Management Notes

Management Notes

Reference Notes for Management

Research on Managing and Measuring Employee Retention

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Abstract

Employee retention and management is one of the key concerns of HRM. Not only they have to make sure that they retain the best of the talents, they also have to evaluate what sort of human resource is willing to stay in the organization. There are many factors that play an important part regarding the way human resources are supposed to be managed. The compensation and benefits, the level of flexibility in the working schedule and overall vision of the organizational play an important part in setting up the way human resource is going to stay in the organization. But despite the best efforts of the organization, there are external factors as well that play their part in the retention of the employee, for instance, the family schedule or personal problems might dictate the willingness of the employee to stay or leave the organization. Now, the key concern for organization is to make sure that they have a measure of the human resource that is used in the organization. It means making sure that evaluation is carried out regarding the turnover that is witnessed in the organization. It means measuring the turnover ratio in the organization as well as evaluating the number of people that the organization has retained. But it goes beyond these numbers; it must be made sure that the brain drain that has been happening in the organization is also looked after. 

To have the measure of whether the employees are going to stay or leave the organization might sound a simple prospect, but it is not something that is really straightforward. With the increased set of skills at their disposal, and dynamic job market, the retention of the employee is a major concern for the employees these days. HR professionals and business executives try to come up with the techniques and rationales to make sure that they develop the ways through which they can eventually take care of employee retention. One of the main reasons that organizations are very eager to retain a good employee is producing quality results rather than bringing someone who is not aware of the current processes of the company. 

 Factors that Affect Employee Retention

One of the important things that the employees really value in the organization is the sort of relationship they have with their immediate supervisor. Even their interactions with the senior management might go a long way in making sure how the job satisfaction of the employees can be taken care off. The other aspect is to make sure that the people across the board must feel that they are respected. The mutual trust among the employees and the management should be established. These though are not the only determinants. People at times tend to underplay the compensation and benefits that employees are supposed to have. The compensation also plays a big part along with the benefits as the marketplace is competitive and the employees are compensated in a variety of ways. Eventual job satisfaction of the employee as per his or her role in the organization as well as the overall engagement that they have towards the organization also plays its part in the retention. The important thing for the business is to make sure all these factors are understood. The problem is that the implementation of these things takes time. The businesses these days have to invest in the same manner towards the human resource as well as the actual assets. This is one of the prime reasons behind the introduction of the concept of human capital investment. The little investment that goes towards the employee retention eventually goes towards the productivity of the employees as well as the eventual employee morale and even the quality of the work. At the same time, it reduces the employee turnover and also allows employees to ensure that they can contribute towards the overall success of the organization. 

 Why It Makes Sense To Reduce Turnover

The organizations that tend to work towards the retention of the employee are more likely to have shortages or surplus of the employees. As a matter of fact, they would be more prone to have an idea about the optimum level of human resource then that they need in an organization. The companies must keep sure that they look after the impending changes in the marketplace as well as the overall supply and demand of talent in the organization. The people that must be across the board must need to have special competencies so that they can stay ahead of the competition at an organization. 

The focus that the organizations seem to place on the retention of the employees also makes sense for the following reasons:

  • It is costly;
  • The performance of the organization is affected by it in the long run; 
  • With the passage of time, it becomes difficult to make sure that all the skilled employees are managed within the span of the organization. 

The turnover costs are bound to have a significant impact on the performance of the company. It has to be noted though that not all the turnover might turn out to be harmful for the business. At times, the turnover might create some important benefits for the organization as well. For instance, the new replacement hire would eventually be more effective than the previous employee. 

Reasons Why Employees Would Leave an Organization

The employees might leave the organization for a variety of reasons. Some people could find something interesting and thus they would pack their bags. However,  sometimes people opt out for personal reasons. There are people who retire and there are times when they are just too angry about the way organization is running. Eventually, it might be a well thought out decision as well as a decision that is taken out of the sheer impulse. Besides, with the rise of the entrepreneur culture, at times people leave the organization to pursuit business interests. Consequently, there are wide varieties of reasons due to which the employee might be leaving an organization. That raises the question about how the employee retention is supposed to be managed when, sometimes, the organization itself is not at fault when the employee is leaving the organization. 

The general way of managing is to have this basic understanding and the rule of thumb that the organization can follow is that, as long as the inducements that are on offer at the organization, such as better working pay, and the decent working conditions are greater than the overall contribution of the employee, people would be pleased to stay within the organization.  These judgments are affected by the employee’s eventual desire to stay or leave within the organization. The ease with which the employee can make that transition is another factor that has to be kept in mind. 

