The relationship between perceived servant leadership characteristics, human resource practices and turnover intention in small medium enterprises

Abstract

Employees’ turnover intention is one of the challenges faced by many organisations including small medium enterprises (SMEs) in Malaysia. Thus, demand for an effective leadership style is crucial as it can increase employees’ interest to stay longer in organisations. The relationship between leadership styles and employees’ turnover intention has been widely studied. There are various leadership styles such as transformational, transactional, autocratic and charismatic leaderships. While the concept of leadership has been extensively studied, the role of servant leadership in reducing employees’ turnover intention has not been fully understood. Servant leadership focuses on their followers’ needs in establishing good relationship with followers. In addition, it is associated with characteristics such as standing back, empowerment, ethical, humility, listening and forgiving. This study examined the relationship between servant leadership (independent variables) and employees’ turnover intention (dependant variable). In addition, this study investigated the effect of human resource (HR) practices as the mediating variable since this relationship has received scarce attention in research. HR practices such as training and development, rewards and pay system, performance management, and occupational safety and health management were the focal points of this research. The objectives in this research were to identify the level of servant leadership in SMEs; to investigate which is the most frequently used HR practices; to determine inter-relationships between servant leadership, HR practices and turnover intention; and to examine the role of HR practices as a mediator. Using questionnaires, data were collected from 227 local SMEs' employees in manufacturing sector. The questionnaires were distributed by hand, mails, emails and Google Forms. SPSS version 24 was used to analyze the normality test and demographic factors of the respondents, whereas AMOS version 24 was used for Confirmatory Factor Analysis (CFA) and testing the relationship between variables in the Structural Equation Modeling (SEM). The results showed that the level of servant leadership is moderate and performance management is most frequently used HR practices among SMEs. Apart from that, it was found that there is a significant positive relationship between servant leadership and HR practices, in which good servant leadership and HR practices are found to be significant in reducing employees’ turnover intention. It is discovered that only two dimensions of servant leadership which are listening and ethical behavior showed a significant mediation effect on turnover intention. In short, these findings provided useful insights for practitioners of SMEs in reducing employees’ turnover. It is recommended that leaders not only have to listen to the needs of their employees but to take care of their welfare such as training opportunities and pay rates.