Employee retention and development - Essay Example

? Human Resource Management: Employee Retention and Development Introduction Manpower shortage, especially skilled manpower shortage is a major problem in western countries like America, Britain, Germany, Australia etc. Organizations in these countries are outsourcing most of the jobs to cheap labour oriented Asian countries in order to compete effectively in the extremely globalized international market. The demand for skilled workers is huge in these countries and organizations are ready to provide any facilities to employees in these countries. However, it is difficult for organizations in these countries to retain their existing employees because of the attractive offers these employees are receiving from other organizations. Employee retention is more difficult than employee recruitment process in western countries. “The expense of recruiting and re-training a new worker costing anywhere from half to 200% of the departing employee’s annual salary”(Hebenstreit, Ph.D. 2008, p.4). It is estimated that U.S. companies spent $134.1 billion on employee learning and development in 2008 (Kraimer et al, 2011, p.485). Normally an organization spends a substantial amount of money for the training and development purposes of its employees. When an employee decides to quit an organization, all the money spent for the training and development of that employee by the organization will be wasted. It is the duty of the human resource department of an organization to implement strategies to reduce employee dropouts or turnover. “The UK average employee turnover rate is approximately 15% a year, although this varies drastically between industries. The highest levels of turnover are found in private sector organisations in retailing, catering, call centres, construction and media”(Workforce Management, 2011). The above employee turnover rate is huge when we compare it with employee turnover rate in other parts of the world. The reasons for higher employee turnover rate could be different like; attractive offers from other organizations, dissatisfaction over the working conditions in the present organization, ill-health, personal problems etc. In any case, it is duty of the human resource department to reduce the employee turnover rate as much as possible. “Replacing employee is not only time consuming, but expensive, costing you between 50 to 100 per cent of that positions’ annual salary” (Employee Retention and Recruitment Tips, 2009). This paper analyses the possible employee retention and development strategies, HRM department can implement in an organization. Theories related to Recruitment Before analysing the employee retention and development policy in detail, it is necessary to evaluate the normal recruitment policies adopting by current organization. In fact retention starts at the time of recruitment itself and therefore HRM professionals should start their efforts to retain the employees at the time of recruitment itself. Recruitment methods can be classified into two broad categories; internal and external. Internal recruitment method is normally adopted by organization when it is in need of emergency requirement of employees at some places. For example, suppose the production manager of manufacturing industry, has resigned due to some reasons. It is difficult for the organization to wait till the HRM department identifies a suitable person using external recruitment method. External recruitment process usually consists of many time consuming stages such as posting of recruitment ads in various medias, written tests, interviews, etc. The organization may not get a production manager at least for few months if it opts for external recruitment methods. It is difficult for a production oriented organization to manage its production works for longer periods without a production manager. So, when emergency occurs, such organizations will try to promote some of its existing supervisors to the production manager post. In other words, an organization may opt for internal recruitment method whenever emergency requirements occur. “Internal recruitment is the cheapest and the quickest method of recruitment, but it limits the number of potential applicants” (Recruitment methods, n. d). Organizations can save lot of money and time while they opt for internal recruitment process. Time consuming and expensive advertisements, written tests and interviews can be avoided if the organization opts for internal recruitment. However, it is not necessary that internal recruitment process may always satisfy all the employees. In the previous example, there may be many production supervisors in that organization who are eligible for the production manager post. However, the organization can promote only one of them. Promotion of one supervisor may create jealousy and displeasure among other supervisors. They may think that the organization has betrayed them and therefore from that moment onwards, they may search opportunities outside the organization. Psychologically, it is difficult for an employee to work under another employee who once worked together with him in the same department. The frustrations of the employees will be doubled if the