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Top-down vs. bottom-up management approach: The effect on employee motivation and retention

Dissertation
Author: Fitzroy Daniels
Abstract:
Globalization, economic trends, competitive labor market, market forces, and other variable forces have created a sense of urgency within organizations to motivate and retain their employees (Cragg, 2007). There however seems to be a consensus that both top-down and bottom-up management approach influences this phenomenon (Mujtaba, 2007). Increasing employee turnover rates and de-motivated staffs have forced organizations to be introspective in their assessment of this problem (Abbass & Hollman, 2000). Organization's review of their micro environment to identify possible factors that influence employees' motivation and retention appears inconclusive (Bridges & Mitchell, 2002). Economic contractions and rising unemployment sometimes create diversion in clearly identifying the main determinants (Dawson, 2005). Research however indicates that top-down and bottom -up management approaches influences employee motivation and retention (Catlette & Richard, 2001).

3 Table of Contents ACKNOWLEDGEMENT iv CHAPTER 1. INTRODUCTION Introduction to the Problem 1

Background of the Study 3

Statement of the Problem 5

Purpose of the Study 6 Rationale 6 Research Questions 7 Significance of the Study 7 Definition of Terms 8 Assumptions and Limitations 9 Nature of the Study (or Theoretical/Conceptual Framework) 9 Organization of the Remainder of the Study 11

CHAPTER 2. LITERATURE REVIEW Introduction 12 Management Challenge 15 Top-Down Management 17 Bottom-Up Management 18 Leadership Practice 21 Top-down vs. Bottom-up 23

4 Motivation 25 Employee Retention 25 Summary 30 CHAPTER 3. METHODOLOGY Introduction 32 Restatement of Purpose 33 Research Design 33 Case Study 35 Data Collection and Instrument 36 Pilot Test 38 Data Analysis 38 Ethical Consideration 39 Validity and Reliability 40 Summary 41 CHAPTER 4. RESEARCH 42 Introduction 42 Pilot Study 42 Demographics of Respondents 43 Management Approach 46 Top-Down Management 48 Bottom-Up Management 50 Motivation Within the Management Approaches 52 Retention Within the Management Approaches 52

5 Application of Themes to the Research Question 53 Summary of Research 57 CHAPTER 5. DISCUSSION, IMPLICATIONS, RECOMMENDATIONS 60 Introduction 60 Discussion 60 Management Continuum 61 Leadership Within the Continuum 61 Motivation and Retention 62 Assumptions and Limitations 65 Suggested Future Research 65 Closing Comments 65 REFERENCES 67 APPENDIX A. 79 Survey Instrument 79

APPENDIX B. 82 Demographics of Respondents 82 APPENDIX C. 83 Qualifications of Respondents 83 APPENDIX D. 84 Respondents changing two or more jobs within the last five years. 84

APPENDIX E 85 Transcription of responses 85

6 CAPTER 1. INTRODUCTION

Introduction to the Problem Globalization, economic trends, competitive labor market, market forces, and other variable forces have created a sense of urgency within organizations to motivate and retain their employees (Cragg, 2007). There, however, seems to be a consensus that both top-down and bottom-up management approach influences this phenomenon (Mujtaba, 2007). Increasing employee turnover rates and demotivated staffs have forced organizations to be introspective in their assessment of this problem (Abbass & Hollman, 2000). Organizations’ review of their microenvironment to identify possible factors that influence employees’ motivation and retention appears inconclusive (Bridges & Mitchell, 2002). Economic contractions and rising unemployment sometimes create diversion in clearly identifying the main determinants (Dawson, 2005). Research, however, indicates that “top-down” and “bottom –up” management approaches influences employee motivation and retention (Catlette & Richard, 2001). Many researchers (Badarcco, 2002; Bridges, 2002; Catlette & Richard, 2001; Dressler, 2000; Filev, 2008), scholars, practitioners (Drucker, 1999), and aspiring management professionals have advocated either one way or the other with regard to top down management versus bottom up management approaches and view the style of management as the key to improve employee motivation and retention, (Drucker, 1995). According to Senguder (2002), although there is a wealth of information written on this topic, there is still no conclusive position as to which approach should be adopted and why. This study investigated the relationship of “bottom-up” and “top- down” management approach on employees’ motivation and retention. A review of the characteristics of both management

