This assignment is based on the case study of Arun Intercontinental traders (AIT), the organisation I worked before. It discusses some of the key issues on HRM policies followed by the proposal that could help the company to overcome those pitfalls and benefits associated while adopting those changes.
Arun Intercontinental Traders
AIT, an automotive wing of Chaudhary Group of organization in Nepal, is catering its superlative automobile products and services for almost three decades and is sole authorized distributor of Suzuki Motor Corporation, Japan and Maruti Suzuki India Limited, India. The company dominates Nepalese automobile market with nearly 50% market share and set up a benchmark in respective industry, until recently, started losing its sales to its competitors. Where, on one hand, it has the advantage of highest product range, on the other, it is losing its sales to competitors. Despite the strength of widest network, adequate knowledge of market, integrated technology and organisational strategy, company failed to increase desired sales volume and customer satisfaction in recent years and lost much of its sales to the competitors.
Background Information on the Issue
One of the key reasons for AIT in losing its sales is the "high rate of employee turnover", which means quality employees leaving company for better opportunities. There are several issues to employee's turnover in AIT's case.
One of that is AIT's work culture and business practice. AIT, is probably the first sole automobile distributor registered in Nepal, started with a limited resources and limited staffs. Unlike today, business operation was rather simple with limited customers and limited service standards. One good point of that time was freedom in decision making and monopoly market. The work culture and environment set by the monopoly market is deep rooted and could still be seen in organizational behaviour. Decision making and strategy planning is highly influenced by finance and account divisions. The objective of the company is to generate maximum revenue by creating maximum sales. HRM practices are often looked after by senior members of the company within the financial restrictions. There are often employee's complaints about remunerations and salaries, favouritism, workloads, benefit programmes etc.
"Employees leave an organisation because they become dissatisfied, underpaid or unmotivated" (Sigler, K. 1999)  .
Secondly, it's the role of competitive market and competitors to attract star employees with better salaries and benefits. In fact, this has been a common issue in Nepal in every industrial sector. The lack of experienced employee and practice of offering high values to those are motivating factor for employees to switch between organizations..
"Retention of the current workforce is the most economic solution to an organisation" (Hacker, C.A. 1996)  . Organizations suffer both tangibly and intangibly with the turnover of their key employees. A major problem is imposition of costs. There will be cost of leaving, replacement, training and indirect.
In AIT's case, leaving costs are the payroll and leaving benefits in the form of 3 months collective salary and life insurance etc. Next is replacement cost that will be spent on recruiting potential employees. This involves hidden costs like advertising, time spent on screening and interviewing. Training costs include Six month probation period, unproductive time teaching new employee to learn required skills. The indirect cost of AIT is the potential loss of revenue because of decreased level of customer service. With employee's departure, there is loss of knowledge, the knowledge of setting work standards in customer's needs and expectations. Also, potential Public Relation i.e. customer base is also transferred. Apparently, the high risk of transfer is the strategic information of the company.
Employee Retention, a Solution.
"The relationship between job satisfaction and employee turnover has been one of the most widely studied but least understood relationship in the organizational behaviour literature". (Spencer, D.G. 1986)  . "Non-productive and productive workers end up receiving the same or nearly the same compensation and package of perks because of management's inability to distinguish talented employees from the rest of the labour force in the organisation" Sigler, K., (op cit). The organization's best practice is to retain productive employees and encourage poor performers to leave.
Right employee retention is critical in sustainable growth of a business. Best employee retention also ensures better customer satisfaction, more sales, satisfied co-workers, effective planning and quality knowledge. Further, sourcing new employees is very costlier and these costs are never recorded in the books of account.
Best HRM practice within the company is the key solution to it. As stated by Noe et al (2010)  , "Effective HRM practices are strategic as it has been shown to enhance company performance by contributing to employee and customer satisfaction, innovation, productivity and development of favourable environment in the firm's community".