promoted employee may have same or less experience than others. In such cases, they will begin their search for new jobs in other organizations in order to escape from the present organization. Promoted employee will always show more sincerity towards the organization whereas same thing cannot be said about all the other employees. So, human resource managers should use internal recruitment methods judiciously and they should make sure that the promoted employee is acceptable to all the other employees, in order to avoid employee dropouts. There are many organizations which accepted internal recruitment as the major recruitment method in their territories. For example, Coca Cola is one organization which give more emphasize to internal recruitment than external recruitments while deciding candidates for the senior posts. According to Coca Cola HR director Stevens Sainte-Rose; “nine in 10 senior marketing roles were now filled internally compared to six in 10 two years ago” (Peacock, 2009). According to Lingham (2008) an employee may consider objective factor, subjective factor and critical contact when he takes decision about joining an organization. Pay and perks, Location, Opportunity for career growth, Nature of work, Educational opportunities, etc are some of the objective factors whereas compatibility of individual personality with the image of organisation is a subjective factor when an employee considers joining an organization. However, it is not possible for an employee to take a decision in some cases because of inadequate objective and subjective data (Lingham, 2008). When an employee fails to analyse an organization based on objective and subjective data, he will look for critical factors such as the reputation of the overall organization, behaviours of the interviewers, pay scale offered, etc before joining the organization. But it is quite possible that his analysis or evaluation of the organization may go wrong. In such cases, the employee may force to resign from the organization after some time from his appointment. Employee Retention and Development “Human capital management now sits alongside business strategy so that organizations can be certain about the right people, their right place and the right time or recruitment” (Recruitment and retention: the quest for the right talent – report, 2009). The right person at the right place at the right time is always beneficial to an organization. Many organizations fell in trouble because of the wrong selection policies and or the wrong placement of employees. For example, some of the recruited employees may have more sales skills than administrative skills. If the organization places those employees in the administration department, neither the organization nor the employees will be benefitted from that. Such employees will always look for options in sales departments in other organizations and when they get attractive offers, they will resign from their current organization. In short, wrong placement is a major reason for employee dropout and therefore HRM professionals should take extreme care, while assigning duties to the newly recruited employees. Even if the remuneration is less, an employee may continue in his profession, if he gets the right assignment and right working climate. “It is a widely accepted premise that retention and productivity of workers is a function of how well the individual is motivated” (Lord, 2002, p.3). Motivation theories such as Hierarchy of Needs Theory, Hygiene Theory, Expectancy Theory, Equity Theory, Reinforcement Theory, and Achievement Motivation Theory stress the importance of motivation in employee retention strategies (Honore, 2009, p.63). Job satisfaction is an important factor which helps an employee to decide whether to continue in the organization or not. “Job satisfaction is related to the nature of the work and the rewards that flow directly from that work”(House & Wigodor, 1967, p.370). It is not necessary that the financial rewards alone may motivate the employees. In many cases, apart from monitory gains, factors such as good management, good working conditions, good organizational environment or climate, flexibility in working hours, scope for further development etc can motivate the employees to continue in the organization. “Human capital theory postulates that some labour is more productive than other labour simply because more resources have been invested into the training of that labour” (Ramlall, 2004, p.53). In other words, experienced employees are much more valuable for an organization than fresh employees. Fresh employees can be considered as raw materials whereas experienced employees can be considered as finished products. Here, training and development separates raw materials from finished goods or fresh employees from experienced employees. Psychological contract in the process of recruitment and retention Psychological contracts are comprised of employees’ beliefs regarding the terms and conditions of the exchange agreement between themselves and their organizations. As such psychological contracts define what individuals expect to receive from their organizations and what they perceive they are obligated to provide to their organization