Human Resource Management Research 2018, 8(1): 14-21

DOI: 10.5923/j.hrmr.20180801.03

The Role of Organizational Climate and Its Impact on

Industrial Turnover
Muhammad Saleem*, Zheng Ji Liang, Narina Perveen

Faculty of Management and Economics, Kunming University of Science and Technology, Yunnan, China

Abstract This study investigated the Role of Organizational Climate and Its Impact on Industrial Turnover. This study
involved 150 banks and their employees, including senior, mid level and, lower-level management of 30 different banks and
their branches in Gilgit. This research is carried out primarily for bank employees and measures its Role of Organizational
Climate and Its Impact on Industrial Turnover, Organizational climate and its influence on organizational commitment and
staff satisfaction and its turnover, for the financial performance of the banks. The variable organizational commitment is
significant for the 1% significant level. The coefficient .45 value of the organizational commitment indicates that, there is a
positive relationship between the variables. According to the results of the regression, when the organizational commitment
increases by 1%, this results in a 45% increase in financial performance. The coefficient .136 organizational climate value
indicates that, there is a positive relationship between financial performances that is dependent variable in our model. The
results of the regression are shown as, when organizational climate increases by 1% after the 14% increase in financial
performance. The general model accounts for 32% of the variance, in financial performance. The result of this empirical
research is that, the organizational climate has a significant impact on the turnover intentions of banking employees, and this
study discovered that climate, commitment and staff satisfaction are the three antecedents of the organizational climate,
which has an important inverse impact on the spinning goal.
Keywords Organizational Climate, Organizational Commitment, Staff Satisfaction, Industrial Turnover, Banking
Industry, Gilgit

1. Introduction satisfactory and educational requirement for managing,

evaluating working tasks, and expressing adverse
Because of the recent improvements, the world of psychological states are associated with essential outcome
business has witnessed the fact that the more employees likely staff satisfaction, intense attractive and working
internalize the firm the more they are agreed to participate in effectiveness. Another suitable working atmosphere
activities (Chen, Huang and Hasiao, 2010). In today’s characteristic is role cleanliness (i.e. minimum level of low
conjecture, every business enterprise has ability to acquire doubtfulness) furthermore; clear identifying planning’s and
new technology due to their financial worthiness, but the objectives for their working responsibility (Winter, Taylor
organizational factors seem to be the Determine the success and Sarros, 2000). Organizational working pressure, having
of these acquisitions. Recent researches on organizational a job schedules which meets ones requirements, emotions,
climate and staff satisfaction has concern on the job his self mentally fit at work, getting different type of drawbacks and
organizational climate as initial means of maximizing organizational delicate atmosphere adversely impacts of
satisfaction. The major comment is here that if working intension to leaving through staffs job satisfaction and
climate is produce to provide a more suitable working engagement (Karsh, Bookse and Saifort, 2005). Furthermore,
atmosphere and increasing Staff satisfaction providing it has been found that organizational climate acts like a
inputs (Metle 2001, Afolabi, 2005). The convincing major mediator variable improving the relationship of compromise
working features via, top level of target identification for with the staff satisfaction, staff satisfaction together to the
self govern, skill value ability and working challenges are organizational climate plays an critical and important role in
the retention of current employees even though he has
* Corresponding author: improvement of his commitment to the organization (Kumar
m.saleem647@gmail.com (Muhammad Saleem)
and Giri, 2007) because it is an antecedent engagement (Lok
Published online at http://journal.sapub.org/hrmr
Copyright © 2018 The Author(s). Published by Scientific & Academic Publishing
et al., 2007).
This work is licensed under the Creative Commons Attribution International This experiential study aims to prevent various previous
License (CC BY). http://creativecommons.org/licenses/by/4.0/ circumstances of organizational climate and also investigate
 Human Resource Management Research 2018, 8(1): 14-21 15

