14-1

CHAPTER FOURTEENCHAPTER FOURTEEN

Retention ManagementRetention Management

Screen graphics created by:Jana F. Kuzmicki, PhD

Troy State University-Florida and Western Region

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

14-2

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, internalEmployment:Decision making, final match

OrganizationVision and Mission

Goals and Objectives

Staffing Organizations ModelStaffing Organizations Model

14-3

Chapter OutlineChapter Outline

Turnover and Its CausesNature of Problem

Types of Turnover

Causes of Turnover

Analysis of TurnoverMeasurement

Reasons for Leaving

Costs and Benefits

Retention Initiatives: Voluntary Turnover

Retention Initiatives: Discharge

Retention Initiatives: Downsizing

Legal Issues

14-4

Turnover and Its CausesTurnover and Its Causes

Nature of problem

Types of turnover

Causes of turnover

14-5

Nature of the ProblemNature 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 andWho is retained

Turnover is inevitable Approach to retention management

Gather and analyze employees’ reasons for leaving

14-6

Types of TurnoverTypes 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

InvoluntaryDischargeDownsizing

14-7

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

Try to Prevent:High-Value Employees

Try to Prevent:High-Value Employees

• High performance• Strong KSAOs• Valued intellectual

capital• High promotion

potential• High training

investment• High experience• Difficult to find

replacement

• High performance• Strong KSAOs• Valued intellectual

capital• High promotion

potential• High training

investment• High experience• Difficult to find

replacement

Do not Prevent:Low-Value Employees

Do not Prevent:Low-Value Employees

• Low performance• Weak KSAOs• Little intellectual

capital• Low promotion

potential• Low training

investment• Low experience• Easy to find

replacement

• Low performance• Weak KSAOs• Little intellectual

capital• Low promotion

potential• Low training

investment• Low experience• Easy to find

replacement

No attempt to Prevent:Regardless of Value

No attempt to Prevent:Regardless of Value

• Retirement• Dual career• New career• Health• Child care or

pregnancy• Elder care• Return to school• Leave country• Take a break

• Retirement• Dual career• New career• Health• Child care or

pregnancy• Elder care• Return to school• Leave country• Take a break

Avoidable(could prevent)

Avoidable(could prevent)

Unavoidable(could not prevent)

Unavoidable(could not prevent)

14-8

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

• Permanent layoff

• Temporary layoff

• Site or plant closing, relocation

• Redundancy due to merger or acquisition

• Permanent layoff

• Temporary layoff

• Site or plant closing, relocation

• Redundancy due to merger or acquisition

DownsizingDownsizing

• Discipline

• Poor performance

• Discipline

• Poor performance

DischargeDischarge

14-9

Causes of Turnover: VoluntaryCauses 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

14-10

Exhibit 14.2: Causes of Voluntary TurnoverExhibit 14.2: Causes of Voluntary Turnover

QuitQuit

AlternativesInternal: New job possibilities

External: Job offers

AlternativesInternal: New job possibilities

External: Job offers+

Desirability of LeavingLow job satisfactionShocks to employeePersonal (nonjob) reasons

Desirability of LeavingLow job satisfactionShocks to employeePersonal (nonjob) reasons

+

Ease of LeavingFavorable labor market conditionsGeneral, transferable KSAOsLow cost of leaving

Ease of LeavingFavorable labor market conditionsGeneral, transferable KSAOsLow cost of leaving

+ Intentionto Quit

Intentionto Quit

+

14-11

Causes of Turnover:Causes of Turnover:Discharge and DownsizingDischarge and Downsizing

Discharge turnoverMismatch between job requirements and KSAOs

Employee fails to follow rules and procedures Unacceptable job performance

Downsizing turnoverMismatch in staffing levels which leads to an

overstaffing situationFactors related to overstaffing

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

14-12

Analysis of TurnoverAnalysis of Turnover

Measurement

Reasons for leaving

Costs and benefits

14-13

Measurement of Turnover: Formula Measurement of Turnover: Formula

Turnover rate

Number of employees leaving average number of employees x 100

Data and decisions

Identify time period of interest

Determine type of employees that count

Determine method to calculate average number of employees over the time period

14-14

BreakoutsAnalysis of turnover data aided by deciding on

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

BenchmarksInternal - Trend analysisExternal - Compare internal data with external data

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

Measurement of Turnover:Measurement of Turnover:Breakouts and Benchmarks Breakouts and Benchmarks

