A definition of Employee Retention
|✅ Paper Type: Free Essay||✅ Subject: Management|
|✅ Wordcount: 5289 words||✅ Published: 16th Aug 2021|
“Retention is a voluntary move by an organization to create an environment which engages employees for a long term” Chaminade (2007 cited in Chibowa et al. 2010). According to Samuel and Chipunza (2009), the most important purpose of retention is to look for ways to prevent the capable workers from quitting the organization as this could have negative effect on productivity and profitability. The view that the main purpose of retention is primarily for organizational gains is similarly viewed by Humphreys et al. (2009), who in describing the concept, place the focus of retention in terms of “some notion of adequacy or sufficiency of length of service, which can be measured in terms of a return on the costs of investment associated with training and recruitment or the effects on patient care that are considered to be optimal.
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In addressing the multi-dimensional concept of retention, Cascio (2003) perceived retention as initiatives which the management takes to prevent employees from leaving the organization. The issues which the latter further proposed are employees being rewarded for doing their jobs effectively, ensuring that the relationship between employees and managers are harmonious, and maintaining a working atmosphere which is safe and healthy.
The Workforce Planning for Wisconsin State Government (2005), placed emphasis on managers’ systematic effort to create organizational systems and an environment which is conducive for addressing the diverse needs of their current employees in order to sustain their continued employment through harmonious work practices. The author Brown (2005) claimed that an orientation program which is designed appropriately, whether it is short or long, will improve retention of employees.” Also, Frank et al. (2004, p. 13) defined retention as the "effort by an employer to keep desirable workers in order to meet business objectives”.
Another important facet of this research study is its attention to some of the weaknesses of other retention studies. Heneman and Tansky (2002) suggested that only by extending the existing retention models from large firms to small emerging firms would not be meaningful since it has not worked appropriately to extend other human resource (HR) practices from large firms to small ones (Barber et al. 1999). Instead, there should be the development of HR theories such as those dealing with retention that are specific to small growth-oriented firms and their strategic practices (Heneman and Tansky 2002).
Gberevbie (2008) referred to frequent labor turnover as “a state of affairs in an organization” where it is seen that employees tend to leave or resign from their jobs because of best known reasons based on their point of view concerning personnel policies and practice of a firm. Frequent labor turnover at work has been found to be causing harm to performance, especially when employees are going to the direct competitors of the organization (Chartered Institute of Personnel Development (CIPD 2006)). The CIPD (2006) further argued that it is essential for employers to completely understand their labor turnover and how these affect the organizations’ effectiveness at achieving their overall set of goals. This implies that when the staff turnover in an organization is found to be higher than usual, the performance of that organization would be relatively low because there will be a lack of availability of competent employees arising from frequent turnover of organizational workforce. (CIPD 2006)
“Excessive staff turnover is costly for an organization” (North et al. 2005). They added that its effect goes above the financial costs inherent in the recruitment, selection and training (new employee). Thereby, Larsen (2000) found that when employees are highly satisfied, they will remain in the organization, and as a result rising the rate of retention of that organization.
Factors having an impact on employee turnover
According to Foster and Krolik (2008 cited in Stern, 2008) the five following factors have an impact on employee turnover:
A tactical IT environment
Somehow motivation tends to lose its essence when organizations are ignorant to the fact that IT forms part of their organizational strategy and of the employee work particularly the tactical projects. Employees tend to develop feelings that their role does not enhance enough value or furnish chances for them to grow, especially if industry peers are working on new developments, when they are not provided with the opportunity to form and carry out strategic initiatives.
Changes in leadership
There are some employees who feel that their roles are affected when there is a change in staff. The fact that an established leader leaves an organization or a new leader makes his entrance in an organization, gives rise to uncertainty among employees who feel that these types of situations will make an impact on them. During this change of leadership, it is essential that the firm knows how to handle the end-to-end communication and the process of transition. As soon as the change is planned, it is quite obvious and wise that the due change should be communicated to the employees, the rationale for it, and what impact it will make on them including the benefits that may arise for example growth or increased opportunity.
