Most organizations of today and probably of the future face critical labor shortages. Managers have to realize that the era of employer’s market or buyer’s market is no longer out there. The age of the Disposable Employee corresponding to the late 1980s and the mid 1990s has no remnant traces today. The new millennium has seen the emergence of the Indispensable Employee. The growth in economy surging ahead of the population growth resulted in labor shortages. The ‘skills gap’ or the gap in the expertise required for a task and that actually available in the workforce is also a cause of concern.
Managers increasingly need to understand what is required to manage the present day workforce, given the changing relationship between employer and employee. To effectively manage today’s workforce, they must determine and analyze factors including whether the labor shortage is going to be a permanent one; how to recruit and retain a diverse workforce and the way the workforce has changed. Several progressive companies are increasingly under pressure for not being able to grow despite having the required financial resources. This is because of their inability to rope in the appropriate people.
Several businesses have cut their working hours due to insufficient staffing. When organizations don’t have sufficient staff, their customer service quality declines. This is mainly because the ones who are available are overworked due to inadequate staffing, resulting in them being less hospitable to the customers. Today’s managers face an uphill task of recruiting and retaining competent staff and are increasingly acknowledging, that the best form of recruitment is retention. It is therefore a little know secret that all organizations indeed lose good people either due to attrition, lay off or retirement.
Organizations must acknowledge the fact that someday even their most valued employees would leave. The retention strategies of human resource management are aimed at ensuring that key people remain with the organization. These strategies are based on the understanding of why people remain with the organization and why people leave it. Attitude surveys would establish reasons as to why people remain in the organization. Exit interviews may provide information as to why people leave to organization, but such interviews are unreliable, as people rarely give full reasons for leaving.
Retention plans are directed to address all areas were lack of commitment by employees or employee discontent can crop up (Armstrong, 2003). Employee turnover may be described as the transit of people into and out of active employment. Turnover costs include both, the costs associated with the person leaving and those associated with the new recruit. Organizations analyze employee turnover based on employee demographic profile which are developed using individual’s details like age, sex, race and place of stay etc..
Analyzing turnover based on this employee demographic profile would project a lot of useful information on why staff leave or staff stay (Fields, 2004). Recruitment and retention strategies can be improved using such analysis. Turnover must be dealt from within the organization. Employees who are dissatisfied and plan to leave may cost a lot to the organization. Low employee morale is infectious and would lead to low productivity, employee theft or sabotage and unwillingness to recommend the organization to prospective employees and customers. Retention and Employee Turnover 3
One of the important factors for employee discontent and a major cause for employees leaving the organization is the pay. Unfair pay systems and uncompetitive pay cause employees to look for alternative employment. Organizations must recognize pay structure and pay system as important to retention strategy and ensure that is it attractive and friendly. The pay levels must be reviewed regularly on the basis of market surveys. Job evaluation must be introduced and employees should understand the logic of performance and reward. The involvement of employees in the development and implementation of job evaluation schemes is very crucial.
This would give transparency and confidence to the employee on the functioning of the job evaluation scheme. The pay and benefits needs to be tailored to individual requirements and preferences, such that it is suitable to every one. Each job must be designed to provide opportunities for learning and growth. The jobs must be able to enhance skill variety, incorporate task significance and also include autonomy and feedback. Job dissatisfaction is an obvious outcome caused by jobs that are seemingly unrewarding in themselves. Employee resignations and turnover is also increased when people are not trained properly.
Employees begin to feel that the demands made on them cannot be fully delivered without proper training. When new employees are not provided adequate training, they experience an ‘induction crises’. Learning and training programs raise existing skills and competences among employees to expected standards, while increasing their morale and confidence. Employees must be encouraged to acquire new skills so that they can assume bigger responsibilities and perform various tasks. Such multi-tasking would also help them to earn more under skill-competency based pay structure.
Demotivation of employees takes place when performance standards and assessments seem unfair. Employees must be aware of the responsibilities and performance standards expected of them. Performance expectations may be set to be hard, but should however be practically achievable. Setting of goals and ways of achieving the same must be discussed and agreed upon by the employees and the managers. Managers need to praise employees for good performances while at the same time discuss performance problems as and when it happens, so that corrective steps can be taken immediately.
It is important that employees are aware of how the performance management system works. Low career prospects have been studied to be among the major causes of turnover. Organizations need to provide a wide opportunity for the career development of all its employees.. Individuals who acquire several skills tend to change career direction, several times in the course of their career. People increasingly conceive that a career development is associated with moving onto another organization.
To maintain a stable workforce, employers must identify potential using better systematic procedures and encourage promotion internally. Career opportunities can be provided by encouraging employees to gain a wide experience and advising them on their career paths. Retention and Employee Turnover 4 Conflict and dissatisfaction with superiors like supervisors and mangers is another common cause for resignations (Armstrong, 2003). When managers or team leaders fail to provide the required leadership by bullying their staff or treating people unfairly, it gives rise to employee discontent.
Such situations emphasize on the qualities of the manager and the team leader. Only those with well-developed leadership qualities must be selected as managers and team leaders. They should be trained in leadership skills, methods of resolving conflict and also on dealing with grievances. Poor selection or promotion decisions too can result in rapid turnover. The selection and promotion processes must be on par with the capabilities of the individuals, with regard to the work they do. Holding on to their employees require a strategy and organizations take several steps to ensure this.
