Ethiopian Civil Service University

Institute of Customs and Tax Administration

Department of Customs Administration

A Draft Proposal On:

The Effect of Employee Motivation, Retention and Turnover on Tax
Collection in Ethiopian Revenue and Customs Authority: The Case of Kality
Branch Office

By:
Daniel Asrat

Advisor:
Ato Teklu Kassa

A Thesis proposal to the Department of Customs Administration, Ethiopian Civil Service

University, in Partial Fulfillment of the Requirement for the award of A Masters Degree
in Customs Administration.

February 2013
Addis Ababa, Ethiopia
 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Human Resource Management is getting more important in the business nowadays,
because people and their knowledge are the most important aspects affecting the
productivity of the company. Employee motivation, retention as well as turnover are the
main aspects of Human Resource Management.

Organizations have to make sure that employees are motivated; since they are the lifeline
of an organization and contribute effectively to its successful running, which is a
precondition for increasing productivity, responsiveness, quality, and customer service.
The more the employees are motivated to task accomplishments, the higher
organizational performance and success will be.
The aim of this thesis is to analyze the level of employee satisfaction and work
motivation, retaining employees of the authority for longer period of time as well as the
effect of increasing rate of employee turnover up on tax collection in Ethiopian revenue
and customs authority specially in kality branch. The theoretical framework of this thesis
may include such concepts as leadership, job satisfaction, motivation, and ways of
retaining employees within the organization.

As motivation impacts on employee performance, there is need to bring together the

appropriate motivational tools with effective management and leadership to achieve
organizational goals.

Successful work performance can arise from a variety of motives. Various researches and
observations show that well motivated employees are more productive and creative
towards achieving company or organizational goals. On the other hand less motivated
employees are less preferment and tend to divert from attaining organizational goals.
Motivation as incentive systems are fundamental to developing capacities and to
translating developed capacities into better performance.
This research will help ERCA specially the kality branch office to realize more
appropriate ways of motivating its workforce to induce high performance, as well as
providing inputs for policy makers to consider issues which make the authority achieve
its goals by motivating employees, retaining them for a maximum possible time within
the authority as well as minimizing the rate of turnover. Collection of revenue from
various tax sources is one of the main objectives of the authority which could achieve
through appropriate motivation.

The other thing that I want to address in this paper is digging out the reasons why
employees are not comfortable to stay longer period within the authority and as a result
of this there are hindrances on the revenue collection objective of the authority.
As employees of the authority are well satisfied and motivated through various means,
they have no reason to leave the authority; as a result existing employees remain
employed in the authority. Here comes the issue of retaining employees; which refers to
various policies and practices which let the employees stick to an organization for a
longer period of time, through designing various programs such as learning and
development, rewards, and recognition, succession planning and providing policies and
practices that address their needs. It is a loss for an organization when the employees
leave their job after they are fully trained. Employee retention takes into account the
various measures taken so that an individual stays in an organization for the maximum
period of time.

Now a day there is a recurrent practice in the customs authority regarding employees’
turnover; which is the ratio of employees leave the authority as compared to those who
remain within the authority, due to the reasons which they raise as a basic one. Employee
turnover is something that companies have to deal with on a daily basis. Some turnover is
beneficial, in that it allows unproductive workers to walk out the door. Other turnover is
detrimental, in that highly competent veteran workers leave, only to be replaced by a
novice. When we come to the authority under study it is mostly those employees who
have abundant knowledge and experiences are leaving the authority.
The above mentioned are directly or indirectly related with the amount of revenue
collected by the authority, which is the major objective for which the authority is
established.

1.2 Statement of the Problem

In the current corporate world organizations, motivating employees to work harder and
better for the accomplishment of their goals and taking competitive advantages over
others is a vital issue. Motivations help employees to evoke interest in work & direct
them for the achievement of better outcomes. For this managers need to understand what
motivates employees for the role they perform within the organization.

Although, the authority under study has performed some structural measures on various
aspects; like salary increment, employees (qualified tax professionals) are still leaving the
authority and the turnover rate is still high.

Given the dynamically changing globalized world of current times in which organizations
perform their activities, they must be able to motivate & retain their employees by
minimizing the turnover rate of the organizations’ most valuable asset i.e. the human
resource in order to ensure their survival and sustainability. Employee motivation and
retention is a key to sustained survival & organizational goal achievement.

