810067

research-article20182018
SGOXXX10.1177/2158244018810067SAGE OpenKhalid and Nawab

Original Research

SAGE Open

Employee Participation and Employee

October-December 2018: 1­–17
© The Author(s) 2018
DOI: 10.1177/2158244018810067
https://doi.org/10.1177/2158244018810067

Retention in View of Compensation journals.sagepub.com/home/sgo

Komal Khalid1 and Samina Nawab2

Abstract
This study determines the relationship between types of employee participation (delegative, consultative, worker director,
and worker union) on employee retention and the moderation of employee compensation in this relationship. The authors
analyzed four types of employee participation, employee retention, and compensation in two major sectors of Pakistan (n
= 1,054): service (n = 535) and manufacturing (n = 519). Self-administered questionnaires were distributed to first-line and
middle-level employees. After establishing the reliability and validity of the scale, descriptive statistics, correlation, univariate
analysis, multiple regression analysis, and independent-sample t test were conducted. All types of employee participation
influence employee retention positively in both sectors. Employee compensation moderated the relationship between
types of employee participation and employee retention. Delegative participation had a stronger influence on retention as
compared with other types in both sectors. This is the first quantitative study to examine the influence of compensation
on the relationship between direct and indirect types of employee participation on employee retention in six industries
(Cement, Pharmaceutical, Food and Beverages, Health Care, Banking, and Higher Education) of Pakistan. The authors extend
previous research studies by using comparative analysis tools to generalize the results in South Asian organizations.

Keywords
delegative participation, consultative participation, indirect participation, retention, employee compensation

Introduction for the maximum period of time or until the completion of

In this era of hyperactive environment, the formulation and
implementation of traditional human resource management
(HRM) strategies and practices are not enough to retain tal-
ented workforce. With the inclusion of more and more
Generation X and Y employees in the workforce, utilization
of these traditional retention strategies is becoming less
effective to meet the requirements of these generations
(Kashyap & Rangnekar, 2014). Organizations are compelled
to find gateways to be more adaptive, accommodative, and
cooperative as the challenges and pressures of competition in
the global changing markets are nerve breaking and highly
intense (Park, Appelbaum, & Kruse, 2010). Taken in this
context, combination of employee participation practices
(e.g., delegation and consultation) and employee compensa-
tion can be a novel idea and unique methodology that could
help organizations to achieve success and could outwit the
competitors (Yukl, 2010).
Employee retention is considered as the heart of organiza-
tional success. It is defined as “A process in which the
employees are encouraged to remain with the organization
the objectives” (Singh & Dixit, 2011, p. 442). The basic aim
of employee retention strategies and practices is twofold
within the organizations. One is to reduce employee turnover
and, second, to considerably reduce the associated expenses
of hiring and training and orientation of the new employees
(Iqbal & Hashmi, 2015).
To analyze the influence of these participation practices
on employee retention in manufacturing and services sectors
of Pakistan, this study differentiates between direct partici-
pation (task delegation and consultation) and indirect partici-
pation (worker director and worker unions), in relation to
employee’s compensation and retention.
Organizations cannot forbid or lockout their employees
from looking for more attractive and lucrative opportunities;
1
King Abdulaziz University, Jeddah, Saudi Arabia
2
COMSATS University Islamabad, Wah Campus, Pakistan
Corresponding Author:
Komal Khalid, Assistant Professor, Faculty of Economics and
Administration, King Abdulaziz University, Jeddah 21589, Saudi Arabia.
Email: kmuddassar@kau.edu.sa

