2. Understanding the Human Resource Management Theories Relevant to Employee Retention

Employee retention is a major issue for organizations, especially in today's competitive labor market. Human Resource Management (HRM) theories provide a theoretical basis to comprehend how employees can be retained and organizational performance enhanced. Several basic HRM theories have evolved over time to meet the need for better employee engagement, satisfaction, and retention. In this paper, we will examine some of the major HRM theories most directly linked with employee retention and their practice implications.

1. Herzberg's Two-Factor Theory

Herzberg's Two-Factor Theory, or the Motivation-Hygiene Theory, emphasizes that both worker satisfaction and dissatisfaction are influenced by two sets of different factors: motivators and hygiene factors.

• Motivators: Internal factors, such as achievement, recognition, responsibility, and personal growth, which can lead to job satisfaction and high performance.

• Hygiene Factors: These are external factors like pay, conditions of work, and company policies that can cause dissatisfaction unless effectively dealt with.

For the purpose of retaining employees, organizations must pay attention not only to providing hygiene factors in order to avoid dissatisfaction but also to supplying motivators that generate employee participation and commitment. Recognition, development, and work significance-based employee retention techniques are founded on Herzberg's theory.

• Offering hygiene factors not only but competitive and supportive (such as flexible work arrangements, open policies, mental health services).

• Creating in possibilities for intrinsic motivation, such as providing significant assignments, offering professional development, and rewarding achievement.

• This dual approach to both hygiene and motivational factors is imperative in an industry where stress levels are high and expectations are even higher.

Herzberg's Two-Factor Theory prevails even in the financial sector today. High salaries and bonuses would be expected by finance professionals but are deemed too petty to inspire loyalty. Professional longevity and motivations, in fact, come from accomplishment, the potential for increase, and what is significant. Such organizations understand the maxims of and will be better able to retain and recruit the best financial professionals.

Strategic Implications for Financial Institutions

Financial organizations seeking to retain and motivate their workforce by,

Conclusion

2. Maslow’s Hierarchy of Needs

Abraham Maslow's (1943) Hierarchy of Needs remains a standard theory of human motivation. The theory proposes that individuals are driven to satisfy a hierarchy of needs, beginning at the physiological level and progressing toward self-actualization. Transposed to the financial services sector, the model offers a helpful instrument with which to examine the underlying cause of employee turnover and to inform effective retention techniques.

(Sprouts,2017)

1. Physiological and Safety Needs: The Building Blocks of Retention

Physiological needs, such as proper rest, food, and shelter, at the base of Maslow's pyramid, and safety needs, such as economic security, employment security, and physical and mental health, are the next higher needs.

Financial services work typically offers above-average compensation and benefits, but they are not adequate to satisfy employees' fundamental needs. High stress, workload demands, and long working hours are frequently threatening work-life balance and mental health. As an example, a report published by AccountsIQ (2023) found that 39% of the UK's young finance professionals had taken time off from work because of stress, and over half had considered quitting the career altogether. These findings show that employers must go beyond the purse strings and provide mental health assistance, flexible working strategies, and burnout prevention strategies to build psychologically safe and sustainable work environments.

2. Belongingness: Encouraging Social Belongingness in High-Stress Environments

Once their physical needs are met, workers seek a feeling of belonging involving interpersonal relationships, inclusion, and community. Within banking institutions, where competition and performance measurement on an individual basis are likely to be the norms, one may feel isolated or depersonalized, particularly among new joiners and lower-level employees.

In order to mitigate this, organizations must invest in team building programs, peer mentoring, and inclusive leadership practices. These practices create a culture of collaboration and support, which drives greater emotional attachment to the organization and better retention.

3. Esteem Needs: Recognition, Achievement, and Professional Validation

The third of Maslow's hierarchy deals with esteem needs, which include the need for status, respect, achievement, and professional acknowledgment. Finance staff are typically very ambitious, and therefore they like clear career advancement, public acknowledgment of performance, and opportunities for promotion.

Failure to acknowledge, particularly where cultures prioritize ends over personal contribution, can lead to disengagement. Gallup (2022) indicates that employees who receive frequent recognition are four times more likely to be engaged. Banks can support esteem needs through formal recognition programs, merit-based promotion, and witnessed leadership support.

4. Self-Actualization: Enabling Purpose, Growth, and Freedom

Self-actualization is at the top of the hierarchy and is the desire of a person to become all that they can be, to aim for goals that are meaningful to them, and to engage in work that is mentally stimulating. In finance, this is accomplished by offering innovation possibilities, cross-functional project work, autonomy, and self-development.

Employees today, particularly millennials and Gen Z, are more concerned with purposeful work and wish to see their own values reflected in the purpose of the organization. Organizations that support learning and development, adopt individual goal setting, and instill a sense of purpose are more likely to retain top performers.

A Combined Strategy for Talent Retention

Together, Maslow and Herzberg offer a two-pronged lens with which financial institutions can rethink their employee experience. Here's how leaders can take advantage of both:

Strategy Maslow’s Needs Addressed Herzberg’s Factors Addressed Competitive salary and health benefits Physiological & Safety Hygiene Flexible work policies Safety & Belongingness Hygiene Recognition and feedback systems Esteem Motivator Career development programs Esteem & Self-Actualization Motivator Internal mobility and mentorship Self-Actualization Motivator

By connecting HR practices with these motivation theories, banks are able to enhance employee satisfaction, reduce turnover, and build a stronger, more committed workforce.

Reference List

AccountsIQ (2023) Stress of working in finance causing widespread burnout, research finds. Available at: https://www.accountsiq.com/blog/stress-of-working-in-finance-causing-widespread-burnout-research-finds [Accessed 13 April. 2025].

Gallup (2022) State of the Global Workplace Report. Available at: https://www.gallup.com [Accessed 13 April. 2025].

Herzberg, F. (1966) Work and the Nature of Man. Cleveland: World Publishing Company.

Maslow, A.H. (1943) ‘A theory of human motivation’, Psychological Review, 50(4), pp. 370–396.