7 approaches with the intent to highlight the effect on employee motivation and retention within the organization was conducted. The study identified key characteristics of both approaches and showed what their relationships are to employees’ motivation and retention. In addition a contrast on key aspects of top-down and bottom-up management was conducted. Among the aspects discussed were keeping decision making at the top of the organization (Dunphy & Stacie, 1993); planning; forecasting and directing in the board room or at senior executive level (Darling, 1999); having strategic planning meetings or events that include only senior management (Holt, Self, Thai, & Lo, 2003); motivating people with fear or incentives only (Purvanova, 2006); not being willing to listen to lower level employees ideas; suggestions or feedback (Filev, 2008); and coaching and reviews (Benefiel, 2003). Battram (1998) argues that top down management approach gives the organization a sense of direction and strategic advantage by centralizing the decision making process. The concept that management should be the one to set goals and strategy for achieving those goals (Catlett &Richard, 2001) and that these important tasks should not be left in the hands of employees who in some cases are not aware of the big picture of the business should be considered valid (Clemmer, 2002). While Badaracco (2002) articulated some very strong arguments that the strength of the organization lies in management’s ability to make decisions, Bridges and Mitchell (2002) posit that empowering or delegating the decision making process is a sign of weakness or lack of assertiveness. While supporters of the bottom- up management style seek to infer that this approach possesses greater benefits for all with the inclusion of employees in the decision making process, its limitations are cause for concerns (Clemmer 2002). George and Williams (1996), Mitchell (2002), and Ramlall (2002) cited that preference for the “bottom-up” management as the attractive approach in the “decision making” process is based on perceived anticipated benefits of improving employees motivation, which

8 is one of the fundamentals of management, as they seek to empower employees and give them a feeling of ownership in the decisions making process within the organization. Filev (2008), Griffeth and Hom (2001), Kinjerski and Skrypnek (2006), Middleton (2004), O’Malley (2005), argued that management attraction towards a bottom up management approach is based on the perception that employee involvement “in the decision- making process” can render upper management redundant and create anxiety among investors. Should this be the attractive approach? This research addresses and answers this question.

Background The evolution of workers awareness of their rights (James, 2005), along with the recognition that they are the most important factor in the production process (Jhen, 1998), coupled with the age of empowerment (Denison, 1990), makes management approach a critical factor in the determination of organizational effectiveness (Nevil, 2004). The strength or success of the organization is often determined by the effectiveness of management to integrate employees in their decision making (Cragg, 2007). The effectiveness of that integration is influenced by management approach adapted within the organization and how employees respond towards that approach (Kinjerski & Skrypnek, 2006). This is often referred to as a process within the management structure and impacts profoundly on the retention and motivation of employees (Ramlall, 2004). Management approach within the organization influences participation and increase morale among employees (Catlette & Richard, 2000`). James (2005) propositioned that top-down and bottom-up management approaches contribute towards job satisfaction, increased productivity, organization loyalty, and motivation among employees. There are mixed opinions as to the overall effectiveness of management approach on employee retention and motivation (Price, 2001). However, as to which

9 approach is more effective and what are the effects is not conclusive. Organizational culture (Dressler, 2000), economic conditions (Abbas & Hollman, 2000), nature of economic activity (Head, 2005), and availability of quality human resources (Purvanova, 2006) are other factors that are often referred to as major contributors of this phenomena (Walker, 2003). There however, is a general consensus that management approach is the fundamental determinant affecting employee retention and motivation (Nevil, 2004). Employee preferences as they relate to management approach within the organization determine the organization culture and its effectiveness in achieving both organizational and employee objectives (Catlette & Richard, 2001). This culture also determines the effectiveness of both the formal and informal structures that exists within the organization. It is within these structures that motivation, job satisfaction, and morale emanates (Drucker, 1993). According to O’Malley (2000) management responsibility should be to galvanize the forces within these sub-structures to achieve a holistic management approach that benefits all the stakeholders in the motivation and retention of employees. Studies conducted by Gallup, NOP, the Work Foundation and Roffey Park have indicated that there is a direct relationship between employee motivation and retention (Poole, 2009). These studies also highlighted that a motivated employee is more likely to remain longer with the organization than a de motivated employee (Catlette & Richard, 2001). Statistical evidence also suggests that the lack of motivation is considered one of the major factors that contribute towards a high voluntary employee turnover rate (Abbasir & Hollman, 2000). Holt, Self, Thai, and Lo (2003) argued that organizations should seek to achieve a highly motivated workforce and increase its retention rate through effective management approaches. Filev (2008) posit that top- down and bottom-up management approaches directly affects employee motivation and retention, however, the extent of the effects is not known.

