Farber ( 2010) also suggests that the rate of job loss for lesseducated workers is more likely to respond to fluctuations in the business cycle than for
higher educated workers. Stewart (2000) finds similar results using decades of CPS data.
Additionally, Royalty finds that turnover rates are higher among less-educated women,
while Gottschalk and Moffitt also find that duration of unemployment between
employment spells is higher among less-educated males. Elsby et al., (2010) find lesseducated workers experience steeper rises in joblessness during all recessions, including
the Great Recession. Mukoyama and Sahin (2006) focus on the heterogeneity in the cost
of business cycles among different groups of people with different skill levels and show
that unskilled workers are subject to a much larger risk of unemployment during
recessions than are skilled workers. Finally, Hoynes et al., (2012) find that the impacts of
the Great Recession are not uniform across demographic groups and have been felt most
strongly for workers with low education, among others. They further argue that these
differences are largely explained by variation in exposure to business cycles across
industries and occupations during the Great Recession.
Less-educated workers may be more likely to experience job separations and possibly
longer unemployment spells, but an overall downward trend in job security is extensively
33

documented by earlier reports and studies. The OECDs employment outlook (1997)
reports that workers perceptions of job security have decreased for most of the OECD
countries, while the 2010 and 2011 reports (OECD Employment Outlook 2010 and
2011) also address concerns about increases in unemployment durations. Additionally, a
number of studies confirm reduced job security throughout the late twentieth century
More recently, Fullerton and Wallace (2007) find that perceived job security in the United
States has declined over the past 30 years.
Although concerns of decreased job security levels persist in the literature, our study is
not necessarily concerned with the overall decline in job security in the United States.
Rather, our findings first suggest a positive link between job security (perceived and
objective proxies) and job satisfaction and that this link is stronger in economic
contractions than in expansions.
In fact, job security has the largest effect on job satisfaction in whole sample estimations
among all the covariates, and in the DD analysis, job security has similar value to having
health insurance, for instance, in contraction versus expansion. Moreover, the link
remains significant even after controlling for parallel trends throughout the business cycle
and also correcting for the potential simultaneous determination of job security and job
satisfaction. Second, job security reduces worker intentions to quit in contractions
relative to expansions. Finally, we find that these relationships hold true mostly for lesseducated workers. In the following sections, we discuss the data and methodology used to
test our hypotheses, present the results and conclude.

34

2.06

MANAGEMENT FAIRNESS AND JOB SECURITY

Every organization must confront the challenge of motivating its work force. From
research on fairness in organizational contexts (organizational justice research) we
know that fairness is one key. Organizational justice research has consistently
finds that employees are more motivated when they feel that organizational resources are
allocated fairly, that organizational decisions are made in fairways, and that their
organization treats them fairly. Moreover, employees who experience fairness at work are
more likely to internalize the organizations goals and values, and to develop close bonds
with other organizational members. In this way, a management-by-fairness approach
motivates employees to work collaboratively for the long-term good of the organization
and its members. Such a long-term collaborative focus tends to produce ethical behavior.
Perceived fairness of employee rewards (or the lack thereof) is often at the root of why
employees leave organizations. The idea of fairness also determines if an employee will
make an extra effort to reach organizational goals or even the objectives of his or her own
job. For these reasons, its vital for organizations to ensure that their employee rewards
are rooted in principles of fairness.
Research demonstrates that employees perception of fairness and equitable treatment is a
core driver of retention, engagement and performance. In fact, unfair treatment is
corrosive. Just the perception that treatment is unfair can have devastating effects on the
organization.

