Posted by: G. Lane Cavalier | August 14, 2008

Leadership: Employee Retention Theory – Part 1

The following five post set is based off of an outline I had used for a presentation on Employee Retention. The concept has a heavy IT lean as that is the audience it was presented to, but I think the Theory has value across all functional business areas:

Please note that the content has been distilled so as to make for a readable blog post, the level of details and examples is not designed to be all inclusive due to the forum this is being delivered in.

Overview:

Employee Retention is a critical and sometimes difficult area for most organizations. Every business entity faces the need to have a certain level of employee retention to aid in the consistency of values and the quality of deliverables to make it a viable and profitable concern.

An organization that has a very high voluntary turnover rate spends an inordinate amount of resources and loss of customer good will to retrain, requalify, and re-indoctrinate new employees to the organizations way of doing things. These cost can include recruiting fees, loss productivity, degradation of quality, loss of networking and relationships in the industry, a bad reputation with both customers and vendors, as well as many other cost both from a human capital and fiscal capital perspective.

Voluntary Retention:

Throughout this article, the term Voluntary Retention will be used often. The definition of Voluntary Retention varies a little from organization to organization, but the most common use of the term is when a company loses a resource that it deems to add value and will have to replace that resource with someone of equal or greater talents. Note that a key phrase in there is the need to replace the individual. Many companies now have facility closures and other corporate downsizing initiatives that result in the loss of quality individuals, though the actions of these employees may need to be replaced, these individuals would not count as a voluntary loss.

One of the most controversial topics related to Voluntary Retention is the loss of “attritionable resources.” These attritionable resources have always been a problem for the development of Key Performance Indicators (KPI). An attritionable resource is an individual that the company does not want to release for a number of reasons, but will not be replaced if they do leave. My thoughts on this subject is that they should NOT be counted against your retention KPI but only if they are clearly identified as such prior to their departure.

The Theory:

Employee Retention has many facets to be reviewed and a significant portion of it is dependent upon the industry, the company, and the position in question. What can be distilled though is that all retention of employees is based on the premise that the job the employee holds is more adds more value to their life and career than a job with another company or entity.

The best way to make an employee stay within a given organization is to remove the need or desire to look for a better position outside of the company. In doing this, the organization can be assured that the individual is fully motivated towards the success and focused toward the companies goals and objectives.

Many significant discussions of employee retention go directly to some of the details of the job performance and benefits, this can include pay, benefits, job satisfaction, work life balance, and many other aspects of the employee experience. While I do not dispute the importance of each of these issues, I think it is necessary to first take a more holistic look at the organizations interaction with it’s employees.

To do this, I think it is imperative that each organization view any of these interactions from one of four categories taken the employee’s viewpoint:

1) True Positive

2) Perceived Positive

3) True Negative

4) Perceived Negative

A significant number of organizations do a good job of identifying the True Positives and True Negatives of the employee experience, but likewise do not focus enough on the Perceived Positives or Perceived Negatives from the employee perspective.

It is also important to understand that interactions can potentially be in more than one of these categories. Many management groups make a bad assumption in believing that if an item is a True Positive, that it will be also viewed as positive, when in fact it can be a Perceived Negative.

A simple example of this was the recent experience of a company that had its management announce that they were going to curtail executive bonuses by 25%. While the significance of this to the organization is easily identifiable and as such can be a True Positive to the bottom line; many of the organization’s line employees perceived this as a purely public relations move. As such, the True Positive became a Perceived Negative if taken from the employee retention viewpoint. For a line employee whom is dealing with a 1% or 2% salary increase cap; the reminder to them that Executive Management were still getting a bonus of 75% of its original target (regardless of the amount) was a significant negative impact.

Throughout the next four installments, I will attempt to take each of the four categories and provide examples and details as to how the effective understanding and utilization of each of these can aid in employee retention.

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Responses

  1. But do most enterprises REALLY want employee retention above the upper management levels? To those of us at the lower levels it does not seem that way. The idea of setting a salary cap on a position and then complaining that older employees are capped out and need to be replace or moved up to me is ridiculous especially in IT. Yet that seems to be the theory behind most HR strategies.


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