Retaining Top Performing Employees - Research Paper Example

No. Retaining Top Performing Employees Introduction Retaining high talent employees is one of the major strategic policies that an organization follows in order to have a competitive edge over other market players. Where there is a huge amount of literature available on retention of potential talent, question arises what strategies are genuinely effective in doing so. Furthermore, it is also important to identify if there are any common strategies that are applicable on every organizational structure. While studying this particular area, it is also important to find out the impacts that elements like leadership, compensation and benefits, organizational culture may have on retention of potential employees. This research paper is intended to examine importance of employee retention for an organization, reasons for high employee turnover along with strengths and weakness of existing research in this area of organizational behavior. 2. Significance of Employee Retention According to Sandhiya and Kumar (1778), “There are many factors which show the importance of the employee retention. They may be the turnover cost which includes hundreds of thousands to the companys expenses. In fact, it is difficult to calculate the turnover cost which includes hiring costs, training costs and productivity loss”. Other than material investment, loss of company’s intellect and information is also another major drawback that an organization has to sustain to when an employee leaves. Sandhiya and Kumar further assert that “the relationships between the customers and clients are developed in such a way that encourages continued sponsorship and services of the business. When an employee leaves the organization suddenly, the relationships that employee built for the company are suffered and also could lead to loss of contact with potential customer”. Hence, overall business performance is affected due to lack of connecting link between client and organization and also potential risks of losing business may emerge as client may have their loyalty attached to a particular employee instead of an organization. In addition to that, employee turnover has a ripple effect; it has a tendency of affecting current workforce. Withdrawal of one employee can affect motivation level of other team members and in some cases may signal anxiety in employees. Employee retention rates have their contributions to employer’s goodwill which helps in attracting new talent and becoming a preferred employer. 3. Reasons for Brain Drain Before making policies and procedures to avoid brain drain, it is important that possible reasons behind the lower rate of employee retention are identified. Research conducted by Middlebrook in 1999 stresses that most of the employees consider other factors to be more important than compensation alone, for making decisions regarding staying at an organization. Some of these reasons included: Feeling undervalued by the organization Limited career growth Limited scope of challenges in future Conflicts with managers and coworkers Lack of job security Changes in career priorities Other reasons such as family issues, transportation, return to education Unjustified work load Lack of coherence between personal goals and organizational vision and objectives Ineffective organizational policies and practices Lack of training at the current employer Lack of compatibility between personal ideology and organizational culture Other factors mentioned by Hausknecht, Rodda and Howard in their working paper are: Extrinsic rewards Nature of work hours Overall job satisfaction Existence of opportunities and alternatives outside organization Organizational commitment Equitability and fairness in organizational policies and rewards structure Feedback from supervisors and managers (Ramlall 54) Literature review of multiple researches conducted in last decade illustrates that that intrinsic benefits carry more value to employees than extrinsic benefits. Organizational culture, opportunity to develop, organizational policies and relationships at workplace are the factors that not only affect individual’s performance but also influence their decision to stay at an organization. 4. Impacts of Leadership on Employee Retention Leadership is one of the fundamental factors playing role in organizational effectiveness. Mission, vision and organizational ideology shared by business leaders has a tendency of affecting the workforce greatly. Leaders like Jack Welch and Steve Jobs have a propensity of breaking the pre-established norms and become a living example of organizational philosophy. Where there is a substantial amount of literature suggesting that through specific leadership traits, today’s business managers and organizational leaders may motivate their workforce, it is important to determine their role in retention of potential talent. In order to identify how leaders can play their role in retaining talented employees, Chang argued that it is important for leaders to have and demonstrate passion, zest and energy towards organizational development and also towards their employees. Doing so would allow employees to develop an emotional connection with their leaders which would act as a retaining force for such employees. Here, it is important to note that only verbal expression is not an effective tool in reaching such employees. Acting as a role model and living the principles that a leader wants his followers to believe in, is the foundation of employee retention regime. This notion presented by Change is coherent with the pre-established theories of employees’ needs. For example, Abraham Maslow presented a hierarchy of human needs demonstrating social needs to be the one of the major human needs which also involves requiring mentoring and guidance. . Retaining employees is a more complex task than attracting potential talent. Talented employees crave for development, career growth and learning. Along with that, organizations are always looking for employees that have a desired skills inventory. Providing robust environment offering challenges and opportunities along with necessary freedom is a task that a leader has to perform in order to retain such employees. Another important aspect of employees retention was shared Bill Adams. According to him, leaders are being assessed by their followers and employees in difficult moments. Such moments define leader’s personality and also provide an opportunity for employees to assess leader’s character. Leaders and organizations can make use of such incidents and moments and help regain employees’ trust and alliance (Adams 13). Where it is understandable that leaders cannot be perfect, expecting them to demonstrate a robust and trustworthy behavior is the least an employee can expect. Developing credibility in such times can help in retaining required talent. 