their impact on the financial performance turnover in guideline for policy makers who are designing different
banking industry in Gilgit. Organizational climate have great policy to their employees in banking sector they must know
impact in to the organizational commitment and financial to policy attracts the employees intension and climate allows
performance, identifies different variables which are to show their best efforts and contribution to the organization
influence with their dependent variable with the help of sustaining and continuing their jobs in same organization
through proper literature review of preceding research in the which overcomes the job switching this all happens when
organization is diverse from present research and which is employees are satisfy from their organization.
actually obliging for the further research. The organizational
climate has a large effect on the human achievement through
their impact on the individual motivation and satisfaction. 2. Literature Review
Organizational climate does not all of this through the
creation of strongly held beliefs about the impact that would Organizational climate
arise from different actions. Employees expect to certain The many researchers are defining organizational climate
recompense and fulfillment on the basis of their receipt is a collection of assessable properties of environmental task
climate organizations. The individuals in the organization that is direct or indirect reception by employees working in
have certain beliefs, and an accomplishment of products organizational setting that influence and encourage their
depends on their perceived state of organizational climate behavior (Holloway, 2012). Organizational climate is
meets in accordance with your needs or not (Lehal, 2004). defined as appellant’s roles models, attributes, attitudes and a
Studies have been conducted to understand how feeling characterizing the lives inside the organization has
organizational climate influences the functional activities in more to atmosphere and securities (Aiswarya and
an organization. One of the most important studies was the Ramasundaram, 2012). An organizational climate which
role of organizational climate on employee’s behavior concerns to values, beliefs exists that are not shown, but
towards specific phenomena such as staff satisfaction, within the conduct and action of the employee (Moghimi and
sustainability, organizational change (Glisson et al, 2008). Subramaniam, 2013). In the literature there is not agreed
Statement of the Problem definitions of organizational climate, Since this is a complex
process, with several perceptions multidimensional levels
Explore the role of organization climate and its impact on
derived employees about his/her experiences within a stable
industrial turnover of banking industry in the Region of
structure over time and broadly these are shared in
Gilgit-Baltistan
organizational unit (Dawson et al, 2008) Since,
Research Objectives organizational climate may designate any person, it is also
 To identify the impact of organizational climate, on the believe increasing intrinsic motivation staff (Goepel, 2011
financial performance. Ayranci, 2011, De Jong and Den Hartog, 2003 Ahmed,
 To identify the impact of organizational commitment 1998). Intrinsic motivation referred to the feeling of pleasure
on the financial performance. in conduct. Meanwhile the intrinsic motivation is considered
 To find the impact of staff satisfaction on the financial as the most critical factor for development behaviors
performance. groundbreaking work in employees (S. Amabileet, 1996,
Research Questions Patterson et al., 2005, Hunter et al., 2007, Ekvall, 1996). This
finding was also endorsed by Amabile (2008), who found
 What is the impact of financial performance in
that the componential theory of creational and innovational
organizational climate, organizational commitment and
they are influenced by three components inside the
staff satisfaction?
individual in the organization; 1) Proficiency relevant
 What is the impact of organizational commitment
competence, 2) suitable processes of creativity, 3) intrinsic
towards financial performance of an organization?
motivation and one external component of the individual
 What is the relationship between financial performance
working atmosphere and organizational climate.
and their performance in over all organization?
Organizational climate relies on the supposition that the
Significance of the study general health of an organization might be assessed by
This research is help out to all those financial institutions measuring prediction of their working environment of the
who are recruiting their employees and offering different individual employees. Together these individual feedbacks
type of pay scales but this research help out their top are additional data that describes how the organization will
management to bottom management to offering good pay work and how it treats its staff (Giles, 2010). In other terms,
scales which promotes the organizational performance organizational climate shows how to make employees feel
towards their organizations. According to my study these about the environment within the organization. For the
research literatures help out all those researchers who are improvement of organization it is mandatory order to feel
interested measuring the organizational climate towards proud of the employee that employees are the major
employee’s financial performance, organizational resources and backbone of the organization (Dickson et al.,
commitment and staff satisfaction. This research provides 2006).
16 Muhammad Saleem et al.: The Role of Organizational Climate and Its Impact on Industrial Turnover

Organizational Commitment Because They need to Log in to do or what is the correct

