DIRECT AND INDIRECT IMPACT OF PERFORMANCE MANAGEMENT SYSTEM DIMENSIONS ON EMPLOYEE RETENTION IN THE BUSINESS PROCESS OUTSOURCING SECTOR

Abstract

The Business Process Outsourcing (BPO) sector faces persistent employee turnover, demanding effective human resource practices such as Performance Management Systems (PMS) to enhance retention. This study examines the direct and indirect impact of several dimensions of PMS on employee retention. A quantitative cross-sectional survey was conducted among 202 employees in BPO organizations in Bangalore, India. Data were analysed using descriptive statistics, correlation, and multiple regression techniques. The correlation and regression analysis revealed that H5: procedural justice (fairness) (r = 0.44, β = 0.183, p < 0.05), h3: employee engagement (r = 0.43, β = 0.188, p < 0.05), h12: retention intention due to employee engagement activities (r= 0.30, β = 0.246, p < 0.01), and H11: Reverse turnover intention due to PMS policy such as distributive justice (r = 0.55, β = 0.363, p < 0.001) positively influenced employee retention. The study contributes to the existing literature by providing empirical evidence from the BPO context and offers practical implications for organizations seeking to strengthen retention through effective performance management practices.