Part 6: Staffing System and Retention Management

Chapter 14: Retention Management

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Organization StrategyOrganization Strategy HR and Staffing StrategyHR and Staffing Strategy

Staffing Policies and Programs

Staffing System and Retention Management

Support Activities

Legal compliance

Planning

Job analysis

Core Staffing Activities

Recruitment: External, internal

Selection:Measurement, external, internal

Employment:Decision making, final match

OrganizationMission

Goals and Objectives

Staffing Organizations Model

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Chapter Outline

Turnover and Its Causes Nature of Problem Types of Turnover Causes of Turnover

Analysis of Turnover Measurement Reasons for Leaving Costs and Benefits

Retention Initiatives: Voluntary Turnover

Current Practices and Deciding to Act

Desirability of Leaving Ease of Leaving Alternatives

Retention Initiatives: Discharge Performance Management Progressive Discipline

Retention Initiatives: Downsizing Weighing Advantages and

Disadvantages Staffing Levels and Quality Alternatives to Downsizing Employees Who Remain

Legal Issues Separation Laws and

Regulations Performance Appraisal

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Learning Objectives for This Chapter

Be able to differentiate among the types and causes of employee turnover

Recognize the different reasons employees leave their jobs

Evaluate the costs and benefits of turnover Learn about the variety of techniques companies use

to limit turnover See how performance management and progressive

discipline limit discharge turnover Understand how companies manage downsizing Recognize a variety of legal issues that affect

separation policies and practices

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Turnover and Its Causes

Nature of problem

Types of turnover

Causes of turnover

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Nature of the Problem

Employee retention can contribute to organizational effectiveness

Turnover is not only costly but may be beneficial

Focus of retention strategies Number of employees retained and Who is retained

Turnover is inevitable Approach to retention management

Gather and analyze employees’ reasons for leaving

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Types of Turnover

Exhibit 14.1: Types of Employee Turnover Voluntary

Avoidable - Could be prevented Try to prevent for high value employees Do not try to prevent for low value employees

Unavoidable - Could not be prevented

Involuntary Discharge Downsizing

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Exhibit 14.1: Types of Employee Turnover -Voluntary -- Employee Initiated

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Exhibit 14.1: Types of Employee Turnover -Involuntary -- Organization Initiated

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Causes of Turnover: Voluntary

Exhibit 14.2: Causes of Voluntary Turnover Behavior of leaving preceded by intention to quit Factors affecting intention to quit

Perceived desirability of leaving Often results from a poor person/job or Person/organization match

Perceived ease of leaving Represents lack of barriers to leaving and Of being able to likely find a new job

Available alternatives Depends on other job options both within and

outside organization

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Exhibit 14.2: Causes of Voluntary Turnover

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Causes of Turnover:Discharge and Downsizing

Discharge turnover Mismatch between job requirements and KSAOs

Employee fails to follow rules and procedures Unacceptable job performance

Downsizing turnover Mismatch in staffing levels which leads to an

overstaffing situation Factors related to overstaffing

Lack of forecasting and planning Inaccuracies in forecasting and planning Unanticipated changes in labor demand and/or supply

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Analysis of Turnover

Measurement

Reasons for leaving

Costs and benefits

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Measurement of Turnover: Formula

Turnover rateNumber of employees leaving

average number of employees x 100Data and decisions

Identify time period of interestDetermine type of employees that countDetermine method to calculate average

number of employees over the time period

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Measurement of Turnover:Breakouts and Benchmarks

Breakouts Analysis of turnover data aided by deciding on

categories of data Type of turnover Type of employee Job category Geographic location

Benchmarks Internal - Trend analysis External - Compare internal data with external data

Exh. 14.3: Data from job openings and labor turnover survey

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Measurement of Turnover:Reasons for Leaving

Important to ascertain, record, and track reasonswhy employees leave

Tools Exit interviews

Formal, planned interviews with departing employees Postexit surveys

Surveys sent to employees soon after their last day Employee satisfaction surveys

Surveys of current employees to discover sources of dissatisfaction which may become reasons for leaving

Results can provide information to pre-empt turnover Require substantial resources

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Guidelines: Conducting Exit Interviews

Interviewer should be a neutral person who hasbeen trained in how to conduct exit interviews

Training issues How to put employee at ease and explain purpose How to follow structured interview format and take notes How to end interview on positive note

Structured interview format should contain questions about unavoidable and avoidable reasons for leaving Exh. 14.4: Examples of Exit Interview Questions

Interviewer should prepare by reviewing interview format and interviewee’s personnel file

Interview should be conducted in private, before employee’s last day

Interviewee should be told interview is confidential

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Measurement of Turnover:Costs and Benefits

Costs and benefits can be estimated for each of the three turnover types

Types of costs Financial Nonfinancial

Some costs and benefits can be estimated financially

Nonfinancial costs and benefits may outweigh financial ones in importance and impact