It is unrealistic to assume that every organization can compete with others given that
there are best strategies developed and taking competitive advantages over them without
considering the most valuable asset of the organization which are the employees. In
whatever type and size the organization has, employee motivational approaches should be
there for its future success.

It is a problem, for an organization, when there is less employee motivation scheme in

order to retain them for a longer period of time as a result they will become eager to leave
the organization. If this is not the case in Ethiopian customs authority, there could not be
as such huge turnover of employees every year & thus have influence on the amount of
tax and duty of which the authority intends to collect.
There is also problem in the authority to give due attention and identifying the real
motivating factor that employees want to get. At the same time the authority is not in a
position to take immediate assessments for the reasons behind employee turnover and its
impact on the tax collection process. Therefore, it is the purpose of this study to assess
the effect of motivation of employees & retaining them with lesser turnover in the
authority under study on the amount of tax collected.

1.3 Objective of the Study

1.3.1 General Objective
Ascertaining employee motivation, enabling them to retain within the authority &
reducing the turnover rate in one way or another has an impact on the amount of revenue
collection of the authority under study.

1.3.2 Specific Objectives

More specifically, the study envisages:
I. To evaluate the extent to which whether there exist sufficient and equitable
compensation practice for employees having different personalities and behaviors
in the authority as a major source of employee motivation.
II. To assess whether the existing employees want to have a long term relationship
with the authority or not.
III. To examine the measures taken by the human resource directorate of the
authority, if any, in addressing the issues of employee turnover is sufficient or not.
IV. To assess whether there exist programs that help to enhance employee’s
motivation that may include: training, rewards and incentives.
V. To show how the study variables are related to one another in the context of the
authority under study.
VI. To explore the overall effect, in their absence or presence, of the study variables
up on the tax collection objective of the authority.

1.4 Significance of the Study

This study may have a considerable contribution in the sense that it focuses on assessing
the existing employee motivation scheme that help to retain them in the authority as well
as turnover of employees that have influence on revenue collection objective of the
authority. It is those employees who are motivated and satisfied on the organization stay
for a longer period than those who do not. When employees who are valuable to the
organization are leaving in a greater number, it has a negative result for the authority
since it is not easy to replace without incurring a huge amount of replacement cost. As
the study is going to review the mentioned human resource study variables with their
impact on the amount of revenue collection, it will provide some remedial measures or
solutions to the problem under study.
It is a must in almost all cases to invest considerable time and money in recruiting and
training employees. But we are not certain about how those valuable employees are
productive and remain loyal to the authority in which they are working.
Retention of employees is essential to maintain client relationships and keep recruiting
and training costs as low as possible. Losing an experienced employee almost always
results in significant costs to your firm. The keys to employee satisfaction and retention
are founded on strong leadership and sound management practices. If you can master
these arts, you should have happy, loyal employees and clients, resulting in growth,
profits and personal satisfaction. This paper will discuss key factors in motivating and
retaining good people.

1.5 Limitation of the Study

Limitations that will encounter while conducting the study may include: lack of
organized data and documents in the authority about the study variables, lack of
willingness of employees in disclosing realist information, the stratified sampling
technique the researcher will use for his convenience may be blamed on the way of
forming stratum, based on the hierarchical structure of the authority, since any one can
form any stratum as s/he wishes in a different way, difficulties to contacting higher
officials of the authority, employees as a respondent are not all reasonably understand the
study variables, limited reading materials on the subject in case of the authority as well as
the financial and time constraints may confront and challenge the researcher, and
ultimately reduce the quality of the overall research.
However, the researcher has, in advance, understood all the above-highlight probable
challenges and get prepared both physically and psychologically to pay a maximum
possible effort so as to tackle them and produce a quality research paper.

1.6 Organization of the Study

This study paper is going to be organized into five chapters. The first chapter deals with
the introduction, including: background of the study, objectives of the study, significance
of the study, and limitation of the study. The second chapter is concerned with presenting
the review of related literature in a broader sense of the research topic, problems,
practices and effects of employee motivation, retention and turnover on the
accomplishment of tax collection objective of the authority. The third chapter describes
the research design and methodology to be employed when undertaking the study. The
fourth chapter will treat analysis of the would-be collected data and its interpretation. The
fifth chapter shall include presentation of summary of the major findings of the study and
its recommendations. At last, references will be set. In addition, data collection
instruments and other relevant materials will be attached to the appendix of the paper.
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

Selecting, recruiting, training, orienting and then assigning employees in respective jobs
do not ensure success. In most cases, there is a gap in giving due attention for employee
motivation, retention and turnover together with the effects there off up on the activities
of the organization. Hence, the stated human resource variables are determinant factors
for adopting the changing organizational demand.

