Employee Retention Practices and the Performance of Small and Medium Enterprises in Nigeria

Abstract

In Small and Medium Enterprises (SME) performance discourse, several factors which can improve or hinder their growth and excellence have been identified. However, the focus has been on factors related to business owners’ entrepreneurial competencies or challenges external to SMEs. Employee turnover is a major challenge experienced by SMEs, that has contributed to their abysmal performance. However, the role of employee retention practices in addressing employee turnover and its impact on SME performance has received little exposure in related literature. This research addressed this gap by examining the impact of employee retention practices on the performance of SMEs in Nigeria. Data was sourced through a questionnaire-based survey of 430 respondents and analyzed using Ordinary Least Squares (OLS) and chi-square statistic. The study’s findings revealed that employee retention practices have a significant impact on the performance of SMEs in Nigeria. For these practices to positively impact SME performance, a coherent combination of practices should be implemented. Gaps were identified in training and career development practices within the SMEs surveyed. The importance of business sector-specific factors and employees’ educational qualification to SME performance were also highlighted. The findings also reiterated the importance of non-financial measures in assessing SME performance. It is recommended that SMEs pay attention to employee retention practices to retain valuable employees and improve their overall performance.