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The Role of Internal Informal Cordial Relationship among Employees and Retention Policy on Employee Loyalty: Private University point of view.

   Mohammad Abul Kashem*


Organizational-growth-and-development requires a sophisticated relationship among employees to ensure profitability. For smooth conduct and congenial atmosphere, professional world feels the importance of team afford even though it is full of competition and self-centered employees. University owing to somewhat different culture comparing to corporate work environment enjoys liberty and freedom. The distinction and flexibility are favorable for workplace cordial relationship which ultimately induces to organization loyalty. The private universities of Bangladesh are trying to introduce standard policy to make the employees loyal. Due to job nature and frank engagement with colleagues, a unique relationship had been built up among the employees what named as internal informal cordial relationship in this study.  For justification of ideas, 402 respondents were considered from few private universities of Bangladesh and used Confirmatory Factor Analysis and Structural Equation Modeling through SPSS 22.0 & AMOS 22.0. Depending on relationships, three hypotheses as such organization retention policy to internal informal cordial relationship, organization retention policy to employee loyalty and finally internal informal cordial relationship to employee loyalty were set and strongly supported, with path coefficients of 0.739, 0.439, and 0.393 respectively. This justification finally indicates the new mood of loyalty of employees toward organization from the traditional factors based on profound relations among employees.

*Assistant Professor, Department of Marketing, Faculty of Business Administration, Feni University, Bangladesh.


Employee relations in an organization are supposed to be made for changing the rules of motivation and loyalty factors in today's world. The relationship may be derived from basic human needs and desires, such as wanting to strive toward goodness, to love and be loved, and to seek self-understanding (Blieszner & Adams, 1992). Informal relationships in organizations stay within the realm of both social and organizational psychology. Again, the base line for satisfaction of the employees in an organization is related to productivity and efficiency in the workplace (Mayo, 1945). Several organizational researchers in the past decade have been contributing to the literature in the area of workplace friendship both theoretically and empirically, but little research on coworkers influences at work, compared to the amount which has emphasized on supervisors and leaders (Raabe & Beehr, 2003). This is really a wholehearted psychological attachment found in employee settings based on relationship, but it might be present in family bindings (Lozada, 1996). This bondage made the employees attached and spent time in between by making a unique environment. But, this is absolutely a belongingness/ interactional settings where employees or colleagues connected with psychological bindings (Markiewicz, Devine, & Kausilas, 2000). Does organizational retention policy exerts influence on employee loyalty? Could it be possible to prove the existence of relationship on organizational loyalty? In university, the colleagues maintain friendly relations in between and continue so that they never think of to avoid and be detached from this setting. This is an absolute emotional settings or illusion where one can't think of separation. One of the major issue found that the switching rate is comparatively too low due to relationship (Levy, 2003).  

The informal relationships among employees have at work seem to have a significant effect on several aspects of turnover either on whether employees choose to stay in their jobs (Richer, 2002), on their subjective enjoyment of their jobs (Nielsen, 2000); on whether organizations want them to remain; or decide to end their employment (Lozada, 1996), but different work roles attract and retain people with corresponding values or needs (Schneider, 1995). If employees are satisfied through bonded relationship among coworkers, the consequences of that relationship will be better performance, and a reduction in withdrawal and counterproductive behaviors (Levy, 2003). Based on this ideology, the study aims at justifying the role of relationships on loyalty and also interrelationship between organization retention policy and loyalty.

Organization Retention Policy and Internal Informal Cordial Relationship

Organizational commitment is considered to be an important factor for creating affective response to the whole organization whereas satisfaction of job influences the job's specific aspects, but both of them are contributing individually to the intention of leave of employees of an organization (William & Hazer, 1986). Again, Fisher (2002) identified that job satisfaction and organizational commitment is positively correlated. Organizational commitment would mean as strong belief in acceptance of the organizational objectives and values i.e., an intention to exert effort on behalf of the organization and a desire to remain in the organization which in turns mediates the effects of satisfaction on turnover and intention to leave (Porter, 1974).Organization itself is not a container for relationships but it is an integral part of relationship in its development process (Sias & Jablin, 1995). The relationship occurs between individuals who are attracted through to people assuming to be similar to themselves, usually with respect to attitudes, values and interest (Anderson & Hunsaker, 1985). In addition, they perform similar work in similar occupations, probably with a similar educational background (Sias & Cahill, 1998). Moreover, people working toward the common goal can increase positive feelings about among others in the same team, and pleasant working environment is more rewarding than an unpleasant one (Anderson & Hunsaker, 1985). To reduce workplace envy, one of the ways is to create “strong team player” and to by adhering to the informal, unofficial workplace “rules” (Bedeian, 1995).