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2 SAGE Open
instead, the purpose of the retention strategies is to make
employees loyal for the time they stay with the organization.
It is an observation that strategies like career aspirations,
autonomy, delegation, involvement, and cooperative and
supportive working environment could be the key factors of
employee retention (Agarwala, 2003).
Employee consultation and delegation by managers is an
immediate force, which influences their perception regard-
ing work environment (Amabile, Schatzela, Monetaa, &
Kramer, 2004). Managerial consultation, delegation, and
encouragement are frequently viewed as variables that have
effects on employee’s performance and employee retention
(Agwu & Olele, 2014). Thus, employee participation or
involvement becomes a key aspect of organizational struc-
ture to achieve positive perceptions from employees and to
increase efficiency and retention.
Theories and assumptions regarding employee’s partici-
pation hold a number of complex characteristics. Participation
can be both direct and indirect which can effectively serve
various operational and structural properties leading to mul-
tiple outcomes (Looise, Torka, & Wigboldus, 2011).
Therefore, this study helps us to analyze the relationship
between types of employee participation and employee
retention in manufacturing and service sectors of Pakistan.
Employee participation and employee retention are inter-
dependent as both results in either high productivity or
exceptionally poor productivity. According to Wilkinson,
Mowbray, and Sun (2018), employee participation has
shifted from its origin of indirect form (worker union, worker
direction, and joint consultation committees) to more direct
employee–manager collaborations in the form of delegative
and consultative participation. Therefore, employees have
now more opportunities to participate in their task-related
decisions and to give suggestions, recommendations, or
ideas for productive organizational change (Barry &
Wilkinson, 2016).
Apart from afore-mentioned solution, the current research
implies compensation as a moderating function to create
equilibrium between employee participative practices and
employee retention. According to Milkovich and Newman
(2011), compensation means “all forms of financial returns
and tangible services and benefits employees receive as part
of an employment relationship (Milkovich & Newman, 2011,
p. 5).” Employee compensation is defined as “All forms of
pay going to employees as an outcome of their employment”
(Dessler & Varkkey, 2011, p. 394). To ensure best talent
within the organization, they must implement effective com-
pensation policies that could influence an employee’s percep-
tions and personal well-being, thus resulting in high
productivity and high financial turnover (Gupta, 2014).
Even though studies conducted by Agarwala (2003);
Gupta (2014); Kashyap and Rangnekar (2014); Ready, Hill,
and Conger (2008) have provided enough empirical evidence
on the influence of employee participation practices on
employee retention, still it requires an elaborated model that
provides an insight on employee retention in a country like
Pakistan, which is developing and facing high inflation, high
unemployment, and high skilled brain drain.
Findings of this study also provide an insight to the orga-
nizations working in other developing countries such as
Bangladesh, India, Nepal, Sri Lanka, Thailand, Malaysia,
and Philippines who have higher level of brain drain as in
Pakistan. The results would help them to devise strategies for
retention of their talented and skilled workforce.
Significance of Study
This study investigates the changes in employee’s retention
through employee participation practices moderated by
employee’s compensatory effects. This study benefits both
manufacturing and service sector organizations by helping
organizations and the executives to understand the role of
compensation in employee retention, which, in turn, can
affect their organizational performance and decrease
employee retention.
Research Objective
This study contains the following core objectives:
i. To understand and analyze the types of participative
practices employed for employee retention in service
and manufacturing sector organizations of Pakistan.
ii. To explore the extent of association among types of
participative practices and employee retention in ser-
vice and manufacturing sector organizations of
Pakistan.
iii. To explore the moderating effect of compensation on
the relationship between participative practices and
employee retention.
Why Pakistan?
Selecting Pakistan for this study has three major reasons.
First, Pakistan is an emerging economy where government is
attempting to accelerate country’s economic growth by cre-
ating a conducive macroeconomic environment and develop-
ing infrastructure to increase local production and generate
competition and efficiency in the economy (Shahbaz &
Rahman, 2014). Because of the uncertain economic situa-
tion, organizations working in Pakistan have to face severe
competition from within and outside the country for attract-
ing and retaining competent employees. Second, external
brain drain from the country is exceeding at an alarming rate.
Brain drain from the country is due to lack of satisfaction
with compensation, even with a regular increase in compen-
sation by public and private sector organizations (Sajjad,
2011). For employee retention, organizations have to work
on something more than compensation only. Different
Khalid and Nawab 3
studies have shown that nonfinancial incentives including
delegation, consultation, and empowerment influence
employee retention (Sajjad, 2011). Third, total population of
Pakistan was approximately 188 million in 2014, which
increased to 193.85 million in 2016. Despite the continued
population planning, Pakistan will be the sixth highly popu-
lated country of the world and it is predicted to reach around
342 million by 2050 at the recent consensus (Sheikh, Sadaqat,
& Meraj, 2014). According to Pakistan Bureau of Statistics
2016, total population of Pakistan between the age group of
25 and 54 years range approximately 7.45 million and the
median age is 23.4. These statistics show that most of the
Generation X are either working in the organizations or are
ready to enter the working environment. With the Generation
X entering the organizations and limited economic and
financial situation of the organization, they need techniques
and practices (employee participation) to retain competent
employees.
According to Gallup survey 2016 and Hay group 2017,
around 50% of employees in Pakistan and India are set to
exit their present organizations before 2017 and stated com-
panies with highly engaged workforces outperform their
peers by 147% in earnings per share.
Literature Review
Employee Participation
Employee participation is a process in which employees take
control of their work and its conditions by incorporating their
involvement in decisions regarding their work (Strauss,
2006). In this process, employees share decision-making
power regarding their tasks with their superiors. A meta-
analysis on employee participation conducted by Pereira and
Osburn (2007) analyzed that organizations equalize the hier-
archical inequality among employees and supervisors by
means of shared influence and authority.
Employee participation includes direct and indirect forms,
including employee’s task delegation and consultation,
employee representations, and shared ownership schemes.
Employee participation schemes promote equal opportuni-
ties and incentives that enhance employee’s commitment and
retention (Allen, 2015).
Direct participation. Participation can be informal, formal,
consultative, delegative, and direct or indirect. This form of
employee participation occurs in the everyday practice of the
job itself. It consists of the capacity to influence the design of
or change in the system of organization in which the
employee is involved, and it might take the form of consulta-
tion about broader and long-term organizational issues. All
these forms have their own individual influence on employee
retention, organizational productivity, and efficiency (Bhatti,
Nawab, & Akbar, 2011). Substantial employee involvement
in decisions, on one hand, can make them fortify their own
interests while, on the other hand, it can reduce the probabil-
ity of opportunism carried out by the managers (Allen, Bry-
ant, & Vardaman, 2010).
Delegative participation.  Delegative participation is distin-
guished as the degree to which subordinates are allowed to
influence their tasks and responsibilities to put into action.
This form of participation gives them a discretionary author-
ity or a say with respect to implementation of their tasks.
This enhances subordinate’s degree of situational task con-
trol thus inducing positive attitudinal outcomes (Krause,
Gebert, & Kearney, 2007). Delegation means that the man-
ager assigns duties to others, and divides work in such a way
that it executes effectively. In a way, delegation reduces the
manager’s workload and ensures that he manages instead of
focusing on functionally executed tasks. This form of del-
egation restricts participation to only operational aspects of
the organization.
Any form of employee participation (delegation, empow-
erment, or autonomy) supports employee retention decisions
and builds positive perception regarding organization and its
management (Liu, Zhang, Wang, & Lee, 2011). Findings of
Liu et al. (2011) have significant implications for academi-
cians in the form of employee retention and participation lit-
erature, along with it has managerial implications to enhance
retention.
Consultative participation. Consultative participation is
distinguished as an ailment of opportunities for participa-
tion to employees by organization. In this process, subor-
dinates provide inputs to managers before taking decisions
in the form of suggestions or recommendations, but manag-
ers retain control over the final decisions (Ruiz & Rivero,
2018). It allows exchange of ideas and different points of
view to take place between the management and employees,
and among employees themselves (Fleetwood & Hesketh,
2010). In consultative participation, employees engage in
long-term, formal, and direct participation, and the content
of the participative decision making focuses on job issues. In
consultative participation, employees give their opinions and
management encourages them to share their views but retain
the right to take the action.
Indirect participation. Indirect participation is classified as
formal, indirect, and of medium to low influence. Employees
participate indirectly through their representatives who were
elected in a governing council or the board of directors
(Akkerman, Sluiter, & Jansen, 2015). It is similar to employee
ownership, except that the influence of employees is gener-
ally lower. Indirect forms of participation include employee
representation in joint consultative committees, works coun-
cils, and employee members of board of directors (worker