This section deals with the general concepts and principles of employees’ motivation,
retention and turnover as it is viewed as organizational perspectives, practices and
problems. The review is basically concerned on the central issues involved in any
employee motivation/retention scheme and reducing the turnover rate in order to attain
organizational goals.

2.1 Definitions, Theories and Concepts

Organization, as a system, uses several kinds of resources in the course of meeting its
goals and objectives including material resources, financial resources, informational
resources, and human resources. There is no doubt about the importance of all these
resources; an efficient and effective development of all these resources relies heavily on
the human resources of the organization. Human resources are strategic engines of
organizations that help them reach their ultimate goals and objectives. Therefore, the
survival of any organization depends on the quality of human resource it possesses.
Different scholars have defined motivation of employees in a slightly different manner;
however, the essence basically remains the same.

Motivation refers to the force either within or external to a person that energize, direct,
and maintain behavior (Daft and Noe, 2001). To Daft and Noe ,an individual’s
motivation influences enthusiasm, directs energy towards an outcome, and maintains
behavior even when the behavior does not immediately result in a reward or the work
environment makes it difficult to perform the behavior. Daft, R. L. and Noe ,R. ( 2001),
Organizational Behavior, Harcourt College Publishers, Fort worth, USA, pp 162-163,
429- 430.

2.1.1 Theories of Motivation

According to Bennet (1995), motivation theory has developed into two directions: there
are “content theories” which focus on why certain goals are more important to some
people than to others, and “process theories” that seek to explain why individuals behave
in a particular way. Thus, content theories ask the question “what are the needs a person
will seek to satisfy and how do these affect motivation?”, whereas process theories
examine the thought process that people experience prior to taking action.

The major content theorists are Maslow, Alderfer, Herzberg and McGregor. Content
theories of motivation seek to determine the individual’s choice of goals and hence why
certain things are more important to some people than others. Perhaps the most influential
of all the proponents of this approach has been Maslow, who suggested that individuals
are motivated by five levels of need. When the first level has been satisfied the individual
will attempt to satisfy second level needs, then move to third, fourth, and finally fifth
levels. The five categories of needs in the order in which (according to Maslow) a person
will seek to satisfy them are as follows: Physiological, Security, Social, Esteem and Self-
actualization needs. There is no doubt that Maslow’s theory of human motivation, called
Hierarchy of Needs, is the most popular of all the theories of motivation. He
hypothesized that within every human being, there exist a hierarchy of needs. Bennet, R.
(1995), “Organizational Behavior”, Longman Group Limited, UK, 2nd edition pp 288.
To Bennet (1995), “expectancy theory” asserts that an individual’s will be motivated by
their expectations that certain modes of behavior will lead to desired events. if an
employee believes that excellent performance will help him/her achieve their needs, they
will strong enough in performing activities in the currently assigned position. There is
also what Bennet call “Equity theory” which asserts that employees own assessment of
whether they are being fairly treated is a major factor influencing motivation.
2.1.2 Essentials of Good Motivation System
High motivation leads to high morale and greater production. A motivated employee
gives his best to the organization. He stays loyal and committed to the organization.
According to Ghandhi, (Ghandhi, J. (2011) ‘Discover the Importance of Motivation’,
www.le.com, (accessed 2011 20/10/11)) a sound motivation system in organization
should have the following features:
 Superior performance should be reasonably rewarded and should be duly
acknowledged.
 Employees must be dealt in a fair and just manner.
According to his view a sound motivation system must be correlated to organization
goals. Thus, the individual employee goals must be harmonized with the organization
goals. The motivational system must be modified to the situation and to the organization.
Various scholars conclude that motivation is very important for an organization through
that human resource can be utilized at the maximum level possible. Hacket, P. (1998)
Success in Managing People. Biddles Limited Guildford Kings Lyun. London

2.1.3 Employee Retention

In simple terms, employee retention means keeping those members of staff that one
wants to keep and not losing them from the organization. A motivated employee will be
satisfied and therefore more productive and more likely to stay within the organization all
other things being equal. Employee retention can determine the success of the
organization or otherwise. Sue, S. (2001), Successful Staff Retention in one week,
Management House, London. 1st edition
Employee retention is one of the primary measures for the good of an organization. If you
are losing critical staff members, you can also expect that other people in their
departments are leaving as well. Exit interviews with departing employees provide
valuable information for the organization in order to retain remaining staff.

