According to Prakashan (2008, p.1-51), “employee Retention involves taking measures to encourage the most productive employees to remain in the organization for the maximum period of time” or up to completion of their projects. Additionally, Carsen & CCH Incorporated (2005, p.2) note that ‘retention of employees also involves weeding out underperformers in order to free up resources and space for high achievers.’
High turnover in a firm can adversely affect the firm’s productivity and profitability; however, low turnover is not necessarily beneficial as it can also harm performance of firms. The causes of voluntary turnover are classified into two groups; low job satisfaction and labor market conditions (Jackson, Schuler & Werner, p.217).
Employees’ retention is very essential to business because the cost of turnover can be exorbitantly high as it includes costs of advertising, paying recruiters. According to Smith (2007), it costs approximately $7-17 to replace an hourly employee and more than $40000 to replace a manager. Moreover, globalization has led to stiffer competition for quality employees. Besides, the United Nations predicts that labor shortages in the coming years will be a real problem (Jackson, Schuler & Werner, p.217).
Some industries have general high turnover rates compared to others; thus, it is necessary for businesses to identify the specific trends in their industries in order to set up appropriate measures. Low turnover among high performers contributes to improved firm’s performance (Jackson, Schuler & Werner, p.217). Therefore, productivity of an organization is directly linked to retention of its most productive employees.
Employees are compelled to leave a certain organization because of some specific reasons. Factors contributing to high turnover rates include job and employee mismatch, and failure of meeting the employees’ expectations. Thus, it is important for management teams to realize that turnover is not caused by a single event, but rather, a string of processes in the organizations.
Retention of employees involves four major factors namely compensation, growth and career, relationship in employee retention programs and support (Prakashan, 2008, p.1-53). These strategies are all geared at increasing employees’ satisfaction, and boosting employees’ morale. Moreover, employee retention practices exist in three levels; low, medium and high levels. Further, selecting and hiring the right employees who fit in the organization culture in itself facilitate retention.
According to Armstrong (2002), rewarding of employees should be based on the value they add to an organization; these rewards are usually in the form of financial and non-financial. Rewarding employees is one method of motivating and hence retaining employees. Besides, through rewarding employees, a business is able to grow its revenue and profits, retain its most productive employees, and inspire peak performance among its staff (Deeprose, 2007, p.1).
Moreover, Reward system used as a motivating technique should be aligned to the unique needs of employees. Additionally, in order for employers to have maximum benefits from rewards, employers need to link rewards to organizational goals. The employers need to identify values or behaviors that they desire to reinforce and they attach rewards to them.
This paper outlines specific issues contributing to high turnover rates in organizations, and identifies the specific ways of rewarding employees. Moreover, the paper will outline what an organization should do in order to retain its productive workforce.
Factors contributing to high turnover rates
Employee turnover “occurs when employees voluntarily leave their jobs and must be replaced” (Smith, 2007). Business owners and management teams need to recognize factors that lead to high turnover rates in their specific businesses and industry. Moreover, factors that contribute to turnover rates among a specific group i.e. gender, race or certain ethnic groups should be explored. Factors contributing to high turnover rates can be classified in two categories; those beyond or within the control of the employer (Smith, 2007). Thus, employers need to identify factors related to high turnover rates which are within their control and put in place strategies to mitigate their occurrence.
One factor contributing to high turnover rates is economic factor; employees leave a business in order to obtain better paying jobs. Indeed, some employees have been reported to leave an organization for another that provides an increment to their previous salaries or wages. Additionally, employees are constantly looking for job opportunities that give better compensation packages such as bonuses, health insurance.
Further, organization experiencing performance difficulties have higher turnover rates; this is due to speculation of future layoffs. Employees in organization which are in the process of restructuring for example merging or being acquired tend to leave the firm due to uncertainty of job security.
The organizational culture in a firm influences satisfaction, hence the rate of turnover. Organizational culture includes these aspects of reward system, strength of the leadership and development of shared goals. Generally, organizations with good support work environment have lower turnover rates (Prakashan, 2008, p.1-53).