director) or management committees. Direct employee par-
ticipation means the direct interaction between employer and
employees in the process of decision making, while in
4 SAGE Open
indirect participation, employers interact with employees
through representatives (Akkerman et al., 2015).
Industrial Relations Act (IRO) of 2008 and its predeces-
sors, IRO 2002, contained requirements for employees to
form trade unions or worker union at the factory or organiza-
tion level and can appeal in law courts and national organiza-
tions to raise their voice and concerns nationally and protect
and promote their rights (Ghayur, 2009). It has a three-
pronged system of employee participation in management.
This system includes works council, the management com-
mittee, and the joint management board; they work indepen-
dent of each other and each having its own sphere of
activities.
Worker director. Worker directors are representative of
employees who are part of board of directors or organiza-
tional supervisory board. The appointment of a worker direc-
tor requires the agreement of the organizational employees
and can be elected or selected from the worker union body
or employees (Addison & Schnabel, 2011). The concept
of worker director might be considered more effective
employee retention and efficiency, as they are involved in
top management of the organization and can influence the
interests of both management and workers (Strauss, 2006).
Theorists with a collective bargaining perspective evaluate
the board representation as ineffective or as a half success
at best. They welcome the legitimate access of employees
to corporate decision-making processes, permitting them to
compete for influence particularly on issues directly affect-
ing employee interests.
Worker union.  The purpose of worker union is to use col-
lective bargaining as a tool to force organizations for better
employee welfare programs and work life (Levine, 1995).
In general, worker unions cooperate with management and
help them in issues related to compensation reduction or
organizational restructuring or reengineering. In most South
Asian countries (Pakistan, China, India, and Bangladesh),
worker unions are part of corporate law. They are usually
interested in participating in strategic-level decision making
to safeguard employee rights in terms of fairness and equity
of resource distribution (Nam, 2003).
Employee Retention
To accomplish organizational business objectives, efforts
that an organization adopts to keep productive and desirable
employees are referred as employee retention (Frank,
Finnegan, & Taylor, 2004). In every sector, employee reten-
tion is a major issue because high turnover cost results in
failure for achieving organizational objectives. Highest
attention is paid to retention as it helps not only in reducing
turnover outlays or in minimizing the cost of recruiting and
training but because it aids in retaining talented workforce
from getting poached (Sandhya & Kumar, 2011). However,
when an employee terminates his job, the organization suf-
fers loss of customer loyalty (in service sector), loss of
expertise, more organizational cost (hiring, administrative,
and training), and interruption in daily workflow, which may
prove disastrous for the organizations in the end (Brandt,
Bielitz, & Georgi, 2016; Karsan, 2007; Ton & Huckman,
2008).
Study conducted by Marescaux, De Winne, and Sels
(2013) indicates that practices like delegative participation,
consultative participation, worker director, and worker union
can result in enhancing employee retention. To retain tal-
ented employees, employers and supervisors have to provide
employees opportunities such as challenging task and a cer-
tain level of autonomy and freedom in their jobs (Ready et
al., 2008).
According to organizational equilibrium theory (March &
Simon, 1958), an individual tends to stay with an employer
as long as the inducement offers (compensation, working
environment, growth opportunities) are similar or greater
than the contributions (such as time, energy, and effort) that
an employee offers. Individual’s desire and ease also matter
in this context.
Organizations with effective employee participation prac-
tices (direct and indirect) have more positive attitudinal out-
comes (commitment, job and pay satisfaction, retention).
When employees have effective role in devising policies and
decisions within their organization, leaving the organization
can become difficult for them (Ojasalo & Tahtinen, 2016).
In developing countries like Pakistan, which offer limited
financial compensation to their employees, employee par-
ticipation practices could be an effective tool to retain
employees (Akhtar, Aamir, Khurshid, Abro, & Hussain,
2015). This leads us to our first hypothesis:
Hypothesis 1: Employee participation significantly influ-
ences employee’s retention.
Employee Participation, Compensation, and
Retention
To attain and retain the productive and skillful employees in
a competitive market and workplace, organizations have to
initiate practices like employee participation (Iheriohanma,
2007). Organization cares about their employees by giving
the opportunity to enhance their skills and career and valuing
their participation (direct or indirect), makes employees feel
as a part of the organization, and results in increased reten-
tion (Allen et al., 2010).
Once a company has captured exceptionally talented
employees, they are required to close the backdoor to curb
their impulse of walking out (Kaye & Jordan, 2001).
Employers should not get deceived that money is the only
Khalid and Nawab 5
employee retention factor; employees in today’s environ-
ment are also concerned with personal growth and career
development (Chiboiwa, Samuel, & Chipunza, 2010).
Hence, they get more fascinated if offered meaningful and
dynamic challenges at workplace. Apart from that, good
supervisors and opportunities for grooming also count a lot.
Compensation is not among the top influential factors for
nonmanagement turnover; however, for increasing retention,
compensation can play a critical role (Moncraz, Zhao, &
Kay, 2009). Studies conducted by Hytter (2007) and
Hausknecht, Rodda, and Howard (2009) stated that compen-
sation has an indirect influence in employee retention. They
also stated that salary or wage has a moderate influence on
compensation. Whereas compensation satisfaction and trans-
parency could have a direct influence on retention.
Employees who have low compensation often do not
involve in practices like delegation, consultation, and sug-
gestions, resulting in low level of employee retention at first-
line employees. Moreover, they consider these practices as a
challenge in their work–life balance and belief as not worthy
of required efforts (Agustine & Ssemugenyi, 2014). Study
conducted by Bhatnagar (2007) also stated that organizations
with higher level of participation have more retention and
productivity. Middle and top-level management can influ-
ence compensation on the bases of participation practices
and employee retention requirement. Managers have to
devise innovative mix of participation practices and utilize
different forms of compensation to make talented employees
view their employment with the organization as more
useful.
Employee retention increases when employees have some
voice and authority regarding their work-related decision.
This relationship can be affected with the fair and transparent
compensation practices (George, 2015). This leads to our
second hypothesis:
Hypothesis 2: Employee compensation moderates the
relationship between employee participation and
retention.
In service sector organization, unlike manufacturing sector
organization, employee attitude and behavior is an essential
part of the organizational outcome, which results in more
efforts from organizations to involve them in making deci-
sions regarding their jobs or seeking opinion rather than just
seeking compliance from employees (Saeed et al., 2013).
According to Cania (2014), both organizational sectors have
basic differences in their core organizational practices that
influence their organizational performance. Manufacturing
sector organizations have more focus on staffing and com-
pensation practices, whereas service sector organizations
emphasize more on customer satisfaction, thus focusing on
HRM practices like participation and training.
According to Zahra, Irum, Mir, and Chishti (2013), with
the increase in service sector organizations (higher education
institutions and hospitals) in Pakistan, employees have now
more job opportunities and they can select organizations
according to their own preferences and satisfactory factors,
resulting in lower employee retention. These satisfactory
factors include more participation, compensation, training
opportunities, and authority.
Moreover, manufacturing organizations have more
worker unions, and mostly unionized organizations have
lower skilled employees, which results in lower level or less
delegative and consultative participation than within service
sector organizations (Schmitt, 2009). To sum up our consid-
erations so far, there is a theoretical argument that suggests
that there is a difference regarding employee participation in
manufacturing and service sector organizations. This leads to
our third hypothesis:
Hypothesis 3: Influence of employee participation on
employee retention significantly differs between manu-
facturing and service sector.
Method
We examined our research hypotheses with the help of data-
sets from manufacturing (cement, pharmaceutical, and food
and beverage) and service sectors (health care, higher educa-
tion, and banking) of Pakistan. To construct a comprehensive
list of populations, we included the higher education insti-
tutes that are approved either by the Higher Education
Commission of Pakistan; banks, cement, and food and bev-
erage companies that are listed in Securities and Exchange
Commission of Pakistan (SECP); health care that are
approved by Pakistan Medical and Dental Association
(PMDA); and pharmaceutical companies that approved by
Drug Regularity Authority of Pakistan (DRAP). Recognized
organizations are included because nonrecognized organiza-
tions are often reluctant to share information due to their own
legal and financial concerns. Employees working at the mid-
dle level and first-line faculty members (i.e., Lecturer,
Assistant Professor, Associate Professor, and Professor)
from higher education institutions, from health care (doctors,
surgeons, and department heads), and managers, assistant
managers, and department heads from banks, pharmaceuti-
cal, cement, and food and beverage organizations were
approached for data collection.
Data Collection and Sample
Two mechanisms were adopted for data collection: first, data
were collected through a self-administration questionnaire
from organizations in Islamabad, Rawalpindi, Lahore, and
Peshawar (response rate = 95%). Second, data were col-
lected through emails (with two reminders after every 3 days
gap) from Karachi and Quetta (response rate = 62%). The
total response rate from manufacturing sector was 79.84%,
6 SAGE Open

