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 Global Business and Management Research: An International Journal
Vol. 10, No. 3 (2018, Special Issue)

Effects of Talent Management on Employee

Retention: A Case Study of Hospitality Industry
Nur Lyana Baharin
College of Business Management and Accounting, Universiti Tenaga Nasional, Malaysia

Wan Noordiana Wan Hanafi *

College of Graduate Studies, Universiti Tenaga Nasional, Malaysia
Email: dianahanafii@gmail.com

* Corresponding Author

Abstract
Purpose: This study is conducted to determine the effects of talent management towards
employee retention.
Design/methodology/approach: This study is based on questionnaires distributed to a sample of
385 respondents in the hospitality industry in Selangor. The data were analyzed with statistical
tools such as IBM SPSS v23, Partial Least Square (PLS) 3.0 and Structural Equation Model
(SEM).
Findings: These findings shows that there is a significant relationship between all variables
proposed. The findings also indicate that the measurement is fit, as it meet all the criterion for
convergent validity, discriminant validity, as well as reliability.
Research limitations/implications: Future researchers are encouraged to include new variables
and mediating variables in the research model.
Practical implications: The research study provide necessary information on the issues of talent
management and employee retention. Thus, it will be beneficial to the hospitality industry and
relevant parties such as other researchers to review and use this information for their future
research.
Originality/value: This study provides additional perspectives on employee retention among
hospitality industry in Malaysia.

Keywords: Talent Management, Employee Retention, Hospitality Industry

Introduction
Employees are the heart and backbone of an organization. Thus, it is vital to hold the key to
employee’s retention as it keeps organization on the right tracks. In favour of retaining the best
talents, a set of strategies aimed at satisfying employee’s needs should be implemented
regardless of multinational companies (MNC) or small medium enterprises (SME) (Hong, Hao,
Kumar, Ramendran, and Kadiresan, 2012). Employee retention is crucial where it will give
major impacts on overall performance of the employees as well the profitability of the
organization (Knott, 2016). Losing key talent costs significantly greater considering the fact that
those employees’ impact and contribution are greater than other employees (Wade et al., 2012).
In the Eleventh Malaysian Plan, the government has defined six strategic thrusts to help
Malaysia stay ahead of the challenges and opportunities of the fast-changing global and political
landscape (Eleventh Malaysia Plan, 2016). Under the third thrust which is accelerating human

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capital development for an advanced nation, the Malaysian Government aims to achieve 35% of
skilled workers by Year 2020, therefore they were giving priorities in empowering human
capital. The lack of effective management of human capital has been attributed to various
reasons including lack of understanding of the importance of human resource and talent
management (Hornsby and Kuratko, 2003; Kumar, Antony, and Tiwari, 2011; Saleh and
Ndubisi, 2006). Retaining top talent from an acquired firm can send a powerful message to the
employees as to how they will be treated (Harding and Rouse, 2007). Regardless of the industry
they are employed in, key individuals can be seen as ‘knowledge banks’ and these individuals
are not necessarily located in the top levels of the organisation (Lord and Ranft, 2000).
According to Astro Awani’s article (2015), Malaysia recorded South East Asia’s second highest
involuntary turnover at 6% and the third highest voluntary turnover at 9.5% in 2015. Meanwhile,
in hospitality industry, few scholars agreed that hospitality organization is experiencing the level
of employee turnover higher than average (Guilding, 2014). Therefore, the purpose of this paper
is to determine the effects of talent management towards employee retention in hospitality
industry.