5. Role of Employees’ Emotional Needs According to Maslow, once physiological needs are satisfied, individuals move onto fulfilling other needs. Hence, monetary benefits and compensation have an effect on retention of employees’ however it is not the only factor affecting their motivation to stay at an organization. “Potential employees need to know what makes an organization tick before they can get excited about it. Identify the forces that give the organization life and communicate them everywhere: in the marketplace, in industry circles, and in recruiting. Once they sense passion, talented employees will find you” (Chang 12). In addition to that, organizations are required to have policies and procedures that exhibit enthusiasm and potential for employees’ growth. Sensing opportunity to develop and have a career progression motivates employees to adhere to a leader offering such benefits. In addition to career progression, employees emotional needs also play a vital role in making decision to stay at a particular organization. In order to address such emotional requirements of employees, it is important that leaders are expected to learn about needs and aspirations of their individual subordinates. Doing so makes employees feel valued at a particular organization and increase their retention over there along with improving their efficiency and effectiveness at work 6. Role of Human Resource Managers and Teams in Employee Retention In the light of reasons for lower employee retention identified earlier, it can be said that human resource managers and teams have substantial responsibility towards employee retention. First and foremost, there can be common factors that are resulting in a brain drain in particular organizations. Human resource managers are expected to derive patterns out of employees’ feedback gathered in the form of surveys; exit interviews etc and identify common reasons for employees leaving an organization in a particular industry. Furthermore, industry surveys and their findings can also act as indicators for employees’ reasons for leaving their current organization. These indications can provide direction to changes in organizational culture, management strategy and organizational policies. 7. Role of Organizational Culture in Employees’ Retention Organizational culture defines basic ideology and philosophy of the leaders and management of an organization. For effective employee retention, it is important that the organizational culture is compatible with values and norms that workforce is aware of (Gelfand et al. 479). With increasing emphasis on humanistic approach, it is being stressed that organizational should pay attention to emotional needs of the workforce which may include developing a culture that is enriching and rewarding. Furthermore, flexible work schedule, fair policies and employee development practices also illustrate management’s concerns for their workforce’s development. Also, having a reward system that is performance-based and helps employees find equilibrium between their job inputs and outputs lead to employee retention. Other than basic organizational practices, employee involvement in decision making reflects management demonstrating value for their employees’ concerns. Employees’ participation in decision making allows management to be aware of employees’ opinions and also gives employees an opportunity to understand the rationale behind organizational polices and strategic decisions. This is precisely an area where employee partnership’s concept emerges. In addition to that, high performance workforce requires timely feedback and recognition. 8. Role of Employee Management Practices in Employee Retention According to research conducted by Kwon, Bae and Lawler, “top performers develop organizational commitment, a critical factor of employee retention, when they are treated in fair and favorable ways. A bundle of High Commitment HR Practices deliver a signal to top performers that their organizations recognize their performance and care for their well-being. Thus, an effective way that organizations can increase the retention of top performers is by utilizing a high degree of a bundle of HCHRPs (Kwon, Bae & Lawler 73).” Therefore, here arises a need to have suitable employee management practices in place that not only provide substantial job satisfaction and rewards to top performers but also provides necessary motivation to employees’ with average performance to increase efficiency and effectiveness in their work. 8.1 Motivation of Employees High performers are those that are already motivated. The real task for the organization is to retain and keep these employees motivated. Not only while performing current responsibilities but staying loyal to the organization, it is usual that organizations ignore the needs of these high performers and lose them to the competitors. The usual policies and procedures related to talent retention may help retain average employee although high performers those that are rewarded well are generally looking to fulfill their self-esteem and self-actualization needs, having full filled their physiological, security and social needs. In order to keep key performers of an organization motivated, one must design and execute programs specific to the needs of high performers. The most important tools used by employees are employee development activities, recognition and reward programs, performance pay, fast track career path, involvement in decision making, frequent career counseling sessions, outbreak programs and building specific skills that are valued and prioritized by employees itself (Sandhiya and Kumar 1780-4). Furthermore leaders tend to focus more and give opportunities to their high performers, it is always seen that high performers are informed of their career paths and even before time they are informed of the position they would be occupying in coming years or even months. The traditional motivational tools along with modern practices mixed with the needs of employees form a workplace that is valued and cherished by employees. So much so that they refuse to leave the organization even if a better opportunity comes along. 