Academy of Strategic Management Journal (Print ISSN: 1544-1458; Online ISSN: 1939-6104)

Research Article: 2021 Vol: 20 Issue: 2S

Determinants of Employees' Job Satisfaction Affecting Loyalty: A Case Study of Small and Medium Enterprises in Vietnam

Nguyen Phan Thu Hang, Saigon University (SGU)

Keywords

Employee, Satisfaction, Loyalty, Enterprises, SMEs, and SGU.

Abstract

In recent years, Vietnam has participated vigorously in the integration process and achieved many successes. International integration has become one of the critical drivers of socio-economic growth and development. Small and medium-sized enterprises (SMEs) play a significant role in each country’s economy, including countries with a high development level. Therefore, the paper aims to determine the factors affecting employees’ job satisfaction and loyalty at small and medium Vietnam enterprises. The results showed five determinants: leadership, training, job characteristics, salary, and working environment. All five factors were affecting employees’ job satisfaction and employees’ loyalty with 1% significance. Since then, the authors gave several recommendations to enhance employees’ job satisfaction and loyalty in small and medium-sized enterprises.

Introduction

Shantz & Truss (2016) studied small and medium-sized enterprises play a vital role in each country’s economy, including countries with a high development level. In the current integration and globalization trend, all countries pay attention to supporting small and medium enterprises. It is to mobilize maximum resources, support large enterprises, increase their competitiveness. Besides, the position of a small and medium enterprise is even more critical. The SMEs are most evident in recent years. Small and medium enterprises have the power to spread in all areas of socio-economic life. According to the new criteria, small and medium enterprises account for over 93% of the total number of businesses in the following forms: State-owned enterprises, private enterprises, joint-stock companies, foreign-invested enterprises. Small and medium enterprises are the main job-creating places in Vietnam. In recent years, it had shown that all small and medium enterprises, especially most enterprises in the foreign sector Joint ventures are the primary source of jobs for all sectors. Specifically, data from the General Statistics Office show that: SMEs employ nearly 1 million employees, accounting for 49% of the national workforce. In the central coastal provinces, the number of employees working in small and medium enterprises compared to the number of workers in all sectors is the highest in the country (67%); The Southeast has the lowest rate (44%) compared with the national average. Thereby, we can see those small and medium enterprises play a crucial role in creating the majority of jobs in Vietnam, meeting people’s employment needs, contributing to income generation, and improving living standards for people. We can see the increasing role and importance of small and medium enterprises and this sector’s huge growth potential through the above analysis.

Methods

Literature Review

Loyalty (Loy)

During the period of globalization and Vietnam is a member of the World Trade Organization (WTO), the need for a shortage of high-quality human resources makes the labor market hotter. On the other hand, Allen & Tuslman (2019) showed that headhunting companies that specialize in providing human resources have specific strategies to attract pre-trained and qualified human resources to supply companies in need. Therefore, in terms of business, human resource management, how to maintain human resources, retain good people, avoid brain drain to ensure stable operation of the company, difficult problems need the most appropriate explanation for the board of directors. On the other hand, about employees, how can they devote themselves to the company’s development? Some employees consider income the essential factor in their jobs, but some want to have opportunities to learn and develop their careers. The new stance of loyalty is not widespread among Vietnamese enterprises and still faces many difficulties in measuring. Therefore, in this study, Mowday’s definition of loyalty is still used, considering loyalty is the desire to stay in the long term with the enterprise by Eshforth & Mael (2016).

Arvidson & Axelsson (2014) studied that employee loyalty needs to consider factors impacting the business and factors derived from employee personal reasons. They are balancing the interests of the company and meeting the employee’s needs to improve employee loyalty. Loyalty expressed in the employee’s intention to stay with the organization for a long time, even when receiving more attractive salaries from other organizations.

Satisfaction (Sati)

During the period of globalization and Vietnam is a member of the World Trade Organization (WTO), the need for a shortage of high-quality human resources makes the labor market hotter. On the other hand, Allen & Tuslman (2019) showed that headhunting companies that specialize in providing human resources have specific strategies to attract pre-trained and qualified human resources to supply companies in need. Therefore, in terms of business, human resource management, how to maintain human resources, retain good people, avoid brain drain to ensure stable operation of the company, difficult problems need the most appropriate explanation for the board of directors. On the other hand, about employees, how can they devote themselves to the company’s development? Some employees consider income the essential factor in their jobs, but some want to have opportunities to learn and develop their careers. The new stance of loyalty is not widespread among Vietnamese enterprises and still faces many difficulties in measuring. Therefore, in this study, Mowday’s definition of loyalty is still used, considering loyalty is the desire to stay in the long term with the enterprise by Eshforth & Mael (2016).

