Incentive Program for Retention of Employees - Coursework Example

Incentive Program for Retention of Employees Introduction Whether a business firm is flourishing in a growing bull marketplace or struggling to break away from the clutches of a bear market, catching the attention and keeping hold of capable employees is key to enduring business success. Today, constant technological progress, a move from commodity-based to intellectual-based markets, significant variations and apparent volatility in global economies persistently compel organizations to acclimatize and ‘bend’ with their immediate business environments. Effectively countering to such changes necessitates several things, not the least of which is a proficient, spirited and dedicated workforce. However, how does an organization create a proficient, spirited and dedicated labor force? What kind of incentives should companies provide their employees so as to maximize performance and remain engaged? What guarantees should business firms formulate so that their best workers stay? This brief treatise undertakes to present current scenarios in the area of human resources management with particular focus on the prevailing issue of staff retention; it likewise attempts to recommend specific moves that could induce employees to keep their productivity levels high, entice them to perform better and to convince them not to leave the organization. Cost of Employee Turnover A study was conducted in 2000 seeking to establish the effect of employee turnover on organizations, such research indicated that unwarranted employee turnover habitually provokes extensive repercussions and, at the extreme, can endanger attempts to achieve organizational objectives. Likewise, it was signified that when a company loses a vital worker, there is an off-putting effect on innovation, reliability in providing service to clients/customers is correspondingly put at risk and the occurrence of significant delays in the delivery of services. Further, the study exhibited that as the standard of service provided to clients plummets, the satisfaction of internal and external customers likewise drops thereby adversely influencing the organization’s level of profitability (Abbasi and Hollman, 2000, pp. 333-342). Financial outlays of high staff turnover can be absurd. A few of the significant costs that arise when a worker leaves an organization include the following: Recruitment costs (from advertising expenses to the time spent interviewing and sourcing) Training costs (orientation materials expenditures and trainer’s time) Lost productivity costs (a new employee operates between 25%- 50% of productivity levels for the first three months, not including the time spent by existing employees to assist) Lost sales costs (the loss of business when the position becomes vacant) Business Impact Replacing a staff worker is apparently costly; on top of that, a company’s reputation is also threatened. As it is, nobody feels self-assured when dealing with a business firm that is incapable of keeping their employees intact. It implies volatility, mediocre management and lack of effectual planning. Notwithstanding the reasons of why a worker leaves his/her job, more often than not the employee departs with a sour taste in their mouth. Such reaction and sensitivity are taken with them – together with the skills they learned and accumulated and these sentiments are frequently repeated to future employers and within their personal network. Evidently, losing knowledgeable and competent individuals can smash up a company’s reputation for years to come. Finally, continuous high turnover generates strife and psychological instability within a workforce, for one, positions made vacant create bigger workloads for other staff workers, workloads which are usually outside of their position profiles or job descriptions. This sense of shakiness and aggravation can trigger work log jams which correspondingly slow down productivity. More importantly, workers’ lack of faith in an organization increases when they see their co-workers depart and such will definitely influence productivity work levels in implausibly depressing ways (Lake, 2000, pp. 65-72; Smith, 2000, p. 22). Figure 1 - Average impact reported by managers how high turnover has adversely affected their organizations (Source: AchieveGlobal Study, 2008, p. 7) Importance of Retaining Vital Workers There is a considerable economic effect when an organization loses any of its vital workers, especially with the knowledge that is lost with the employee’s departure. It will become notably more important in the years ahead to be aware of the commitment of individuals to an organization, as well as the organization’s need to produce an environment where one would be willing to stay. In essence, it is imperative for organizations to either create an intellectual capital environment where the diffusion of knowledge come about right through the system or keep on losing significant individual knowledge that has been built up during the length of service. Currently, the labor market has employees who are willing to jump anywhere where they see a better opportunity -- whether it's a dot-coin company with the enticement of stock options or a competitor who induce them with a few more dollars. As it is, the cost of turnover is contemptible. According to an assessment by the U.S. Department of Labor, it costs one-third of a new hire's annual salary to substitute an employee. So it is really up to employers