Employee Retention in the United Kingdom - Case Study Example

EMPLOYEE RETENTION IN THE UK Is employee retention an issue Employee retention deals with achieving employees' loyalty and commitment. Loyalty or commitment is the degree to which an employee identifies with the orgnization and wants to continue actively participating in it. It is the measure of the employees' willingness to remain with the company in the future. It often reflects the employees' belief in the mission and goals of the company, willingness to expend effort in their accomplishment, and intentions to continue working there. Commitment is usually stronger among longer-term employees, those who have experienced personal success in the company and those working within a committed employee group. Organizationally committed employees will usually have good attendance records, demonstrate a willing adherence to company policies, and have lower turnover rates. In particular, their broader base of job knowledge often translates into loyal customers and even pay premium price. Employee retention is an issue since the turnover levels from various industries are rising. Statistics show different percentages related to turnover rates as well as the reasons for the increasing turnover. "Turnover levels vary very considerably from industry to industry. The highest levels of turnover (22.6%) are found in private sector organisations. Successive surveys of labour turnover show that the highest levelsare found in retailing, hotels, cateringand leisure,and among other lower paid private sector services groups. The public sector has an average turnover rate of 13.7%." (Stone, 2007) Turnover levels also vary from region to region. The highest rates are found where unemployment is lowest and where it is unproblematic for people to secure desirable alternative employment. Almost a quarterof employees in the UK have been in their current jobs forfive years.As a proportion of aggregate turnover, the percentage of people leaving organisations through redundancy remains small. There was a slight decreasefrom 28% to 24%of organisations making more than ten people redundant during 2006 and in those operating a recruitment freeze from 24% to 22%in the course of the year. The cost of high staff turnover can be substantial. Not only are there the direct financial costs of replacing staff but also other repercussions such as the potential loss of key skills, knowledge and experience, disruption to operations and the negative effect on workforce morale. In addition, high turnover represents a considerable burden both on HR and line managers as they are constantly recruiting and training new staff. When seeking to resolve the problems associated with high turnover, companies must first investigate the underlying causes. They need to have in mind an appropriate level of attrition by benchmarking against similar organisations and taking into account the real costs of turnover to the company. Different theories of employee retention People are vital components for the effective operation of the organisation; as a matter of fact, managers often say that people are their most important assets. The human assets are never shown on the balance sheets as a distinct category, although a big amount of money is invested in the recruitment, selection, training of personnel. Rensis Likert suggested maintaining accounts of the valuable human assets through human resource accounting. The importance of the employees cannot be over emphasized because it can determine the success or failure of the organisation. Make-You-Happy Action Teams (MAT) plays a critical role in managing employee retention. This is Z-Theory management. To briefly sate, Z-Theory management means everyone that is effected by a decision for the company gets a "say" or a "vote" in the decision (tons more on Z-Theory Management in another article). This means employees are directly involved in decision making that affects them. When then make decisions that directly affect them, they stay around longer. This theory can help in managing employee retention due to the fact that this will provide employees the "right to be heard" for they will be given the opportunity to state what they believe will make them "happy" working in the company. The management will take into consideration the employees' responses to the decisions they will be making. Herzberg's Motivation Hygiene (MH) Theory and other current literature on employee retention were used as a basis to investigate the high turnover rate of sales consultants at a group of security companies. The nominal group technique was used to determine whether certain intrinsic and extrinsic factors are influencing the retention of sales consultants. Applying this theory with employee retention, being able to identify the factors affecting employee retention will help the management in addressing any internal or external problems or concerns or find ways to enhance these factors if they provide positive outcomes. How do organisations retain staff Some companies apply Eugene Volokh's Mechanisms of the Slippery Slope. They make a hypothesis that "introduction of new performance appraisal methods for employees may lead to increase in employees' productivity and higher retention rates and more satisfied internal customers." (Webster, 1972) 1. Cost-lowering: Retention is better than investing on new hires. If the management will have proper and open communication between them and the employees, this will promote understanding and lessen conflicts and dissatisfaction. 