Arvidson & Axelsson (2014) studied that employee loyalty needs to consider factors impacting the business and factors derived from employee personal reasons. They are balancing the interests of the company and meeting the employee’s needs to improve employee loyalty. Loyalty expressed in the employee’s intention to stay with the organization for a long time, even when receiving more attractive salaries from other organizations.

Satisfaction (Sati)

There are many different definitions of employee satisfaction at work, and it is usually about the emotional or mental state of the person. Toroff & Lewin (2018) argued that employee satisfaction at work is an exciting or positive emotional state resulting from job evaluation or work experience.

Roughlan (2015) emphasized employees satisfied with their job defined as the amount of general positive or (emotional) influence that individuals have on their jobs.” According to Andrew Brin, satisfaction is what you love about your job. If you like your job, you will have high job satisfaction. Suppose you do not like your job strongly. In that case, the employee felt dissatisfied with the job. Employee satisfaction defined the degree of positivity of their emotions or attitudes towards Daniels & Hall (2017). When a person says that he has high job satisfaction, he likes his job. I feel good about it and appreciate its work. Research on employee satisfaction plays a vital role in human resource management. It is applied in practice to improve personal life and its effectiveness by Rishipal & Manish (2013). This factor is reflected in many published studies: Employee satisfaction has a positive effect on job performance. Elegido (2013) studied that job satisfaction understood as the employee’s best effort to contribute more to the job and the willingness to sacrifice personal interests when necessary to help the organization succeed.

Leadership (Lead)

Harris (2018) studied that leadership refers to the relationships between employees and direct superiors, the support of managers, leadership style, and the leader’s ability to perform governance functions in the organization. Leaders always show fairness in resolving conflicts, divide work among employees somewhat, always ready to help employees. When necessary, listen to the staff’s suggestions and trust that a leader is a capable person that helps SMEs overcome all difficulties and challenges in business by Guillon & Cezanne (2014). Besides, SME leaders need to have solutions for the corporate brand to maintain its image in consumers’ and employees’ eyes Tajdin (2015). Based on the concept mentioned above and studies, authors give hypothesis H1 following: 3

Hypothesis H1: Leadership (Lead) positively impact job satisfaction at SMEs in Vietnam

Training (Train)

Masakure (2016) studied training related to employees’ perception of training opportunities and personal capacity development. The business evaluation staff has not paid attention to the professional improvement training, professional qualifications for employees. Ankumah (2016) studied that SMEs need to screen employees for qualifications, seniority, and achievements to focus on training and developing human resources in the future. The training can motivate the staff to self-train with SMEs’ support on time and possibly financially or invite experts from different places to organize short-term training courses on-site by Hosanas & Velilla (2013). Based on the concept as mentioned earlier and studies, authors give hypothesis H2 following:

Hypothesis H2: Training (Train) positively impact job satisfaction at SMEs in Vietnam.

Job characteristics (Chara)

Schrag (2011) showed that the company allows employees to participate in discussions and speeches on plans and tasks that employees understand the goals and functions from which the staff will plan the implementation. This way, employees will not feel pressured, and they are proactive in their work. Autonomy at work is the degree of freedom or degree of control that people labor have been in work schedule and performance at work by Ahmadi (2016). Self- control Work can be an essential factor in relieving stress and improving work quality because it encourages employees to feel productive, productive, and productive, accountable and trusted by others in the organization by Shaker (2013). Based on the concept as mentioned above and studies, authors give hypothesis H3 following:

Hypothesis H3: Job characteristics (Chara) positively impact job satisfaction at SMEs in Vietnam.

Salary (Sala)

Aityan & Gupta (2018) showed that the salary is related to the employee’s perception of the salary level and fairness (internal and external). Gahlgaard (2015) showed that wages are considered labor costs, including basic salary, bonus, and allowance. Besides, the benefits are usually indirectly paid payments to employees such as insurance, services such as annual health checks, and travel by Kumar & Shekhar (2012). Asad (2016) showed that salary plays an essential role in whether company employees are loyal to the organization or not. The pay will also help employees cover their lives and ensure longer-term loyalty to the company by Sodhi (2015). Besides, high salaries are not enough, but wages must demonstrate fairness among everyone. Thus, pay and benefits help employees be more loyal to the organization by Klopotan, Buntak & Drozdek (2016). Based on the concept mentioned above and studies, authors give hypothesis H4 following:

Hypothesis H4: Salary (Sala) positively impact job satisfaction at SMEs in Vietnam.