8.2 Organizational Citizenship The loyalty of high performing employees is dependent on cohesiveness present between personal values and organizational values. Organizations tend to create personalities that represent the organization in the market and in society. The employees feel comfortable in organizations and find people with similar values in principals above and around them; with time it becomes a small community that takes pride in the identity that comes with the employers. Therefore, instead of opting for command and control model, a participative model should be introduced that makes employees part of necessary organizational decision making and make them follow the values projected by management (Manville and Brook 52-3). Doing so would increase employees’ emotional affiliation with organization. However, there is a downside to empowering employees by following bureaucratic model. Making employees participate in organization’s decisions can give them unnecessary power to manipulate and influence organization’s decisions. Undue practices by labor unions in the form of strikes and lockouts are examples of employees’ over-influence on management’s decisions. 8.3 Co-managing Career Planning It is immensely important that after classifying an employee as high performer, HR managers and supervisors must identify the development needs of that employee. Doing so involves sitting with the employee himself determining both short term and long term career objectives. In these counseling sessions, it is important to determine employee’s field of interest along with their development needs and other needs. A succession plan is drafted for the employee who then follows it and fulfills the needs chalked out for him in order to progress in the career. 8.4 General Principles of Employee Engagement An engaged employee is a productive employee. For keeping a high performer engaged organizations must communicate well with their employees, hear their point of views and suggestions. Another tool used in this regard is supervisory relationship; organizations emphasize on this aspect a lot as relationship with peers and supervisors is probably the first informal relationship that an employee creates (Martel 27-43). By introducing exciting and informal team activities, giving them autonomy and encouraging them to perform as a unit creates a family-like feeling. The supervisor in such settings is admired as a leader and an informal relationship creates a life-long candor. 8.4.1 Employee Empowerment Empowering employees to do their jobs as they like, creates an enterprising situation for the employee. High performers need an extensive level of empowerment, pinning them down or giving undue direction would frustrate them and as a result they would take their skills to the competitor. Besides the job itself employers these days empower employees by giving them autonomy over the work environment, work stations, client management, work schedules and decision making related to their jobs (Martel n.p). 8.4.2 Performance Management Performance management refers to the overall process, which starts with creating expectations from employees and ends with rewards and new objectives once expectations are met. High performers do not only need work; they also need challenges, areas where their analytical skills and expertise are not only utilized but developed further. They consistently strive to achieve greater heights and organizations that cannot provide great opportunities end up losing such employees. Managing performance of the productive employees is probably the most important thing their managers and HR personnel do (Martel 30). Once they exhibit high performance they do not only look for both extrinsic and intrinsic rewards but also strive for new challenges that can give them satisfaction and groom them further as an expert in their field and inevitably a leader. A high performer unnoticed is an unhappy employee; there are instances where ignoring a high performing employee can result in team lacking motivation. 8.4.3 Recognition The organizations of the modern era must devise competitive recognition practices in line with the competitors and best employers. The leaders recognize high performers by declaring them as the best, acknowledging their good work and defining the resulting outcome in context of organizational objectives. It is also important that this recognition should match the effort of the employee with a human touch and both tangible and intangible rewards. Similarly it should have value for the employee making him feel special within the work unit (Martel 31). Without recognition employees remain disengaged and de-motivation influences them with a negative feeling of self-worth. 8.4.4 Services to Employees Employers introduce services for employees that are unique and make their lives easier. The technological advancements of the modern era enable them to access and perform their daily chores. Organizations that help employees balance their work and life tend to keep employees more motivated and goal oriented (Martel n.p). 8.4.5 Flexibility in Work Schedules Modern organizations have introduced measures such as work from home and manage your own schedule as a tool for retaining high performing employees. The empowerment and autonomy over work life goes a long way for such employees. High performers possess great skills and they tend to add value to the team and the organization, following strict work hours with less flexibility to enjoy leisure time with friends and family demotivates them. 8.4.6 Employee Development Practices High performers value skill development; organizations that cannot fulfill the learning needs of the employees lose their human capital to other competitors. A comprehensive learning and development program must ensure that continuous and incremental learning activities are conducted. Employees value continuous learning, as long as they keep learning they seldom feel the need for a change. Both formal and informal learning sessions by internal and external trainers enhance their skills and prepare them for future challenges. 