to take care of their workers so as to cut down turnover. The advice is to offer employees with everything they need to complete their respective tasks, remove obstructions and they will for sure stay (Friedman, 2000). International Trends While labor force issues top the list of an organization’s priorities, research studies’ outcomes continuously advocate a direct correlation between high employee turnover and lack of effective talent management or leadership. Without a doubt, successful talent management is a global HR challenge. Worldwide, social realities like population shifts have a direct influence on workforce retention. For instance, in the West, retiring Baby Boomers generate numerous vacancies in various industries; in Europe, vacancy trends will most likely escalate because of low birth and high incidence of immigration thereby making access to younger workers more difficult; in Asia, specifically China, the single child rule resulted to a shortage of trained and experienced workers, particularly in urban areas. Even though organizations worldwide experience related challenges and parallel standpoints on the significance of strategic talent management, there are dissimilarities in the labor markets from one constituency to the next. Unambiguous market and organizational realities eventually delineate how business firms operating in those regions handle and deal with their workforce concerns and issues. In the United States, where a dwindling financial system connotes diminished revenues, managers are competing to fill gaps in their leadership pipelines while producing performance-driven cultures to maximize competence and output. As such, talent management programs handled by HR are devised to concentrate on and deal with quick turnover, high attrition and ways to fill in key positions. In Germany, managers are challenged to provide talent management solutions for their major retiring workers in order to trim down the loss of knowledge and leadership capability. Likewise, in Asia, hastened market growth necessitates managers to build up innovative skills training that could act in response to adjustments and changes in their business models. As labor markets become more spirited and employees have become more mobile, they must craft strategies to curtail high attrition rates while centering on the effort to correct or fix quick hiring turnover. In essence, business organizations all over the world are mulling over and evaluating the gains of employee inclusion and engagement while factoring in the attraction of work-life balance. These approaches are reinforced with advancement and compensation elements that respond to the needs and expectations of exceedingly capable and vastly talented workers (Manhertz, pp. 6-7). Proposed Incentive Program 1) Performance-Related Compensation/Rewards (also known as “distributing the wealth,” workers will be thankful for being recompensed additional ‘payment’ for their contributions and their efforts) a) For a successful project $500 worth of groceries (Project Manager) 2-days paid leave (project members) b) Top Grosser of the Month $1000 bonus c) Top Performer of the Year $5000 bonus 2) “Lifestyle Extras” a) Subsidized daycare; b) discounts at merchants and travel centers; c) on-site wellness centers 3) Seminars and workshops (a plus factor to both the employee and the company, as the worker comes back with a spanking new outlook from outside and supplementary proficiencies to apply for the company’s purposes) a) computer literacy & new software update / training b) leadership & management instruction c) language training & development (for those who wish to acquire a 2nd or 3rd language) 4) Tuition Fee Reimbursement (this inducement exhibits a commitment backing up the employee in becoming a better person) 5) Incremental Vesting Options Yearly bonuses (on percentage basis) Worker (15% of gross income) Superintendent (25% of gross income) Manager (35% of gross income) Director (45% of gross income) An additional incentive would be that on the 10th year, the individual would get a cash bonus of $20,000.00 for each of the 5 years of service (this would only be paid if the ten-year commitment requirements are met) 6) PTO - Personal Time Option Plan (this inducement allows employees to take time off for whatever reason, without the unnecessary calculation of what hours come from what bank of time; this also shows a consideration and empathy of different employees’ needs) a) time-off for a sick child b) “mental health” day c) important family occasions (anniversaries, funerals, graduation, etc) d) time-off for Volunteer Work 7) Company Culture Additives a) Company-provided lunch on Fridays b) Free tickets to specific cultural and sporting events c) Scheduled “playtime” d) Free-product allocation Retention Checklist People are valuable; this fact must be highly acknowledged. People must be provided the chance to develop and evolve; they need to be nurtured so that a company can keep them. Admit that there is a problem; once an issue is understood and the accountability has been clearly distinguished, the costs of high turnover will motivate any organization into crafting a laudable retention program Discover why people are leaving; the answer to this question is the first step to realizing that there is a problem and can be the starting point for a retention strategy Goals for Retention Strategy 1. Top Performer Profiling – done at the onset of the staffing phase by matching up candidates with the