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Friday, 3 December 2010 00:18 - - {{hitsCtrl.values.hits}}
By Tharanga Thilakasiri
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The employee retention and organisation culture has become one of the most important concerns in today’s business context due to the shortage of skilled and talented work force. Throughout the world employee turnover rates are rising, hence, the cost of replacing employees is also increasing.
Employee retention is a process in which the employees are encouraged to remain with the organisation for the maximum period of time. Employee retention is beneficial for both the organisation and the employee.
In today’s business environment, employee retention has turned out to be a key element for organisations. Top corporate firms have managed the issue to a greater extent, due to the importance given in retaining employees. Employees stay and leave organisations for various reasons, which may be personal or professional. These reasons should be understood by the employer and be taken care of.
The Human Resource function takes a number of initiatives to retain and manage talent within the organisation with the assistance of proper human resources strategy together with the business strategy to achieve the ultimate objectives/goals of the organisation.
Hence, the prime objective of this article is to provide a comprehensive knowledge on the topic with reference to human resources implications and responses and how the issue should be addressed and how successful the current methodologies are in managing the issue.
Importance of the theme
Today, most of organisations are currently facing the problem of retaining talented employees. Hiring a knowledgeable person for the job is essential for an employer. Retention and motivating them is even more important.
There are ample opportunities available in the market for such talented people and many organisations are searching such people; therefore, if a person is not satisfied with the current job he/she can switch over for a more suitable and satisfying job.
The cost of losing a skilled/talented employee is greater than hiring a new employee. Thus, employee retention is more beneficial for any organisation.
nInterruption of customer service
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Strong relationships built with the customers could be disturbed and led to loss of business opportunities because; most customers tend to do business with organisations partly because of the people they deal with for their day to day involvements.
The cost of employee turnover is added to the organisation’s staffing cost and affects the bottom line of the organisation.
When an employee terminates, the effect is felt throughout the organisation. Co-workers are often required to pick up the slack. The unspoken negativity often deepens for the remaining staff.
The image/goodwill of a company is maintained when the attrition rates are low and motivates the potential employees to join the organisation.
When an employee leaves the organisation, it takes time to hire a new employee and to train prior to assigning duties. It leads to inefficiencies and same level of efficiencies and productivity cannot be guaranteed from the new employees for a period of time.
Naturally, when employees leave organisations, they may take valuable, confidential information and knowledge about the organisation with them, in certain instances to the competitors.
Why do people leave organisations?
Employees leave organisations due to various reasons. These could be personal or official. Every person has different reasons for working. The ultimate objective of a person is to gain benefits (financial and non financial) out of it.
Nevertheless, when the individual senses that what is expected is not met or accomplished, he/she tends to search for better opportunities. At the same time as human needs and wants are infinite, when wants are satisfied, more needs, wants and expectations arise; this too will lead to search for better job opportunities.
The most common reasons for leaving an organisation can be:
Key factors that influence the retention of employees
Globalisation of the labour force has resulted in greater number of opportunities for existing employees in other countries. This has brought a great challenge for managers in terms of retention of existing employees. Workforce diversity too has resulted in many different cultures mingling together and forming a complex organisational culture. Hence, this factor has contributed to lowering the retention rate even if the employees are satisfied in the national context.
Job satisfaction has been identified as the most crucial factor in retention of employees (Derensky, 2008). Often employee retention is viewed as a process or function of the human resources department. Somehow, there is an expectation that the recruiting staff should not only identify and hire employees, but that they should also ensure their retention through some sort of strategy or program. The reality is that employee retention is everyone’s responsibility.
According to experts, while most managers believe employees leave due to money issues, in reality it is an employee’s relationship with their supervisor that has the greatest impact on whether they stay or leave, because the supervisor has control over the core elements that create job satisfaction, compensation, opportunity, recognition and environment. And that is why it is important to hold supervisors accountable for retaining a thriving workforce. Devi, V Rama (2009, p. 3-4)
Corporate cultures characterised by teamwork, pleasant working conditions, considerate treatment of employees, growth opportunities, flexible-working practices, and good leadership and management practices foster employee engagement and retention.
This means that not only do organisations need a Performance Management System (PMS) that recognises and rewards supervisors for meeting objectives that reduce employee turnover, supervisors need to understand what steps they can take to meet their responsibility in employee retention and job satisfaction.
It is widely accepted that if employees feel that the organisational ethical values do not comply with the ethical values adopted by the employee, then employees do not wish to remain further in such organisations. Since ethical values are moulded by organisational culture it can be attributed to the underlying organisational culture and the values of organisation.
Every organisation has to face unprecedented rate of change in today’s competitive environment. To survive, these organisations have to improve quality of their products and services, increase innovation and find new ways to boost productivity.