10 Globalization and contracting economies have renewed the challenge for management to focus on increasing productivity and efficiency for greater profitability (Dessler, 2000). This challenge indirectly impacts on management ability to motivate and retain its employees (Head, 2005). Taking into consideration that the average employee spends less than two years with a company, along with increasing complaints from employees of not being motivated on the job, highlights the paradigm in management approach being employed (Griffeth & Hom, 2001). Research in this area has not conclusively identified how top-down and bottom-up management approaches directly contribute towards this phenomenon (Filev, 2008). This study explored the various views on this topic of management and identified the most effective approach that would positively influence employee motivation and retention. This research also explored the concept that the decision making process is a key element in employee motivation and retention and is influenced by the management approach adopted within the organization (Walker, 2003). Inherent within this management function is the potential to positively or negatively influence the organization in terms of achieving its objectives and employee motivation and retention Sengunder (2003).

Statement of the Problem It is not known how bottom-up and top-down management approaches influence employee motivation and retention. Employee motivation and retention is considered a critical concern for an organization’s productivity and profitability (Hoopes, 2003). As organizations seek to become more competitive, attention is being diverted to the paradigm of management approach and employee retention and motivation. The fundamentals of this study were based on the experiences of employees working within these management models and outline how these approaches affect their motivation and

11 retention (Hoopes, 2003). Early research in this area suggests that management approach is considered one of the leading factors (Khan, 1998).

Purpose of the Study The purpose of this study was to explore the experiences of 14 employees within two organizations that practice top-down and bottom-up management styles. The understanding of the experience of these employees will assist managers in adopting an approach that is favorable to employee motivation and retention. According to James (2005), the bottom-up approach is more conducive to employee motivation and retention, whereas Clemmer (2002) posits an opposing perspective. The results of this study will assist organizations in the human resource planning and add to the body of knowledge in organization and management. Rationale There were three fundamental reasons for conducting this research: 1. To determine how a management approach influences employee motivation and retention. 2. To determine whether there is a relationship between employee motivation and retention. 3. Identify variable factors within top down and bottom up management approaches that impact negatively on employee motivation and retention. Research Questions There are three questions that guided this study: 1. Research Question1. In what way does top-down management influence employee motivation and retention?

12 2. Research Question 2. How does bottom-up management influence employee motivation and retention? 3. Research Question 3. Does one management approach contribute more favorably towards employee motivation and retention?

Significance of the Study The significance of this study was to explore the relationship of employee motivation and retention within two organizations that practice top-down and bottom-up management styles. The general understanding that the key to organizational effectiveness, growth and profitability revolves around the management of the organization’s human resources (Griffeth & Hom, 2001) validates the importance of this research as the study identified contributing factors that affected employee motivation and retention. Management approach employed is therefore very critical in ensuring that organizations can attract, retain and motivate their employees (Benefiel, 2003). A review of the variable factors within the two management approaches was conducted to identify those factors that impacted negatively towards employee retention and motivation. Also, the study highlighted the inter- relationship between employee motivation and retention. It is the intent that the findings and recommendations of this research will increase its significance among management professionals and researchers as they continue to pursue theories and concepts on management styles and its relationship to employee motivation and retention.

Definition of Terms Bottom-Up management approach: The fundamentals of this approach are based on consultative management which encourages employee participation in the decision making process throughout the

13 organizational structure (Butcher & Atkinson, 2000). It is characterized by the communication of goals, values, and objectives by management to lower level employees and employees are given the responsibility to develop initiatives and strategies for achieving them. “Top-down” management approach: This approach is designed to have the least participants in the formulating and participating in policies and decision making (Greiner, 1972, James, 2005). Involvement within the management hierarchy is designated by the organizational positions. This obviously contributes toward centralization of the decision making process. It is characterized as a structured approach towards the achievement of goals and objectives, which is communicated throughout the organization structure from top management. Employee retention: The factors present within the organizational structure that allows an organization to attract and retain its employees (Bowery, 1989; O’Malley, 2002). Employee within the organization experiences both job satisfaction and job enrichment and has no intentions of leaving. Employee turnover rate is very low. Employee motivation: Stimulants present within the organization that encourages employees to perform above average (Price, 2001).