35

According to James Brown (2007), he defines fairness as equal treatment, receiving the
same services and benefits as other people. Fairness means different things to different
people, and our view of whether or not something is fair often depends on the
circumstances. Competent employees are essential to the success of any organization. An
important factor driving satisfaction in the service environment is service quality. One
school of thought refers to service quality as a global assessment about a service category
or a particular organization (PZB, 1988). Recently, it has been argued that satisfaction is
generally viewed as a broader concept and service quality is a component of satisfaction
(Zeithaml & Bitner, 2003). This is because satisfaction derives from various sources,
such as service encounter satisfaction and overall satisfaction. In other words, a little
satisfaction from each service encounter leads to overall satisfaction with the service.
Various studies discussed shows that job satisfaction has been studied with relevance to
co-worker behavior supervisor behavior, pay and promotion, organizational factors and
other work related factors. In some studies the employees were highly satisfied or
otherwise.
Perception is a process by which individuals organize and interpret their sensory
impressions in order to give meaning to their environment (Robbins & Judge, 2007) as
cited by (Warokka et al., 2012, p. 12). In reality, the objectives often vary and differ from
one's perception due to every person has different behavior and thought. Therefore, it is
common that there is more disagreement among people's view. Factors that influence
someone's perceptions are from their nature characteristics, which include his or her

36

attitudes, personality, motives, interest, past experiences and expectations. Employees

want fair management dealing in the organization. It was reveals that management
fairness and employee perceptions about various components of organizations have very
serious implications not only for employees, but also for an organization .
The study of fairness or organizational justice came out from Adams equity theory in the
social-psychology literature (Adams, 1965). Employees perceptions of fairness depend
on one or more of their perceptions concerning the various organizational outcomes
which they receive from the organization (distributive justice), procedures used to make
those decisions (procedural justice) and the treatment which they receive from
organization or agents (i.e. managers) (interpersonal justice) and all the required
information related to various outcomes is provided within an organization (informational
justice) Ikramullah, M. et al., (2011, pp. 94).
Job Security is an assurance that an individual will keep his or her job without the risk of
becoming unemployed. He or she will have continuity in employment and it may be from
the terms of a contract of employment, collective bargaining agreement or labour
legislation that prevents arbitrary termination. Lack of job security refers to a situation
where a person with a job would have a high chance of becoming unemployed.
Sometimes your employee needs your reassurance that you require his services,
especially in times of economic hardship, overall or specifically with your company.
Showing your employee that you value his employment with your company helps you
both to understand your mutual desire to work together to continue to make your
37

company thrive in the future. By setting a motivational tone for your office, you empower
your employee with a sense of well-being at the office so he will not need to question his
job security.
Job security can also be referred to as an assurance (or lack of it) that an employee has
about the continuity of gainful employment for his or her work life. Job security may
depend on economy, prevailing business conditions, and the individual's personal
capacity. Job security usually arises from the terms of the contract of employment,
collective bargaining agreement or labour legislation that prevents arbitrary termination,
layoffs and lockouts. Employees have more job security in times of economic expansion
and less in times of a recession. Normally, government jobs and jobs in education,
healthcare and law enforcement are considered very secure but private sector jobs are
generally believed to offer lower job security. Job security increases if the economy is
good.

2.07

EMPLOYEE POWERLESSNESS AND JOB SATISFACTION

Much has been written about the need for employees, individually and collectively to
know how to obtain and exercise power. Employees have permitted themselves to be
used as simply as a labour force; a means of production to keep the system and its
subparts operational. According to researches, employees have dwelled upon such topics
as cooperative, teamwork, collaborative action and the interdependence of employees and
38

organisation. Furthermore, young employees quickly learn that they are to use their
power cooperatively and collaboratively to keep the system or organization operative.
They learn less about the ways and means of using their power to change a system that
needs changing. Power, when seen as a combination of authority and influence, is an
essential component of the practice of any profession. This type of power is often referred
to as professional autonomy. It is critically important for professionals to have power
over the practice of their discipline. For professionals practicing in organizational
settings, additional sources of power are also important and necessary. Specifically, job
autonomy, or power over working conditions that structure work and power in
determining

overall

organizational

policies

are

relevant

to

the

practice

of

organizationally-based professionals. Lack of adequate control over the practice of ones

profession (professional autonomy) or the structuring of work (job autonomy), combined
with little authority or influence over the governance of organizations is cited in some
discussions as a major impediment to professional employee practice. Other impediments
to the acquisition of personal and professional power cited in the researches are economic
constraints and employees lack of commitment to their professional beliefs; devaluation
of the work of employees and poor working conditions. Several large scale studies of
employees found that conflicts in power are one of the major causes of dissatisfaction
with their jobs.

