Employee Retention - Assignment Example

Business organizations consists of a group of people working together to achieve a common purpose. The effectiveness of employees increases with the cumulative work experiences obtain through the passage of time. It is the objective of businesses to keep their human assets as long as possible. To achieve this goal a manager must keep the employee turnover rate as low as possible. This paper discusses the causes and consequences of employee turnover and strategies that can be used to improve employee retention. The metric employee turnover rate is a ratio of the number of employees a company must replace in any given time period to average number of total employees (Beam, 2008). The importance of keeping a low turnover is that employee turnover raises costs and reduces productivity. Employee turnover is categorized into different types or causes to be able to determine the root of the problem. Some of causes are retirement, firing, contractual issues, illness and voluntary. Things such and illness are events that can not be prevented, but when a company has many people leaving voluntarily then something is driving people out of an organization and the issue must be dealt with. A research study performed by the Chartered Institute of Personnel and Development revealed that in Great Britain in 2007 the average employee turnover rate of domestic firms was 17.3% (Cipd, 2008). An employee may voluntary leave a firm for numerous reasons, but some of the most common ones are low wages, poor benefits package, limited professional growth opportunities, physically or emotionally harming working environment, and a lack of non-financial rewards. Leaving a company sometimes is not about money, it’s about respect. In the National Basketball Association the Los Angeles Clippers this off-season offered its star power forward Elton Brand the best monetary deal he get land, but the player left to sign for Atlanta because he felt the Clippers did not appreciate his efforts of the past. In this case the salary figures were enormous regardless of his choice the man was rich, but the case shows that it is in the human nature of people to desire a work place where they feel comfortable and appreciated by their colleagues. Of the bond of trust are broken between the firm and employees it is more likely that the employees will more tempted to leave the company for a different work opportunity. The financial costs of the company associated with employee turnover start with the initial recruiting costs, training costs, and management hours spend developing the human resources. Marketing campaigns to attract personnel these are other direct costs. A firm incurs in exit costs when employees leave such as severance pay, exit interviews, accumulated fringe benefits. The wastage of training is particularly detrimental factor. Not only does the company lose the payments of training hrs for a person that ends up using the new skills for different firm, but it also incurs in opportunity costs associated with the lack of professional development among the staff. Time in these cases becomes a variable that leads to negative consequences. For example a company that has a team together is able to develop these employees to become more productive. In the case of companies with high turnover rates the employees are never able to break the learning curve since they are not with the firm long enough. When an employee leaves a company is left with an empty work vacancy that despite the absence of an employee the associated work task must be fulfill. Most of the time management ends up increasing the workload of the other employees to fill work outages due to employee turnover. Such a scenario should not be fostered because doing so leads to greater problems for the company such as work related stress, increase absenteeism, loss of employee productivity, and lower employee morale. The loss of productivity occurs because the new employee does not understand the business culture of the firm nor does he have experience with the production techniques utilized by the experienced workers to improve work productivity. Other costs associated with replacing employees are entrance interviews, testing, medical exams, and pre-employment administrative expenses (Pinkovitz & Moskal & Green, 2006). A firm with an employee turnover problem must focus on it employee retention rate in order to find solutions to help the situation. The key strategic direction is to find ways to increase employee retention. There are several strategies that can be used to achieve this objective. One of the options is to concentrate on employee job satisfaction. Job satisfaction is the degree to which individuals feel positively or negatively about their jobs (Schermerhorn & Hunt & Osborn, 2003, p. 119). Since job satisfaction is inversely correlated with employee turnover it is imperative for a company to quantify through the use of primary research tools such as questionnaires the current level of job satisfaction among the staff. Five work facets that influence job satisfaction are actual work, quality of supervision, relationship with co-workers, promotion opportunities, and pay (Schermerhorn, et al. 2003, p.120). The relationships built with co-workers are an emotional factor that positively affects productivity, but leads to dependency among the employees whose negative consequences manifest themselves after employees leave a firm. The remaining staff’s production goes down in the short run. The existence of promotion opportunities are motivating factors that improve retention because the employees has to establish personal professional goals of seeking better work opportunities in-house with its current employer. One of the most sound and effective retention strategies is the use of effective job designs through the organization. Job design deals with the process of specifying the job tasks of the employees and the work arrangements that must be created to accomplish them. It is important for the workers to clearly understand what is expected of them. A commonly used managerial approach towards job designing is job specification. This approach standardizes the tasks so that the employees end up with similar routine jobs that are simple while at same time perform specialize tasks. The technique works well when dealing with a large homogenous workforce. Businesses have become more complex and the employees want to be more involved in the entire process. In order to raise employee retention through job design a manager the staff is motivated by the work. Two job design techniques that empower employees are job enlargement and job rotation. Job enlargement increases the variety of tasks performed by the workers by adding new tasks of similar difficulty. Exposure to new work experiences keep the employees interested in their work since the person gets an opportunity to learn new things. Job rotation provides workers the opportunity to shift from one work environment to another without increasing the difficulty of the work. This approach to a greater extend provides more opportunities for the employee to learn new things while at the same time providing the workers with new exciting challenges. People in general want to feel a sense of belonging in any organization. The way a manager can provide this experience for employees is through the implementation of job enrichment. Job enrichment is the practice of enhancing job content by building into it additional motivating factors such as responsibility, achievement, recognition and personal growth (Schemerhorn, et al.). Another way to improve employee retention is by providing employees with greater schedule flexibility. Alternative work arrangements have become very attractive options for workers in the 21st century since they give the employee the ability to schedule the work week based on personal time needs, instead of the company’s needs. Working moms, college students, and people with more than one job benefit the most from alternative work arrangement offerings. Some of these arrangements include the compressed work week, flexible working hours, job sharing, and telecommuting. The total compensation package offered by a company is a determining factor in the ability of the company to retain its employees. A company must offer equal or greater pay in comparison with the industry to be able to retain employees. Total wages in the form is not the only variable of the formula. The greater the extend of the fringe benefits offered by company the higher the possibility of increasing its overall employee retention rate. Today employees seeks a greater work life balance, thus benefits such as maternity leave, higher vacation and sick leave, paternity leave, medical plans, company gyms and educational assistance are the types of perks that employees value the most. The business world has changed a lot during the last few decades. The enterprise can no longer exploit its employees as if they were machines under the premise that the worker will continue to accept it. Today’s employee will move elsewhere once he realizes a company is not serving his best interest. This leads to the problem of employee turnover. Employee turnover hurts the profitability of a company since it leads to higher cost and lower productivity. In order to attend turnover issues the manager of a company must implement different strategies to increase employee retention. Three business variables that lead to greater employee retention are employee satisfaction, job design and total compensation package. Increasing employee retention is a long term objective increases corporate profitability and helps ensure a firm longevity. References Beam, J. (2008). What is Employee Turnover? Available from [Accessed 4 October 2008]. Cipd.co. (2008). Employee Turnover and Retention. Available from [Accessed 3 October 2008]. Pinkovitz, W., Moskal, J., Green, G. (2006). How Much Does Employee Turnover Costs? Available from [Accessed 5 October 2008]. Schermerhorn, J., Hunt, J., Osborn, R. (2003). Organzational Behavior (8th ed.). New York: John Wiley & Sons. Read More