Assumptions and Limitations There are three fundamental assumptions of this research: 1. The sample frame targeted is reflective of organization norms, management practices, and employee behavior. 2. There is a direct link between motivation and retention and that they are influenced by management approaches.

14 3. Information volunteered by respondents reflects their true experiences within the organizations. The limitations of this research are as follows: 1. Available literature resources. 2. Resources of the researcher to conduct a national research thus examining the various cultures that may influence this study. 3. Data collection source is limited to employees still within the organization.

Conceptual or Theoretical Framework Qualitative methods are best suited for the study of human behavior and behavior changes (Kirk & Miller 1986; Silverman, 2000). This is primarily as a result of a weakness within the quantitative approach to capture complex human behavior (Creswell, 2007). Qualitative research methods also share the assumptions of the interpretative paradigm which is based on the concept that social reality is created and sustained through the subjective experience of individuals involved in communication (Morgan, 1980, Creswell, 2007). According to Fryer (1991), the focus within this framework is more on investigating the complexity, authenticity, shared subjectivity of the researcher and research, contextualization, and minimization of illusion. In qualitative research the conceptual framework is drawn from the data rather than from set hypotheses (Silverman, 2000). This approach is often labeled inductive and interactive (Patton 1980). The adaptation therefore of a qualitative methodology which will provide a methodical approach of direction and guidance to this exploratory study was implemented. Prior to conducting the research: concepts, priorities and operational definitions of the study were developed. This resulted in a decrease in time as a result of clarity in the objectives and questions necessary for this research. The fundamental focus of the research design was to identify a research instrument that validated and provided credibility

15 to the process. The construction therefore of the research instrument was critical to the process and required several pre-tests to refine this research tool before embarking on the study. The premise of this research was to review the two dominant theories of motivation as propositioned by Douglas McGregor (1961). The assumption that there is interdependency between the theories adopted and the management approach practiced within the organization will drive this research. Douglas McGregor (1961) in his Theory X and Theory Y propositioned two types of workers. This proposition indicated that workers are motivated differently and it is the responsibility of managers to understand the composition of the workforce and employ a motivational theory that will yield the best results. His assumptions of workers also indicate that management approach should be directed differently to the two classifications of workers. Although this study made reference to McGregor’s works it did not focus on his classifications of workers and the different approaches that should be adopted towards each classification. A general understanding of motivation and its effects on employees within the management continuum added clarity to this study. Clearly defining top- down and bottom- up management approaches and identifying their influence throughout the organization structure and how those influences impacted employees were clarified in the study. Leadership styles and their effects on the management approach (Pearlstein, 2004), along with evidence based management were used to address the problem statement and research questions. Contrasting the two approaches and identifying their strengths and weakness in motivating and retaining employees impacted significantly on the role of management approaches in employee motivation and retention (Price, 1994).

16 Organization of the Remainder of the Study The remainder of the study consists of four chapters. Chapter 2 consists of the literature review of theories that have impacted on the two management approaches; Chapter 3 describes the research methodology and research process. Chapter 4 reviews the data and findings of the research. Chapter 5 includes final results and recommendations of this research.

17 CHAPTER 2. LITERATURE REVIEW Introduction Managers today are faced with several dilemmas that evolved from the core of the two basic management approaches, top-down and bottom-up. Inherent within these approaches are elements that can create or eliminate these dilemmas. Employee motivation and retention are considered prominent among those dilemmas (Clemmer, 2002). These two dilemmas are often considered interrelated, and are heavily influenced by the management approach adopted within the organization (Neville, 2004). Griffith (2001) in reference to top-down and bottom-up management approach suggested that the probable effects of these dilemmas to the organization created a resurgent among management practitioners to analyze the effectiveness of the management approach within the organization and to determine its effects on employee motivation and retention. According to the experts at Robert Hall Financing & Accounting (2006) there are five major dilemmas that managers are faced with: 1. Conflict between employees 2. Low morale 3. Poor Performance 4. Chronic tardiness/absenteeism 5. Resignations from key employees. An analysis of these dilemmas will show that there is a direct relationship between employee motivation and retention and the management approach adopted within the organization. The continuum of management approach expands from top-down to bottom- up and has been modified by several management scholars (Handy, 1993; Price & Shaw, 1994; Tushman & Romanelli, 1985; & Udechukwu & Mujtaba, 2006). The modification however has not changed the core