Inc magazine once reported in its January 1998 issue that a company RHS Help Desk, based in New York had cut its turnover from 300 percent to 25 percent just by redesigning its employee orientation program, implementing a career ladder and communicating at least on a weekly basis with its field staff. Companies occasionally take to short-term efforts like UPS which once promised its employees a bonus of $1300 on the condition they stay till the end of the year, which ensured that the employees were there to meet the holiday rush. It should be noted here that turnover is not always negative.
Sometimes turnover might be required too. The important fact however is in realizing when an organization needs a turnover, and managing the situation effectively. The employee resources strategy of any organization ensures that people required by the organization are obtained and retained in the employment of the organization. The employee resourcing strategy is a vital aspect of the Human Resource Management (HRM) process. The primary aim of this strategy is that the organizations employ more competent people than its competitors.
Such people, with their wider skills and knowledge would provide an increased contribution to the growth of the organization. An organization can attract such people by being a ‘preferred employer’. It then needs to retain them by providing opportunities and rewards, which are much better than others. It is also very important for the organization to develop a positive psychological contract with the employee to create a mutual trust and increase commitment. The psychological contract is a set of unwritten and mutual expectations and obligations between each employee and the employer.
The psychological contract is directed to answer basic employment questions like ‘What can I reasonably expect from the organization? ’ and ‘What should I be reasonably expected to contribute in return? ’. The psychological contract develops overtime, allowing employees to reevaluate their expectations with changing employment conditions while gaining experience. From the employee’s point of view, psychological contract would be based on trust in the management to keep its promises, security of employment, career expectations and opportunity to show competence.
For the employer, psychological contract would Retention and Employee Turnover 5 emphasize commitment, competence, effort, compliance and loyalty. A psychological contract is required for maintaining a harmonious relationship between the organization and the employee. However, violation of this psychological contract can imply that the organization and employee no longer share, or perhaps never had a common set of values or goals (Sims, 1994). Retention steps are often intermingled with recruitment efforts, although many see both as two different aspects.
Organizations would fail miserably despite having detailed, planned recruitment programs, when the hired individuals find the environment inhospitable and look for alternatives in the recruitment market. News of ill treatment by employers and employee struggle stories are propagated much faster than good treatment and good employers. Organizations have plenty of scope and opportunities to improve their efforts towards retaining employees. Research into retention identify certain crucial aspects of employment contributing to it.
The presence of an inspirational leader with a vision for the organization contributes to employee retention. Such leaders spread the organization’s ideas through their own words and actions. When the organization’s or leader’s vision is clear to employees who identify with it, they too want to be part of the winning team, whenever it achieves the goal. Workers here know the progress and direction the company is making, and also of their contribution to its progress. Communication is crucial to all retention efforts. In the absence of proper communications, rumors would be doing its own rounds.
Staff ideas and opinions should be encouraged and two-way communication maintained between executives and workers, through managers and supervisors. Retention efforts need to be evaluated to understand its effectiveness and its shortcomings. The success of such efforts can be judged from exit interviews, turnover statistics and inputs from suggestion boxes, employee open forums, surveys/questionnaires and through staff meetings. Organizations strive to enhance retention of their employees in several ways. Managers must be aware of the tight labor market and its relevance on their retention efforts.
Employees need to be regularly surveyed to know what they want and the benefits provided to them should be in line with their requirements. Guessing what the employees would want would be a mistake. Studies show that though employees might not have actively pursued the idea of leaving the organization, the thought of leaving would have certainly been explored. Such employees who are not-completely satisfied serve as the main targets of employers poaching for labor. Pricewaterhouse Coopers had surveyed several investment management employees for its 2000 Report on Recruiting, Retention and other Employment Practices.
The results showed that all surveyed people believed that they could earn more somewhere else. Everyone also believed that in case they left the organization, it would be difficult to find a replacement and would also cost the company more to hire a replacement. Retention and Employee Turnover 6 Commitment by an employee is the level and intensity of an individual’s identity and involvement in an organization. Commitment reflects an individuals desire to remain with the organization, his belief in the values and vision of the organization and willingness to contribute more to the organization (Porter).
However some argue that commitment by employees to unilateral values and goals would not help them to handle any ambiguities or unexpectedness, which an organization is prone to. In deciding to commit to an organization, it was learnt that people attached importance to certain factors. Learning opportunities, competitive compensation and opportunities for career enhancement are among the main decisive factors for employees committing to an organization. The work environment, employee benefits and the firm’s reputation are the other important factors for an employee committing to an organization.
When problems associated with an organization’s turnover is to be resolved, it is primarily necessary to study the underlying causes (IDS, 2006). The attrition level must be viewed against those prevailing in similar organizations. Certain issues can be resolved at a primary level by just responding to employees concerns or ideas and bringing in appropriate changes. However in general, retention complexities would require broader adjustments through long-term plans. Organizations introduce several initiatives not only to tackle retention but also to be seen as a ‘great place to work’ or an ‘employer of choice’.