Changes in organizational structure
As a whole, changes in the business or influencing the IT organization directly create suspicion. This can be supported with substantial examples like outsourcing, and merger and acquisition but also we have to bear in mind that the creation of uncertainty is not only because of large scale business initiatives. There can be changes in the roles of employees and their responsibilities that can make them become alert about their future when there is the restructuring of an IT department to streamline operations or align IT more effectively with the business. This situation may not have the chance to arise if both the rationale for change and their future role are distinctly communicated and like such the employees will make their own interpretations.
Cost cutting, leading to reduction or cancellation of planned IT projects
It is said that initiatives that do not create a direct impact on the bottom line is the first to be impacted when organizations attempt to decrease their cost. In this case, large or new IT initiatives can go down. The cutting of new developments has an effect on morale and interest especially if the workers perceive that this is impacting their development and marketability.
Lack of respect (for your boss)
The author, Stern (2008) found that Bethanis (1999) also explained this point well by adding that, “A key differentiator in why someone stays with an organization is satisfaction with his/her boss”. There is a tendency of employees becoming disengaged when they firstly feel that they are not given respect at the workplace and also the management does not bother in taking into considerations about their opinions. Stern (2008) proposed that leaders can win the trust of employees by meeting up to the expectations of maintaining the commitments they make to their organization. However, this does not imply that leaders must be reliable, people who must always abide to its commitment or someone who is the leader must try to do the right thing.
THE SCRUTINY OF RETENTION AND TURNOVER
According to Curtis and Wright (2001, p. 59), when managers ignore the concept of retention, there may be high employee turnover in an organization which can severely cause damage to the business particularly if it affects factors which provide competitive advantage to the company. The authors added that as a result this could hinder business growth or even the business can go down. Similarly, Brazier (2005, p. 128) stated that there are some factors like hierarchical structures, high employee turnover and lack of resources which are likely to prevent creativity and innovation.
Moreover, in view of Curtis and Wright (2001, p. 59), it costs quite a lot to replace workers who leave an organization. Also, it is said by Thornton (2001) that to recruit the key employees like the managers, specialists or highly trained professionals asks for a large amount of money which in turn can be up to 150 per cent of the annual salary. Thornton (2001, p. 24) also added that the cost for hourly paid workers is six months’ salary. As a whole, this causes disorder in the work and there may be a negative effect on employees’ morale (Curtis and Wright 2001, p. 59).
TURNOVER AND RETENTION
When studying turnover, there are some essential antecedents to turnover which normally have to be considered and they are satisfaction, commitment and intention to quit (Bigliardi et al. 2005, p. 428). Job satisfaction has been taken into account within research and numerous studies have seen the relationship between low job satisfaction and high turnover motivation (Jamal (1999, p. 727 cited in Hytter 2007)). There is some research work which shows the correlation between commitment and turnover and this was demonstrated by Kondratuk et al. (2004). It was found that affective commitment (emotional attachment, identification and involvement in the organization), and normative commitment (feel obliged to continue work) were notably lower comparing those who moved to another organization and those who remained in the same position (Bishop and Scott 1997; Kondratuk et al. 2004).
According to Michaud (2005, p. 10), when an employer is unsuccessful in maintaining a good relationship with his or her employees they tend to develop a feeling of being not important, not being appreciated which can consequently push them to quit the organization. The suggestion put forward by Hytter (2007) is that an employer should try to build a strong relationship with his or her employees which may in turn act as an essential retention strategy to the organization. To retain non-senior staff it is advisable to introduce flexible benefits where the employees can choose from a wide choice of benefits available and this particular type of benefit can be characterized as the easier and cheapest way for the owners of organizations to satisfy most of its staff (Curtis and Wright 2001, p. 61).
