The Impact of Organizational Identification on Employee Retention

Key takeaways

  • Newcomer organizational identification waxes and wanes over key milestones including organizational entry, newcomer training, informal socialization and the initial project; these patterns eventually predict employee turnover.
  • Newcomers form their initial expectation about a firm based on its’ reputation; their identification, and subsequently the extent to which they stay on in the firm, is dependent on the extent to which it lives up to these expectations.
  • Newcomer identification patterns vary depending on the individual’s educational qualifications, the demographic composition of the incoming cohort and employee’s initial assignment; leaders can use their understanding of these patterns to influence employee identification and turnover.

Organizational identification, or the extent to which employees feel they are full-fledged members of the organization who truly belong there, has long been known as a contributing factor in how well employees perform and how long they are likely to stay in the organization. But how does newcomers’ identification change during their initial months of employment, and what drives these patterns?

It is important for leaders to think about this issue because recruitment initiatives are costly. Organizations that do not manage to promote newcomer identification may be left with employees who do not perform optimally and who leave sooner than highly identified employees, potentially triggering the need for more recruitment.

Data from an Indian IT organization shows that organizational identification waxes and wanes as new employees pass the milestones of entry, institutional socialization and initial assignment. Individuals are attracted to this organization due to its prestigious reputation. Any interaction between the newcomer and the organization that takes away from this initial perception of prestige feels like a violation of the psychological contract the employee made with the firm, and leads to lower identification. Interactions that enhance its perceived prestige boosts identification by bolstering the employees’ perceptions of a fulfilled psychological contract. Employees with lower identification are more likely to leave the firm within a two-year period.

After entry, the extent to which employees find their organizations to be prestigious increases due to the positive experiences and information provided by the organization during the institutionalized socialization that occurs in the training programs implemented after hiring. But, as employees leave the structured training environment and try to adjust to everyday life in the organization, their perceptions of prestige often fall due to the uncertainty associated with this period. Luckily, as people settle into their first assignments and become familiar with some of the more positive features of their work, many rebound, identifying more positively with their organizations.

Since employees are more likely to identify with an organization when they perceive greater fulfillment of their initial expectations, their change patterns of identification over time parallel the change patterns of perceived prestige and psychological contract fulfillment. In turn, organizational identification over time predicts turnover. Three individual and organizational attributes modify these patterns:

  • Newcomers with a more prestigious educational background may be less awed by their firm’s prestige.
  • Newcomers who are inducted with a cohort who are ethnically similar tend to retain their perceptions of firm prestige more than those who are inducted with a dissimilar cohort.
  • Newcomers who are given an initial project of their choice continue to perceive the organization to be more prestigious than those who are not so fortunate.

In each case, lower prestige leads to lower identification and a higher tendency to leave.

Our findings highlight the importance of understanding the newcomer experience over the milestones of the initial training program, the informal socialization that occurs immediately afterwards and the initial projects allocated to employees. Leaders who are able to do so may intervene more successfully to enhance the newcomer’s organizational identification and retain them for a longer period.

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