The study of job satisfaction is a topic of wide interest to both people who work in
organizations and people who study them. Job satisfaction has been closely related with
39

many organizational phenomena such as motivation, performance, leadership, attitude,

conflict, moral etc. Researchers have attempted to identify the various components of job
satisfaction, measure the relative importance of each component of job satisfaction and
examine what effects these components have on employees productivity. Spector refers
to job satisfaction in terms of how people feel about their jobs and different aspects of
their jobs. Ellickson and Logsdon (2002) support this view by defining job satisfaction as
the extent to which employees like their work. Schermerhorn also defines job satisfaction
as an affective or emotional response towards various aspects of an employees work. Job
satisfaction can also be define as the feelings that a worker has about his or her job or a
general attitude towards work or a job and it is influenced by the perception of ones job.
Job satisfaction and dissatisfaction does not only depend on the nature of the job, it also
depend on the expectation whats the job supply to an employee (Hussami, 2008). Lower
convenience costs, higher organizational and social and intrinsic reward will increase job
satisfaction (Willem et al., 2007). Job satisfaction is influenced by the factors like salary,
working environment, autonomy, communication, and organizational commitment.
Employee would rather desire working conditions that will result in greater physical
comfort and convenience. The absence of such working conditions, amongst other things,
can impact poorly on the workers mental and physical well-being (Baron and Greenberg,
2003). Robbins (2001) advocates that working conditions will influence job satisfaction,
as employees are concerned with a comfortable physical work environment. In turn this
will render a more positive level of job satisfaction. It is a personal as well as a
management goal in every profession to maximize job satisfaction. Most obviously, job
40

satisfaction can be viewed as an end in itself; by nature, pleasure and satisfaction are
desirable. Secondly, under certain circumstances job satisfaction and particularly job
dissatisfaction may lead to both overt and covert behaviors which affect the quality and
cost of services provided by organizations. Furthermore, research has provided evidence
that dissatisfied workers have a higher turnover rate than satisfied workers.

2.08

JOB SECURITY AND TURNOVER INTENTION

Every organization faces turnover of employees, some of them leaves the organization
voluntarily while the organizations discharge some of their employees from the
organization. All kind of turnover incurs cost of replacement of those separators,
recruitment, selection etc. Studying the behavior of employees who quit their
organization is turnover analysis of employees. The organizations can reduce turnover
rate but they cannot reduce it to 0%, high turnover rates are not good for the organization
so, the organizations try to retain their employees and save their cost. When the
employees are not satisfied with their jobs and organizations do have not trust in their
employees the employees intention towards turn over will be greater, they will leave the
organization and the duration of their job will be smaller (Jeffrey, 2007). Turnover is of
two types which are Voluntary turnover and Involuntary turnover, when employer fire the
employees it is said to be involuntary turnover and when the employees quit their job by
their willingness it is called involuntary turnover.(Dess and Shaw 2001). Turnover has
both positive and negative effects on the organization. The organization has to pay a
heavy cost of replacement of employees as a negative consequence; the organization has
41

to pay a big portion of its time to recruiting and selecting activities which will increase
the administrations responsibilities. According to (Riley, 2006) Employees work
interdependently in an organization, quitting of some of the employees affect the
efficiency of the remaining employees. It is good for the organization to fire the
employees who are not productive and replace them with the productive ones which will
increase the human capital and the new ones will bring innovative ideas and solutions.