Sigler (1999, p. 2 cited in Hytter 2007) proposed that when trying to retain employees with other factors than compensation (pay and stock ownership), the management must try to do all possible things in order to level up the rate of job satisfaction among the employees. Cappelli (2000, p. 104) stated that there is a need of executives to ‘take a hard-headed, analytical approach to what has long been viewed as a “soft” side of business- the management of people.’
Factors influencing employee retention
Employee retention has been a major concern of organizations all over the world. Although there has been a common trend among organizations to outsource work that is routine and non-core, retaining people at strategically important positions remains a major concern.
A number of factors have been assembled so as to give explanation of the reasons why employees leave an organization for others, or in some situations they just leave the country. Some of the reasons are inappropriate hiring practices, unprofessional management style, no good recognition, lack of competitive compensation system, lack of interesting work, lack of job security, not enough of promotion, inadequate training and development opportunities and an unhealthy working environment (Hewitts Associates (2006); Abassi and Hollman (2000); Sherman et al. (2006)). CHECK REFERENCE
Herzberg (1959 cited in Bassett-Jones and Lloyd 2005) two factor theory argued that employees are motivated mostly by the internal values rather than the external values to the work. In other words, Herzberg (1959) stated that motivation is “internally generated and is propelled by variables that are intrinsic to the work” and he called that “motivators”. Conversely, certain aspects which cause dissatisfying experiences to employees are mostly resulting from non-job related variables (extrinsic).
Other researchers have also discovered that the decisions of employees to leave a firm are influenced by factors such as “salary, work life balance, or career opportunities” (Mayer 2006; Abraham 2007; Holland et al. 2007).
Moreover, in a study on employee retention, Sunil Ramlall (2003) suggested that when there is lack of challenge and opportunity, career advancement opportunities, recognition, inadequate emphasis on teamwork, no flexible work schedule, these become the most common reasons for employees’ quitting an organization. Consequently, Hannay et al. (2000) stated that the extent to which the employer has met employee expectations and the witnessed future opportunities provided by the employer are seen as the most important variables for employee retention.
While conducting a study in Australia, Mayer (2006), discovered that the reasons for young academic staff members’ leaving are somehow different. Their decisions to leave were varied as follows: too much workload, lack of input in decision making, inadequate new challenges, teaching out of field, insufficient autonomy, not enough salary and personal circumstances (Mayer 2006, p. 65). He added that after the study it was noticed that workload was ranked as the highest, while salary was the least motivating factor for quitting.
At a finishing point, we could deal with these challenges by introducing retention strategies (Armstrong 2002 cited in Millmore et al. 2007; Mayer 2006; Holland et al. 2007; Prichard 2007) that would aid the organization in keeping the employees that are in sought after fields.
Employee retention strategies refer to the “means, plan or set of decision-making behavior put in place by organizations” so as to retain the competent staff for performance (Gberevbie 2008). Researchers have also found that employees remain longer and work for the attainment of successful organizational goals when appropriate employee retention strategies are adopted and practiced by organizations (Amadasu 2003; Taplin et al. 2003; Gberevbie 2008).
There are studies which showed that when right employee retention strategies such as job satisfaction arising from appropriate rewards (Gomez-Mejia and Balkin 1992; Heneman and Judge 2003), pay according performance (Griffeth et al. 2000), training and career development (Okoh 1998) and social community at work are used, this enhances social relations such as encouraging employee marriages and siblings employment (Ayagi 2001), job security (Chartered Institute of Personnel and Development (CIPD) 2006), increased level of wage rate and company image (Taplin et al. 2003) and decision making and sharing of information (Jike 2003; Riordan et al. 2005) serve as a catalyst in retaining employees for organizational performance.
