Effect of human resource management practices on employee retention in Kenya women finance trust, Nairobi

Abstract

Micro finance institutions contribute towards a country’s economic growth, employment creation, poverty reduction and development of an industrial base. According to the Bureau of Statistics economic survey of 2017, Micro Finance Institutions contributed to 20% of Kenya’s GDP. However, according to an article in the Daily Nation in 2017 Kenya Women Finance Trust lost about 800 employees in a span of two years. The institution developed and implemented appropriate Human Resource Management Practices that will enable them manage and retain the right talent. Preliminary analysis shows that training and development, compensation and work life balance are more pronounced in Kenya Women Finance Trust. Past studies have linked various aspects of training and development, compensation and work life balance to other variables like performance and productivity. None of these studies have explicitly established the link between these three human resource management practices and employee retention. Consequently, the effect of training and development, compensation and work life balance on employee retention particularly in the context of micro finance institutions is not known. Therefore, this study sought to examine the effect of human resource management practices on employee retention. It looked at how training and development, compensation and work life balance affects employee retention. The study was guided by Herzberg Two factor theory and Social exchange theory in correlation study design. The study population constituted 196 employees of Kenya Women Finance Trust from different categories; top, middle and lower management, out of which a sample of 132 respondents was selected using stratified sampling technique. Primary data in form of perception was collected from the respondents using questionnaires while Secondary data was obtained from published materials and unpublished academic reports. Furthermore, validity of research instrument was ensured through expert review while reliability test yielded a Cronbach’s Alpha coefficient of between 0.855 and 0.814. The findings revealed that Training and development was found to have a significant positive effect on employee retention at (B =0.146, p=0.044).Compensation was found to have a significant positive influence on employee retention at (B =0.184, p=0.014)and Work life balance was found to have a significant positive influence on employee retention at (B =0.414, p=0.000)there by leading to rejection of the null hypotheses. These findings imply that every unit change in training and development, in compensation and in work life balance, 0.146, 0.044 and 0.014 units change are realized in employee retention respectively. The study concludes that training and development, compensation and work life balance affect employee retention in Kenya Women Finance Trust. Therefore, the study recommends that the human resource management practices of training and development, compensation and work life balance be enhanced. The study is expected to be useful for policy making in KWFT, banking industry and government. Academia may use it in future research.