14-15

Important to ascertain, record, and track reasonswhy employees leave

ToolsExit interviews

Formal, planned interviews with departing employeesPostexit surveys

Surveys sent to employees soon after their last dayEmployee 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

Measurement of Turnover:Measurement of Turnover:Reasons for Leaving Reasons for Leaving

14-16

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

Training issuesHow to put employee at ease and explain purposeHow to follow structured interview format and take notesHow 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

Guidelines: Conducting Exit Interviews Guidelines: Conducting Exit Interviews

14-17

Measurement of Turnover:Measurement of Turnover:Costs and BenefitsCosts and Benefits

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

Types of costsFinancialNonfinancial

Some costs and benefits can be estimated financially

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

14-18

Costs Benefits

Costs and Benefits for Types of TurnoverCosts and Benefits for Types of Turnover

Voluntary turnoverExh. 14.5: Voluntary Turnover:

Costs and Benefits

Exh. 14.6: Example of Financial CostEstimates for One Voluntary Turnover

DischargeExh. 14.7: Discharge: Costs and Benefits

DownsizingExh. 14.8: Downsizing: Costs and Benefits

14-19

Retention Initiatives: Voluntary TurnoverRetention Initiatives: Voluntary Turnover

Current practices and deciding to actWhat do organizations do?

Exh. 14.9: Retention Initiatives: Usage and Effectiveness Exh. 14.10: Retention Initiative Examples

Decision process Exh. 14.11: Decision Process

Desirability of leavingExh. 14.12: Guidelines for Increasing Job

Satisfaction and Retention Ease of leaving Alternatives

14-20

Guidelines for Increasing Job Satisfaction and Guidelines for Increasing Job Satisfaction and RetentionRetention

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 for work characteristics

Provide clear communication with employees

Design fair reward allocation systems

Ensure supervisors provide a positive environment

14-21

Exh. 14.11: Decision ProcessExh. 14.11: Decision Processfor Retention Initiativesfor 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?

14-22

Ease of LeavingEase of Leaving

Two points of attackProvide 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

14-23

AlternativesAlternatives

Approaches to make internal alternatives more desirable than outside alternativesInternal staffing

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

internal staffing systemResponding 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

14-24

Performance managementExh. 14.13: Performance Management Process

Manager training and rewards

Progressive disciplineFive requirements of a progressive discipline system -

P. 701

Actions to take Exh. 14.14: Progressive Discipline Examples: Misconduct

and Penalties

Retention Initiatives: DischargeRetention Initiatives: Discharge

14-25

Exh. 14.12: Performance Management ProcessExh. 14.12: Performance Management Process

Organization StrategyOrganization Strategy

Work-Unit PlansWork-Unit Plans

(1) Performance Planning(1) Performance Planning

GoalsCompetencies

GoalsCompetencies

(2) Performance Execution(2) Performance Execution

ResourcesCoachingFeedback

ResourcesCoachingFeedback

(3) Performance Appraisal(3) Performance Appraisal

Goal attainmentCompetency ratingsWritten commentsFeedback

Goal attainmentCompetency ratingsWritten commentsFeedback

(4) Decisions(4) Decisions

PayTraining/career plansPerformance problemsRetention

PayTraining/career plansPerformance problemsRetention

14-26

Weigh advantages and disadvantagesSee Exh. 14.8

Staffing levels and qualityView 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”

Retention Initiatives: DownsizingRetention Initiatives: Downsizing

14-27

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

Retention Initiatives: DownsizingRetention Initiatives: Downsizing(continued)(continued)

14-28

Legal IssuesLegal Issues

Separation laws and regulations

Performance appraisal

14-29

Legal Issues: SeparationLegal 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

14-30

Legal Issues: Suggestions forLegal Issues: Suggestions for Performance Appraisal Systems 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 description

and 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

14-31

Ethical IssuesEthical Issues

Issue 1Consider a circumstance where your organization is

doing exit interviews and has promised confidentiality to all who respond. Your supervisor has asked you to give the name of each respondent so she can assess the information in conjunction with the person’s supervisor. What obligation to corporate HR employees have to keep information confidential in such circumstances?

14-32

Ethical IssuesEthical Issues

Issue 2There are numerous negative organizational

consequences to firing employees, including the discomfort of the supervisor who delivers the termination information, conflict or sabotage from the departing employee, and the potential for a lawsuit. In response, many supervisors provide problem employees unpleasant work tasks, reduced working hours, or otherwise negatively modify their jobs in hopes that the problem employees will simply quit. What are the ethical issues raised by this strategy?