company’s finest workers 2. Orientation and On-Boarding – meticulously planned, post hiring “fitting-in” schemes instill enduring employee confidence in the organization 3. Performance Reviews – performance opinions and pointers on a standard basis drives success 4. “Career Pathing” and The Two-Way Value Proposition – matching organizational objectives with personal goals and preparing for success in the future builds impetus to perform well or beyond what is expected in the current positions 5. Communication – listening and demonstrating sincere empathy commands respect and representation 6. Morale Boosting – showing value, respect and appreciation to employees accomplishes more than what financial compensation can do and increases retention probabilities 7. Competitive Compensation – 3rd party remuneration assessments allow a company to be updated on current compensation scenarios, the knowledge will help an organization make offers to employees that will make them stay 8. Non-Monetary Reward and Recognition – an assortment of incentives will amplify employee satisfaction and job fulfillment 9. Employee Surveys – allow employees to be heard; a company must listen to their concerns 10. Exit Interviews – learn from those who have just left the company and make the necessary modifications either to existing profiles or to company structure and whatever needs to be altered so that organizational objectives can be more efficiently accomplished 11. Boomerang Effect – tap the resource of returning employees whose experience and connections are very useful Conclusion Evidently, a lot of issues and concerns are up for grabs when retention is not willfully placed on high priority. From a spoiled company repute and standing to stumpy worker efficiency, high turnover is unconstructive, harmful and expensive. Maintaining employees who surpass beyond expectation lessens the necessity of recruiting and cuts down associated hiring and training expenditures. Succinctly, a company will be successful and will continue to thrive if it treats its employees well, for these workers will want to stay in the company for as long as they can. Employing and engaging dynamic and top-performing employees require certain abilities, however, keeping these types of employees is an art. To be able to retain workers effectively demands meticulous planning and prudent implementation which could lead to a concrete yet attractive program that assimilates many or all of the solutions to avoid high turnover. Integrating these practices into internal company planning does not automatically mean considerable financial outlays. In reality, most of the retention strategies cost little or no money to execute and involve nothing more than cautiously planned time committed to lasting objectives. Business organizations should realize that by keeping their turnover levels low, they are actually enhancing their bottom line. The price of replacing employees is unwarranted which many companies cannot come up with the money for. Putting it side by side with the outlay of retaining existing top performing employees, the variation in cost and time constrictions involved are overwhelming. As it is, it is imperative that a recruiter or manager must be concerned with retention from the beginning of every recruiting program and basically the entire process must be cognizant of the end goal -- keeping the good performers in the company and make them stick. Letting the newly recruited/hired employee conscious of the intention to keep them as long as possible persuades the employee in committing him/herself to long-standing goals and objectives. Apparently, no retention strategy must be fixed or inert; it should be continuously evolving to go with the shifting needs of the workforce and with the rapidly changing world of business. In the generations to come, business organizations must confront and acknowledge the certainty of a dwindling workforce. The finest approach for them to contest this is by making employee retention a main concern. The notion that successful businesses are built by their employees must not be discarded. By understanding and responding to their needs, a business firm can save itself a lot more than just money. Identifying why employee retention is significant is effortless; however, integrating retention strategies into a company’s corporate culture and effectively executing them are not that simple. It is a measured and continuing process that should be passionately pushed by the company’s leaders and they have to set the example. In essence, a business firm must prove itself to be positive rather than unthinking to the needs of its employees for as workers feel valued and motivated to do their best, they will be proud to be a part of such a successful organization. References Abbasi, S. and Hollman, K. (2000). “Turnover: The real bottom-line.” Public Personnel Management, vol. 29, no. 3, pp. 333-342 Friedman, Robyn A. “Keeping Good Employees.” Florida Trend. Trend Magazines, Inc. 2000, Retrieved February 17, 2009 from HighBeam Research: http://www.highbeam.com/doc/1G1-62205865.html Lake, S. (2000). “Low-cost strategies for employee retention.” Compensation and Benefits Review, vol. 32, no. 4, pp. 65-72 Manhertz, H. “Worldwide trends in employee retention: How to keep your best employees in any market.” AchieveGlobal, 2008. Available online at www.achieveglobal.com Smith, M. (2000). “Getting value from exit interviews.” Association Management, vol. 52, no. 4 p. 22. Read More