Successful Retention Tools of American Businesses - Term Paper Example

I. Introduction In any business organization, Human Resource is often said to be its important most asset. The human capital can spell the difference of a business enterprise’s success or failure (Guld, 2007). A motivated, talented and committed workforce can bring in the company and vast potentially for growth and unsurpassed output enhancing the company’s viability not only in the present but also in the future. Such, it is imperative that businesses should strive to keep its most talented employees. Letting go of employees that contributed so much to the company’s growth and bottom line does not only forgo the productivity of that employee in the present but also in the future. It is also costly to the company. Labor turnover and attrition is costly not only in terms of resources but also in precious time of training new employees. It will take time until a new employee will be able to yield the same output like the one that has left and it is also is an opportunity lost to the company. It may be tempting to disregard a company’s retention program because rewards incur cost. But it has to be kept whatever the economic circumstances because in the final analysis, the cost of rewards is more than justified considering the opportunity cost of losing an organization’s best talent (Frasch, 201). It is worth noting that at the aftermath of the recent financial crisis, the survey conducted by Nashville, Tennessee based OI Partners found that an alarming 64 percent of companies “are concerned that they may lose managers when the job market improves” and that includes a 48 % likelihood of losing their executives (Frash, 2011). Such, a revisit on the successful tools of retaining best talents in an organization would be necessary to prevent the likelihood of an impending labor turnover. II. Successful Retention Tool in American Businesses Given with the changing economic landscape brought by the recent crisis, it is becoming difficult for companies to financially reward their employees because of financial constraints. Many are even cutting wages as a cost cutting measure to weather the recent economic turmoil (O’Hara, 2011). On the other hand, about 65 percent of employees are beginning to be sensitive to pay increase as a motivation for them to stay with their current employer as reflected in the survey from Marlborough, Mass.-based benefits and compensation consultant Workscape (O’Hara, 2011). This economic difficulty however should not prevent companies to strive to keep their best employees. Nor should they disregard because of the costs associated with rewards that is a component of a retention program. The failure to keep their best employees may prove them costlier in the long-run and it will defeat any cost saving measures a company will employ because of the opportunity costs and the expense incurred in training a new employee. Hence, the following retention tools for American businesses should not be disregarded for them to keep their best talents in the organization. The retention tools are categorized into two. First, the monetary tool which will incur cost to the company as it requires paying them either for a raise, benefit or perks. The second category is the non monetary tool because it almost or does not cost anything. It only requires a great deal of creative and simple act of kindness to employees. Monetary Tools a. Pay increase and Benefits We have to realistic. Employees work in companies for their livelihood and career growth. Of all the motivation in staying in an organization, economic determinism ranks the first. This has been increasingly important among American workers especially after the crisis where majority of companies were not giving a raise as a cost saving measure. The recent survey from Marlborough, Mass.-based benefits and compensation consultant, Workscape reported that 65 percent of workers identified pay increase as a driver for them to stay with their current players. Given the numbers, companies should strive to respond to this need the very moment they can afford it to keep their best talents in the organization. Benefits are also the traditional tools of keeping an employee in an organization. Benefits such as “providing health insurance, life insurance and a retirement-savings plan is also essential in retaining employees”. In a study conducted by Gresham, it reported that "one-third of employees say that benefits are important to their decision, up from 24% in the past two years." Further, he says, "over 40% of pre-retirees and workers with young families see benefits as an important criteria in a job search and retention" (2006:50). b. Stock options One of the best ways to keep the organization’s best talent is to make them a shareholder in the company they work for to keep them. This is also an excellent motivator for driving the productivity of a company because an employee is able to share the fruits of the company’s success through the dividends and appreciation of the stock he or she now owns. It provides the employee a feeling that he or she truly owns the company because of the shares given. Microsoft uses this kind of incentive to keep its employee. In their pay structure, the base salary is relatively but the company offers stock options that makes its employees well paid. c. Perks Extra pay, bonuses may be costly to the company but nevertheless never lost its effectiveness in keeping talents. Small perks will also do. “Free bagels on Fridays and dry-cleaning pickup and delivery may seem insignificant to you, but if they help employees better manage their lives, they’ll appreciate it and may be more likely to stick around” (Anon., 2011). d. Foster employee development Study showed that employees who were helped by an organization’s development program have a greater likelihood to stay in the host organization. In a case of Verizon, it found that employees who earned degrees with employee development programs are “96 percent likely to stay in the company for at least two years beyond the completion of their degree” (Plourd, 2008). Non Monetary Tools a. Work-Life balance One of the factors that both prospective employees and current employees in considering and staying in an organization is the opportunity to balance work arrangements with personal priorities (Gresham, 2006). To retain an employee, it is critical that management supports work life programs especially during a recovery period as this is an effective retention tools that does not cost much to the employer" (Milligan, 1999). 18 percent of employees who leaves an organization cite the lack of work life balance as one of the reason of them leaving (____). This tool is not costly to implement but will incur cost to the company when not implemented because will leave 18 percent of the time. b. Promote from within There is no greater cause for undermining the motivation of existing employees in an organization than seeing a new hire occupying a post that can be filled from the roster of existing talents. It is also a source of frustration among employees seeing a new comer or outsider getting a much coveted post. This could result in the dip of moral within the organization and will eventually translate to attrition (Anon., 2011). Whenever possible, companies must consider internal promotion first before entertaining new hire to be able to keep its best talents. c. Share the Organization’s Vision. This may seem elementary but many organizations do not involve their employees in their vision. This retention tool is important especially when a company is in the process of recovering as it commits the employee of being part of something bigger that fulfills his or her need of being valued by the