It is also found from the studies that if the coworkers have relatively less autonomy, have a proportionately greater need for solidarity with their peers (Fine, 1986). High pressure work environment are opposed to such kind of relationship and develop negative attitude among coworkers and less cohesive and ultimate result in higher turnover. In some cases, informal relationship in some cases arouses intention to leave due to presence of negative relationships (Dillard & Fritz, 1995). The psychological climate and perceived as high in cohesion were related to collegial and special peer relationships (Odden & Sias, 1997). The effects of interpersonal relationships under a “team orientation dimensions” and a “respect for people dimension” have had an influential role on retention (Sheridan, 1992). Consequently, this study hypothesizes that organization retention policy is a significant predictor of internal informal cordial relationship.

Hypothesis 1:  Organization retention policy has a positive effect on internal informal cordial relationship

Organization Retention Policy and Employee Loyalty

Social satisfaction in the workplace has had the most powerful influence on productivity and group interaction. A good leadership and satisfying personal relations in the workplace are to be considered as the key determinants of job satisfaction (Mayo, 1945). The need satisfaction of employees is related to organizational commitment (Steers, 1977), job satisfaction and intention to switch (Zinovieva, 1993) along with achievement, recognition for accomplishment, challenging work, responsibility and opportunities for growth and development (Herzberg, Mausner, & Snyderman, 1959). Knoop (1994) found the evidence of the applicability of job satisfaction between the satisfaction and work values of Canadian teachers based on two factor theory of motivation whereas Furnham Forde and Ferrari (1999) studied for relationship between personality and work performance. This kind of relationship among coworkers had little bit of more influence compared to the amount which had focused on leaders and supervisors (Raabe & Beehr, 2003; Vecchio & Bullis, 2001). The role of status and power particularly are very salient in many workplaces because work roles are usually prescribed by the organization and clearly defined status hierarchies. That's why; the role of organizational influence cannot be avoided.  Literature with a focus on interpersonal relationships indicates that men acquire and define closeness through the sharing of activities, while women define and achieve closeness through the sharing of feelings and emotions (Odden & Sias, 1997). Both men and women were found to derive more emotional support and therapeutic value from their relationships with women (Winstead, 1995). Generally both males and females state greater satisfaction, more instrumental and emotional rewards (Veniegas & Peplau, 1997) by successful relations as a part of their self-concept (Markiewicz, 2000). Virtually all close relationships involve shared interests and activities, intimacy, emotional support, small talk and the exchange of tangible favors, regardless of the gender of the participants (Wright, 1988). (Rook, 1984; Rusbult, 1980). As a result, this study hypothesizes that organization retention policy is a significant predictor of employee loyalty.

Hypothesis 2:  Organization retention policy has a positive effect on employee loyalty

Internal Informal Cordial Relationship and Employee Loyalty

People are prone to a relationship that generates satisfaction (Bui, 1996; Rusbult, 1980). Again it is also assumed that relationships are more satisfying and stable when reciprocity is perceived and when the rewards for each partner are relatively equal (Buunk & Prins, 1998). Women's Organizational relationships have the potential to be greater intimacy and mutual dependence, and reflect findings in non-work contexts (Fritz, 1997). The salient features worked behind the relationship or friendship were proximity, similarity, working towards a common goal, social exchange and intrinsic rewards (Fine, 1986). In relationship, information peers are less open, and use less functional communication skills,  than either collegial or special peers and that's why, peer relationship differs in context to closeness, strength, multiplicity and communication (Myers, 1999). Peer relationships at workplace are considered to be one of the primary means by which organizational socialization takes place (Louis, 1983). (Ringer & Robinson, 1996).

Furthermore, interpersonal relationships exert influence a variety of performance and attitudinal outcomes (Riordan & Griffeth, 1995). Someone argued that internal relationship can be distinguished from friendship based on source and supervisory support, on the level of trust between subordinate and supervisors (Cunnigham & MacGregor, 2000), on the extent to which supervisors and subordinates like and respect each other (Murphy & Ensher, 1999) and the way tasks are assigned by the supervisors (Blau, 1999). Again trust between employees and the satisfaction comes from the relationship lead to a higher level of loyalty in the organization based on the belief that guided to and motivated for favorable and positive intentions toward the welfare and interests of the organization (Delgado-Ballester and Munuera-Aleman, 1999). Thus, this study hypothesizes that internal informal cordial relationship has a significant influence on employee loyalty.

Hypothesis 3:  Internal Informal Cordial Relationship has a positive effect on Employee Loyalty


Here three variables have been considered such as Organizational Retention Policy (ORP), Informal Internal Cordial Relationship (IICR) and Loyalty (L) where ORP and IICR are independent variables and Loyalty is a dependent variable.