2.09

RETRENCHMENT EXERCISE AND EMPLOYEE COMMITMENT

The business environment is continuously changing and organisations are dealing with
the after-effects of a global economic slowdown. Organisations are under pressure to
change the way they do business in order to remain competitive in a more demanding and
cost-controlled environment. Many organisations have turned to restructuring as a
strategic decision to realign internal structures with changing macro-environmental
factors (Marais & Hofmeyr, 2013). The increase in global competitiveness, together with
advances in technology and ongoing changes in the environment, requires organisations
to continuously adapt and be willing to change their structures, strategies, methods and
practices to remain competitive. In some cases they need to transform themselves from
rigid bureaucracies into leaner and more flexible operations (Cummings & Worley 2009).
Although retrenchments have become standard managerial strategy in most
organizations, their effectiveness in increasing organizational efficiency is unclear (De
Meuse, 2004). Different theories are divided, and research findings inconsistent (Krasz,
2004). Subsequently, positive and negative results must be examined as the basis for a
42

more comprehensive research question: when and under which conditions does
downsizing improve business performance, and is the improvement sustainable? It has
been assumed that retrenchment reduces expenses and reorganizes processes ensuing in
improved competitiveness and profitability (Cascio, 2002). Reorganization occurs when
the purging of unnecessary organizational layers enables a focus on core capabilities and
increased output (Krasz, 2004). A leaner hierarchy may also reduce unnecessary costs
(Cameron, 1998). Therefore, positive organizational results are eventually expressed in
the company's economic performance.

The key reason for retrenchment is to reduce costs as management seeks to maximize
efficiency (Cascio, 2002) and business objectives can be best achieved with fewer
employees. Cascio advanced several strategies, particularly a cost leadership strategy
which enables the organization to increase return on sales, or to increase market share
through aggressive costing. Following staff reduction the company can transform the
leaner cost structure into competitive advantage by increasing profitability or lowering
prices, which will be expressed in increased market share. Companies that retrench
expect to increase their value to their shareholders by either reducing costs or increasing
revenues. Management believes that future costs can be anticipated more than future
revenues, and that wage expenses are fixed costs. Therefore, cutting costs through layoffs
is a safe bet for increasing profitability, and consequently raising share value (Redman &
Wilkinson, 2009). Additionally, shareholders are expected to react favourably to
downsizing announcements although recently, Cameron (2008) has shown that
43

retrenchment announcements have an overall negative effect on stock market prices.

Nevertheless, cutbacks communicate streamlining and raise expectations of a future
growth in profits. A positive response will be expressed in an increase in shareholder
returns and should enhance the company's attractiveness to investors (Cascio, 2002).
Most studies have focused on financial performance, because of the assumption that
firms reason for existence is profit maximization. Because firms' bottom line is their
economic state and market position (Iqbal & Akhigbe, 1997), it is clear that the
association between retrenchment and economic results is of major importance.
Researchers have followed the differences between long and short-term results (Sheaffer
et al., 2009). De Meuse, 2004 notes that retrenchment may improve performance in the
short-run because dismissals reduce expenses. This improves profitability and liquidity
indices, enabling industry dominance through a cost leadership strategy. Moreover,
organizations benefit from an initial increase in output, as survivors work harder and
more competitively in an attempt to keep their jobs (Krasz, 2004). Despite the
improvement in liquidity, initial growth in output is short-term and accompanied by
organizational behaviour changes including the survivor syndrome (Noe et al., 2006).
Additionally, a cost leadership strategy may be erroneously emulated and applied in the
wrong context.

Definitions of employee commitment vary greatly across organizations. Many managers

wonder how such an elusive concept can be quantified. The term does encompass several
ingredients for which researchers have developed measurement techniques. These
44

ingredients include the degree to which employees fully occupy themselves in their work,
as well as the strength of their commitment to the employer and role. Committing to the
Work and the Company Some experts define commitment as both a willingness to persist
in a course of action and reluctance to change plans, often owing to a sense of obligation
to stay the course. People are simultaneously committed to multiple entities, such as
economic, educational, familial, political and religious institutions. They also commit
themselves to specific individuals, including their spouses, children, parents and siblings,
as well as to their employers, co-workers, supervisors and customers. Commitment
manifests itself in distinct behavior. For example, people devote time and energy to fulfill
their on-the-job responsibilities as well as their family, personal, community and spiritual
obligations. Commitment also has an emotional component: People usually experience
and express positive feelings toward an entity or individual to whom they have made a
commitment.
Commitment is the bond that employees experience with their organization, employees
who are committed to their organization generally feel a connection with their
organization, feel that they fit in and also feel that they understand the goals of the
organization. The added value of such employee is that they tend to be more determined
in their work, show relatively high productivity and are more proactive in offering their
support. To engage workers as well as to benefit from that engagement, your organization
must invest in its human resource practices. Employees who are engaged in their work
and committed to their organizations give organizations crucial competitive advantages