Four Primary Paths to Turnover and How to Mitigate Them

Human resource experts have to come up with the following paths to make sure how different paths to turnover might be managed within an organizational framework. 

Employee Lack of Satisfaction

This issue can be managed with the help of the traditional retention strategies like monitoring the overall workplace as well as the eventual attitude of the people that are managing or driving the turnover. 

Better Alternatives

It must be made sure that the organization is competitive in a sense that it rewards the developmental opportunities of the people as well as the quality of the work environment that is supposed to be taken care off.  The company must be prepared to tack the external offers that the valued employees are getting all the time. 

Sticking to the Plan

There are certain employees who have a predetermined career path to quit. For instance, they might be having a career plan that prompts them not to stick to a single organization and keep moving their career path. Then, there are people who might opt to leave for personal reasons, such as pregnancy or pursuing further education. This situation can be managed with the help of the more flexible maternity leaves and family friendly policies. There are organizations that are offering flexible time working schedules so that the employees can manage their workloads as well as a pursuit of their studies. 

Leaving on the Impulse

If the employees decide to leave without any particular reason and abruptly, the organization needs to understand the issues whether there are any circumstances that lead to this decision. For instance, they might be facing harassment within the organizational culture or unfair and inconsistent working policies. To guarantee that these issues do not escalate out of hand, the effort should be made towards making sure that the conflict resolution procedures and alternative working schedules is provided along with the absurdity that their grievances would be taken care of. 

Measuring Employee Retention

The turnover metrics and calculations are integral when it comes to the management of human resources. They turn out to be more effective when keeping in mind the initial view of the team, department, and the way the organization is moving forward. In the following section,  some of the methods are going to be discussed through which employee retention or employee turnover can be managed. 

Overall Retention Rate

The overall retention rate is going to provide a decent insight into the overall health of the team and even the organization as a whole. The basic question though that must be asked is how many employees are supposed to stay in the team over a given period of time. It can be calculated by dividing the current number of employed individuals by the number of employees at the start of the base time period. The length of the measurement period is not much of an issue, but the usual practice dictates that it has to be calculated on an annual basis. 

Overall Turnover Rate

The overall turnover rate is just the opposite of the retention rate, and it also gives an indication of the overall health of the team. The overall turnover rate can be calculated with the help of dividing the number of individuals who are leaving a team over a specific period of time. Most of the people are under the perception that the overall turnover rate and the retention rate are interchangeable, but there is a degree of difference between them. 

Voluntary Turnover

The voluntary turnover occurs when the employee resigns and is leaving the team or the company. This type of turnover is witnessed when the employees are unhappy at the workplace. There might be conflicts or any other reason that might prompt the employee to opt for voluntary resignation within the setup. It is always a good idea to have an idea regarding why the employees are leaving the organization as it allows the business to see the grievances of the people. It is a more refined metrics as compared to the other two mentioned above. 

Retention Rate of Stars

Now, it is very important for the organization to know why people are leaving it , but it becomes a bigger issue when the brain drain starts to happen within the company. The high performers are the ones that should be always motivated to stay.  Not only the high performers, but the effort needs to make for the people who have the right attitude and are continuing to excel as well as encourage others that are around them. The organization needs to have this realization that it is very hard to find good performers within any setup. Calculation of the retention rate of the stars is going to allow the assessment of the working environment and the processes in the organization. 

Turnover Costs

The organizations should also have a fair idea regarding what is the total cost of the turnover. The reason that the business might be interested in knowing the turnover is a simple fact that the company wants to be effective and efficient, and, if the high turnover costs are resulting in a lack of efficiency in business, then the organization must make an effort to correct it. 

Conclusion

The management and the retention of the employees is one of the biggest challenges that the business faces these days. It is very important for the organization to have an idea regarding why people are leaving them as well as the quality of people who are leaving or staying in the company. The cost of turnover is also another area that has to be factored in. Only when the organization has a measure of the turnover, they can come up with suitable strategies to mitigate them. Eventually, basing on the information presented in this research, it becomes possible to understand that there are numerous aspects to consider when it comes to measuring and managing the workers’ retention. As a result, in order to avoid such problems within the company, all business executives and human resource management professionals are highly recommended to come up with effective strategies to improve their workers’ satisfaction rates and to develop the techniques and rationales to guarantee the fruitful atmosphere within the organization.


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