2. Legal rule combination: There are state rules which the company must abide and the employees must understand. Informing the employees about their value as well as their benefits by staying within the company can facilitate better negotiation between the two parties. Aside from this theory, companies are also creating various strategies of increasing the retention rates and decreasing employee turnover. It is not only in the retention of the managerial personnel that could answer the problem of the company. It also needs the proper communication techniques so as to retain the people working in the company and making them feel equally important, so that they won't feel that "they don't have any future" if they stay in the company. If they stayed motivated with this idea, they may not leave the company. Ensuring the workers that everyone is important and needed for the success of the company, as well as that their success depends if they also work for it, in the company, might make them sense that it is for them to fulfil it. Organisational structures An organizational structure is composed of various positions designed to accomplish systems, goals, and objectives. Variety of managerial activities is essential to keep those positions staffed with personnel who have the knowledge, the skills, and he motivation to perform the roles effectively. It is becoming clear that considerable confusion emerges in an organization when the activities are performed independently. (Robbins, 2004) The organizational structure is essential in improving employee retention for there are employees who frequently check on the company's organizational structure to figure out how it could work for their benefit. It is important that there is clarity of rules and policies, investments in employees like training, respect and appreciation for the efforts of employees, employee participation and autonomy as well as making employees feel valued. What is needed is an integrated system to deal with the total array of personnel activities. These include human resources planning, recruitment, selecting, induction, training and development, the intent of which is to attract in the organization personnel conceptualized in the design of the various positions filled. Organisations are the grand strategies created to bring order out of chaos when people work together. Organizations provide the skeletal structure that helps create predictable relationships among people, technology, jobs and resources. Wherever people join in a common effort, organization must be used to get productive results. Organisational culture Organisational culture is the set of assumptions, beliefs, values and norms that are shared by an organization's members. This culture may have been consciously created by its key members, or it may have simply evolved across time. It represents a key element of the work environment which employees perform their jobs. (Robbins, 2004) This idea of organizational culture is somewhat intangible, for we cannot see it or touch it, but it is present and pervasive. It surrounds and affects everything that happens in an organisation. Because it is a dynamic systems concept, culture is also affected by almost everything that occurs within an organization. An example is to avoid the development of a culture of 'presenteeism' where people feel obliged to work longer hours than are necessary simply to impress management. Evaluation of individual commitment should be based on results achieved and not on hours put in. Employment rate in the UK Unemployment, measured by the ILO definition, is down 34,000 from 3 months ago, a 2% decline. The unemployment rate consequently dipped to 5.4% from the 5.5% that has prevailed most of the last year. The more widely followed unemployment gauge in the UK, the "claimant count rate", is showing further declines: a single monthly figure, it stood at 2.7% in May and June, the lowest since September 2005 and down from a recent peak of 3.0% last October. The number of claimants in June was 864,100, down almost 10% from their peak of 956,700 last September. Recruitment In selecting employees, the one who has the best qualification that meets the requirements is chosen from among the candidates. There are two approaches to fill organizational positions. One is the selection approach, where applicants are sought to a position with specific requirements. The other is the placement approach where the strength and weaknesses of the applicant are evaluated, and a suitable position is found. (Plous, 1993) The diversity of selection methods and tests indicates that there is no single way to select applicants. Experience has shown that no matter how careful one is in the recruitment and selection criteria there are still imperfections in predicting performance. The difference between what persons can do their ability to perform and what they will do may be related to motivation. Motivation can induce an individual o produce more if his needs are satisfied. It may be inferred that, the recruitment and selection techniques and instruments used are not a sure way to predict what people will do, even assuming that they may have the ability to do it. Retention The first two steps to take when developing an employee retention strategy are to find out why employees in hard to recruit groups are leaving and what employee turnover among these groups is costing your organisation. The major methods of costing employee turnover are described. Obtaining accurate information on reasons for leaving is harder. Where exit interviews are used it is best to conduct them a short time after the employees hand in their notice. The interviewer should not be a manager who has had responsibility for the individual and who will not be involved in future reference writing. Confidentiality should be assured and the purpose of the interview explained. (Simon, 2006) Alternative approaches involve the use of confidential attitude surveys which include questions about intention to leave and questionnaires sent to former employees on a confidential basis