06. Expectancy Theory and Employee Retention: Aligning Effort, Performance, and Rewards

Introduction

In today's fast-moving and competitive business world, companies are facing a big challenge: how to find and keep the best employees. It's really important for companies to keep talented and dedicated workers because this helps them stay strong, come up with new ideas, work better, and grow over time. As businesses realize how much having a stable and motivated workforce matters, they're looking at human resource theories as really important tools. These theories help them understand and solve the complicated problem of keeping employees in their teams.

Among all the different strategies and ways of doing things, there's one theory that stands out and could change how companies keep their employees: it's called the Expectancy Theory. This theory was made by a person named Victor Vroom in 1964 (Arnold, H. J. - 1981). The Expectancy Theory is like a tool that helps us understand why people do what they do at work. It's all about how people's beliefs and what they want affect how they act. This theory shows how important it is for companies to connect what employees expect, how hard they work, and the good things they get in return. It's like a special way of looking at things that can help companies figure out how to keep their best workers happy and motivated.

Expectancy Theory:

The Expectancy Theory, which Victor Vroom introduced in 1964, is like a map that helps us understand why people work hard and do well in their jobs. Imagine you have a goal, like getting a good grade in a test. This theory says that you'll work hard to get that good grade if you believe your hard work will actually help you do well (Chen, M.J, & Miller, D.  - 1994).

                                  

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1.     Expectancy:

Think of this like a link between effort and performance. It's like believing that if you put in a lot of effort, you'll do a good job. In the world of work, this means employees should feel that when they work hard, they'll do well in their tasks. For example, if you think that practicing a lot will help you do better in a test, you're using this "expectancy" idea.

2.     Instrumentality:

This is about believing that good performance will lead to rewards. It's like knowing that when you do a great job on that test, you'll get a reward, maybe a special treat or praise from your teacher. In work, employees need to feel sure that their good work will be noticed and rewarded. This makes them want to keep doing well.

3.     Valence:

Valence is about how much you really want the reward. Everyone likes different things, right? Some people really like getting praise, while others prefer getting a bonus or extra time off. This part of the theory says that companies need to understand what rewards matter the most to their employees. When the reward is something employees truly want, they'll work even harder to get it.

Application in Employee Retention (Behling, O., C. Schriesheim and J. Tolliver. 1975):

1.  Setting Clear Performance Expectations: Organizations need to set clear and realistic performance expectations for their employees. Employees should understand what is expected of them and how their performance will contribute to achieving organizational goals. This clarity enhances the expectancy component of the theory.

2.   Reward Structure: Aligning the instrumentality aspect of the theory, organizations should establish a transparent and fair reward structure. Recognitions, promotions, bonuses, and other incentives must be tied to actual performance. When employees see a direct correlation between their efforts and rewards, their motivation to stay and excel increases.

3.  Personalized Incentives: Valence suggests that organizations should recognize the diverse needs and preferences of their employees. While some might be motivated by monetary rewards, others might value professional development opportunities or work-life balance. By tailoring rewards to individual preferences, companies can enhance the appeal of staying with the organization.

4.   Continuous Feedback and Development: Regular feedback and opportunities for skill enhancement contribute to employees' belief in the link between effort and performance. When employees receive constructive feedback and feel that their growth is supported, they are more likely to invest their efforts in the organization.

5.  Leadership Role: Managers and leaders play a crucial role in reinforcing the expectancy theory. They should actively communicate the connection between effort, performance, and rewards. Moreover, leaders should be approachable and open to discussions about career growth, addressing any doubts employees might have about the theory's application.

Benefits and Positive Outcomes:

Using the Expectancy Theory to improve employee retention has a range of advantages that can significantly enhance an organization's overall performance and culture (House, R. J., H. J. Shapiro and M. A. Wahba. 1974).

01. Increased Engagement:

When employees perceive a clear link between their efforts, their performance, and the rewards they receive, they become more engaged in their work. They understand that their hard work will lead to positive outcomes, which motivates them to put in their best effort. This increased engagement means that employees are more focused, enthusiastic, and willing to contribute their skills and ideas.

02. Reduced Turnover:

The Expectancy Theory directly addresses a key factor that influences turnover: the belief in the connection between effort and desired results. When employees are confident that their efforts will be rewarded and contribute to their desired outcomes, they are more likely to stay committed to the organization. This reduced turnover has a cascading effect by preserving institutional knowledge, maintaining team dynamics, and saving the costs associated with recruitment and training new employees.

03. Enhanced Performance:

Motivated by the clear understanding that their hard work will lead to valued rewards, employees are naturally driven to perform at their best. As each individual's performance improves, the collective organizational performance also rises. Departments and teams become more efficient, innovative, and productive, which ultimately contributes to the overall success of the company.

04. Cultivation of a Positive Culture:

Embracing the principles of the Expectancy Theory creates a workplace characterized by trust, transparency, and fairness. When employees see a direct correlation between their efforts and the rewards they receive, they feel that their contributions are recognized and valued. This fosters a positive work environment where employees are more likely to collaborate, communicate openly, and support one another. Such a culture becomes an attractive proposition for top talent looking for an organization that values and respects its workforce.

Conclusion

The Expectancy Theory shines brightly in today's fast-paced business world, helping companies understand how to keep their best employees happy and motivated. This theory shows that when employees know their hard work leads to good results and rewards, they become more engaged and dedicated.

With the Expectancy Theory, companies can reduce employees leaving, boost performance, and create a friendly work atmosphere. This theory guides businesses to connect effort, achievement, and rewards, forming a strong bond between employees and the organization. By embracing this philosophy, organizations move forward with confidence, working hand in hand with their employees towards a future filled with success and inspiration.

References:

* Arnold, H. J. (1981). A test of the validity of the multiplicative hypothesis of expectancy-valence theories of work motivation. The Academy of Management Journal 24(1): 128-141.

* Behling, O., C. Schriesheim and J. Tolliver. 1975. Alternatives to expectancy theories of work motivation. Decision Sciences 6(3): 449-461.

* Chen, M.J, & Miller, D.  (1994). Competitive Attack, Retaliation and Performance: An Expectancy-Valence Framework. Strategic Management Journal, 15, 85-102.

* House, R. J., H. J. Shapiro and M. A. Wahba. 1974. Expectancy theory as a predictor of work behavior and attitude: A re-evaluation of empirical evidence. Decision Sciences 5(3): 481-506.

* Schuler, R. S. 1980. A role and expectancy perception model of participation in decision making. The Academy of Management Journal 23(2): 331-340.