Holland et al. (2007, p. 248) suggested that companies should look for workers possessing scarce specialized skills and must try to retain them. Also, they added that in order to be able to retain those having new knowledge and skills for long term, the organizations also must use effective retention strategies. Similarly, effective retention strategies are seen as a motivator to workers which improve their performance at work and this may result in attracting more qualified people to work for the institution (Naris and Ukpere 2009, p. 883).
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Furthermore, DeMarco (2007) proposed three retention strategies to effectively deal with the Generation X work group that is those born between 1964 and 1977. According to him, the first one is that communication is vital which includes feedback, group communication, employee surveys and corporate communication. Secondly, he added that top management should review issues such as supervision whereby the manager deals with building of team, performance management and the development of individuals and thirdly he concluded that attention should be given to the matter of generational interest. The researcher even stated that “employees want to know that they are valued and important.”
Recognition, Rewards and Compensation
Many studies have shown what implications employee compensation, rewards and recognition have on turnover and retention (Becker and Huselid 1999, Cho et al. 2006, Milman 2003, Milman and Ricci 2004, Walsh and Taylor 2007). Furthermore, numerous research studies found that employee commitment can be promoted by highly competitive wage systems and thus resulting in the attraction and retention of a superior labor force (Becker and Huselid 1999, Guthrie 2001). Also, most of the managers believe that the prime retention factor is money and many employees mentioned the reason of better pay or higher compensation for leaving one employer for another (Mathis and Jackson 2003). Compensation is said to play a fundamental role in attracting, retaining and motivating workers (Swanepoel et al. 2003).
According to Arms (2010), although employee recognition is largely important, it is said to be quite simple to deal with. He added that it is just a matter of an everyday interaction by saying a simple “thank you” to the staff that has gone out of their way. Also, he stated that an employer must often acknowledge the stress and effort of employees working on an important and timely project. The author further added that it is essential for the boss to give them credit they deserve for work that they have done for the firm and instead not to give them the impression that the employer is taking credit for their efforts. He finally concluded by proposing to employers that they can set up a more formal program for employee recognition having both the financial rewards such as “gift certificates” and intangible rewards that is having a personal parking place, obtaining summer flexible time and “dress code perks”.
However, several other research studies have showed that compensation in the form of base or variable pay may not be sufficient to attract or retain employees. Milman (2003) and Milman and Ricci (2004) concluded that the most significant retention predictors included intrinsic fulfillment and working conditions rather than monetary rewards. Similarly, the study by Walsh and Taylor (2007) revealed that although compensation and work-life balance are important, it is the absence of opportunity for professional growth and development that affects management retention and turnover (Walsh and Taylor, 2007).
Researchers have found that rewards as provided by organizations have relationship with job satisfaction and hence employee retention (Taplin et al., 2003). Rewards help to motivate and retain competent staff for performance (Okoh, 1998; Bamigboye and Aderibigbe, 2004; Jerez-Gomez et al., 2005). Heneman and Judge (2003) argue that for an organization to retain its employees for performance, it must match its rewards to employees’ preference. The match between rewards desired by employees and offered by the organization is what leads to job satisfaction. And job satisfaction in turns guarantees employee retention.
Others like Kinnear and Sutherland (2001: 17) assert that managers should not be deceived that money no longer matters in retaining employees any longer. They further reiterate the importance of money in attracting, motivating and retaining quality employees in the organization and further concluded that skilled employees are achievement oriented and want their achievements rewarded with money. However, Amar (2004: 96) argues that money has not remained as good a motivator as it was in the past. The efficiency of money as a motivator of skilled employees is quite low.
In contemporary organizations, Hay (1999: 46) contends that if managers reward performance with only money, in many ways, they lose the retention war, because there are other more powerful motivators of talent, such as freedom and flexibility in the organization. Concurring with Hay (1999: 46), Dess et al. (2008: 127) state that money cannot be ignored, but it should not be the primary mechanism to attract and retain talent because employees who come for money will leave for money.