18 philosophy or fundamentals of the two approaches. According to Hoopes (2003) those modifications sought to expand on the positive elements of both approaches with a view to establishing a common philosophy of management approach which when practiced will lead to the eventual elimination of some of the salient dilemmas (Robert Hall Financing and Accounting, 2006) that affect management. In practice top-down and bottom-up management are still the centrifugal force of management (Clemmer, 2002). In a quest for comparative advantages, the bottom-up approach of management is gaining popularity (Dessler, 2000). In recent years leading organizations such as New York Times, Tribune Co., and Ernest Young have abandoned the top-down approach in quests of the possible benefits from the bottom-up approach (Filev, 2008). A primary reason for the switch was attributed to the success of some of the world’s largest corporations such as Toyota and IBM that have benefited from the attractiveness of employees partnership in the decision making process which empowers employees to be more proactive and creative (Badaracco, 2002). Employee involvement in the decision making process has a positive spin on their overall motivation (Catlette & Richard, 2001). Abbass and Holman (2000) in reviewing employee turnover rate within organizations indicated that organizations with the bottom-up management approach benefits from greater collaboration within teams, morale is very high, turnover rate among employees reduces, and the dilemmas that challenge managers become more manageable. A motivated employee is therefore less likely to leave a company than a demotivated employee (Dressler, 2000). The New York Times is a classic example of an organization that applied the top-down management approach and switched to the bottom up management approach primarily because senior management felt that they were not able to create a vibrant workplace and increase retention. The American Journalism Review (2008) attributed this to the centralization of power. Employees within

19 the organization felt that their voices were not being heard and that they were not part of the decision making process. This contributed to the employees not being motivated to do their jobs. When the switch was implemented employees were more motivated and their productivity increased. Similar problems can be observed in many organizations with the traditional top-down management approach. Drucker (1995) indicated that the role of management is constantly changing and employees are becoming less dependent on the manager for job execution. Cragg (2002) also indicated that the focus of management is more on team leadership where the manager is seen as the team leader who facilitates or filters the team communication, provides a creative work environment where moral is high, and guides the team. This new role of management is embodied within the transformational leadership style where the leader is seen as a visionary, leveraging the team strengths and weakness while adjusting to changes in both the micro and macro environment (Bridges et al., 2002). A peripheral view at the success and failure of the bottom-up management approach can create the illusion that this is the most effective management style (Hoopes, 2003). While this style facilitates the involvement of employees to become partners in the decision making process, it has its inherent flaws (Hoopes, 2003). Among some of the flaws in this approach are lack of clarity, control, and ambiguities (Lake, 2000). These ambiguities are mostly maligned in the communication network where personal interpretations, takes precedence over best practice (Nevil, 2004). The written evidence on this subject does not provide a conclusive analysis of the direct effects of top-down and bottom-up management approach as it relates to employee motivation and retention. The literature reviewed is not intended to form an opinion on this subject but to create awareness among management practitioners on the effects of top-down and bottom-up management approach and its influence on employee motivation and retention.

20 Management Challenge The recognition of the importance of the human factor in the production process (Stalin, 1976); the need to organize labor in the New Lanark experience (1795); Karl Marx challenges of the basis of the capitalist system (communist manifesto 1848); Max Webber development of the organizational structure (1864 – 1920); Adam Smith with his encouragement of free enterprise; Henri Fayol’s research on leadership and management theory; Frederick Taylor’s introduction of scientific discipline as a core concept of management (1920s); human behavior studies in the late 1920s by Hawthorn; and subsequent research in motivation by Mayo, Maslow, Hetzberg, and McClelland have all impacted on the evolution of management thought (Child, 1988). The 20 th century with its demands for greater efficiency and productivity gave credence to institutionalize the works of Fayol and Taylor as core disciplines of management. This period of management saw the emergence of the Classical Approach where the emphasis was placed on organization of labor. It was the general consensus that to achieve effective organization of labor, concentration must be placed on the role of top and lower levels of management (Copley, 1923). Taylor’s scientific management theory and Fayol’s 14 principles of management became the centrifugal forces that drove management approaches during this period (Aitken, 1960). This evolution also led to the creation of bureaucracy within management. Max Weber (Haire, 1959) in his work on formal structures within organizations outlines that organizations should have very rigid structure with rules and regulations as it relates to the organization operations. Emphasis was placed on authority, promotion, and selection criteria for employees. The classical approach was successful for a time and achieved its objectives; however, with the advent of globalization many tenants of this approach are not applicable (Horn 1983). Bowery (1982) indicated that the paradigm of the workforce where more than 30% of the workforce possesses a college