Table 1.  Respondent’s Demographics.

S. No Demographics Responses Frequency Respondents %

1. Gender
 Male 725 68.8 1,054 100
 Female 329 31.2
2. Age
 20-30 400 37.9 1,054 100
 31-40 490 46.5
 41-50 146 13.9
  51 and above 11 1.7
3. Qualification
 PhD 149 14.1 1,054 100
 MPhil 204 19.4
 Masters 618 58.6
 Bachelor 83 7.8
4. Organization type
  Food and beverage 218 20.7 1,054 100
 Cement 154 14.6
 Pharmaceutical 147 13.9
  Higher education 227 21.5
  Health care 169 16
 Bank 139 13.2
5. Sector
 Manufacturing 519 49.2 1,054 100
 Service 535 50.8

while from service sector, it was 82.30%. In each sector
organization, 650 questionnaires were distributed (food and
beverage = 250, cement = 200, pharmaceutical = 200,
higher education institutions = 250, banks = 250, and health
care = 250). These types of organizations were selected
because according to the data of SECP 2016, they altogether
make around 30% contribution in their sectors. Based upon
this, study results can be generalized.
The two samples were collected as convenient samples
where the individual workers were personally approached in
their workplaces. After a brief introduction to this study, the
voluntary participants were handed the surveys that were to
be collected at the end of the day. Although the survey
requires only 10 min for completing, some surveys were col-
lected in the next 2 days to give them enough time to attempt
the survey attentively. As shown in Table 1, 68.8% of the
respondents were male. From universities, most of the fac-
ulty members were either PhDs or were registered in PhD
programs. In banks, almost all employees were Master
degree holders while very few employees were with MPhil
or MS degrees, whereas in health care, mostly respondents
were MBBS or Master degree holders. On the contrary, most
employees in manufacturing sector organizations were
Master and Bachelor degree holders.
Instrument Validity
In pilot test phase for content validity of the scale, three types
of methods were executed. These methods included focus
group discussion, general interviews from two manufacturing
organization and two service organization managers, and
doing pilot testing of the survey form. After completion of
these three experiments, survey form was modified in terms
of simplifying survey language and translating survey form
into Urdu (by using back translation method) for those who
find difficulty in understanding English. Survey statements
were modified for each sector and two questions were added
in employee retention variable.
Measures
The survey includes items for demographics (i.e., age, edu-
cation, sector, industry, and employment status). For the
measuring employee participation, six-item scale of
Lammers, Meurs, and Mijs (1987) was used with 5-point
Likert-type scale ranging from highly disagree to highly
agree. For construct validity, exploratory factor analysis
revealed that six items of delegative participation explain
62.46% of the variance; five items of consultative participa-
tion explain 60% variance; three items of worker union scale
explain 60.98% variance, whereas three items of worker
director scale explain 53.42% of the variance. To measure
employee retention, 10-item scale of Govaerts, Kyndt,
Dochy, and Baert (2011) was used. Exploratory factor analy-
sis revealed that it explains 65.15% of the variance. To mea-
sure employee compensation, a ­self-developed three-item
scale was used. The sample included items such as mark
your pay grade and salary range. For construct validity,
Khalid and Nawab 7