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Major Turnover Costs and Benefits

Costs of turnover Separation costs

Staff time and loss of productivity

Replacement costs Recruiting and

selecting new employee

Training costs Teaching new

employees the job

Benefits of turnover Potentially better

new employees Short term labor

cost savings Opportunities to

restructure work units

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Costs and Benefits for Types of Turnover

Voluntary turnoverExh. 14.5: Voluntary Turnover:

Costs and BenefitsExh. 14.6: Example of Financial Cost

Estimates for One Voluntary TurnoverDischarge

Exh. 14.7: Discharge: Costs and BenefitsDownsizing

Exh. 14.8: Downsizing: Costs and Benefits

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Ex. 14.9 Most and Least Effective Retention Initiatives

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Exh. 14.11: Decision Processfor Retention Initiatives

Do We Think Turnover Is a Problem?

How Might We Attack the Problem?

What Do We Need to Decide?

Should We Proceed?

How Should We Evaluate the Initiatives?

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Guidelines for Increasing Job Satisfaction and Retention

Extrinsic rewards Rewards must be

meaningful and unique Rewards must match

individual preferences Link rewards to

retention behaviors Link rewards to

performance

Intrinsic rewards Assign employees to

jobs that meet their needs

Provide clear communication

Design fair reward allocation systems

Ensure supervisors provide a positive environment

Provide programs to enhance work-life balance

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Ease of Leaving

Two points of attack Provide organization-specific training

Should organization invest in training to provide general or organization-specific KSAOs?

Combine training strategy with a selection strategy focused on assessing and selecting general KSAOs

Increase cost of leaving by providing Above-market pay and benefits Deferred compensation Retention bonuses Desirable location of company’s facilities

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Alternatives

Approaches to make internal alternatives more desirable than outside alternatives Internal staffing

Encourage employees to seek internal job opportunities Provide attractive internal options outside of traditional

internal staffing system Responding to external job offers entails developing

appropriate policies Decide whether to provide counteroffers or not Determine types of employees to provide counteroffers Decide who will develop counteroffer and nature of

approval process

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Exh. 14.13: Performance Management Process

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Retention Initiatives: Discharge

Ex. 14.14: Performance Counseling and Disciplinary Process Identify performance problems Assess causes Develop corrective actions Develop and discuss clear consequences for failure

to improve Document incident, corrective actions, and

consequences for continued problems Termination if problem is not resolved

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Retention Initiatives: Discharge

Progressive disciplineFive requirements of a progressive

discipline systemGive employees notice of the rules of conduct

and misconductGive employees notice of the consequences of

violation of the rulesProvide equal treatment for all employeesAllow for full investigation of the alleged

misconduct and defense by the employeeProvide employees the right to appeal a decision

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Retention Initiatives: Downsizing

Weigh advantages and disadvantages See Exh. 14.8

Staffing levels and quality View retention in two ways

Balance a financial quick fix against unlikely return of downsized employees if economic conditions improve

Approach reductions in selective or targeted terms, rather than across the board

Determine who should be retained, if cuts are made Retain most senior employees Make performance-based decisions Retain “high-value employees” and layoff “low-value

employees”

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Retention Initiatives: Downsizing(continued)

Alternatives to downsizing No layoff or guaranteed employment policy Layoff minimization programs

Exh. 14.15: Layoff Minimization Examples Employees who remain

Potential results of ignoring survivors Increased stress levels Critical appraisals of downsizing process Examples of “survivor sickness”

Provide programs to meet needs of survivors Enhanced communication programs Morale-boosting events Promotion of EAPs Stress-related training

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Discussion Questions for This Chapter

Why should an organization seek to retain employees with performance or discipline problems? Why not just fire them?

Discuss some potential problems with downsizing as an organization’s first response to a need to cut labor costs.

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Legal Issues: Separation

Basic tenet of employee separation Fair and consistent treatment of employees

Laws and regulations governing separation process Public policy restrictions on employment-at-will Employment discrimination laws and regulations Affirmative action requirements Employment contract principles Labor contract provisions Civil service laws and regulations Negligent supervision and retention Advanced warning about plant closings

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Legal Issues: Suggestions for Performance Appraisal Systems

Appraisal criteria should be job-related, specific, and communicated in advance

Manager/rater should receive training in overall performance appraisal process and how to avoid rating errors

Manager should be familiar with employee’s job descriptionand actual performance

Agreement should exist among different raters in evaluating an employee’s performance

Evaluations should be in writing Employee should be able to review evaluation and make comments

before it becomes final Employee should receive timely feedback about the evaluation and an

explanation for any outcome decision Provide upward review of employee’s appraisal Provide appeal system for employees dissatisfied with their evaluations