If the employees are unable to manage the environmental forces of change the employees will be under stress. Stress leads to high turnover of employees. The ability to accept and manage change is deep rooted in the organisational culture. If the organisational culture accepts risk and encourages employees to develop new methods and products, then such employees will be more relaxed and satisfied; therefore, such companies will be able to retain employees.
nEmployee motivation and career prospects
One key factor in employee motivation and retention is the opportunity employees want to continue to grow and develop job and career enhancing skills. In fact, this opportunity to continue to grow and develop through training and development is one of the most important factors in employee motivation.
There are a couple of secrets about what employees want from training and development opportunities, however, plus training and development opportunities are just not found in external training classes and seminars. These ideas emphasise what employees want in training and development opportunities.
They also articulate your opportunity to create devoted, growing employees who will benefit both your business and themselves through your training and development opportunities. The relationship between the employees’ job performance and their retention also varied significantly with organisational culture values.
Many companies fail to pay attention to data about their most valuable assets who are their people. the company should pay attention before the problems become company disasters. Hence, it is important to organise the information so that the management knows what’s happening, both company-wide and in different work areas.
HR application to manage the problem
The concept of Human Resources Management (HRM) could be defined as the function that intermediates the gap between organisational goals and personal goals of its employees (Price A, 2004, p33). Therefore, to manage the issue of employee retention will require quite an interference of HRM.
(Tharanga Thilakasiri M.B.A (International), AIMM, AIM (SL), ACPM, can be reached via [email protected])
Recruitment and placement
When recruiting people it is essential to pick the correct employee with the correct attitude for the correct job. If either one fails, it will result in organisation loosing an employee. Placement too has an importance with regard to managing the talent within the organisation.
An appropriate job analysis will motivate the talent, as it will give the most accurate picture of the responsibilities and duties assigned to an employee. This is a motivation factor to retain relented employees within the organisation. Also, it is the duty of the human resource management to review the process and to update all important jobs periodically.
Training and Development
An appropriate orientation should be given to the new employee with basic background information about the organisation is important. Training and development is treated as one of the most valued capital investments as it helps the organisation to build a well-trained human capital base. Hence, organisations must review the training process periodically to formulate a training need analysis for each and every employee of the organisation.
Soft skill trainings such as communication, management styles, time management, problem solving, managing people and decision making as it will motivate the employee as it will help them to identify their hidden capabilities.
Performance management and appraisal
Performance management is a process that consolidates goal setting, performance appraisal and development into a single, common system, the aim of which is to ensure that the employee’s performance is supporting the company’s strategic aims.
Performance Appraisal (PA) is the process of evaluating an employee’s current and/or past performance relative to the performance standard demonstrated (Dessler, G.2005 p 310). A properly formulated fair process will motivate staff and could be used as a positive tool to manage the employee retention well.
Managing careers
Career management is done in three stages. Career planning is the deliberate process through which someone becomes aware of personal skills, interests, knowledge, motivations and other characteristics and establishers an action plans to attain specific goals. Career development is a lifelong series of activities that contribute to a person’s career exploration, establishment, and success fulfilment. Career management is the process for enabling employees to better understand and develop their career skills and interests and to use these skills and interests more effectively.
Compensation
Compensation constitutes the largest part of the employee retention process which HR should pay more attention, as revealed earlier under why people leave organisations; benefits are one of the key areas when it comes to employee retention.
Whenever there is a decision to be made with regard to the change of the employer, benefits offered by the employer will pay a vital role in making the decision. Hence, a reasonable package of financial and non financial incentives and a pay for their performance is the key to retain employees within an organisation.
Fair treatment in HR management
A proper ethics with properly formulated HRM policy to manage fair treatment too could be considered as an added benefit that could be offered to an organisation’s employees.
In summary, leaders can improve motivation within organisation by following Five Step PRIDE Model which keeps and motivates its work force and gives a sense of pride and purpose in what they do. Managers have the sole responsibility for creating this work environment. The model is a collection of the HRM concepts which discussed earlier. (Glen, C 2006)
New trends in employee retention
Recruitment, retention and turnover survey 2009 reported that the overall employee turnover rate for the UK to be 15.7%.
Turnover levels vary between industries. The highest level of turnover (16.8%) is found in private sector organisations. Successive CIPD surveys of labour turnover show that the highest levels are typically found in retailing, hotels, catering and leisure, call centres and among other lower paid private sector service groups. Turnover stands at 16.4% voluntary, community and not-for-profit organisations and the public sector has an average turnover rate of 12.6%.
Turnover levels also vary from region to region. The highest rates are found where unemployment is lowest and where it is unproblematic for people to secure desirable alternative employment.
Conclusion
It is obvious out of above the most costly and the most important is the human capital which comprises knowledge, skills and abilities of employees. Therefore it is important that a considerable time and resources are allocated to develop the human capital component of an organisation as its returns could be enormous.
As discussed earlier, it can be seen that a relationship between employee retention and the organisational culture rate in organisations exists. There is considerable evidence on literature and surveys conducted in the past in this regard.
From the above analysis it can be concluded that the management should take appropriate action in order to develop an organisational culture that nurtures the values and the competences of its employees if the organisation wishes to retain its best talented employees in the long run.
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