Table 2.  Rotated Factor Matrix.a

Factor

  1 2 3 4 5 6
DP1 .743  
DP2 .539  
DP3 .751  
DP4 .823  
DP5 .842  
DP6 .687  
CP1 .612  
CP2 .736  
CP3 .615  
CP4 .781  
CP5 .629  
WU1 .657  
WU2 .820  
WU3 .847  
WD1 .610  
WD2 .891  
WD3 .650  
ER1 .816  
ER2 .624  
ER3 .874  
ER4 .637  
ER5 .710  
ER6 .658  
ER7 .533  
ER8 .628  
ER9 .781  
ER10 .629  
EC1 .597
EC2 .725
EC3 .693

Note. Extraction method = principal axis factoring; rotation method = varimax with Kaiser normalization. DP = delegative participation; CP = consultative
participation; WU = worker union; WD = worker director; ER = employee retention; EC = employee compensation.
a
Rotation converged in seven iterations.

exploratory factor analysis revealed that three items explain
50% of the variance in compensation.
As a first step, an exploratory principal components anal-
ysis with varimax rotation on all multiple-scale items to
determine item retention was performed. A principle com-
ponents factor analysis with varimax rotation was conducted
to validate the basic structure of delegative participation,
consultative participation, worker union, worker director,
employee retention, and employee compensation. In inter-
preting the factors, only a loading of 0.50 or greater on the
factor has been considered. The Kaiser–Meyer–Olkin
(KMO) measure of sampling adequacy value for items was
0.726, indicating sufficient intercorrelations with Bartlett
test of sphericity was also found to be significant (chi-square
= 7,840.151; significance = .000, p < .001). These factors
can be used as variables for further analysis.
Goodness of model fit presented satisfactory results of
indices—minimum discrepancy, divided by its degrees of
freedom (CMIN/DF) = 2.41; goodness of fit index (GFI)
= 0.74; adjusted goodness of fit index (AGFI) = 0.73;
comparative fit index (CFI) = 0.82; root mean square
error of approximation (RMSEA) = 0.04. Cronbach’s
alpha coefficient values ranged between .70 and .81,
composite reliability (CR) ranged from .74 to .83, and
average variance extracted (AVE) ranged from 0.53 to
0.64.
Prior to the analysis of structural model, multicollinearity
issues were also checked. For that, variance inflation factor
(VIF) and tolerance tests were conducted on all variables
separately. Results indicated no issue of multicollinearity as
tolerance values are above 0.10 and VIF values are less than
10 as recommended by O’brien (2007).
8 SAGE Open

Table 3.  Descriptive and Pearson Correlations Analysis.

M SD 1 2 3 4 5 6 7 8 9
Gender 1.32 .47 1.00  
Age 1.60 .79 −.21** 1.00  
Qualification 2.81 .93 −.18** 0.14 1.00  
Compensation 3.25 .98 .54** .29** .35** 1.00  
DP 3.18 .72 −.32** .24** .12** .29** 1.00  
CP 3.28 .63 −.11** .18** −.25** .16* .17** 1.00  
WU 3.46 .94 .14* .26* −.14 .31** −.11 .12* 1.00  
WD 3.24 .83 .21* .15* −.22 .24** −.17 .15* .18** 1.00  
ER 3.42 .55 −.35** .34* −.38** .23** .34** .27** .13** .12* 1.00

Note. DP = delegative participation; CP = consultative participation; WU = worker union; WD = worker director; ER = employee retention.
*
p < .05. **p < .01.

Table 4.  Univariate Analysis (Dependent Variable = Employee Retention).

Manufacturing sector Service sector

  F β t value F β t value
Intercept 17.55** 2.74 4.38** 7.97** 2.84 7.35*
Compensation 3.21** 0.23 2.85* 4.22* 0.26 2.54*
Delegative 12.37** 0.32 5.33** 3.47** 0.27 5.92**
Consultative 37.52** 0.27 4.20** 8.85** 0.20 5.31**
Worker Union 18.84** 0.13 3.24** 9.34** 0.12 3.98**
Worker director 15.24** 0.16 4.10** 3.42* 0.12 2.97**
Compensation × Delegative 45.78** 0.35 2.05* 3.24** 0.38 2.05*
Compensation × Consultative 9.45** 0.32 3.04* 4.53* 0.29 3.25*
Compensation × Worker Union 6.32** 0.16 3.58* 5.68** 0.15 3.61*
Compensation × Worker Director 3.22** 0.22 2.50* 3.21* 0.19 3.55*
R2 .41 .58
Adjusted R2 .39 .56
M 3.45 3.87
SD .96 .84
*
p < .05. **p < .01.