Conceptual Model

Based on the literature review, the hypothesis and measurement model formulated for the exogenous variable and the endogenous variables as shown in figure-1 to explain the relationship among organization retention policy, internal informal cordial relationship and employee loyalty.

Figure-1: Theoretical model of the study

a) Measures

A structured questionnaire was used to collect data. Here the three key variables have been considered such as Organizational Retention Policy (ORP), Informal Internal Cordial Relationship (IICR) and Loyalty (L). In preliminary judgment to identify the reasons of internal informal cordial relationship, several factors have been identified, as such, Independence & Autonomy (IA), Sacrifice (Sac), Cooperation (C), Sharing of Feelings (SF), Periodic Tour (PT), Team Work (TW), Exchange (E), Close Intimacy (CI), Participatory Decision Making (PDM), and Family Background (FB), but most of the preferences went to Independence & Autonomy (IA), and Close Intimacy (CI), Sacrifice (Sac), Team work(TW), Cooperation (C), Sharing of Feelings (SF) and Participatory Decision Making (PDM),  that's why, these seven factors are considered here as the key tools of close relationship among employees. In the same ways, Switching Rate (SR), Dedication to Work (DW), Advocacy (A) and Contribution To Work (CW) are considered for Employee Loyalty whereas Salary (S), Relaxation in work load (R), Financial Commitment (FC), Promotion (P) and Facilities (F) considered for Organizational Retention Policy (ORP).

b)  Data Analysis:

To assess direct relationships among the studied variables the researcher has performed confirmatory factor analysis and structural equation modeling (Anderson & Gerbing, 1988). SPSS 22.0 and AMOS 22.0 had been used to perform these analyses.  These analyses supposed to help to understand which model fits the data best while presenting a credible assessment on the antecedents of employee loyalty in the organization.

c) Sampling and respondents profile

The survey was conducted on few private universities of Bangladesh namely University of Information Technology & Sciences (UITS), Port City University, Feni University, BGMEA Institute of Fashion and Technology, Southern University at Chittagong addressed to the faculties and staffs.  During a period of one month survey, it is attempted to cover 430 respondents through a proportional sampling method but 381 questionnaires were finally found correct. Of the respondents, 52 percent were males and 48 percent were females. The respondents can be considered as rather young: 51 percent of them were between 24 and 33 years old.


Statistical techniques were applied to assess the reliability and validity of the survey and to obtain more clarity regarding the influence of the selected variables on employee loyalty.

a) Reliability

In measuring reliability coefficient for the different construct were computed using the reliability procedure in SPSS 22. The reliabilities of the entire construct used in this study found to be above the standard set of 0.70 (Nunnally, 1978).  The range of Cronbach alpha shows the reliability of the variables of research ranges from α = 0.832 to α = 0.943; mean scores had been computed by equally weighting the mean scores of all the relevant to each construct.

b) Confirmatory Factor Analysis (CFA)

Confirmatory Factor Analysis was used here to measure the construct validity of the model whereas convergent validity is used for existence of construct determined by the correlations exhibited by independent measures of the construct. To assess convergent validity, the loading estimates and construct reliability were investigated. In AMOS 22.0, convergent validity can be measured using the measurement model by determining the significant value of each item's estimated pattern coefficient on its posited underlying construct factor (Anderson & Gerbing, 1988).

To measure the uni-dimensionality, convergent and discriminant validity through AMOS 22.0, the CFA provides overall fit indices (χ2 = 188.523), chi-square degrees of freedom = 96, RMSEA (Root Mean Square Error of Estimation) =0.050, GFI (Goodness of Fit Indices) = 0.942, AGFI (Adjusted Goodness of Fit Indices) =0.918, CFI (Comparative Fit Indices) = 0.979, and NNFI (Non-Normed Fit Indices) = 0.974.

Here Goodness-of-fit of the final model indicated ‘reasonable or good fit' having RMSEA = 0.050 with the condition 0.05 < RMSEA< 0.08 is for good fit (Hair, 2009). In this study, CFI = 0.979 & GFI = 0.942 demonstrate reasonable fit (Hu and Bentler, 1999; & Joreskog & Sorbom, 1999). The AGFI of 0.918 indicate reasonably good fit of the researcher model. The NNFI (Non-normed Fit Indices) or Tucker-Lewis Index has been recommended a value of 0.90 or better for good fit (Bentler & Bonett, 1980; Hair, 2009). Thus, an NNFI = 0.974 for this study implies good fit. From the above goodness-of-fit evaluation, confirmatory factor analysis for the final measurement model reasonably supported the model's fit.