45

including higher productivity and lower employee turnover. Organizations of all sizes and
types have invested substantially in policies and practices that foster engagement and
commitment in their workforces.
No company, small or large, can win over the long run without energized employees who
believe in the firm's mission and understand how to achieve it. That's why you need to
take the measure of employee engagement at least once a year through anonymous
surveys in which people feel completely safe to speak their minds. Though different
organizations define employee commitment or engagement differently and some common
themes emerge. These themes include employees satisfaction with their work and pride
in their employer, the extent to which people enjoy and believe in what they do for work
and the perception that their employer values what they bring to the table. The greater an
employees commitment, the more likely he or she is to go the extra mile and deliver
excellent on-the-job performance. In addition, engaged employees may be more likely to
commit to staying with their current organization, highly engaged employees are more
likely to be high performers than less engaged employees and less likely to voluntarily
leave the company. Engaged employees are more productive, make more effective use of
resources, less inclined to leave or look for jobs outside the company and take better care
of customers. On a financial level, employee engagement has been linked to higher levels
of profitability and business performance. Committed employees add value to the
organization through their determination, proactive support, relatively high productivity
and an awareness of quality. They are also less likely to call in sick or to leave the

46

organisation. Non-committed employees can work against the organisation and hold
back the organisation's success.
Finally, commitment has a rational element: Most people consciously decide to make
commitments, then they thoughtfully plan and carry out the actions required to fulfill
them. Because commitments require an investment of time as well as mental and
emotional energy, most people make them with the expectation of reciprocation. That is,
people assume that in exchange for their commitment, they will get something of value in
return such as favours, affection, gifts, attention, goods, money and property. In
organizations, employees and employers have traditionally made a tacit agreement: In
exchange for workers commitment, organizations would provide forms of value for
employees, such as secure jobs and fair compensation. Reciprocity affects the intensity of
a commitment. When an entity or individual to whom someone has made a commitment
fails to come through with the expected exchange, the commitment erodes. Dramatic
changes in the global economy over the past 25 years have had significant implications
for commitment and reciprocity between employers and employees and thus for
employee engagement. For example, increasing global competition, scarce and costly
resources, high labour costs, consumer demands, higher quality and investor pressures for
greater returns on equity have prompted organizations to restructure themselves. At some
companies, restructuring has meant reductions in staff and in layers of management.
Although restructuring helps organizations compete, these changes have broken the
traditional psychological employment contract and its expectations of reciprocity.

47

Employees have realized that they can no longer count on working for a single employer
long enough to retire. And with reduced expectations of reciprocity, workers have felt less
commitment to their employers. Many companies, having broken both formal and
psychological employment agreements, are struggling to craft effective strategies for
reviving employees commitment and thereby revitalizing their engagement.

REFERENCES
Kalleberg, A.L. & Mastekaasa, A. (2001). Satisfied movers, committed stayers: The
impact of job mobility on work attitudes in Norway. American Sociological Review 28,
183 209.

Tett, R.P. & Meyer, J.R. (1993). Job satisfaction, organizational commitment, turnover
intention and turnover: Path analysis based on meta-analytic findings. Personnel
Psychology. 46(2), 256-292.

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Bull, I.H.F. (2005). The relationship between job satisfaction and organizational
commitment among high school teachers in disadvantaged areas in the Western Cape.

Clugston, M. (2000). The mediating effects of multidimensional commitment on job

satisfaction and intent to leave. Journal of organizational Behaviour . 21 (4), 477-486.