8.4.7 Aligning Practices with Organizational Strategy It is important that a clear organizational strategy must be formed in context of retaining high performing employees. Career management programs, rewards, recognition and a competitive compensation and benefits package should be made a part of organizational strategy. Similarly age and gender along with race or nationality should not limit an individual’s capability to rise up the corporate leadership ladder (Martel 41). Diversity within teams should be cherished with emphasis on doing work in an innovative manner. It is observed that many organizations lose great employees because their overall organizational growth does not include succession planning and development of employees. 8.4.8 Attention to Market Competition The aspects that ensure retention of high performers must be evaluated and reconsidered after taking in to considerations the programs prevailing in the competing organizations. A considerable gap between intrinsic and extrinsic practice may trigger an employee to switch from one organization to the other. Hence it is important for an organization to conduct or partake in total rewards survey where HR consultants review and evaluate the reward practices of the organization with other players in the market (Martel 39). Based on the recommendations, the organization must adopt the best practices prevailing in the market. In this regard both monetary and non-monetary benefits must be closest to the best practices followed by others. 9. Role of Recruitment in Employee Retention In an organization with high performing employees, HR department has an important role of sourcing candidates with similar or better capabilities. A wrong hire in a high performing team can slow down the whole team, create misbalance and mistrust amongst the team members. It is important to identify the values and norms prevalent in a high performing team and recruit similar incumbents in order to maintain the team candor and further improve it (Holtom and Inderriden n.p). Hence employee referrals play a big role in the recruitment process where a team member refers a candidate with similar attributes carried by the team. 10. Compensation and Benefit Structure A market competitive compensation and benefit structure is important to high performing employees. Their skills must be valued both extrinsically and intrinsically, under paid high performers feel unvalued and leave organizations who don’t value their skills. Both monetary and non-monetary benefits play a role in this regard, by introducing benefits that secure the future of the employee and his family organizations retain employees for many years to come (Martel n.p). 11. Strengths and Weakness of Contemporary Research Literature review performed earlier indicated that contemporary research contains substantial information about factors affecting employee retention and also necessary management practices required for retaining top contributors in organizational success. Where most of these practices suggested are beneficial in general employee retention, focus on specific work segment that is responsible for organizational development is one of the major strengths of this research (Blau 148). The research also outlines relationship of employees management to strategic business management. It defines how employee management and retention is not an independent area having no impact on management’s policies, practices, performance and decisions. In fact, current level of organizational performance and future business plans are directly related to the efficiency and effectiveness of work force’s performance. Hence, this area provides indication of HRM placement at high cadre in overall business management regime. Another major strength of this literature is greater emphasis on the role of HR teams and managers. Digression from traditional administrative role to strategic partnership that involves continuous evaluation of organization’s culture and performance and its impacts on the work force, enhances the basic scope of HR management. It makes HR managers and advisors to be more liable towards employee management and representation of employees in management of an enterprise. Finally, this literature review indicates that general policies and practices of employee retention have their adherence to earlier theories that provided foundation of new business management. Theories like Maslow’s Hierarchy of needs, McClelland’s theory of Management and humanistic approach help present day managers to understand factors underlying employee motivation and utilizing them for retaining top talent for longer period. The research also provide greater evidence that transformation of supervisors into business leaders helps them to retain better talent which further supports deviation from traditional management practices and models to rather flexible and contemporary strategic management. Where there are many strengths of current research present in the area of employee retention in organizational behavior, there are several weaknesses too. It can be seen that research performed so far recognizes personal reasons as a fundamental factor affecting employees’ decision to stay at an organization. On the other hand, there is limited support available to handle areas where employees’ personal needs are overwhelming and incompatible with organizational policies (Hausknecht et al. n.p). It is important to recognize that not all kind of turnover is bad for organizational success. Practices that have provided to be effective in ensuring employee retention are rather general in nature and do not address areas concerning involuntary exit and turnover desired and needed by an organization. Prevailing research also fails to recognize the cost benefit analysis of employee retention and turnover, and its implications on organizational management. Since most of these HR management costs are hidden in areas like recruitment, general payroll, bonuses etc, there are no concrete models that would illustrate organization’s investment in employee retention and identifying parameters for investment in the desired talent only. Research present also emphasizes more on providing effective employee retention techniques based on generalized models and consideration for factors like job market, perceptions regarding certain jobs and employees’ values is rather limited. On the other hand, utilization of present day technology is also undermined in increasing employee retention. Lesser attention to cultural forces, demographics and social values and their relation to employee retention also act as a major weakness in contemporary literature. Since most of the research has been conducted in developed countries like US and UK advocating individualistic culture, therefore application of current research on collective cultures is rather difficult due to limited generalization (Gelfand, Erez and Aycan 481-507). 