Subsequently, organizations with limited career growth opportunities are exposed to high turnover, as employees seek for new challenges and career growth. Indeed, findings suggests that employees who had progressed through different jobs were more likely to remain in an organization compared to those who had remained in one job since being hired (Branham, 2005, p.204). Besides, high-performers stuck in one position for too long have a high tendency of leaving.
The characteristic of a job also determine its turnover rate. For example, employees who are compelled to perform duties that take up personal time are likely to leave employment (Smith, 2007, p.24). In addition, job’s status determines its attractiveness or the lack of attractiveness.
Usually, “job’s attractiveness will be affected by many characteristics, including its repetitiveness, challenge, danger, perceived importance, and capacity to elicit a sense of accomplishment” (Smith, 2007). Jobs which are monotonous and have limited opportunities for career growth experience high turnover rates. According to Jackson (2002), dissatisfaction with growth and career development prospects in a firm also cause employees to leave.
Impractical expectations and general ignorance from employees at the time they accept a job offer fundamentally affects turnover rates. Subsequently, if employees are constantly assigned duties that do not match their qualification or personalities, they are compelled to leave (Prakashan, 2008, p.1-53).
In addition, demographics of employees also contribute to their decisions of leaving an employment. Indeed, “empirical studies have demonstrated that turnover is associated in particular situations with demographic and biographical characteristics of workers” (Branham, 2005, p.204). For example, employees who have attained additional qualification (degrees) are more likely to leave a firm if they feel their achievements are not recognized or there is no room for utilizing their qualifications (Branham, 2005, p.204).
Substandard working conditions in an organization also contribute to high turnover rate. Employees require adequate materials and equipment necessarily for accomplishing their responsibilities. Subsequently, the workplace environment should be hygienic and safe, for instance, proper lighting and well ventilated. Moreover, it is noted that there is high turnover in departments where the managers leave. Changes in management can destabilize an organization.
How to retain employees
Management of businesses can reduce employees’ turnover by using some basic HR practices. Turnover is not caused by a single event; rather, it is mostly caused by a series of processes in the workplace.
Therefore, management teams need to diagnose reasons that cause employees to disengage so that management can interrupt the process hence save a lot of resources (Jackson, Schuler & Werner, p.217). Employers need to make special consideration during mergers or acquisition or low performance because organizations are more vulnerable to higher turnover rates.
Smith (2007) outlines pay, promotion opportunities, and work/life balance as the most essential needs from their companies. Firstly, organization should appoint a retention committee that is tasked with dealing with all issues regarding retention of the workforce; this is essential especially in large organizations.
Organization with retention initiatives reported up to 40% turnover decline among salaried employees and 25% decrease in hourly employees (Branham, 2005, p.205). Moreover, it may be necessary to re-interview the organizations staff yearly to review employees in terms of growth and areas where there is need for training. Additionally, large organizations should create an employee alumni organization where former employees can be contacted and possibly rehired.
Organizations should offer competitive compensation packages to its employees depending on the industry. The compensation package includes wages, salaries, bonuses, stock options and vacations. Jackson et al (2002) recognizes compensation given to employees plays a crucial role in retaining them. The compensation given should reflect the amount of skills and experience of the employee and the amount of time spent working.
Employers also need to train sectional or departmental managers on the importance of employees’ retention and factors that lead to high turn over rates. Besides the department managers should be given retention goals. In order to establish why employees are leaving their employment managers should conduct exit surveys where the managers conduct an interview to establish the reasons for dissatisfaction (Jackson, Schuler & Werner, p.218).
Importantly, departmental managers should be encouraged to remain in their position since their departure can cause turnover from their junior staff. In the event that a department manager has to leave, the position should be filled by an internal candidate trusted by the current employees (Branham, 2005, p.204).
The organization should facilitate their employees to assess the organization hence pinpoint possible retention problems. Smith (2007) recommends two approaches through which organization a can be assessed; through a regular, informal assessment of employees by their supervisors and a formal assessment where employees can express their views regarding their company.