Data Analysis Univariate Analysis

Descriptive Statistics and Pearson Correlation
Analysis
The descriptive statistics in Table 3 indicates that the
responses for all the study scales were above the neutral
response options. Results of mean and standard deviation
show that data have normal distribution. Results of Pearson
correlation analysis indicate in Table 1 that employee reten-
tion was positively correlated with salary, delegative partici-
pation, consultative participation, worker director, and
worker union. Employee retention was negatively associated
with gender, age, and qualification. Employee retention has a
strong association with delegative participation while it has a
weak association with worker director.
Univariate analysis was conducted to further investigate
the influence of compensation and the interaction effect of
compensation with employee participation (delegative,
consultative, worker union, and worker director) on
employee retention. The findings from these tests shown in
Table 4 are for manufacturing and service sectors. For both
sectors of Pakistan, three forms of employee participation
had significant main effect on employee retention.
Delegative participation had a positive influence on
employee retention. The interactions among forms of
employee participation, employee retention and compen-
sation is shown in Figure 1 as theoratical framework.
The interaction between compensation and delegative
participation also had a significant effect on
Khalid and Nawab 9
Figure 1.  Theoretical model.
Figure 2.  Delegative Participation × Compensation (manufacturing sector).
retention predicting that level of compensation influences
the relationship between delegative participation and
employee retention.
Delegative participation interacted with higher compensa-
tion to enhance employee retention is shown in interactional
plots (Figure 2 and 3). Interactive Figures 2 and 3 show with
higher level of compensation, the influence of delegative par-
ticipation on employee retention becomes stronger in both
sectors. Results of Table 4 show that interactive influence of
compensation and delegative participation on employee reten-
tion is stronger within service sector than manufacturing sec-
tor. In Table 2 rotations were converged in seven iterations.
Consultative participation had a positive influence on
employee retention. The interaction between compensation
and consultative participation also had a significant effect on
retention, predicting that level of compensation influences
the relationship between consultative participation and
employee retention. Consultative participation interacted
with higher compensation to enhance employee retention is
shown in interactional plots (Figures 4 and 5).
Interactive Figures 4 and 5 show with higher level of
compensation, the influence of consultative participation on
employee retention becomes stronger in both sectors. Results
of Tables 2 and 3 show that interactive influence of compen-
sation and consultative participation on employee retention
is stronger within service sector than manufacturing sector.
For both manufacturing and service sector, indirect par-
ticipation (worker unions and worker directors) had signifi-
cant effect on employee retention. The results showed that
indirect participation has a positive influence on employee
retention. The interaction between compensation and worker
director also had a significant effect on retention, predicting
that level of compensation influences the relationship
between worker director and employee retention. In both
10 SAGE Open

Figure 3.  Delegative Participation × Compensation (service sector).

Figure 4.  Consultative Participation × Compensation (manufacturing sector).

Figure 5.  Consultative Participation × Compensation (service sector).

Khalid and Nawab 11
Figure 6.  Worker Director × Compensation (manufacturing sector).
Figure 7.  Worker Director × Compensation (service sector).
sectors, worker director interacted with higher compensation
to enhance employee retention is shown in interactional plots
(Figures 6 and 7); employee retention is reduced with lower
compensation levels in both sectors even with high levels of
worker director.
The interaction between compensation and worker union
also had a significant effect on employee retention predicting
that in both sectors, level of compensation influences the
relationship of worker union and employee retention. Worker
union interacted with higher levels of compensation to
enhance employee retention as shown in interactional plots
(Figures 8 and 9). Between both sectors, influence of com-
pensation is stronger on the relationship of worker union and
retention in manufacturing sector than in service sector.
Compensation had a stronger moderation effect on direct
participation (delegative and consultative) and retention
relation than indirect participation (worker director and
worker union) and retention relationship. Overall, R statis-
tics showed that employee participation (delegative,
consultative, worker director, and worker union) and their
relationships with compensation predicted 39% variation in
employee retention in manufacturing sector while 56% vari-
ation in employee participation in service sector. Moreover,
the values of F statistics showed that model is significant.
Results of the study supported the first hypothesis by
showing positive significant main effects of employee par-
ticipation (delegative, consultative, worker director, and
worker union) on employee retention. Second hypothesis
was supported by the results of Table 4, which showed sig-
nificant moderation effect of compensation on the relation-
ships of forms of employee participation and employee
retention in the two sectors.
Multiple Regression Analysis
Multiple regression analysis was conducted to analyze each
industry (cement, pharmaceutical, food and beverages, higher
education, bank, and health care). As shown in Table 5,
12 SAGE Open
Figure 8.  Worker Union × Compensation (manufacturing sector).
Figure 9.  Worker Union × Compensation (service sector).
among manufacturing sector organizations, direct and indi-
rect participation, compensation, and their moderation influ-
ence employee’s retention in cement industry (36%),
pharmaceutical industry (36%), and food and beverage indus-
try (39%). On the contrary, these independent and moderating
variables influence employee’s retention in higher education
industry (53%), banking industry (49%), and health care
industry (51%). Results showed that among manufacturing
sector organizations, food and beverage industry employee’s
retention is more effected by direct participation (delegative
and consultative) and indirect participation (worker director
and worker union).
In higher education sector type, impact of direct participa-
tion (delegation and consultation) on employee’s
participation is more than other two types of service sector
organizations while impact of indirect participation (worker
director and worker union) on employee’s retention is least
as compared with other types of service sector organizations.
In food and beverage industry, influence of both types of
employee participation on employee’s retention is greater
than other two sector types (cement and pharmaceutical).
Independent-Sample t Test
Independent-sample t test was used to explore difference in
both sectors. The results of delegative participation, consul-
tative participation, worker director, worker union, employee
retention, and compensation were significant as shown in
Khalid and Nawab 13

Table 5.  Sector Type Wise Regression Analysis for Industrial Comparison (Dependent Variable = Employee Retention).

