Employee Retention - Research Paper Example

EMPLOYEE RETENTION - SPECIFICALLY, THE POSITIVE ROLE LEARNING AND DEVELOPMENT PROGRAMS HAVE HAD ON DECREASING TURNOVER. EXECUTIVE SUMMARY Human capital management is a growing challenge for HR department of every business, irrespective of size, place and domain. Also with economic down turn firms have become more considerate to reduce cost; this in turn has resulted in firms’ increased attention to retain employees. For the purpose, various retention strategies are aggressively being adopted worldwide. Retention of employees, which in turn results in reduced employee turnover, brings benefits to the firm far beyond than just direct monetary cost. Employees have also raised their demand for compensation which includes both financial and non-financial rewards. Hence, most retention strategies are designed to meet these two way requirements. Retention strategies which include learning and development opportunities for employees have multi-facet benefits. This research is aimed at exploring these benefits. In addition, it has also shed light upon the risks and possible disadvantages learning and development directed retention strategy carries. Moreover, obstacles in adoption of such retention strategies are also made part of the discussion. INTRODUCTION Human capital management is constantly gaining importance since the realization of fact that employees are organizations’ most important asset. These most important organizational assets demand much more from job than just monetary compensation for their services. To state concisely, employees look for job that allows them to lead balanced lives; growth opportunities for personal and professional development; meaningful work that brings them recognition for betterment of world; and value based work environment (Izzo and Withers, 2002). The organizations which are classified as ‘best places to work’, achieved this title on the basis of successful mechanism employed to provide combination of above mentioned factors (CNN Money, 2012; King, 2012). Human capital management process accounts many stages, and one most important among them is retention of employees. Retention refers to the intended efforts incorporated in the organizational policy that is capable of engaging employees for longer term (Chaminade, 2007). Retention strategies encompass efforts in various domains. These efforts are employed to develop the organizational culture as well as individual’s job so that employees’ intent to stay in firm remains positive. Comprehensive framework that results in employee retention as developed by Deery (2008) is as follows: (Deery, 2008) Organizations are inclined to retain employees as it has direct relation with cost of doing business. High employee turnover requires further investment (in many forms than just monetary cost) in hiring and training the new employee for the position (Waldman, Kelly, Aurora, and Smith, 2004). Employees turnover cost has many components that are direct, indirect and also intangible (Clark-Rayner and Harcourt, 2000; Dess and Shaw, 2001). The organization’s retention strategies in order to retain employees also results in incurring cost. Hence, firms have to trade off between the hiring cost and cost of retaining employees. Generally, organizations pick the latter one with focus on retaining employees that are able to contribute to company’s competitive advantage (Hytter, 2007). Cost incurred on competent employees translates into an investment that yields long term return to the firm. Consequently, both employees and employer take benefit of this investment. Achoui and Mansour (2007) list various factors from organization’s external environment, internal environment and the job itself that results in employees’ turnover. One of these factors is the lack of growth prospects. James and Mathew (2012) list strategies employed to reduce the employee turnover. Moreover, most of the retention strategies are designed in a way that ensures employee development and growth (James and Mathew, 2012). Hytter (2007) articulates the direct relationship of retention strategies with training and development with respect to France and Sweden. Shafiq, Muqsood, Rasool, and Naseem (2011) also provide evidence that retention strategy has direct positive relation with career prospectus. (James and Mathew, 2012) SCOPE With the wide scope of the retention strategy and its strongly bonded direct link with growth prospects in term of learning and development, the scope of this research has been confined to evaluate the relationship of effective retention strategies and employees’ growth and development. Rationale to determine this scope for the underlying research is the fact that most of the retention strategies revolve around these two factors in one form or the other. Along with the benefits this study will also explore any disadvantages and risk associated with mentioned retention strategies. KEY AREAS TO ADDRESS On identification of the role of learning and development programs, hereafter, this research will focus on the following: How does learning and development play role in positively defining the employees’ intentions to stay? What kind of learning and development opportunity plays most positive role? Cost and benefit analysis of these programs, impact of legal implications, risk etc. What are the areas of improvement? SUPPORT FROM ACADEMIC LITERATURE AND FIELD Google stands on the first position on the chart of best place to work for the year 2012 and with job growth of 33percent (CNN Money, 2012). Computerworld ranked USAA in IT as best place to work; mainly for being leader on three factors that are encouraging work environment, providing great facilities and a promising culture for innovation (King, 2012). Among leading factors that led the companies to achieve these positions is the commitment level of these firms to continuously invest in their employees despite economic down turn. Many more examples are present around where the importance of investment in employees for their development can be witnessed. Moreover, other than big giants small and medium size firms that contribute to employees learning and development receive positive feedback from employees in form of greater job satisfaction and commitment (Rowden, 2002). Employees learning and development refers to level of knowledge that is enhanced by doing certain job. Elements of innovation or challenges are made part of job descriptions for the same reason (image below). (Glen, 2006) Jobs that do not carry such challenges such as assembly line jobs, meter reader, nurses, fast food workers etc usually witness high turnover (Gerencher, 2005). These jobs being less challenging are also low paid that result in less excitement of workers to continue so they shift as soon as they get any other opportunity. Corporate Leadership Council (2004) has developed rule of thumb with 10:6:2 for the purpose as given below: (Corporate Leadership Council, 2004) Employees are more concerned to stay for job and work harder once they are clearly explained the importance of their job to the organization (Corporate Leadership Council, 2004). Employees’ intent to stay with the organization increases to maximum on being given career development counseling along with the general learning (image below). (Corporate Leadership Council, 2004) Hence organizations, in order to retain their employees, have to integrate strategies that must provide development prospects to individuals. These development programs show exceptionally positive results once employees are given the feeling that organizational growth is linked with employees’ growth. Furthermore, the commitment of organizations to remain committed to development of their employees even in instance of economic down turn results in getting reward in the form of high commitment from employees. DOWNSIDE OF SCENARIO Retention strategies that are directed with learning and development of employees are extensively fruitful for the organization. However, it is also proven fact that these retention strategies are not the only factors that guide employee decision to stay or leave organization. Study shows that this aspect though accounts for the major portion, however there are many other factors that have sizeable impact as mentioned in the image below: (Corporate Leadership Council, 2004) With the sizeable impact these factors have on employee retention decision, the cost incurred for employee development gets more conservative. For instance, on leaving job the learning is also transported to the other organization. Meilan (2010a) states disadvantages associated with employee turnover; almost all of them pose question to the organizations’ investment in employee development. As mentioned earlier jobs such as fast food workers sales man etc have high turnover. Firms resist investing in these employees as they are more prone to be taken away by head hunters for competitors by offering comparatively little better package (Meilan, 2010a). This causes firm dual loss; first, loss of investment on employees which will no longer yield return to the firm in the form of increased sales, second disadvantage has greater negative impact; upon leaving, sales persons transport the client base with them to their new job to strengthen their position on new place. Hence, the benefit of employer’s investment of time, money and other elements is yielded by competitor’s organizations. Investment on employees of higher management level also carries risk of skills being transported to other firms. Investment on employees of this level is usually riskier as they form the strategic pillars for organization and their movement can cause harm to the extent of survival (Al-Harbi, 2011). EWCO (2012) cited a research about the factors that results in resistance on part of the employers to invest in training and development of their employees and concluded that highest factor is lack of need followed by other factors as shown in the image below: (EWCO, 2012) The 63 percent of employers consider no need for training employees and support their response by claiming that that need of the firm is fulfilled with qualification their employees have already acquired. Moreover, their intention to invest in employees is more dependent on external funding (48.6 percent) and development of company itself (22.8 percent) (EWCO, 2012). These results refer to the reluctance of employers to invest in their employees; despite of the fact this investment been considered most important. Other disadvantages associated with employee turnover also result in resistance on part of the management to invest in employee development. For instance, employee on leaving firm voluntarily for other job justify their decision by finding faults in their previous jobs or organization that results in bad reputation about the company (Al-Harbi, 2011). This low level of loyalty results in decreased intention of employers to invest in employees. Furthermore, firm cannot afford to invest in each employee at each level at very same time and has to maintain balance between the entire work-force. Aging of baby boomers and new work force ready to take lead has raised host of issues for firms from recruitment to talent management (Rappaport, Bancroft, and Okum, 2003). Firms invest in employees to reap benefits in the longer term and for the purpose their priorities divert to investment in the younger ones. This can cause dissatisfaction in aging employees resulting to decline in their intention to benefit the firm with their experience. This is another major reason behind firms’ less investment in their employees. Cost to firm for not investing in employees would be much higher than cost posed to firm with employee turnover. To resolve this dilemma of investing on employees or not and on which employee, firms shall develop standards that strikes the right balance depending on organizational needs. The organizational investment in employees shall be linked with their performance. Moreover, job assigned to each single employee shall have some challenging tasks that would itself direct employees to learn the smarter way of performing it. This would self direct worker to explore innovative ways to perform job increasing their learning while adding minimal cost (resulting monetary reward) factor to firm. Finally, employees showing capacity to constantly input in such practices shall be then selected for higher position and respective training and development. Striking this balance also means that firm shall maintain acceptable level of employee turnover. Certain percentage of employee turnover is beneficial for firm as it injects fresh blood to firm (Al-Harbi, 2011). Meilan (2010b) states that employees after reaching certain point of performance do not let new comers to adjust and resist even good changes. Hence, certain level of turnover is mandatory to keep employees on their toes. CONCLUSION Employee retention is the one of the most important domains of HR department of any firm. Successful retention strategy is able to retain and motivate employees in order to become part of the firm’s competitive advantage. Employees increasing demand from their job for providing growth opportunities have linked retention strategy with learning and development activities. Most retention strategies are directed to offer constant growth and development to employees. This transforms expense of employee turnover into investment in employees that is to yield returns in long term. However, there are certain disadvantages associated that causes firms to resist from this investment, but overall benefits dominantly overweigh it. References Achoui, M., and Mansour, M. (2007). Employee Turnover and Retention Strategies: Evidence from Saudi Companies. International Review of Research Papers, 3(3), 1- 16. Al-Harbi, B. (2011). How do leading companies control employee turnover: a Saudi company as an example. Retrieved November 1, 2012, from http://www.masterstudies.net/media/pdf/Theses/2010/Project-51080746.pdf Chaminade, B. A Retention Checklist: How do you rate? Retrieved November 1, 2012, from www.humanresource magazine.co.au Clark-Rayner, P., and Harcourt, M. (2000). The Determinants of Employee Turnover Behaviour: New Evidence from a New Zealand Bank. 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