RETENTION STRATEGY

OVERVIEW

Why are we concerned about employee retention now?

Lean organizations depend heavily on the performance and quality of current employees. Current employees have specialized, institutional knowledge.

The concern are the costs of employee turnover, including hiring costs: time spent in screening, verifying credentials, references, interviewing, hiring, and training the new employee just to get back to where you started.

In addition there are the hard costs of productivity loss. Replacement costs usually are 2 ½ times the salary of the individual, and may include lost customers and business and damaged morale.

Employee retention, a set of actions designed to keep good employees once they have been hired.

Turnover Problems• Nonvoluntary:

Employer controlled (layoffs, terminations, downsizing)

• Voluntary: Employee controlled (quits, retirements)

• Gray Area: (spouse relocation, child/elder care problem, exit reporting problems)

Turnover Rates Among Fortune 100’s Best

Potential SavingsCompany1 Number of

Employees (US)

Turnover Rate

Estimated Turnover Cost per employee2

Reducing Turnover 1%

Savings / yearMerck 39,489 9% $7592 $2,765,000

Cerner 2,953 14% $8000 $240,000

Charles Schwab

18,863 12% $8329 $1,512,000

MBNA America

Bank

16,960 15% $4800 $1,000,000

Average US Company

10,000 15.6% $5000 $500,000

Notes:

1. Based on Public Data from Fortune Magazine’s 100 Best Companies to work for January 2001.

2. Estimated Turnover Costs Calculated at 20% of most common entry level salary ($42,940) as provided in note 1.

Labor Market:•Unemployment•Knowledge of Other Jobs•Relocation Costs

Satisfaction Influences:• Job Complexity• Role Stress• Group Cohesion• Compensation• Leader-Member Relations• Met Expectations• Negative Affectivity

Commitment Influences:• Procedural Justice• Attraction of Internal Roles• Job Security• Job Investments• Extra Organizational Conflicts• Conditions of Job Entry• Commitment Propensity

Job Satisfaction

Organiza-tional

Commitment

Job-Seeking Costs & Benefits: Turnover Costs & Benefits

Shocks

Decisions to Quit

Job Search

Evaluate Alternatives

Resignation

Hom-Griffeth Model of Turnover

POSSIBLE POSITIVE CONSEQUENCES OF TURNOVER

1. Displacement of poor performers

2. Increased satisfaction among stayers

3. Infusion of new knowledge/technology via replacements

4. Facilitate organizational change

5. Increased internal mobility opportunities

6. Decrease in other “withdrawal” behaviors

7. Opportunities for cost reduction

PRACTICAL STRATEGIES FOR MANAGING TURNOVER

1. Hire carefully within legal/ethical constraints: personality2. Use pre-employment interventions3. Promote job satisfaction4. Promote job autonomy through job enrichment5. Use small work groups6. Reduce task repetitiveness7. Improve human relations skills of supervisors8. Reduce stress9. Promote organizational commitment (e.g., career counseling; side bets)10. Emphasize person/job fit

ELEMENTS OF RETENTION STRATEGY

The Eight Elements of the High-Retention Organization 1. Clear Sense of Direction and Purpose 2. Caring Management 3. Flexible Benefits and Schedule Adapted to the Needs of the

Individual 4. Open Communication5. Charged Work Environment 6. Performance Management 7. Recognition and Reward 8. Training and Development

Retention Strategy

MANAGING EMPLOYEE EXPECTATION

The Reality Of "Managing Expectations" Revolves Around 3 Simple Principles:

1. Managers communicate their expectations consciously and unconsciously.

2. Employees consciously and unconsciously understand these expectations.

3. Employees perform in ways that are consistent with their manager's expectations.

DEVELOPING RETENTION PLANNING

FRAMEWORK OF EMPLOYEE RETENTION

• Equity and job security– Employees want to be treated fairly and, just as

importantly, compensated fairly.– Companies must demonstrate more than the minimum

obligations to people.• Communication

– Individuals want to understand management’s expectations so they have a clear idea of how their work will be judged.

– It is important to set measurable goals and evaluate an employee’s performance.

The Secrets of Employee Retention

• Pride and teamwork– Employees want to feel good about their jobs, have a

sense of achievement, and be proud of their accomplishments.

– Individuals should be properly trained and provided with adequate materials and equipment to complete their jobs successfully.

– Employees want to work with teammates who are as enthusiastic and competent as they are.

– Failure to address problem employees communicates to team members that management view substandard performance as acceptable.

The Secrets of Employee Retention

• Fun– While it’s important that attempts at creating a fun work

environment don’t disrupt the overall productivity of employees, making the job enjoyable is beneficial.

– By never taking time to celebrate, employees are more likely to experience elevated stress and burn-out.

The Secrets of Employee Retention

• Recognition– “People want to do good work and they want to

be recognized for it,” says Larry Johnson, president, Johnson Training Group.

– Johnson recommends that recognition be significant, specific and sincere.

• For example, telling an employee “you’re great” isn’t nearly as meaningful as saying that his/her innovative ideas and work to satisfy a particular tenant or to keep a specific project on budget was terrific.

The Secrets of Employee Retention

RETENTION REALITY: WHY THEY JOIN

SURVEY

• UK organizations are struggling to retain their employees, claims a new survey which finds that 3 out of 4 have no explicit strategy or budget for employee retention and they don’t understand the real reasons why employees leave.