The Organizational commitment has several definitions, object to perform.
the organizational commitment define as employee Wiener (1982) illustrates normative commitment that
adherence in organization and participating on it. In "the employment of a person actions, guided through
Generally there are three size of engagement are the wisdom of responsibility, obligation and loyalty towards the
extension or continuing commitment, affective commitment organization." The members of the organization have
and normative commitment (Allen and Meyer, 1996; pledged to organization based on ethical reasons (Lverson
Karrasch 2003, Turner and Chelladurai 2005, Greenberg, and Buttigieg, 1999). the employee contracted normative the
2005; Boehman 2006 Canipe, 2006). All these kinds are moral law Justice to remain in the organization irrespective
independent in a nature and presented by individuals at of the improvement of the condition or the organization to
different levels of the organization (Meyer and Allen, 1997, gives him the satisfying larger than the years. The force of
Porter et al. 1974) has defined the commitment of the the organization's normative commitment is affected by the
organization believe that accepting the aims and values of agreed regulations of mutual obligations among the
the organization have show desire to become members of the Organization and their staff (Suliman and Iles, 2000). Mutual
organization. Employees are committed to demonstrate responsibility is the theory based of social exchange which
every intention to serve as their organizations and small suggests that the individual who receives a benefit is subject
intention to quit (Hunt and Morgan, 1994; Robbins and to the obligation or the solid normative rule to pay the benefit
Coulter, 2003; Mowday, et al, 1982) organizational in a certain way (Makin and McDonald, 2000). This involves
commitment, Emotional goals and values of commitment of that the individuals habitually suffer forced to reimburse the
organization Buchanan (1974). The Organizational organization invest in them, for example during education
commitment is "interiorized normative worldwide and improvement. (Meyer and Allen, 1991) argues with the
requirements where conducted in a systematic way that leads intention of "the ethical commitment arises either throughout
the objectives and interest of the Organization" (Wiener, the development of socialization within the enterprise or the
1982). organization." In moreover case, it is based on the
exchanging the things, this means whether the member of
Affective commitment
staff receives a assistance he or she or the organization has a
The size of organizational commitment is the leading ethical responsibility to reply to thoughtfulness.
emotional engagement that is emotional affiliation of the
Staff Satisfaction
individuals in the organization. In retrospective to Meyer and
Allen (1997) affective commitment "emotional affiliation to, In the literature, there is several numbers of definitions of
mark of the employees and with the involvement of the personal satisfaction. Locke (1976), employee satisfaction
organization." The people of the organization they are has been described as an emotional response. Historically
engage to the organization on emotional basis, and continue employee satisfaction (Judge et al., 2003) employee
to work for the organization besides they wish (Meyer and satisfaction is defined "as a multidimensional psychological
Allen, 1991). the staff of the organization who are response to work, personal satisfaction as well as the
emotionally committed and they are need to stay in the emotional and cognitive status. (Fisher, 2000) work
organization and feel that their duty of employees are also satisfaction of the employees is the pleasure and member of
consistent which are valuable for the organization to the staff derives commencing his / her work. It is an attitudinal
desire objectives in the organization (Wong, 2002). variable which describing how people are feeling regarding
Affective commitment is a working approach linked with their employment. (Agho, Mueller, and price, 1993).
good emotions and feelings towards organization and also In the same way Sousa-Poza suggests staff satisfaction is
claimed that this kind is attitude "an direction towards the resolute by the balance connecting the input and output.
group that connects before attach the uniqueness of the Accordance with the concept is essential and widespread
individual within the group. "Affective commitment is the human necessities and that individual requirements are
comparative power of identification of an entity and satisfied in your present condition, and then that individual
participation within a specific group (Mowday et al. 1982). will be joyful. Staff satisfaction depend on sense of balance
between the job roles inflows (for hurting) like education,
Normative commitment
working time, effort, and operates puts (pleasure), like
The final size of the model in organizational commitment salaries, remuneration, position, assignment significance and
is normative commitment in nature (Meyer and Allen, 1997) working circumstances and the inherent aspects of work.
defined normative commitment as "a sense of requirement to Whether the outputs of work (delights) are related to work
continuing working." Normative attitude internalized responsibility inflows (pain). Frederick Herzberg Theory
obligation and requirement of folks are required to bracket Herzberg US scientific behavior suggests that the people
the relationship of the organization (Allen and Meyer, 1990). how their dissatisfaction with salary, job security or policy of
Selon (Meyer and Allen, 1991) "Employees with normative the organization. However the unsatisfying improvement
commitment feel they must see stay with the organization." over these factors does average are not needed employees
In the art net of normative aspect, continue employed meeting, Identifies of hygiene factors as the recognition,
 Human Resource Management Research 2018, 8(1): 14-21 17

