Relationship between psychological climate and turnover intentions and its impact on organisational effectiveness: A study in Indian organisations

Vol 22, No 3; Article by Soumendu Biswas; September 2010

With the liberalisation of the Indian business environment, managerial practices, particularly with regard to human resources (HR), have undergone a sea change. Organisations are very receptive towards the way individual employees perceive their working environment and contemporary HR policies and practices are geared to promote individual involvement on the job. The literature on the subject recommends the examination of psychological climate as a primary antecedent of a variety of individual-level outcomes such as job satisfaction, job involvement  and turnover intentions, and studies on human resource management in India reveal a variety of factors that affect employees’ attitude towards their job.  Examining the theoretical suggestions in the literature in the context of the Indian management scenario, this study posits the two attitudinal variables of job satisfaction and job involvement as mediators between psychological climate and employees’ turnover intentions and extends it to their impact on organisational effectiveness.  Data  collected from 357 managers/executives from manufacturing and service sector companies was measured on the key variables— psychological climate, job satisfaction, job involvement, turnover intention and organisational effectiveness,  and was subjected to multivariate data analysis.  The results revealed the extent of support for the five hypotheses generated in the study. Psychological climate is seen to have a positive influence on job satisfaction and job involvement, which in turn have a negative effect on turnover intention.   Turnover intentions, in turn, have a negative consequence on organisational effectiveness. In practical terms, it is important for managements to be aware of employees’ perceptions about work realities, design work responsibilities to reduce stressors and increase the challenges and rewards, define managerial processes to enable greater  role and goal clarity, pay attention to framing performance requirements and standards, and create policies and practices that encourage participatory decision making, cohesion and improve the sense of employee ownership of business.