Effects of Transformational Leadership and Employability on Employee Retention: An Agent-Based Model

Employee retention is a major problem for organizations, especially for small and medium-sized organizations, which make up 99.7 percent of U.S. Organizations. Research reveals how leadership style affects employee retention, showing that supervisors who are transformational help to reduce employee turnover. However, little research has assessed the interdependent dynamics of transformational leadership, employability, and employee retention. Furthermore, employability is a sparsely discussed concept in the literature, making it a novel inquiry to consider in the dynamics of employee retention. This research employs agent-based modeling (ABM) to examine the dynamics of employee retention while considering the interdependent nature of modern organizations and workforce. The goal is to look at the relationships between the degree of transformational leadership of leader, the employability factors of individual employees, and employee turnover. The model will input data from previous empirical research to define parameters for these variables in NetLogo. This simulation model shows how workers and leaders interact and how these interactions affect the employability and retention of each employee over time, as well as how employability affects the individual’s turnover behavior once they become dissatisfied with their leader. Results demonstrate that there is a positive relationship between transformational leadership and employability, and transformational leadership and employee retention, in some organizations from the model. This study contributes to organizational research on retention by looking at the dynamic impacts of both transformational leadership and employability in an employee’s decision to leave their organization. Additionally, changes in this study can look at other factors affecting employee retention. The resulting research will impact practice by clarifying the interdependence of leadership and employability on employee retention, leading to new innovations to decrease the turnover in organizations. This model will be replicable and adjustable to look at other factors impacting employee retention that are worth studying.