21 degree; the emergence of trade unions; increasing awareness of human rights; trading agreements; political and economic alliances; new and innovative technology; economics; and demand for the efficient use of scarce resource made those tenants redundant. The limitations of the classical approach gave way to the emergence of the behavioral approach. This approach according to early research seems to suggest that there is a direct relationship between management approach and employees’ behavior. Amongst the early pioneers of this were Mayo, Hawthorn, and Woodward. Mayo (1948) focused on how group dynamics, conflict management, and politics within the organization contribute toward employee behavior. Hawthorne (1948) meanwhile focused on the motivation of employees and factors that influences workers attitudes and the effectiveness of management approach on these variables. Joan Woodward (Sanzotta, 1977) in her contribution to the behavioral approach sought to disect the organization and examines the span of control and the levels of authority, and how it impacts employee motivation and retention. The success of this approach is not conclusive, since there are concerns that it has failed to meet the changing dynamics of organizations and employees. The evolution of management can be measured by the changing demands and expectations of civilization. As an organization seeks to develop its culture, the management approach employed is critical. Irrespective of the various approaches there are two basic ways in which an organization is managed: top-down or bottom- up (Horn, 1983).

Top-down Management The classical approach to management suggests that change should evolve from the top (Clemmer, 2002). Commonly held beliefs and practices also advocate the difficulty of implementing change from the bottom-up. The emergence of this approach can be traced to the classical period where authoritarianism was generally practiced between the land owners and workers (Haire, 1959). There is,

22 however, a paradigm in the top-down approach and authoritarian approach that distinguishes their attractiveness to modern day managers. Considered to be a major benefit to the organization is its holistic approach towards decision making in pursuit of organizational objectives. Practitioners within this management continuum may not necessarily be the most influential or inspirational individuals within the organization and as such may not necessarily receive the respect or cooperation from employees. This may contribute towards some of the negatives of this approach and not necessarily the theory (James, 2005). This approach according to Greiner (1972) is designed to have the least participants in the formulating and participating in policies and decision making. Involvement within the management hierarchy is designated by the organizational positions. This obviously contribute towards centralization of the decision making process. Critics suggests that this centralization excludes rank and file and also creates dissent among those who are part of the decision making process and those who are not involved (Horn, 1983). This dissent creates the potential for organizational interests being bypassed by employees who are not motivated.

Bottom-up Management The fundamentals of this approach are based on consultative leadership which encourages employee participation in the decision making process throughout the organizational structure (Butcher & Atkinson, 2000). There are two dominant characteristics that facilitate this management approach within an organization: a flat organization and employee empowerment (Woodworth, 1986). Considered the alternative to the top-down approach, it creates an environment that promotes creativity, flexibility, and high employee morale (Bower, 1974).

Full document contains 110 pages
Abstract: Globalization, economic trends, competitive labor market, market forces, and other variable forces have created a sense of urgency within organizations to motivate and retain their employees (Cragg, 2007). There however seems to be a consensus that both top-down and bottom-up management approach influences this phenomenon (Mujtaba, 2007). Increasing employee turnover rates and de-motivated staffs have forced organizations to be introspective in their assessment of this problem (Abbass & Hollman, 2000). Organization's review of their micro environment to identify possible factors that influence employees' motivation and retention appears inconclusive (Bridges & Mitchell, 2002). Economic contractions and rising unemployment sometimes create diversion in clearly identifying the main determinants (Dawson, 2005). Research however indicates that top-down and bottom -up management approaches influences employee motivation and retention (Catlette & Richard, 2001).