Literature Review
Talent Management
In order to grow and be innovative the company in any sectors need to have the right talent in the
organization. To make sure that organizational will be successful; talent management can be
used to strengthen the capability of the organizational capability (Iles, Chuai, and Preece, 2010).
Talent management is also considered as an additional management processes and opportunities
that are made available to people in the organization who are considered to be ‘talent’ (James
Sunday Kehinde, 2012). According to Kontoghiorghes (2016) effective talent management
recommends talented employees begin to see themselves as part of the organization, add value to
the organization and remain glued to it. It ensures that employees remain professional at all times
in their business practices, serves meritoriously, has the right people made up of experienced
professionals, who have excelled in their various professions, possessing the needed integrity,
skills and experience (Nzewi, Chiekezie, and Ogbeta, 2016). In this study, talent management is
measured using career development, employee engagement, performance management, and
competency mapping which is discuss further below.
Career development describes the process throughout life managing life, learning and work
involves individuals planning and decision making about education, training and career choices,
as well as develop the skills and knowledge to make this right (Lyria, Namusonge, and Karanja,
2017). According to Kong, Cheung, and Song (2012) career development focuses on what they
want to achieve with effort to enhance employee’s career competencies. In other terms is related
to career motivation, personal meaning, and identification and concern about networks and
contact also career relevant skill and knowledge.
Employee engagement is related to individual’s attitudes, intentions, and behaviours (Ram and
Prabhakar, 2011). Over the past decade there has been an increase in the interest concerning the
concept of work engagement and its function in paintings performance and competitive
advantage (Slåtten and Mehmetoglu, 2011). Moreover, Richman, Civian, Shannon, Jeffrey Hill,
and Brennan (2008) and Shaw and Bastock (2005) pointed out that engaged employees have
high degrees of involvement and attachment to their employers and/or organizations.

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Performance Management is one of the secret ingredient and the greatest needs in the new
world of work is the need to reconsider how organizations oversee, assess, and compensate
people (Bersin, 2015). According to Armstrong’s Handbook of Performance Management,
performance management refers to a continuous process that performed by individuals and
teams for improving the organizational. The important thing is the contribution of performance
management not only to improvise an individual or teams but all activities of human capital
management, enhancing level of engagement, learning and development, talent management
and reward (Oladapo, 2014).
Competency mapping is a process of identifying key competencies for an organization and/or a
job and incorporating those competencies throughout the various processes of the organization
(Jain, Abhyankar, and Venugopal, 2013). Competency can be defined as a cluster of related
knowledge, skills and attitude that enable an individual or an organization to act effectively and
efficiently in a job or situation which results in an excellent performance at work (Chouhan and
Srivastava, 2013). Competency mapping also analyzes the individual strength, weakness,
opportunity and threat (SWOT) which later on will help the individual in his/her career growth
so that they can perform each role effectively (Yuvaraj, 2011).

Employee Retention
Nowadays, employee retention has become one of the major concerns because of the impact to
the organization. Employee retention refers to policies and practices that companies use to
prevent precious employees from leaving their job. It involves taking measures to encourage
employees to stay in the organization for the maximum period of time. Hiring knowledgeable
people for the job is a must for an employer. However, retention is even more important than
hiring. This is true as many employers have underestimated costs related with turnover of key
staffs (Ahlrichs, 2000). Iles et al. (2010) define employee retention as a systematic attempt by
employers to build a conducive working atmosphere that promotes a culture of retention.
Organization has to implement policies and procedures that concentrate on various needs to
achieve the culture of retention. It also addresses the cost related to employee replacement,
turnover, loss of productivity, etc. The word retention means a state where employees in their
own free will determine to work and stay with their organizations. Retention is a voluntary
move by means of an organisation to create an surroundings which engages employees for long
time (Kibui, Gachunga, and Namusonge, 2014). According to Kgomo and Swarts (2010),
retaining employees is critical for success in today’s business environment. Research conducted
by Ernst and Young indicates that attracting and retaining employees are two of the eight most
important issues that investors consider when judging the value of a company (Michlitsch,
2000).

Theory
This study is based on the Social Exchange Theory (SET). SET can be defined as voluntary
activities from one’s action expecting to receive something from another based on mutual
relationship (Paillé and Raineri, 2015). The theory suggests that when an organization identifies
talent and invest in them they are likely to attain better returns on these investments. In the light
of employee retention, this theory suggests that when staff is satisfied with the work environment
provided to them, they are more than likely to stay longer with one organization. In other words,
when the employees feel motivated and supported, they will contribute more and produce more
results in their organizations (Paillé, Boiral and Yang, 2013).

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Hypothesis Development
In a study conducted by Waithiegeni Kibui (2015) found that talent management has a
significant positive effect on employee retention in state corporations in Kenya. The variables
studied were competency mapping, employee engagement, performance management and
career development and all variables were found to have a significant positive relationship with
employee retention. Besides, finding from Sutanto and Kurniawan (2016) also found that there
is a strong positive between talent management and employee retention. Coetzee and Stoltz
(2015) have also highlighted the significance of talent management and employee retention.
Chaturvedi and Sangwan (2016) on the other hand, have investigates the impact of competency
mapping on recruitment, interviewing, selection, placement, performance and reward
management, training and development, career and succession planning which plays a major
role in talent management and retention. Zafar et al., (2014) stated that high engagement of
employees towards their organizations will increase retention. Performance management also
have a significant impact towards employee retention (Mbugua, 2015). From the literature
above, the following hypothesis is proposed:
H1: There is a significant effect of career development on employee retention.
H2: There is a significant effect of competency mapping and employee retention.
H3: There is a significant effect of employee engagement and employee retention.
H4: There is a significant effect of performance management and employee retention.