around six months after their departure. A costed retention strategy can then be developed focusing on particular causes of turnover in your organisation. It is worth considering the following elements, all of which have been shown to play a positive role in improving retention. Give prospective employees a 'realistic job preview' at the recruitment stage. Take care not to raise expectations only to dash them later. Where possible invite applicants to work a shift on the job before committing themselves. Maximise opportunities for individual employees to develop their skills and move on in their careers. Where promotions are not feasible, look for sideways moves that vary experience and make the work more interesting. Ensure wherever possible that employees have a 'voice' through consultative bodies, regular appraisals, attitude surveys and grievance systems. This helps to ensure that dissatisfied employees have every opportunity to sort out problems before resigning. Where there is no opportunity to voice dissatisfaction, resigning is the only option. Managing Turnover/ turnover rates how much does labour turnover matter As might be expected, higher job satisfaction is associated with lower employee turnover, which is the proportion of employees leaving an organisation during a given time period. The more satisfied employees are less likely to go through a progressive process in which they think about quitting or announce their intention to quit. Thus they are more likely to stay with their employer longer. Those employees who have lower job satisfaction usually have higher rates of turnover. They may lack self-fulfillment, receive little recognition on the job, or experience continual conflicts with a supervisor or peer, or they may have reached personal plateau in their career. As a result they are more likely to seek greener pastures elsewhere and leave their employers, while their more satisfied associates remain. Excessive emplyee turnover can have several negative effects on an organisation. They include: Separation costs (exit interview time, separation pay, unemplyment tax increase) Training costs for new employees (both orientation and skill-development instruction; both formal and informal learning experiences) Vacancy costs (temporary help or overtime pay, productivity loss and service disruption) Replacement costs (attracting, screening, and relocating new hires) Morale effects (loss of friendships, concerns about personal job loss during downsizing) There is no set level of employee turnover above which effects on the employing organisation becomes damaging. Everything depends on the type of labour markets in which you compete. Where it is relatively easy to find and train new employees quickly and at relatively little cost (i.e. where the labour market is loose), it is possible to sustain high quality levels of service provision despite having a high turnover rate. Some employee turnover positively benefits organisations. This happens when a poor performer is replaced by a more effective employee, and can happen when a senior retirement allows the promotion or acquisition of welcome 'fresh blood'. Moderate levels of staff turnover can also help to reduce staff costs in organisations where business levels are unpredictable month on month. In such situations when business is slack it is straightforward to hold off filling recently created vacancies for some weeks. The message for managers is to look beyond overall turnover rates and examine instead the functionality of each departure. Managers need to ask themselves these questions -"Are the right people staying, and are the right people departing" This is an extremely critical analytical issue during downsizing . Challenges in recruitment/retention/turnover By contrast, where skills are relatively scarce, where recruitment is costly or where it takes several weeks to fill a vacancy, turnover is likely to be problematic from a management point of view. This can be problematic for the turnovers may result in high losses in production output due to lack of manpower. This may also lead to increase in expenses for it will cost a lot to conduct hiring processes for new employees. This is especially true of situations in which you are losing staff to direct competitors or where customers have developed relationships with individual employees as is the case in many professional services organisations There is no set level of employee turnover above which effects on the employing organisation becomes damaging. Everything depends on the type of labour markets in which you compete. Where it is relatively easy to find and train new employees quickly and at relatively little cost (ie where the labour market is loose), it is possible to sustain high quality levels of service provision despite having a high turnover rate. Having retention strategies prevents company losses by maintaining the same level productivity due to high work output from employees as well as prevent spending more with hiring and training new applicants to fill up left positions. Recruitment difficulties Psychological testing used in the recruitment process has some limitations especially when it purports the seeking of personal information, for it may be considered an invasion of privacy. In some cases, it has been observed that the administration of some tests unfairly discriminates against members of a particular religion or of minority groups. (Ash, 1992) Another difficulty in the recruitment and selection process concerns selection and hiring because time and cost are involved in making decisions. It is important to identify the factors that goes with the approach such as advertising expenses, agency fees, cost of testing materials, time spent for preparing test materials, time spent in interviewing applicants, cost for reference