achievement and growth. H1: There is no relationship between organizational

Financial Performance climate, financial performance.
H2: There is no relationship between organizational
Several authors have explored the links between
commitments, financial performances.
organizational Climate and financial performance. For
H3: There is no relationship between staff satisfaction,
example, Cascio (1991) and Flamholtz (1985) argued that
financial performance.
the financial performances associated with investments in
progressive human resource management practices are
generally significant of organizational climate. Similarly,
work in the field of utility analysis (Boudreau, 1991,
3. Methodology
Schmidt, Hunter, MacKenzie and Muldrow 1979) has The reason of this study is to explore the connection or the
concluded that the value of an increase in standard deviation relation between antecedents to determine the organizational
in the performance of the employee measured in dollars (SD) climate, organizational commitment, staff satisfaction and
is equivalent to 40 percent of salary (per employee) and that financial performance in the banking industry.
the organizational implications of human resource Organizational climate is a way of awareness of these
management practices that can produce such an increase are aspects of their surroundings with the aim of directly
considerable. Although most of the empirical work on this influences how they preserve to do their work in a suitable
topic has been carried out in research centers, Becker and working environment for the employee. The first studies on
Huselid (1992) presented field data suggesting that (SDy) the organizational climate were conducted (Havard et al,
may in fact exceed 40 percent of salary. Similarly, Terpstra 1968). There after so many studies and researches were
and Rozell (1993) found a significant and positive link conducted to attempts define the construction have often
between the extension of recruitment, the validation of the been problematic (land and Ableson, 1982). Regardless of
selection test and the use of formal selection procedures and the detail that organizational atmosphere is a differential
firm profits, and Russell, Terborg and Powers (1985). They component of distinctions in any organization (Moran and
demonstrated a link between the adoption of employee Volkwein, 1992). This research attempts to conduct the type
training programs and financial performance. The use of of relationship among diverse variables and highlights the
performance evaluations (Borman, 1991) and the linking of definite factors dependable for the variation in these
such evaluations and compensations have also been variables. On this foundation, a model determination is
consistently related to a higher profitability of the Industry framed, and the interactive relations between four variables
(Gerhart and Milkovich, 1992). given away in Figure. The models to test this hypothesis in
Research Hypothesis study with the aim of

Conceptual Framework

Organizational
Climate

Financial
Organizational Performance
Commitment

Staff Satisfaction

Figure 1. Organizational Climate

The conceptual framework of our research model is based independent variables and dependent variables, the many
on three independent variables like (Organizational Climate, researchers can use this model in their research which are
Organizational Commitment, and staff satisfaction) and one based and pillar of our research which we can shown here
of dependent variable financial performance. The major through proper facts and figures.
variables and its indicators can measure the dependency of
18 Muhammad Saleem et al.: The Role of Organizational Climate and Its Impact on Industrial Turnover

Findings The descriptive statistics shows that’s we are taking one

In this research, the researcher aims to find the role of hundred and fifty employees of different banks from Gilgit.
organizational climate and its impact on industrial turnover In this statistics here missing values are zero and valid values
and research is taken as the case study of banking industry in are 150.
Gilgit, where all schedule and non schedule banks has been Gender Distribution
in use for going away from beginning to end the study such Table 2 the data given below shows the distribution of
as, National bank of Pakistan, MCB, JSB, BOK, BOP, and employees with respect gender
Karakorum Cooperative Bank Gilgit etc organization. This
study is quantitative based and the data have been composed Table 2
in the shape of questionnaires. This questionnaire consists Frequency Percent Cumulative Percent
of forty questions which comprise of forty close ended Male 112 74.7 74.7
questions were no open ended question asked from
Female 38 25.3 100.0
respondent. The close-ended questions were productive for
Total 150 100.0
the intention of generating views, objects, and thoughts of
the employees of the banking organizations of Gilgit.
Through stratified random sampling, a sample of one
hundred and fifty employees is selected from different kinds
of schedule and non schedule banking organization. To
Gender
produce the views from the staffs of these stated 100
organizations, a five scale model is adopted which ranges
from strongly disagree to strongly agree (likerd scale). 50
Gender Percent
The data composed from questionnaires is processed 0
through on SPSS, after which the information became ready Male Female
for explanation. This explanation is as under.
Descriptive statistics Figure 3