Source: http://www.clickpress.com/releases/Detailed/59127005cp.shtml

75% OF ORGANISATIONS HAVE NO STRATEGY OR BUDGET FOR EMPLOYEE RETENTION

SURVEY

• Developed from a survey of HR practitioners in 316 organizations, it finds that 93% have implemented retention initiatives over the past year, yet nearly half (47%) still admit that they have a problem retaining staff and two-thirds (65%) say they want to reduce their employee turnover.

• According to the survey, 44% of organizations have a staff turnover rate higher than 15% per year, with one in ten exceeding 30% per year. In organizations with over 500 employees, more than a third (36%) have a turnover rate exceeding 20%. 81% of organizations believe staff turnover has a detrimental impact on their effectiveness.

STAGES OF RETENTION STRATEGY

RETENTION MODEL DIAGRAM

HOW CAN I IMPROVE THE RETENTION

Source: peopleindairy.businesscatalyst.com

7 STEPS TO BETTER EMPLOYEE RETENTION

1. Track retention 2. Hire right in the first place 3. Offer employees a path to greater pay and responsibility 4. Train first-level supervisors 5. Look for stressors and train leaders on how to help

employees in stressful positions 6. Be more flexible on work conditions7. Re-evaluate benefits package

KEEPING IS CHEAPER THAN REPLACING

Direct Costs of Replacement• Paperwork/Time Exit Interview • Recruiting Replacement • Interview/Select New Employee • On boarding New Employee • Training New Employee• Depending on the complexity of the job, this process can take

at least 3-6 months in most cases.

KEEPING IS CHEAPER THAN REPLACING

Indirect Costs of Replacement• Losses in productivity.• Slips in schedule.• Loss of corporate knowledge.• Lost opportunity costs etc.

TOP 10 LOW & NO CO$T EMPLOYEE RETENTION TIP$

1. Hire the Right Person 2. Open & Effective Communication3. Clear Expectations4. Outstanding Feedback & Recognition 5. Treat People with Respect 6. Share Training Responsibility 7. Have Fun 8. Promote Work/Life Balance 9. Demonstrate Corporate Social Responsibility10. Utilize Connection & Exit interviews

STRATEGY FOR IMPROVING EMPLOYEE ENGAGEMENT

Employee engagement is the extent to which employees feel passionate about their jobs,

are committed to the organization, and put discretionary effort into their work.

What is Employee Engagement?

E m p l o y e e E n g a g e m e n t D e fi n i ti o n

Employee Satisfaction vs. Employee Engagement

Employee engagement is not the same as employee satisfaction.

• Satisfied employees are merely happy or content with their jobs and the status quo. For some, this might involve doing as little work as possible.

• Engaged employees are motivated to do more than the bare minimum needed in order to keep their jobs.

Employee satisfaction…– only deals with how happy or content employees are.– covers the basic concerns and needs of employees.– does not address employees’ level of motivation or involvement.

Employee Engagement Framework

Engagement withThe Organization

Engagement with“My Manager”

Strategic Alignment Competency

High Performance

An employee engagement model based on statistical analysis and widely supported by industry research.

Engagement with The Organization

• Measures how engaged employees are with the organization as a whole.

• Includes employee feelings about and perceptions of senior management.

• Key components include trust, fairness, values, and respect - i.e. how people like to be treated by others, both at work and outside of work.

Engagement with “My Manager”

• A more specific measure of how employees feel about their direct supervisors.

• For most employees, this factor has the largest impact on day-to-day life at work.

• Topics include mutual respect, feeling valued, being treated fairly, receiving feedback and direction, etc.

Beyond Engagement – Alignment & Competency

Strategic alignment• Does the organization have a clear

strategy and set of goals?

• Do employees understand how the work they do contributes to the organization's success?

• Strategic Alignment ensures that employee effort is focused in the right direction.

An organization needs more than just engaged employees in order to succeed. There are two additional areas that relate to employee performance and that are closely linked to engagement.

Competency• Do managers have the skills

needed to get the job done?

• Do managers display the behaviors needed to motivate employees?

• Competency is measured with 360 Degree Feedback.

Employee Engagement Dynamics

Drivers of Engagement - What matters most?Knowing whether employees are engaged or disengaged is only the first step. You also need to understand the key drivers of engagement.

We employ two techniques that enable you to identify what to focus on and how to improve in those areas.

1. Priority Level - we look at the statistical patterns across all groups in your organization to determine which items are impacting overall engagement within each demographic group.

2. Virtual Focus Groups - next, we ask targeted follow-up questions at the end of the survey that ask employees to provide examples of problems as well as suggestions for how to improve. These comments often provide the detailed and specific what, why, and how so you can take action.

Employee EngagementWhat to do ?

Individual: Drivers Personal attributes Organisational contextHR practices

Managers: 5 things Align efforts with strategyEmpowerPromote and encourage teamwork and collaboration Help people grow and developProvide support and recognition where appropriate

Organisation: Ten things1. Start on day one – recruitment2. Start at the top – senior management commitment3. Develop two-way communication 4. Give satisfactory opportunities for development and

advancement 5. Ensure that employees have everything they need to

do their job6. Give appropriate training 7. Have strong feedback system 8. Provide incentives 9. Build a distinctive corporate culture 10. Focus on top-performing employees

Empower

Encourage

Communicate

Enable

Commitment

EngagementEnjoyment

Change and innovation

Wellbeing and job

satisfaction

Improved work

experience

Improved customer service

Engagement inputs

Commitment and involvement

of staff

Benefits /Outcomes

Staff, customers

Effort

Creativity

Working Model