in return. Psychological contract breach occurs when individuals perceive that they have received less than their organization promised or committed to provide them (William, 2002, p.2). Psychological contracts need not be a written contract just like the employment contract. Before joining an organization, an employee may expect lot of things form the organization. For example, an employee who joins Apple Inc may expect better career options and working climate. However, it is not necessary that his expectations may fulfil always. Apple Inc is a company which received lot of criticisms internationally, with respect to racism and discriminations in dealing with its diverse workforce. “Unfairness in promotions and overall treatment is a common complaint in Apple Company” (Qumer, 2009, p.15). It is not necessary that an Indian who accepts a job offer from Apple may know these facts. “Apple is the second largest company in the world in market capitalization” (Kim, 2010) and under such circumstances, those who join Apple Company may not think much about racism, biases or discriminations. In other words, the expectations of the employees while joining a big company like Apple would be high. However, only after joining the company, they will face the realities and may develop a feeling that their psychological contract with the company has been breached. Employees who develop a feeling of breach of psychological contract may always think in terms of joining other companies. Psychological contracts develop through an interactive process that often begins during recruitment, but may be influenced by a number of other human-resource practices such as performance reviews, compensation, training, personnel manuals and benefits. The employee brings to the organization, a set of expectations about a possible future relationship that are subject to change through an interactive exchange with the organization’s representative. Only those expectations that are implicitly or explicitly promised by the employer will also form part of the psychological contract. Therefore, unlike pre-entry expectations, psychological contracts are formed through interaction with the employer (Sutton & Griffin, 2004, p.494) Psychological contracts are formed between the employees and the employers before and after the recruitment process. A professional always like to work in a reputed company. He will apply for a particular post in an organization, only if he is satisfied with the reputations of the company. So, even before joining the company, an employee may keep lot of expectations about the company. After joining the company, he may try to work hard in order to prove his abilities to the company and also to get some rewards or promotions. However, in some companies, employees may get nothing much in return for their hard work. Some companies promise much and deliver less whereas some other companies promise less and deliver more. Employees, who forced to work in companies which failed to deliver much, may think in terms of other options. Strategies ensuring the retention and development of employees People with exceptional skills and abilities will always get better opportunities in the employment market. So, HRM professionals should make sure that all the employees who have exceptional skills, are treated fairly in the organization. External recruitments can sometimes lead towards employee turnover. For example, a smart or hardworking employee always expects promotions while working in an organization. A hard working supervisor always expects a promotion to the managerial post. If the organization brings a manager from external sources, he may think that the organization has cheated him. He will develop a feeling that he may not get any better openings in that organization even if he continues his hard work. Under such circumstances, he may resign from that organization whenever he gets an opening. So, HR professionals should make sure that all the deserving employees are always getting proper rewards and promotions for the outstanding works they performed. “Researches frequently demonstrate that employee loyalty is tied to educational offerings, opportunity for career advancement, and management style much more than just salary” (Georghiou, 2003, p.1). One of the major myths associated with employee retention is the belief that providing good salary to an employee will keep him in the organization forever. Current employees are more concerned with the working climate or the work culture rather than the monetary gains. If an organization offers outstanding salary and stressful work environment, an employee may think twice before accepting the offer. Work-life balancing is one of the major requirements of the current employees and organizations which fail to offer flexible working hours may find difficulties in their recruitment process. “Continuous training and acquisition of new skills holds the key to success for any retention plan. For example hiring undergraduates and allowing them to complete their graduation helps” (Retaining the Employees, 2006). Most of the current employees are more focussed with their career developments. Organizations which offer career development packages such as training