Working environment (Envi)

Kagesh & Yiruthiga (2015) showed that the working environment is related to the working atmosphere, working culture, and energetic style. Working conditions include resources and facilities within the business. Employees have a fair assessment of the working environment. To maintain the right working environment, the company should regularly inspect and review quality standards on the operating environment by Nurli (2017). Regularly check employee working conditions such as equipment and supplies provided sufficiently? Is the workplace clean, cool, or not? From there, employees can feel motivated and strive to work every day by Tandrew & Sofian (2018). Besides, the company should create a working environment to support and help each other at work and in difficult life by Preko & Adjetey (2013). This factor helped employees feel shared and encouraged by the company as well as colleagues. Based on the concept mentioned above and studies, authors give hypothesis H5 following:

Hypothesis H5: Working environment (Envi) positively impact job satisfaction at SMEs in Vietnam.

Research on the relationship between job satisfaction and employee loyalty with the organization. Authors have the hypothesis following:

Hypothesis H6: Job satisfaction positively impacts employees’ loyalty at SMEs in Vietnam. (Figure 1)

Figure 1: A Research Model for Factors Affecting Satisfaction and Loyalty

Methods of Research

The research method of the topic is a combination of qualitative research methods and quantitative research methods. (Figure 2)

Figure 2: A Research Model for Factors Affecting Job Satisfaction and Employees’ Loyalty

(Source: Researchers proposed)

The authors conducted qualitative research through technical discussions with 11 human resource management experts, preliminary research, and group discussions with experts from large Vietnamese enterprises. This work did gain an inadequate understanding of loyalty and the factors that influence loyalty and make further adjustments to the scale of research concepts. The findings revealed five factors: leadership, training, job characteristics, salary, and working environment. Employee job satisfaction and loyalty are affected by all five factors by Hair, Anderson, Tatham & Black (2010).

Quantitative research: Authors are to save money and time; the report used survey sampling to gather data from 100 SMEs employees. The sample size was calculated by the study’s estimation and processing procedure. Survey questionnaires were used to collect data.

The quantitative study was conducted with an expected sample size of n=800 employees who worked for 80 Vietnamese SMEs. A convenient sampling method was used to pick a sample, but 763 samples were processed, leaving 37 samples unprocessed.

The authors used SPSS tools to measure Cronbach’s Alpha’s trust coefficient, EFA: Explore factor analysis, Confirmation Factor Analysis (CFA), and Structural Equation Modeling for the scales’ reliability (SEM). Finally, the writers gave suggestions.

Research Results

Table 1 showed that Cronbach’s alpha for job satisfaction meets this technique’s requirements. Specifically, all of Cronbach’s Alpha values are more than 0.6.

Table 1
Testing of Cronbach’s Alpha for Job Satisfaction
Items Cronbach’s alpha
Satisfaction (Sati) 0.953
Sati1 He/she is satisfied with your current job at SMEs in Vietnam 0.948
Sati2 He/she is delighted with your career development prospects at SMEs in Vietnam 0.896
Sati3 He/she will introduce the organization well to the outside at SMEs in Vietnam 0.95

Table 2 showed that Cronbach’s alpha is more than 6.0 for employees’ loyalty at SMEs.

Table 2
Testing of Cronbach’s Alpha for Employees’ Loyalty
Items Cronbach’s alpha
Loyalty (Loy) 0.88
Loy1 He/she will introduce that the company is the best place to work at SMEs 0.858
Loy2 He/she plans to continue working at the company for many more years at SMEs 0.805
Loy3 He/she is willing to sacrifice personal interests when necessary to help the company succeed at SMEs 0.861
Loy4 He/she will still work for the company even though you offered a similar job with a slightly higher salary at SMEs 0.858

Table 3 showed that Cronbach’s alpha is more than 6.0 for leadership and training at SMEs in Vietnam.

Table 3 Testing of Cronbach’s Alpha for Two Factors Affecting Job Satisfaction
No. Items Cronbach’s alpha
Leadership (Lead) 0.959
Lead1 The leadership is a capable, caring person at SMEs 0.943
Lead2 He/she receives specific and clear direction, support, and guidance from the leader at SMEs 0.946
Lead3 Leaders trust and treat his/her relatively at SMEs 0.957
Lead4 There are good cohesion and coordination between colleagues to complete together joint work at SMEs 0.935
Training (Train) 0.967
Train1 At SMEs, he/she has many opportunities for personal advancement and development 0.953
Train2 He/she is trained in the necessary knowledge and skills to perform the job 0.962
Train3 Promotion policy in the company is fair and reasonable 0.961
Train4 The SME’s training and promotion policy always encourages you to make an effort 0.947

Table 4 showed that Cronbach’s alpha is more than 6.0 for the job characteristics, salary, and working environment at SMEs in Vietnam.

