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.

Staffing Organizations Model Mission Goals and Objectives Organization Strategy HR and Staffing Strategy 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 14-2

Chapter Outline Turnover and Its Causes Analysis of Turnover 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

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

Discussion Questions for This Chapter For the three primary causes of voluntary turnover (desirability of leaving, ease of leaving, alternatives), might their relative importance depend on the type of employee or type of job? Explain. Which of the costs and benefits of voluntary turnover are most likely to vary according to type of job? Give examples. If a person says to you, “It’s easy to reduce turnover, just pay people more money,” what is your response? 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.

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

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

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

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

Exhibit 14.2: Causes of Voluntary Turnover

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 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 reasons why 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 has been 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

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

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

Ex. 14.9 Most and Least Effective Retention Initiatives

Exh. 14.11: Decision Process for 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?

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

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

Discussion Questions for This Chapter For the three primary causes of voluntary turnover (desirability of leaving, ease of leaving, alternatives), might their relative importance depend on the type of employee or type of job? Explain. Which of the costs and benefits of voluntary turnover are most likely to vary according to type of job? Give examples. If a person says to you, “It’s easy to reduce turnover, just pay people more money,” what is your response?

Exh. 14.13: Performance Management Process

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

Retention Initiatives: Discharge Progressive discipline Five requirements of a progressive discipline system Give employees notice of the rules of conduct and misconduct Give employees notice of the consequences of violation of the rules Provide equal treatment for all employees Allow for full investigation of the alleged misconduct and defense by the employee Provide employees the right to appeal a decision

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

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.

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 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

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?