company. d. Create open communication between employees and management. Retention tools do not have to cost money to the company. With the right creativity, non-monetary retention tools can also be as potent in keeping the best talents in an organization. In Huntington Medical Hospital, they were able to device a retention tool by arranging an incentive whereby employees can have a breakfast with the hospital’s President. This ingenuity served two purposes, first it facilitates an open communication with the management and employees; second, it strengthens the working employees that the employee will not want to leave (Ralph and Ortega, 2006). e. Positive Work environment This is best exemplified by Google who relies on its culture of attracting and keeping talent in the organization. It keeps a flexible environment that encourages challenges to have a fun and stimulating working environment. In addition, its culture also strives to help each other to achieve a work-life balance. The bottom line in keeping its people in this organization is that when employees are having fun, they are likely to stay (Lovewell, 2005)." In a study by ______, it reported that along with monetary rewards and career opportunities, organizational culture is also one of the key of retaining good employees (___) f. Thoughtfulness can go a long way in keeping employees This does not also cost anything and contributes to a positive work environment. Random act of kindness such as a simple note of appreciating a great job done has a tremendous effect to an employee to be attached to the organization. “Thank you’s” which are now used seldom in an organization will tremendously be appreciated by subordinates thus keeping them in an organization (Guld, 2007). g. Make sure employees know what you expect of them. In time of cost cutting and saving cost, responsibilities might be lumped into an employee that he or she would not know how his or her performance will be measured. This predicament will result in the employees’ inability to stand out which will affect morale leading to a departure. While it may be necessary to add responsibilities to an existing employee due to downsizing, it is still critical to be clear what is expected of them for them to know how to perform and how to stand out to be considered for growth and opportunities in the company. III. Conclusion To sum up the successful retention tools employed by American businesses, it only redounds to “pay them well and treat them well” (Capowski, Genevieve, 1998). This might sound simple when everything is abundant where companies can pay off to make their best talents stay. But during a crisis, when resources are meager, such that it would require a great deal of creativity in talent management to keep employees as resources are not enough to keep them, a balance has to be created where the cost of rewards will not undermine the company’s viability. This will require the usage of both monetary and non-monetary retention tools for a company to keep its best employees. Retaining employees cannot be ignored nor disregarded. It is not just a company prerogative where it is just being nice to retain those who have stayed long, but rather a business imperative. An organization’s most important asset is its human capital and it is a key for its success or failure. Talent Management’s importance has to be stressed in an organization’s programs as it can make a difference in a company’s viability and demise. Such that, if a business enterprise fails to keep its best people resulting in a high labor turnover and attrition, its competitiveness in the market will be undermined in two ways. First, its talent might have been taken by the competitor who now works against the company. The dangerous part of this tendency is that such employees know the former organization from within and that knowledge can be used against it. Second, turnover breeds perpetual recruitment and hiring which is a very expensive process. It is not only costly in terms of finding and hiring prospective talents, but also costly in training new employees to have at least a shade of the learning curve of the former employee. There is also an opportunity cost associated with it as the productivity of the former employee is forgone in exchange for a new talent which takes time to match reach the productivity level of the former employee. In a time of financial crisis where people are losing their jobs, people may likely to stay in the company just to keep his or her livelihood. But when it is over, there is a big chance that they will leave as they bear the discontent and grudge of being unhappy with how they were paid and treated. Such, a crisis must not be used as an excuse to get away from exerting effort to retain the best talents in an organization. Employees should still be paid reasonably to develop a strong working relationship that will increase the likelihood of employees in staying with the company. IV. Recruitment versus Retention: Where to Allocate Time and Money In electing where to put a company’s resources in getting the best people, whether in recruiting new hires or retaining its existing people, it is really a no contest. A company has to retain its own best people not only to save cost on training but also to be able to develop talents which the company could use for its future growth. Retaining talents in the organization is especially true today where the economy is still struggling where companies are still in the process of recovering from the recent crisis. Retaining talents is one of the cost saving measures that an organization can employ. There are several reasons for this. First, a high turnover and attrition rate that a company has to resort to recruitment is costly. The money spent for recruitment could be used somewhere else. The lost productivity of an employee who left can also be counted as a cost to the company. In addition, a company has to spend more resources in training a new hire. After training, a new hire cannot be expected to have the same productivity of the old employee as he or she is still learning the ropes of the new job. It takes time also to acclimatize to the new organizational culture that facilitates productivity and performance. This process costs money to the company in terms of lost opportunity which could have been done by an old employee. As all human resource professional knows, learning curves are expensive to have. This being the case, companies should allocate more resources in retaining their best employees. This can also serve as a motivator for employees and an avenue to foster a strong working relationship. The benefit of this kind of relationship will be reaped by the company when the economic atmosphere improves. When the economy finally recovers that the labor market can now offer best talent options, the goodwill invested in retaining the employees during the hard times will be remembered such that employees will still stay in the company even if there will be options offered to them. References: Anon., (2011). Employee Retention – How to Retain Employees. Wall Street Journal. Online. Retrieved at . Viewed on September 30, 2011. Anon., (2000). Resources on Employee Retention. HR Focus, Jul2000, Vol. 77 Issue 7, pS1, 1/4p Capowski, Genevieve (1998). Recruitment and retention 101. HR Focus, Aug98, Vol. 75 Issue 8, p16, 1/2p Dossenbach, Tom (2007). EMPLOYEE RECRUITMENT AND RETENTION.. Wood & Wood Products. Vol. 112 Issue 3, p31-34, 3p Gresham, Lynn (2006). Winning the talent war requires a fresh benefits approach. Employee Benefit News. Vol. 20 Issue 5, p9-50, 2p Frasch, Kristen B. (2010). Pay Incentives Planned as Retention Tools. Human Resource Executive Online. 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