2.1.4 Employee Turnover

Turnover can be defined as any permanent departure beyond organizational boundaries or
the measurement of the number of employees leaving a particular workplace and their
replacement. Currently it is a major issue for most employers. High level employee
turnover can pose serious problem for both large and small firms. In one way or another
organization expect some degree of labor turnover. What matters is whether it is
reasonably acceptable or not. It is the responsibility of human resource manager to ensure
this fact. Turkson, J.K. (1997), “Business Management, Jakentee Publications, Kumasi
Ghana.

2.2.5 Practices and Problems of Employee Motivation, Retention & Turnover in

ERCA’s Perspective.
There are literatures that signify various theories, methods and practices of the study
variables. Thus the responsible management body of the Ethiopian Revenue and Customs
authority must apply them considering their appropriateness since the study variables
have directly or indirectly affect the move towards its goal achievement.
 CHAPTER THREE

RESEARCH METHODOLOGY

The purpose of this research will assess the current practices of the authority in
entertaining the major human resource variables i.e. motivation, retention and turnover in
connection with their effect on the achievement of authority’s primary goal which is
collection of tax and duties. To achieve this purpose the methodology of data going to be
collected and analyzed is presented below.

3.1 Type of the Research Design

This study will be employed the descriptive research and survey type. Because of the
purpose of this study is to assess the major problems observed in the authority whether
employee motivation, retention and reducing turnover schemes are available or not. At
the same time their effects up on tax collection. To achieve this purpose and to answer
the basic research questions the use of descriptive research type is very important. Since
the researcher has no control over the study variables s/he can only report what has
happened or what is happening. Kothari 2004, research methodology, methods and
techniques, 2nd edition.

3.2 Research Approach

Here qualitative research approach will be used for this study. In this regard I will use
responses obtained from the selected respondents through questionnaires and conducting
interviews with employees and higher officials of the authority.

3.3 Source of Data

Field work is the central and important method for collecting the primary information.
Secondary information also plays an important role while, analyzing and giving inference
of some empirical knowledge. So, this study will be based on both primary and secondary
data. The following sub-sections present the methods/techniques of data collection.
3.3.1. Primary Source of Data
I plan to use different kinds of primary data collection methods. Those are structured
interviews, questionnaire and observation. All the Primary data will be collected by field
survey.

A. Questionnaire
To collect necessary information from the sample respondents, structured questionnaire
containing both open-ended and closed ended types of questions will design and
distribute to the respondents. The Open-ended questions allow the responder to have a
variety response options while the Closed-ended questions to certain responder choices
among provided. This method of data collection will use because of the nature of
questionnaire for a wide coverage of many respondents and its easiness to quantify and
analyses the obtained information. To get information through the structured questioners,
every sample respondents will be asked. The questionnaire will be prepared in English.
B. Interviews
To extract as enough information as possible in addressing the objective of the study,
structured interview will be carried out through face to face with selected respondents
and management officials with regard to the problem of the study. The interview
questions form will be prepared in a manner which allows interviewee to provide
valuable information on the problem of the study.
C. Observation
The other primary data collection method will be conducted through non participatory
observation. During data collection, at the same time non-participatory observation will
be carried out at the study area, especially at the branch office under the study. This
techniques will be chosen because, it allow the researcher to see practically the problem
on the ground and enabling to raise more questions relating to the objectives of the study.

3.3.2 Secondary Source of Data

Secondary data is data which have been collected by individuals or agencies for the
purposes other than the particular research study. The reason why I desire to choose
secondary data in addition to primary data is because, the information derived from
secondary data can be very helpful to make the study useful.
In addition to this, because of the purpose of this study is to observe how employees are
motivated and want to stay longer within the authority at the same time how they feel
about the increasing turnover of employees. Specially, what kind of measures
management must take on the study variables in order to minimize their effect on the
amount of tax collection? Therefore, for this study the secondary data will be collected
from the annual statistical data report of the authority, written literatures on the issue
under study. The statistical trend of employees for the last five years will be taken as a
source to see whether turnover is increasing or decreasing year after year. In addition to
this the secondary data obtained from different published and unpublished documentation
by searching different websites will used.

3.4 Sample Design

3.4.1 Population
The total of the target populations for this study will be the total number of registered
staff of the authority in kality branch. According to this, the total numbers of employees
at the given branch are 1200.