The data given below the employees are distributed This group of femininity shows that males contributed
according to their designations 75% while females are 25% of the percentage of respondents.
Table 1 This shows the inequality of gender employment in the
organizations.
Cumulative
Frequency Percent Valid Percent Correlation
Percent
OG1 8 5.3 5.3 5.3 The connection or interdependence between two or more
OG2 19 12.7 12.7 18.0 things is called correlation.
Managers 44 29.3 29.3 47.3  common relationship or connection between two or
Op Manager 10 6.7 6.7 54.0 more variables
 The degree of relation connection, as between two sets
Officer 18 12.0 12.0 66.0
of information: a relationship is 75%.
Others 51 34.0 34.0 100.0
 A correlating or living being connected
Total 150 100.0 100.0 5.3
Descriptive
Table 3

Designation Mean Std. Deviation N

Staff Satisfaction index 5.2450 .83594 150
40 Organizational Commitment Index 7.6135 1.41778 150
30 Organizational Climate Index 3.0009 2.64467 150
20
10 The data given below shows the correlation between
0 Percent independent variables
Correlation Model

Figure 2
 Human Resource Management Research 2018, 8(1): 14-21 19

Table 4

Staff Satisfaction Organizational Commitment Organizational Climate

**
Pearson Correlation 1 .473 .139
Staff Satisfaction Sig. (2-tailed) .000 .089
N 150 150 150
**
Pearson Correlation .473 1 .104
Organizational
Sig. (2-tailed) .000 .207
Commitment
N 150 150 150
Pearson Correlation .139 .104 1
Organizational Climate Sig. (2-tailed) .089 .207
N 150 150 150

Table 4 show the correlation between independent The results of (B. Holloway, 2012) quite similar
variables, the staff satisfaction is positive correlated with comparatively relates to our findings. There is positive and
organizational commitment with .473 and the staff significant relationship among relations-oriented leadership
satisfaction is again positive correlated with organizational behaviors and the organizational climate dimension reward.
climate with .139. Also (Holloway, 2012) in another correlation tests are quite
The organizational commitment index is positive similar to our finding. In attendance is positive and
relationship with staff satisfaction of .473 and also considerable relationship between age and responsibility and
organizational commitment shows positive correlation with in attendance is a positive and significant correlation.
organizational climate with .104. In the third independent Model Summary Tables
variable which is organizational climate index which is
positive correlated with staff satisfaction of .139, and climate Table 5
again shows his positive relationship with organizational Adjusted R Std. Error of
commitment with .104. So there is positive connection with Model R R Square
Square the Estimate
all independent variables in this table. 1 .377a .321 .334 2.033

Hypothesis Summary
Table 6

Variables B Std. Error t Values Sig

(Constant) 5.316 1.152 4.615 .000
Staff Satisfaction .103 .227 .453 .651

1 Organizational
.458 .133 3.434 .001
Commitment Index
Organizational
.136 .064 2.143 .034
Climate Index

As our null hypothesis (H1) there is correlation among For our third null hypothesis (H3) there is connection
organizational climate and financial performance of an between staff satisfaction and financial performance,
employee, according to our study result null hypothesis is according to our study null hypothesis is accepted.
rejected As our alternate hypothesis (H0) there is not relationship
As our alternate hypothesis (Ho) there is no connection between staff satisfaction and financial performance hence,
among organizational climate and financial performance of our alternate hypotheses are rejected
an employee. Hence, our alternate hypothesis is accepted. But according to our above regression analysis table in the
For our second null hypothesis (H2) there is relationship last Column the significance level shows the acceptance and
between organizational commitment and financial rejection of hypothesis. The valve .651 for the staff
performance of an employee, according to our study null satisfaction which is greater than sig level .05 shows the
hypothesis is accepted. insignificance relationship to the dependant variable and
As our alternate hypothesis (H0) there is not relationship rejected the hypothesis. Further results for the variables
between organizational commitment and financial organizational commitment and organizational climate
performance of organization hence, our alternate hypotheses are .001 and .034 correspondingly which is less than the
are rejected. significance level .05. Hence, this proves that there is strong
20 Muhammad Saleem et al.: The Role of Organizational Climate and Its Impact on Industrial Turnover