Manufacturing sectors Service sectors

  Cement Pharmaceutical Food and beverage Higher education Banking Health care
Intercept 2.71** 3.11** 2.96** 2.85** 3.21** 3.34**
DP 0.30** 0.25** 0.29** 0.41** 0.34** 0.33**
CP 0.16** 0.23** 0.27** 0.32** 0.29** 0.27**
WD 0.23** 0.19* 0.26* 0.14 0.12* 0.15*
WU 0.27** 0.28** 0.29* 0.12* 0.25** 0.21**
C 0.27** 0.33** 0.31** 0.34** 0.32** 0.38**
C × DP 0.18** 0.17** 0.15** 0.35** 0.28** 0.34**
C × CP 0.12* 0.19* 0.17* 0.23** 0.21** 0.20**
C × WD 0.19* 0.14* 0.16* 0.11 0.14* 0.12*
C × WU 0.15* 0.12* 0.19* 0.10* 0.17* 0.18*
R2 .37 .38 .41 .58 .52 .54
Adjusted R2 .36 .36 .39 .53 .49 .51
F value 17.21** 15.46** 18.72** 10.32** 11.57** 17.49**
n 154 147 218 227 139 169

Note. DP = delegative participation; CP = consultative participation; WD = worker director; WU = worker union; C = compensation.
*
p < .05. **p < .01.

Table 6. Independent-Sample t Test for Sector Comparison.

Manufacturing Service

Variable M SD M SD t p
Compensation 2.68 .57 2.96 .51 4.48 .01
Delegative 3.24 .66 3.52 .69 5.72 .00
Consultative 3.27 .63 3.69 .65 6.44 .01
Worker director 3.04 .71 2.64 .57 5.59 .01
Worker Union 2.96 .54 2.51 .39 6.70 .00
Retention 3.46 .56 3.69 .49 7.81 .00