and options for skill development may succeed in retaining its employees up to certain extent. No employee would like to stay in his profession for ever. He wants to climb the career ladder and for that purpose training and development is essential. While working in an organization, it is difficult for an employee to acquire new skills from external sources. So the organization should provide opportunities to the employees for career and new skill development. Organizations should implement a policy like earn while learn, to keep the employees tied in the organization for a longer period. “Making the employee the stakeholder of the organization is another way of retaining them” (Retaining the Employees, 2006). The relationship between the employer and the employee is vital in retaining an employee for a prolonged period. In order to develop stronger relationships between the employer and the employee, the organization should cultivate a feeling in the minds of the employees that the organization belongs to the employees. Democratic management styles can help employers to build strong relationships with the employees. An employee who feels some kind of affection towards an organization may never leave that organization. In short, the success of employee retention strategies depends on the ability of the employer in making the employees stakeholders of the organization. The most effective retention strategies have nothing to do with HR processes and policies, according to Matthew Brearley, HR director at Vodafone UK. Speaking exclusively to Personnel Today, Brearley said: "The most effective retention strategy is a great manager - it's not an HR policy or process. "Our job in HR is to find how to help select, promote, develop and create the capabilities for great managers. People join great companies they leave bad managers" (Personnel Today, 2007). Not only HR managers, but also the managers of a particular department can prevent employees in that department from resigning their jobs. There are many employees who continue in their profession only because of the excellent treatment they received form their managers. Such employees will never leave an organization even if the organization fails to cater their needs adequately. In other words, the intimacy or relationship between the manager and the employees play a vital role in employee retention strategies. Manager is a mediator between the organization and the employees. In other words, he is a bridge between employees and the organization. Employees can communicate their requirements to the organization through their managers. If the manager happens to be an autocratic or adamant personality, employees might not be able to communicate effectively with the organization and the ultimate result would be employee turnover. The type of human resources management in an organization can be classified into soft and hard s based on the approaches of the HR managers. Hard and Soft approaches were developed by Michigan and Harvard universities’ respectively in the 1980’s. “The Harvard model, drawing on human relations school emphasized communications, team work and the utilization of individual talents whereas the Michigan model is a more strategic approach with a unitarist outlook, which endorses management's views” (Gill, 1999, p.2). In other words, Harvard model is more democratic in nature whereas Michigan model is more autocratic in nature. In an employee retention perspective, Harvard model of HRM seems to be the best option for the organizations. Allotment of flexible working hours is another major employee retention strategy. No employee would like to sacrifice his personal life for the betterment of his professional life. In fact all the employees accept some kind of profession in order to secure their personal life. In other words, personal life is more important than professional life for most of the employees. Lack of flexibility in working hours may affect the personal life of an employee and he may struggle to achieve work-life balancing. For example, there are many organizations which may keep inadequate number of employees and ask the available employees to stay back for over time to complete the works. In order to make more profit, it is better for an organization to keep few employees and ask them to do overtime. However such organizations are spoiling relations with its employees and the final outcome would be the employee dropouts. In short, helping employees to achieve work-life balancing is necessary to prevent employee turnover. Some of the employees could be highly religious. Denial of worshipping opportunities may force such employees to think in terms of a possible resignation. For example, Friday is sacred day for Muslims. Muslim employees would like to spare time for attending their mosques during Friday noon time. Allowing them to spare some time to attend mosque prayer may increase their loyalty towards the organization. Conclusions Employee retention is difficult than employee recruitment. HR professionals should start the retentions strategies at the time of recruitment itself. Employee drop outs may cause severe problems to an organization since it is difficult for an organization to substitute