Table 4
Testing of Cronbach’s Alpha for Three Factors Affecting Job Satisfaction
No. Items Cronbach’s alpha
Job characteristics (Chara) 0.882
Chara1 He/she feels like you’re doing exactly in the position you love 0.855
Chara2 He/she is independent in handling work and take responsibility for work results 0.81
Chara3 His/her work is of particular importance to the operations of the Company at SMEs 0.865
Chara4 Current job is suitable for your capacity at SMEs 0.864
Salary (Sala) 0.861
Sala1 He/she has a salary commensurate with the performance of the work 0.808
Sala2 He/she has the income at the SMEs ensures your personal life 0.821
Sala3 The SMEs’s salary policy is highly stimulating to you 0.854
Sala4 The welfare regime shows the company’s concern for its employees at SMEs 0.811
Working environment (Envi) 0.969
Envi1 He/she fully equipped to support the work at SMEs 0.953
Envi2 He/she is easy and convenient when manipulating accounting software 0.963
Envi3 The administrative processes and procedures are very professional and streamlined at SMEs 0.966
Envi4 The rooms where he/she works and makes you feel very comfortable and safe at SMEs 0.953

Figure 3 showed that the assessment of the CFA for factors affecting job satisfaction and employees' loyalty includes the following elements: CMIN/DF=3.914 (<5.0), GFI=0.907 (>0.8), TLI=0.951 (>0.9) and CFI=0.959 (> 0.9).

Figure 3: Testing CFA For Factors Affecting Job Satisfaction And Employees’ Loyalty

(Source: Data processed by SPSS 20.0 and Amos)

Table 5 showed that the assessment of the scale of job satisfaction and loyalty includes the following elements: CMIN/DF=3.289 (<5.0), GFI=0.919 (>0.8), TLI=0.962 (>0.9) and CFI=0.968 (> 0.9).

Table 5
Test CMIN/DF for All of The Components
Model NPA R CMIN DF P CMIN/ DF GFI TLI CFI
Default model 85 963.66 293 0 3.289 0.919 0.962 0.968
Saturated model 378 0 0     1   1
Independence model 27 21360.427 351 0 60.856 0.28 0 0

Figure 4 showed that the SEM assessment had factors affecting job satisfaction and employees' loyalty with a significance level of 0.01.

Figure 4: Testing Sem for Factors Affecting Job Satisfaction and Employees' Loyalty

(Source: Data processed by SPSS 20.0 and Amos)

Table 6 showed that five factors affect job satisfaction and job satisfaction affecting loyalty, with a significance level of 0.01. These results are critical information for managerial implications to enhance job satisfaction and loyalty at SMEs.

Table 6
Testing Coefficients for Factors Affecting Job Satisfaction and Employees’ Loyalty
Relationships Unstandardized Standardized Estimate SE. CR. P Hypothesis
SATI <--- CHAR A 0.181 0.081 0.056 3.229 0.001 Accepted
SATI <--- TRAIN 0.51 0.537 0.03 16.852 *** Accepted
SATI <--- LEAD 0.087 0.097 0.028 3.133 0.002 Accepted
SATI <--- SALA 0.194 0.18 0.034 5.687 *** Accepted
SATI <--- ENVI 0.099 0.102 0.028 3.541 *** Accepted

Table 7 showed that the bootstrap test results are very good with a sample of 10.000 employees. These results indicated that five factors are affecting job satisfaction and loyalty with a significance level of 0.01. These results are essential information for managerial implications to improve job satisfaction and loyalty.

Table 7
Testing Boostrap With 10.000 Samples For Factors Affecting Job Satisfaction And Employees’ Loyalty
Relationships Unstandardized Standardized Estimate SE. CR. P Hypothesis
SATI <--- CHARA 0.181 0.081 0.056 3.229 0.001 Accepted
SATI <--- TRAIN 0.51 0.537 0.03 16.852 *** Accepted
SATI <--- LEAD 0.087 0.097 0.028 3.133 0.002 Accepted
SATI <--- SALA 0.194 0.18 0.034 5.687 *** Accepted
SATI <--- ENVI 0.099 0.102 0.028 3.541 *** Accepted