Further, during frequent staff meeting, managers should identify productive staff whose departure would hurt the organization. Moreover, the management should establish and implement ways of to better the needs of these key employees (Branham, 2005, p.204).
According to Prakashan (2008), growth and development are fundamental issues to every employee. Therefore, organizations should focus on the career development needs of their employees and broaden the employees’ marketability. Besides, findings suggest that nonexempt employees who advanced to exempt stay longer in businesses.
Consequently, the organizations should provide coaching to encourage their nonexempt employees to grow their knowledge and capabilities hence attain career growth opportunities (Branham, 2005, p.204).
Moreover, the managers should ensure that the employee’s personal goals and objectives are met as they participate in organization responsibilities. Further, the employees need training on various aspects of the organization in order to facilitate easier working. Subsequently, employers need to appraise its workforce and provide feedback and recommendation of improving their performance.
First-year turnover rates are usually very high due to poor selection and hiring processes. To prevent this first-year turnover, an organization should select employees who can easily fit in the existing organizational culture, thus avoid employee-job mismatch, which causes dissatisfaction.
Normally, new employees need to be properly oriented in a bid to make them fit into the system smoothly without having to kill their morale to work so early in their career. New employees who fit in the organization’s culture tend to have maximum length of time in a firm.
Additionally, the management may need to review new-hire orientation process and training of new employees during the first year of employment (Branham, 2005, p.204). Additionally, employers need to explain explicitly, job responsibilities when hiring new employees, since unexpected responsibilities can cause dissatisfaction. In this case, employees should be made aware of what roles they are likely to play in the organization from the beginning of their engagement.
Employees can also to be retained through creation of a supportive work culture, which enable employees to develop and boost employee satisfaction (Prakashan, 2008, p.1-53). A supportive work culture should encompass the following; respecting all employees, assigning appropriate job profiles and promoting or disciplining all employees according to the corporate culture.
Additionally, the organization should support its employees to be successful. In addition, it is necessary for an organization to “support its employees during personal crisis through providing personal loans during emergencies or counseling services” (Prakashan, 2008).
What rewards do employees want
As stated earlier, rewarding employees is important to a business as; it grows revenue and profits, helps to retain productive employees and inspiring peak performance among the workforce. Effective reward programs in businesses have a great bottom-line impact. Rewarding employees also helps to great a positive work environment, motivates high performance, and reinforcing desired behavior.
Moreover, organizations which recognize the efforts of their employees register better performance than organizations which do not recognize and reward its employees. Moreover, ‘organizations need to formulate employees reward systems that consist of integrated policies, processes and practices of rewarding employees depending on their contribution’ (Armstrong, 2002, p.4).
Contrary to believe of many employers that rewarding employees is an expensive strategy, rewarding can actual have no or minimal cost. Importantly all rewards used by employers should be frequent and personalized since employees have unique needs. Therefore, employers require understanding of the unique needs of their employees in order to have an appropriate reward scheme for each.
Most employers tend assume that their employees require rewards and incentives in form of monetary form. Conversely, as much as monetary rewards is an important way of recognizing employees achievements, there are many other forms of rewards which employees require as discussed below. In deed most studies conducted on employees suggest than money is not ranked highly among motivating factors. Ideally, rewarding of achievements and progress should be done on daily basis.
Employees require recognition, praise and appreciation from their employers; this can be in form of a personalized written praise (Stredwick, 2005, p.338). The employees need their employers to publicly recognize their efforts or achievements so the whole company can share in their accomplishments. In deed when employees perform a good job, employers should show appreciation.
Employees require flexible working hours in order to maintain work/life balance; besides, new technology can facilitate working from home (Armstrong, 2007, p.38). The employers should reward top performers with flexible working hours or facilitate them to work from home.
Where possible give opportunity to deserving employees to determine their working schedule; this strategy facilitates in building trust and good relationship between employers and key employees. Additionally it is essential to compensate for any extra time worked by employees. Further, the employees’ life schedule should fit with their work; example female workers may require more flexible working hours due to their maternal duties.