an experienced employee with a fresh employee. Fresh employees need adequate training and development before they become capable enough to replace the experienced employees who resigned. Training and development are expensive processes from which an organization expects adequate returns. When an employee decides to quit after only a few years of service in the organization, the organization may loss the amount spent for the training and development of that employee. Moreover, the organization should spend same amount again for another employee when it appoints another person. In short, employee turnover is not a healthy phenomenon for an organization. Building stronger relationships with the employees may help an organization to reduce employee turnover. Instead of treating employees just as workers, it is better to make them the stakeholders of the organization to prevent them from thinking in terms of resignation. Democratic management styles, better pay scales, career advancement opportunities, flexible working hours, giving importance to work-life balancing etc are some of the other strategies which may help an organization to retain its employees for a prolonged period. References 1. Employee Retention and Recruitment Tips (2009), [Online] available at: http://www.expertbusinesssource.com/article/CA6416860.html [Accessed on 31 August 2011] 2. Georghiou M (2003), Improving Employee Recruitment and Retention. White paper. [Online] available at: http://www.mathewgeorghiou.com/resources/WP+Employee.pdf [Accessed on 31 August 2011] 3. Gill C (1999). Use of Hard and Soft Models of HRM to illustrate the gap between Rhetoric and Reality in Workforce Management, [Online] available at: http://mams.rmit.edu.au/d4lhtsmk45c.pdf [Accessed on 31 August 2011] 4. Hebenstreit RK, Ph.D (2008). A Call to Apply the Principles of the Enneagram in Organizations to Attract , Retain, and Motivate Employees. The Enneagram Journal – Summer 2008 5. Honore J. (2009). Employee motivation. Consortium Journal of Hospitality & Tourism. Date: July 1, 2009 6. House RJ& Wigodor LA (1967). Herzberg's dual-factor theory of job Satisfaction and motivation: a review of The evidence and a criticism. Personnel psychology. Date: December 1, 1967 7. Kim R (2010). Apple Passes Microsoft As Top Tech Company. [Online] Available at: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/05/26/BUDJ1DL0IU.DTL [Accessed on 31 August 2011] 8. Lingham L (2008). Human Resources/Query Regarding Recruitment Theories. [Online] Available at: http://en.allexperts.com/q/Human-Resources-2866/2008/3/QUERY-REGARDING-RECRUITMENT-THEORIES.htm [Accessed on 31 August 2011] 9. Lord RL (2002). Traditional motivational theories and older engineers. Engineering Management Journal Date: September 1, 2002 10. Peacock L (2009), Talent management strategy helps Coca-Cola keep its top Performers, [Online] available at: http://www.personneltoday.com/articles/2008/09/17/47535/talent-management-strategy-helps-coca-cola-keep-its-top.html [Accessed on 31 August 2011] 11. Personnel Today (2007), Vodafone does not regard staff retention as an HR policy issue [Online] available at: http://www.personneltoday.com/articles/2007/03/13/39651/vodafone-does-not-regard-staff-retention-as-an-hr-policy.html [Accessed on 31 August 2011] 12. Qumer S.M, (2009). Apple Inc’s corporate culture: The good, the bad and the ugly, ICMR Center for Management research. www. Icmrindia.org 13. Ramlall S. PhD. (2004). A Review of Employee Motivation Theories and their Implications for Employee Retention within Organizations. The Journal of American Academy of Business, Cambridge * September 2004 14. Recruitment and retention: the quest for the right talent – report (2009), [Online] available at: http://www.grantthorntonibos.com/Reports/Focus-reports/Recruitment-retention.asp [Accessed on 31 August 2011] 15. Recruitment Methods, (n. d), [Online] available at: http://tutor2u.net/business/gcse/people_recruitment_methods.htm [Accessed on 31 August 2011] 16. Retaining the Employees (2006), [Online] available at: http://www.scribd.com/doc/6756787/Retaining-the-Employees [Accessed on 31 August 2011] 17. Kraimer ML, Siebert SE, Wayne SJ, Liden RC & Bravo J. (2011). Antecedents and Outcomes of Organizational Support for Development: The Critical Role of Career Opportunities. Journal of Applied Psychology. American Psychological Association 2011, Vol. 96, No. 3, 485–500 0021-9010/10/$12.00 DOI: 10.1037/a0021452 18. Sutton G & Griffin MA (2004). Integrating expectations, experiences, and psychological contract violations: A longitudinal study of new professionals. Journal of Occupational and Organizational Psychology (2004), 77, 493–514. 2004 The British Psychological Society. [Online] available at: http://griffin.zydec.net.au/publications/Sutton_Griffin_JOOP.pdf 19. Workforce Management (2011). [Online] available at: http://hiring.monster.co.uk/hr/hr-best-practices/workforce-management/employee-retention-strategies/what-is-the-ideal-employee-turnover-rate.aspx [Accessed on 31 August 2011] 20. William T.H (2002). The role of psychological contract in recruitments and retentions. [Online] available at: http://dodreports.com/pdf/ada410111.pdf [Accessed on 31 August 2011] Read More