12. Need for Future Research It has been established earlier that degree of socialization in an organization culture affects employees’ motivation to stay at an organization for long term; it provides a premise for future research related to utilization of social networking in increasing organizational effectiveness in retaining top talent. It is also important to note that although world has transformed into global trade village however cultural and social forces act as a major factor affecting employees’ choices. Since most of the research has been conducted in organizations belonging to UK and US, therefore implications and applications to developing parts of the world is questionable. This factor is highly important considering that inflow of minorities from developing parts of the world to developed countries is taking place at an exponential rate. Hence, research is required to examine cultural comparisons and their relation to employee retention (Gelfand, Erez and Aycan 481-507). There is also a significant need of research in implications of external factors on employee turnover. Where it is visible that like economic activity, employee turnover can also take a cyclic form, limited research is present to address external economic impacts. Another area needing more research is early turnover in an organization. Early turnover may take place because of lack of compatibility in organizational elements and individual’s personality and needs. On the other hand, it might be related to certain milestones like a particular position, development of skills etc. There is a need of research to identify such early quitting motivations and their implications on recruitment practices and costs. There is also a need for substantial research on relation of employee turnover to job level and job type. Systematic correlation between turnover decision making and job types can help in designing policies and procedures to curtail emerging trends (Holtom and Inderrieden 440-449). Employee turnover is not an individual mechanism only having cost-based implications for an organization; in fact it has direct relation to organizational effectiveness in terms of performance. Other than lack of competitive advantage, a withdrawal of an effective group member or a leader can affect cognitive states of other participants. Hence, implications of social capital loss require substantial research (Holtom et al. 256-263). Applications of social class division and age-based demographics, is also an area requiring major research. With ageing workforce, trends of turnover and voluntary withdrawal can be high. Other than that, income and expenditures related to a particular class can also act a detrimental factor affecting organizational performance. Therefore, there is need to study demographic factors and their relation to turnover trends (Blau 139-145). 13. Implications & Applicability on Current Job In my current job, my role is Senior Vice President (SVP) of new Business Development in a leading consultancy firm offering executive search and head hunting services. I am responsible for business generation of a department consisting of five external and two internal recruiters. We work in the financial services and recruit financial advisors for our clients. So, I travel a significant amount of time to train and help my staff close business point of sale. Analysis of literature in the field of employee retention has made me understand the underlying factors that affect any employee’s motives to stay with a specific employer. Executive search requires thorough knowledge of candidate’s personality and its relativity to the organizational structure and culture prevailing in a client organization. Without having job-fit and organization fit profile, a candidate recommended by us may not get selected which affects our revenues in turn. Therefore, it can be said that knowledge of employees’ motives for joining an organization and factors that may lead to their turnover has direct implication on my work. This knowledge would allow me to hunt suitable candidates for my clients on the basis of their personality types and motivations. It will also help me in assisting my clients in dealing with their internal turnover issues and also retaining an employee that we are referring. In consultancy and services industry, nature of services provided is a basic criterion for further business generation. Going an extra mile in indicating areas requiring attention for better employee retention can help in further business development which is my actual job. Other than services to the clients, this knowledge would help me in being a better departmental head. Since I am heading a team of human resources on which my organization has made substantial investment in recruiting, training and developing them as a skilled professional, therefore losing my current subordinates can have direct implications on departmental and organizational performance. Therefore, I can learn and practice new techniques of being an effective leader and playing my role in my subordinates’ retention. Furthermore, I can also assist my organization in designing policies and procedures that can affect reduce employee turnover and provide a competitive and energetic environment to the current and future workforce. I am also in a better state of devising practices that can make my organization a preferred employer with significantly positive employer branding. Exhibiting such traits can have direct implications on my career as well. It is evident that employees with exceptional skills set and leadership skills are valued more by employers and tend to have better opportunities for career growth. Exhibiting such talent can help me progress more in my current role, bring more value addition to my employer and also have better extrinsic and intrinsic benefits. Similar ideology applies in future employments as well. Knowledge gained in this area can help me become a more effective leader in future roles. 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