Okpara, J.O. (2006). Gender and the relationship between perceived fairness in pay,
promotion and job satisfaction in sub-Saharan African economy. Women in management
Review. 21(3), 224-240.

Simon Luechinger & Stephan Meier & Alois Stutzer, 2010. "Why Does Unemployment
Hurt the Employed?: Evidence from the Life Satisfaction Gap between the Public and
Private Sectors," Journal of Human Resources. 45(4) 998-1045.

Clark, A.E., Knabe, A. and Rtzel, S. (2010): Boon or Bane? Others` Unemployment,
Well-being and Job Insecurity, Labour Economics, 17, pp. 52-61.

Blanchflower, D. and Oswald, A. (1999): Well-being, Insecurity and the Decline of

American Job Satisfaction, Working paper, University of Warwick.

Clark, A.E. (2003): Unemployment as a Social Norm: Psychological Evidence from

Panel Data, Journal of Labor Economics, 21, pgs. 323-351.
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Bockerman, Petri & Ilmakunnas, Pekka & Johansson, Edvard, (2011). "Job security and
employee well-being: Evidence from matched survey and register data," Labour
Economics, Elsevier, vol. 18(4), pages 547-554, August.

Di Tella, R., MacCulloch, R., Oswald, A., 2001. Preferences over inflation and
unemployment: evidence from surveys of happiness. American Economic Review 91,
335341.
Akpan, C.P., Ekpiken, W.E. & Okon, C.E. (2007). Incentive management and Job
involvement among teachers in Technical Schools in Cross River State. Nigerian Journal
of Educational Administration and Planning (NAEAP). 7 (1), 97-106

Mowday, R.T., Steers, R. M. & Porter, L.W . (1992). Employee- organization linkages.
The psychology of commitment, absenteeism and turnover. New York: Academic press.

Meyer, J.P. & Allen, N.J. (1993). A three-component conceptualization of organizational

commitment. Human Resource Management Review. 1, 61-89.

Probst, T.M., & Brubaker TY.L. (2001). The effects of jop insecurity on employee safety
outcomes: cross-sectional and longitudinal explorations. Journal of Occupational &
Health Psychology, April, 6 (2), 139-159.

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CHAPTER THREE
RESEARCH METHODOLOGY
3.01

RESEARCH DESIGN

The design employed in this study was a descriptive survey design method, as the study
is designed to investigate the nature of a situation as it exists at the time of the study and
to explore the effects of particular phenomena on the perception of employees.

3.02

DATA SOURCES AND METHOD OF COLLECTION

For this study, a Primary source of data was adopted. The Primary data was collected
through the use of administered structured questionnaire which was designed specifically
to provide answers to the study research questions.

3.03

THE STUDY POPULATION

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The population of this study consists of the lower and middle level employees of Stanbic
IBTC Bank PLC and Sky Bank PLC in Sango, Ogun State and this cut across all units of
the organization with the estimation of two hundred-and-fifty (250) staffs.
A selected portion of the staff was studied as a fair representative of the entire population.

3.04

SAMPLE SIZE AND SAMPLING TECHNIQUES

The sample size used for this study is one hundred-and-twenty (120) staffs, which serves
as a representative of the whole population of staffs. The samples were collected through
convenience sampling techniques.
3.05

RESEARCH INSTRUMENT

The instrument used in obtaining reliable, objective and unbiased information in the
study is a well structured questionnaire. A total of one hundred-and-twenty (120)
questionnaires were administered to the employees of the organizations selected as the
sample size to be specific, so as to obtain relevant information to use in the study. The
questionnaire is divided into two (2) sections: Section A and B. Section A relates to
personal characteristics of respondents while Section B relates to information on the
variables in this research work and each question has alternative answers provided for
respondents to choose.

3.06

METHOD OF DATA PRESENTATION AND ANALYSIS

52

The data extracted from the questionnaire were analyzed and interpreted with the use of
Simple Percentage Method. However narrative was used to give qualitative explanation
to the contents of the tables. The Hypothesis was tested using SPSS (Statistical Package
for Social Science) with correlation matrix at 5% level of significance.

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