3.4.2 Sampling frame

The sampling frame for this study will be the staff employees of the authority in the given
branch office and those who are leaving the authority in any reason. Employees are 1200
in number including management bodies and I will collect data from the maximum
possible number of individuals who are leaving the authority recently as well as selecting
customers of the authority purposively. The rationale behind for the selection of those
who are leaving the authority is that they may provide valuable information without fear
of any measures taken by the authority. Those customers may genuinely see what is
recurring in the authority human resource conditions.

3.4.3 Sampling Unit

The sampling unit for this study will be staff employees of the authority, the employees
leaving the authority recently and those who are customers of the authority.
3.4.4 Sampling Technique
To distribute the questionnaire to the taxpayers and office employees, the researcher will
plan to use the probability sampling technique i.e. simple random sampling technique.
The rationale behind for the selection of this sampling technique is because of it enables
the researcher to get the required number of representative samples easily and avoided
conscious and unconscious biases in the selection of such sample.

3.4.5 Sampling Size

The purpose of this study is to assess the effects of the study variables up on the tax
collection activity of the authority. To conduct this I will try to take the maximum
possible sample size from the total population. In addition to this I will make an interview
with the management officials who have responsibility of the issue under study i.e.
purposive sampling will be taken. The rationale behind for the purposively selection of
management bodies is that they are small in number and easily manageable that help the
researcher to extract important information from them.
Lastly out of 646 employees in the sample frame, 241 sample sizes will be selected using
the following formula: fn=n/(1+n/N) at 95% confidence level. (Research methods and
techniques, 2008)
 Fist to calculate the desired sample size when Population is >10,000
n=the desired sample size
Z=the standard normal deviate of the required confidence level (in this case
the 95%)
P=the Proportion of target population estimated. (50%)
d=the level of statistical significance.
Z=1.96 p=0.5 q=1-p d=5% (0.05); Assume that 95%
confidence level
n= Z2 pq
d2
n= (1.96)2 (0.5) (0.5)
(0.05)2
n = 384 the desired sample size of taxpayers.

 Second, because of the number of population is less than 10,000, to calculate the
sample size,
 fn'= __n__
1+n/N
fn = __384__
1+384/646
fn = 241
From the 200 clearing agents 131 will be selected as a sample using the above standard
formula in such a way:
fn = __384__
1+384/200
fn = 131
Therefore, the sample of 131 will be taken as a sample size from clearing agents.
Therefore, the grand total of respondents will use as sample size for this study include
(241+131 = 372).

3.5. Method of Data Analysis

The collected data will be analyzed using qualitative analysis tools and approaches. The
qualitative data is going to be analyzed against various theories that will help to providing
reasonable, rich, and acceptable explanations thereby enhancing the generalize ability of
the research result to the wider population of interest.

3.6 Data Presentation

Both primary and secondary data will be analyzed and presented using statistical tools
like tables, bar charts, pie charts, details description using words and others to facilitate
the interpretation of the result of the data analyzed.
 Time Schedule for MA Thesis Preparation
February March April May June
Weeks Weeks Weeks Weeks Weeks
No. Activity 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th
1 Submission of proposal
2 Data collection
3 Final data for reporting to advisor after

collection of data
4 Submission of chapter one, two and three
5 Submission of chapter four data analysis
6 Submission of chapter five conclusions

and recommendations
7 Submission of 1st draft
8 Submission of final draft to department
9 Defense
10 Submission of approved thesis
 Budget Breakdown

Quantity Cost per Unit Total Cost

No. Required Items Birr Cent Birr Cent
1 Stationery Materials
a. Duplication and Printing Papers 10 pads 80 00 800 00
b. Pens 30pcs 5 00 150 00
2 Transportation costs 3000 00
3 Costs of writing, Printing and Duplication
a. Questionnaire/Interview writing 10 3 00 30 00
b. Questionnaire/Interview Printing 10 1 00 10 00
c. Questionnaire Duplicating 3*372 =816 0 50 408 00
d. Research Paper writing 120 3 00 360 00
e. Research Paper Printing 120 1 00 120 00
f. Research Paper Duplicating 120x4=480 0 50 240 00
g. Research Materials copy(Supportive 2000 0 50 1000 00
materials )
4 Enumerators cost (Questionnaire 372 10 00 3720 00
distributing) questionnaire
Birr 10 per Questionnaire s
5 Miscellaneous Expenses (such as mobile 2330 00
card, tea &coffee for interviewees, etc)
Total 12168 00