follow-up, medical examination, start-up time required for the newly hired candidate to get acquainted with the job, relocation, and orientation about policies of the organization. Attracting and selecting candidates In attracting and selecting candidates, it is important to make the applicants interested with applying for the job through advertising or even the reputation of the company is enough to motivate candidates to apply. The selection process includes interviews and tests. Before an employee is hired, an interview is conducted. Various interviews may take place t obtain the needed information about the educational qualification, training and experience of the applicant to make a final judgment. During the interview portion, there are certain questions the interviewer may ask. (Ullman, 2006) The interview is just one aspect of the selection process. It should be supplemented by data and other information from the application form and the results of various tests. Reference checks and letters of recommendation may be necessary to verify the information given by the applicant. For a reference to be useful, the person must know very well and give a truthful and complete assessment of the applicant. Some people are adamant to provide complete information, and so an applicant's strong points, most often, are overemphasized. Working with recruitment agencies Recruitment agencies are hired by the company to perform the duties of hiring and selecting applicants for them. They are the ones who do continuous search and screening for candidates. Some companies view this as a good option for they are able to lessen the tasks they have on hand and focus on the business operation itself. These recruitment agencies may get commissions for every successful applicant. There are some issues related to working with recruitment agencies for often times, the quality of the candidates hired are overlooked just to be able to complete a batch to undergo training. (Simon, 2006) Defend your organisation against penetration by headhunters and others seeking to poach your staff. Keep internal e-mail addresses confidential, train telephonists to spot calls from agents and to avoid giving them useful information, refuse to do business with agents who have poached your staff, and enter into pacts with other employers not to poach one another's' staff. Trust in Business Relationships Every continuing relationship requires some degree of trust - the capacity to depend on each other's words and actions. Trust opens up boundaries, provides opportunities in which to act, and enriches the entire social fabric of an organisation. Trust takes time to build but it can be destroyed in an instant. When someone has a real or perceived reason not to trust the business relationships, the potential for conflict arises. Retention in call centres Call centres are in demand right now. There are numerous call centres established to perform the customer service and technical support functions for other companies. With this, there is an increasing competition with regard to the recruitment and retention process. The call centre industry is faced with high attrition rates for some of the call centre agents transfer from one centre to another for various reasons. Call centres face high attrition rates due to health reasons, compensations as well as career growth. The shifting schedules being offered in call centres may cause different illnesses on agents as well as cause too much stress for people who are not well-adapted to these erratic changes in schedules. There are call centres that change their shifting schedules every quarter while some do it biannually. Aside from this, pregnant women who are employed in call centres often times resign if their request for morning shift is not approved instead of risking their baby. Aside from this, the constant increase in the number of call centres gives way for new options for existing agents that they do "call centre hopping" wherein they work from one call centre to another to simply request for higher compensation. Lastly, some workers have been agents for several months or even years and they have not experienced any career development. Some of them feel that they will remain as agents for several years and that they will be taking calls all the time. Diversity Employees in almost any organisation are divided into subgroups of all kinds. This cultural diversity or rich variety of differences among people at work raises the issue of fair treatment for workers who are not in the positions of authority. A promising approach to overcoming discriminatory practices in the recruitment and actual workplace are actually attempts to change the underlying attitudes. Programs aimed at managing and valuing diversity build from a key premise: prejudicial stereotypes develop from unfounded assumptions about others and from their overlooked qualities. REFERENCES: Ash, M.G. (1992) Cultural Contexts and Scientific Change in Psychology: Kurt Lewin. American Psychologist, 47 (2) pp. 198-207. Bradford, D.L. & Burke, W.W. eds (2005) Reinventing Organization Development. San Francisco, Pfeiffer. Robbins, S.P. (2004) Organizational Behavior - Concepts, Controversies, Applications. 4th Ed. Prentice Hall Weick, K.E. (1979) The Social Psychology of Organizing 2nd Ed. McGraw Hill Simon, H.A. (2006) Administrative Behavior: A Study of Decision-Making Processes. Prentice Hall Staw, B.M. (1981) The Escalation of Commitment to a Course of Action The Academy of Management Review, 6 (4) October, pp. 577-587 F. E. Webster (1972) Organizational Buying Behaviour. Prentice-Hall S. Plous (1993) The Psychology of Judgement and Decision Making. Mcgraw-Hill Ullman D. G. (2006) Making Robust Decisions. Trafford Stone, C. (2007) Employment Rises Sharply in UK, Unemployment Down Read More