Subsequently employees need learning and development opportunities where they can improve their marketability and career growth chances. Employers need to offer training and guidance to their employees in order to equip them with necessary skills (Armstrong, 2007, p.36).
This is in realization that employees are always seeking an opportunity to advance their career and personal development, thus can be part of motivation. Additionally, employees require employers to consider employees voices and decisions, and in this case, ensure that all employees are allowed to participate whenever key decisions that touch their roles are being made.
Employees want to be rewarded with greater responsibilities and leadership position. High achiever employees should be rewarded will new challenges; therefore, they should be rewarded with opportunity “to choose their assignments and rise to new challenges offered by new responsibilities” (Armstrong, 2007). Moreover, employees need higher degree of autonomy and independence when performing their duties. By giving room for employees to work independently they are able to be innovative.
What makes a good workplace
The quality of a workplace influences motivation, satisfaction of employees and hence productivity of the firm. Generally, the structure and corporate culture of an organization determines the quality of a workplace. The quality of working relationship between co-workers and employees and management determines the quality of a workplace.
In organization where workplace relationships are solid and supportive they form a good environment for working. Moreover, the work place relationship is influences the work environment, work teams cohesion and job satisfaction (Ganster & Perrewe, 2010, p.118). Additionally workplace friendships affects work place experience positively; they contribute to job satisfaction and job involvement.
Employees are willing to stay in organizations where they have clear understanding of what is expected from them. Good workplaces offer guidance of meeting goals but they do not control the employees. Thus, management needs to effectively communicate their expectation from each employee and then give autonomy and independence for employees to attain the goals through their preferred routes.
Subsequently, good workplaces have adequate materials and equipment necessary to maximum their potential. Moreover, employers should facilitate training employees on how to use provided equipment. Employees are motivated to stay in workplaces where duties that match with the right individuals.
Additionally, workplaces with culture of appreciation are more attractive to employees. Further good workplaces provide opportunities for growth and development to its employees. Besides, employees are compelled to stay in organizations, which have high productivity culture.
Employee retention is a major concern for many employers; management teams of successful organization have to realize the importance of retention its most productive workforce. High turnover leads to loss of valuable workers whose replacement is costly.
It is important to note that a high employee turnover is normally unhealthy to an organization’s performance as well as the productivity of other presumably loyal employees. Moreover, turnover affects productivity of remaining employees since they may be compelled to perform duties of more than one person or allocated duties that do not match with their training.
Employee exit from an organization may be a subject of variant factors; however, although some are avoidable, other factors may be too strong for the employer to control. It is fundamental for employers to identify these factors and establish strategies of preventing their occurrence.
Primarily, turnover is attributed to lack of job satisfaction or economic conditions. Lack of job satisfaction is mainly caused by unmet expectations, the nature of job, corporate culture in the organization and personal demographics. On the other hand market conditions influence turnover through availability of better job opportunities with improved compensation.
In order to limit harm of high turnover, employers need to utilize some strategies so as to improve job satisfaction and hence retention. Primarily, an employer should review his compensation packages, the workplace relationships, career and development prospects, and support in the workplace to facilitate retention of high-performers. The employers should offer competitive compensation packages depending on skills and experience of their employees and duration worked.
Moreover, the employers can allow high-performers to formulate their work schedule or flexible working hours. Besides, the employers should compensate the employees for any extra hours. Further, employees want more independence and autonomy whenever handling their duties. Moreover, employers can retain employees through providing career development opportunities and training.
The workplace culture influences the productivity of employees and also the rate of turnover. Management need to instill a supportive culture in the workplace as it leads to higher job satisfaction, therefore lower turnover. Additionally, the workplace relationships affect quality of the workplace. Thus, employers are required to establish strategies which promote internal cohesion. Besides, a good workplace has necessarily materials and equipment while the staff has been trained on how to effectively use the provided materials.
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