AIT must take responsibility for their employee retention to avoid running into a situation of losing good employees. The idea is to realize the power of skilled employees who can make or break company's reputation. It requires more attention to employees' needs and handle each issue more sensitively. Following are the core areas where improvements are needed for AIT to retain its employees.
Fairness in managers role and their supervision
Argued and complained mostly, the role of immediate superior was not very supportive in employee's expectations. The annual appraisals were done on the basis of favouritism. The employees felt unvalued and deprived from the general information. Managers have to be well liked person and transparent and equal opportunity provider. More importantly, they have to be fair in their judgement.
Employee's freedom to speak freely
Another issue is the employee's equal opportunity to speak and provide feedback.
Management role should ensure skilled employees to have right assignments and autonomy in making decision given on their areas of expertise. In addition, "providing employees with adequate trainings to learn further skills will also increase satisfaction level within the organisation" Sigler, (op cit). Favourable and pleasant work environment where the employee's decisions are valued and appreciated would entice them to stay longer.
Designation of right nature of job to right person
"Motivation is the willingness to exert high levels of effort toward organisational goals, conditioned by the effort's ability to satisfy some individual need" Ramlall, S (op cit).
Ironically, many of the employees are still positioned in areas where they are constrained to express their skill, talent and experience. Motivation reciprocated in terms of their work assignment is very poor. The result is work stress and compulsion state of thinking towards the designated work.
"Employees at all levels occasionally find themselves faced with excessive work demands, and will leave it if is the only course of action" (French and Caplan 1973)  .
Given a right shuffle in job i.e. creating more opportunity to an individual employee to explore extent of their talent and to express in the best way in their relative area would yield the highest motivation and productivity.
Especially the best employees within the organization always seek opportunities to learn more and rise in their careers, knowledge and skills. "The organisations culture needs to allow an environment of personal growth" (Thomas, K. 2000)  . AIT should adopt growth oriented programmes to encourage potential employees.
Employees Existence Feeling
"It is often unclear to what the employee and employer, actually owe each other, therefore this makes fulfilling the obligations difficult (Pate,J. et al 2003)  .
The physiological thinking behaviour of Employees in AIT's case is that they feel they don't exist in CEO's and MD's mind as they hardly get to meet them. There should be frequent interactions with head members to boost employee's motivation.
This is the final but most important issue to be considered in employee retention process of AIT. Reward system is one of the key policies within strategic HRM which could be considered as an effective tool to seek employee's commitment and competence. Employee must get rewarded, appreciated and recognized frequently. Even by saying thank you and well done by the seniors may bring a change in employee's perception.
A motivational theory stands effective on the condition where there is an equal output i.e. equitable return to the input provided i.e. contributions to the job. "The challenge therefore for organisations is to develop reward systems that are perceived
to be fair and equitable and distributing the reward in accordance with employee beliefs about their own value to the organisation" Ramlall, S. (2004)  .
Monetary rewards, incentives, bonuses and gifts are another approach to acquire staffs devotion and dedication. Besides outdoor training programme, once a year outdoor recreational travel bonuses for the outstanding performer is another approach. Similarly, a picture of best employee of the month inside the organization's board sounds effective in retention of sincere employee.
To retain current employees, it is very important for AIT to identify the reasons of employee's shift. This will highlight good HRM practice to review on the issue for further wastage of quality employee.
The employee shift pattern includes most likely both high and low performers than the average performers. AIT can afford to lose poor employee but at the same time it will be losing its star performers. "Therefore organisations need to monitor their turnover of employees" (Sturman, M 2003)  .
As stated by Armstrong (2001)  , "The analysis of the number of leavers and the reasons why they leave provides information which will indicate whether any action is required to improve retention rates".
Hence, by tracking down the leaving pattern and with the best HRM approach, AIT, will have an additional benefit of surplus quality employees. Much importantly, it will have its advantage of retaining the best staffs. This will help AIT to increase satisfaction amongst the work force and the team as a whole as a result increased output and productivity of work. Finally, achieving its strategic mission i.e. "increasing its revenue by increasing customers and employee's satisfaction".