relationship exist among these independent variables commitment increases by 1% it results 45% increment in
(organizational commitment and organizational climate) to the financial performance. The coefficient valve .136 of
the dependant variable (financial performance). The results organizational climate indicates that there is positive
for these variables depict the significance relation and accept relationship with financial performance which is dependent
the hypothesis. variable in our model. According to the regression results
Table shows the result of coefficient of independent when organizational climate increases by 1% it results 14%
variables. The independent variable staff satisfaction is increment in the financial performance.
insignificant with financial performance so that’s why we According to the R2 results overall model explained 32%
cannot interpret this variable. In another side the variable of the variation in financial performance. The results of
organizational commitment is significant for 1% significant (Borden at al 2009) are quite similar which are
level. The coefficient valve .45 of organizational comparatively relates to our findings. In their research
commitment indicates that there is positive relationship Participant age and the length of time in the youth program
between organizational commitment and financial were used as predictors of leadership behavior using
performance which is dependent variable in our model. regression analysis.
According to the regression results when organizational ANOVA Model

Table 7

Model Sum of Squares Df Mean Square F Sig.

Regression 99.775 3 33.258 8.045 .000b
1 Residual 603.536 146 4.134
Total 703.311 149
a. Dependent Variable: Financial Performance Index
b. Predictors: (Constant), Organizational Climate Index, Organizational Commitment Index, Staff Satisfaction

In this study data analysis is perform through the help of clearness and agreement are most effective in predicting job
statistical package for social sciences (SPSS 20 version). The motivation and attraction. In our research literature help out
study used both descriptive as well as inferential statistics to to all the managers of different financial institutions to
present the responses. Hypothesis testing is done where improve organizational climate, Organizational commitment
using large samples and ANOVA. and improving their policies to their staff who are totally
This is the table which shows the results of the ANOVA engaging to give their best effort to the organization.
analysis and whether we include a statistically significant Furthermore our research findings help out policy makers to
difference among our collection means. We can see that offer good pays to their employees who are showing their
the significance level 0.00 (P= .00), which is less 0.05, emotional commitments with organization and they are
and consequently, there is a statistically significant satisfying from their Job and which is great turnover for
differentiation in the mean duration of time to complete the banking Industry.
database problem among the different courses taken. This is
great to recognize, but we do not know which of the specific
group differed. 5. Conclusions
The study set elsewhere to expand a banking industry and
4. Discussion measures the role of organizational climate and its impact on
Industrial Turnover a literary case study of banking industry
The results of first and second questions show that in Gilgit. The outcomes of this experimental study support
situation of the organizational climate, organizational that organizational climate has a significant impact on
commitment, and staff satisfaction among staff at banking objective of banking employees turnover. The study results
sector is above average. Furthermore, the consequences of exposed that climate, commitment, and staff satisfaction are
the first hypothesis indicated that there is no significant the three background of organizational climate, which has a
positive relationship between organizational climate and its contrary significant impact on turnover intention. I.e. if
dimensions (salaries, increment, reward satisfaction, policies banking employees are clear about the organizational and
agreement) of job motivation at banking industry. Also, the individual goals, financial satisfaction and rewards inside the
findings of the second hypothesis revealed that there is a organization is correctly managed than it is a smaller amount
significant positive relationship between organizational possible for them to give up the organization. The findings
climate and it's characteristics with Organizational hopefully recommend that these three antecedents may
Commitment. The outcomes of third hypothesis of the study correspond to what constitutes a hypothetically broadened
detected that the components of staff satisfaction and role and enriched thoughtful of the organizational climate in
 Human Resource Management Research 2018, 8(1): 14-21 21

relation to banking employees of banking industry in Gilgit. Study. The ICFAI journal of Organizational Behaviour, 6(3):
7-18.
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