Method
This study is a quantitative study and data was gathered by using self-administered
questionnaire. The questionnaire with a five-point likert rating scale, ranging from “1 strongly
disagree” to “5 strongly agree” questionnaire. Stratified random sampling technique is used to
select the respondents for this research. In this study, the sample are 385 selected respondents
from companies in Hospitality Industry in Kuala Lumpur. Data for this study is analysed using
IBM SPSS version 23, Partial Least Square (PLS) 3.0 and Structural Equation Model (SEM).

Findings
Demographic
From the data gathered, it can be summarized that majority of the respondents are from 31 to 35
years old. Most of the respondents were female (50.4%) while 49.6% are male. The respondents
are mostly made up of Malays (43%), followed by Chinese (28.5%), Indian (20.7%) and others
(7.3%). Distribution of job status consists of middle level (65.5%) as majority, followed by
lower level (26.4%), and finally upper level (7.8%). As far as academic qualifications are
concerned, 38.9% are STPM/Diploma, 26.7% are Bachelor, 25.9% are SPM, 4.1% are others,
3.4% are Master and 0.8% are PhD holders. For the number of years in service, majority of
them have served the company between 2-5 years (44.6%), followed by 6-10 years (23.3%), 1
year and below (21.3%) and 11 years and above (10.6%). Table 1 below summarizes the
respondent profile.

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Table 1: Respondent Profile

Items Characteristics Frequency Percentage
Age 20-25 89 23.1
26-30 63 16.3
31-35 98 25.4
36-40 63 16.3
41-45 51 13.2
>50 21 5.4
Gender Male 191 49.6
Female 194 50.4
Race Malay 166 43.0
Chinese 110 28.5
Indian 81 20.7
Others 28 7.3
Job Status Lower Level 102 26.4
Middle Level 253 65.5
Upper Level 30 7.8
Academic Qualification SPM 100 25.9
STPM / Diploma 150 38.9
Bachelors 103 26.7
Masters 13 3.4
PhD 3 0.8
Others 16 4.1
Years of Service <1 82 21.2
2-5 172 44.6
6-10 90 23.3
> 11 41 10.6
Measurement Model
To assess the measurement model, it involves evaluation of reliability and validity. In this study,
reliability will be assessed through internal consistency. Internal consistency is measures using
composite reliability (CR). CR is considered more suitable for PLS-SEM because it incorporates
information about the item loadings into its calculation (Hair, Ringle, and Sarstedt, 2011). From
Table 2 below, all of the CR are value are as recommended by (Compeau, Higgins, and Huff,
1999), where all the items are more than 0.70. Validity is assessed through convergent and
discriminant validity, for convergent validity, the factor loadings and average variance (AVE) is
assessed. From Table 2 below, all the factor loadings are in the range of 0.752 to 0.868, thus, no
items is deleted as all value is more than 0.5, which is as proposed by (Hair, 2007). The value of
AVE reported for this study is higher than 0.5, which is acceptable as suggested by (Chin, 2010;
Hair et al., 2011; Kock, 2011). Next, discriminant validity is assessed using Fornell and Larcker
(1981). As demonstrated in Table 3, all the bold value are higher compared to the correlations.
Thus, the discriminant validity is acceptable as it meet the Fornell–Larcker criterion. From the
analysis above, it could be concluded that the measurement fit, as it meet all the criterion for
convergent validity, discriminant validity, as well as reliability.