Measurement Model:

a) Structural Equation Model (SEM)

Three paths (organization retention policy to internal informal cordial relationship, organization retention policy to employee loyalty and internal informal cordial relationship to employee loyalty) are found to have significant positive standardized path coefficients and not dropped sequentially based on Wald test. The goodness of fit indices for the final structure model shown in the table-1 that suggests a good fit to the data: small ratio of chi-square to degree of freedom (<2), great values of GFI, AGFI, CFI, NFI (>0.9) and RMSEA values (<0.05).

Table 1 : Goodness-of-fit results of the study

Goodness-of-fit statistics Values Desired range of values for a good fit

Chi-square test λ2


Absolute fit measures

Degrees of freedom Df 96 ≥0

Chi-square/ degrees of freedom ration λ2 /df 1.964 2 to 5

Goodness of fit index GFI 0.942 > 0.90

Root mean square error of approximation RMSEA 0.050 < 0.08

Incremental fit measures

Adjusted good-of-fit index AGFI 0.918 > 0.90

Tucker-Lewis Index TLI 0.974 > 0.90

Comparative fit index CFI 0.979 >0.95

Normed fit index NFI 0.959 > 0.90

Figure-2: Standardized estimates

In accordance with the parameter standardized estimates shown in figure-2, organization retention policy is positively and significantly rated to internal informal cordial relationship (coefficient = 0.60), this finding as proposed in H1. In the same way, as proposed in H2, organization retention policy has a positive and significantly effect on employee loyalty (coefficient = 0.30). The analysis results also yield that Internal informal cordial relationship related positively and significantly with employee loyalty (coefficient= 0.33), this finding as proposed in H3.

b) The Hypothesized Casual Structure Model

Table 2: Summary of hypothesis testing results

Estimate S.E. C.R. P Label

IICR <--- ORP .739 .091 8.081 ***

LOYALTY <--- ORP .439 .105 4.192 ***

LOYALTY <--- IICR .393 .078 5.024 ***

    Note: β = Standardized beta coefficient; S.E. = Standard error; C.R. = Critical ratio, *p <0.01

As shown in table 2, the regression weight of organization retention policy to internal informal cordial relationship (t=8.081; p< 0.05), organization retention policy to employee loyalty (t=4.192; p< 0.05) and internal informal cordial relationship to employee loyalty (t=5.024; p< 0.05) were significant. This indicated that organization retention policy and internal informal cordial relationship had significant direct effect on employee loyalty. The estimation results in table 2 indicate that the three hypotheses, H1 (organization retention policy→ internal informal cordial relationship), H2 (organization retention policy→ employee loyalty), and H3 (internal informal cordial relationship → employee loyalty) are strongly supported, with path coefficients of 0.739, 0.439, and 0.393 respectively.

In this study, relationship among coworkers has been built up for the satisfaction and the empathy of the organization toward the employees which is similar to the study of Fisher (2002) where found that job satisfaction and organizational commitment is positively correlated. Again, organizational commitment would mean as strong belief in acceptance of the organizational objectives and values or an intention to exert effort on behalf of the organization or a desire to remain in the organization. It mediates the effects of satisfaction on turnover and intention to leave (Porter, 1974). It is also suggestive from this study that the relationship ultimately induces employees to stay in the organization means to reduce turnover. The university itself sets the basic criteria of selecting employees e.g., faculty members are selected based on merit or previous academic performance or even experiences on the relevant field. The criteria is however, used as parameters for having the similar types of employees from the same or similar discipline in the organization. So getting the internal informal relationship in the organization is not vague or irrational for service oriented industries because Anderson & Hunsaker (1985) suggested that the relationship occurs between individuals who are attracted to people similar to themselves, usually with respect to attitudes, values and interest. In addition, they will perform similar work, in similar occupations, probably with a similar educational background (Sias & Cahill, 1998).


The research study was conducted to find the impact of internal informal cordial relationship and organization retention policy on employee loyalty development in selected organizations in particular and service oriented industry in general. Research indicates that both internal informal cordial relationship and organization retention policy are the important factors to increase the loyalty in an organization based on their significant and positive relationship with employee loyalty. The research can be replicated in the same manner with a large sample size and more variety of variables affecting the loyalty of an employee towards its service. As this research concludes that internal informal cordial relationship and organization retention policy are important in building loyalty, hence future research can be conducted on how organization introduces better internal informal cordial relation among employees for employee loyalty. Although SEM provides a good fit to the hypothesized model, future research could use a different design to examine causal relationships posited by theories, such as to explore other antecedents on employee loyalty, and should be conducted in other industries and other countries or different global regions.  

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