Effective Retention Strategy: a Vital Component of Resourcing Strategy - Case Study Example

Effective Retention Strategy – a Vital Component of Resourcing Strategy Introduction As a result of globalization, human resource management is being challenged to improve the organization’s employee retention strategies in order to reduce the high costs associated with high rate of employee turnover. These unnecessary costs are usually related to the costs of hiring new employees and training them so as to increase their productivity at work. As a result of not being able to satisfy, motivate, and retain employees, the business organization is also expected to lose some of its valuable company knowledge related to its customer-base including its past and future projects which are likely to be passed on to the company’s competitors. Since work motivation does not only increase employees’ retention rate but also their productivity rate, staying focus on motivating employees becomes a crucial factor in terms of increasing the work satisfaction of each employee and enabling the entire team to reach the optimal levels when it comes to accomplishing the company’s objectives. Once an employee is very much satisfied with their current profession, there is a higher chance for him or her to remain employed with a company for a very long period of time. In general, effective work motivation, job satisfaction, high productivity, better business profit, and improved employee retention are all interrelated matters. For this reason, most of the modern human resource managers today who are working in large-scale multinational companies are being challenged to search for different ways on how they can improve the effectiveness of their motivational and retention strategies at work. Aiming to prove that many people believe that an effective retention strategy is a vital component of any wider people resourcing strategy, a literature review will be conducted to determine the truth behind the statement. In the process of going through the discussion, several effective retention strategies that are commonly used by the modern human resource managers today will be identified and discussed followed by conducting a research analysis to determine the similarities and contradicting positions of each author(s) pertaining to the positive and negative impact of each employee retention techniques. Based on the gathered information, the ways wherein an organization can effectively retain employees will be evaluated. Several Effective Retention Strategies Commonly Used by Modern Human Resource Managers The ability of the HR manager to satisfy employees with their existing jobs will result to a higher chance that the business organization will be able to control employee turnover and increase the rate of employee retention (Tas, Spalding, & Getty, 1989). With regards to the use of effective retention strategies, some of the common techniques that were adopted by the HR management includes: (1) effective career management and the promotion of equal gender rights; (2) talent management; (3) succession planning; (4) integration of learning and development with employee relations; and (5) reward strategies. Effective Career Management and the Promotion of Equal Gender Rights Career development program (CDP) is referring to the actual organizing, formalizing, and planning on employees’ career growth based on the specific job requirements needed by the business organization. (Lips-Wiersma & Hall, 2007) Some employees developed a negative perception with regards to career management because of its paternalistic nature which means that men in general have a higher chance of being promoted at work as compared to women (Maume, 1999). On the contrary, Cassirer and Reskin (2000) stated that “gender is not necessarily associated with promotion attitudes.” This statement is true because of the fact that male employees give more importance to work promotion than female employees. For this reason, most of the male employees are able to reach higher managerial positions than female employees (Cassirer & Reskin, 2000). Aside from improving the company’s overall performance, a positive work satisfaction highly affects an employee’s decision to stay loyal with a company. As part of the positive impact of promoting and implementing an effective career program, several studies conclude that promoting a career management program within a business organization is an effective work motivating strategy in terms of making employees delivers a good work performance and higher business profitability return (Chen, Chang, & Yeh, 2006; Eby, Allen, & Brinley, 2005; Crabtree, 1999). It is equally important to promote the equal rights of men and women. Basically, allowing male and female employees to manage their own career growth is a good strategy since most modern HR managers who have personally applied the strategy found it to be effective in terms of improving the employees’ work performance regardless of the gender issues (Baruch, 2003; Dreher, 2003). As a result of giving employees the power to control their career path, competition between male and female employees increases. On the contrary positive impact of effective career management and the promotion of equal gender rights on decreasing the turnover rate of employees, Baruch (2003) argues that each employee has the right to desire to have several careers all at the same time. Since each employee has a tendency to become less committed in a single occupation, career, or even an industry (Parker & Arthur, 2000), the implementation of an effective career management and the promotion of equal gender rights may not always be effective as retention strategy. Talent Management, Succession Planning, and the Integration of Learning and Development with Employee Relations There are similarities between talent management and succession planning in the sense that both are sensitive to environmental and economic changes (CIPD, 2008: p. 8). In general, talent management is about effectively managing employees that has outstanding talents in different areas which can be an advantageous on the part of the business organization (Blass, 2007) whereas succession planning is referring to the process wherein organizational position like senior-level openings are carefully planned for and eventually filled based on the employees’ adopted skills and other qualifications that are suitable for the work demands of a successful manager. (Dessler, 2000: p. 133, 681) Due to external pressures related to globalization and work-life balance, a lot of business organizations have been competing