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Table 2: Assessment Result of Measurement Model

Construct Measurement items Loading CR AVE
Employee retention ER1 0.834 0.904 0.706
ER2 0.835
ER3 0.828
ER4 0.858
ER5 0.846
Career development CD1 0.819 0.91 0.669
CD2 0.859
CD3 0.782
CD4 0.806
CD5 0.822
Competency mapping CM1 0.850 0.928 0.721
CM2 0.861
CM3 0.822
CM4 0.858
CM5 0.842
Employee engagement EE1 0.825 0.897 0.636
EE2 0.850
EE3 0.759
EE4 0.794
EE5 0.756
Performance management PM1 0.778 0.904 0.653
PM2 0.807
PM3 0.844
PM4 0.785
PM5 0.823
Note : ER= Employee retention, CD= Career development, CM= Competency mapping, EE=
Employee engagement, PM= Performance management.
Table 3: Discriminant Validity- Fornell and Larcker
#1 #2 #3 #4 #5
1. Employee retention 0.840
2. Career development 0.602 0.818
3. Competency mapping 0.501 0.544 0.849
4. Employee engagement 0.546 0.623 0.555 0.798
5. Performance management 0.579 0.661 0.529 0.744 0.808
Notes: Values on the diagonal (bolded) are square root of the AVE while the off-diagonals are
correlation

Structural Model
To assess the structural model Hair, Hult, and Ringle (2014) suggested looking at the R2, beta,
and the corresponding t-values via a bootstrapping procedure with a resample of 5,000. The
structural model comprises of the hypothesis relationship between talent management with
employee retention which consist of career development, competency mapping, employee

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engagement, and performance management. To test the structural model, the results of the path
analysis were used. All the direct effects in Figure 1 are significant (Table 4). All hypothesis are
significant which is H1 (t=25.221**, p<0.01), the result is similar with previous study by
(Qureshi et al., 2013; Tracey, 2015) which indicate employee career development is a solid
retention strategy. H2 (t=27.546**, p<0.01), is supported by (Shah, Desai, Jorwekar, Badyal, and
Singh, 2016; Yasin and Ali, 2016), who found a significant relationship between both variable.
H3 (t=20.721**, p<0.01) is similar with study done by (Balakrishnan, Masthan, and Chandra,
2013; Desai, Majumdar, and Prabhu, 2010) who indicate that the overall raise in the level of
employee engagement has improved the retention level significantly. Lastly, H4 (t=22.067**,
p<0.01), which is proposed to measure the effects of performance management on employee
retention, the result findings is supported by previous study by (Bersin, 2015; Mbugua, 2015) (p-
value <0.01, more than 2.33**). R2 value is calculated in order to assess the structural model, for
R2 value of 0.26 is substantial, 0.13 moderate and 0.02 weak, it is as suggested by (Cohen, 1988).
For this study the R2 are 0.426 which is considered as substantial. It is also means that, the PLS
regression model could explain 42.6% of total variance in employee retention.
Table 4: Summary of Structural Model Assessment
Hypothesis Standard Standard t-value Decision R2
Data Error
H1 Career development -> 0.307 0.011 25.221** Accepted 0.450
Employee retention
H2 Competency mapping -> 0.294 0.013 21.875** Accepted
Employee retention
H3 Employee engagement -> 0.286 0.012 22.976** Accepted
Employee retention
H4 Performance management -> 0.302 0.012 24.678** Accepted
Employee retention
Note: t-value is greater than 2.33 at **p<0.01

Figure 1: Path Coefficient

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Conclusion
This research is conducted to measure talent management variable as an independent variable
and employee retention as a dependent variable. The results support the previous findings of
Kibui (2015). From the relationship analysed, results demonstrated that all of the independent
variables shows a significant effects with the dependent variable. These findings strengthened
the previous outcomes of other researchers (Shoaib et al., 2009; Nawaz, 2014; Loew, 2015). This
study used SET theory as a guideline to examine and understand the relationships between talent
management and employee retention. By using SET it could give the theoretical foundation to
explain the variability of talent management in influencing employee retention. In summary,
SET theoretical foundation justifies the reasons why employees decide to engage more or less on
their work, either positively or negatively, contingent upon the economic and socio-emotional
resources received from their organization, or even decide to stay with their organization
(Andrew and Sofian, 2011). Therefore, organization needs to continue to train and develop high
performers for potential new roles, identify their knowledge gaps, and implement initiatives to
enhance the competencies among employees in hospitality industry. Organization should focus
on the implementation of talent management since it can help to attain strategic goals such as
building a high-performance learning environment and increase value to the organization. Other
than that, this research contributes the additional knowledge to human resource managers to
identify whether there is an improvement in employee retention when implementing the right
talent management practice in the organization. This research also provides necessary
information on the issues of talent management and employee retention that will be beneficial to
the hospitality industry and relevant parties such as other researchers to review and use this
information for their future research.

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