Empirical study by Samuel and Chipunza (2009) found a strong evidence of association between job security and employee retention. This is more so in under-developed and developing economies where job security presents an important factor in employment decision making of individuals. Also they stated that employees place great importance on their jobs because it provides them with the source of income with which socio-economic stability and psychological well-being are achieved.
However, regardless of the importance attached to job security, existing literature argues that job security at present has a different valence to different generations of employees. Supporting this assertion, Amar (2004: 97) posits that job security is not a retention antecedent for the new generation of skilled employees. Their expectations in the organization do not include long-term employment. He adds that they see job security as a positive feedback of their labor market worth and therefore look for a daily proof that their work matters. According to him, in this way, skilled employees create for themselves a sense of security every day, meaning that, if they are doing a good job, they are secure, if not with their present employers, then with another one.
Training and Development
According to Cataldo, Assen and D’Alessandro (2000), employees with key information technology skills have become increasingly hard to find. Thereby, organizations that focus extensively on developing newly hired talent through continuous training will be in a much stronger position to retain the most talented employees, thus becoming an employer of choice (Boxall & Purcell, 2003). Also, according to the research of Matlay (2010), “Companies that want to hang on to the graduates that they have and continue to attract the best should look to their training programs.” His research also showed that training was considered key not just to newly working graduates but to final year students. He perceived that over 90 per cent of them believe that organizations that continue to invest in their people will come out of the recession stronger. In his view, whilst they acknowledge that training budgets may have shrunk and will view companies claiming the opposite with some scepticism, they demand honesty about training opportunities from employers during the interview process.
“Successful retention programs incorporate training and development in an effort to retain their employees. Any organization that develops employees will want to retain staff and utilized their skills. It is important that key staff members, who are developed, are also retained” (Pritchard, 2007: 140). Also, when combined with selective promotion and salary action, the learning and development process is a strong retention activity. (Echols, 2007 cited in Govaerts, Kyndt, Dochy, & Baert, 2011)
In the US the ‘Jobs Initiative’ found that although work readiness activities increased participant placements, training and the provision of hard skills was the most important factor in supporting longer term retention (Abt Associates, 2003). According to Kellard et al. (2002); NESA (2007), training has been found to be most successful when it: makes use of a range of education options from on the job to fully accredited training; is closely linked with the skill requirements of employers in the local labor market; and fits with both home and work schedules. They added that this should involve continual development of hard and soft skills, addressing of skill deficits as they arise in the workplace and the targeted development of skills in jobs at one level that will support advancement to jobs at a higher level of employment.
According to Arms (2010), “There are various ways you can support the professional development of your staff. Consider offering internal training opportunities. Facilitate continuing professional education (CPE) attendance by not only paying for the classes but also allowing your staff necessary time away and reasonable travel and per-diem expenditures. Many companies also offer a tuition assistance program with vested or performance-based reimbursement for secondary education. Finally, don’t neglect technology. Keeping up with the latest and greatest in office equipment, software, and personal devices can be a daunting capital investment, but it will provide significant returns in the form of streamlined operations, improved accuracy, and increased revenue. The fact that your staff will also enjoy being at the forefront of technology is an added benefit.”
On the other hand, once employees feel they are no longer growing, they begin to look externally for new job opportunities (Rodriguez, 2008). This makes development and learning critical for attracting and retaining employees, because “[. . .] talented people are inclined to leave if they feel they are not growing and stretching” (Michaels et al., 2001, p. 14).
On the other side of the coin, what we see is that there are some companies very unwilling in investing money for training employees (Lyons, 2003:398; Gagg, 2005:28)
Corporate culture and communication
According to Becker and Huselid (1999), culture creates competitiveness since it changes employee behavior by making them act consistently with the firm’s desired corporate culture, thereby influencing employee retention. Other researchers who investigated the relationship between organizational culture and employee turnover and retention uncovered similar findings (Chew et al., 2005; Cho et al., 2006; Milman and Ricci, 2004). For example, a study by Milman and Ricci (2004) revealed that among the most powerful indicators to predict hourly employee retention in the lodging industry were positive experiences with the company’s policies and with the company’s humane approach to employees.