Conclusions and Managerial Implications

Conclusions

The research results are based on survey results from 800 employees at SMEs in Vietnam. After evaluating the scale’s reliability through Cronbach’s Alpha coefficients and Exploratory Factor Analysis (EFA), Confirmation Factor Analysis (CFA), and SEM. The results showed that five factors positively affect employees’ loyalty through job satisfaction at SMEs in Vietnam with a significance level of 1%. It is vital to increase the job performance and work effort of SMEs’ staff to integrate human resources with domestic and foreign enterprises. SMEs should note that: salary is not weak. The most important, more important factor is the attractiveness - advancement training in the job and the adequate provision of facilities and working conditions for employees. Work environment and leadership factors also need to be noted and improved. However, to retain employees and avoid “brain drain,” the salary-benefits factor plays the most important role, followed by attractiveness - training opportunities in work, work environment, leadership. Some of the recommendations in each aspect those SMEs with managerial implications:

(1) SMEs continue ensuring high wages. Businesses need to ensure salaries are paid relatively (not scratched), commensurate with the level of contributions and have activities that care for employees. Enterprises need to build a fair, homogeneous, and transparent salary system, avoiding the situation of doing the same amount of work, but one branch’s salary is higher than another one. Conduct an industry assessment according to the capacity and work efficiency associated with the specific job completion conditions and circumstances. In addition to salary, it is necessary to perfect the welfare policy to ensure that SMEs can work with peace of mind and continue contributing for a long time. There is a rewarding policy for collectives or individuals with excellent performance; rewards calculated and paid immediately to the employee’s salary, such as bonuses for team productivity, compensation for team quality, bonus diligently create a healthy emulation environment for the industry to bring into play its full potential, promoting healthy development

(2) Job characteristics, enterprises need to ensure the right person and job placement; have appropriate tools to evaluate job performance, arrange challenging and creative work if possible, and at the same time specify the necessary conditions to be promoted for employees. Enterprises need to pay attention to this factor to take timely measures to build and strengthen trust with workers through their direct managers’ image. Enterprises need to focus on perfecting management, increasing awareness of managers’ role in understanding the industry’s needs and aspirations to narrow the gap between government and industry. It is necessary to organize periodical dialogues at the workplace each quarter to exchange information, announce plans, business results capture workers’ thoughts and aspirations. Managers need to support, instruct and guide the profession for them to complete their jobs. Management encourages employees to think independently and make work improvements from a personal perspective and consult superiors when needed.

(3) The working atmosphere in the SMEs, businesses need to ensure a polite and amiable working atmosphere; treated relatively, creating a feeling of mutual trust in work; assure the functional style urgently and on schedule. The SMEs provided workers with a working environment and appropriate facilities such as A calm working environment, proper hygiene, light temperature provides tools and tools to support the work relatively complete such as the labor protective equipment they dedicated to working with good coworkers. It is necessary to organize periodic health check-ups to ensure workers’ health and give workers a sense of concern. Periodically test the working environment to manage temperature, dust, noise, vibration, light, and air affecting the employees’ working environment and detect weaknesses. Occupational hazard and harm factors exceed the permitted standards, improve working conditions, or provide appropriate personal protective equipment to ensure workers’ health and safety. The working environment also includes labor relations that are managers and workers, between workers. SMEs need to pay attention to corporate culture; first of all, the behavioral/communication culture and the culture of sharing “healthy leaves protect torn leaves” are very useful for workers. In terms of working conditions, including computers, internet connections, SMEs infrastructure - factors that play a crucial role in the SMEs, businesses need to ensure the requirements of necessary machinery and equipment to promote human resources.

(4) Leadership tools are not too crucial for workers in SMEs, perhaps because workers in this field attach great importance to being able to do suitable jobs and be trained. Through work rather than private training. Therefore, they generally do not need “hands-on” people but can operate relatively independently when assigned work with precise quality and work schedules. Managers must create close relationships with workers, recognize their contributions promptly, and evaluate their capacity to help them do better according to the regulations set out by the enterprise. Give feedback on work accurately and swiftly so that employees can know what’s right and evil to adjust. Compliment them on the results of their work. Besides, managers should treat all employees fairly, so they should not let emotional issues interfere with work decisions such as performance evaluation. Doing so helps employees have confidence in the fairness of their superiors and strive to stick to businesses.

(5) Human resource training is one of the necessary personnel policies in the career. This activity helps new employees quickly adapt to the working style and company culture. Besides, internal training also allows employees to improve their professional capacity, thinking, and application skills. SMEs should focus on developing their employees’ potential and enhancing productivity. Here, staff trained to perfect their skills and knowledge to meet job requirements and challenges. Professional and talent training courses, as well as hands-on training sessions, are held regularly by us. Besides, SMEs should outline the specific career development path for staff, and SMEs bring the most suitable training programs to help the team improve their work efficiency.

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