Table 6. These results predict that there is a significant differ-
ence in both sectors (manufacturing and service) regarding
the model variables, thus proving third hypothesis of the
study.
Discussions, Implications, and
Conclusion
Discussion
The study was conducted to analyze the influence of types of
employee participation practices on employee retention in
manufacturing and services sector of Pakistan. One of the
main purpose of this study was also to explore impact of
compensation on participation–retention relationship in both
sectors. Univariate analysis was being used to examine the
moderation influence of compensation on the relationship of
employee participation forms (delegative, consultative,
worker director, and worker union) and employee retention.
Results showed that all forms of employee participation (del-
egative, consultative, worker director, and worker union) had
a significant and positive relationship with employee reten-
tion. To enhance employee retention within the organization,
employers have to design both direct and indirect forms of
employee participation and employee compensation vigi-
lantly. Forms of employee participation have a significant
influence on employee’s retention and are consistent with the
study conducted by Gutherie (2001) which stated that for
retaining vital workforce and reducing distractions related to
employee turnover, most organizations use employee partici-
pation practices. When organizations provide employees
with opportunities of participation in decisions related to
their job, employee’s retention increase.
In manufacturing sector of Pakistan, 39% variation in
employee retention is due to factors of employee participa-
tion, while 56% variation in service sector was being
recorded. In the service sector organizations, employee
retention is more influenced by employee participation (del-
egative, consultative, worker director, and worker union)
than manufacturing sector because service sector has more
human influence than in manufacturing sector. Employers
should acknowledge that by using employee participation,
14 SAGE Open
they could enhance their dependence on specialized employ-
ee’s knowledge, which make them very critical for organiza-
tional survival.
Retaining valuable employees within the organizations
present organizations with the real challenge. Organizations
that are willing to attract and retain these talented employees
can not only rely on nonfinancial practices (i.e., career devel-
opment, appreciation, or work–life balance). They also have
to offer them attractive financial rewards (compensation)
(Turnea, 2018). Specifically, in service sector organizations
where most of the procedures are based on employee’s
explicit and tacit knowledge, practices for employee’s reten-
tion become very crucial (Gutherie, 2001). In service sector
organizations, greater impact of participation on employee
retention could also be due to their better understanding
regarding the effect of satisfied employees in terms of pro-
viding service to the customers (Bell & Menguc, 2002).
For both manufacturing and service sectors, when higher
levels of compensation influence delegative participation
and consultative participation, employee retention increases.
This study also suggests that organizations in both sectors
should give due importance to employee compensation and
create an environment where employees can work as a team
and employees participate in decision-making practices
enthusiastically. These results are in accord with the study
conducted in Kenya by Agustine and Ssemugenyi in 2014,
showing that if employees have low level of compensation,
they will consider participation as a burden. In this scenario,
despite of participation source of high retention, it can
become a source of high employee turnover. The results veri-
fied that weather it is Africa, Asia, or any developed country,
if employees perceive that their efforts and contributions are
not justified, their intention to stay in the organization
reduces. Moreover, if there is organizational procedural and
distributive transparency, employees would know what they
can get (financial and nonfinancial compensation) and how
they can get (tasks and processes), and their performance and
retention can be increased (Sharma, Sharma, & Agarwal,
2016).
As suggested by Kashyap and Rangnekar (2014) that uti-
lization of employee participation practices, that is, employee
delegation, employee consultation, worker director, and par-
ticipation in the tasks of worker union, organizations can
plan reward and career development strategies, thus resulting
in more visibility of talented employees. Employer–employee
relationship should be strengthened through open door pol-
icy and regular communications so that an environment of
trust can be developed between them. This can help employ-
ers and managers and also employees for better decisions in
succession planning, employee career progression, and
retention.
Among all industries, only higher education industry
worker directors had no impact on employee retention. It
could be due to absence of worker director in the board of
directors. In Pakistan, universities and colleges have usually
two types of boards: one is board of directors, which usually
take decisions regarding university administration and often
do not have faculty members on the board. Hence, no worker
directors are in universities, which depict nonsignificant
influence of worker director on retention (Table 5). Second is
the education council, which take decisions regarding educa-
tional affairs of their universities. The education council
members are usually faculty deans and department heads.
The tasks which education council performs are delegative
and consultative in nature.
In service sector organizations, managers and employers
need to recognize and promote practices (delegation, consul-
tation, autonomy, and empowerment) in the organizational
environment for knowledge workers (professors, doctors,
and bankers). This would help these employees in develop-
ing a positive perception toward employee retention (Smith,
Capitulo, Griffin, & Fitzpatrick, 2012).
Among all forms of employee participation, direct form
of employee participation influences employee retention
more than indirect forms of employee participation, because
in delegation and consultation practices, employee percep-
tion regarding their voice is more effective and influential.
Implications of the Study
The results of the study offer useful insights on employee
retention in relation with employee compensation and par-
ticipation strategies in Pakistani organizations. This study
through multiple regression analysis and ANOVA theoreti-
cally identified the commonalities and differences in
employee participation practices (delegation, consultation,
worker director, and worker union) across different indus-
tries (cement, pharmaceutical, food and beverage, health
care, higher education, and banking). In Pakistan, it also
investigated the role of these participation practices in shap-
ing employee retention. The study has seven important man-
agerial implications for Pakistani managers working in
cement, pharmaceutical, food and beverages, health care,
higher education, and banking industries:
1. The study provides valuable information for HRM
and development practitioners due to its pragmatic
significance in enhancing employee participation
practices that can influence retention.
2. We observed that managers or employers who dele-
gate tasks or responsibilities to their subordinates
form a good quality relationship with their subordi-
nates, which is characterized by respect, loyalty,
motivation, and mutual trust. Employee delegation
and consultation also enhance employee explicit
knowledge regarding their job and can reduce
employee training and development cost.
3. Several initiatives should be taken by the employers
to educate employees about the role, importance, and
implementation of employee participation practices
Khalid and Nawab 15
(delegation, consultation) within their organizations.
This also would help them in their task-related
knowledge and skills.
4. This study also provides an insight to managers of
developing countries like Bangladesh, Nepal, Sri
Lanka, Malaysia, and Bhutan, where there is a high
level of skilled brain drain and economic inflation.
By providing information that how they can utilize
participation–retention relationship while having
cost-effective compensation strategies.
5. This study also provides HRM practitioner an insight
that how they can devise employee compensation
that can positively influence participation–retention
relationship.
6. Results of industrial comparison provide an insight
for industrial managers belonging to different indus-
tries that what forms of employee participation prac-
tices and compensation combination can better
influence employee retention in their respective
industry.
7. As most of the study respondents belong to Generation
X which is characterized as having less organiza-
tional loyalty but more people loyalty, high self-
esteem, desire to have more organizational voice
(consultation), and autonomy (delegation) (Deal,
Altman, & Rogelberg, 2010), thus, to retain talented
employees, managers and employers have to treat
employees as valuable assets of the organizations and
have to find ways of displaying their commitment
toward subordinates and employees. Organizations
where employees feel that they are valued, recog-
nized, and supported might result in higher retention
(Tolbize, 2008).
The industrial comparison found that service sector due to its
nature of procedures can acquire more benefits from direct
and indirect forms of employee participation, whereas in
interviews from manufacturing sector organizations, it has
observed that retention is more influenced by financial form
of employee participation.
Employee retention is not always examined effectively
although human resource (HR) professionals reflect it as a
lethal issue for organizations. Even during the interviews
with the faculty members and university administrators,
there is an absence of any formal retention strategy. On a
practical point of view, if university management proactively
examine faculty intent to turnover, it will provide them an
opportunity to delay turnover or enhance retention.
Organizations can get the same information at the time of
exit interviews of the employees, but it would be a reactive
or rather a delayed approach.
Based on our research findings, delegative and consulta-
tive employee participations have a greater influence on fac-
ulty’s employee retention. Hence, it can be used for enhancing
employee retention at faculty level of the universities and
doctors and surgeons from health care sector. It has been
observed that brain drain in these two service sectors is max-
imum. Specifically, in health care and higher education sec-
tors, compensation can have a strong positive influence on
delegative participation–retention relationship and can stop
external brain drain.
Recommendations for Future Researchers
Recommendations for future research are as follows:
i. The application of the direct and indirect participa-
tion questionnaire to other sectors such as banking,
telecommunication, health care, restaurants, and
even primary and secondary schools.
ii. Use different measurement scales for the same sam-
ple of employees to analyze whether the results
remain same or use the same measurement tool for
the longitudinal study.
iii. The employee participation–retention relationship
should be examined in the light of economic condi-
tions. In good economic conditions, when there is no
recession and jobs are easily available, employees
may leave the jobs if they are not satisfied. In times
of inflation, however, when there are less job oppor-
tunities available, employees will have less turnover.
Therefore, in countries where there is economic
inflation, HRM practitioners should use participation
and cost-effective compensation strategies to enhance
employee retention.
Due to time constraints, the researcher utilized a limited
sample size. More generalized results can be drawn by cov-
ering a larger portion of the population. In this study, only
one method of data collection is utilized, which is survey
forms, but future studies can utilize other methods of data
collection like focus groups, interview, and observation
methods to further strengthen our study.
Conclusion
The two main hypotheses of this study were to investigate
the influence of forms of employee participation (delegative,
consultative, worker director, and worker union) on employee
retention and to examine the moderating effect of compensa-
tion on this relationship in manufacturing and service sector
of Pakistan. There is a significant relationship between
employee participation (delegative, consultative, worker
director, and worker union) and employee retention. In addi-
tion, employee compensation significantly moderated the
relationship between types of employee participation and
employee retention. This study further concludes that organi-
zations of both manufacturing and service sectors should
develop such practices, which could enhance employee
engagement and voice within their task-related decisions.
16 SAGE Open
These participation practices would in turn enhance employee
retention and would give organizations its aligned benefits.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect
to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, author-
ship, and/or publication of this article.
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Author Biographies
Komal Khalid, PhD, is an assistant professor of human resource
management at the King Abdulaziz University, Jeddah. She had
more than a decade experience in academic and research field. Her
research focuses on HRM, employee attitudes and their job out-
comes. She is mainly interested in the impact of economic effects
on HRM practices and employee outcomes.
Samina Nawab, PhD, is an associate professor of management sci-
ences at COMSATS University, Islamabad, Pakistan. She has expe-
rience of around 17 years in the field of education and research. Her
research focuses on HRM and organizational behavior.