According to Arms (2010), Communication is seen as a key. Even if you speak with your employees regularly, are you telling them what they need to know? Share your mission, vision, and goals with them. If they’re expected to help you attain something, they should at least have an idea of what it is they’re working toward. Also, many employers don’t include staff in discussions of company performance, assuming that they don’t care or need to know. But they do care, and keeping them informed gives them a feeling of inclusion and unity that will foster accountability.
Moreover, Sinkin and Putney (2009) states that no simple solutions can eliminates these retention fears, but one of the most effective actions is clear and frequent two-way communication in which you share your firm’s vision and ask for (and to listen) their opinions. These actions create an environment in which staff feels someone is listening, they have input and their opinion counts.
Work environment, Work Life Balance and Job Enlargement
“Professional practice environments, successful in attracting and retaining staff, intentionally utilize events and activities that promote employees’ social attachment to the workplace community.” (Halbesleben and Wheeler, 2008; Holtom and O’Neill, 2004). Similairly, some companies that actively promote a positive work environment, and who also value employee contributions while achieving a true work-life balance have been found to be more successful at communicating the idea that their employees are one of their most valuable resources (Hom and Kinicki, 2001; McGrath, 2006; Mitchell, Holtom, Lee, Sablynski, Erez, 2001). Furthermore, work/life balance factors are also cited as retention factors by DeMarco (2007) and Gillis (2007).
Also, an institution should help employees maintain a balance between personal and work life (Dibble, 1999 cited in Netswera, Rankhumise and Mavundla, 2005). He added that in some institutions, practices such as making childcare facilities available on the premises and flexi time can make the difference between keeping and losing an employee. Work/life policies include flexible work scheduling (e.g. part-time work, job-sharing, variable starting and quitting times), family leave policies allowing periods away from work for employees to take care of family matters, and childcare assistance (e.g. referral service, on-site or offsite care centres) (Burke & Cooper, 2002). Similarly, Hytter (2007) stated that some firms have ameliorated in retaining employees by giving them more flexible working options and also by offering them other family-friendly policies.
However, according to Dibble 1999, p. 157, often statements about the environment, caring attitude towards workers, etc. appear in the official statements of the organizations, but are not often practiced in most work environments. Additionally, Loyal, high technology employees (those who cannot envision changing jobs in the foreseeable future) are more concerned with leave (vacation, holidays etc), flexible work schedules, family friendliness and a proximity to their home, than job seeking employees who are actively looking for a new position (Dubie, 2000).
Results of empirical studies of lodging properties in Central Florida confirmed that hourly employees’ retention was predicted by self-fulfillment and working conditions, even over monetary rewards (Milman, 2002, 2003; Milman and Ricci, 2004). These studies found that employees who had a positive experience with regards to working hours, sense of fulfillment with their jobs and higher level of job satisfaction are more likely to stay with their current employer. In a study of restaurant food servers, Wildes (2007a, b) noted that although monetary rewards can be a top motivator for employee retention, having a fun working environment and flexible hours were also important motivators.
Flexible work arrangements have been used for more than a decade as a way of retaining valued employees. However, this is a short-term fix (Maitland, 2007). Instead, employees should be encouraged to choose from a menu of options in the following four areas:
- Pace of career progress (ranging from accelerated to decelerated)
- Workload (from full to reduce)
- Location and schedule (from not restricted to restricted)
- Role (from leader to individual contributor) (Maitland, 2007).
Walsh and Taylor (2007) study found that although it was important to obtain a good salary and benefits package, whether employees remain with the organization primarily depends on the degree to which their employers respond to their professional growth. They noted: “those employees most committed to performing challenging work are the ones most likely to remain with their companies” (Walsh and Taylor, 2007, p. 147).
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