on hiring the best talents within the industry (Pearson & Bracker, 1986). Training and development is actually one of the key factors that contribute to an effective succession planning. When it comes to building the personal character of employees and retaining them to serve the needs of the business organization, Krewson (2004) explained that skills can be developed through daily experiences at work. Therefore, allowing each employee to share their personal work experiences with other employees can indirectly improve the skills of other workers. Similar to the explanation of Krewson (2004) with regards to the importance of social learning, Barlow (2006) also acknowledges the individual talents and skills of each employee. It means that gathering employees as a team can enhance the learning experience of each member. Another effective strategy is to encourage HR managers to make employees aware of their personal strengths and weaknesses. By allowing them to know their own weaknesses, each employee will have the opportunity to improve the level of their knowledge and skills (Digeorgio, 2004). Equally important is to develop an organizational culture that adopts ‘mentoring and coaching approach’ between the managers and employees since it increases the chance for each employee to be trained and developed as the future leaders (Pollitt, 2005). Reward Strategies Rewards can either be intrinsic or extrinsic. Basically, intrinsic rewards are motivational approaches that make use of a sincere acknowledgement for a good performance (Shamir et al., 1993). For example: A manager verbally thanking the employees for the effort they put into work. On the other hand, extrinsic rewards can be in a form of monetary rewards like increasing employees’ salary or giving them an annual bonus. The type of company rewards offered by any business organization contributes a lot in the quality of work performance and job satisfaction of its employees. Although the use of traditional reward system such as compensation and promotions are still effective in some employees, this type of reward are slowly becoming ineffective in terms of motivating the generation X and Y employees. (Craig, March-April 1989) Material rewards such as cash incentives could even result to demotivating the employees. (Anthony, Dearden, & Bedford, 1989: p. 57; Cecil Hill, Spring 1989) This is the main reason why ‘pay-for-performance’ concept fails to work is because in exchange with the money, the pride and job satisfaction of employees suffer. Related to this issue, several studies show that the use of ‘pay-for-performance’ strategy does not guarantee the improvement in employees’ work performance, retention rate, and job satisfaction (Bowley & Link, 2005; Sherwood & Wechsler, 1986; Lawler, 1971: 151). In terms of improving employee retention, Guthrie (2000) revealed that the use of skill-based pay system is a lot better than using group-based compensation. The author also reported that the use of group-based compensation is very much associated with higher rate of employee turnover (Guthrie, 2000). Eventhough extrinsic rewards such as increase in pay or bonus given to employees could still be effective in terms of motivating employees and increasing their job satisfaction (Heywood & Wei, 2006), a study shows that the use of intrinsic rewards such as congratulating the employees for a job well done either verbally, written on a personal note, through public recognition, or implementing a celebration for success in work performance is more effective in motivating employees to increase their work performance (Graham & Unruh, 1990). Discussion The population of Generation X and Y workers are more flexible in terms of dealing with organizational change. Therefore, changing employment or career is not a problem to most Gen X and Y employees since globalization combined with the youths’ dependency on the use of the internet technology has gradually made employment opportunity more open and diverse. This is the primary reason why HR managers are having a difficult time trying to retain employees over a long period of time. In general, there is a significant generation gap among the baby boomers, generation X and generation Y employees in terms of their work perspectives, attitude, and behaviour at work. Even though most of the work force today is composed of generation X, the work experience and managerial skills of the baby boomers is still needed in running the business smoothly. For this reason, HR managers should carefully align succession planning with talent management, learning and development processes, expected work performance, and reward system (CIPD, 2008: p. 8). In other words, HR managers should be flexible when it comes to developing work benefits and packages that can effectively motivate and attract a diverse group of employees to retain within the work force. Organizational learning has also recently gained equal importance in the field of HRM. Therefore, competitive employees’ decision to stay or leave a business organization highly depends on the challenge, freedom of expression, and personal growth they receive from work (Lips-Wiersma & Hall, 2007; Walsh & Taylor, 2007). To improve employee retention within an organization, HR managers should encourage employers to invest not only a proper career development program but also establish an organizational culture that promotes organizational learning aside from providing employees with tools that will enrich their career development and fair compensation (Walsh & Taylor, 2007). The best way to make this strategy work is to have a mutual agreement between the employer and employees. Without the mutual agreement between employer and employees, it would be very difficult to implement an effective career development program within the business organization. Conclusion The ability of HR managers to develop a set of effective retention strategy should really be considered as an important component of people resourcing strategy. Although not all available retention strategies work effectively, there are many ways to retain competitive employees within the business organization. Aside from encouraging HR managers to be flexible when it comes to developing work benefits and packages that can effectively motivate and attract a diverse group of employees to retain within the work force, Walsh and Taylor (2007) suggest that the commitment level of employees is likely to increase when they are given challenging work opportunities that will allow them to learn as they stay longer with the company. 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