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CHAPTER FOURTEEN Retention 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.

Organization Vision and Mission Goals and Objectives Organization Strategy HR and Staffing Strategy Staffing Organizations Model Staffing Policies and Programs Support Activities Core Staffing Activities Legal compliance Recruitment: External, internal Planning Selection:Measurement, external, internal Job analysis Employment:Decision making, final match Staffing System and Retention Management

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 Retention Initiatives: Discharge Retention Initiatives: Downsizing Legal Issues Chapter Outline

Turnover and Its Causes • Nature of problem • Types of turnover • Causes of turnover

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

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

Try to Prevent:High-Value Employees Do not Prevent:Low-Value Employees No attempt to Prevent:Regardless of Value Avoidable(could prevent) Unavoidable(could not prevent) • Low performance • Weak KSAOs • Little intellectual capital • Low promotion potential • Low training investment • Low experience • Easy to find replacement • Retirement • Dual career • New career • Health • Child care or pregnancy • Elder care • Return to school • Leave country • Take a break • High performance • Strong KSAOs • Valued intellectual capital • High promotion potential • High training investment • High experience • Difficult to find replacement Exhibit 14.1: Types of Employee Turnover -Voluntary -- Employee Initiated

Downsizing Discharge Exhibit 14.1: Types of Employee Turnover -Involuntary -- Organization Initiated • Discipline • Poor performance • Permanent layoff • Temporary layoff • Site or plant closing, relocation • Redundancy due to merger or acquisition

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 andoutside organization

Desirability of Leaving • Low job satisfaction • Shocks to employee • Personal (nonjob) reasons + • Ease of Leaving • Favorable labor market conditions • General, transferable KSAOs • Low cost of leaving Intentionto Quit + + • Alternatives • Internal: New job possibilities • External: Job offers + Exhibit 14.2: Causes of Voluntary Turnover Quit

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

Analysis of Turnover • Measurement • Reasons for leaving • Costs and benefits

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

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

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

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

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

Costs and Benefits for Types of Turnover • Voluntary turnover • Exh. 14.5: Voluntary Turnover:Costs and Benefits • Exh. 14.6: Example of Financial CostEstimates for One Voluntary Turnover • Discharge • Exh. 14.7: Discharge: Costs and Benefits • Downsizing • Exh. 14.8: Downsizing: Costs and Benefits Costs Benefits

Retention Initiatives: Voluntary Turnover • Current practices and deciding to act • What 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 leaving • Exh. 14.12: Guidelines for Increasing Job Satisfaction and Retention • Ease of leaving • Alternatives

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 Guidelines for Increasing Job Satisfaction and Retention

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?

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

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

Retention Initiatives: Discharge • Performance management • Exh. 14.13: Performance Management Process • Manager training and rewards • Progressive discipline • Five requirements of a progressive discipline system - P. 701 • Actions to take • Exh. 14.14: Progressive Discipline Examples: Misconduct and Penalties

Organization Strategy Work-Unit Plans (1) Performance Planning (2) Performance Execution (3) Performance Appraisal (4) Decisions Goals Competencies Resources Coaching Feedback Goal attainment Competency ratings Written comments Feedback Pay Training/career plans Performance problems Retention Exh. 14.12: Performance Management Process

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”

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

Legal Issues • Separation laws and regulations • Performance appraisal

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

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

Ethical Issues • Issue 1 • Consider 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?

Ethical Issues • Issue 2 • There 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?

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